Occidental May Owe $800 Million in Colombia Taxes, Penalties, Report Says
LOS ANGELES (AP) _ A foreign tax ruling and a Wyoming jury verdict that together represent a potential $1.5 billion drain on Occidental Petroleum Corp. have been branded ″hullabaloo″ of no concern by the company’s chairman.
Word of an adverse tax ruling in Colombia sent Occidental’s stock diving $1.50 per share to $27.62 1/2 at the close of trading Monday, and at one point, the price was off as much as $2 per share.
″We’re not concerned about any of these things, despite all the hullabaloo,″ Occidental Chairman Armand Hammer said, according to Tuesday editions of the Los Angeles Times.
He labeled as ″absurd, preposterous,″ the ruling that his company may owe the Colombian Tax Department $800 million in back taxes and penalties for allegedly undervaluing the giant Cano Limon oil field when that property was shifted to a subsidiary.
Separately, Hammer said the company intends to asks a Wyoming judge to set aside or reduce a $724 million jury verdict handed down last Thursday against Natural Gas Pipeline Co., a division of Occidental subsidiary MidCon Corp. of Lombard, Ill.
That award was made to Coastal Corp over Natural Gas’ abrogation of a natural-gas purchase contract in the face of declining prices.
Also Monday, Moody’s Investors Service said it has Occidental’s debt ratings under review because of continuing weakness in the oil industry and the uncertainty caused by the Colombia and Wyoming rulings.
At issue in the Colombian case is Occidental’s decision to shift half its holdings in the Cano Limon field to its Cities Service unit in April 1983. At the time, Occidental had found no oil but had spent $50 million on exploration.
Hammer indicated the shift was made so that Occidental’s unsuccessful exploration costs could be written off against modest production profits by its Cities Service division.
Oil was discovered in the field in July 1983, and in June 1985, the company sold half its stake in Cano Limon to Royal Dutch Shell for $1 billion.
The Colombian Tax Department audit suggests that Occidental should have valued the field when it turned it over to Cities Service at the same price the Shell deal put on it, or $2 billion for the whole field.
Under Colombian law, Occidental could be liable for back taxes, a fine equal to 200 percent of that amount plus interest.