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UPDATE 1-Occidental Petroleum caps 2021 spending as COVID-19 hits prices

(Adds share price, CEO and analyst comments)

Nov 10 (Reuters) - Occidental Petroleum Corp said on Tuesday it will not spend more than $2.9 billion on new projects in 2021, an amount that would keep its oil and gas output flat.

The U.S. producer posted a bigger-than-expected quarterly loss on Monday, as it reeled from a plunge in crude prices due to the COVID-19 crisis. Occidental has cut jobs and production this year, piling pressure on a company that had taken on significant debt to acquire Anadarko Petroleum for $38 billion last year.

Even if oil prices rise, Occidental “will go into 2021 conservatively,” Chief Executive Vicki Hollub said on a call with analysts. The company plans capital spending of about $2.5 billion this year, and will not go higher than $2.9 billion in 2021, she said.

Occidental is targeting $2 billion to $3 billion in asset sales to be announced by the first half of 2021, which “will continue to be applied towards debt reduction,” Hollub said.

The company said its total long-term net debt stood at $35.9 billion at the end of September, slightly lower than the $36.03 billion at the end of June.

“Execution on asset sales is critical to the survival of this highly leveraged company,” said Jennifer Rowland, analyst with Edward Jones.

Oil prices are likely to “be much healthier in 2022” and that is when the company expects to use free cash flow to start paying down debt early, Hollub said.

Occidental is returning drilling rigs to work in the Permian Basin in the southwestern United States and in Colorado this quarter, and returned a drillship to the Gulf of Mexico in early October.

The company’s shares dipped to $12.20 on Tuesday.

On an adjusted basis, Occidental lost 84 cents per share in the third quarter, while analysts had expected a loss of 72 cents, Refinitiv data showed. (Reporting by Jennifer Hiller in Houston, Editing by Franklin Paul and Paul Simao)

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