Chevron Corp., the second-largest U.S. oil company, is offering $6 billion of bonds in its first sale this year.
The company may issue $750 million of three-year notes to yield 40 basis points more than similar-maturity Treasurys, $2 billion of five-year securities at a relative yield of 65 basis points, $1 billion of seven-year debt at an 85 basis-point spread and $2.25 billion of 10-year bonds at 100, according to a person with knowledge of the transaction. The company canceled plans to offer floating-rate notes due in 2016 and 2018.
The bonds, expected to be rated Aa1 by Moody’s Investors Service, may be sold as soon as today, said the person, who asked not to be identified because terms aren’t set. Proceeds will be used to refinance commercial paper.
Chevron “is finding it increasingly difficult to expand production and add reserves as many of the remaining pools of cheap, easily accessible resources” are owned by government and national oil companies, David Schivell, an analyst at Chicago-based research firm Morningstar Inc., wrote in a note today. “Still, the company maintains a rock solid balance sheet,” he said.
Morningstar estimated a fair-value spread of 45 basis points on the new three-year bonds, 55 basis points on the five-year, 70 for the seven-year and 90 on the 10-year, according to the report.
Chevron last sold debt in November, issuing $2 billion each of 1.104 percent, five-year debentures at a spread of 47 basis points and 2.355 percent, 10-year securities at 72 basis points, according to data compiled by Bloomberg. The bonds due December 2022 traded at 95 cents on the dollar to yield 2.96 percent on June 11, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
Barclays Plc, JPMorgan Chase & Co., Morgan Stanley and Wells Fargo & Co. are managing the offering for the San Ramon, California-based company.
Exxon Mobil Corp. is the largest U.S. oil company.
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