Occidental's Phibro Energy-Trading Business Posts Loss on `Lousy Results'
Occidental Petroleum Corp., the largest oil producer in Texas, said its Phibro energy-trading business acquired from Citigroup Inc. last year had a $104 million loss in the second quarter.
The loss was incurred as Occidental adjusted its valuation of Phibro’s holdings to reflect market prices at the end of the quarter, Chief Financial Officer Stephen I. Chazen told investors today on a conference call.
Chazen said Occidental has made changes to try to reduce volatility in the trading business. When the company agreed in October to buy Phibro for $250 million, Occidental said it wouldn’t alter the trading model of Phibro’s Andrew J. Hall.
“You can’t say that his trading results in the quarter were anything but lousy,” Chazen said.
Occidental fell $2.98, or 3.6 percent, to $79.94 as of the 4 p.m. close of New York Stock Exchange composite trading. The stock had climbed 1.9 percent this year before today.
After receiving a taxpayer-funded bailout, Citigroup approached Occidental about selling Phibro amid controversy over Hall’s $100 million, 2008 compensation package. The purchase price was equal to Phibro’s current assets minus liabilities at the time. Phibro generated average pretax profit of $371 million the past five years.
Phibro’s management has interests in the business and is “feeling the pain disproportionately” from the loss, Chazen said.
Earlier today, Occidental said its second-quarter net income climbed 56 percent to $1.1 billion, or $1.31 a share, from $682 million, or 84 cents, a year earlier. Per-share profit was 4 cents below the average of 16 analyst estimates compiled by Bloomberg.