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Occidental (OXY) Down 16.1% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Occidental Petroleum (OXY - Free Report) . Shares have lost about 16.1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Occidental due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Occidental's Q1 Earnings & Revenues Beat Estimates

Occidental Petroleum Corporation reported first-quarter 2019 earnings of 84 cents per share, surpassing the Zacks Consensus Estimate of 72 cents by 16.7%. However, the bottom line was lower than 92 cents per share recorded in the prior-year quarter.

Total Revenues

Occidental's total revenues were $4,089 million, beating the Zacks Consensus Estimate of $3,957 million by 3.3%. Also, the top line improved 6.9% from $3,825 million in the year-ago quarter.

This year-over-year improvement in total revenues resulted from an increase in production from Permian Resources, and revenue growth from its Midstream & Marketing segment.

Production & Sales

Occidental’s average daily net oil, liquids and gas production volume expanded to 719,000 barrels of oil equivalent per day (boe/d) from 609,000 boe/d in the prior-year quarter. This improvement in production volume was backed by higher drilling activity and solid output from the Permian Resources region. Permian Resources production improved 47.5% year over year.

In the quarter under review, total sales volume was 713,000 boe/d compared with 610,000 boe/d recorded in the year-ago period.

Realized Prices

Realized prices for crude oil in the first quarter dropped 13.8% year over year to $52.62 per barrel on a worldwide basis. Worldwide realized NGL prices decreased 28.4% from the prior-year quarter to $18.14 per barrel. Moreover, worldwide natural gas prices were down 14.8% from the year-ago quarter to $1.55 per thousand cubic feet.

The overall decline in realized prices of the commodities did not allow the company to realize full benefits of higher production and sales volumes in the reported quarter.

Highlights of the Release

Total production from Permian Resources touched 261,000 boe/d, increasing 47.5% from the year-ago quarter. The company has made an offer to acquire Anadarko Petroleum . If the deal gets through, it will further strength Occidental’s presence in this resource-rich region.

Selling, general and administrative, and other operating expenses in the first quarter were $378 million, up 23.1% from $307 million a year ago.  Interest expenses in the reported quarter were $98 million compared with $97 million in the year-ago period.

Occidental’s management, which continues to increase the value of its shareholders, has returned $800 million in the first quarter through buybacks and dividend payments.

Financial Position

As of Mar 31, 2019, Occidental had cash and cash equivalents of $1,752 million compared with $3,033 million on Dec 31, 2018. As of Mar 31, 2019, the company had a long-term debt (net of current portion) of $10,203 million compared with $10,201 million on Dec 31, 2018.

In first-quarter 2019, cash from operations was $948 million, down from $1,009 million in the prior-year period. In first-quarter 2019, Occidental’s total capital expenditure was $1,259 million, higher than $1,032 million invested in the year-ago period.

Guidance

Occidental expects second-quarter 2019 production in the range of 723,000-735,000 boe/d. Production from Permian Resources is expected in the range of 274,000-282,000 boe/d.

Occidental expects 2019 production in the range of 715,000-730,000 boe/d. Production from Permian Resources is expected in the range of 278,000-288,000 boe/d.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 14.72% due to these changes.

VGM Scores

At this time, Occidental has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Occidental has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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