Oxy, CEO of Anadarko: "We would not let him be kidnapped"

The executive director of Occidental Petroleum pledged Friday to defeat skeptical or angry investors who believe that Oxy has paid too much for his victory over the war in order to acquire Anadarko Petroleum on the much larger Chevron.

At OXY's annual meeting on Friday, CEO Vicki Hollub said she was ready to embark on the "transformational" integration of Woodlands-based Anadarko, after agreeing to buy back the company for $ 38 billion Thursday night, when Chevron decided to withdraw from the negotiations.

"We would not let him be kidnapped," Hollub said. "This is too important for our shareholders."

Houston-based Oxy shares plunged nearly 20% in one month – including a further decline on Friday – because of Wall Street fears that Oxy is too much debt to acquire a company which is not much smaller than Occidental.

"In the end, this is going to be a good thing for our shareholders, and they are starting to see it," Hollub said, acknowledging that she still had some work to do.

RELATED: Oxy's $ 38 Billion Wins Anadarko While Chevron Goes On

And she pointed out that there was a big difference between determination and despair.

"We were absolutely not desperate," she said. "We were in a strong position."

But Hollub did not have to deal with angry shareholders on Friday. Whether it is bad weather or the latest news before the meeting, no investor has risen to ask him a question on Friday. Only about 100 people attended the meeting in a white, windowless conference room at Oxy headquarters, most of whom were Oxy employees or media outlets.

The shareholder Steve Lukingbeal, of Houston, attended his first annual meeting of Oxy because he was curious to know all the transactions.

"I am always open-minded," he said, recognizing both the potential and the risks of the deal with Anadarko. "It's a matter of time, but I was very impressed by Ms. Hollub's defense of the acquisition."

Still, many investors have expressed dissatisfaction from afar, including large institutional shareholders such as T. Rowe Price. Some voted in protest against the members of the Oxy board, but they were all approved Friday with the support of at least 70% of the votes cast.

David Katz, whose firm Matrix Asset Advisors in New York holds more than 240,000 Oxy shares – less than 1% of the company – did not bother to travel to Houston, but voted against the board of directors. # 39; administration.

"It's disappointing and frustrating," Katz said. "It seems that the CEO decided on Anadarko two years ago and that she was not going to let the facts change."

Among the issues still surrounding this agreement, there is the fate of the Anadarko campus at The Woodlands and its some 2,000 employees. Chevron was committed to keeping the campus open and retaining many workers, but so far, Oxy has been silent on the subject and has not commented yet.

Oxy, which employs about 3,000 people in the Houston area, is likely to face considerable pressure to reduce its debt and costs, including jobs, after finalizing the agreement by the end of 2019. Oxy should already move its current headquarters from its Greenway Plaza hub to the former ConocoPhillips headquarters in the Houston Energy Corridor.

The chief financial officer of Occidental, Cedric Burgher, notably mentioned the job cuts and the sale of real estate as well as the fleet of four Anadarko jet planes as a way to reduce costs.

"We do not think we need all these jets, and we can reduce that number, as well as, of course, the number of people, the duplication of offices and real estate," Burgher said Monday, at a news conference. a conference call. Wooded land.

Glenn Vangolen, senior vice president of business support at Oxy, will lead the integration team with people from both companies.

The agreement for Oxy, which includes the jewel acreage of the Anadarko crown in the Permian Basin, in western Texas, ensures that it will be one of the leading Permian producers booming in the coming years.

For his part, Hollub refused to take much of the credit for his victory in the auction war.

"What you should know about me is that I am an engineer and I have very little experience in mergers and acquisitions," she said. , praising his "dream team" in mergers and acquisitions.

She said Vice President Michael Ure identified Anadarko as an ideal candidate for the takeover two years ago.

The two most important steps in obtaining this funding included quick trips to Paris and Omaha, Neb. They flew to sell Anadarko's African assets to France's largest energy group Total for $ 8.8 billion, including the multi-billion dollar liquefied natural gas project in Mozambique. start the heavy construction.

Then, they traveled to Nebraska to meet with Warren Buffett to have his Berkshire Hathaway company commit $ 10 billion to help finance the deal with Anadarko. Some shareholders complained that Oxy had sold too large a stake in Buffett.

"For this agreement to be concluded, we had to have these funds," Hollub said Friday. "The timing was critical for us."

These changes allowed Oxy to soften its offer, including bringing the cash portion of the cash-and-stock transaction to almost 80%, eliminating the need for a shareholder vote.

Hollub said that Oscar Brown, senior vice president of Oxy's strategy, had led the negotiations with Total, then flew to her in Nebraska. It took less than 90 minutes to convince Buffett to intervene, she said.

Mizuho Securities analyst Paul Sankey praised Oxy's value for Africa's assets, but said the stake she had to give up was to win the win over Buffett.

"(Hollub) had a self-inflicted defeat in the funding deal with Warren Buffett, which damaged his reputation with existing shareholders, and a real victory with Total's massive deal" said Sankey in a statement.

Part of the reason why Oxy was willing to offer $ 5 billion more than Chevron is because she explained that Oxy was the most efficient operator of the Permian because it drilled them. well performing wells at lower cost and allowed the main activity of enhanced oil recovery to develop further. wells maturing. Hollub estimates that Oxy can save $ 10 billion in the Permian over time compared to his peers.

"We can get more out of these assets than any of our competitors," Hollub said.

The main production area of ​​Anadarko is currently in Colorado's DJ Basin. Hollub said he was confident that Oxy could pass on these best practices from the Permian to Colorado.

RELATED: Q & A: How did the CEO of OXY survive the collapse of oil and came out stronger?

For its part, Hollub is from Alabama and is a fan of Alabama Crimson Tide football. She began her career in the oil and gas industry in 1981 working in Mississippi with Cities Service, the company best known for having founded the Citgo brand. A year later, Los Angeles – based Occidental bought Cities Service and Hollub began a long career at Oxy, which in 2016 made her the first woman to head a major company. oil.

Western, which will celebrate its 100th anniversary next year, was a sleepy Californian company created by former CEO Armand Hammer in the 1960s and 1970s. A colorful chef, Hammer acquired a large stake in the Arm Baking Soda brand & Hammer, simply because people have confused their names. For the younger generation, the actor Armie Hammer is his great-grandson.

Hollub worked with Oxy all over the world, from the Ecuadorian jungle to Russia, but she spent a lot of her time in Houston, which became Oxy's headquarters in 2014. Hollub took over from Oxy after moved to Houston and divested, selling pipeline assets and much of its acreage in the Middle East and North Africa. The company sold its US assets in the Central and Rocky Mountain regions, as well as the Eagle Ford shale in southern Texas and the Williston Basin in North Dakota. Oxy has even sold its California operations to California Resources Corp.

All the while, Oxy doubled and tripled to concentrate the company on the Permian Basin in western Texas, even before the Permian resumed. Hollub took over during the recent oil collapse, but this area has become a real gangbusters affair, as well as a large part of Oxy's business.

"At least since 2000 (when Oxy bought Altura Energy) Permian became the foundation of our company since then," Hollub said at a meeting last year. "Thus, the Permian is also our engine of growth, so the Permian is the basis and growth of our society."