Occidental to Buy Back $2.5 Billion of Debt as Oil Prices Soar
(Bloomberg) -- Occidental Petroleum Corp. is buying back $2.5 billion of its bonds as the junk-rated company seeks to cut debt after reporting better-than-expected earnings with rising crude prices.
The oil producer launched a tender offer Monday to repurchase 15 tranches of notes with maturities ranging from 2023 to 2049. Some of its targeted bonds gained. The $663 million of 4.1% unsecured notes due in 2047 vaulted 5 cents to 92.5 cents on the dollar Monday morning, according to data compiled by Bloomberg.
The cost of West Texas Intermediate crude for April rose to roughly $95 a barrel Monday as tougher sanctions were imposed on Russia following its invasion of Ukraine.
While Houston-based Occidental doesn't drill or own assets in Ukraine or Russia, Chief Executive Officer Vicki Hollub condemned the “insane and inhumane” actions of Russian President Vladimir Putin.
And even though oil prices remain high, the company does not intend to boost production this year, and any future annual growth will be capped at roughly 5%, Hollub said Hollub said last week during a call to discuss fourth-quarter earnings.
Read more: Occidental Hikes Dividend 1,200% to 13 Cents as Oil Prices Surge
Occidental is focused on cutting debt and regaining its investment-grade status in the medium term, Hollub said on the call. Both Fitch Ratings and S&P Global Ratings give the company the highest junk rating, while Moody's Investors Service grades it one step lower.
The company expects net debt to fall below $25 billion by end of the first quarter. It ended 2021 with around $28.4 billion of total debt and $2.8 billion of unrestricted cash.
Occidental's debt buyback includes principal and premium in its purchase price, but excludes accrued and unpaid interest. The offer expires on March 4. Bank of America Corp., HSBC Holdings Plc, SMBC Nikko Securities America Inc., SG Americas Securities LLC and TD Securities Inc. are leading the deal, according to the announcement.
©2022 Bloomberg L.P.
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