Thread regarding Occidental Petroleum Corp. layoffs

There would no doubt be many questions asked in the case of a bankruptcy. There are too many major players like billionaire investors and financial institutions to just let this slide.

Not totally true. The company still has assets that generate income. If they restructure the debt they continue to operate. The trustee has a say in what is done with the assists and who is in line for debt repayment. The restructured company can have “new stock” and it is possible that the new stock can be issued in place of the “worthless” stock from the company before the restructure, of course the new stock will be at a lower value than old stock. There have been people who buy stock in a bankrupted company and end up making good money when the stock came back up. Smith International filed for bankruptcy to protect their assets in 80’s from a lawsuit they were involved in. There are so many legal ramifications involved in bankruptcy unless you are the bankruptcy attorney or court appointed trustee you cannot say the stock will be worthless.

If the company becomes insolvent, it can no longer generate revenue. No revenue means not only no dividends, but no value whatsoever for the shareholders. The common stockholders will get nothing. Bankruptcy means the company has no equity. Their shares will be worthless. The creditors would be at the front of the line and would own the new company. Common stockholders are last in line, and there wouldn’t be anything left unless all the creditors are made whole. At that point, the creditors have to settle for only a portion of what’s owed to them.

What Happens To The Stocks?

Normally, when a company goes bankrupt, there is a very good chance that stockholders will not get back anything close to the full amount of their investment. Even if a company does successfully restructure, you may still lose money. As a stockholder, your status once a company files under bankruptcy protection will change. Under Chapter 11, stockholders will cease to receive dividends and the appointed trustee may ask that stocks are returned in order to be replaced with shares in the reorganized company. However, you may also receive fewer shares, the value of which is worth less than the original stocks.

Oil prices will certainly rise. The problem is that Oxy needs them to rise FAST. A 2-3 year price recovery will be too late. Every price scenario Oxy is showing to investors involves a sharp V-shaped recovery into Q1 2021, when the big tranches of bonds start maturing.

Creditors will not lose their investments In bankruptcy (for the most part). They have priority over the stockholders and Oxy has considerable assets. The creditors will accept agreements to trade their bonds in for common stock and become stockholders in NewOxy. They will make out like bandits, owning a new company with good assets and a clean balance sheet. The old stock will be worthless. The debt will be gone. The assets will still be there. The employees will get the shaft. And the wheels on the bus go round and round.

Bankruptcy is a possibility, but nowhere near a sure thing. Thinking the price of oil will never go up again simply ignores history. If creditors believe that higher prices will return, they will make accommodations to avoid losing all of their investment. Half a loaf is better than no loaf.

Seeking Alpha - “ It would be hard to imagine a deal where victory has turned to ashes faster than the OXY/Anadarko deal. (If you can think of one, please comment thusly. I'd love to know about it.) It's almost like divine intervention to "scorch the earth," in front of the victor.

There was once a guy called Murphy who, legend has it, coined a term after a series of unfortunate events that has stood the test of time. It has entered the lexicon as "Murphy's Law" and has untold corollaries. Simply stated it says that, "Anything that can go wrong, will."

With the year that's gone by one must wonder if Vicki Hollub "murphied" the Anadarko deal to any extent. Probably not, if one murphies to the extent below, nothing would ever get done.“

Good

Drilling any wells at all is a risk if cash is such a problem. Only if the wells can IP at high rates and have low payout times would it make sense.

80% or higher. We are well into the death spiral. Solvency is a very real concern over the next 12 months. Cash and short-term securities are nearly exhausted. The only options left are the $5B revolver, issue bonds at very high yields, issue more shares or sell assets in a fire sale. If the debt-to-capital ratio increases too much, the revolver gets closed down. If oil gets back to $50 by 1Q 2021, then we will probably be able to continue to service our debt (assuming we can reorganize by convincing bond holders to push back some of our maturities), but we won’t be able to pay it down much unless we get $65+ per barrel I would guess.

I’m a 20 year legacy OXY employee and all I can say is VHs tenure at OXY has been such a joke. We are such a joke now.

OP
Bankruptcy has two flavors: chapter 7 and chapter 11

Chapter 7 (liquidation) is not likely unless oil prices stay below ~$30 for a year. Not likely.

Chapter 11 (reorganization) much more likely but still less than 20% (my guess?)

Chapter 11 may occur if VH and CI factions (mediated by WB and SC?) cannot come to some agreement on how to proceed. Under chapter 11, a trustee makes the decisions instead of them. Lots of options for Oxy. Selling assets. Renegotiation of debt terms. Bond holders get equity for debt forgiveness.

Oxy will be much different in the future (perhaps not better) but it is not going out of business.

Both VH and CI do not have employees’ interests as a top priority.

All I can say is that the VSP was good timing for me and I’m glad I got out at end of September last year. Kudos to remaining employees, they can get the ship going in the right direction again.

Oxy has debt payments of $7.4 billion in 2021 and $4.6 billion in 2022. Of the $7.4 billion, $2.4 billion is due in the first quarter.

For sure.