Occidental gains on potential OxyChem sale

Occidental Petroleum (OXY) shares rose over 1% premarket following reports of advanced talks to divest its OxyChem division for at least $10 billion. Barclays views this potential sale as a strategic shift that would accelerate OXY's balance sheet normalization and facilitate increased cash returns, developments expected to be positively received by the market. The reported $10 billion price implies an approximate 7x 2026-2027 estimated EBITDA multiple for OxyChem, which Barclays projects to reach $1.46 billion by 2027.

Analysis

Occidental Petroleum (OXY) is reportedly in advanced negotiations to divest its OxyChem division for at least $10 billion, a development that triggered a more than 1% premarket rise in its share price. According to analysis from Barclays, this potential transaction represents a significant strategic shift aimed at accelerating balance sheet normalization and positioning the company for increased cash returns to shareholders, which is expected to be received positively by the market. The reported sale price implies a valuation multiple of approximately 7x the 2026-2027 estimated EBITDA for OxyChem, a notable premium to Occidental's own current trading multiples of 5.7x for 2026 and 5.4x for 2027. Barclays projects OxyChem’s EBITDA will reach $1.46 billion by 2027 and calculates that even with a 15% tax, the deal would remain modestly accretive. This move contrasts with previous management commentary that emphasized OxyChem’s stable cash flow, underscoring a clear pivot toward deleveraging and a focus on core operations.

Key Decisions for Investors

• Investors should consider the potential for significant value unlocking, as the reported sale price for OxyChem implies a valuation premium to Occidental's current trading multiple, which could accelerate deleveraging and shareholder returns.
• It is crucial to monitor for an official announcement, paying close attention to the final price and terms to confirm the accretive nature of the transaction as outlined by Barclays' estimates.
• Acknowledge that this divestiture marks a strategic pivot that will concentrate the company's profile more on its core energy assets and Direct Air Capture initiatives while forgoing the stable cash flows of the chemicals division.