By Cara Lombardo 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (May 6, 2020).

Occidental Petroleum Corp. is examining ways to lessen its roughly $40 billion debt load following a historic plunge in oil prices and an ill-timed acquisition, which have put the Texas energy producer on shaky footing.

Occidental recently tapped boutique investment bank Moelis & Co. for advice on how to ease the burden of its liabilities at a time when its revenue is under severe pressure, according to people familiar with the matter.

Actions under consideration include buying back some of the company's roughly $35 billion in bonds at a discount, a move that could lower its debt load, and launching an exchange offer that could push maturities back, some of the people said.

Significant asset sales that have been considered, such as unloading a chemicals business that accounts for roughly 20% of Occidental's sales, are unlikely to be on the menu until oil prices recover, some of the people said.

There is no guarantee the company will ultimately go forward with a balance-sheet revamp. While hiring restructuring advisers can be a precursor to exploring bankruptcy, that is not the case with Occidental, which is seeking Moelis's help with so-called liabilities management.

Occidental has been hobbled by the sharp decline in oil prices, coming just months after the company completed its $38 billion purchase of Anadarko Petroleum Corp. in August. Chief Executive Vicki Hollub had pledged to sell $15 billion in assets to lighten the company's debt load, but those plans have been stymied by a drop-off in mergers-and-acquisitions activity due to the coronavirus pandemic.

Occidental had about $39 billion of debt at year-end, much of it assumed in the Anadarko deal. Bonds maturing after 2023 make up more than $20 billion of that, and the bulk were recently trading at between 60 cents and 80 cents on the dollar, according to MarketAxess, while those maturing in the next few years were trading at an average of roughly 90 cents. Occidental's market value, meanwhile, has dropped to less than $15 billion from roughly three times that a year ago.

To finance the Anadarko deal, Occidental sold $10 billion of preferred shares to Warren Buffett that carry annual dividend payments of $800 million. The company in April opted to pay its quarterly obligation of $200 million in shares.

Occidental has taken other measures to conserve cash, slashing capital spending by more than half, trimming salaries and cutting the dividend it pays common shareholders by 86%.

The company reported a first-quarter loss of $2.2 billion Tuesday, as it contended with a decline in oil prices and demand. Occidental wrote down the value of its oil and gas assets by about $580 million and took $1.4 billion in charges tied to its investment in pipeline company Western Midstream Partners LP, acquired as part of the Anadarko deal.

Moelis is expected to work hand-in-hand with a newly formed advisory committee on Occidental's recently overhauled board. It is led by Chairman Stephen Chazen and includes lieutenants of activist investor Carl Icahn, who owns roughly 10% of the company's shares.

Companies -- particularly in the retail and energy sectors -- have in recent weeks been racing to hire advisers to help them manage their debt piles as the pandemic crimps business and, in some cases, to prepare for possible bankruptcy.

Moelis has lately been one of the most active of the so-called boutique banks that specialize in doling out advice rather than capital.

Rebecca Elliott contributed to this article.

Write to Cara Lombardo at cara.lombardo@wsj.com

 

(END) Dow Jones Newswires

May 06, 2020 02:47 ET (06:47 GMT)

Copyright (c) 2020 Dow Jones & Company, Inc.
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