Occidental Petroleum small but well positioned
Question: I am a longtime shareholder of Occidental Petroleum Corp. What do you think of my stock?
Answer: This Los Angeles-based energy company has a strong balance sheet, little debt and plenty of cash, plus industry-leading technology effective in tapping older oil and gas assets.
However, it must compete against much larger global players with greater financial clout in a field that is subject to volatility in demand and pricing. That could make a difference as resources become less available in the future.
Shares of Occidental are down 7.2% this year following last year’s 38% rise. Despite disappointing results from its Phibro commodities trading unit acquired from Citigroup Inc. last year, Occidental’s earnings rose 56% in the second quarter on higher oil and gas prices and increased greater production.
The biggest public complaint against the firm is over the compensation of 75-year-old Chairman and Chief Executive Ray Irani, who received $52.2 million in total direct compensation last year. Although Irani has done a commendable managerial job since taking charge in the 1990s, critics consider his pay excessive.
The California State Teachers’ Retirement System and San Diego-based investment management firm Relational Investors, both critical of Irani’s compensation, have launched a fight for four seats on the firm’s 13-member board to be decided at next year’s board meeting. They contend that Irani dominates a board of long-term directors favorable to him and also consider the lack of a CEO succession plan detrimental to development of senior management.
The average Wall Street analyst rating of Occidental is a “buy,” according to Thomson Reuters, which reports four “strong buy” ratings, 12 “buys,” three “holds” and one “sell.”
Analysts on average expect Occidental’s earnings to increase 47% this year, compared with 61% projected for the overall oil industry. Next year’s forecast is 27% versus 17% industrywide. Analysts expect Occidental to post a five-year annualized growth rate of 14%, comparable to that projected for its peers.
Occidental specializes in the exploration and production of crude oil and natural gas primarily in the U.S., Latin America and the Middle East. It has reentered the Libyan market and is involved in the development of oil fields in Iraq. It also makes chemicals and operates midstream assets that include pipelines and carbon dioxide processing plants.
The company has steadily acquired leases in the U.S. where the company can use its enhanced recovery techniques. The downside is that such declining fields are more costly to put into production.
Pricing financial planners
Question: How do financial planners base their rates? What should I ask for? What do you ask for beyond price?
Answer: Be sure to have an initial meeting with a prospective planner to compare philosophies and find out fees.
“Pay attention to whether the planner is focused more on the process or the product, because an entire meeting to explain products is a red flag,” said Richard Salmen, national chairman of the Financial Planning Assn. and senior vice president of GTrust Financial Partners in Overland Park, Kan. “A planner must get to know you and your financial goals before starting to recommend products to fix problems.”
Financial planners can charge for services a number of ways:
• An hourly fee or flat per-project fee.
• A commission in which the advisor is paid a fee by the mutual fund company or insurer providing financial products.
•An asset management fee in which you are charged an annual fee, usually ranging from 0.50% to 1.5% of assets.
•A retainer fee in which you write one check per year to the advisor that covers his or her help for the year.
Andrew Leckey answers questions only through the column. E-mail him at yourmoney@tribune.com.
