We have maintained our Neutral recommendation on Occidental Petroleum Corporation (OXY). The company currently has a Zacks Rank #3 (Hold).
Why the Reiteration?
The reiteration is primarily based on risks associated with oil exploration and production infrastructure damages, over-dependence on crude oil price movement, and strict regulations. However, we consider Occidental Petroleum’s strong financial position and diversified asset base, steady capital investment program and cost curtailment measures to be the catalysts for forthcoming growth.
In first-quarter 2013, Occidental Petroleum’s earnings per share and revenues surpassed the Zacks Consensus Estimates primarily based on strong performances from its domestic operations and a rise in domestic natural gas prices. In addition, the company’s marketing and trading operations also added considerably.
Occidental Petroleum is an organization with higher operating efficiencies and steady capital investment programs. The company’s strong financial position allows it to expand its operations outside the U.S. We believe steady production growth from its diversified asset-base located at diverse areas along with scheduled progress at the Al Hosn gas project in Abu Dhabi and development at the Russian Creek will likely enhance the company’s future performance.
In addition, Occidental Petroleum also executed numerous cost-curbing initiatives, including reduction of domestic wells to handle higher international operating expenses from its planned maintenance turnarounds in Qatar.
Despite possessing solid growth drivers, Occidental Petroleum’s over-reliance on crude oil price movement may be shrinking its future profitability as it is a crude oil-levered organization with no refining capacities.
Other Stocks to Consider
Other stocks from the sector that are presently performing better include EPL Oil & Gas, Inc. (EPL) and Sandridge Mississippian Trust II (SDR) with a Zacks Rank #1 (Strong Buy), and Braskem S.A. (BAK) with a Zacks Rank #2 (Buy).
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