Conservative Occidental Buys Phibro
October 10, 2009 by Stephen Kersey
Filed under Business
Occidental Petroleum Corp. has decided that it will purchase Citigroup’s Phibro business, a surprising move considering Occidental’s traditionally conservative leanings. Acquiring Phibro means that Occidental will enter the notoriously volatile world of oil trading, a market that brings great risk with the potential for significant rewards.
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The company will pay $250 million for Phibro, its net asset value, allowing it to take advantage of Phibro’s several expert traders to help Occidental minimize risk and maximize reward as it begins to trade energy derivatives. Occidental joins a variety of other oil giants that have long been big players in energy trading markets, as well as the various financial giants that also dabble in energy and commodities trades.
The move to purchase Phibro is especially interesting for Occidental because the company has long taken pride in its conservative approach to business and its slow but steady growth in oil and gas reserves. While some analysts have cautioned that purchasing Phibro could end up eroding investor confidence in the company, others wonder whether or not Occidental will be able to successfully navigate the volatile oil market to take in enough income to justify the purchase.
