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Occidental Petroleum Reports Mixed 4th-Quarter Results

After the market closed on Feb. 27, Occidental Petroleum Corp. (NYSE:OXY) reported fourth-quarter and full-year earnings for 2019.

For the quarter, the oil and gas producer reported $6.28 billion in revenue and a net loss of $1.3 billion, or $1.50 per diluted share. Adjusted net loss per share came in at 30 cents. These metrics fell short of analyst expectations, which forecasted revenue of $6.51 billion and a net loss of 6 cents per share on an adjusted basis. This compares to revenue of $4.76 billion and a loss per share of 93 cents in the prior-year quarter.


For full fiscal 2019, Occidental's revenue came in at $21.23 billion compared to $18.93 billion in 2018, while the loss per share was $1.20 compared to earnings per share of $5.40 in the prior-year quarter.

As of Feb. 27, shares of Occidental traded around $31.81 for a market cap of $29.2 billion and a price-earnings ratio of 20.78. GuruFocus has assigned the company a financial strength rating of 3 out of 10, a profitability rating of 7 out of 10 and a valuation rating of 7 out of 10.

Major changes

During the fourth quarter, Occidental reported its first full quarter with Anadarko Petroleum's assets, which it acquired in the previous quarter. The company accounted for $656 million in acquisition-related transaction costs during the fourth quarter.

"The integration of our combined businesses is progressing extremely well and faster than expected as evidenced by our outstanding operational performance and we are ahead of schedule in capturing value from our $2 billion synergy program," President and CEO Vicki Hollub said in regard to the Anadarko acquisition.

The company announced divestitures worth $10.2 billion, making significant progress toward its goal of $15 billion in divestitures as it seeks to trim non-core operations and improve its balance sheet. It also invested $1 billion to gain a stake in Western Midstream Partners LP (NYSE:WES) and paid down $7 billion in debt.

"Deleveraging and returning excess free cash flow to shareholders remain key priorities, and we are highly confident in our ability to achieve both," Hollub said.

Occidental has been no exception to the embattled energy sector as oil and natural gas oversupply drive down prices across the board. Add this to the fact that Occidental recently made a major acquisition and already had a high amount of debt before that, and the company was almost guaranteed to miss analyst expectations.

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However, paying down debt is a good move for the company going forward. At the end of the third quarter, the cash-debt ratio stood at 0.16, which is lower than 68.46% of industry competitors.

Due to the low stock valuation, Occidental now has a dividend yield of 9.86% and a forward dividend yield of 9.23%.

Looking forward

For 2020, Occidental guides for 1,360 to 1,390 thousand barrels of oil equivalent per day. It also expects to capture $2 billion in cost synergies from the Anadarko acquisition as it continues to integrate operations.

The company plans to further invest in low-carbon commercial projects and reduce its atmospheric greenhouse gas emissions.

Disclosure: Author owns no shares in any of the stocks mentioned. The mention of stocks in this article does not at any point constitute an investment recommendation. Investors should always conduct their own careful research and/or consult registered investment advisors before taking action in the stock market.

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This article first appeared on GuruFocus.