UPDATE 2-Occidental plans sale of Middle East oil stake

Fri Oct 18, 2013 11:31am EDT

* Plans to sell interest in Middle East, North African assets

* Considering options for some U.S. assets

* Plans to sell stake in Plains All American Pipeline for $1.3 bln

* Shares fall 1.4 percent (Adds analyst comment, share price)

Oct 18 (Reuters) - Occidental Petroleum Corp said on Friday it plans to sell a minority stake in its Middle East and North African operations, part of a restructuring meant to lift its valuation.

The company also said it was considering strategic alternatives for some oil and gas assets in the U.S. Rocky Mountain region, which have lower returns. It did not specify what options.

Occidental has spoken openly since April about striking a deal to reduce its exposure to the politically volatile Middle East and North Africa, part of a broader plan to split up the fourth-largest U.S oil company.

"Our goal is to become a somewhat smaller company with more manageable exposure to political risk," Chief Executive Stephen Chazen said in a statement.

Shares of Occidental fell 1.4 percent after the announcement as some investors hoped for more details about the restructuring.

Wells Fargo analysts noted there was no information about what the company plans to do with its California assets or whether the it intends to divest oil fields in Latin America.

Analysts briefed by the company have said Occidental's California unit, which analysts at Credit Suisse value around $22 billion, may eventually be spun off to investors.

Its assets across the Middle East, which include oilfields in Libya, Iraq and Yemen, could be worth between $15 billion and $20 billion, analysts have said.

Chazen has started talking to sovereign wealth funds and other potential investors about possible investments in the Middle East unit, Reuters reported last month, citing sources.

Occidental's Rocky Mountain assets include low-return gas properties such as the Hugoton field in Kansas, Oklahoma and eastern Colorado, the Piceance basin in western Colorado, and higher-cost oil fields in the Williston basin in North Dakota.

"OXY has prioritized development in the Permian and California over the Midcontinent as returns and profitability in the Permian and California are more attractive in the current environment," analysts at Houston based energy investment bank Simmons & Co told clients in a note.

The company also said its board had authorized the sale of part of its 35 percent stake in the general partner of pipeline company Plains All American Pipeline LP for pre-tax proceeds of about $1.3 billion.

Occidental's remaining interest in Plains All American Pipeline, based on the initial public offering price, was worth about $3.4 billion, the company said.

Sale proceeds along with excess cash will be used to reduce the company's capitalization, likely through what analysts at Tudor Pickering Holt & Co characterized as a "sizable" stock repurchase of greater than 10 percent of outstanding shares.

Occidental's shares fell $1.42 to $96.66 in morning trading on the New York Stock Exchange. So far this year the stock is up 14 percent, underperforming a 19 percent gain in the Standard & Poor's 500 index. (Reporting by Garima Goel in Bangalore and Anna Driver in Houston; Editing by Rodney Joyce, Terry Wade and Marguerita Choy)