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Occidental looks to raise cash, get debt under control

Jennifer Hiller
The logo of Occidental Petroleum is displayed on a screen on the floor at the NYSE in New York

By Jennifer Hiller

HOUSTON (Reuters) - Occidental Petroleum Corp <OXY.N> said on Wednesday it is looking at a series of options to shore up its impaired balance sheet, including raising cash or refinancing debt, a day after posting a $2 billion loss.

Energy companies worldwide, including Exxon Mobil Corp <XOM.N> and Royal Dutch Shell PLC <RDSa.L>, have slashed capital expenditures and oil output to reckon with the collapse in fuel demand due to the coronavirus pandemic.

Occidental faces additional challenges stemming from last year's purchase of Anadarko Petroleum for $38 billion, a bet on continued growth of U.S. shale oil production. It shoulders about $40 billion in debt amid the worst oil-and-gas industry downturn in 40 years.

The U.S. oil producer's shares fell 10% on Wednesday, and are down 68% so far this year, making it the worst performing energy stock in the Standard & Poor's 500 index in 2020.

Asset sales planned to reduce debt from the Anadarko acquisition in Africa have been sidetracked, and it soon may be forced to cut the value of those and other properties due to the crash.

The company is "increasingly challenged to manage its significant debt burden" and production likely will drop more than 10% by year end, said Jennifer Rowland, an analyst with Edward Jones.

Robert Peterson, Occidental's finance chief, said in a conference call on Wednesday the company is considering raising new cash, swapping debt for stock and refinancing existing debt because of collapsing oil demand.

Occidental also withdrew its 2020 outlook.

When an analyst asked if refinancing markets were available to the company, Peterson said, "Absolutely."

The company expects to book $2 billion from asset sales in the near term, Chief Executive Vicki Hollub said, adding that it could sell some assets or do oil joint ventures in its Permian Basin or Rocky Mountains properties to raise money.

Future stock-for-debt swaps or use of stock to pay preferred dividends to Warren Buffett's Berkshire Hathaway Inc <BRKa.N>, which helped Occidental finance the purchase of Anadarko, could cause an ownership change under Internal Revenue Service rules, it said in a securities filing.

The book value of $44 billion in oil-and-gas properties it acquired could be reduced this quarter due to the decline in oil prices, it also said. They include Anadarko properties acquired when U.S. oil <CLc1> was selling at $51 a barrel; it is now at about $24.

Occidental hired investment bankers Moelis & Co to advise on its debt, the Wall Street Journal reported on Tuesday. While the bulk of that debt comes due beginning next year, it may face a $992 million call in October from noteholders, according to Wednesday's securities filing.

A planned sale of its Algerian oil and gas properties to France's Total SA <TOTF.PA> was canceled. Occidental will have to reclassify those as continuing operations, which could hurt second-quarter results, Rowland said.

It is pursuing a sale of other assets in Ghana, a deal that had been held up, but that the transaction now is riskier in the current environment, Hollub said.

(Reporting by Jennifer Hiller; Editing by Lisa Shumaker)