Occidental Sells $2.6 Billion Notes - Analyst Blog

Oil and gas production company Occidental Petroleum Corporation (OXY) sold $2.6 billion notes in three tranches. The issue was rated A2 by Moody's Investors Service and A by Standard & Poor's.

One offering comprised $600 million of 1.45% senior notes due December 13, 2013, at an offer price of $99.881 (per $100.00 principal) to yield 1.491%. The second offering was of $700 million of 2.50% senior notes due February 1, 2016, at an offer price of $99.94 (per $100.00 principal) to yield 2.512% and the third offering constituted $1.3 billion of 4.10% senior notes due February 1, 2016, at an offer price of $99.997 (per $100.00 principal) to yield 4.102%.

Occidental recently announced that it is planning to purchase crude and natural gas assets in North Dakota and southern Texas for $3.2 billion. We expect the company might use a portion of the proceeds of debt issue to fund the acquisition.

Occidental ended the third quarter with long-term debt of $2.51 billion compared with $2.56 billion in the third quarter of 2009. During the first nine months of 2010 the company repaid debt worth $311 million, leveraging the company's strong cash position.

Occidental ended the third quarter 2010 with interest and debt expenses of $26 million versus $40 million at the end of the comparable period last year. The decline in interest expenses was due to steady debt repayments year to date. Interest expenses will inevitably increase with the current debt issue.

The third quarter 2010 operating earnings of Occidental Petroleum were $1.47 per share versus $1.14 per share recorded in the year-ago quarter. The Zacks Consensus Estimates for fourth-quarter 2010, fiscal year 2010 and fiscal year 2011 are $1.50 per share, $5.58 per share and $6.93 per share, respectively.

On a competitive landscape, Occidental's net margin fared better than the net margins of its peers, El DuPont de Nemours & Company(DD) and Exxon Mobil Corporation (XOM), in the trailing twelve months.

Occidental Petroleum currently retains a Zacks #3 Rank (short-term Hold rating). We also maintain a longer–term Neutral rating on the stock.

Based in Los Angeles, California, Occidental Petroleum along with its subsidiaries operates as an oil and gas exploration and production company. Occidental has operations in the United States, Middle East/North Africa and Latin America.

 
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