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Occidental Petroleum: Troubles Ahead


  • Occidental Petroleum's 4Q'19 total revenues and others were $6.80 billion, up 41.7% from a year ago, and up 15.8% sequentially.
  • The total output was 1,402K Boe/d in 4Q'19. The US operations accounted for about 72.3% of the company's total production. OXY's output was up sequentially or 21.4%.
  • I believe the company is not a long-term investment anymore. Hence, I recommend reducing your long-term position slowly and allocate about 60% of the capital invested in trading.
  • Looking for a helping hand in the market? Members of The Gold And Oil Corner get exclusive ideas and guidance to navigate any climate. Get started today »

Source: Occidental Petroleum Corp.

Investment Thesis

The Houston-based Occidental Petroleum (NYSE:OXY) is an energy-integrated company specializing mainly in crude oil, natural gas exploration, and production.

Occidental Petroleum was viewed as an ideal long-term domestic oil play and, in theory, should be accumulated when the price is weakening. However, this whole thought process was trashed when the company changed its business profile drastically with the controversial acquisition/merger of Anadarko Petroleum that was finalized on August 8, 2019.

Not only was this acquisition extremely overpriced, but the timing was the worst ever. As soon as the purchase was completed, the price of oil and gas began to drop and just collapsed recently with the coronavirus outbreak and the damaging impact on the world economy.

My investment thesis has changed based on this new development and the fact that the dividend is not covered by free cash flow, which means that the company will probably be forced to "adjust" the dividend to a more suitable level.

I believe the company is not a long-term investment anymore. Hence, what I recommend is to reduce your long-term position slowly and allocate about 60% of the capital invested in the stock to trading short term the volatility of the sector.

As you all know, the company has a strong presence in the Permian Basin, and it was the primary reason why Occidental Petroleum outbid Chevron (CVX) and acquired Anadarko.

OXY is still the largest operator in the Permian Basin with total combined production (Permian Resources and Permian EOR) of 629K Boep/d in 4Q'19. I will show you the details later in this article.

From presentation

Occidental Petroleum - 4Q'19 Quarterly Financial Table: The Raw Numbers

Occidental Petroleum 2Q'18 3Q'18 4Q'18 1Q'19 2Q'19 3Q'19 4Q'19
Total Revenues in $ Billion 4.13 6.18 4.80 4.09 4.48 5.87

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This article was written by

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As an experienced investor, I will help you stay on task more efficiently.

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Note: I am not a financial advisor. All articles are my honest opinion. It is your responsibility to conduct your own due diligence before investing or trading.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

I trade OXY short term only.

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