The divestment would help Occidental, which is backed by Warren Buffett's Berkshire Hathaway (BRKa.N), opens new tab, slash the $18.5 billion debt pile it has accumulated because of acquisitions.
Occidental inked a deal in December to acquire oil and gas producer CrownRock for $12 billion, an acquisition which would add further borrowing, four years after its $54 billion purchase of peer Anadarko Petroleum.
Western Midstream shares closed 5.7% higher at $30.81 on the news, their highest finish since July 2019. Occidental shares dropped 1.6% to $59.56, along with broad declines among energy producers.
Occidental owns 49% of Western Midstream and controls the company's operations by also owning its general partner. Western Midstream is structured as a tax-advantaged master limited partnership, and a general partner is its controlling entity.
JPMorgan Chase (JPM.N), opens new tab is advising Occidental on how to extract the most value from its ownership of Western Midstream, the sources added.
Western Midstream will likely attract interest from most of its major peers, including Enterprise Products Partners (EPD.N), opens new tab, Williams Companies (WMB.N), opens new tab and Kinder Morgan (KMI.N), opens new tab, the sources said. It could also appeal to private equity firms and infrastructure funds.
The sources cautioned no deal was guaranteed and spoke on condition of anonymity to discuss private deliberations. Occidental last week reaffirmed its goal of reducing its debt to below $15 billion, while saying divesting land it does not need in the Permian basin would depend on completing its CrownRock deal.
Western Midstream said in a statement it was aware of Occidental's interest in selling assets and could not provide further details, directing questions to Occidental. It added that Western Midstream itself was not running a sale process.
