Occidental Petroleum (OXY) has officially sealed its biggest divestment yet, selling its chemical unit OxyChem to Warren Buffett’s Berkshire Hathaway (BRK.A) (BRK.B) for $9.7 billion. The move is not just a headline-making M&A story; it’s a turning point in Occidental’s multi-year effort to clean up its debt-heavy balance sheet after blockbuster acquisitions.
Occidental said it will apply $6.5 billion of the proceeds directly toward debt reduction, taking principal debt below the $15 billion target set after last year’s $12 billion CrownRock acquisition. That’s a big milestone for a company still carrying $23.3 billion in debt as of June.
The sale also tightens Berkshire’s grip on Occidental. Already its largest shareholder with a 27% equity stake, Buffett now adds a chemicals business to his empire, complementing Lubrizol and broadening exposure beyond oil and gas. For Occidental, the divestiture reflects a sharpened focus: oil and gas production, where 75% of 2024 earnings came from. CEO Vicki Hollub described the deal as a way to “unlock 20-plus years of low-cost resource runway” in core upstream operations.
Valued at $43 billion by market cap, Occidental Petroleum Corporation is a global energy company with operations across the U.S., the Middle East, and North Africa. OXY operates through Oil and Gas, Chemical (OxyChem), and Midstream segments while also investing in low-carbon ventures. The company combines traditional energy production with carbon management to drive sustainable growth.
On Oct. 2, Occidental Petroleum (OXY) shares dropped more than 6% following the announcement, highlighting ongoing investor caution related to the Berkshire Hathaway deal. Year-to-date (YTD), as of early October 2025, the stock has hovered in the mid-$40s, marking a 10% decline for the year. The weakness mirrors broader energy sector struggles, as oil prices fell to four-month lows in September on oversupply worries.
OXY’s valuation appears stretched, with a forward P/E of 20, significantly higher than the sector median of 13. This suggests the stock might be overpriced compared to its peers. However, its price-to-cash-flow ratio of 4 is lower than the sector’s 5, indicating some undervaluation.
Occidental Petroleum continues to reward shareholders with a quarterly dividend of $0.24 per share, reflecting a forward yield of about 2%. Despite a mixed five-year growth trend, the company has maintained payouts for three straight years while keeping its payout ratio at a modest 30%.
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Occidental’s financial picture looks mixed but generally healthier than a year ago. Q2 revenue slipped about 6.1% year-over-year (YoY) to $6.456 billion, and net income sits at $458 million, which suggests margins face some pressure.
The bright spot is that the operating cash flow came in near $3.0 billion, and free cash flow was roughly $0.7 billion after capex, real cash that lets management pay the dividend and chip away at debt (about $3.0 billion repaid YTD). The planned OxyChem sale should accelerate deleveraging, though it also removes a steady earnings contributor. In short, cash generation and debt reduction point to improving financial health, even as revenue and headline profits show some softness.
Management also trimmed 2025 capex by about $100 million and says it has identified roughly $500 million of efficiency gains YTD. Those moves, plus roughly $950 million of asset sales and $3.0 billion of debt already repaid YTD, show the company is prioritizing the balance sheet.
The bottom line is that Q2 proves that OXY can make cash, fund its dividends, and take down debt when needed. If oil prices stay reasonable and the OxyChem proceeds hit the balance sheet as planned, full-year 2025 financials should look meaningfully stronger than 2024, and analysts’ price targets could drift higher.
Analysts have mixed views on Occidental’s OxyChem deal. TD Cowen noted the timing isn’t ideal, since the sale helps cut debt but also eliminates future free cash flow from OxyChem’s growth projects.
Roth MKM echoed that concern, warning the divestiture could weigh on long-term cash flow. Meanwhile, Scotiabank’s Paul Cheng argued that the $9.7 billion price looked low compared to his $12 billion valuation.
OXY is rated a consensus “Hold” on Wall Street by 26 analysts. The average price target of $50 implies about 12% upside potential from current levels.
Occidental Petroleum is using the $9.7 billion OxyChem deal to cut debt and strengthen its balance sheet, while its low-cost Permian operations keep cash flowing even with softer oil prices. But with heavy debt, reliance on oil cycles, and the loss of OxyChem’s steady earnings, the company faces risks that make its recovery story one to watch carefully.
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On the date of publication, Nauman Khan did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com
