June 3 Occidental Petroleum Corp. is
discussing how a potential break-up of the oil company might
look, according to analysts, as it puts flesh on an idea floated
by the chief executive in April that has helped boost the stock
by 13 percent.
Shares of Occidental were up 2.2 percent on Monday at
$94.12, nearly $11 higher than before CEO Steve Chazen mentioned
on the quarterly conference call that he was looking at
potential deals to "move the needle" for the stock. Shares of
other big U.S. oil companies are up less than half as much in
"Oxy's had a nice run here lately, and at least part of
that's due to increasing expectations they're going to do
something (via restructuring)," said Brian Youngberg, an analyst
at Edward Jones in St. Louis who has a 'buy' rating on the
Oppenheimer & Co. said in a recent research note that last
week certain analysts attended group meetings with Chazen in
which he discussed different restructuring scenarios.
"OXY could announce within three months plans to spin off
its international operations," Oppenheimer said, predicting an
estimated $20 billion from that sale could be used to buy back
25 percent of its shares.
The company's California and Permian basin assets in New
Mexico and Texas could be spun off into separate companies, the
analysts added, as they raised their price target on
Occidental's stock to $115 from $100 on the potential
Occidental did not respond to a request for comment.
Apart from its South American interests in Bolivia and
Colombia, Occidental has operations in seven countries in the
Middle East and North Africa, from Libya to Iraq to Yemen.
One reason the assets may be on the block is the departure
last month of the company's long-serving Lebanon-born chairman,
Ray Irani, after shareholders voted him out.
"He had strong contacts there, which in the past served the
company very well," Youngberg said, noting that political
turmoil in the Arab world over the past few years had made it
less attractive for many U.S. investors.
Chazen said on April 25 that Occidental's stock
underperformance meant he would take a hard look at sizable
deals to realize value for the company.
"I do not want to go down the path of a sort of delicatessen
approach to this where you slice a piece of baloney off and
throw it to the wolves," he told analysts on a conference call.
Credit Suisse analysts saw what they called a "Potential
Three Way Break Up" in which the California unit - valued at $22
billion - would also be spun out, leaving Oxy's Permian assets
attached to its pipeline, oil trading, storage and chemicals
(Reporting by Braden Reddall in San Francisco and Michael Erman
in New York; Editing by Dan Grebler)