Occidental Subsidiary to Redeem $610M in WES Units for Revised Midstream Contracts
Summary
Occidental Petroleum's subsidiary, Western Gas Resources, Inc., will redeem 15.3 million common units of Western Midstream Partners, LP, valued at $610 million, as consideration for new and amended midstream agreements.
Key Events
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Unit Redemption Agreement
Western Gas Resources, Inc., a subsidiary of Occidental Petroleum, will transfer 15,307,402 common units of Western Midstream Partners, LP to the Issuer for redemption and cancellation.
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Transaction Value
The units to be redeemed are valued at $610.0 million as of the agreement date.
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Strategic Consideration
The unit redemption is in exchange for amendments to existing gas gathering and processing contracts, including minimum volume commitments and a fixed-fee rate structure, and a new midstream agreement.
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Ownership Reduction
Occidental's beneficial ownership in WES will decrease from 40.6% to approximately 36.86% after the redemption.
Analysis
This Schedule 13D/A filing details a significant strategic transaction where Occidental Petroleum, through its subsidiary, will surrender a substantial block of Western Midstream Partners units back to the company for cancellation. This unit redemption, valued at $610 million, serves as consideration for new and amended gas gathering and processing contracts in the Delaware Basin. The transaction is mutually beneficial, providing WES with a reduction in outstanding units (which is accretive to per-unit metrics) and securing long-term volume commitments and a fixed-fee rate structure for its midstream assets. For Occidental, it optimizes its midstream service agreements while reducing its ownership stake in WES.
At the time of this filing, WES was trading at $40.98 on NYSE in the Energy & Transportation sector, with a market capitalization of approximately $16.5B. The 52-week trading range was $33.60 to $43.33. This filing was assessed with positive market sentiment and an importance score of 7 out of 10.