Occidental Petroleum Corporation

Occidental Petroleum Corporation (NYSE: OXY) is an international energy company with assets primarily in the United States, the Middle East, and North Africa. The Company is an oil and gas producer in the United States, including a producer in the Permian and DJ basins, and the offshore Gulf of Mexico. It operates through three segments: oil and gas, chemical and midstream and marketing.

Key Business & Financial Updates

• Strong Financial and Operational Performance: Occidental delivered impressive financial results in the second quarter of 2024, marked by strong operational performance. The company generated an operating cash flow of USD 2.4 billion, with an operating cash flow before working capital adjustments of USD 3.0 billion. Capital expenditures amounted to USD 1.8 billion, alongside contributions from noncontrolling interests of USD 42 million. As a result, Occidental achieved quarterly free cash flow of USD 1.3 billion before working capital adjustments. Total production reached 1,258 Mboed, exceeding the midpoint of guidance by 6 Mboed. The Midstream and Marketing segment surpassed pre-tax adjusted income projections by over USD 180 million, while OxyChem generated pre-tax income of USD 296 million, in line with guidance. Earnings per diluted share and adjusted earnings per diluted share were USD 1.03, and Occidental maintained full-year production guidance despite the planned divestiture of 15 Mboed in the fourth quarter.
• Oil and Gas Performance: The oil and gas segment reported pre-tax income of USD 1.6 billion for the second quarter of 2024, a notable increase from the USD 1.2 billion recorded in the first quarter. Adjusted oil and gas income improved due to increased domestic crude oil volumes, lower depreciation and depletion rates, and higher domestic crude oil prices. The Gulf of Mexico operations showed resilience, overcoming a mid-April third-party outage, further contributing to higher earnings. However, these gains were partially offset by lower domestic gas prices and higher transportation costs. The average realized worldwide crude oil price rose by 5% to USD 79.89 per barrel, while natural gas liquids prices fell by 4%, and domestic gas prices dropped by 66% to USD 0.54 per Mcf.
• Global Production Exceeds Expectations: Occidental's global production averaged 1,258 thousand barrels of oil equivalent per day (Mboed) during the second quarter, surpassing the midpoint of guidance by 6 Mboed. This increase was largely driven by strong performances from the Permian and Gulf of Mexico regions, which exceeded production targets with 587 Mboed and 138 Mboed, respectively. The Rockies & Other Domestic segment produced 306 Mboed, while the International segment recorded production of 227 Mboed. These strong production numbers were instrumental in driving the company's solid financial results for the quarter.
• OxyChem's Performance: OxyChem delivered pre-tax income of USD 296 million in the second quarter of 2024, reflecting a solid improvement from the previous quarter. This growth was driven by higher realized prices for caustic soda and polyvinyl chloride, coupled with improved sales volumes across most product lines. These positive factors, however, were partially offset by an increase in ethylene costs. Excluding items affecting comparability, OxyChem’s income remained in line with company expectations, continuing to contribute positively to Occidental’s overall results.
• Midstream and Marketing Performance: The Midstream and Marketing segment reported pre-tax income of USD 116 million in the second quarter of 2024. Adjusted for comparability items, the segment’s results exceeded expectations by over USD 180 million. The performance was bolstered by strong gas marketing income, which benefited from improved transportation spreads between the Permian Basin and the Gulf Coast. The WES equity method investment income, excluding comparability adjustments, totaled USD 163 million. Additionally, the company experienced lower equity method investment losses in its low-carbon ventures, further supporting the segment’s financial performance.
• Production Guidance Maintained: Despite the anticipated divestiture of 15 Mboed in the fourth quarter of 2024, Occidental has decided to maintain its full-year production guidance, excluding CrownRock. The company's ability to uphold production levels reflects its operational strength and strategic focus, supported by strong performances from key regions such as the Permian Basin and Gulf of Mexico. With robust financial results and consistent production levels, Occidental remains well-positioned to meet its targets for the year.

Technical Observation (on the daily chart):

The Relative Strength Index (RSI) over a 14-day period stands at a value of 41.56, recovering from oversold zone, with the expectations of price taking support from the support zone of USD 55.00 – USD 58.00. Additionally, the stock's current positioning is below both 50-Day SMA and 200-Day SMA, which can act as a short to medium term resistance levels.

As per the above-mentioned price action, momentum in the stock over the last month, current macroeconomic scenarios, recent business & financial updates, and technical indicators analysis, a ‘WATCH’ rating has been given to Occidental Petroleum Corporation (NYSE: OXY) at the closing market price of USD 57.61 as of August 16, 2024.

Individuals can evaluate the stock based on the support and resistance levels provided in the report in case of keen interest taking into consideration the risk-reward scenario.

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing.

Related Risk: This report may be looked at from a high-risk perspective and a recommendation is provided for a short duration. This report is solely based on technical parameters, and the fundamental performance of the stocks has not been considered in the decision-making process. Other factors which could impact the stock prices include market risks, regulatory risks, interest rates risks, currency risks, social and political instability risks etc.

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance level is August 16, 2024. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Note 4: Target Price refers to a price level that the stock is expected to reach as per the relative valuation method and or technical analysis taking into consideration both short-term and long-term scenarios.s

Note 5: ‘Kalkine reports are prepared based on the stock prices captured either from the New York Stock Exchange (NYSE), NASDAQ Capital Markets (NASDAQ), and or REFINITIV. Typically, all sources (NYSE, NASDAQ, or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.