HOUSTON: Occidental Petroleum Corp <OXY.N> said on Wednesday it was looking to raise new cash or swap debt for stock, a day after it posted a large first-quarter loss, sending its stock down 9%.
The company has been struggling with debt taken on in last year's $38 billion acquisition of Anadarko Petroleum, an ill-timed bet on rising shale oil prices ahead of a market crash.
Shares fell to $13.87 after the company laid out in a securities filing the potential for new asset impairments and an ownership change based on its need to raise new cash to cover future debt payments.
Wednesday's drop pushed its shares down about 65% this year.
The company expects $2 billion of asset sales in the near term, Chief Executive Vicki Hollub said, adding that it could potentially sell some assets or do joint ventures in the Permian Basin or Rockies to raise money.
Robert Peterson, the company's finance chief, said in a conference call on Wednesday it 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."
Future debt-for-stock 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.
Global energy demand has tumbled amid coronavirus-related travel and business restrictions and a glut of oil from a price war.
The value of about $44 billion in acquired oil and gas properties may be reduced due to the decline in oil prices, it also said in a securities filing. They include Anadarko properties acquired when U.S. oil, now selling for about $23 a barrel, sold for $51, it said in the filing.
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 could face a $992 million call in October from noteholders, according to Wednesday's securities filing.
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, analyst with Edward Jones.
The planned sale of its Algerian oil and gas properties to France's Total SA will not go forward, both companies said this week. Occidental will have to reclassify those as continuing operations, which could hurt second-quarter results, Rowland said.
The Anadarko purchase increased Occidental's debt to about $40 billion, but the oil-price crash has cut the value of assets picked up in the deal.
Reuters
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