Occidental Petroleum Corp. is selling off a minority stake in Middle East and North Africa oil fields along with other assets in an effort to boost value for shareholders.
The Westwood oil and gas giant said those decisions come as part of a push to streamline operations and boost profitability. Analysts say Occidental is looking to soothe investors whose unhappiness with its share price resulted in the ousting of longtime Chairman Ray Irani earlier this year.
“Our goal is to become a somewhat smaller company with more manageable exposure to political risk,” Stephen I. Chazen, the company’s chief executive, said in a statement Friday. “We will continue to consider additional strategic alternatives of the company to maximize total returns to our shareholders.”
Occidental’s holdings in the Middle East and North Africa include interests in the Sirte Basin in Libya, the Zubair Field in Iraq and the Awali Field in Bahrain. Some analysts have long predicted the company would sell off assets in that region as part of a corporate overhaul.
Other plans include the sale of a portion of Occidental’s 35% stake in the general partner of Plains All-American Pipeline for $1.3 billion before taxes. The company will also pursue “strategic alternatives” for other assets such as its oil and gas interests in the Williston Basin, Hugoton Field and the Piceance Basin.
Occidental said these sales would result in a “significant amount of proceeds.”
Analysts were mixed in their reactions.
Fadel Gheit, senior energy analyst for Oppenheimer & Co., was among those who advocated splitting the company into separate entities as ConocoPhillips and others in the industry have done in recent years.
“Occidental is basically doing a partial slim down, and investors wanted a total breakup,” he said. “The market did not take it very positively.… It was not met by the enthusiasm that people thought it would.”
Shares of Occidental were up 21 cents, or 0.21%, to $98.29 on Friday.
Over the last few years, Occidental’s shareholders became increasingly vocal as its stock lagged behind others in the industry.
Investors were disappointed by the Monterey Shale in California, which was touted as a potentially big source of oil by Occidental and others but has so far fallen below expectations. Others have questioned the acquisition of an energy trading business in 2009 that has produced mixed results.
“There was no major smoking gun that was responsible for the underperformance. It was small mistakes,” Gheit said. He compared the company with a straight-A student who suddenly began earning Bs. “You are not a failing student, but investors are disappointed.”
The company’s performance led to a boardroom spat this year that became public when the board said it was seeking a successor to Chazen.
Several shareholders viewed that move as a power play on the part of Irani, the former chief executive, and called for him to step down. In May, shareholders voted Irani off the board after nearly three decades as a company director.
Although some analysts said Occidental’s restructuring plans did not go far enough, others applauded the company’s strategy.
“What they are doing is in line with industry trends” of leaving volatile regions abroad and investing more within the U.S., said Amy Myers Jaffe, executive director of energy and sustainability at UC Davis. “Over the long term, as events in Libya and Egypt have shown, you can wind up with high geopolitical risks in some projects.”
Jaffe said she didn’t think Occidental would benefit from a breakup of its divisions. The current oil industry trend of splitting up companies, she said, has echoes of the mergers boom spurred on by Wall Street during the 1980s.
“It’s a typical Wall Street raider mentality,” she said. “We are going to gut the company now and take our money this quarter. They were wrong then and my opinion is they are wrong now.”