Occidental Sells Wyoming, Colorado and Utah Land Grant Assets for US$1.3 B
Occidental Petroleum Corp. has entered into a purchase and sale agreement with Orion Mine Finance, a portfolio company of Orion Resource Partners (USA) LP, to divest certain Wyoming, Colorado, and Utah Land Grant assets for a total consideration of US$1.33 billion.
The transaction includes approximately 4.5 million mineral acres and 1.0 million fee surface acres targeting the world’s largest known deposit of trona, a mineral used to make soda ash, the principal ingredient in baking soda, global glass manufacturing, pollution control systems, and other chemical applications.
Occidental stated that it will retain all cash flow from currently producing oil and natural gas properties on the position, which are primarily cost-free royalties. Also not included in the sale is approximately 2.5 million mineral acres derived from the land grant in Colorado, including Occidental’s core Denver-Julesburg (DJ) Basin position.
New York-headquartered Orion Resource Partners is a global alternative investment management firm with over US$6 billion under management. The firm specializes in institutional metals and mining investment strategies in the base and precious metals space. The properties acquired will be held under Sweetwater Royalties, a new base metals and industrial minerals royalty company managed by Orion Mine Finance.
“Acquiring high-quality producing royalties is a core component of our investment strategy and we are thrilled to be partnering with Occidental in this transaction. This transaction offers significant royalty cash flow from the trona mines and has strong potential for mineral development,” said Oskar Lewnowski, Chief Investment Officer of Orion.
In April last year, Occidental entered into an agreement to acquire Anadarko Petroleum Corp. in a corporate transaction valued at ~USD55.0 billion, including the assumption of Anadarko’s outstanding debt. The subsequent crash in oil prices has left the company vulnerable to the heavy financing burden taken on to fund the acquisition, which included an expensive US$10 billion preferred stock issuance to billionaire investor Warren Buffett’s Berkshire Hathaway Inc.
Occidental’s market capitalization has dropped from nearly US$50 billion before the launch of its bid for Anadarko, to about US$12.9 billion at present. In a regulatory filing release on August 11th, Occidental reported a net loss of US$8.4 billion for Q2-2020. The company’s total debt stood at approximately US$38.5 billion at the end of the quarter. In March, Occidental had also announced that it was slashing its 2020 dividend by 86%, while cutting capital spending for this year by one-third.
“This transaction significantly advances the progress against our $2 billion plus divestiture target for 2020. We will retain our core oil and gas assets in the Rockies, including the prolific DJ Basin in Colorado and the highly prospective Powder River Basin in Wyoming,” said Occidental’s President & CEO, Vicki Hollub.
RBC Capital Markets, CBRE Group Inc., and Latham & Watkins LLP advised Occidental on the transaction, while Citi and Shearman & Sterling LLP advised Orion.
The transaction is subject to certain closing conditions, and is expected to be completed in Q4-2020.