Occidental Reaches Agreement With Icahn -- WSJ
By Rebecca Elliott and Ryan Dezember
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (March 26, 2020).
Occidental Petroleum Corp., the largest oil producer in the
giant Permian Basin, has ceded to activist investor Carl Icahn's
demands and announced deep spending cuts in a bid to survive the
steepest crude-price plunge in decades.
The truce with Mr. Icahn, unveiled Wednesday, is the culmination
of a monthslong battle that began last year after Occidental outbid
Chevron Corp. for Anadarko Petroleum Corp.
Two of Mr. Icahn's deputies, Andrew Langham and Nicholas
Graziano, will receive Occidental board seats under the agreement.
Herbalife Nutrition Ltd. board member Margarita Paláu-Hernández
will join as an independent director.
Occidental's board will also create a new board oversight
committee that must be informed of any offers to acquire the
company or its assets. Both of Mr. Icahn's deputies will serve on
the new board.
Occidental also installed its former chief executive Stephen
Chazen as chairman.
Meanwhile, the company is cutting salaries for its U.S.
employees by up to 30% to slash expenses, according to an internal
email reviewed by The Wall Street Journal. On Wednesday morning, it
said it would cut its 2020 capital spending budget by about $800
million, on top of a previously announced $1.7 billion cut.
Reductions in operating and overhead spending are expected to total
about $600 million, the company said Wednesday. The company said
these steps would reduce its oil and natural gas output in 2020 by
The Houston company is facing plunging oil prices, high debt
from an ill-timed $38 billion Anadarko acquisition and falling
demand due to a halt in economic activity because of t he
Chief Executive Vicki Hollub, who presided over the Anadarko
deal last year, is expected to keep her job -- albeit at a much
lower salary. Ms. Hollub's salary will be slashed by 81% and the
oil-and-chemical company's top executives' pay will be cut by an
average of 68%, according to the email.
Ms. Hollub earned compensation valued at $14.1 million in 2018,
according to the company's most recent annual proxy statement,
mostly in stock.
Employee bonuses and perks, such as gym memberships and commuter
subsidies, are set to end in April.
The company said the drastic steps were necessary to weather the
steep decline in oil prices. The benchmark U.S. oil price is down
61% since the start of the year, closing at $24.01 a barrel on
"The coronavirus pandemic has led to an unprecedented decline in
demand for oil on a global basis," the email said. "On top of that,
the price war between Saudi Arabia and Russia has further
exacerbated the situation. We must take immediate and unprecedented
actions for our company."
Occidental released a statement confirming it was taking steps
to "ensure the health of the company while protecting jobs."
Earlier this month, it cut its dividend 86% and made an initial
round of capital spending trims.
The entire U.S. oil industry has been badly battered in recent
weeks, and Occidental has been among the hardest hit.
Dozens of U.S. shale companies also have slashed spending.
Chevron and Royal Dutch Shell PLC cut their capital budgets and
suspended share buybacks, but neither took the step of
across-the-board salary cuts.
Occidental's market capitalization has since plunged below $10
billion, from more than $46 billion at the time of the Anadarko
The company had staved off Mr. Icahn for months, but had to give
up significant ground as oil prices plunged below $25 a barrel.
Write to Rebecca Elliott at firstname.lastname@example.org and Ryan
Dezember at email@example.com
(END) Dow Jones Newswires
March 26, 2020 02:47 ET (06:47 GMT)
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