Occidental Petroleum Corp. Corporate Credit And Debt Ratings Off CreditWatch Negative, Outlook Stable

Stocks and Financial Services Press Releases Friday December 19, 2014 09:28
NEW YORK--19 Dec--Standard & Poor's

NEW YORK (Standard & Poor's) Dec. 18, 2014--Standard & Poor's Ratings Servicestoday removed the corporate credit and debt ratings on Occidental PetroleumCorp. (OXY) from CreditWatch, where we placed them with negative implicationson Feb. 18, 2014, following the company's announcement that it would separateits California operations into a publicly traded company: California ResourcesCorp. (CRC). We are affirming the 'A' corporate credit and senior unsecuredratings on OXY. We are also affirming the 'A-1' short-term debt and commercialpaper ratings. The outlook is stable.

"The ratings affirmation reflects our assessment that OXY's financial riskprofile remains 'modest' and business risk profile remains 'strong', followingthe spin-off of California Resources Corp.," said Standard & Poor's creditanalyst Paul Harvey. "Although we estimate that CRC represented about 20% ofyear-end 2013 proved reserves, we expect OXY's scale of operations, operatingefficiency, and competitive advantage to remain consistent with a 'strong'business risk profile," said Mr. Harvey.

The "strong" business risk profile designation reflects the still large scaleof OXY's operations in the U.S., Middle East/North Africa, Latin America, andrelated benefits to costs, as well as a greater ability to securetransportation and other services compared with peers.

We assess OXY's liquidity as "adequate" given our estimate that liquiditysources will exceed uses by at least 1.2x over the next 24 months. Inaddition, we expect liquidity sources to continue to exceed uses if EBITDAfalls 30%.

The stable outlook reflects our view that Occidental's strong credit measuresand adequate liquidity will remain supportive of credit quality throughout thecommodity cycle. The current ratings also incorporate our expectation thatmanagement will maintain dividends, share repurchases, and any acquisitions ina manner that allows it to maintain FFO/debt in excess of 60% over the nexttwo years.

An upgrade would require Occidental to significantly improve its business riskprofile, while maintaining its conservative financial measures. While we doexpect production and reserve growth, we do not expect it to be meaningfulenough to warrant an upgrade over the next two years.

We would consider a downgrade if Occidental pursued a more aggressivefinancial policy such that expected FFO/debt fell below 60% for a sustainedperiod. Such an event could occur if the company pursued an aggressive capitalspending and/or share repurchase program in a low price environment such asthe one we currently face.


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