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.