Vicki Hollub, the chief executive of Houston oil company Occidental Petroleum, won a bidding war for Anadarko Petroleum Corp. against oil giant Chevron Corp. And everything about the deal is why the center of gravity for the oil universe has moved to Texas.
Hollub, an Alabama native who had worked for Oxy in the Permian Basin before her promotion to chief executive, targeted Anadarko for takeover months ago, coveting the company’s operations in West Texas. But against Chevron, she hit a wall.
She did not back down.
With confidence in her company’s ability to operate the Anadarko assets at a lower cost, she pulled together a team to negotiate a $38 billion offer that includes two big partners: French petroleum company Total SA and Nebraska investment giant Warren Buffet.
“We can operate this better than anybody else. We are the rightful owners,” Hollub said at the company’s annual general meeting on Friday, according to Reuters.
She won the deal. But Wall Street worries the deal might not be a winner, and the Oxy share price dropped to a ten-year low. Oxy, which has $43.9 billion in assets, will attempt to swallow a company that’s close to its size, at $40.4 billion, and in the process take on nearly $40 billion in debt. Hollub’s partners, Total and Buffet, help with financing, with Total agreeing to buy some international operations and Buffett buying a stake in Oxy to help pay for the deal. But even so, the acquisition is a bet that Occidental Petroleum really can operate oil and gas wells better than anyone else, and that oil prices will remain high enough for efficiency to even matter. Hollub is putting all her chips on the table.
High-stakes maneuvering over drilling operations in West Texas is no longer a story for Texas history class. Thanks to fracking and horizontal drilling technology developed here in North Texas and applied to the Permian Basin, Texas has become a major oil producer and the U.S. has become an oil exporter.
Houston oil executives no longer have to look to the furthest reaches of the world to boost production; a short flight to Midland brings them to one of the richest boom regions on the globe. Nobody has to negotiate with a Saudi or a Russian for access; in West Texas, the fiercest barriers to drilling are money, tumbleweeds and, in the case of Chevron, Ms. Hollub.
If she wins, Hollub will prove the wisdom of betting on Texas oil and of doing so with smart collaboration.
If she loses, she won’t be the first to bet big on Texas oil and walk away with little more than the boots on her feet. We Texans love a wildcatter with courage, in part because it’s that kind of courage that creates the dynamism essential to grow our economy. And for that, we can all hope for Hollub’s success.