It has been about a month since the last earnings report for Occidental Petroleum (OXY). Shares have added about 15.3% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Occidental due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Occidental Q1 Loss Wider Than Expected, Revenues Top
Occidental Petroleum Corporation reported first-quarter 2020 loss of 52 cents per share, wider than the Zacks Consensus Estimate of a loss of 50 cents. The company had recorded earnings of 84 cents per share in the prior-year quarter.
Occidental's total revenues were $6,451 million, beating the Zacks Consensus Estimate of $5,224 million by 23.5%. The top line also increased 57.8% from $4,089 million in the year-ago quarter. The year-over-year improvement was driven by higher oil and gas revenues.
Production & Sales
Occidental’s total production volume in the first quarter was 1,416 thousand barrels of oil equivalent per day (Mboe/d), which came ahead of the guided range of 1,375-1,395 Mboe/d. The strong production volumes were attributed to higher volumes from the Permian Resources region. Permian Resources production in the first quarter was 474 Mboe/d, which exceeded the midpoint of the guided range by 13 Mboe/d.
In the quarter under review, total sales volume was 1,417 Mboe/d compared with 713 Mboe/d recorded in the year-ago period.
Weak Realized Prices
Realized prices for crude oil in the first quarter decreased 10.5% year over year to $47.08 per barrel on a worldwide basis. Worldwide realized NGL prices decreased 29.3% from the prior-year quarter to $12.82 per barrel. Worldwide natural gas prices were also down 14.8% from the year-ago quarter to $1.32 per thousand cubic feet.
Highlights of the Release
Occidental, similar to other oil and gas companies, was adversely impacted by a steep decline in oil prices and significant drop in demand. Crude oil hedges provided some support to the company amid the falling commodity prices.
Selling, general and administrative expenses in the first quarter were $260 million, up 85.7% from $140 million in the year-ago period.
Interest expenses in the reported quarter were $352 million compared with $98 million in the year-ago period. The higher interest expenses were due to an increase in debt levels to fund the acquisition of Anadarko.
As of Mar 31, 2020, Occidental had cash and cash equivalents of $2,021 million compared with $3,032 million in the corresponding period of 2019.
As of Mar 31, 2020, the company had a long-term debt (net of current portion) of $36,058 million compared with $38,537 million on Dec 31, 2019. The increase in debt level was due to the loan taken by the company to fund the acquisition of Anadarko. It has been taking steps to lower debt level. The company lowered long-term debt by $2.5 billion in the first quarter.
In first-quarter 2020, cash from operations was $1,414 million, down from $1,832 million in the prior-year period.
In first-quarter 2019, Occidental’s total capital expenditure was $1,293 million, up 2.7% from $1,259 million invested in the year-ago period.
To preserve liquidity amid the unprecedented economic crisis as a result of the novel coronavirus pandemic, Occidental decided to lower 2020 capital expenditure by more than 50% to the range of $2.4-$2.6 billion.
The company continues to carry out cost-saving initiatives, and identified $1.2 billion in operating and overhead cost reductions to be realized in 2020.
Occidental decided to withdraw its 2020 guidance on account of the market disruption caused by the spread of the novel coronavirus.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -24.93% due to these changes.
At this time, Occidental has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Occidental has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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