OXY: Running on All Cylinders

Occidental Petroleum (OXY) is expanding exploration in the Middle East by entering into partnerships with Middle Eastern oil companies and re-establishing its historic relationship with Libya. The company has surprised on estimates the last four quarters on an average of 8.53%. OXY has a 2008 P/E of 10.88.

Occidental Petroleum Corporation is an international oil and gas exploration and production company with operations in the United States, Middle East/North Africa and Latin America. OXY is the fourth largest U.S. oil and gas company, based on equity market capitalization.

Occidental, a Zacks #1 Rank (Strong Buy), is the largest oil producer in Texas and the largest natural gas producer in California. The company has additional operations in Kansas, Oklahoma and New Mexico.

OXY is also a big player in the Middle East and North Africa. It has assets in Libya, Oman, Qatar and Yemen, and is a partner in the transborder Dolphin Project supplying natural gas from Qatar to markets in the United Arab Emirates.

The company also has operations in Latin America, specifically in Colombia and Argentina.

In addition to crude production, Occidental has a large chemical division, OxyChem, which manufactures vinyls and other specialty chemicals, in addition to chlorine and caustic soda.

On Mar 10, Occidental and Abu Dhabi's state oil company, International Petroleum Investment Co., announced that they agreed to jointly develop oil and natural gas projects in various Middle East and North Africa locations. The two companies have already developed a natural-gas project in Qatar and are engaged in an exploration venture in Libya.

"This agreement is a natural extension of our existing strategic partnership with Abu Dhabi which currently includes the highly successful Dolphin project, development of the giant Mukhaizna Field in Oman, and an exploration joint venture in Libya," said Dr. Ray R. Irani, Chairman and Chief Executive Officer of Occidental Petroleum Corporation.

The company has been buying back shares. On Feb 14, the Board of Directors increased the number of shares authorized for repurchase by 20 million. Since October 2005, the company has repurchased approximately 52.4 million shares.

With near record crude prices and high natural gas prices, OXY has been running on all cylinders. On Jan 29, the company reported a record 2007 with net income of $5.4 billion, or $6.44 per share, compared to $4.191 billion, or $4.87 per share, in 2006.

The company surprised on estimates by seven cents, or 4.19%. Net income for the fourth quarter of 2007 was $1.452 billion, or $1.74 per share, compared with $930 million, or $1.09 per share, for the fourth quarter of 2006. Analysts expected $1.67 per share.

After the bullish report for the fourth quarter and the full-year, analysts responded by raising estimates.

For the first quarter, three out of 12 covering analysts raised consensus estimates in the last thirty days, with one raising in the last week, by eight cents to $1.77 from $1.69 per share. For 2008, consensus estimates have risen in the last 30 days by 30 cents to $6.83 from $6.53 per share. Ninety days ago consensus estimates were at $6.09 per share.

OXY's 2008 P/E of 10.88 is under the industry average of 11.4. Its price-to-book is 2.66. The company has an outstanding five year average return on equity of 24.87%. OXY reports first quarter earnings on Apr 24.