Occidental Petroleum (OXY -1.2%) shares continue to drop even as most oil and gas names move higher today, as investors continue to frown upon OXY's takeover of Anadarko Petroleum.
J.P. Morgan's Phil Gresh is the latest to weigh in, reinstating coverage of OXY following a period of restriction and downgrading shares to Underweight from Neutral with a $50 price target, cut from $74.
Despite OXY's 33% decline since before the Anadarko deal was announced, Gresh sees OXY's total return potential of just 15%, roughly half that of the peer group.
OXY's estimated 2021 free cash flow to enterprise value yield of 5.2% at $60/bbl Brent is still not compelling enough to compensate investors for its elevated dividend as a percentage of free cash flow, Gresh says.
Evercore ISI downgraded OXY yesterday, saying the Anadarko deal makes OXY larger but "significantly less valuable."
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