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Occidental (OXY) Down 7.6% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Occidental Petroleum (OXY). Shares have lost about 7.6% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Occidental due for a breakout? 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 drivers.

Occidental's Q3 Earnings and Revenues Beat Estimates

Occidental Petroleum Corporation reported third-quarter 2023 earnings of $1.18 per share, which surpassed the Zacks Consensus Estimate of 89 cents by 32.6%. In the year-ago quarter, the company recorded earnings of $2.44 per share.

GAAP earnings in the quarter were $1.20 per share compared with $2.52 in the prior-year period.

Total Revenues

Occidental's total revenues came in at $7,400 million, which surpassed the Zacks Consensus Estimate of $7,195 million by 2.8%. The top line declined 22.1% from the year-ago quarter’s figure of $9,501 million.

Segmental Details

Oil and Gas revenues totaled $5,594 million in the reported quarter, down 21.2% year over year.

Chemical revenues amounted to $1,309 million, down 22.6%.

Midstream & Marketing revenues came in at $552 million, down 45.1% year over year.

Production & Sales

Occidental’s total production volume was 1,220 thousand barrels of oil equivalent per day (Mboe/d), higher than the company’s guidance of 1,166-1,206 Mboe/d. Such an outperformance can be attributed to higher volumes from the Permian segments. Permian’s production for the third quarter totaled 588 Mboe/d, toward the higher end of the guided range of 568-588 Mboe/d.

Total sales volume came in at 1,222 Mboe/d, up 3.6% from 1,179 Mboe/d in the year-ago period. The improvement was due to an increase in U.S. sales volume. Out of the total sales volume, 997 Mboe/d came from domestic sales, which was up 5.6% year over year.

Realized Prices

Realized prices of crude oil decreased 14.9% year over year to $80.7 per barrel on a worldwide basis. Realized natural gas liquids prices fell 40.3% to $21.04 per barrel globally.

Natural gas prices declined 65.9% from the year-ago quarter’s number to $1.92 per thousand cubic feet.

Highlights of the Release

Occidental’s total expenses in the reported quarter were $5,697 million, down 6.9% from $6,119 million in the year-ago period.

The company generated $1.7 billion in free cash flow during the third quarter.

Interest expenses decreased 19.3% to $230 million from $285 million in the year-ago quarter.

Occidental repurchased shares worth $600 million. Through systematic buyback, the firm has utilized 60% of its $3 billion share repurchase program.

Financial Position

As of Sep 30, 2023, Occidental had cash and cash equivalents of $611 million compared with $984 million as of Dec 31, 2022.

As of Sep 30, 2023, the company had long-term debt (net of current portion) of $18,597 million compared with $19,670 million as of Dec 31, 2022. The decrease in the company’s debt level was due to its effective debt management since the acquisition of Anadarko.

Cash flow from operations amounted to $9,069 million in the first nine months of 2023 compared with $12,835 million a year ago.

Total capital expenditure was $4,726 million in the first nine months compared with $2,977 million in the year-ago period.

Guidance

For the fourth quarter of 2023, the company expects production of 1,206-1,246 Mboe/d. Output from the Permian Resources segment is projected at 571-591 Mboe/d. Our model projects fourth-quarter total production of 1,226.2 Mboe/d.

Exploration expenses are estimated at $150 million for the fourth quarter.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

The consensus estimate has shifted -9.07% due to these changes.

VGM Scores

Currently, Occidental has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile 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.

Outlook

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.

Performance of an Industry Player

Occidental belongs to the Zacks Oil and Gas - Integrated - United States industry. Another stock from the same industry, Antero Midstream Corporation (AM), has gained 3.5% over the past month. More than a month has passed since the company reported results for the quarter ended September 2023.

Antero Midstream Corporation reported revenues of $263.84 million in the last reported quarter, representing a year-over-year change of +14.2%. EPS of $0.23 for the same period compares with $0.20 a year ago.

Antero Midstream Corporation is expected to post earnings of $0.21 per share for the current quarter, representing a year-over-year change of +5%. Over the last 30 days, the Zacks Consensus Estimate has changed +1.9%.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #2 (Buy) for Antero Midstream Corporation. Also, the stock has a VGM Score of D.

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