OCCIDENTAL PETROLEUM CORPORATION: Why is it the Most Admired Company of 2011?

By Gbolade Okeowo

In my series of articles on the company, I seek to provide an independent analysis of the Occidental Petroleum Corporations’ stakeholders and their objectives, Oxy’s recent performance and make clear recommendations as to the future direction of Oxy. Also, my analysis will address how my recommendations will address the issues highlighted in the stakeholder and performance analysis. Taking a cue from relevant parts of Porter’s 5 Forces model, Duncan’s PEST model, Whittington’s Matrix and Gardener’s Power/Dynamism Matrix, this business report delves deep into the organisational stakeholders and objectives that make up the DNA of Oxy, particularly the oil and gas arm of the business. 

This article will be in four installments. In subsequent installments, I will utilize various financial analysis models, particularly the widely acclaimed John Dorfman’s (Bloomberg.com) stringent financial standards to analyse the effectiveness of Oxy’s recent performance towards shareholder objectives and expectations. The contemporary ‘sane portfolio’ financial analysis is backed up by orthodox financial management literature. This report then flows from shareholder objective analysis to a brief analysis of Oxy’s recent performance in maintaining high standards of operations with other stakeholders identified previously. At this stage the reader will be well aware of the unique ‘stakeholder fabric’ that provides direction for Oxy’s operational strategy. This fabric is characterised with an unusual link in stakeholder priorities. 

As you progress, the report attempts to use academic theories (Porter, Prahalad and Hamel) to assess the functionality of Oxy’s strategy in the long and short term. This triangulation directs the report into Ansoff’s swot analysis as a basis of recommendations as to the future direction of Oxy and how this might affect other stakeholder’s satisfaction with the corporation.

Corporate Overview

Fortune- Most Admired Corporation, Mining & Crude Oil Production- Occidental Petroleum Corporation was found in 1920 in California. It is a multinational oil and gas company operating in exploration and production, midstream and marketing, and in the chemicals business. Occidental Petroleum Corporation is also known as Oxy in reference to its symbol on the NYSE. (Oxy Corporate Overview 2009). Oxy is an international oil and gas exploration and production company with operations in the United States, the Middle East, North Africa and Latin America. In the United States it discovered natural gas at California in 1961, it kept growing its oil and gas and chemical assets over the years and in 2007 via an asset swap it acquired BP’s assets in the Permian basin. In the Middle East, Oxy has a strong presence in Qatar, Oman, and Yemen and is a key player in the magnanimous Dolphin project. In North Africa Oxy operates in Libya through extensive development and production acreage in the largely untapped hydrocarbon resource rich region. (Oxy Corporate Overview 2009) 

Oxy’s business is divided into three arms; oil and gas,’ midstream, marketing and other’, and OxyChem. Oxy employs more than 9000 people globally. In the oil and gas stream of oxy’s business, Oxy strategically focuses on large high potential oil and gas assets in three core geographic regions: US, Latin America and the Middle East. Oxy’s strategy in oil and gas is investment in projects that meet the company’s stringent financial standards. As my analysis will discuss later, this strategy has made Oxy one of the most profitable oil and gas production corporations in the US and indeed globally. The ‘midstream, marketing and other’ stream of Oxy’s business is into transporting, storage and marketing of crude oil, natural gas, natural gas liquids and C02. Oxy chem., the third stream of Oxy is involved in the manufacturing of PVC resins, chloride, caustic soda, caustic potash, chlorinated organics, sodium silicates and resorcinol. Oxy chem. has manufacturing facilities in the US, Canada, Brazil and Chile. (Oxy Corporate Overview 2009) 

In all three business segments Oxy has established a reputation as a key industry player. Oxy oil and gas has been ranked as the world’s most admired Oil and Gas Corporation by Fortune magazine ahead of the likes of Exxon Mobil, Royal Dutch Shell and BP (Fortune Magazine, 2009); Occidental is been recently ranked as 20 World’s most admired Mining, Crude Oil Production Corporation for 2011 by Fortune Magazine as well. For the past decade to 2007, Oxy has grown in market capitalisation by 536% to become the fourth largest U.S based oil and gas company. (Oxy Corporate Snapshot 2009) Oxy is the largest gas producer in California, the largest oil producer in New Mexico and Texas and Oxy is the 2nd largest oil producer in both Oman and Qatar. (Oxy Corporate Overview 2009) 

Both diagrams below are quick illustrators of Oxy’s growth and profitability in the past decade. 

Fig 1

Oxy Financial Statement 2008 

Fig 2 

Oxy Financial Statement 2008 

“Over time, Oxy has had to balance operational needs with the ever-changing interests of the numerous stakeholders... (e.g. shareholders, governments, communities and non-governmental organisations) so that its operations can continue to be sustainable and mutually beneficial for all stakeholders”. (IPIECA 2009) 

Any oil and gas production corporation of this size has to carefully balance the expectations of all its stakeholders as they all affect the business in an interlinked, cyclical and often malign nature. 

My next article identifies Oxy’s stakeholders and analyses the organisation's objectives towards these various stakeholders.

NUTSHELL:

This is the first in a series of articles analyzing this ''Most Admired' company called Oxy. It is amazing that the company seems to be in the news for the right reasons while its ''bigger'' contemporaries seem to find their way into the news for the wrong reasons. Does this suggest that Oxy is getting some things right- which the others don't? Is the company just lucky? How has it attained this ''most admired'' status; what makes the company tick? Gbolade gives us a few answers by analyzing the business from the stakeholder-shareholder perspective with a view to understanding the company better. I hope you do. 

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