Yahoo Finance Occidental (OXY) Gains From Investments & Permian Exposure
Occidental Petroleum OXY is well poised to benefit from acquisitions, strategic investments, cost management and international operations. Exposure to Permian Basin will continue to boost performance.
OXY - which currently has a Zacks Rank #3 (Hold) - is exposed to inflationary cost pressures and stringent federal, state, local and foreign laws. Strict regulations pose a headwind as well.
Tailwinds
Occidental’s investment plans and production growth support the cash flow generation capacity of the company. OXY invested $4.5 billion in 2022 and is expected to invest $5.4-$6.2 billion in 2023. Its persistent focus on Permian resources has been beneficial for the company. Production and operations in this region are expected to improve, courtesy of the new wells added and the acquisition of Anadarko Petroleum. The company is also utilizing its organic assets in the best possible manner in this unprecedented economic crisis.
Occidental, a low-cost operator with high-quality assets in different locations across the globe, has a competitive advantage over its peers and benefited from the sudden increase in commodity prices. It 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.
The strong performance, driven by consistent growth in production and cash flow levels, has made OXY a consistent payer of dividends. The company is also expanding its operation internationally. It has entered a new 25-year production sharing agreement with Sonatrach in Algeria.
Headwinds
Occidental’s operations are subject to stringent federal, state, local and foreign laws and regulations related to improving or maintaining environmental quality, and compliance with the same will increase operating expenses and affect margins. The impact of inflation on construction materials and labor is expected to increase the project budget for Occidental, raising overall costs and reducing expected profitability from the capital projects.
Stocks to Consider
Some better-ranked stocks in the same sector are NOW Inc. DNOW, Archrock Inc. AROC and DrilQuip Inc. DRQ, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for NOW, Archrock and DrilQuip’s 2023 earnings per share indicates a year-over-year increase of 9.5%, 110.7% and 82.1%, respectively.
NOW, Archrock and DrilQuip delivered an average earnings surprise of 32.1%, 8.3%, and 119.8%, respectively, in the last four quarters.
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Dril-Quip, Inc. (DRQ) : Free Stock Analysis Report
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Archrock, Inc. (AROC) : Free Stock Analysis Report
