HOUSTON, June 19 (Reuters) – Hess Corp said on Monday it would sell its stake in enhanced oil recovery (EOR) projects in the Permian Basin of West Texas and New Mexico to Occidental Petroleum Corp for $600 million in cash.
The deal cements Occidental’s status as the dominant U.S. producer of oil via carbon injection, a process favored by environmentalists and oil producers alike, and one that could grow in popularity if Congress expands a tax credit this summer.
The EOR process harnesses the carbon dioxide produced during the extraction of oil, from power plants or from natural sources, and forces it back into aging oil fields. That boosts the pressure underground and drives more oil to the surface.
Occidental is not only buying out Hess’s stakes in carbon injection projects, but is also getting complete control of naturally occurring sources of underground carbon dioxide, a boost to the company’s bottom line. The cost of carbon is one of the largest expenses in EOR projects typically.
For Hess, the deal gives it cash to further expand in North Dakota’s Bakken shale and the U.S. Gulf of Mexico, areas in which it already invests heavily. The deal is expected to close by August.
Shares of Hess fell about 1 percent to $43.25 in morning trading.
Separately, Occidental said it would sell remote acreage in the Permian for $600 million to undisclosed buyers and acquire other acreage closer to existing wells. The deals will effectively cut Occidental’s holdings in the Permian, America’s largest oilfield, by 13,000 acres.
Occidental declined to disclose the buyer but said the deal was not connected to the Hess transaction. The company said the deals should help it, one day, to break even with oil prices at $50 per barrel after paying its dividend.
Oil on Monday traded near $45 per barrel.
“By monetizing assets in the tail of the portfolio that were not strategic to us, but are synergistic to other companies, we are creating value for our shareholders,” Vicki Hollub, Occidental’s chief executive, said in a statement.
Shares of Oxy fell a penny to $61.82 per share in morning trading.
(Reporting by Ernest Scheyder; Editing by Bernadette Baum)
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