Motley Fool Opinion Piece on the New OXY: Sum of the Parts = $150 per Share
The new Oxy
In splitting its company by its two single most valuable pieces, this breakup will result in at least two fundamentally different businesses. While the Middle East and Latin American assets will initially be part of the Texas-based business, it is conceivable that they will also be sold off at some time.
The more exciting part of this breakup story will be a split of the American operations into two camps:
1.A growth-oriented business anchored by flagship waterflood and steamflood assets in California. This business, presumably, would also hold Occidental's higher-growth Bakken acreage. Growth will be driven by Bakken acreage, California steamflood operations, and also Elk Hills drilling. The more profitable but less prolific California waterfloods will serve as a provider of cash flow.
2.A value-oriented business in the Permian Basin of West Texas. The Permian's vast CO2 flooding oil operations will provide significant free cash flow, which could lead to a nice dividend. In addition, as the Permian's largest acreage holder, Occidental has tremendous untapped potential for horizontal drilling in the Wolfcamp and Bone Spring shales.
3. It's also possible that various other international holdings and possibly OXY's chemical business could be spun off or sold.
Bank of America energy analyst Doug Legette, in a report published last summer, wrote that the sum of Occidental's parts, when accounted for separately, should be worth around $150 per share.