Occidental Petroleum Corp. bonds advanced across the stack this morning after the company unveiled cash tender offers for a raft of senior-note issues maturing between 2023 and 2049.
Per a Feb. 28 press release, the tender offer will be divided into two pools, the first targeting up to $1.5 billion of lower-coupon front-end bonds and the second involving $1 billion of longer-dated paper.
Pool 1 comprises the 3.50% notes due 2025, 3.20% and 3.40% notes due 2026, 3.50% notes due 2029, 3% notes due 2027, 2.90% and 3.45% notes due 2024 and 2.70% notes due 2023.
Pool 2 comprises the 4.10% notes due 2047, 4.20% notes due 2048, 4.40% notes due 2049, 4.30% notes due 2039, 4.40% notes due 2046, 4.50% notes due 2044 and 4.625% notes due 2045.
The long end of the Occidental curve rose on today's buyback news, with the longest dated 4.40% 2049 bonds rising 4 points in light trading, to change hands at 95.375. That's after dipping to an eight-month low of 89 on Feb. 22. However, the most active of the company's stack on the day were the 6.625% senior notes due 2030, which edged 0.75 points higher on two-way action, to 117, for a yield of about 4.109%, versus recent lows just south of 113.
The tender offer expires at 5 p.m. EDT on March 4, unless extended. BofA Securities, HSBC Securities, SMBC Nikko, SG and TD Securities are the lead dealer managers. Occidental will fund the deal with cash on hand, which totaled $2.8 billion at the end of the fourth quarter, per its Feb. 24 earnings report.
Management flagged the new deal on the company's Feb. 25 earnings call as a follow-up to a 14-tranche cash tender offer launched at year-end that fell just short of its $2 billion target and contributed to a $6.7 billion reduction in debt over the course of the year.
"Certainly, the next dollar we put forward will be towards debt reduction," Occidental CFO Robert Peterson told analysts on the call. "And with the cash we ended the year at and the cash we're adding during the quarter, it's pretty safe to say that's probably not too far in the future that we initiate that process again."
Occidental swung to a profit in the fourth quarter as soaring oil prices inflated revenue, leading the company to report a consensus-crushing adjusted earnings of $1.48 per share. Cash flow from operations has topped $3 billion and free cash flow $5 billion in each of the past two quarters. Management said it expects net debt to be below $25 billion by the end of the first quarter of 2022 and is looking to pare another $5 billion of the $28.4 billion of debt it was holding at year-end.
Its debt-reduction efforts earned Occidental a January upgrade from S&P Global Ratings, which nudged the company up to BB+, leaving it within one notch of the investment-grade rating it lost in March 2020. Fitch in December had done likewise, upgrading Occidental to BB+, while Moody's changed the outlook on its Ba2 OXY rating to positive.