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Occidental (OXY) Gains From Investments, Permian Basin Focus
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Occidental Petroleum’s (OXY - Free Report) strategic investment to strengthen infrastructure, focus on Permian region, divestiture of non-core assets and strength in international operation are going to drive its performance in the long run.
However, this Zacks Rank #3 (Hold) stock has to cope with stiff competition, stringent regulations and commodity price fluctuation.
Tailwinds
Occidental has been investing consistently to strengthen its infrastructure and expand operations. The company invested $4.5 billion in 2022 and followed it up with a capital expenditure of $6.3 billion in 2023. In 2024, it plans to invest in the range of $5.8-$6 billion to further strengthen its operations.
Occidental’s acquisition of Anadarko Petroleum has expanded its operations in the Permian Basin and is accretive to free cash flow. The company is also utilizing its organic assets in the best possible manner to further expand business.
Permian Resources assets remain a consistent contributor to OXY’s overall production. From Permian, production is expected in the range of 569-791 Mboe/d for 2024, and management expects total production of 1,220-1,280 Mboe/d in 2024. The company can quickly reduce production activity in this low-price environment and has the flexibility to ramp up production during appropriate opportunities.
Occidental recently completed its large-scale asset divestiture program and utilized the net proceeds from asset sales and free cash flow to repay near and medium-term debt maturities. It is working consistently to strengthen the balance sheet and has been successful in extending near-term $7-billion debt maturity beyond 2025.
Headwinds
OXY’s businesses operate in a highly competitive environment, which could adversely impact its profitability and growth. It faces intense competition from other oil and gas companies, which include state-owned foreign oil companies, major integrated oil companies and independent producers of oil and natural gas.
Fluctuations in demand and prices of commodities may affect Occidental’s results of operations. The company's practice is to remain exposed to market prices of commodities. If the price of commodities continues to remain soft, it will fail to realize full benefits from the improvement in production volumes from domestic and international assets. As of Dec 31, 2023, there were no active commodity hedges in place for Occidental.
Price Performance
Occidental’s shares have gained 5% in the past three months compared with its industry’s growth of 4.7%.
The Zacks Consensus Estimate for RES’ 2024 earnings per share (EPS) indicates an increase of 6.1% in the past 60 days. It reported earnings surprise of 58.3% in the last reported quarter.
The Zacks Consensus Estimate for MUSA’s 2024 EPS indicates a rise of 4.3% in the past 60 days. It reported average earnings surprise of 13.63% in the last four quarters.
The Zacks Consensus Estimate for NXT’s fiscal 2024 EPS indicates an improvement of 21% in the past 60 days. It reported average earnings surprise of 56.3% in the last four quarters.
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Occidental (OXY) Gains From Investments, Permian Basin Focus
Occidental Petroleum’s (OXY - Free Report) strategic investment to strengthen infrastructure, focus on Permian region, divestiture of non-core assets and strength in international operation are going to drive its performance in the long run.
However, this Zacks Rank #3 (Hold) stock has to cope with stiff competition, stringent regulations and commodity price fluctuation.
Tailwinds
Occidental has been investing consistently to strengthen its infrastructure and expand operations. The company invested $4.5 billion in 2022 and followed it up with a capital expenditure of $6.3 billion in 2023. In 2024, it plans to invest in the range of $5.8-$6 billion to further strengthen its operations.
Occidental’s acquisition of Anadarko Petroleum has expanded its operations in the Permian Basin and is accretive to free cash flow. The company is also utilizing its organic assets in the best possible manner to further expand business.
Permian Resources assets remain a consistent contributor to OXY’s overall production. From Permian, production is expected in the range of 569-791 Mboe/d for 2024, and management expects total production of 1,220-1,280 Mboe/d in 2024. The company can quickly reduce production activity in this low-price environment and has the flexibility to ramp up production during appropriate opportunities.
Occidental recently completed its large-scale asset divestiture program and utilized the net proceeds from asset sales and free cash flow to repay near and medium-term debt maturities. It is working consistently to strengthen the balance sheet and has been successful in extending near-term $7-billion debt maturity beyond 2025.
Headwinds
OXY’s businesses operate in a highly competitive environment, which could adversely impact its profitability and growth. It faces intense competition from other oil and gas companies, which include state-owned foreign oil companies, major integrated oil companies and independent producers of oil and natural gas.
Fluctuations in demand and prices of commodities may affect Occidental’s results of operations. The company's practice is to remain exposed to market prices of commodities. If the price of commodities continues to remain soft, it will fail to realize full benefits from the improvement in production volumes from domestic and international assets. As of Dec 31, 2023, there were no active commodity hedges in place for Occidental.
Price Performance
Occidental’s shares have gained 5% in the past three months compared with its industry’s growth of 4.7%.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks worth considering in the same sector are RPC Inc. (RES - Free Report) , Murphy USA (MUSA - Free Report) and Nextracker Inc. (NXT - Free Report) , each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for RES’ 2024 earnings per share (EPS) indicates an increase of 6.1% in the past 60 days. It reported earnings surprise of 58.3% in the last reported quarter.
The Zacks Consensus Estimate for MUSA’s 2024 EPS indicates a rise of 4.3% in the past 60 days. It reported average earnings surprise of 13.63% in the last four quarters.
The Zacks Consensus Estimate for NXT’s fiscal 2024 EPS indicates an improvement of 21% in the past 60 days. It reported average earnings surprise of 56.3% in the last four quarters.