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Oxy Petroleum's 'No fight at the top' statement won't end concerns

April 08, 2013|By Ronald D. White
  • Occidental Petroleum Corp.'s board of directors issued an unusual statement Monday, deploring what it called "inaccurate speculation" and saying that there was "no fight at the top" involving the company's senior management.
Occidental Petroleum Corp.'s board of directors issued an unusual… (Kevork Djansezian / Associated…)

Occidental Petroleum Corp.'s board of directors issued an unusual statement Monday, deploring what it called "inaccurate speculation" and saying that there was "no fight at the top" involving the company's senior management.

Analysts said that the statement was unlikely to quell questions and confusion among shareholders over the Westwood company's succession plans -- including reports that Chairman Ray R. Irani was trying to force out Chief Executive Stephen I. Chazen.

The statement by the Occidental board mentioned that last year "presented challenges, including disappointing stock performance."

"As these 2012 events unfolded," the board statement Monday added, "the independent directors began to reflect on the longer term succession plans for the Company’s senior management. After extensive deliberation, they concluded that now is the time to seek new leadership to be in place for the longer term."

The board statement left some observers scratching their heads and wondering what was happening at a company long praised by analysts as one of the best run in the oil industry.

"It's a mess at the top," said Fadel Gheit, senior energy analyst at Oppenheimer and Co. "I have never heard of a board of directors who starts a succession plan when the CEO is already past retirement age."

Irani, 78, left the CEO post to become executive chairman of the board in 2010. That year, Chazen, then the president and chief operating officer, was named chief executive. Chazen is 66.

Occidental shares have taken a beating.

After shares fell in 2011, the Westwood-based company's stock lost nearly one-fifth of its market value in 2012 as costs escalated and oil production growth failed to meet expectations.

Not used to such sustained stock weakness at a time when the industry as a whole was booming, one group of shareholders, First Pacific Advisors, issued a statement this month that called on the company to end its chief executive search, keep Chazen and have Irani retire immediately.

Among oil companies, few have been run like Occidental. Armand Hammer, one of the original oil industry giants, ran the company for decades.

Irani was 76 when he finally stepped down as chief executive.

The succession plan was supposed to have been addressed beginning in 2010 when analysts said that one of Chazen's most important tasks would be to groom his replacement.

Phil Weiss, an analyst at Argus Research, said he would feel better about the search for a successor to Chazen if it was really based on a desire to find the new leadership for the company for the next 10 years.

"I just hope it's not a desire to dump him after one bad year," Weiss said.

Today's board statement reaffirmed that Irani will retire as executive chairman and as a member of the board effective at the end of 2014.

"In the meantime, as the search effort proceeds, Mr. Chazen remains in place as CEO," the board statement said, "with the full authority of that office. He has assured the Board that he will stay as CEO until a replacement is designated. The Board is committed to having him do so."

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