Certified in “SIC” Management

$OXY CEO, Stephen I. Chasen

Every CEO should be required to obtain the “SIC” certification in management.  SIC stands for Stephen I. Chasen (SIC), Occidental Petroleum’s long term finance man, and since May 2011 it’s CEO.  Basically if a CEO is SIC certified he lays out a clear and precise strategy for investors, he reports honestly on the progress (both good & bad), and he holds his employees accountable for meeting targets.  Here are some highlights from his no non-sense statements from Thursday’s conference call:

SIC:  “If for some reason our investment plans do not result in successful stock market results over the next few months, we will return more of our retained earnings to our shareholders……we intend to raise dividends next year at a rate that will maximize returns to shareholders.”

Translation:  $OXY will appreciate in the next 3 months or we are sending shareholders more cash via dividends.  This is bullish for long term holders of $OXY.

SIC:  “If I do not see the proper returns in the coming quarters our strategy will change.”

Translation:  Stockholders will make money by either the stock appreciation or higher dividends.  Once the stock appreciates we will return to investing more capital in the business.

SIC:  “More capital discourages prudent spending……..half the shareholders think I should spend $20 billion CAPEX, the other half think I should spend $2 billion……..If they (Operations) do not get their operating cost down, which is what I am most focused on, because that translates immediately into profits, then we will continue to tighten there and their will continue to be changes in management…….especially in the Permian.  If they do not do it soon there is going to to be wide spread changes in the organization.”

Translation:  I am cutting rigs to prove to the operations team that I am serious about cutting costs. Every BU better lower costs, or they will be fired and we will get someone in there that can lower the costs.  #BOOM  #ACCOUNTABILITY

SIC:  “Oil guys can only work on one thing at a time.  So if you tell them you want volume growth, then volume growth will show up.  But if you tell them you also want something else, only volume growth will show up.”

Translation:  Like all humans, only one BHAG (Big Hairy Audacious Goal) at a time is all my managers can handle.

SIC:  “If the relative performance does not improve we will return more money to the stockholders.”

Translation:  I repeat, stockholders are # 1 priority for this company.

Their is probably another 10 examples I could share, but I think you get the point.  SIC takes his job as a steward of the stockholders money seriously, he holds his management accountable for short-medium term goals, and he is smart enough to change his strategy if market conditions warrant.  The $OXY conference calls never disappoint, but this one was classic.

Also, it’s interesting to note this was the first CC for the new CFO Cynthia L. Walker.  The 35 year old Mrs. Walker is a former Goldman Sachs managing director (from H town office) and became an executive vice president and CFO on Aug 6.  Besides reading from her prepared remarks, Mrs. Walker was otherwise silent on the Q&A portion of the call.  M&A is obviously in her wheel house, but SIC made clear on the call no significant M&A is in $OXY’s foreseeable future.  Makes you wonder if the debits and credits will keep this CFO interested.

Mail Box Money: WYNN Resorts Dividends

Steve Wynn is # 1 Shareholder Friendly CEO

Steve Wynn is # 1 shareholder friendly CEO.  On Wednesday WYNN Resorts announced an $8 special dividend and raised their regular dividend 100%, from $.50 per quarter to $1.00 per quarter.  Prior to earnings release the stock was trading for $113 in change, which equates to a 2011 yield of 8.8%.  Assuming another $8 special dividend in 2013 and the yield rises to 11%.  Did I mention that WYNN resorts is also growing bottom line earnings 4-6% and has a $4 billion Cotai project in the backlog?  Not many investments come along with significant yield, significant growth, and a pristine balance sheet.  WYNN resorts is the ultimate mail box money for stock investors. 

American Irony

I came across this message in a blast email forward I received this week.  The accuracy and honesty of the message is amazing, and I thought it was timley with the election looming just 11 days away. 

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Every now and then someone makes it obvious and simple…

 TOP-10 “Only In America” Observations – by a Canadian:

1)  Only in America, could politicians talk about the greed of the rich at a  $35,000.00 a plate campaign fund-raising event.

2)  Only in America, could people claim that the government still discriminates against black Americans when they have a black President, a  black Attorney General, and roughly 18% of the federal workforce is black while only 12% of the population is black.

3)  Only in America, could they have had the two people most responsible for our tax code, Timothy Geithner, the head of the Treasury Department and Charles Rangel who once ran the Ways and Means Committee, BOTH turn out to be tax cheats who are in favor of higher taxes.

4)  Only in America, can they have terrorists kill people in the name of Allah and have the media primarily react by fretting that Muslims might be harmed by the backlash.

5)  Only in America, would they make people who want to legally become American citizens wait for years in their home countries and pay tens of thousands of dollars for the privilege while we discuss letting anyone who sneaks into the country illegally just ‘magically’ become American citizens.

6)  Only in America, could the people who believe in balancing the budget and sticking by the country’s Constitution be thought of as “extremists.”

7)  Only in America, could you need to present a driver’s license to cash a  check or buy alcohol, but not to vote.

8)  Only in America, could people demand the government investigate whether oil companies are gouging the public because the price of gas went up when  the return on equity invested in a major U.S. oil company (Marathon Oil)  is less than half of a company making tennis shoes (Nike).

9)  Only in America, could the government collect more tax dollars from the people than any nation in recorded history, still spend a Trillion dollars  more than it has per year – for total spending of $7-Million PER MINUTE, and complain that it doesn’t have nearly enough money.

10)  Only in America, could the rich people – who pay 86% of all income taxes –  be accused of not paying their “fair share” by people who don’t pay any  income taxes at all.These top 10

observations may be worth sharing…

John-L Johnson
President
Silent Majority

  USA

Black Gold near Sin City?

Could it be that miles below sin city is a vault full of black gold?  Noble Energy announced on Thursday that they believe a significant oil resource resides in north eastern Nevada.  Noble has acquired 350,000 net acres in the tight oil play at less than $200 per acre.  In the investor presentation Noble points out this play was overlooked and under explored by the industry.  Noble plans initial production in late 2014, ramping up to grow production to 50,000 bpdoe. 

It is refreshing to know that Noble was not out chasing the hottest new play.  They were taking their geologic knowledge and applying it to a new play.  This demonstrates the entrepreneurial spirit that is embedded in the oil & gas industry, and a reminder for us all that it’s better to lead than to follow, it’s better to be lucky than to good. 

Increased exploration from companies like Noble, and consistent improvement in technology, will eventually make America energy independent.  Not too mention creating value for shareholders, additional American jobs, and increased taxes paid to the government.  I love big oil.

Distribution Growth Defined: Western Gas Parnters (WES)

Lot’s of MLP’s talk about consistent and significant distribution growth, but Western Gas Partners, LP (WES) actually delivers.  Exhibit A:  On Friday the partnership declared a cash distribution of $0.50 per unit for the third quarter of 2012, representing a 4-percent increase over the prior quarter (yawn) and a 19-percent increase (WOW) over the third quarter of 2011.  Where else can you buy an income stream that increases 19-percent a year?  Bueller?  Anyone?  Did I mention that income stream was also tax deferred? 

The distribution increase does not come cheap though, the units are up 45% YoY, and even with the increased distribution yield only 3.9%.  WES had projected 15-20% distribution growth over the next two years, and the market has priced in that growth buy rewarding unit holders with higher equity value.  If you missed jumping on the WES distribution super high way (your not in the stock), than you are probably kicking yourself.  If you have a longer investment time frame, it may be time to take another look at WES.

WYNNing with American Jobs

Steve Wynn is already an iconic American businessman.  He is a proven entrepreneur and a visionary in the hospitality and gaming industry.  American workers have been WYNNing with Steve Wynn over time as well, he has estimated to create over 250,000 jobs over his lifetime in the State of Nevada.  He has provided healthcare to his employees for 45 years.  In today’s world of political correctness though, Mr. Wynn’s best characteristic is his candid analysis of politics, grounded in facts and reality.  This was on display this past Friday on CNBC.  Here’s my favorite exchange from the video:   

Joe Kernen (CNBC):  “When you create a job suddenly your also creating market cap for your shareholders.  I tried to add up Mirage + Wynn, then I think all those employees are paying taxes to the government, and I look at the multiplier of a private job versus what the government can do, and it’s just mind boggling.”

Steve Wynn:  “It sure is.  It would be wonderful if you could repeat that to President Obama, because his lack of experience in the real world is causing this problem.  Anybody that had any experience in business would immediately understand these fundamental relationships and they would behave accordingly.”

Investing in CFA

If you ask the general public (or even a business professional) to define a certification for excellence in financial markets, you probably would get a variety of answers:  Certified Public Accountant, Certified Financial Planner, or perhaps Certified Management Accountant.  The truth is that all of those are on the B team of certifications, the gold standard of financial markets certification is the Chartered Financial Analyst (CFA). 

This “gold standard” endorsement was validated by the recent CFA survey of June 2012 exam takers.  When asked “about how many hours did you spend preparing for the June 2012 CFA exam,” the average was 291 hours for those that Failed the exam, and a wopping 309 hours for those that Passed.  That equates to 12 complete days of studying, or equivalent  of 15% of the annual average work year. 

Investing in the CFA is a costly investment of time and resources, but this certifcation creates knoweldge that pays dividends for decades to follow.

Entrepreneurship on the Brain: Google Ventures

One of CNBC’s Squwak Box guest on last Thursday (09/20 – Wow time flies) caught my attention.  His name was Bill Maris, Google Ventures Managing Partner.  Google Ventures is a $1 billion venture capital fund started by, you guessed it, Google.  The purpose of the fund is to nurture and assist start-up companies.  Whether taking a Billion dollars of Google stakeholders money and investing it in an angel investment fund is good Corporate Governance is a topic we will save for another day.  It’s Mr. Maris statement on the type of entrepreneur’s that he is seeking out:  “We are looking for entrepreneur’s that have a healthy disregard for the impossible.” 

That statement was very Steve Jobs like in my mind (think 1984 commercial at Super Bowl) and reminded me that we should all have a healthy disregard for the impossible. 

Check out the full interview here:  http://video.cnbc.com/gallery/?video=3000116290