What is the net financial impact of these transactions?

Occidental is selling its Argentine assets for $2.5 billion and acquiring domestic assets for $3.2 billion, resulting in a net acquisition cost of approximately $700 million. The company will also increase its stake in Plains All-American and acquire full ownership of the Elk Hills Power Plant. The acquisitions will be financed through existing cash and debt.

Why is Occidental divesting its Argentine operations and acquiring assets in South Texas and North Dakota?

This appears to be a strategic repositioning to focus on core domestic oil and gas operations. The South Texas assets offer substantial gas production and are 100% operated by Occidental, while the North Dakota acquisition targets the prolific Bakken and Three Forks formations. This shift allows for greater operational control and alignment with the company's domestic strategy.

How will the increased dividend payment be funded?

The press release states that the company plans to finance the acquisitions through existing balance sheet cash and debt financing. The increased dividend is a signal of management's confidence in the company's cash flow generation capabilities, which are expected to be bolstered by the new domestic assets and strategic partnerships.

What is the significance of increasing ownership in Plains All-American?

Increasing General Partner ownership in Plains All-American to 35% suggests Occidental sees strategic value in further integrating its domestic oil and gas operations with PAA's midstream infrastructure. This could lead to improved logistics, cost efficiencies, and better market access for Occidental's production.

OXY/OXY-WT 8-K: Regulation FD

Summary

Occidental Petroleum Corporation (OXY) announced significant strategic transactions on December 10, 2010, aimed at reshaping its asset portfolio and enhancing shareholder returns. The company is divesting its Argentine oil and gas operations to a subsidiary of Sinopec for approximately $2.5 billion in after-tax proceeds. Concurrently, OXY is investing heavily in domestic growth, with agreements to acquire oil and gas properties in South Texas from Shell for $1.8 billion and in North Dakota's Bakken and Three Forks formations from a private seller for $1.4 billion. These transactions represent a strategic shift towards core domestic U.S. assets and highlight a focus on enhancing operational control and capturing synergies. The company is also increasing its General Partner (GP) ownership in Plains All-American (PAA) to approximately 35%, complementing its existing operations. Furthermore, OXY is acquiring full ownership of the Elk Hills Power Plant. These strategic moves are complemented by a substantial 21% increase in OXY's quarterly common dividend rate, signaling confidence in future cash flow generation and a commitment to returning value to shareholders. The acquisitions are expected to be financed through existing cash and debt, with completion targeted by the end of Q1 2011.

Key Highlights

1Occidental Petroleum is selling its Argentine oil and gas operations for approximately $2.5 billion in after-tax proceeds.
2The company is acquiring oil and gas properties in South Texas from Shell for $1.8 billion, adding 200 MMcfe/d of production.
3Occidental is purchasing approximately 180,000 net acres in North Dakota's Bakken and Three Forks formations for $1.4 billion, adding 5,500 BOEPD of production.
4OXY is increasing its General Partner ownership in Plains All-American (PAA) to approximately 35%, enhancing its midstream integration.
5Occidental will acquire 100% ownership of the Elk Hills Power Plant by purchasing the remaining 50% joint venture interest.
6The company's Board of Directors has approved a 21% increase in the common dividend rate to $0.46 per quarter.
7All transactions are expected to close by the end of the first quarter of 2011, subject to closing conditions and regulatory approvals.

OCCIDENTAL PETROLEUM CORP /DE/ 8-K Report, Regulation FD Disclosure (Dec 10, 2010)

Summary

Key Highlights

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