Occidental (OXY) Benefits From Investments and Acquisitions
Occidental Petroleum OXY is well-poised to benefit from acquisitions, strategic investments, high-quality asset holdings and low-cost operations. Exposure to Permian Basin will continue to boost its performance.
Occidental, which currently has a Zacks Rank #3 (Hold), is exposed to strong competition. Strict regulations pose another headwind.
Tailwinds
Occidental’s investment plans and production growth support the cash flow generation capacity of the company. OXY is expected to invest $5.4-$6.2 billion in 2023. In second-quarter 2023, the company repurchased $425 million of common shares and completed approximately 40% of its $3 billion share repurchase program announced in February 2023.
OXY’s 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.
Headwinds
Occidental’s operations are subject to stringent regulations related to improving or maintaining environmental quality. The business operates in highly competitive environment, which could adversely affect its profitability and growth.
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 NextDecade Corp. NEXT, Constellation Energy Corp. CEG and Archrock Inc. AROC, 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 NEXT’s 2023 earnings per share (EPS) indicates an increase of 44.6% from the previous year’s figure. The bottom-line estimates have moved up 42.9% in the past 60 days.
Constellation Energy’s long-term (three to five-year) earnings growth rate is 23.3%. The bottom-line estimates have moved up 21.5% in the past 60 days.
Archrock’s long-term earnings growth rate is 7%. The Zacks Consensus Estimate for AROC’s 2023 EPS indicates an increase of 128.6% from the previous year’s figure.
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Constellation Energy Corporation (CEG) : Free Stock Analysis Report
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NextDecade Corporation (NEXT) : Free Stock Analysis Report
