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NorthAmOil INVESTMENT NorthAmOil

Occidental decides against

selling Algerian assets

US-ALGERIA OCCIDENTAL Petroleum (US) has decided negotiations on the Algerian and Ghanaian sites.
against selling the Hassi Berkine oilfield and It did so after Algeria’s government blocked the
other assets in Algeria, the head of the company deal, explaining that the terms of the SPA had
told analysts in a conference call earlier this week. made the sale of Anadarko’s Ghanaian assets
Vicki Hollub, Occidental’s CEO, said the firm contingent on the sale of the Algerian fields.
had taken another look at its Algerian assets and The SPA signed between Total and Occiden-
had decided to classify them as a core part of tal is due to expire in September 2020. The two
its portfolio. “It’s not that we gave up on selling companies have already signed a waiver that
Algeria,” she explained. “We believe that those allows the latter company to begin marketing
assets there are [of] such high quality [that] Anadarko’s Ghanaian assets to other potential
they’re going to be very competitive with our buyers.
domestic assets. We want to be in Algeria.” As such, Occidental is in a position to con-
Occidental had said last year that it intended tinue looking for a buyer in Ghana. If it succeeds,
to unload Anadarko’s assets in several African it can use the proceeds of the sale to pay down
countries, including Ghana, Mozambique and some of the debt it assumed to finance the pur-
South Africa, as well as Algeria. It arranged to chase of Anadarko for $37bn. But if it retains the
sell these holdings to Total under a sales and Algerian assets, it will not be able to collect pay-
purchase agreement (SPA) signed last year, ment on that front. Hollub appears to be hopeful,
and the French major has already bought Ana- though, that the Algerian fields will be profitable
darko’s stakes in fields in South Africa and enough to compensate for that shift.
Mozambique. Occidental had said previously that it hoped
In May of this year, though, Total confirmed to earn a total of $5bn from the sales of Ana-
that it was abandoning attempts to complete darko’s Ghanaian and Algerian holdings.™

PERFORMANCE

Occidental hit by $8.4bn loss

US OCCIDENTAL Petroleum has reported a net the year to 1.16mn barrels of oil equivalent per
loss of $8.4bn for the second quarter of 2020, day (boepd). Occidental’s output in the Permian
joining a handful of super-majors in writing Basin – where it became the largest operator
down the value of its oil and gas properties by through its acquisition of Anadarko – is pre-
billions of dollars. Like other shale producers, dicted to be hit particularly hard, with a pro-
the company has been returning shut-in oil vol- jected base decline of around 37% this year.
umes to the market. However, it also warned that Occidental reported total impairment
Occidental’s operations it expected its output to fall in the remaining two charges of $6.6bn in the second quarter, includ-
in the Permian Basin quarters of the year. Occidental’s president and ing $5.2bn on continuing oil and gas operations
are expected to be CEO, Vicki Hollub, said on the company’s earn- and $1.4bn on discontinued ones. The com-
particularly affected by ings call that it did not intend to grow production pany had already been making losses in recent
the projected decline in until it had “significantly” reduced its debt. quarters, but on a year-on-year basis, it swung
production. The oil market downturn that started in to its multi-billion dollar loss from a net profit
March came at a bad time for Occidental, which of $635mn in the second quarter of 2019. Over
took on a large amount of debt last year to fund the subsequent quarters, Occidental’s losses wid-
its $38bn takeover of Anadarko Petroleum. The ened each time, with a loss of $2.2bn in the first
acquisition increasingly looks like an ill-timed quarter of this year. But like many other produc-
gamble on higher oil prices, having been aimed ers, it was hit hardest during the second quarter.
at increasing Occidental’s efficiency and profits The company’s production outlook “does
by boosting oil and gas production. not inspire confidence in capital efficiency” or
Instead, Occidental now expects its output in Occidental’s ability to “meet sustaining capi-
to fall by 13% this quarter over the previous tal requirements next year”, a Mizuho Securities
one, and a further 5% in the fourth quarter of analyst, Vincent Lovaglio, commented.™

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