May 6, 2020 / 4:26 PM / a month ago

Occidental looks to raise cash, swap debt as oil prices pressure finances

HOUSTON, May 6 (Reuters) - Occidental Petroleum Corp 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 7%.

Shares fell to $14.23 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.

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.

Future debt-for-stock swaps or use of stock to pay preferred dividends could cause an ownership change under Internal Revenue Service rules, it said in a securities filing.

The company is 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 dive that continues to weigh on its results.

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, and the oil-price crash has cut the value of assets picked up in the deal, making it harder to sell some of them to pay down the debt.

Reporting by Jennifer Hiller; Editing by Lisa Shumaker

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