• E-mail
• Print
• Comment
• Font Size
• Digg
• del.icio.us
• Discuss article

Fitch Affirms Occidental Petroleum's 'A-/F2' Debt Ratings

Posted on: Friday, 14 October 2005, 12:00 CDT

Fitch Ratings has affirmed Occidental Petroleum Corporation's (OXY) debt and issuer default ratings following the company's announcement that it is acquiring Vintage Petroleum Inc. (Vintage). The Rating Outlook on OXY remains Stable.

Ratings affirmed are listed below:

Occidental Petroleum Corp. IDR 'A-';

Occidental Petroleum Corp. bank facility 'A-';

Occidental Petroleum Corp. senior unsecured notes/debentures 'A-';

Occidental Petroleum Corp. medium-term notes 'A-';

Occidental Petroleum CP Program 'F2'.

Fitch anticipates rating Vintage's senior unsecured debt 'A-' at close.

OXY has announced that it is purchasing Vintage Petroleum for approximately $3.8 billion in total consideration. The cash and stock deal also includes the assumption of $550 million in Vintage debt and an estimated $225 million in cash. Initially, OXY will issue 0.42 OXY common shares for each Vintage share which works out to approximately $2.15 billion in stock (based on the Oct. 13, 2005 closing price) and pay cash to Vintage shareholders of approximately $1.4 billion. OXY will also be buying back approximately 9 million shares of its stock, essentially bringing the total cash portion paid for the transaction to approximately $2.1 billion. Fitch anticipates that OXY will pay for the cash portion (including the stock repurchase) from cash on hand and that no external financing will be necessary. Closing for the transaction is expected to be completed in the first quarter of 2006 and is subject to customary regulatory conditions.

In the transaction, the acquisition of Vintage will give OXY 437 million barrels of oil equivalent (boe) of proven reserves at a cost of approximately $9/boe. Approximately half of the proven reserve base is located in Argentina with approximately 140 million boe located in the United States. OXY has also indicated that it will be divesting non-core Vintage assets in East Texas, along the Gulf Coast and in the Mid-Continent region which accounted for one quarter of Vintage's second quarter production. Pro forma for the acquisition, Vintage production will represent approximately 15% of OXY's proven reserve base and 12% of the company's production. Pro forma debt for OXY will be approximately $3.5 billion which is less than the amount it had at the end of 2004.

Occidental Petroleum is one of the largest independent oil and gas exploration and production companies in the world. At year-end 2004, the company's proven reserves were approximately 2.5 billion boe of which approximately 78% were developed. Presently, crude oil represents approximately 80% of the company's production stream. Most of OXY's domestic oil and gas assets are located in California, the Permian Basin of Texas and New Mexico and the Hugoton Basin of Kansas and Oklahoma. Internationally, the company has production in Qatar, Oman, Yemen, Pakistan, Russia, Colombia and Ecuador. Through its Occidental Chemical Corporation subsidiary, OXY is also a leading North American manufacturer and marketer of basic chemicals such as chlorine and co-product caustic soda, polyvinyl chloride (PVC) and certain performance chemicals.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.

Source: Business Wire

More News in this Category