OXY Occidental Petroleum Corporation

By Ryan Dezember and Rebecca Elliott 

Occidental Petroleum Corp. is cutting salaries for its U.S. employees by up to 30% in a bid to slash expenses, according to an internal email reviewed by The Wall Street Journal.

The Houston company is facing plunging oil prices, high debt from an ill-timed acquisition and falling demand due to a halt in economic activity because of the new coronavirus.

Chief Executive Vicki Hollub's salary will be cut by 81% and the oil-and-chemical company's top executives' pay will be cut by an average of 68%, according to the email.

Employee bonuses and perks, such as gym memberships and commuter subsidies, are set to end in April.

The company said the drastic steps were necessary to weather the steep decline in oil prices. The main U.S. oil price is down 61% since the start of the year, closing at $24.01 a barrel on Tuesday.

"The coronavirus pandemic has led to an unprecedented decline in demand for oil on a global basis," the email said. "On top of that, the price war between Saudi Arabia and Russia has further exacerbated the situation. We must take immediate and unprecedented actions for our company."

Occidental released a statement confirming it was taking steps to "ensure the health of the company while protecting jobs."

The company said it was reducing compensation for all of its employees but didn't comment on the specific salary cuts. Reductions in operating and overhead spending are expected to total about $600 million, the company said Wednesday.

Occidental also said it would further slash its capital spending this year by about $800 million, on top of a previously announced $1.7 billion cut. The company now plans to spend roughly half of its original 2020 budget of about $5.3 billion.

Earlier this month, it cut its prized dividend 86% and made an initial round of capital spending trims.

The entire U.S. oil industry has been badly battered in recent weeks.

Occidental, whose $38 billion acquisition of Anadarko Petroleum Corp. last year left it deeply indebted, has been among the hardest hit.

Its share price, which began the year trading in the lows $40s, closed on Tuesday at $10.72.

Dozens of U.S. shale companies also have slashed spending. Chevron Corp. and Royal Dutch Shell PLC cut their capital budgets and suspended share buybacks, but neither took the step of across-the-board salary cuts.

Meanwhile, Occidental is nearing a truce with Carl Icahn that would bring the billionaire activist into the oil company's boardroom, The Wall Street Journal reported Sunday.

A settlement would mark the end of a protracted fight with Mr. Icahn, who took aim at Occidental after the company outbid Chevron for Anadarko.

The company's market capitalization has since plunged below $10 billion, from more than $46 billion at the time of the offer.

Occidental had staved off Mr. Icahn for months, but had to give up significant ground as oil prices plunged below $25 a barrel due to a price war between Saudi Arabia and Russia and depressed demand because of the coronavirus pandemic.

The company also has brought back its former Chief Executive Stephen Chazen back as chairman.

Ms. Hollub, who presided over the Anadarko deal last year, is expected to keep her job -- albeit at a much lower salary.

Ms. Hollub earned compensation valued at $14.1 million in 2018, according to the company's most recent annual proxy statement. The bulk of it was paid in stock. Her base salary was $1.25 million and her bonus amounted to $2.81 million.

Write to Ryan Dezember at ryan.dezember@wsj.com and Rebecca Elliott at rebecca.elliott@wsj.com

(END) Dow Jones Newswires

March 25, 2020 09:12 ET (13:12 GMT)

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