Credit rating agency Moody's (MCO -3.21%) announced today that it has downgraded Occidental Petroleum's (OXY -0.13%) senior unsecured debt from Baa3 to Ba1. That pushed Occidental's bond rating into junk territory. 

Occidental's credit profile has been under pressure since it acquired Anadarko Petroleum last year. The company took on $40 billion in debt to finance that transaction. That debt is now "significantly compromising its financial flexibility to confront the collapse in oil prices," according to Andrew Brooks, a vice president at Moody's.

An oil pump with an orange sky in the background.

Image source: Getty Images.

Occidental had targeted to sell $15 billion in assets so that it could pay off some of its acquisition-related debt. However, it has had trouble meeting that goal due to delays and other issues. Those headwinds will become even worse with the crash in crude prices. That's "leaving OXY with a significantly weakened credit profile whose prospects for near-term improvement are uncertain," according to Brooks.

This downgrade follows several moves Occidental has made to shore up its financial profile amid the crash in crude prices. Occidental not only reduced its capital spending budget range from $5.2 billion-$5.4 billion to $3.5 billion-$3.7 billion but also slashed its dividend by 86%. These moves have reduced Occidental's oil price break-even level to the low $30s. However, with crude prices recently touching $20 a barrel, it's on track to tack on more debt. As such, it might need to slash spending further or sell assets at fire-sale prices if oil prices don't improve in the coming months.