(Reuters) Occidental Petroleum will sell its chemicals arm OxyChem to Warren Buffett's Berkshire Hathaway for $9.7 billion, the company said on, marking its biggest divestment yet to slash debt after years of costly acquisitions.
If the deal closes, it would also be the biggest acquisition for Berkshire since its $11.6 billion purchase of insurance firm Alleghany Corporation in 2022, and expand its chemical portfolio beyond Lubrizol.
Berkshire is Occidental's largest shareholder and it began acquiring stake in the U.S. oil and gas producer in February 2022, around when Russia invaded Ukraine.
The divestment highlights the close ties between the two. In a 2019 meeting with Buffett, Occidental CEO Vicki Hollub secured a $10 billion investment that allowed her to make an offer for oil producer Anadarko Petroleum, outbidding rival Chevron to secure some of the richest shale oilfields in Texas.
But the $55 billion purchase of Anadarko left Occidental saddled with debt. The burden exacerbated after the company closed its $12 billion acquisition of privately held U.S. shale oil producer CrownRock last year.
To reduce its massive debt load, which stood at $23.34 billion by the end of June, Occidental been steadily divesting assets in recent years.
The company had disclosed in August $950 million of additional divestitures since the start of the second quarter, of which $370 million already closed and it repaid $3 billion of debt year-to-date.
Occidental said on Thursday it would use $6.5 billion of the proceeds to reduce debt, bringing the total principal debt below the $15 billion target set after the CrownRock deal.
TPH analyst Matt Portillo said the debt repayment should open the door for increased shareholder returns in the form of share repurchases.
Occidental shares were down nearly 1% in early trading.
CEO Hollub said the sale of OxyChem, which produces chemicals used for treating swimming pools and vinyl products used for water supply piping and medical supplies, would allow Occidental to "unlock 20-plus years of low-cost resource runway" in oil and gas.
The unit had generated a combined revenue of $2.42 billion in the first two quarters of this year.
The deal, expected to close in the fourth quarter, also indicates that Occidental is refocusing on its oil and gas business, which formed 75% of its total earnings last year.
