Occidental Petroleum Corp. cut its dividend for the first time in 30 years as the oil producer opts to conserve cash to cover debt incurred in its $37 billion takeover of Anadarko Petroleum Corp. last year. The company slashed the payout 86% after oil prices plunged this week, adding fuel to criticism from shareholders including billionaire investor Carl Icahn that Occidental took on too much debt and destroyed shareholder returns to buy Anadarko. Icahn plans to run a proxy battle against Chief Executive Officer Vicki Hollub and the board later this year.
The cut comes less than two weeks after Hollub said the payout was “one of the defining characteristics of our company” and vowed to protect it. The last time Occidental reduced payouts was 1990, after Iraqi leader Saddam Hussein’s invasion of Kuwait sent oil markets tumbling. “This is genuinely frustrating and disappointing to see, especially after the repeatedly, consistently stated commitment to the dividend from management,” Raymond James analyst Pavel Molchanov wrote in a note.
Hollub’s pledge was conditioned on crude remaining at $40 to $50 a barrel, but the dividend was already looking tenuous at those price levels, and this week’s market crash forced her and the board to act fast. Oil futures that reached more than $60 a barrel early this year closed at $34.36 on Tuesday in New York, after dipping to $27.34 on Monday.