Please ensure Javascript is enabled for purposes of website accessibility

Occidental Petroleum to Write Down as Much as $9 Billion in Assets

By Matthew DiLallo – Jun 25, 2020 at 11:08AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The deep downturn in oil prices is forcing the company to revalue its assets.

Occidental Petroleum (OXY 4.13%) revealed in a filing with the Securities and Exchange Commission that it plans to record a sizable impairment charge during the second quarter. The oil giant currently estimates that it could take an after-tax impairment charge on its oil and gas properties in the range of $6 billion to $9 billion. That will likely result in the company posting a steep loss during the period. 

While Occidental didn't provide too many details on the expected writedown in its filing, a portion likely relates to last year's $55 billion acquisition of Anadarko Petroleum. The company paid a hefty premium for Anadarko at the time, which included outbidding a rival offer from Chevron (CVX 1.83%) by $5 billion. With oil prices slumping significantly since it bought Anadarko, the acquired assets are no longer as valuable as they were when Occidental made that deal. 

A burned piece of cash.

Image source: Getty Images.

This writedown will be Occidental's second this year. The company also recorded a $1.4 billion impairment charge during the first quarter relating to its ownership stake in MLP Western Midstream Partners (WES -0.90%), which it acquired when it bought Anadarko. On top of that, Occidental wrote down the value of its oil and gas properties by $580 million. As a result of these charges and lower oil prices, Occidental posted a $2.2 billion loss in the first quarter. That number will likely widen considerably in the second quarter.

These writedowns might not be the last ones for Occidental. The company warned that if the currently challenging oil market environment continues or worsens, it might take additional impairment charges.

Matthew DiLallo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Chevron Corporation Stock Quote
Chevron Corporation
CVX
$161.43 (1.83%) $2.90
Occidental Petroleum Stock Quote
Occidental Petroleum
OXY
$70.54 (4.13%) $2.80
Western Midstream Partners Stock Quote
Western Midstream Partners
WES
$26.52 (-0.90%) $0.24

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
339%
 
S&P 500 Returns
109%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/06/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.