Carl Icahn won three seats on Occidental Petroleum’s board Friday, giving the billionaire activist investor greater control over the direction of the embattled Houston energy company.
Shareholders who gathered virtually for Oxy’s annual meeting elected Icahn Capital Portfolio Manager Nicholas Graziano, Icahn Enterprises General Counsel Andrew Langham and Margarita Paláu-Hernandez, CEO of Hernandez Ventures, to the company’s 11-member board of directors. The three Icahn-backed members were added to the board as a concession to Icahn, who has been vocal in his opposition to Oxy’s high-stakes takeover of rival Anadarko.
Yet Icahn, who also pushed Oxy to bring back former CEO Stephen Chazen to lead the company's board, faces an uphill battle to turn around the company and get a return on his investment. The activist investor is Oxy’s second largest shareholder with 88.6 million shares worth more than $1.1 billion, or about 9.9 percent of the company.
“Carl is kind of stuck,” said Ed Hirs, a petroleum economist with the University of Houston. “He's got three of his team in there, but quick frankly, Occidental is in a bind. The value of its assets is much less than the value of its debt. There’s no quick flip on this.”
OXY WOES: Unable to sell assets, Oxy seeks other ways to pay debt
Oxy on Friday faced shareholders for the first time since acquiring Anadarko in August and saddling the company with some $40 billion of debt. The megadeal, which made Oxy the largest player in the Permian Basin of West Texas, was a huge gamble that the world’s leading oil producers would play well together and that oil prices will continue to rise amid the U.S. shale boom. However, both linchpins of the deal suddenly fell apart in March, after Saudi Arabia started a short-lived price war with Russia and the growing coronavirus pandemic shut down economies around the world.
Oxy, which lost $2.2 billion in the first-quarter, has responded to the subsequent oil collapse by slashing overhead and operating expenses by $1.2 billion, cutting capital spending on new wells by $2.5 billion and offering voluntary buyouts. The company also capped executive salaries to $250,000, and twice slashed its quarterly shareholder payout, announcing on Friday that it would pay a dividend of just 1 cent a share in July, down from 79 cents before the pandemic.
“We’ve taken a series of decisive financial and operational actions to ensure that Oxy has the resiliency to weather this difficult period while positioning the company to succeed in future higher price environments,” Oxy CEO Vicki Hollub told shareholders Friday. “We’ve been encouraged by recent green shoots of recovery, but know that we must continue to demonstrate low-cost leadership while ensuring the safety of our employees.”
Oxy has been trying to sell $15 billion of assets by the end of next year to help pay down its massive debt. But Oxy's planned sale of former Anadarko assets in Algeria and Ghana to French oil major Total fell through earlier this month as oil prices plunged along with the value of oil and gas assets. Hollub, who was re-elected to Oxy’s board Friday, said the company plans to market its Ghana assets to other potential buyers.
The company faces debt payments of nearly $12 billion between now and 2022. Oxy this month said it had $1 billion in cash and an additional $5 billion under its revolving line of credit as of April 30.
TOTAL COLLAPSE: Total backs out of deal with Oxy to buy Anadarko assets in Ghana
Shareholders on Friday also authorized Oxy to issue 400 million in shares to be used instead of cash as dividend payments, and issue warrants to Warren Buffett’s Berkshire Hathaway for up to 80 million common shares. Berkshire Hathaway last year helped finance Oxy’s acquisition of Anadarko by buying $10 billion in preferred shares.
Oxy faces lawsuits from several investors over the Anadarko deal. Earlier this week, former Anadarko shareholders sued Oxy in a New York state court in Manhattan, arguing the company should have disclosed how quadrupling its debt load to $40 billion would leave it “precariously exposed” to oil price volatility. The lawsuit also criticized Oxy’s decision to issue $10 billion in preferred stock to Berkshire Hathaway, saying it compounded the overleveraging.
Oxy shares closed at $12.95 on Friday, down 5 percent from yesterday and down 76 percent from its 52-week high of $54.05. The company’s market value is $11.7 billion, less than a third of what it paid for Anadarko less than a year ago.
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Oxy shareholders give Icahn 3 board seats - Houston Chronicle
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