Chevron Issues $6 Billion of Bonds in First Offering This Year

Chevron Corp., the second-largest U.S. oil company, issued $6 billion of bonds in four parts for its first sale of 2013.

The company’s $750 million of 0.889 percent, three-year notes yield 40 basis points more than similar-maturity Treasuries; $2 billion of 1.718 percent, five-year securities pay a relative yield of 65 basis points; $1 billion of 2.427 percent, seven-year debt pay an 85 basis-point spread; and $2.25 billion of 3.191 percent, 10-year bonds yield 100 more, according to data compiled by Bloomberg.

The company canceled plans to offer floating-rate notes due in 2016 and 2018, according to a person familiar with the transaction, who asked not to be identified citing lack of authorization to speak publicly.

Proceeds from the bonds, expected to be rated Aa1 by Moody’s Investors Service, will be used to refinance commercial paper, the person said.

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 governments 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.

November Deal

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, Bloomberg data show. The bonds due December 2022 traded at 95 cents on the dollar to yield 2.96 percent on June 11, or a relative yield of 75 basis points, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

The average new issue concession on investment-grade bonds in the U.S. reached 11 basis points last week, the highest since the five days ended June 28, 2012, according to data from Barclays Plc.

Barclays, JPMorgan Chase & Co., Morgan Stanley and Wells Fargo & Co. managed the offering for San Ramon, California-based Chevron, Bloomberg data show.

Exxon Mobil Corp. is the largest U.S. oil company.

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