Occidental Agrees to Sell Hugoton Gas Field for $1.4 Billion

Feb 13, 2014 5:26 pm ET

(Updates with share buyback in third paragraph.)

Feb. 13 (Bloomberg) -- Occidental Petroleum Corp., the largest oil producer in the continental U.S., agreed to sell 1.4 million acres in a Midwestern natural gas field to an undisclosed buyer for $1.4 billion.

Average net production from the Hugoton field, which includes portions of Kansas, Colorado and Oklahoma, was the equivalent of 110 million cubic feet a day in 2013, Los Angeles- based Occidental said today in a statement. About 30 percent of that output was oil.

Chief Executive Officer Stephen I. Chazen has embraced asset sales from North Dakota to the Persian Gulf after lackluster returns in 2011 and 2012. The company announced in a separate release today it will boost dividends and increase a share buyback program. Proceeds from today’s sale, which is expected to close by April 30, will be used to buy shares, the company said.

“This should be the first of a number of sales in what they deem their Midcontinent region, where they have produced a lot of natural gas,” Brian Youngberg, an analyst at Edward Jones in St. Louis, said today in a phone interview. The company’s focus is on West Texas and California, where it’s seeing higher growth and profitability, said Youngberg, who rates Occidental a buy and doesn’t own the shares.

Production from the Hugoton field represented 17 percent of Occidental’s Midcontinent output in the fourth quarter, according to a Bloomberg calculation.

Dividend Boost

The company said in October it was seeking a buyer for oil and gas assets in the Hugoton, the Williston Basin and the Rocky Mountains, part of an initial phase to streamline the company. The total areas up for sale included 2.5 million acres, according to a company statement.

The sale was announced after the close of regular U.S. trading. Occidental fell 1 cent to $92.26 at 4:44 p.m. in New York. Melissa Schoeb, an Occidental spokeswoman, declined to comment on the identity of the buyer.

The company boosted its quarterly dividend 13 percent to 72 cents, the 12th consecutive year of increased investor payouts, and said it will buy back an additional 30 million shares over an unspecified time frame.

“These actions demonstrate our confidence in the company’s financial strength and future performance,” Chazen said in the statement.

Shareholders ousted longtime Chairman Ray Irani in May after the company announced plans to replace Chazen. Irani’s departure freed Chazen to pursue a breakup, including the sale of as much as 40 percent of the company’s operations in the Middle East and North Africa and a spinoff of the California business.

--Editors: Tina Davis, Jasmina Kelemen