Occidental Agrees to Carl Icahn Truce. “Icahn wanted to oust the company’s entire board..” By Todd Horwitz, Bubba Trading

 

Occidental Petroleum Corp. agreed to a truce with activist investor Carl Icahn, ending a bitter 10-month campaign by the billionaire activist investor to fire the board and seize control of the company. Now, Chief Executive Officer Vicki Hollub’s future will be in the hands of a new board after surviving Icahn’s calls for her resignation. But her most immediate challenge will be Occidental’s near $40 billion of debt at a time when oil is trading below $25 a barrel, near the lowest price in 18 years.

During his battle with Occidental, Icahn wanted to oust the company’s entire board, including Hollub, the firm’s stock dropped over 80% and the shale giant had its credit rating downgraded to junk. The company had already reduced its spending expectations for this year and dramatically cut its dividend, and the latest announcement reduces spending even more—to $2.8 billion from $3.6 billion at the midpoint of its guidance. Its production this year is likely to come in at 1.29 million barrels of oil equivalent at the midpoint, below analysts’ expectations for 1.34 million.

Occidental will also cut compensation for employees to help reduce operating costs by $600 million, after a previously announced reduction in operating costs of $1.1 billion. The cuts include “significant salary reductions for executive leadership.” The Wall Street Journal reported that CEO Vicki Hollub’s pay will be cut.

Asked about the Journal’s report, a company representative responded in an email, “We notified our employees of a number of measures we will be implementing, including compensation reductions, which will impact everyone at the company starting with the management team.”

Even with all these actions, Occidental needs to raise more cash, SunTrust Robinson Humphrey analyst Neal Dingmann wrote in a note on Wednesday. “While the latest is a valor attempt at cutting overall dollars, we do not believe the total is near enough given the limited cash flow and $1.4 billion annual bond interest and $1.2 billion annual dividend payments,” he wrote. “While we believe the announcements in [capital expenditure] reduction and cost reduction are notable, we still see the urgent need for material asset sales.”

Todd “Bubba” Horwitz
BubbaTrading.com

 

Financial Markets and Political Commentary

 

 

Tags

, , , , , , ,

Related Posts

About the author

Todd Horwitz - Author of “Average Joe Options“. Todd began his trading career in 1980 at the CBOE. He was one of the original traders in the OEX & helped start the SPX. He is a member the CME where he trades S&P futures as well as foreign currencies & is a regular contributor to CNBC, Bloomberg, BNN, Fox & many other major news networks.