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NEW YORK — Financial credit ratings firm Moody’s Corp. (NYSE: MCO) slashed Occidental Petroleum Inc. (NYSE: OXY) to almost below investment-grade as the combination of COVID-19 related drops in demand and a price war between Russia and Saudi Arabia drives oil prices below $30 per barrel.
Moody’s cut its rating of senior unsecured bonds from Weld County’s largest producer of oil by volume to “Ba1,” the highest rating it assigns to debt it believes is junk status, pointing out in particular its $38.5 billion long-term debt load after acquiring competitor Anadarko Petroleum last year.
That debt load in current economic conditions is “significantly compromising its financial flexibility to confront the collapse in oil prices,” Moody’s vice president Andrew Brooks said in a statement.
The cuts came a week after one of the most brutal few days for the oil and gas industry in recent memory. Saudi Arabia and Russia, the second and third-largest oil-producing states in the world behind the U.S., failed to agree on lowering output with the rest of OPEC to match the falling global demand for fuel caused by the spread of the COVID-19 virus.
Instead, the two vowed to raise production and flood the world market with cheap oil, cratering global prices to almost $30 per barrel Monday. West Texas Intermediate was trading in the low-$20 per barrel range for most of this week.
Occidental cut its new drilling operations in Weld County as part of a larger corporate cost-cutting measure and agreed to pay a state record $18.25 million in fines to the Colorado Oil and Gas Conservation Commission as a result of the 2017 Firestone gas leak explosion that killed two.