(Bloomberg) – Occidental Petroleum Corp. reported an entry of $ 6.6 billion in the second quarter, equivalent to more than 40% of its market value, as the collapse in energy prices took its toll on the debt-laden U.S. shale oil producer.
More than two-thirds of the valuation was responsible for the lower value of their domestic land, with the rest in the Gulf of Mexico and abroad, the Houston-based company said Monday in a statement. The shares dipped as much as 6.8% in trading to the New York market.
Occidental is not only taking large limit after the Covid-19 pandemic has crushed demand for petroleum all over the world, but its writing is one of the largest relative to its size. Although the charges do not affect cash flows over the long term, they do increase certain leverage ratios, potentially pushing up the borrowing costs for the oil producer.
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Occidental’s debt jumped after his Anadarko deal
Excluding the write-downs, Occidental made an adjusted loss of $ 1.76 per share, worse than the average $ 1.68 estimated by analysts in a Bloomberg survey. Production came at the very end of Occidental’s lead, at the equivalent of 1.41 million barrels of oil per day, boosted by exports from the Permian Basin of Texas and New Mexico.
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Almost every major oil and gas company has declined or warned of massive write-downs after energy margins collapsed in the second quarter, eroding the value of their reserves. With uncertainty about when the demand for petroleum will fully recover and exacerbate spending cuts, the sector effectively says that large parts of its oil in the ground can never be produced economically.
Company |
Write down |
| Shell | $ 16.8 billion |
| BP | $ 11.8 billion (excluding exploration) |
| Total | $ 8.1 billion |
| Occidental | $ 6.6 billion |
| Chevron | $ 4.4 billion |
The loss puts further pressure on Occidental, which is struggling with a $ 40 billion debt burden following its poor time acquisition of Anadarko Petroleum Corp. last year. The company is currently considering selling assets to pay off the debt and expects to receive about $ 2 billion in sales in the full term, it said in a presentation on its website.
To address the collapse in oil prices, Occidental has been in fully exposed retreat, and has reduced its capital budget by more than half to $ 2.5 billion for the year. That is below the $ 2.9 billion a year needed to support production going forward. As such, exports are declining rapidly, with a 13% drop to 1.23 million barrels per day expected in the current quarter and a further 5% in the fourth.
The company said it plans to operate only one rig in the Permian Basin for the rest of the year and none in the Rocky Mountains, in stark contrast to the proposed growth plans when the Chevron outperformed last year’s competitor Anadarko to buy.
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