Occidental Petroleum Corp. is headed for a sweeping restructuring under Ray R. Irani, newly installed as chairman, president, and chief executive officer.
Formerly president and chief operating officer, Irani was named to his new posts upon the death last month of Armand Hammer, Oxy chairman and CEO for 33 years (OGJ, Dec. 17, 1990, p. 30).
Irani said the restructuring program will focus on Oxy's strengths in oil, gas, and chemicals and establishment of a more prudent debt policy. The program will slash long term debt by 40% and significantly improve the company's liquidity. The program also aims to yield increases of $200 million/year in net income and $600 million/year in cash flow.
In key moves, Oxy plans to:
- Cut debt by at least $3 billion through the sale of assets, with no "sacred cows" protected from the auction block.
- Cut costs and eliminate losses by shucking a number of unprofitable businesses, including a role in the big Tengiz petrochemical development project in the Soviet Union.
- Take a nonrecurring, after tax charge of $2 billion against fourth quarter 1990 earnings to provide for estimated losses upon withdrawing from the unprofitable businesses and other things.
- Adopt a new common stock dividend rate of $1/share/year. "As earnings improve," Irani said, "our target dividend will be 50% of earnings."
Assets that no longer fit with the company's principal business strategy will be prime candidates for sale. Although Oxy said it is committed to maintaining a substantial presence in its core businesses, it may be necessary to sell some of those assets to achieve its debt reduction goal.
Businesses earmarked for sale to cut costs and reduce losses include interests in the An Tai Bao coal mine joint venture in China, oil shale research and development, cattle and horse breeding, land and hotel development, film production, and hybrid seed research and development.
The fourth quarter charge also will provide for current and future environmental costs, write down mines idled by depressed business conditions in coal, write down certain U.S. and non-U.S. oil and gas and chemical assets to more closely reflect current market values, and provide employee severance costs.
Included in the charges will be the company's interests in Peru and Libya as well as potential costs relating to cleanup of Love Canal.
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