Occidental Petroleum likely will receive a downgraded investment rating if it wins the bidding war against the much larger Chevron to acquire Anadarko Petroleum,
- Moody’s Investors Service (Moody’s) placed all ratings of Occidental Petroleum Corporation (OXY) under review for downgrade, including its A3 senior unsecured debt rating and its P-2 commercial paper rating.
These rating actions follow today’s announcement that OXY has proposed a $76 per share acquisition of Anadarko Petroleum Corporation (APC, Ba1 review up), totaling approximately $38 billion in stock and cash. OXY has proposed issuing 0.6094 new shares and $38.00 cash for each share of Anadarko, resulting in overall consideration that is 50% equity and 50% cash. The transaction value is approximately $57 billion, consolidated for Anadarko’s debt and the debt of Western Midstream Operating (Western, Ba1 review up). Should OXY’s bid for Anadarko prove successful, a multiple notch rating downgrade should be expected. If the acquisition closes as proposed and crude oil prices remain supportive, OXY would likely emerge from the review with a weakly positioned investment grade rating.
Anadarko’s and Western’s ratings remain on review and are not affected by this action.
The following ratings were placed under review for downgrade:
Issuer: Occidental Petroleum Corporation
CREDIT RATINGS ISSUED BY MOODY’S INVESTORS SERVICE, INC. AND ITS RATINGS AFFILIATES (“MIS”) ARE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MOODY’S PUBLICATIONS MAY INCLUDE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES.
Occidental Petroleum (OXY) Investor Presentation
Looking back on 2018, I’m pleased with the significant progress we made in strengthening Occidental’s long-term
financial and business outlook. We completed our strategic cash flow breakeven plan six months ahead of schedule and
now have the ability to cover the dividend and production sustaining capital at a $40 West Texas Intermediate (WTI) price per barrel of oil, and add meaningful production growth at $50 WTI. This achievement reflects the strength of our integrated business model, combined with our team’s focus on financial discipline and operational excellence.
Outstanding performance across our businesses fueled record free cash flow, and the return of more than $3.6 billion to shareholders through share repurchases and our sector-leading dividend. We delivered a 14 percent return on capital employed and a 27 percent
cash return on capital employed 1 — among the best in our peer group. Our solid balance sheet once again received A ratings from the major credit rating agencies.
These are significant accomplishments, but we must do more to maximize shareholder return. We remain laser-focused on financial discipline and industry-leading performance, striving to ensure every dollar we spend delivers the most value.
We are committed to disciplined capital allocation and have set the 2019 budget at $4.5 billion, 10 percent less than the previous year, with additional value-based production growth. Our goal is to invest in projects that create long-term value, targeting returns well above
the cost of capital employed. We continue to focus on delivering industry-leading returns across our integrated businesses and returning capital to shareholders through our dividend and share repurchases.
In 2018, the Board of Directors increased the dividend for the 16th consecutive year, returning $2.4 billion to our shareholders. This February, the Board affirmed an annualized dividend rate of $3.12 per share, and we expect to continue funding the dividend from cash flow generated by our base business and increased production from organic growth. We also repurchased more than $1.2 billion of shares under our $2 billion-plus share repurchase program, with the intention of completing the remainder this year. Since 2002, Occidental has returned $33 billion to shareholders through dividends and share repurchases. In the United States, we continue to hold a dominant
position in the Permian Basin, one of the most prolific oil-and-gas basins in the world. Our unique portfolio of
unconventional and conventional acreage differentiates us from competitors. Our Permian Resources business adds unconventional, short-cycle production at high rates, while our Permian Enhanced Oil Recovery (EOR) business provides reliable production and steady cash flow. Our midstream and marketing segment is complementary to and supports upstream operations, providing an integrated business from point of production to point of sale.
Permian Resources delivered 40 percent of the top 50 wells in the basin, based on 24-hour initial production rates, the
most of any operator, despite drilling less than 5 percent of total wells. As the largest user of carbon dioxide (CO2)
for EOR in the basin, Permian EOR continued to maximize recovery and deliver significant free cash flow. Permian cash operating costs were the lowest level this decade, supported by our long-term investments. One example is Aventine, our
integrated logistics-and-maintenance hub in New Mexico, which began operations in 2018.
Occidental’s principal businesses consist of three segments. The oil and gas segment explores for, develops
and produces oil and condensate, natural gas liquids (NGL) and natural gas. The chemical segment (OxyChem) mainly
manufactures and markets basic chemicals and vinyls. The midstream and marketing segment purchases, markets,
gathers, processes, transports and stores oil, condensate, NGL, natural gas, carbon dioxide (CO2) and power. It also
trades around its assets, including transportation and storage capacity. Additionally, the midstream and marketing segment invests in entities that conduct similar activities.
Occidental’s common stock is listed on the New York
Stock Exchange (NYSE). The symbol is OXY
Carbon neutral investments? Occidental Petroleum sets example
Oxy, Carbon Engineering to Build Largest Carbon-From-Air Plant, The Permian Basin plant would initially capture 500,000 tons of atmospheric carbon per year. Occidental CEO hopes project with Carbon Engineering will serve as an example for other companies.
The companies will jointly proceed with the engineering and design of the world’s largest Direct Air Capture (DAC) and sequestration facility. The companies are evaluating a facility designed to capture 500 kilotonnes of carbon dioxide (CO2) directly from the atmosphere “CO2 Recovery” each year, which would be used in Occidental’s enhanced oil recovery (EOR) operations and subsequently stored underground permanently. The plant would be located in the Permian Basin.
The feasibility of DAC has been disputed, in part, because publications have not provided sufficient engineering detail to allow independent evaluation of costs. We provide an engineering cost basis for a commercial DAC system for which all major components are either drawn from well-established commercial heritage or described in sufficient detail to allow assessment by third parties. This design reflects roughly 100 person-years of development by Carbon Engineering.
Dr. David Keith, President of Carbon Engineering, a company based in Calgary, Alberta, is commercializing a technology to capture carbon dioxide (CO2) from the atmosphere. The company plans to market the captured CO2 to produce low carbon transportation fuels in markets such as California where regulation, derived from a state law designed to manage climate change, restricts the maximum carbon intensity of transportation fuel. – https://www.hbs.edu
Canadian companies that do carbon capture
Based in Squamish, B.C., Carbon Engineering focuses on direct-air carbon capture and conversion. One of the products it developed is a carbon-neutral jet fuel. Technology trends drive business development – grow your business with the Daily Oil Bulletin.
The company recently closed a US$68 million equity financing round. Investors include Bill Gates and Murray Edwards, founder and executive chairman of Canadian Natural Resources Limited.
Burnaby, B.C.-based Inventys developed an adsorption material that draws CO2 from industrial flue gas stacks. In partnership with Husky Energy Inc. it is now building a $15 million demonstration plant in Saskatchewan, with the captured CO2 to be used in enhanced oil recovery.
Calgary-based CleanO2 developed CARBiNX, a small-scale carbon-capture device for home furnaces that captures CO2 in the form of carbonate, which can then be used to make a range of products, including hand soap.
CarbonCure Technologies, of Dartmouth, N.S. developed a process for adding CO2 to ready-mix concrete in which the CO2 becomes converted into a mineral and sequestered to make a lighter, stronger and lower-carbon concrete. More than 100 concrete makers in the U.S., Canada and Malaysia are using the product.
CO2 Solutions Inc.
Montreal-based CO2 Solutions developed an alternative to existing liquid amine carbon capture that produces no toxic waste. The company has partnered with Resolute Forest Products to build a 30-tonne-per-day carbon-capture plant at the company’s pulp mill in Saint-Félicien, with the CO2 to be used in the Toundra Greenhouse complex.
Pond Technology, based in Markham, Ont., developed a process for taking untreated emissions from power plants, refineries or cement plants and uses it to grow algae in bioreactors, sequestering the carbon and cleaning up other impurities from the exhaust. The algae is then used to make animal feed, cosmetics and biofuels.