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Occidental Stock Down 20% in a Month: Time to Hold or Fold?
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Occidental Petroleum’s (OXY - Free Report) share price has dropped 19.8% in the past month compared with its industry’s decline of 12.7%. In the same period, the Zacks Oil & Energy sector has declined 11.9%.
OXY’s exposure to fluctuating commodity prices remains a concern. As of Dec. 31, 2024, there were no active commodity hedges in place, so if the commodity prices drop substantially, it can adversely impact Occidental’s performance.
Price Performance (One Month)
Image Source: Zacks Investment Research
Other operators in the same space, such as ConocoPhillips (COP - Free Report) and Hess Corporation (HES - Free Report) , have lost 13% and 15%, respectively, in the past month. Crude oil prices have dropped recently due to concerns over global trade, which has impacted the share price of the majority of oil and gas operators.
Should you consider adding OXY stock to your portfolio only based on the softness in share prices? Let’s delve deeper and find out factors that can help investors decide whether it is a good entry point to add OXY stock to their portfolio.
Strong Performance of Domestic and International Assets
Occidental's persistent focus on Permian resources has been beneficial for the company. Its core development area in the Permian region has been recording solid results.
The company expects total production in 2025 in the range of 1,385-1445 thousand barrels of oil equivalent per day (Mboe/d), out of which Permian region production is expected in the range of 754-786 Mboe/d.
International production volume in 2025 is expected in the range of 226-236 Mboe/d. The company is utilizing advanced seismic waves to discover new oil and gas reservoirs. Seismic surveys are crucial in oil and gas exploration because they allow company officials to identify promising areas for drilling with greater accuracy than traditional methods.
Free Cash Flow and Debt Reduction
Occidental’s top priority is to strengthen its balance sheet and lower capital servicing expenses. In 2024, the company achieved its near-term debt reduction target of $4.5 billion seven months ahead of schedule. It intends to use its free cash flow and proceeds from non-core asset divestiture to redeem its outstanding debts and strengthen its balance sheet.
Occidental’s management aims to reduce more outstanding debt through the first half of 2027 through its free cash flow and proceeds from non-core asset sales. The consistent decline in outstanding debts will reduce the company’s interest expenses, improve its margins and strengthen its balance sheet.
OXY’s Systematic Capital Expenditure
Occidental, being a low-cost operator with high-quality assets in different locations across the globe, has a competitive advantage over its peers. The systematic capital investment has allowed the company to strengthen its infrastructure. In 2024, it invested more than $7 billion to strengthen and expand its existing operations and aims to invest in the range of $7.4-$7.6 billion in 2025.
Among the other operators in this space, Hess is expected to invest $4.5 billion in 2025, while ConocoPhillips is expected to invest $12.5 in the same period to further strengthen its operation.
OXY Stock’s Earnings Surprise History
The stable performance of the company allowed it to surpass earnings estimates in each of the last four reported quarters, the average earnings surprise being 23.56%.
Image Source: Zacks Investment Research
Headwinds for Occidental Stock
Fluctuations in demand and volatile global and local commodity prices affect Occidental’s results of operations. The company remains exposed to fluctuating market prices of commodities, and as of Dec. 31, 2024, there were no active commodity hedges in place. If commodity prices drop substantially from their current level, it will impact Occidental’s performance.
OXY operates in a highly competitive environment, which could affect its profitability and growth. The company faces competition from peers to procure new reserves and replenish production volumes.
Occidental’s Earnings Estimates are Going Down
The Zacks Consensus Estimate for Occidental’s 2025 and 2026 earnings per share has moved down 11.8% and 3.66%, respectively, in the past 60 days.
Image Source: Zacks Investment Research
Occidental Trading at a Premium
Occidental shares are currently trading at a premium compared to its industry. OXY’s current trailing 12-month Enterprise Value/Earnings before Interest Tax Depreciation and Amortization (EV/EBITDA) is 4.93X compared with the industry average of 4.75X. It indicates that the company is presently marginally overvalued compared to its industry.
Image Source: Zacks Investment Research
Occidental’s ROE Lower Than the Industry
Return on equity, a profitability measure, reflects how effectively a company utilizes its shareholders’ funds to generate income. The trailing 12-month ROE of OXY is 16.33%, which is lower than its industry.
Image Source: Zacks Investment Research
Summing Up
Occidental’s focus on the Permian region, its ongoing initiatives to lower debts, and its strength in global operations will boost its performance.
Occidental’s exposure to commodity price fluctuation and a very competitive oil and gas industry poses challenges for the company. The company’s premium valuation and lower return compared with the industry also do not make a strong case for the company.
Despite the headwinds, it is advisable to keep this Zacks Rank #3 (Hold) stock in your portfolio, given its strong domestic operations and exposure to the prolific Permian Basin. Ongoing reduction of debts through its free cash flow is a tailwind. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Occidental Stock Down 20% in a Month: Time to Hold or Fold?
Occidental Petroleum’s (OXY - Free Report) share price has dropped 19.8% in the past month compared with its industry’s decline of 12.7%. In the same period, the Zacks Oil & Energy sector has declined 11.9%.
OXY’s exposure to fluctuating commodity prices remains a concern. As of Dec. 31, 2024, there were no active commodity hedges in place, so if the commodity prices drop substantially, it can adversely impact Occidental’s performance.
Price Performance (One Month)
Image Source: Zacks Investment Research
Other operators in the same space, such as ConocoPhillips (COP - Free Report) and Hess Corporation (HES - Free Report) , have lost 13% and 15%, respectively, in the past month. Crude oil prices have dropped recently due to concerns over global trade, which has impacted the share price of the majority of oil and gas operators.
Should you consider adding OXY stock to your portfolio only based on the softness in share prices? Let’s delve deeper and find out factors that can help investors decide whether it is a good entry point to add OXY stock to their portfolio.
Strong Performance of Domestic and International Assets
Occidental's persistent focus on Permian resources has been beneficial for the company. Its core development area in the Permian region has been recording solid results.
The company expects total production in 2025 in the range of 1,385-1445 thousand barrels of oil equivalent per day (Mboe/d), out of which Permian region production is expected in the range of 754-786 Mboe/d.
International production volume in 2025 is expected in the range of 226-236 Mboe/d. The company is utilizing advanced seismic waves to discover new oil and gas reservoirs. Seismic surveys are crucial in oil and gas exploration because they allow company officials to identify promising areas for drilling with greater accuracy than traditional methods.
Free Cash Flow and Debt Reduction
Occidental’s top priority is to strengthen its balance sheet and lower capital servicing expenses. In 2024, the company achieved its near-term debt reduction target of $4.5 billion seven months ahead of schedule. It intends to use its free cash flow and proceeds from non-core asset divestiture to redeem its outstanding debts and strengthen its balance sheet.
Occidental’s management aims to reduce more outstanding debt through the first half of 2027 through its free cash flow and proceeds from non-core asset sales. The consistent decline in outstanding debts will reduce the company’s interest expenses, improve its margins and strengthen its balance sheet.
OXY’s Systematic Capital Expenditure
Occidental, being a low-cost operator with high-quality assets in different locations across the globe, has a competitive advantage over its peers. The systematic capital investment has allowed the company to strengthen its infrastructure. In 2024, it invested more than $7 billion to strengthen and expand its existing operations and aims to invest in the range of $7.4-$7.6 billion in 2025.
Among the other operators in this space, Hess is expected to invest $4.5 billion in 2025, while ConocoPhillips is expected to invest $12.5 in the same period to further strengthen its operation.
OXY Stock’s Earnings Surprise History
The stable performance of the company allowed it to surpass earnings estimates in each of the last four reported quarters, the average earnings surprise being 23.56%.
Image Source: Zacks Investment Research
Headwinds for Occidental Stock
Fluctuations in demand and volatile global and local commodity prices affect Occidental’s results of operations. The company remains exposed to fluctuating market prices of commodities, and as of Dec. 31, 2024, there were no active commodity hedges in place. If commodity prices drop substantially from their current level, it will impact Occidental’s performance.
OXY operates in a highly competitive environment, which could affect its profitability and growth. The company faces competition from peers to procure new reserves and replenish production volumes.
Occidental’s Earnings Estimates are Going Down
The Zacks Consensus Estimate for Occidental’s 2025 and 2026 earnings per share has moved down 11.8% and 3.66%, respectively, in the past 60 days.
Image Source: Zacks Investment Research
Occidental Trading at a Premium
Occidental shares are currently trading at a premium compared to its industry. OXY’s current trailing 12-month Enterprise Value/Earnings before Interest Tax Depreciation and Amortization (EV/EBITDA) is 4.93X compared with the industry average of 4.75X. It indicates that the company is presently marginally overvalued compared to its industry.
Image Source: Zacks Investment Research
Occidental’s ROE Lower Than the Industry
Return on equity, a profitability measure, reflects how effectively a company utilizes its shareholders’ funds to generate income. The trailing 12-month ROE of OXY is 16.33%, which is lower than its industry.
Image Source: Zacks Investment Research
Summing Up
Occidental’s focus on the Permian region, its ongoing initiatives to lower debts, and its strength in global operations will boost its performance.
Occidental’s exposure to commodity price fluctuation and a very competitive oil and gas industry poses challenges for the company. The company’s premium valuation and lower return compared with the industry also do not make a strong case for the company.
Despite the headwinds, it is advisable to keep this Zacks Rank #3 (Hold) stock in your portfolio, given its strong domestic operations and exposure to the prolific Permian Basin. Ongoing reduction of debts through its free cash flow is a tailwind. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.