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Occidental Petroleum Corporation Message Board

  • save_n_investte save_n_investte Jun 30, 2013 9:03 AM Flag

    Will OXY Breakup Create Shareholder Value?

    I don't know whether it will or not. However, besides being long in OXY, I'm long in COP also. About 13 months ago Conoco Phillips spun off it's refinery business, Phillips 66, PSX. COP shareholders received shares of both the new COP and PSX.

    In the 13 month period since the spinoff, I have been pleased with the shareholder value created from the spinoff. The pps of COP has increased approximately 20% with a dividend payout of 4.4%. Simultaneously, the pps of PSX has increased approximately 90% with a dividend payout of 2.2%.

    Before the spinoff, the pps of COP had been stagnant for a long time, just like OXY. Good luck to all OXY longs.

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    • Breaking up OXY is a lot different than the COP deal. To begin with, OXY does not have a refining business, only a relatively small commodities chemical company. From reading about this company it appears this was part of the last CEO's empire building and appears to really have no rhyme or reason. If you look at chemicals share to earnings, it is not too large. Looks more like a sale than a spin off. PSX (the COP spin off) holds over 10 refineries, 1/2 of CP Chem, 1/2 of DCP midstream and all kinds of other midstream and pipeline assets owned directly. In short it is a huge operation.

      Getting back to OXY, they do have some midstream, but it is hooked into some of their production and looks more like a candidate for an MLP, but they could also sell it off. The spin offs could be a break up of the E&P part of the business. A lot of the talk has been about spinning off all of the Mid-east/Africa operations into a separate company and or doing the same with California assets. There are so many possibilities. The COP decision was basically spin off anything not E&P into PSX and then let them decide what to do. We see that PSX has decided to keep all the JV's and then take most of the directly held pipeline assets and drop them down to their own MLP. I do not remember if the midstream will also go at this time.

      Depending on exactly what they do, a huge buy back might be part of the restructuring. For example, if they decide to sell more than spin, they could take most of the proceeds and buy back shares. Also, could do a buyback and special dividend. I am long OXY, COP & PSX and hanging in to reap the rewards. The big shareholders did not kick the chairman out only to have the current CEO sit around and do nothing.

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