Occidental Beats Estimates Before Leadership VoteBradley Olson
Occidental Petroleum Corp., the oil and natural gas producer on the brink of a shareholder vote that may eject longtime Chairman Ray Irani, reported first-quarter profit that exceeded analysts’ estimates as surging U.S. production outstripped declines overseas.
Excluding a $4 million cost from discontinued operations, per-share profit was 15 cents more than the average of 23 estimates compiled by Bloomberg. Net income fell to $1.36 billion, or $1.68 a share, from $1.56 billion, or $1.92, a year earlier, Los Angeles-based Occidental said in a statement today.
The company is looking for options that “move the needle a lot” to boost share prices, Chief Executive Officer Stephen Chazen said on a conference call today with investors. A breakup of the company’s U.S. and international assets, advocated by shareholders including Livermore Partners Inc. and Cambiar Investors LLC, is an option “we consider all the time,” said Chazen, whom the board said it was seeking to replace.
“They’ve done a good job in the last few quarters squeezing every dollar out of each barrel, but they need a clearer strategy,” David Neuhauser, a managing director at Northbrook, Illinois-based Livermore who helps oversee $100 million in assets including Occidental shares, said in a phone interview today. “The board needs a reboot.”
Occidental rose 1.5 percent to $85.55 at the close in New York.
Investors reacted positively to statements about potential breakup options, even if the CEO was careful not to promise any major shifts, Pavel Molchanov, a Houston-based analyst with Raymond James & Associates Inc., said today in a telephone interview.
“He went further than he has historically in acknowledging that strategic alternatives are on the table,” said Molchanov, who rates Occidental the equivalent of a buy and doesn’t own shares.
First-quarter sales fell 6.3 percent to $5.87 billion from $6.27 billion a year earlier. Maintenance in Qatar and production contracts in the Middle East led to a decline in international sales volumes equivalent to 15,000 barrels of oil a day, the company said.
Occidental, the largest crude producer in the continental U.S., boosted domestic output to the equivalent of 478,000 barrels of oil a day, a record for the 10th consecutive quarter. The company has reduced drilling costs by 19 percent compared to 2012, Chazen said in the statement, above its stated 15 percent target for the year.
Well costs in North Dakota’s Bakken field fell from $10 million to $8.2 million, placing Occidental among the lowest-cost producers, William Albrecht, president of Americas operations, said on the call. Average well costs in some West Texas areas are down 20 percent, and similar initiatives led to “significant improvements,” he said.
Occidental shareholders have pushed for changes at the oil company. Investors including First Pacific Advisors LLC, Livermore and Cambiar have said that the announcement that it planned to replace Chazen was a mistake and Irani, who has been chairman since 1990, should depart instead. The California State Teachers’ Retirement System joined First Pacific to publicly express support for Chazen.
Speculation about a rift between Irani and Chazen that followed the company’s February announcement it would seek a new CEO is unfounded, Occidental said on April 8.
Irani plans to retire at the end of 2014. If the majority of votes are cast against his re-election next week, the former CEO will have to tender his resignation, according to company filings. The company hasn’t announced a time line for replacing Chazen, who declined to comment today on his future.