NEW YORK Feb 14 Occidental Petroleum,
the global oil firm that bought Connecticut-based hedge fund and
trading house Phibro nearly five years ago, said on Friday that
it is cutting back on proprietary trading.
Oxy, as it is known, is working to streamline its business
to sharpen its focus on booming U.S. oil patches like the
Permian Basin of Texas. It bought Phibro, the trading house run
by renowned oil bull Andy Hall, from Citigroup in 2009.
"Consistent with Occidental's strategic review to focus in
core businesses, it also plans to reduce its exposure to
proprietary trading activities related to crude oil and other
commodities," Oxy said in a press statement to announce a
restructuring of its oil business.
A spokeswoman did not immediately reply to an email seeking
comment. It was unclear how much of Occidental's proprietary
trading is done by the company itself rather than Westport,
Connecticut-based Phibro, or Hall's $3.5 billion hedge fund
When Oxy made its purchase, Hall, 63, was in the midst of a
more than decade-long profit streak, reaping billions of dollars
by betting on a long-term rise in crude oil prices. The
century-old trading firm, formerly known as Philipp Brothers,
had sold its refineries and focused on proprietary trading.
More recently, however, he has struggled, like many other
traders, to profit from a U.S. shale oil boom that has flattened
U.S. crude oil prices. Astenbeck's fund lost 8 percent in 2013,
its second loss in three years, Reuters reported last week. It
also suffered notable investor redemptions, reducing its assets.
Astenbeck, named for a village near the 1,000-year-old
German castle that Hall owns, was initially set up in 2007 as a
way for investors to profit from trades that mirrored Phibro's
strategies. Occidental owns 20 percent of Astenbeck, which
allows it to share in Hall's management fees.
But times have changed, both for energy hedge funds in
general that are struggling to thrive amid range-bound oil
prices, and for Occidental, whose shareholders ousted long-time
chairman Ray Irani last year.
Peers like Hess Corp. have come under pressure to
break themselves up, unlocking shareholder value and jettisoning
non-core businesses. Hess is in the midst of attempting to sell
its proprietary oil trading joint-venture Hetco, a company
similar to Phibro.
Hall, a UK-born Oxford graduate and avid art collector,
burst into wider public view in 2009 for refusing to give up a
$100 million bonus he made while at Citi, which had owned the
small trading company for a decade.
Initially at least, the unit added to Oxy's bottom line.
For 2010, Occidental reported $293 million in "gains from
derivatives not designated as hedging instruments", according to
its annual report, a category that is likely to be heavily
influenced by proprietary trading results, analysts say. It had
only $64 million such gains in 2009, before Phibro. More recent
figures were not immediately available.