Occidental's new CEO says company's transformation shifts gears

CHICAGO (Bloomberg) -- After three years of spin-offs and asset sales from Brazil to California, Occidental Petroleum Corp. is ready to start growing again, said CEO Vicki Hollub.

Once the world’s largest independent oil explorer finishes reducing its footprint in Bahrain and Libya, Occidental will have achieved all the goals it set out to do when Hollub’s predecessor and mentor, Stephen Chazen, began dismantling the company’s far-flung empire to focus on Texas, Colombia and a handful of Persian Gulf countries.

“We’re almost done with all the things we wanted to do with our portfolio optimization,” she said during a conference call with analysts on Thursday, six days after taking on her new role.

Hollub became the first female CEO of a major U.S. oil explorer on April 29 when she succeeded Chazen upon his retirement from management. She’s taking control of the company at a time when oil prices are barely off 12-year lows and investment in new projects can be a tough sell.

New goals

Going forward, the goal will be to boost oil production in Occidental’s vast West Texas and New Mexico holdings and harvest more gas from rich deposits in places such as Abu Dhabi, she said. The company controls 1.4 Bbbl of crude in Texas that will take 22 years to flush out using high-pressure carbon dioxide; the cash generated from that will be funneled into higher-margin projects such as horizontal wells in nearby shale formations, Hollub said during the call.

The conference call capped a day in which Occidental boosted its full-year 2016 production target for so-called "core" operating areas by as much as 6 percent even as capital spending declined during the first three months of the year. The "core" excludes fields Occidental sold during its slimming-down phase, such as in North Dakota, or places like Libya, where civil unrest has disrupted the oil industry.

Absent a $285 million asset sale and a $550 million payment from Ecuador stemming from a 2006 oilfield seizure, Occidental’s first-quarter loss was 56 cents, wider that the average 41-cent loss estimated by 25 analysts in a Bloomberg survey. That compared with a loss of $218 million, or 28 cents, a year earlier. Shares climbed 3% to settle at $76.14 in New York Thursday.

The company said on the call it expects to receive another $300 million installment in coming months from Ecuador on the $1.1 billion the Latin American nation is ultimately required to pay under a ruling by a World Bank panel.

Spending cuts

Occidental, the world’s biggest independent oil explorer by market value, has been casting off lower-profit oil and gas fields and curbing spending to conserve cash and maintain dividend payouts to shareholders. Hollub said in an interview last week that she plans to expand the company’s presence in the Permian basin of Texas and New Mexico, one of Occidental’s largest cash-generating regions.

While other oil companies have been burning through cash reserves to cover expenses amid the market downturn, Occidental had $3.2 billion of cash on hand at the end of the first quarter. The company also has foregone the sorts of job cuts most rivals have resorted to; Hollub said on the call that layoffs have been avoided so Occidental can retain talent.

Career history

Hollub, 56, has been with Occidental for almost the entirety of her career. As a fresh engineering graduate in the early 1980s, Hollub was hired on at Cities Services Co. shortly before Occidental bought the Oklahoma-based oil and natural gas driller.

At the time of the merger, Hollub had just embarked on her first major project: an effort to double output from a field in LaSalle Parish, La., by flooding it with water to push out the most stubborn crude deposits. Using high-pressure pulses of carbon dioxide to flush aging oilfields -- a practice Occidental helped pioneer and uses in thousands of wells -- was still years in the distance.

“My first project, you might find very boring, but I was very excited,” she said in the interview in Midland, Texas. “My task was to figure out how to significantly increase production, and to significantly increase production in those days was to increase from 5,000 to 10,000 bpd.”

Hollub spent the next decade working to enhance production from various U.S. fields before heading overseas to work on Occidental’s joint venture with a Russian explorer in western Siberia.

That was followed by assignments in Venezuela and Ecuador before returning the U.S., she said. Hollub’s upward trajectory inside the company included overseeing all of Occidental’s Western Hemisphere oil and gas drilling before her elevation to global president last year.

She took the reins at Occidental in the midst of the worst energy rout in a generation, but Hollub said on the call she isn’t worried.

"We believe the world will continue to need oil, and when markets demand production growth, they will first look to the Permian and we will be ready," she said.