Occidental Petroleum Charts a New Course with Landmark Divestiture

Occidental Petroleum has taken a decisive step in its corporate strategy by finalizing the sale of its chemical division. The multi-billion dollar transaction with Berkshire Hathaway is designed to streamline the energy company’s operations and fortify its balance sheet. However, the retention of certain legacy obligations underscores that this strategic pivot involves navigating complex arrangements.

The company has now completed the divestiture of its OxyChem chemical business to Warren Buffett’s conglomerate. Valued at $9.7 billion, the deal was agreed upon in October 2025 and formally closed on January 2, 2026. This substantial sum represents approximately one-quarter of Occidental’s current market capitalization.

Proceeds from the sale are earmarked for a primary objective: reducing the company’s considerable debt burden. With total debt standing at around $22.9 billion, the influx of capital provides management with a significant opportunity to strengthen the financial position. Freed-up resources are expected to be channeled into higher-return oil and gas projects within the remaining portfolio.

Market Analysts Reassess the Outlook

This completed transaction has prompted initial reassessments from financial analysts. Experts at Wall Street Zen have upgraded their rating for Occidental Petroleum from “Sell” to “Hold.” This adjustment reflects a more neutral view of the firm’s financial stability following its exit from the chemicals sector.

Other market observers maintain a cautiously optimistic stance. While UBS remains more reserved with a $43 price target and a “Neutral” rating, both HSBC (target: $54, “Buy”) and Raymond James (target: $50, “Outperform”) see greater potential. A conservative tone persists, partly due to a relatively high price-to-earnings ratio of 29.6.

Should investors sell immediately? Or is it worth buying Occidental Petroleum?

A Strategic Deal with Retained Responsibilities

A critical element of the agreement is that Occidental Petroleum will retain specific historical risks. To address potential future claims and environmental liabilities from past operations, a separate subsidiary named Environmental Resource Holdings has been established.

This structure means that while Berkshire Hathaway acquires the operational value of the OxyChem assets, Occidental remains responsible for long-term remediation efforts. The company anticipates allocating funds for these pre-approved activities over many years. This arrangement secured the transaction value for the buyer while keeping the historical obligations tied to the seller.

Financial Performance and Future Trajectory

With the divestiture, Occidental is now poised to concentrate more intensely on its remaining upstream (exploration and production) and midstream (transportation) oil and gas activities. This increases its exposure to traditional energy markets in the United States, the Middle East, and North Africa.

The most recent quarterly results demonstrated solid operational performance, with earnings per share of $0.64 beating expectations of $0.50, although revenue of $6.72 billion came in slightly below forecasts. The current strategy aims to leverage expertise in carbon management to advance lower-emission technologies while maximizing value from traditional hydrocarbon production.

Shares recently traded at $42.38, marking a gain of over 7% in the past week. The effectiveness of management’s deployment of the $9.7 billion in proceeds to translate this strategic shift into sustainable growth will become clearer in the coming quarters.