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WYO’s Oxy Deal: What You Need to Know

Wyoming will pay $2.5 million to value Oxy properties. Last fall, Oxy reportedly hoped for a $700 million gain in one of the largest government land deals in American history, dubbed the Project Bison.

The proposal:

The proposed purchase includes 1 million acres of private land and 4 million acres of mineral rights along the Union Pacific Railroad corridor in southwestern Wyoming. Known as the Anadarko holdings, the land is owned by Occidental Petroleum Corp. The properties are interspersed with lands administered by the Bureau of Land Management in what is known as Wyoming’s checkerboard. The assets involved include trona, coal and mining, oil and gas, and the surface itself. The deal also includes mineral rights and lands in Utah and Colorado.

There have been no details released about the potential price tag for the deal, but earlier this year legislators used a hypothetical purchase price of $1.2 billion and providing an annual revenue stream of $130-150 million.

Oxy Background:

In August 2019, Occidental (Oxy) acquired Anadarko Petroleum in a transaction valued at about $55 billion, paying $38 billion for assets, plus assuming $17 billion of debt. That was $5 billion more than Chevron was willing to pay in the bidding process, and is the second biggest takeover of a U.S. oil and gas company in history, according to Dealogic.

Oxy’s stock price soon began to crumble.

Warren Buffett’s Berkshire Hathaway provided $10 billion in financing for the deal, in exchange for $10 billion in preferred stock with an 8% dividend and a discount on about $1.2 billion in warrants in the future, according to Markets Insider.

Shareholder and investor Carl Icahn blasted the deal and the terms granted to Buffett, and made moves to replace the Oxy board. A compromise was reached in late March 2020, when Icahn was able to install three of Icahn’s associates to the board. Oxy has been working to unload $15 billion in assets, including natural gas assets in Africa, and the Anadarko properties in southwestern Wyoming. A French oil company agreed to purchase Oxy’s Africa assets, and completed the transfer of the assets in Mozambique and South Africa, but backed out of the remainder of the deal in Algeria and Ghana last month.

Oxy posted a $2.2 billion loss in the first quarter of 2020, and recently reported that it will write down $6-9 billion in assets in the second quarter, Investor Place reports.

Oxy’s Wyoming Assets:

In November 2019, Reuters reported that Oxy had hoped to gain $700 million for the sale of its oil and gas assets in southern Wyoming and in neighboring Colorado. Reuters reported on Tuesday that Oxy received 13 bids in the first round of its sales process for the properties.

After Wyoming Governor Mark Gordon spent months privately discussing the possibility of the State of Wyoming purchasing the Oxy checkerboard properties, the public disclosure that Wyoming government was even considering the deal didn’t occur until February 12, when proposed bills setting out how Wyoming could proceed on the deal were filed in the Wyoming Legislature. The proposal caused considerable controversy with the general public, but details were kept secret.

Responding to criticism, the legislature amended the bills to set out a process to release information to the public once the confidential inquiry had proceeded. But in the end, Gordon vetoed the bill providing for legislative oversight, while vowing to continue to consider the deal on his own and committing to allowing public scrutiny should an agreement be reached on the deal.

Gordon is continuing to pursue the largest government purchase of private land since the United States purchased Alaska amid the drastic decline in Wyoming’s forecasted revenues and global economic downturn due to the current public health pandemic. If successful, the deal would transfer ownership of 1 million acres of private land to a state government – in a state that is already majority owned by government.

Gordon’s administration continues to emphasize that the deal is being investigated as an investment opportunity, and the investment would have to provide a rate of return that would benefit the State of Wyoming and its citizens.

Acting on the recommendation of a group of unpaid advisors, in late April Gordon hired Barclays to work through the Office of State Lands and Investments to provide financial advisory services in connection with the Oxy deal. Barclays will be paid $2.5 million for its services, according to its 9-page contract signed by OSLI Director Jennifer Scoggin. Should the State of Wyoming proceed to buy the assets, Barclays will then receive additional fees based on the total value of the deal, with the minimal amount of “success fees” to be received by Barclays at $2.4 million, to a maximum of $8 million. For example, Barclays’ success fee would be $4 million on a $700-million deal, payable in cash at the closing of the acquisition.

The initial $2.5 million being paid to Barclays to assess the assets involved in the Oxy deal is being funded in $500,000-per-month payments from existing state funding mechanisms, Gordon said. Gordon has repeatedly expressed frustration that the Wyoming Legislature did not take action to provide a designated funding source for the State’s due diligence efforts on the deal.

What’s Unknown:

Most of the details of this proposed deal are unknown, from the full inventory of assets, to a potential bid amount, and from what accounts the purchase would be accomplished.

It’s also unknown which assets Wyoming would be expected to retain, and which assets would be sold, and the process for such a disposal. It’s unknown what Wyoming may do with the assets involved in the deal that are located in Utah and Colorado.

It’s unknown how the lands purchased and retained by Wyoming would be managed.

It’s unknown what parties the State of Wyoming is currently making deals with in expectation of those parties acquiring certain assets should Wyoming complete the deal. It’s unknown if some of these parties are corporations seeking mineral assets, and/or if other parties are environmental groups with a larger vision for management of the checkerboard assets (which is interspersed with lands held by the Bureau of Land Management as well as other lands held in trust by the State of Wyoming).

It’s unknown how many other bidders there are for the properties, and whether any of the other bidders represent foreign interests.

What’s Next:

A special meeting of the State Loan and Investment Board (SLIB) will be held Monday, July 6, 2020 at 10:30 a.m. to discuss the potential investment in real property held by Occidental Petroleum Company. The meeting will convene via web conference and is open to the public. If you have business before the SLIB or wish to provide comment on any matter at the meeting, please register for the meeting here. A livestream of the public meeting will be available at lands.wyo.gov. Due to the anticipated high level of interest in this meeting, public comment will be limited to three (3) minutes per person. 

According to the public notice of the meeting, “During the meeting, the SLIB may convene a closed executive session. In the event an executive session is held, discussion would be limited to appropriate items, as described by Wyo. Stat. Ann. § 16-4-405.”

For current and updated SLIB meeting information, including the meeting agenda and board matter, check the OSLI website at lands.wyo.gov. For those trying to find the Oxy deal on the agenda, it's the fourth item slated for discussion, called "Authorization for Project Bison Bid."

Bids on the Oxy deal are due July 8th.

If Wyoming’s bid is accepted, then the governor will report to the Wyoming Legislature and begin releasing information to the public. In vetoing legislative oversight in March, Gordon noted: “Should an agreement in principle be reached, the Legislature will have the opportunity to review. It is the Legislature’s role to decide whether and how to fund a potential purchase based on the Agreement in Principle.”

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