TLDR
- Occidental Petroleum sold its OxyChem chemicals division to Berkshire Hathaway for $9.7 billion in an all-cash deal expected to close in Q4 2025
- The sale represents Berkshire Hathaway’s largest acquisition since purchasing Alleghany for $11.6 billion in 2022
- OXY stock dropped 7.5% following the announcement as investors reacted to the transaction
- Occidental plans to use $6.5 billion of proceeds to reduce debt, targeting principal debt below $15 billion
- Some analysts worry about the impact on future cash flow growth and question whether OxyChem was undervalued in the sale
Occidental Petroleum announced Thursday it will sell its OxyChem chemicals division to Berkshire Hathaway for $9.7 billion. The all-cash transaction is expected to close in the fourth quarter of 2025.
The deal marks Berkshire Hathaway’s biggest acquisition in three years. The company last made a purchase of this size when it bought insurer Alleghany for $11.6 billion in 2022.
Occidental’s stock price fell 7.5% on the news. Investors appeared concerned about the strategic implications of the sale.
The company currently carries heavy debt loads from previous acquisitions. These include the purchases of Anadarko Petroleum and CrownRock.
Occidental plans to allocate $6.5 billion of the sale proceeds toward debt reduction. The company aims to bring its principal debt below $15 billion.
CEO Vicki Hollub said the deal strengthens the company’s financial position. She praised OxyChem’s performance under Occidental’s ownership.
“OxyChem has grown under Occidental into a well-run, safely operated business with best-in-class employees,” Hollub said in a statement. She expressed confidence the business and employees will thrive under Berkshire Hathaway’s ownership.
Berkshire Hathaway’s Growing Portfolio
Greg Abel, Berkshire’s vice chairman of non-insurance operations, welcomed the addition to the company’s holdings. He called OxyChem another addition to Berkshire’s “robust portfolio.”
Abel commended Hollub and the Occidental team for their commitment to financial stability. He specifically noted their plan to use proceeds to strengthen the company’s balance sheet.
Market and Financial Concerns
Some analysts have raised questions about the transaction. They worry about the potential impact on Occidental’s future cash flow growth.
Others suggest the $9.7 billion price tag may undervalue OxyChem. These concerns have contributed to investor unease about the sale.
Occidental’s debt-to-equity ratio currently stands at 0.68. The company’s Altman Z-Score of 1.46 places it in the distress zone.
The company reported net proved reserves of nearly 4 billion barrels of oil equivalent at the end of 2023. Net production averaged 1.327 million barrels of oil equivalent per day in 2024.
Revenue for the trailing twelve months stands at $27.15 billion. The company’s operating margin is 20.1%, while the net margin is 8.84%.
The P/E ratio sits at 26.07, close to its three-year high. Analyst recommendations average at 2.7, with a target price of $50.62.
The transaction is expected to close in the fourth quarter of 2025, pending regulatory approvals and standard closing conditions.
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