Shortfall May Force Cuts at Occidental

Occidental Petroleum Corp. said it will have a cash shortfall for 1998 that may force it to sell assets, restructure debt or reduce spending.

The Westwood-based company said in a filing with the Securities and Exchange Commission that if oil prices remain low and the cash shortfall continues, it may “sell assets, reduce capital spending, restructure debt covenants, obtain additional equity financing or take other actions.” The filing did not say how much the shortfall will be.

Occidental also said in the filing that it expects a decrease in net equity, or value of the company, largely because it will pay $91 million in dividends for the fourth quarter. It also said book value will continue to go down if the net cash shortfall and dividend payments continue.

An Occidental spokesman declined to comment Wednesday on the filing.

Occidental’s common stock dividend is $1 a share, representing a yield of 5.69%. That’s almost twice the average yield of 2.91% for the other eight members of the Standard & Poor’s index of large domestic oil companies.

Crude oil prices on the New York Mercantile Exchange averaged $12.92 a barrel in the fourth quarter of 1998, down more than $7 from the year-earlier period. The benchmark closed at $12.80 on Wednesday.

Prices at the end of 1998 for basic petrochemicals such as ethylene and polyethylene fell by 40% to 45% from a year earlier. Occidental generated 54% of its 1997 revenue from its chemicals business.

Occidental’s third-quarter earnings were $3 million, or a penny a share. That was down 98% from the year-earlier period. The company is expected to lose 12 cents a share in the fourth quarter, the average estimate of analysts polled by First Call Corp.

The company had revenue of more than $8 billion last year.

In November, Occidental said it would cut 500 jobs over the next two years, bringing its total job cuts over a three-year period to 1,000. The company employed about 12,000 people at the end of 1997. Occidental also cut 1999’s capital spending budget by 21% because it expects oil prices to remain low.

Occidental shares closed up 44 cents at $17.56 on the New York Stock Exchange.