Fitch Ratings has affirmed the following ratings of Occidental Petroleum Corporation (NYSE: OXY):
--Issuer Default Rating (IDR) 'A';
--Senior Unsecured Bank Facility 'A';
--Senior Unsecured Debt 'A';
--Commercial paper 'F1';
--Short-term IDR 'F1'.
The Ratings Outlook is Stable.
OXY's ratings reflect the company's low absolute level of debt, diversified portfolio of properties, significant leverage to oil, and solid operational metrics. Key operational metrics for OXY were strong in 2007 and include all-in reserve replacement of 116%, 3-year FD&A costs of $15.30/boe, and an R/P ratio of 13.8 x, according to Fitch calculations. Total reserves were 2,867 million boe (barrels of oil equivalent), of which 80% were proved developed. In Q1 2008, OXY's production rose to 607,000 barrels of oil equivalent per day (boepd), an 8.4% increase from year-ago levels. Increases were primarily tied to higher gas and liquids output from the Dolphin project in Qatar, as well as in Latin America and at core US properties.
In 2007, OXY retired $1.2 billion in net debt, resulting in total debt balances of just $1.83 billion as of March 31, 2008, while OXY's debt-to-capitalization stood at just 7%. Share buybacks in the latest quarter were fairly light at approximately $435 million, with 20.2 million in repurchase authorization remaining. While Fitch anticipates that buybacks may ramp up if OXY is unable to reinvest in upstream projects which meet its rate or return criteria, we expect that any major increase in buybacks would be funded out of free cash flow at this point.
Offsetting factors include the potential for heavy future capital expenditures, as well as commodity price volatility. Note that with the recent debt reductions, the company is at the upper end of its current 'A' rating category.
Occidental Petroleum Corporation is an international oil and gas exploration and production company with operations in the United States, Middle East/North Africa and Latin America regions. The company's core US properties are located in the Permian Basin, Elk Hills and other California locations, as well as the Hugoton Basin. In 2007 the company exited Pakistan and Russia. Oxy's wholly owned subsidiary, OxyChem, manufactures and markets chlor-alkali products and vinyls across 26 manufacturing sites. Occidental also reports a separate midstream segment. Total employee count as of Dec. 31, 2007 was 9,700.
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.
Contacts:
Mark Sadeghian, +1-312-368-2090, Chicago
Sean T
Sexton, +1-312-368-3130, Chicago
Media Relations:
Brian
Bertsch, +1-212-908-0549, New York
