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OXY Stock Outperforms Industry in Three Months: Time to Buy?

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Key Takeaways

  • Occidental stock rose 7.9% in three months, topping its industry's 6% growth.
  • OXY's Permian Basin assets and global projects boost production and cash flow.
  • The company cut $7.5B in debt in the last 13 months but is exposed to price volatility.

Occidental Petroleum Corporation’s (OXY - Free Report) shares have gained 7.9% in the past three months compared with the Zacks Oil and Gas-Integrated-United States industry’s rally of 6%.

The company operates in a very competitive industry, but Occidental’s strong presence in the prolific Permian Basin works to its advantage.

Occidental has outperformed its sector and Zacks S&P 500 Composite’s return in the past three months. Occidental has outperformed some other operators in this space. In the same period, other operators in the same space, like Cactus (WHD - Free Report) and DT Midstream (DTM - Free Report) .

Price Performance (Three months)

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Should you consider adding OXY stock to your portfolio only based on positive price movements? Let’s delve deeper and find out the factors that can help investors decide whether it is a good entry point to add OXY stock to their portfolio.

Major Catalysts Supporting Occidental’s Outlook

Occidental boasts one of the strongest domestic asset portfolios in the U.S. energy sector. Its extensive position in the Permian Basin, the most prolific oil-producing region in North America offers a reliable base of high-quality, low-cost output. Complementary assets in the Rockies, Gulf of America, and other regions further enhance production capacity. 

These domestic holdings provide steady cash flows, ensuring operational resilience and underpinning consistent shareholder returns, even during periods of commodity price volatility. Permian Basin is expected to contribute in the range of 768-784 thousand barrels of oil equivalents per day (“Mboed”) in 2025.

Occidental Petroleum’s exploration efforts continue to expand its oil and gas reserves, strengthening the foundation for long-term production growth and value creation. With global energy demand remaining resilient due to economic and population expansion, the company’s growing resource base secures sustained output capacity while reinforcing its competitive advantage in the upstream sector. Occidental ended 2024 with a proved reserve of 4.6 billion barrels of oil equivalent (BOE) compared with 3.98 billion BOE at the end of 2023. The increase was primarily due to the addition of new domestic oil, gas and NGL reserves.

Occidental’s international assets play a pivotal role in driving its growth and resilience. International assets, such as Qatar’s Dolphin gas project, Oman’s Mukhaizna oilfields and the UAE’s Al Hosn Gas, contribute significantly to production and cash flow. Occidental expects its international operation to contribute in the range of 233-MBoed in 2025 to total production.

A key focus for Occidental is strengthening its balance sheet and lowering capital servicing expenses. In the last 13 months, the company has lowered its debt by $7.5 billion. which lowered its annual interest expenses by $410 million. OXY has decided to divest more non-core assets in 2025 and utilize the proceeds to reduce its outstanding debts.

Headwinds for Occidental Stock

Occidental’s operating results are influenced by shifts in demand and the volatility of both global and local commodity prices. As of Dec. 31, 2024, the company had no active commodity hedges in place, leaving it fully exposed to market fluctuations. A significant decline in commodity prices from current levels could adversely affect OXY’s financial performance.

OXY Stock’s Earnings Surprise History

Due to the stable performance, the company’s earnings beat estimates in each of the trailing four quarters, the average surprise being 25.72%.

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Cactus surpassed earnings estimates in two out of the last four reported quarters and missed expectations in the other two, resulting in an average surprise of 1.71%.

Occidental’s ROE Lower Than the Industry

Return on equity (“ROE”) is a key indicator of a company’s financial performance. It reflects how effectively a corporation uses shareholders' equity to generate profits and is widely regarded as a measure of profitability and operational efficiency. Occidental’s ROE is lower than the industry average in the trailing 12 months. ROE of OXY was 13.78% compared with the industry average of 14.57%.

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DT Midstream’s trailing 12-month ROE is 8.48%, which is lower than its industry.

OXY’s Shares Are Trading at a Premium

Occidental’s shares are currently expensive on a relative basis, with its current trailing 12-month Enterprise Value/Earnings before Interest Tax Depreciation and Amortization (EV/EBITDA TTM) being 5.35X compared with its industry average of 4.6X.

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Summing Up

Occidental’s focus on debt reduction, combined with the strength of its domestic and international operations, is expected to support its overall performance.

However, the company continues to face headwinds from volatile commodity prices and returns that remain below industry averages.

Despite these challenges, holding this Zacks Rank #3 (Hold) stock remains advisable due to its robust U.S. operations and rising high-quality reserves.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

 


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