We have maintained our Neutral recommendation on Occidental Petroleum Corp (OXY). The company currently has a Zacks Rank #3 (Hold).
Why the Reiteration?
The reiteration was primarily based on Occidental Petroleum’s strong balance sheet and liquidity position, diversified asset base, steady capital investment programs, and cost curtailment measures. However, over-reliance on crude oil prices movement, delay in drilling and development activities, and risks associated with oil exploration and production infrastructure damages may to some extent temper these positives.
In fourth-quarter 2012, Occidental Petroleum’s earnings per share and revenues surpassed the Zacks Consensus Estimates primarily on higher sales from all its segments and higher realized crude oil prices.
Occidental Petroleum is an organization with higher operating efficiencies and stable capital investment programs. In the forthcoming quarters, we expect steady production growth from its diversified asset-base located at different regions leading to improved operating results.
Despite having solid catalysts, Occidental Petroleum’s over-reliance on crude oil price movement may be shrinking its future projected growth-pattern as it is a crude oil-levered organization with no refining capacities.
We are also cautious about hazards related to oil exploration and production infrastructure damages and natural calamities, which might obstruct the company’s future operations.
In spite of facing several challenges, Occidental Petroleum continues to take some cost-cutting measures, like the shutdown of a few plants and production curtailment, which may allow the company to improve its forthcoming performance.
Other Stocks to Consider
Other stocks from the sector that are presently performing better include Chesapeake Energy Corporation (CHK), Statoil ASA (STO) and YPF S.A. (YPF). All the three stocks carry a Zacks Rank #2 (Buy).
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