Occidental Petroleum Corp. Ratings Lowered To 'BB+' From 'BBB' On Expected Weaker Credit Measures; On Watch Negative

  • We expect U.S.-based exploration and production (E&P) company Occidental Petroleum Corp.'s (Oxy) credit measures to be well below our expectations for the rating over the next two years under our revised oil and gas price assumptions.
  • The company enters this period of low oil prices with a balance sheet burdened by debt related to the 2019 acquisition of Anadarko Petroleum Corp. While the company has sharply reduced its planned capital spending and dividend, its production is largely exposed to market commodity prices.
  • We lowered our ratings on Oxy, including our issuer credit rating and unsecured issue-level ratings, to 'BB+' from 'BBB'. At the same time, we placed the ratings on CreditWatch with negative implications.
  • The CreditWatch listing reflects the likelihood of a downgrade if Oxy does not address its high debt burden, and its daunting debt maturity profile, over the next two years.
NEW YORK (S&P Global Ratings) March 25, 2020--S&P Global Ratings today took the rating actions listed above.
The recent collapse in oil prices will hurt Oxy's profitability and cash flows.  We forecast that the company's credit measures will be weak for our expectations for the rating, with funds from operations FFO to debt and debt to EBITDA of well below 12% and above 5x, respectively, in 2020 based on our revised oil and natural gas price deck assumptions (see "Unrestrained Supply Swamps Oil Outlook: S&P Global Ratings Revises Oil & Gas Assumptions," published March 9, 2020).

The CreditWatch placement reflects the likelihood of a downgrade by year-end 2020 if Oxy does not address its maturities in 2021. We view successful execution of asset sales as the most plausible path to achieving this. We expect to resolve the CreditWatch, likely toward the end of this year, based on the company's progress on debt reduction.
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