Occidental Petroleum was downgraded to junk by Fitch Ratings as it struggles to combat a sharp decline in oil prices, making it the biggest fallen angel in this downgrade cycle.
The exploration and production company’s long-term default rating was cut three levels to BB+ and may be downgraded further, Fitch said in a statement late Friday.
Fitch is the second credit rater to downgrade Occidental, following an earlier ratings action by Moody’s Investors Service, officially making it a fallen angel. Its $35.2 billion of debt will leave investment-grade indexes at the end of the month, and it will be the largest high-yield issuer.
Occidental’s bonds have been battered as an OPEC price war and the coronavirus outbreak has taken WTI crude down briefly below $20 a barrel, dragging much of the energy sector into distressed levels.
Several investment-grade companies like Apache Corp. and Marathon Oil Corp. have also been flagged as potential peers to follow Occidental to speculative-grade indexes.
Occidental has tried to preserve its finances by cutting its dividend for the first time in 30 years, as well as reducing capital spending.
Occidental’s 2.7% bonds due 2022 fell 2.5 cents to 60 cents on the dollar, according to Trace.