Tags: Occidental | deal | mideast | political

Occidental's $8 Billion Deal Stalled by Mideast Political Feud

Tuesday, 25 March 2014 06:06 PM

Occidental Petroleum Corp.’s efforts to raise as much as $8 billion by selling a stake in its Middle East business are being delayed by regional disputes over the Muslim Brotherhood.

The global oil and gas producer might have to break up the assets and sell them to individual countries because political tension has made it too complicated to win agreement for a single sale to a consortium made up of Oman, the United Arab Emirates and Qatar, Chief Executive Officer Steve Chazen told a group of about two dozen investors at the Howard Weil Energy Conference in New Orleans Tuesday.

“The notion that they were going to somehow cooperate with each other in an oil investment is difficult at best right now,” Chazen said. Occidental began exploring a sale last year. Melissa Schoeb, a company spokeswoman, did not immediately respond to a phone message and e-mail requesting further comment on Chazen’s remarks.

The failure of the deal as it was originally envisioned is the first major sign of how a political rift between Qatar and other Gulf nations is hurting business decisions in the oil-rich region. Qatar’s backing for the Muslim Brotherhood has drawn criticism from its neighbors in the region that have cracked down on the Islamist organization after it gained power in Egypt with the 2012 election of President Mohamed Mursi.

Abu Dhabi’s Mubadala Development Co., Qatar Petroleum and Oman Oil formed a consortium late last year to buy as much as a 40 percent stake in Occidental’s Middle East operations. The consortium marked a rare three-way collaboration between state- owned Gulf energy firms in a region where investment decisions have mainly been based on political aspirations.

Separate Deals

“At their suggestions, we’ll probably make separate deals with the three countries with somewhat different assets in each one,” Chazen told investors Tuesday. “In some ways, that’s a lot simpler.”

Calls after business hours to the three state-owned companies were not immediately returned.

Saudi Arabia, United Arab Emirates and Bahrain recalled their envoys from Qatar March 5, accusing the state of undermining regional security in a dispute that threatens efforts to integrate Gulf economies, where six countries hold a third of the world’s oil reserves. Economic integration of the Gulf Cooperation Council, created in 1981, has already been slow as plans for a common currency were delayed and feuding broke out over regional politics.

Regional Schism

Qatar backed the Brotherhood with $8 billion in aid after the Egypt election.

Saudi Arabia and the U.A.E. welcomed Mursi’s overthrow last year and, along with Kuwait, they have pledged about $15 billion to support the military-backed government.

Occidental is seeking to sell assets in the Middle East as part of a breakup plan begun last year after the Los Angeles-based company had seen shares fall for two consecutive years in 2011 and 2012, the worst performance in more than two decades. In the Middle East, the company has assets in the UAE, Qatar, Oman, Bahrain, Iraq, Yemen and Libya.

Occidental also is planning a spinoff of its California business and will use proceeds from the transactions to buy back shares.

Chazen hosted a lunch March 20 with more than a dozen analysts who cover the company and suggested that political challenges could delay the Middle East sale, Roger Read, an analyst with Wells Fargo & Co., said in a note to clients March 21.

Occidental may not close a transaction in the deal before the end of the year, Read said.

Same Value

The plan to sell pieces of assets to individual countries should yield about the same proceeds as the stake sale, Chazen said. A sale of 40 percent of the assets would be valued at about $8 billion, based on a total $20 billion value Chazen placed on the business late last year, according to two people with knowledge of the matter.

Occidental may opt to keep some properties it otherwise would have included in the sale, such as the Dolphin Gas project in Qatar, the CEO said today.

“I think we’ll make reasonable progress over the next few months,” Chazen said.

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Occidental Petroleum Corp.'s efforts to raise as much as $8 billion by selling a stake in its Middle East business are being delayed by regional disputes over the Muslim Brotherhood.
Tuesday, 25 March 2014 06:06 PM
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