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Oxy to Buy Citigroup Trading Unit

October 12, 2009
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Los Angeles-based independent Occidental Petroleum Corp. (Oxy) has signed an agreement to purchase Phibro LLC, Citigroup Inc.'s commodities trading unit, for approximately $250 million, Oxy said Friday.

Phibro, which trades primarily in oil and gas, would become part of Oxy's midstream segment, which includes Oxy's natural gas liquids, power, pipeline and existing trading business. Phibro's management team, headed by Andrew Hall, and its employees will remain with the company after closing, which is expected by the end of the year, according to Oxy.

"The senior management team has agreed to make a significant investment in Phibro and receive returns dependent upon the company's future performance. Additionally, significant portions of current and future bonuses will be deferred and retained by Phibro and paid out in future years. These future payouts will be adjusted to reflect Phibro's results during that period," Oxy said.

Citigroup, which received a $45 billion federal bailout package earlier this year, was the target of some criticism when it was revealed that Hall's compensation could have totaled $100 million this year. Citigroup has said 2009 compensation for Phibro executives, including Hall, would be deferred.

In January Oxy's board approved a "say-on-pay" policy that will give shareholders a nonbinding advisory vote on executive compensation beginning at the 2010 annual meeting (see NGI, Feb. 2). Oxy CEO Ray R. Irani received an estimated $77.6 million in overall compensation in 2007, according to company documents.

Phibro trades natural gas in all U.S. regions, with a particular focus on the Gulf Coast and the Northeast. Phibro enters into transactions on the New York Mercantile Exchange division of the Chicago Mercantile Exchange, IntercontinentalExchange Futures Europe and in the over-the-counter physical, swaps and options markets. The company has averaged $371 million annual earnings over the past five years, Oxy said.

Citigroup's natural gas and power trading operations remained in Houston following completion of a reorganization intended to bolster the struggling banking giant earlier this year (see NGI, Jan. 26). Phibro, which had been an oil trading unit, was combined with gas and power trading.

Occidental shares closed Friday at $79.54, down 55 cents from Thursday's closing price; Citigroup closed at $4.63/share, down 2 cents.

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