Occidental Petroleum Corp. has announced it will reduce its 2020 capital spending and corporate and operating costs in response to continued pressures on the oil market and global economy.
Occidental said it plans to cut its capital spending to between $2.7 billion and $2.9 billion this year in a March 25 statement. The move further reduces the company’s spending outlook from the $3.5 billion to $3.7 billion range it announced March 10, and it is nearly 50% less than its original capital spending guidance of $5.2 billion to $5.7 billion for 2020.
Occidental President and CEO Vicki Hollub said earlier in March that the reductions were planned to reduce the company’s debt and strengthen its financial position due to the recent steep drop in commodity prices worldwide.
The company also announced it will cut its planned 2020 operating and corporate costs by at least $600 million, including salary reductions for its employees.
"We are making solid progress with additional cost reductions to help withstand the low commodity price environment and other macroeconomic pressures impacting our industry and the global economy," Hollub said in a March 25 statement. "Based on our team’s recent efforts, we now expect to significantly lower our costs in all aspects of the business. We will continue to take actions as necessary to further strengthen our balance sheet and ensure the long-term viability of our business."
Occidental spokesperson Melissa Schoeb said in an email reduced compensations will apply to employees across the company as it responds to the coronavirus outbreak and related financial effects.
"During this unprecedented time impacting our industry and the global economy, we’re taking aggressive actions to ensure the health of the company while protecting jobs," Schoeb said. "We notified our employees of a number of measures we will be implementing, including compensation reductions, which will impact everyone at the company starting with the management team. We deeply value our employees and want to keep them working for the health of their families, the communities we serve, and the overall economy."
The company previously said it had identified some necessary staffing reductions following the Anadarko deal, while Hollub said in January that Occidental plans to retain its presence in The Woodlands. Occidental signed a 13-year lease for one of The Woodlands Towers at The Waterway, the former home of Anadarko, after the Howard Hughes Corp. acquired the buildings in December.
In addition to its reduced spending and corporate costs, Occidental will also see a changed board of directors in 2020. The company announced March 24 that former CEO Stephen I. Chazen had been elected chairman of the board and on March 25 announced the appointment of three new board members designated by investor Carl C. Icahn and affiliated entities.
Chazen first joined Occidental in 1994 and served as its CEO from 2011-16 and a director from 2010-17. He currently serves as chairman and CEO of the Houston-based Magnolia Oil and Gas Corp., where he will remain following his appointment to the Occidental board.
"The current macroenvironment is among the most difficult I have seen in my career. I am confident that the board and this management team, led by Vicki Hollub, have the operational experience to guide Occidental through the challenges ahead, and my goal is to help them succeed,” Chazen said in a March 24 statement.
The three new board members, Andrew Langham, Nicholas Graziano and Margarita Paláu-Hernández, were appointed March 25 as independent directors in an agreement with Icahn. The directors’ appointments will run through the board’s 2020 annual stockholder meeting, where they will be nominated for election as directors. Current directors Spencer Abraham, Eugene Batchelder, Margaret M. Foran and Elisse B. Walter are expected to retire from the company’s board at the annual meeting.
“We are pleased to reach this agreement with Carl Icahn, and we look forward to working with Carl Icahn’s board members and the rest of the board and management as a team to navigate the current difficult environment,” Chazen said in a statement.
Icahn had previously criticized Occidental’s leadership for its handling of the company’s 2019 acquisition of Anadarko Petroleum Corp., most recently in a proxy statement filed with the U.S. Securities and Exchange Commission earlier in March. In that filing, Icahn and his related entities had said they intended to nominate new directors for the Occidental board at its 2020 stockholder meeting and propose amendments to the company’s bylaws related to its corporate leadership.
“[Occidental’s] CEO and board unanimously voted to roll the dice and bet the company by risking stockholder money on a disastrous acquisition. They lost the bet. They have egregiously failed [Occidental] stockholders and should be removed,” the statement said.
Occidental said the Icahn Group had withdrawn its board nominees and proposed amendments March 25 after the company said it adopted amendments to its bylaws related to corporate governance and will recommend its shareholders adopt additional amendments related to stockholder rights at its annual meeting. A new board oversight committee set to include two of Icahn’s new directors will also be created.
“We believe Oxy is a good company with good assets. We are pleased to have reached this settlement and can now focus on working with Steve Chazen to enhance value for all Oxy stockholders,” Icahn said in the company statement March 25.