UPDATE: Occidental Petroleum’s latest earnings report reveals a robust performance in the third quarter, driving a 5% increase in net production to 1,465 mboe/d. This significant uptick comes as the company implements effective cost-cutting measures, with cash operating costs dropping 9% to $14.28 per barrel of oil equivalent (boe).
The financial results, just announced today, highlight how Occidental is navigating a challenging market. The corporation successfully reduced capital expenditures by 14% to $1.3 billion, using the same amount to pay down debt, while also allocating $400 million for dividends. These moves are crucial as the company manages a higher debt load compared to its peers.
“This performance exceeds our expectations,” said analysts at Morningstar, who have raised their fair value estimate for Occidental’s stock to $64.00 per share, up from $63.00. The stock now trades at over a 30% discount to its estimated value, despite a Very High Uncertainty Rating due to its elevated debt levels.
The focus on efficiency is evident as Occidental continues to invest in low-cost reservoirs like the Delaware Basin. Notably, the company has achieved a remarkable 38% reduction in well costs in the Midland area and increased oil extraction by 22% in its low-cost reservoirs this year.
However, the company’s decision to sell its OxyChem division for $9.7 billion has raised eyebrows. Analysts express concerns about timing, suggesting the sale occurs at a low point in the chemicals cycle. Despite these concerns, the sale could provide Occidental with the flexibility to enhance shareholder returns through stock buybacks.
The immediate impact of these developments is significant for investors, as Occidental’s management continues to prioritize capital efficiency in a volatile market. As the energy sector faces ongoing challenges, including fluctuating oil prices and rising operational costs, investors are closely watching how Occidental will leverage its recent gains to strengthen its financial position.
Looking ahead, all eyes will be on how the company utilizes its capital to navigate its elevated debt and deliver greater returns to shareholders. With ongoing improvements at well sites and a strategic focus on cost-cutting, Occidental Petroleum is positioning itself for potential growth in the coming quarters.
Stay tuned for more updates as this story develops.
