American exploration company Occidental Petroleum Corp (Oxy) saw its issuer and issue-level credit rating get upgraded to BB from BB- by S&P on Monday. The rating agency cited Oxy’s improving leverage metrics and S&P’s stronger oil and gas price assumptions as reasons for the upgrade. S&P assigned a stable outlook on the company on expectations that Oxy will continue to prioritize debt reduction using excess cashflow and asset sales. The rating agency said that Oxy has retired over $12bn of debt since its acquisition of Anadarko, including a recent tender for over $3bn of bonds maturing through 2026, and expects another $2bn of debt “that may be redeemable heading into 2022.” Commenting on its liquidity position, S&P said that while Oxy’s quarter-end cash of $4.6bn would have been reduced given the July tender, they expect Oxy to end the year with cash of $2bn in addition to its undrawn $5bn revolver that make for a strong buffer against volatility in commodity prices. Oxy has slightly over $2bn of debt due through the end of 2023 making its near-term maturity schedule “very manageable”. S&P expects FFO/debt of 20% and debt/EBITDA of ~4x over the next two years.
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