Here are highlights:
- 53% crashed on March 9, 2020
- 2029 and 2049 bond 0.70 on a dollar
- On track to outspend cash flow by $2.6 billion after paying its dividend
March 9, 2020
Shares of Occidental Petroleum (NYSE:OXY) crashed a stunning 53% today as the oil market endured its worst sell-off since 1991. Overall, crude oil prices cratered more than 25% because Saudi Arabia entered into an all-out price war against Russia after that country abandoned its supply reduction agreement. That sell-off pushed the yield on Occidental's dividend up to a staggering 25%. The oil company, which declared its next payment last month, will pay is scheduled to pay its next quarterly dividend on April 15th, with investors who hold the stock as of March 10th eligible to receive the payment.
The market, however, is growing increasingly concerned that this might be Occidental's final dividend at the current level. That's because the company took on a mountain of debt as part of its $55 billion acquisition of Anadarko Petroleum last year. While it had planned to sell $15 billion in assets to help pay for the transaction, it's struggling to meet its target due to market conditions and other delays.
With crude prices crashing, and Occidental still short of its asset sales target, its bonds are under pressure. The company's publicly traded bonds, which mature in 2029 and 2049, both plunged below $0.70 on the dollar today amid concerns around its ability to repay. Because of that, analysts believe the company will need to reduce, or even eliminate, its dividend so that it doesn't tack on more debt to an already bloated balance sheet. Given crude's recent plunge, Occidental is on track to outspend cash flow by $2.6 billion after paying its dividend, according to analysts from Tudor Pickering Holt.
Follow up | Oct. 18, 2021
I like to share this case study with friends. We can learn together how things work if crude oil price goes down.
In short, it is interesting to see OXY bond plunged on March 9, 2020.
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