Hollub could outmuscle rival five times Oxy's size

By Kevin Crowley and Catherine Traywick on 5/7/2019

HOUSTON and DENVER (Bloomberg) -- Occidental Petroleum Corp. CEO Vicki Hollub is on the cusp of winning a David versus Goliath bidding war that has captivated the oil industry.

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Vicki Hollub, CEO, Occidental Petroleum.

After making a series of approaches to rival Anadarko Petroleum Corp. about a merger over almost two years, Hollub was outflanked last month when the company embraced a takeover offer from Chevron Corp., despite it being considerably lower than her $38-billion bid.

The University of Alabama-trained engineer didn’t back down. In a series of bold and creative moves that included securing a $10-billion investment from Warren Buffett, Hollub is back in pole position in the battle for Anadarko. In gaining the stamp of approval from Anadarko’s board on Monday, she has boxed Mike Wirth, her counterpart at Chevron, into a corner with the uncomfortable choice of tarnishing his reputation for financial conservatism or conceding defeat.

“Hollub is ripping up the playbook and running an all-out offense on the Anadarko board to favor her bid,” Mizuho Securities analyst Paul Sankey said.

Three moves have been key to Hollub’s ascendancy in the biggest oil-industry bidding war in years. First, she flew to Omaha to explain the deal’s benefits to Buffett and returned with a huge investment.

Level field

Second, she hammered out a sale of Anadarko’s African assets to France-based Total SA for $8.8 billion, locking down a tranche of cash to help pay down debt. A third obstacle was that Anadarko was concerned Occidental needed a shareholder vote while Chevron didn’t.

“We weren’t playing on a level playing field,” Hollub, 59, said during a conference call with analysts on Monday. To change that, she upped the cash portion of her offer to eliminate the need for a vote, a measure she said provided “clarity” about how the deal would be completed.

Chevron has yet to make a counterbid, despite Anadarko’s shares now trading close to Hollub’s latest offer, suggesting she’s the likely victor. Chevron declined to comment.

What Bloomberg Intelligence says

"Anadarko extracted greater value as a target by playing hard to get with Occidental, whose strategy of winning at all costs may damage its reputation in the longer term. We believe Occidental should have given shareholders more say in determining the franchise’s fate. Raising the cash portion of the deal likely prevents a shareholder vote, which may raise corporate governance concerns. Occidental’s share plunge shook out weaker hands, but we think the odds of an activist revolt against the deal are lower than before the disclosure of Berkshire’s support and Occidental’s asset sale to Total."-- Brandon Barnes, senior analyst.

Anadarko was little changed at $75.41 at 7 a.m. in pre-market trading in New York, less than $1 below the value of Occidental’s offer. Occidental was also little-changed at $58.75.

Still, Hollub’s pursuit of Anadarko has taken its toll on Occidental’s stock price, which is down more than 10% since her interest was first made public and attracted some investor criticism for the deal’s cost and leverage. But her desire to take over Anadarko is underpinned by deep expertise in the Permian Basin, the world’s biggest oil field and the heart of the U.S. shale boom.

Permian prize

The Permian has been central to Hollub’s 35-year career at Occidental. She was general manager of the company’s operations in the region before the shale revolution and has also held several technical roles in Russia, Venezuela and Ecuador. She took charge of Occidental’s shale growth when she became chief operating officer in 2015 before rising to the top job a year later.

At Occidental, “it didn’t matter who you were, what you looked like, where you were from, gender or anything,” Hollub said in an interview last year. She characterized Occidental as unique in the male-dominated oil industry -- a place where women were granted the flexibility to both raise a family and move up the corporate ladder, where hard work was rewarded regardless of gender.

“I felt like if I stepped up and did as much as I could do, I wasn’t going to be denied any kind of chances to do more,” she said.

‘Generational’ opportunity

Hollub’s operational expertise may be behind her pledge to save twice as much money than Chevron can from folding Anadarko into Occidental despite, on paper at least, the target’s Permian acreage lining up better with the California-based supermajor. Victory would make Occidental far and away the Permian’s largest crude producer.

“It’s very rare, in fact generational, when you see an opportunity like this come along where you can check every box you want to check from a value standpoint,” Hollub said on Monday. “It’s got things I believe that haven’t even been evaluated yet.”

If Occidental wins Anadarko it may have a cultural challenge on its hands. Hollub’s experience of being treated equally with male colleagues in her career differs dramatically from the career paths described by former employees of Anadarko.

Anadarko has said that it’s been responsive to complaints about gender inequality, and has recently rolled out programs focused on sexual harassment and discrimination. It’s also strengthened its policies on retaliation, and appointed more women to leadership positions.

For Hollub, this doesn’t appear to be a concern just yet.

“Anadarko has incredible people too,” she said during the call. “We believe the combination of their employees continuing to have the opportunity to work these assets with the culture they have blending into our culture which we think is going to be a fairly easy transition.”

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