Article in Barron's today, below. OXY could be broken up, probably should be. The US assets to me seem to be first tier, Permian and CA.
Doug Terreson, analyst at ISI Group, thinks Occidental is worth $105 a share as is, but thinks the breakup value is about 20% higher. He says the E&P operation is worth $38 a share, international $33, the Permian Basin assets $32, the California assets $15, the Abu Dhabi project $4, chemicals $3, its portion of the
BridgeTex oil pipeline in Texas $4, and other midstream assets $4. Excluding net debt, that would bring the stock to roughly $125 a share.
OXY is my oldest holding. I have owned it off and on for 30 years. It seems to go through long periods of undervaluation and short spurts of fair valuation. I have long considered it worth around $100. I liked it better when Ray Irani was running things. He was always criticized for his large salary but I thought he deserved it more than others in his field. I received a email this morning to vote my shares for this years annual meeting. I reviewed the proxy and have never in my life seen so many pages on executive compensation. It is hard for me to figure out exactly how much we pay the guys which irritates the hell out of me so as usual I vote no on these things. I know it is a exercise if futility but it makes me feel better.
They have made pretty good acquisitions over the years and I have been expecting them to so again. I used to think they should take over DNR but now I think WLL would be a good fit. Their international has always been a strong part of the company. They have been in bad places around the world and seem to get along with the locals despite what the idiots in Washington are doing.
The stock has held up well in the last few weeks of market weakness so it seems that it is being accumulated by someone. Probably the insiders at Barrons.
Birdog, I have never owend OXY because of the pay of Irani, his was always off the charts, missed a good company, but who knew oil would go from $10 to a $100 in a few years. I used to deal with exec comp back in my corporate days, and it was just then beginning to get out of hand, it is completely out of control, but look at the Boards, they are over compensated as well are execs of other companies, and the more the competitors' pay go up, the more they make. I just filled out a couple of proxies, thought the same thing, to vote no, but the little guy has really no influence and the big investors are all over paid as well, so they have no incentive to control pay. Their are a few good stewards of owner equity, my favorite is Rich Kinder, pays himself a dollar, the co has no perk, and he is worth billions because of the increase in market value overtime. Dan Duncan at Enterprise was another example, he was always thinking long term value and since he was he owned big chunk of the co, did the right things. I remember when he decided to get rid of the incentive distribution rights, some thought prematurely but it worked to his benefit, he lowered the cost of capital for the whole entity and was able to grow faster, he ended up making more than he would have otherwise. And then there are the Wards and Aubrey's of the world. Ward was paying his Directors something like $300k per year for four days work a year, they are not going to resist whatever he wants to do. Lots of things have been out of control for a while now, the Federal Reserve is probably the best example. And we trip merrily down the asset bubble road. It's not going to end well, but it could be a few years. Hard to figure out what to do and
when to protect your investments. Met with Schwab folks yesterday, and everyone there thinks this is a market top, which tells me it probably isn't. Seems investors will need to get used to the fact that 08 won't happen again for a few years.