The president of Occidental Petroleum Corp., citing a hereditary heart condition he hadn't discussed publicly, said Monday that he would retire at the end of the year.
The surprise announcement by Dale Laurance, president since 1996, came as Los Angeles-based Occidental said its second-quarter profit surged 55% from a year earlier. Soaring oil prices, stepped-up production and higher chemical earnings boosted the results.
Laurance, 59, had been considered a leading candidate to succeed Ray Irani, Occidental's 69-year-old chairman and chief executive. With Laurance departing, "it brings the issues of succession to the front burner," said Fadel Gheit, an analyst at Oppenheimer & Co.
Occidental said Irani had no plans to retire. The company doesn't have a mandatory retirement age for senior managers.
Laurance relinquished his duties as head of Occidental's oil and natural gas operations on Monday, handing them to John Morgan, 51, an Occidental executive vice president. Laurance said that he would remain president until Dec. 31 and that Irani then would take on that job.
Irani's heir apparent now appears to be Occidental's chief financial officer, Stephen Chazen, 57, who was given the added title of senior executive vice president Monday.
"By all measures he's clearly the No. 2 guy now," Laurance said in an interview.
He said some of Occidental's 7,100 employees and certain shareholders knew of his family's heart problems, although "it wasn't something I had held a press conference about."
There are "chronic heart-related illnesses in the family," Laurance said, adding that he decided to retire as a precaution. "Right now I'm still healthy, but it's important I quit now and take care of it so my health doesn't deteriorate."
His decision caught some analysts off guard. "I had not expected Dale to bow out, and I was not aware of his family situation," said Irene Haas, an analyst at investment firm Sanders Morris Harris Group Inc.
She noted that Occidental "typically is tight-lipped about their operations" and that Laurance's announcement "is in line with their corporate personality." She said Occidental's remaining management was strong "and this is a good time to hand over responsibility."
In a note to clients, analyst L. Bruce Lanni of A.G. Edwards & Sons Inc. said that while Laurance's departure "may be of concern to some investors," the management changes Monday showed a "succession plan has been in place."
After the announcement, Occidental's stock closed down 47 cents to $50 a share on the New York Stock Exchange. Analysts said that mostly reflected profit-taking after a recent rise in Occidental's price.
In the three months ended June 30, Occidental's profit jumped to $581 million, or $1.46 a share, from $374 million, or 97 cents, a year earlier. Wall Street expected earnings of $1.43 a share, according to analysts surveyed by Thomson First Call. Occidental's second-quarter revenue climbed 21% to $2.75 billion from $2.27 billion.
Irani became the company's chief executive in 1990 after Armand Hammer, the founder and flamboyant leader of Occidental for 34 years, died at age 92.
As CEO, Irani shed assets unrelated to Occidental's core energy business and reduced overhead and debt costs. In the late-1990s, Irani and Laurance made several deals to improve production from Occidental's portfolio of properties. The new stable of assets enabled the company to boost earnings and cash flow even when crude-oil prices dropped.
Now, facing eventual production declines at some fields, Occidental is looking for additional ventures in foreign countries.
That includes Libya, where U.S. economic sanctions have been eased and ruler Col. Moammar Kadafi is again embracing foreign investment. Occidental suspended all activities in Libya in 1986 because of the sanctions.
"There is a desire by us to go back to Libya," Irani said Monday on a conference call with analysts. "But after being gone for 18 to 20 years, it takes a while to get everything in order."