Occidental Petroleum (OXY 0.09%) announced today that it would reduce its dividend and capital spending plan following yesterday's historic decline in oil prices. The market widely anticipated this move, as shares of the oil company plummeted more than 50% yesterday and pushed its dividend yield up to 25%

Occidental will reset its dividend from its previous quarterly rate of $0.79 per share to $0.11 per share, starting with its July payment. Further, the company intends to reduce its 2020 capital spending plan to a range of $3.5 billion-$3.7 billion, which is down from is initial $5.2 billion-$5.4 billion budget guidance. Finally, the company said it would implement additional expense reductions. Occidental can sustain its new spending plan and dividend on the cash flow it can produce at an average oil price in the low $30s, which is right around the current level.

Scissors cutting a $100 bill in half

Image source: Getty Images.

The company is undertaking these actions to strengthen its balance sheet so that it can continue to reduce debt following last year's $55 billion acquisition of Anadarko Petroleum. It has struggled to deliver on its $15 billion asset sales target due to challenging market conditions and trouble closing some of its planned sales. 

Occidental joins a growing list of U.S. oil companies that have slashed their spending plans following yesterday's oil market crash. Several more will likely join this group, including other major producers like Chevron, which is reportedly eying spending and production cuts.