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Occidental Nears Deal With Activist Investor Icahn

Occidental Petroleum is nearing a deal with activist investor Carl Icahn who launched an offensive against the company’s management after the acquisition of Anadarko, sources in the know who wished to remain anonymous have told Reuters.

Icahn was among the most vocal critics of the US$38-billion takeover of Anadarko, in which Occidental beat Chevron. The deal was supposed to cement and expand Occidental’s position as the largest oil producer in the Permian after it incorporated Anadarko’s acreage, which comes in at some 600,000 acres gross in the Delaware Basin, part of the largest and most prolific shale play in the United States.

The activist shareholder warned that the acquisition, for which, according to him Oxy had paid too much, could turn sour in case oil prices fell. 

It seems he may well have been spot on. West Texas Intermediate has slumped to less than $23 a barrel since the start of the month after Saudi Arabia announced it was turning the oil taps to maximum.

Occidental’s stock price went with it. 

Related: Saudi Arabia’s Oil Price War Is Backfiring

From close to $38 per share at the end of February, Oxy has plunged to a bit over $10 as of Friday. This gave it a market cap of just $9.16 billion, as everyone with exposure to U.S. shale is slashing spending and conserving cash.

Now, Occidental’s executives are negotiating with Icahn and a deal could be inked before the end of the month, according to the Reuters sources. It will give two board seats to Icahn associates and give the activist investor the power to name a third independent director. This means the company has caved to the pressure, agreeing to give Icahn a bigger say in important decisions such as acquisitions.

Meanwhile, Oxy is tackling its $29-billion debt pile. According to a Bloomberg report from last week, the company has started contacting debt and equity investors to find ways for easing the load. Oxy’s debt was downgraded to junk status last week.

By Irina Slav for Oilprice.com

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