Oxy sells Argentine assets; buys US assets

Dec. 20, 2010
Occidental Petroleum Corp. plans to sell its properties in Argentina for $2.5 billion to Sinopec Group.

Paula Dittrick
Senior Staff Writer

Occidental Petroleum Corp. plans to sell its properties in Argentina for $2.5 billion to Sinopec Group. Separately, Oxy also outlined two separate acquisitions of US producing properties in South Texas and North Dakota for a total of $3.2 billion.

Oxy's Argentine oil and natural gas assets produce 44,000 boe/d net to the company. Upon closing with Sinopec, Oxy will have divested all of its Argentine holdings, a spokesman said. Oxy has operations in the San Jorge basin about 1,100 miles south of Buenos Aires and in the Cuyo and Neuquen basins in western Argentina. Oxy acquired most of those assets in 2006.

All the transactions announced Dec. 10 are expected to close by the end of first-quarter 2011, subject to regulatory approvals.

Separately, Oxy subsidiary Oxy USA Inc. agreed to pay $1.8 billion to Royal Dutch Shell PLC for a group of predominately mature tight gas fields that produce 200 MMcfd of gas equivalent. Oxy also plans to acquire 180,000 net contiguous acres in North Dakota for $1.4 billion from a private seller. The North Dakota assets produce 5,500 boe/d from the Bakken formation.

The South Texas properties from Shell include McAllen Ranch field, Javelina field, McAllen Pharr field, Slick Ranch field, and LaCopita/North Rincon field. Oxy will own 100% of those properties. Eagle Ford shale acreage is not part of the Shell-Oxy transaction. Shell is working to divest $7-8 billion in assets worldwide during 2010-11.

In the North Dakota transaction, Oxy said it believes the acreage has oil potential in the Three Forks. Oxy said its net risked reserve exposure in that transaction is more than an estimated 250 million boe.

Combined with Oxy's existing interests in the Williston basin, the company will have a stake in more than 200,000 net acres and more than 6,000 boe/d of production. Oxy expects to increase production in the Williston basin to at least 30,000 boe/d in 5 years. Before the Dec. 10 announcement, Oxy had 25,000 acres there.

"With these new acquisitions and without Argentina in our asset mix, achieving both our short-term and long-term average annual production growth outlook of 5-8% will be more certain and will generate higher returns," said Ray R. Irani, Oxy chairman and chief executive officer.

Irani said the acquisitions, combined with acquisitions made earlier this year, will more than replace the production from the sale of the Argentine operations.

"We expect that each of these new acquisitions together with future drilling, potential exploration, and consolidation opportunities in these areas, over time, will grow to over 50,000 boe/d," Irani said.

Additionally, Oxy agreed to increase its general partner ownership in Plains All American Pipeline LP to 35%. Oxy said its purchase of an incremental 13% ownership in the general partnership compliments its US oil and gas operations. Plains All American operates oil pipelines in Texas, California, and North Dakota, among other areas.

Oxy also agreed to acquire the remaining 50% joint venture interest in the Elk Hills Power gas-fired plant from Sempra Generation to help cut costs at Oxy's Elk Hills business unit. The 550-Mw power plant is on a parcel of land in Oxy's Elk Hills oil and gas field, about 25 miles west of Bakersfield, Calif.

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