Occidental Petroleum's new chief executive Richard Jackson is working to steady the shale producer after the volatile tenure of Vicki Hollub, whose $55bn Anadarko takeover left the company laden with debt. Seven years on, Occidental has cut its principal debt to about $11.8bn, the lowest level since Q2 2019, though Berkshire Hathaway's overall return on its backing of the deal has lagged expectations.
Occidental won the takeover of Anadarko Petroleum in 2019 by outbidding Chevron, in one of the largest energy deals of the decade. The debt from that deal defined Hollub's tenure and now shapes the turnaround her successor must deliver.
Hollub's exit and a $1bn stock jump
Occidental's stock value gained $1bn in March on a single piece of news: Hollub was stepping down as chief executive. That reaction capped a tenure defined by the 2019 hostile takeover of Anadarko Petroleum, a deal Hollub won by outbidding Chevron in one of the decade's largest energy transactions.
Shares had plunged from $62 when Occidental first went public with its Anadarko bid to less than $9 at their pandemic-era low, as oil prices collapsed and left the company's $39bn debt load threatening bankruptcy. The stock has since returned just 18% overall, or about 2.3% a year since the bid was announced — trailing Exxon and Chevron, which have advanced more than 98% and 68% respectively over the period.
Berkshire's mixed returns on the bet
Warren Buffett's Berkshire Hathaway bankrolled the Anadarko deal with a $10bn preferred stock investment. It then added a further $14.4bn into Occidental common stock between 2022 and 2025. That combined bet has generated an internal rate of return of about 7.3% over the past seven years, according to FT calculations — a figure investors call subpar for the conglomerate.
Bill Stone, chief investment officer of Glenview Trust, a Berkshire investor, said the capital would have been better invested in Apple and called the result disappointing. Christopher Bloomstran, chief investment officer of Semper Augustus, described the overall investment as mediocre, noting the preferred stake has performed well even as the common shares suffered from the Anadarko overpayment.
Debt reduction becomes the new discipline
Occidental's excess cash is still directed toward debt reduction and the eventual pay-off of Berkshire's remaining $8.5bn in preferred shares, which the company has signaled it wants to redeem once possible in 2029. In the first six months of the year, Occidental generated $4.8bn of free cash flow from continuing operations before working capital. S&P Global analysts expect that figure to eclipse $10bn for the full year.
The company also reached a record of more than 1.4mn oil-equivalent barrels per day in Q4 last year. Its dividend has risen by half since 2023 to $0.28 per share. By comparison, Exxon pumped 5mn oil-equivalent barrels per day over the same period.
New chief executive Richard Jackson, who took over in June after previously overseeing Permian operations and the company's carbon capture business, has signaled a more cautious approach to growth. During the August second-quarter results call, Jackson said Occidental has a deep inventory of advantaged, well-understood resources for low-cost development, but that any investment for growth would be thoughtful.
Analysts see his promotion as confirmation that Occidental will keep prioritizing debt reduction over the acquisitive strategy that defined the Hollub era. According to James West, head of energy and power at Melius Research: "They want to be a boring dividend-growth story."
Source: Financial Times
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