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Has Bolton’s Firing Burst The Oil Price Bubble?

Has Bolton’s Firing Burst The Oil Price Bubble?

Oil prices fell significantly on…

Occidental Sells Up To $13B Bonds To Fund Anadarko Acquisition   

Dollars

To help fund part of the acquisition of Anadarko, Occidental Petroleum has started selling bonds this week, with the sale expected in the range of US$11 billion to US$13 billion and divided into 10 parts, Bloomberg News reported, quoting a person familiar with the matter.

This spring, Occidental outbid Chevron to seal one of the largest oil and gas M&A deals of the past few years by buying Anadarko. Occidental offered US$38 billion for Anadarko, 80 percent of it in cash, in addition to the assumption of Anadarko’s debt. Initially, Oxy had offered 50 percent of the US$57-billion debt-including price in cash and the rest in stock, but Anadarko was reluctant to accept this bid. Oxy then upped the cash portion of the deal to 80 percent and won the approval of Anadarko’s board.

Occidental, however, will be taking on a lot of debt in this transaction, analysts and experts warn.  

Occidental hasn’t closed the acquisition of Anadarko yet, but analysts are already speculating about which Anadarko assets Occidental could divest to cut part of the debt it has taken on from the transaction and to focus on the core assets after the deal—Anadarko’s prime U.S. shale acreage. 

According to analysts who spoke to Reuters in May, Occidental’s most likely asset sales could be Anadarko’s pipeline business and the assets in the Gulf of Mexico. Anadarko’s GoM position may be worth at least US$6 billion, and potential buyers could be some of the biggest players with experience in the Gulf of Mexico such as Exxon, Shell, Chevron, and Total, analysts told Reuters. 

Related: Iran Seizes Iraqi Vessel In The Gulf

In the Q2 earnings call last week, Occidental’s President and CEO Vicki Hollub said that “We have set targets to reduce capital spending by $1.5 billion, captured $2 billion in annual cost reductions and delivered $10 billion to $15 billion in asset sales to reduce debt. We’ve already begun delivering on these targets, and we’ll provide updates during the remainder of the year.”

n the same day, Moody’s Investors Service downgraded Occidental’s ratings, saying that “the acquisition affords strategic and cost benefits to OXY, however, at the very high cost of a significantly eroded credit profile.”  

“OXY’s acquisition of Anadarko is a significantly leveraging transaction, adding over $40 billion of debt to OXY’s capital structure at its outset,” Andrew Brooks, Moody’s Vice President, said last week.  

By Tsvetana Paraskova for Oilprice.com

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