Occidental Petroleum (OXY) Up on Strategic Announcement
The share price of Occidental Petroleum Corporation (OXY) stood at $95.96 at the close of the trading session on Oct 3, 2014, up around 0.8% from previous day’s closing, as a result of the announcement of several important strategic initiatives.
Occidental Petroleum’s board of directors had approved the spin-off of the company’s Californian oil and natural gas business to create an independent entity called California Resources Corporation (California Resources). The transaction will take place through the distribution of around 80.1% of the outstanding shares of California Resources to shareholders of Occidental Petroleum common stock. Upon fulfilling the conditions, the distribution will likely happen on Nov 30, 2014.
Per the agreement, shareholders of Occidental Petroleum will receive 0.4 shares of California Resources common stock for each share of Occidental Petroleum common stock. Occidental Petroleum will hold roughly 19.9% ownership interest in California Resources for up to 18 months. Shares of the common stock of California Resources are expected to commence trading on the New York Stock Exchange under the symbol “CRC” from Dec 1, 2014. California Resources will post third-quarter 2014 results after the market closes on Oct 22, 2014.
The proposed spin-off will enable Occidental Petroleum to focus on exploration and production operations in the Permian Basin and the Middle East region, and manage its scale of operations and business more efficiently. This will help the company to expand its reserves and maintain a stable reserve replacement ratio.
Secondly, Occidental Petroleum announced that its board of directors authorized the repurchase of an additional 60 million shares of its common stock. Since the end of third-quarter 2013, the company had repurchased more than 26 million shares of its common stock, including over 6 million during second-quarter 2014. These initiatives will help Occidental Petroleum to improve its earnings.
In addition, Occidental Petroleum will maintain its quarterly dividend rate of 72 cents per share on common stock on Jan 15, 2015 payable to its stockholders of record as of Dec 10, 2014.
Occidental Petroleum’s strategy to pursue investor-friendly moves, including the effective share repurchase and payment of regular dividends, will allow it attract more investors.
Occidental Petroleum currently has a Zacks Rank #3 (Hold). However, some better-ranked stocks in the sector include WPX Energy, Inc. (WPX), Halcon Resources Corp. (HK) and World Point Terminals, LP (WPT). WPX Energy carries a Zacks Rank #1 (Strong Buy), while Halcon Resources and World Point hold a Zacks Rank #2 (Buy).
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