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 that time.
"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 stock.
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 restructuring impact.
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 businesses.
(Reporting by Braden Reddall in San Francisco and Michael Erman in New York; Editing by Dan Grebler)