Analysts: new Oxy president has right chemistry; Ray Irani may sell IBP, cut dividends, retire some debt.

Analysts: New Oxy president has right chemistry

The way has now been paved for a transformation at Los Angeles-based Occidental Petroleum Corp. Analysts are coining the new leader, Dr. Ray Irani, as a competent man who will steer the company toward a bigger focus on its chemical production and possibly be willing to sell some assets and unload some debt.

"He's a builder, the way I see him," said Joseph Battipaglia, director of research at Gruntal & Co. in New York.

Irani succeeds Dr. Armand Hammer, who died on Dec. 10 at the age of 92, after a 34-year reign as chairman and chief executive of Occidental.

Irani holds an undergraduate degree in chemistry from the American University in Beirut, Lebanon, and a Ph.D. in physical chemistry from USC. Before coming to Occidental in 1984, Irani served as president and chief operating officer at Olin Corp.

"I would think Ray Irani would want to build a strong oil and chemical company, maybe even stronger in chemicals than Armand Hammer has been," said Albert Anton, a partner with Pforzheimer & Co. in New York.

"He has been firmly committed to building the chemical business at Occidental," said Craig Schwerdt, director of research at Seidler Amdec Securities in Los Angeles.

More of Occidental's revenues were derived from its petrochemical business in 1989 than from oil and natural gas production. About 25 percent came from chemical production and 14 percent from production of oil and gas.

In addition, Irani might not be as adamant in holding onto Occidental's subsidiaries as Hammer was, the analysts said.

If Irani sees a particular subsidiary that is not related to the rest of the company's business, he might seel it, said Battipaglia.

The subsidiary most in question is IBP Inc., Occidental's beef packing operation. IBP earned Occidental $79 million on revenues of $9.1 billion during 1989.

"I think that's the most likely item to be sold," Anton said.

"Occidental has a good nose for finding oil and gas and that's where they should concentrate their efforts," said George Gaspar, first vice president of petroleum research for Robert W. Baird in Milwaukee.

As Occidental's president, Irani had an advantage over his predecessors. Although Hammer had a history of revolving-door presidents whom he kept a close watch over, Schwerdt said, he had more confidence in Irani than he had in the other company presidents.

Irani is in firm control of the company because his eventual leadership of it had been planned for, Schwerdt added.

Shareholders upped the price of Occidental's stock $1.875 to close at $22.625 on Dec. 11, the day following Hammer's death. Analysts said the jump reflected investors' hope that Occidental will undergo changes that would enhance the stock's value, as well as possibly opening the door for a buyout of the company.

"There's speculation that someone would make a bid for Occidental," said Philip Dodge, an oil analyst with Nomura Research Institute in New York.

Dodge said the most likely potential bidders would be the country's major oil companies. "Diversification is out these days," he said.

However, Dodge said he was still speculative about a takeover move. "They could have done it any time in the last 10 years. It just makes people think more about that possibility than they did before," he said.

A. Jack Linder, vice president of Rosenkrantz, Lyon & Ross in New York, said he also wasn't too sure of Occidental's chances of becoming a takeover target.

"In its present shape, I don't think it's going to make a target short term," Linder said.

Analysts are also speculating that Occidental could reduce its $2.50-a-share dividend. If one goes according to basic theories, the dividend is too high, Anton said.

By reducing the dividend, Occidental could help repay some of its debt as well as use some of the money for additional exploration and development, Gaspar said.

With Occidental's high dividend payment and high level of debt, the question will be "how do you juggle the ball," one analyst said.

PHOTO : Irani: Committed to the chemical business