At YourDailyAnalysis, we view Occidental Petroleum’s decision to sell its chemical unit OxyChem for $9.7 billion to Warren Buffett’s Berkshire Hathaway as a strategic move that reshapes the company’s balance sheet and allows it to fully refocus on its core oil and gas operations. While the stock price fell more than 7% immediately after the announcement, we believe the deal is a long-term positive that strengthens Occidental’s position in the U.S. energy market.
CEO Vicki Hollub emphasized that proceeds will be directed toward debt reduction, and the lost cash flow from the chemical division will be replaced in roughly two and a half years. At YourDailyAnalysis, we highlight a key point: the expected $350 million in incremental free cash flow from OxyChem in 2027 coincides with the amount the company will save on interest payments once debt is reduced. In effect, Occidental is gaining financial flexibility while doubling down on its core business.
The company is already showing progress: in the first half of this year, capital expenditures in oil and gas operations were cut by $2 billion on an annualized basis. With high-yielding assets in the Permian Basin and Powder River Basin, Occidental can secure attractive margins without the need for aggressive production growth. At YourDailyAnalysis, we believe that efficiency gains and advanced extraction methods will give the company an edge amid commodity market volatility.
The structure of the deal also warrants attention. According to Hollub, Berkshire is paying a higher multiple than typically seen in comparable chemical transactions. Yet some analysts, including Scotiabank, argue the fair valuation could have been closer to $12 billion. At YourDailyAnalysis, we stress that while the price may appear discounted, the speed and scale of the transaction underscore the limited pool of potential buyers capable of executing such a deal.
Out of the $9.7 billion in proceeds, approximately $6.5 billion will be allocated to debt repayment, bringing Occidental’s total debt load below the $15 billion target set after its CrownRock acquisition. We see debt reduction as the primary factor that will help restore investor confidence over the medium term.
Our conclusion at Your Daily Analysis: the OxyChem sale is not a loss but a reallocation of resources. Occidental is freeing up capital and positioning itself to concentrate on strategically vital oil and gas operations, laying the groundwork for improved profitability. For investors, this signals that within a two- to three-year horizon, the company could deliver more stable and predictable results than it would have under a diversified structure.
