Is Occidental Petroleum Corp., L.A.’s second largest public company, planning to move its corporate headquarters to Houston?

There are signs it could do so. In recent weeks, people with knowledge of Occidental’s Westwood headquarters have said that the company has told employees they should either get ready to move to Texas or make other career plans.

However, in response to a query for this article, the company said it has no plans to move at this time.

“We do not have any current plans to move our corporate headquarters out of Los Angeles,” spokeswoman Melissa Schoeb said. She would not elaborate.

Occidental earlier this year expanded its lease footprint in Houston, and at least two top-level executives are already there. Some have described the Westwood headquarters building as having become a “ghost town.”

What’s more, a move would seem to dovetail with the company’s corporate restructuring. Several Wall Street analysts expect Oxy to sell or spin off its California operations.

“While we would hate to see Occidental leave Los Angeles, this development would not come as a surprise,” Steve Sann, chairman of the Westwood Community Council, said in response to a Business Journal query. “We’ve been aware that Occidental for some time has been shifting people and departments to Houston. We’ve also been aware that Occidental is operating with a skeleton crew in their Westwood headquarters.”

Earlier this year, the Houston Business Journal reported that rumors were swirling there about an imminent corporate headquarters move, but the company denied it.

Longtime presence

An Occidental move would represent the latest in a long line of departures of major public company corporate headquarters from Los Angeles, including Northrop Grumman Corp. in 2010, DaVita Corp. in 2009 and Computer Sciences Corp. in 2008. Occidental has been in Los Angeles longer than any of those companies; it was founded here in 1920.

The departure would mark another transition: Occidental is the last big oil company headquartered in Los Angeles, which was once a capital of the national oil industry. Unocal and Arco were based here but both were bought up by competitors, Chevron Corp. and BP respectively.

Despite its global reach and size – its market capitalization of $76 billion is second only in Los Angeles County to Walt Disney Co. – Oxy has kept a low profile in its involvement in the city’s civic life and business affairs. While Occidental has had representatives on the boards of local business and civic organizations, they have not assumed any leadership roles. That’s unlike the old oil company Atlantic Richfield, or Arco, whose longtime Chief Executive Lodwrick Cook was one of the region’s most active civic leaders. So apart from its presence in Westwood, a departure would not have a big impact.

Former company executives have made significant contributions to the Hammer Museum and USC.

But “they are not the kind of firm that regularly touts what they do in the community. That’s just not a part of their corporate culture,” Gary Toebben, chief executive of the Los Angeles Area Chamber of Commerce.

Oxy has not been a big employer locally. According to a 1998 article, it then had 443 employees in Westwood and planned to go down to 190.

The company has reported that it has 12,300 employees worldwide. It would not disclose how many remain at headquarters and how many are in Houston.

A search of the website LinkedIn showed that of more than 7,000 people on the site who say they work at Occidental, about 350 list the L.A. area as their base. That figure could include people who work at other Occidental facilities in Los Angeles County, such as oil drilling islands off the Long Beach coast.

Of course, California’s high personal income tax rates have pushed out more than a few headquarters; a single person earning $500,000 pays about $50,000 to the state plus 12 percent of anything more than that. Texas, by contrast, has no personal income tax.

Also, corporations don’t pay tax in Texas; in California, the corporate tax rate is 8.8 percent.

Any move could depend on the outcome of Occidental’s restructuring, which Chief Executive Stephen Chazen launched after a bitter boardroom fight earlier this year. Chazen survived an ouster attempt by former Chief Executive Ray Irani; after that he led an attempt to slim down the company in the hopes of boosting what had been a share price that lagged industry averages.

Since then, the share price has jumped more than 20 percent, closing Dec. 11 at $91.54.

In his most recent teleconference call with analysts in late October, Chazen said he hoped to present a completed restructuring plan to the board by the end of this year. The first major restructuring move – the intention to sell a major portion of the company’s Middle Eastern assets – was announced in October. Also on the block: Occidental operations in the northern Plains states and Rocky Mountains.

Analyst Fadel Gheit of Oppenheimer & Co. in New York was at a closed-door meeting with Occidental this summer. He said that if splitting off international operations doesn’t boost shareholder value enough, the company would look at selling or spinning off its oil and gas assets in California. Occidental has extensive operations in oil and gas fields in the Bakersfield area and has plans to expand its drilling in the nearby Monterey Shale formation.

Gheit and other analysts believe that Chevron Corp. of San Ramon would be a logical candidate to buy some of Occidental’s California assets, should they be put on the block.

In that same closed-door meeting, Gheit said Chazen told the analysts that he and his wife had purchased a home in the Houston area in June; a chief executive’s choice of residences is often tied to the company’s location.

While Chazen is required under new mandatory age limits to step down as chief executive at the end of next year, he could retain a board seat or a consulting role. However, observers note that his wife’s family is in Texas.

Gheit said last week that he expects Occidental to move its corporate headquarters to Houston next year.

“Since the restructuring is almost complete, there is no reason for them to stay in California,” Gheit said. “I would say it is most likely that Oxy will relocate to the Houston area next year, probably even by midyear.”

People with knowledge of the company who spoke on condition that they not be identified said they had heard either first- or secondhand from Occidental executives that the company has given employees a deadline of May or June to empty the current corporate headquarters location.

“I was told by a friend who works there that her job at the Westwood headquarters would end in May,” one of these sources said. “She also told me it wasn’t just her; come May, all employees would be out of that building.”

Of course, it’s possible that Occidental could move most of its operations to Houston and retain a minimum presence here and still call Los Angeles its headquarters. However, sources interviewed for this article said they did not get an indication that was happening.

Houston energy

Whatever the case, Occidental is part of an ongoing rush among energy companies to build up their presence in Houston, the capital of the domestic energy industry. Exxon-Mobil Corp., ConocoPhillips Co., Royal Dutch Shell and dozens of other companies have either built campuses or expanded their current leases in the last two years. Chevron announced this summer plans to build a 50-story skyscraper in Houston that the oil giant intends to fill entirely with its own staff.

All these companies hope to draw on the Houston region’s huge talent pool and the extensive network there of firms that have sprung up to service oil and gas companies.

In March, Occidental signed a lease extension and expansion at a Houston office complex, renewing a lease of nearly 600,000 square feet and adding 62,000 square feet, according to a report from Jones Lang LaSalle’s Houston office. Since 2003, Occidental has nearly tripled its office square footage in Houston. In September, Reuters reported that Occidental has nearly 1,500 employees in Houston.

Chevron has also expanded its Houston presence at a similar pace, but still has more than 3,000 people at its headquarters in San Ramon. Occidental has far fewer; indeed, if sources familiar with Occidental contacted last week are correct, there might be fewer than 100 people remaining at its headquarters.

“It’s like a ghost town in there,” said one source who met with an Occidental employee recently. “Only three or four floors seem to be occupied.”

The 1962 building has 15 floors. There are other tenants on the ground floor, but no other tenants on upper floors.

Staff relocations

John Pruitt, an executive managing director for Cassidy Turley in Houston, said he wouldn’t be surprised if Occidental made the move, considering the company’s steady office expansion in the area over the last decade.

“It is the oil and gas capital of the world, where all the exploration, production and energy services are located,” he said. “It would not be a surprise.”

An Occidental spokeswoman confirmed to Reuters in September that General Counsel Marcia Backus is based in Houston. Sources last week told the Business Journal that the whole legal division that had been based in the Westwood headquarters building has moved to Houston.

Reuters also reported that the head of Occidental’s Americas unit, Bill Albrecht, has been working in Houston for more than a year.

Another factor might also be contributing to a possible decision to relocate: a lease agreement involving the 51-year old headquarters building. In the 1980s, Armand Hammer, longtime Occidental chief executive, bequeathed his extensive art collection to a new museum, which opened in late 1990 on the ground floor of the headquarters building. As part of a 30-year lease agreement reached in 1991, the Hammer Museum has the option to buy the entire building for $55 million once the lease expires in 2021.

Most major oil companies prefer to own their headquarters buildings and Occidental now faces uncertainty over future ownership of the building.

– Staff Reporter Bethany Firnhaber contributed to this story.

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