#occidentalpetroleum

The renowned value investor Warren Buffett is causing a stir with his substantial investment in blue-chip energy equities like Occidental Petroleum (OXY). We expose the seven crucial elements that support this investment legend's optimistic outlook for the energy industry.

Stay away from Occidental Petroleum (NYSE: OXY) as it would not be able to turn its fortunes around any time soon despite a mega acquisition. #energy #oilstocks $OXY Read the full article

Occidental shareholders believe that the company is paying a big premium for Anadarko. Also, it is widely believed that the acquisition doesn’t make sense as both Occidental and Anadarko are Permian Basin players, so the former won’t get any diversity in assets after the acquisition. That’s why investors believe that paying such a big sum for Anadarko doesn’t make sense, as any downturn in the oil pricing cycle will create more pressure on the balance sheet. But as it turns out, Occidental has taken steps to address these problems. First, Occidental has announced that it will sell Anadarko’s African assets – in Ghana, Algeria, Mozambique, and South Africa – to French oil major Total SA for a price of $8.8 billion if the deal goes through. Such a move will allow Occidental to integrate Anadarko better into its operations, while also allowing the former to de-lever the balance sheet. Second, Occidental has removed the need for a shareholder vote so that the deal goes through with certainty by increasing the cash component. Because Occidental will pay only 22% of the consideration in stock, the total number of shares that it needs to issue is now less than the issuance threshold that would have led to a shareholder vote. Meanwhile, Anadarko shareholders will still need to vote on the deal, but it is likely that they will go with Occidental instead of Chevron because of the premium on offer. In all, don’t be surprised if Occidental manages to successfully hijack Chevron’s offer, until and unless the latter comes up with a better one. Stay tuned for more updates to the deal to know how things play out in this acquisition saga. Read the full article

Reuters reports that major Occidental shareholders are opposed to the deal, especially because of the costly financing agreement in place with Warren Buffett. For instance, T. Rowe Price, which is a shareholder in all the parties involved and is Occidental’s sixth largest shareholder, believes that the company can avoid a shareholder vote thanks to Buffett’s financing package. The current Occidental deal requires shareholders to vote on the matter. Also, Occidental investors are concerned that the premium that the company is paying for Anadarko doesn’t seem justified because the latter is a Permian Basin player. As such, the acquisition won’t diversify Occidental’s holdings as its acreage will be concentrated in just one area. Moreover, the fact that the oil industry is a cyclical one is another problem for investors. In case of any downturn in oil prices, making such a costly investment for a company of Occidental’s size doesn’t make sense. Occidental’s market cap at present is $43 billion, while that of Anadarko is at $36.5 billion. So it would be on the lines of a merger of equals if the transaction goes through. Chevron, on the other hand, is a much bigger company with a market cap of nearly $225 billion. As such, it will be much easier for Chevron to integrate Anadarko into its operations as it will be better placed to handle any potential downturn in oil prices. Occidental, on the other hand, might have to face bigger challenges as integrating an almost identical company into its operations will be a big task. In all, it looks like Chevron’s offer could be the better fit, and that’s why Occidental investors could scuttle the deal. Read the full article

Improving oil prices will be a big tailwind for Occidental Petroleum (NYSE: OXY) as the company aims to deliver efficient production growth this year. #oilstocks #energystocks $OXY Read the full article

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