(Bloomberg) – Occidental Petroleum Corp. reported a $ 6.6 billion write-down in the second quarter, representing more than 40% of its market value, as the collapse in energy prices took its toll on the debt-laden US shale oil producer.
Occidental is not alone in taking large write-downs after the Candid-19 pandemic crushed demand for petroleum around the world in the second quarter, but the write-down is one of the largest in relation to its size. Although the fees do not affect cash flows in the short term, they increase certain leverage conditions, which enables the oil producer’s borrowing costs.
Excluding the write-downs, Occidental made an adjusted loss of $ 1.76 per share, worse than the average $ 1.68 that analysts estimated in a Bloomberg survey. Production came at the end of Occidental’s guidance, equivalent to 1.41 million barrels of oil per day, increased by production from the Permian Basin in Texas and New Mexico.
Almost all major oil and gas companies have either taken or warned of massive write-downs after the energy markets collapsed in the second quarter and eroded the value of their reserves. With uncertainty about when or if demand for petroleum will recover and spending cuts, the industry effectively says that large parts of its oil in the ground must never be produced economically.
The loss puts further pressure on Occidental, which is struggling with a $ 40 billion debt burden following its wrongful 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 from the sale in the short term, it says in a presentation on its website.
To deal with the collapse in oil prices during the second quarter, Occidental has been in full-blown recession and cut its capital budget by more than half to $ 2.5 billion for the year. That’s under $ 2.9 billion a year it needs to sustain production going forward.
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, a sharp contrast to the planned growth plans when it surpassed Chevron to buy overall rival Anadarko last year.
(Updates with profit in the fourth paragraph)
bloomberg.com“data-reactid =” 41 “> For more articles like this, visit us at bloomberg.com
Subscribe now to keep up with the most reliable news source for companies. “data-reactid =” 42 “> Subscribe now to stay ahead of the most reliable news source.
© 2020 Bloomberg LP