OXY Spin-Off; Headquarters Moving To Texas; Leaving California; OXY To Shed Assets "From North Dakota To The Persian Gulf"

Updates

February 15, 2014: OXY USA trying to put a positive spin on the new company they will spin off to develop the Monterey shale in California. Bloomberg is reporting: 

Occidental Petroleum Corp., the largest oil producer in the continental U.S., will split its operations in California into a separate publicly traded company in one of the final steps of a breakup plan. The new California company will be the biggest oil and natural gas acreage holder in the state with about 2.3 million net acres, Los Angeles-based Occidental said today in a statement.

[The new company] will have 8,000 employees and contractors and will establish its headquarters in the state.

“Creating two separate energy companies will result in more focused businesses that will be competitive industry leaders,” Chief Executive Officer Stephen Chazen said in the statement.

Chazen is targeting asset sales from North Dakota to the Persian Gulf to focus on Occidental’s most profitable operations after lackluster returns in 2011 and 2012. The California company could be worth as much as $19 billion and carry as much as $5 billion of debt, Tudor Pickering Holt & Co. analysts wrote today in a note to clients. The assets being spun off represent about 20 percent of total production.  

The new company will be more aggressive:

The company produces the equivalent of 154,000 barrels of oil and natural gas a day in the state and its operations there generated revenue of $4.3 billion last year with $1.7 billion of capital expenditure. Occidental plans to boost spending and debt at the California company, operating more as a traditional high-growth explorer, Leo Mariani, an analyst with RBC Capital Markets in Austin, Texas, wrote today in a note to clients. 

But, it is not going to be easy, from a companion article at Bloomberg:

“No one has found the secret sauce yet to the Monterey,” said David Hackett, president of Stillwater Associates, an energy consulting firm in the state. ’’Occidental is working hard at it, but they don’t understand it well enough to make it perform like everybody hopes it will.’’ 

“Historically, California has been a ‘hard to grow’ asset and suffers from severe regulatory constraints,” a factor that could weigh on how investors value the new company, Mariani said. The potential of the Monterey has been questioned by executives including Chevron Corp.’s John Watson and Continental Resources Inc.’s Harold Hamm. 

Also the environmental backlash, from the second Bloomberg article link:

Environmental groups concerned about the possibility of an oil renaissance are lobbying legislators and organizing protests against development. A federal judge in April ruled that the U.S. Bureau of Land Management violated the law by failing to sufficiently study the impact of fracking on the environment.

“If we go in the direction of North Dakota, the consequences for California would be devastating,” said Patrick Sullivan, a spokesman for the Center for Biological Diversity, which sued to invalidate government lease sales for drilling. ’’We’re determined to protect water, wildlife and public health.’’

Despite the obstacles, state oil production surged in February to the highest seasonal level in three years, according to U.S. Energy Information Administration data through November. Output climbed 13,000 barrels a day in the first 11 months of 2013 and rose 4,000 in 2012, marking the first annual rise since 1998.

Occidental plans to drill more than 1,000 wells in 2014, a 36 percent increase from 2013 that will help increase oil production by 11 percent, a growth rate that rivals some of the best onshore drillers. More than 10 percent of those wells will be in layers of shale rock, according to a Jan. 30 company presentation.

Original Post

 

This is a huge, huge story - I can't remember if I mentioned whether it was OXY or CVX or COP that the tea leaves suggested to me one of the three would be leaving California. I think I was thinking Chevron, but .... I digress. [Yes, based on this posting, I always thought Chevron would be the first of the three to leave California.]

The bigger story is just that: Rick Perry has done a great job enticing California companies to move (in some cases, back) to Texas.

Don sent me the link. I would not have seen it until later. This was worth waiting for. I was just getting to wrap it up for the day.

Reuters is reporting:

Occidental Petroleum Corp said it would spin off its oil and gas assets in California into a separately traded company and move its headquarters from Los Angeles to Houston, where it will be closer to its largest U.S. operations.

Occidental did not provide a valuation for the California business, but analysts at investment bank Tudor, Pickering, Holt & Co said it could be worth up to $19 billion. Analysts at Credit Suisse valued the unit at about $22 billion in October.

"Creating two separate energy companies will result in more focused businesses that will be competitive industry leaders," Chief Executive Stephen Chazen said on Friday.

Occidental, whose shares were up 3 percent at midday, said the California unit generated a pre-tax profit of about $1.5 billion in 2013.

The fruits and nuts hate Big Oil.

The California geology for fracking is very, very problematic.

The water for fracking is even more problematic.

OXY's Bakken wells, by the way, have been getting better and better. With all this restructuring, it seems this would have been a great time for OXY to sell off its Bakken assets if it were planning to do so. The tea leaves suggest to me that OXY is staying in the Bakken, but tea leaves have been known to be misinterpreted, even by the best readers.

I believe OXY has a huge play in the Eagle Ford. Have to look up some of this stuff later.

****************************

Video: the one who got away. 

The One That Got Away, Devil Doll

A man's gotta do, what a man's gotta do. It doesn't matter what you say.