Occidental is small in size, but not ambition

NEW YORK • Occidental Petroleum Corp’s US$38 billion (RM157.32 billion) bid for Anadarko Petroleum Corp is one of the boldest moves in the 99-year history of a company that has never lacked ambition.

While being meet with scepticism from analysts — who have called the bid “ill-advised” and “ a very bad idea” — the proposal shows the appetite of CEO Vicki Hollub, 59, who took over in 2016 as only the fourth CEO in the company’s history and is one of the few women leading a major oil producer.

“It is tough to fight a bidding war against a supermajor that is four times larger,” Raymond James analysts Pavel Molchanov and Muhammed Ghulam wrote in a note on Wednesday.

The price of the deal is only about US$8 billion less than Occidental’s total market value.

The move is fitting for a company that for decades was led by larger-than-life characters, including Ray Irani, who was for a time the industry’s highest-paid leader, pulling in US$80 million in average compensation over several years.

He took over from Armand Hammer, who built the company into a sprawling conglomerate with interests as far-flung as film-making, horse breeding and meatpacking.

Irani’s protege and successor, Stephen Chazen, dismantled what was left of the Hammer-era empire, spinning off or selling marquee assets and relocating the company to Houston from Los Angeles.

When Hollub succeeded Chazen in early 2016, her stated goal was to continue refining her predecessor’s focus on the Permian Basin.

In an April 2016 interview at the company’s Permian headquarters in Midland, Texas, she made no bones about her plans to snap up rivals to expand Occidental’s portfolio in what has since become the world’s biggest oil field.

Buying Anadarko would prevent Occidental from losing its position as the No 1 producer in the Permian to Chevron Corp, which is currently the second-largest. Hollub said she sees her company being able to reduce well costs for Anadarko’s Permian assets by more than 10%, and that the deal will boost cashflow, while moderating growth.

Just hours after Hollub went public with her offer for Anadarko, she revealed in a Bloomberg Television interview that she’s been pursuing the explorer since January 2018 — almost half the time she’s been leading the company.

However, Hollub still has some work to do to seal the deal. To pay for the merger, the company will issue about 309 million shares (a little less than half of its current number of shares outstanding) and sell off US$10 billion to US$15 billion in assets in two years. — Bloomberg