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Occidental Beats on Q4 Earnings, Revs

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Occidental Petroleum Corporation’s (OXY - Free Report) fourth-quarter 2013 pro forma earnings were $1.72 per share, beating the Zacks Consensus Estimate by 1.8%. However, quarterly earnings were 6% lower than the prior-year figure due to an increase in depreciation expenses.

On a GAAP basis, the company’s earnings per share were $2.04 compared with 42 cents a year ago. The variance between GAAP and pro forma adjusted earnings was primarily due to the combined impact of an after-tax gain related to the sale of a part of an investment in the general partner of Plains All American Pipeline, L.P. (PAA - Free Report) and an after-tax charge associated with the impairment of certain non-producing domestic oil and gas acreage.

For 2013, Occidental reported pro forma earnings of $6.95 per share, in line with the Zacks Consensus Estimate. Annual earnings however edged down 2% from the year-ago result.

Annual GAAP earnings were $7.32 per share compared with $5.67 per share in the prior-year quarter.

Total Revenue

Occidental's quarterly total revenues were $6.2 billion, surpassing the Zacks Consensus Estimate by 2%. Revenues also surged marginally from the year-ago figure primarily due to higher sales from the company’s Oil and Gas and Midstream, Marketing and Other segments. This was partially offset by lower revenues from Chemical segment.

The company’s total revenues were $24.5 billion in 2013, beating the Zacks Consensus Estimate as well as the year-ago figure by 1.2%.

Production, Sales and Realized Price

In the quarter under review, Occidental’s average daily production volumes were 750 thousand barrels of oil equivalents (“MBoe”), down 3.7% from 779 MBoe a year ago. The decline was primarily due to lower overall domestic production as a result of unfavorable weather conditions and plant turnarounds in the Permian operations and decreased domestic gas drilling activities. In addition, lower cost recovery barrels in Oman and Iraq and field and port strikes in Libya negatively impacted production volumes.

Daily sales volumes was 772 MBoe, down 1.5% year over year primarily due to lower oil sales volume in Oman and Qatar, and a sharp decrease in natural gas sales in the U.S.

Realized price for worldwide crude oil increased 3.2% to $99.27 per barrel from the prior-year figure of $96.19 per barrel. Domestic crude oil prices jumped 7.6% year over year to $94.52 per barrel. Middle East/North Africa crude oil prices were $105.83 per barrel, down 1.6% year over year.

Domestic gas prices increased 7.8% year over year to $3.33 per thousand cubic feet (“Mcf”).

Worldwide realized natural gas liquids (“NGL”) prices were $44.69 per barrel, down 0.9% from the year-ago level.

Financial Update

As of Dec 31, 2013, cash balance was $3.4 billion versus $1.6 billion as of Dec 31, 2012.

Occidental’s cash from operations during 2013 totaled $12.9 billion compared with $11.3 billion in the year-ago comparable period.

Long-term debt (including current maturities) as of Dec 31, 2013 was $6.9 billion versus $7.6 billion as of Dec 31, 2012. The company’s total debt-to-capitalization ratio is 14%, down from 16% in Dec 31, 2012.

For 2013, the company’s capital expenditure was $9 billion compared with $10.2 billion a year ago.

Peer Comparison

Hess Corp. (HES - Free Report) reported adjusted earnings of 96 cents per share in fourth-quarter 2013, lagging the Zacks Consensus Estimate of $1.09 per share.

Murphy Oil Corp’s (MUR - Free Report) adjusted earnings from continuing operations were 67 cents per share, missing the Zacks Consensus Estimate by 40.2%.

Our Take

We note that Occidental continues to follow several initiatives to improve its future performance. We appreciate the company’s steady share repurchase activities. For 2013, Occidental repurchased approximately 11 million shares. This initiative will enable the company to reduce its cost of equity. In addition, the company is continuously lowering its debt level, which will subsequently help it to improve future margins.

Occidental Petroleum currently has a Zacks Rank #3 (Hold).

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