Oil And Gas Exploration Company Occidental Petroleum Agreed To Buy Phibro From Citigroup
October 20th, 2009 | File Under : Natural Gas - Oil and Gas - Petroleum
Occidental Petroleum Corp., an oil and gas exploration and production company, said on Friday it agreed to buy Citigroup Inc’s controversial commodities trading unit Phibro for roughly its net asset value. Occidental said its net investment in Phibro is expected to be about $250 million.
Phibro’s management team, headed by Andrew Hall, and its employees will remain with the company after closing, which is expected by year end.
Citigroup shares were down a little less than one percent in early morning trading on the New York Stock Exchange, while Occidental Petroleum shares were little changed.
The following is reaction from industry analysts and investors:
TOM BENTZ, SENIOR COMMODITY ANALYST, BNP PARIBAS COMMODITY FUTURES, INC, NEW YORK, NY
“I think most people expected it to happen at some point. Andy Hall is due a huge payout and with Citigroup now under government scrutiny right now, it was going to be difficult to go forward with Phibro. I’m sure Phibro wanted out. I think it works out best for all parties to part ways.”
ANTON SCHUTZ, PRESIDENT, MENDON CAPITAL, ROCHESTER, NEW YORK:
“It’s sad that it has to happen. They’re selling the goose that laid the golden egg, and it’s to appease regulators. The U.S. owns 33 percent of Citi, so why are they giving away earnings over this insane compensation policy? I’m angry about this issue. It wastes a lot of people’s time.
“This is pure optics. It’s bananas.”
PHIL FLYNN, ANALYST WITH PFGBEST RESEARCH IN CHICAGO
“Citigroup had it on the block and I think Occidental got it at a pretty good price. Of course, everything in the industry is so beaten up because of the slowdown in demand.
“I think this is probably good for both parties. Citi didn’t want it, and I think Occidental is going to be in the market for some good traders.
“I think Occidental is picking up some pretty good tailwind. Obviously, when you to pick up a huge trading unit like that, with something like $2 billion in earnings, you are going to have a good trading side and a good cash side.
It definitely makes them one of the premiere players in the country when it comes to energy. They have been very aggressive lately, on the and I think this is going to be a wise move for them.”
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