Occidental rockets 24% in two days after reaffirming pro-shareholder plans
Occidental Petroleum (OXY +7.7%) is the best performer among major oil producing stocks for the second straight day, skyrocketing as much as 24% to hit another multiyear high, as oil prices extend their rally above $100/bbl.
Investors have taken to heart Occidental's recent guidance and new financial framework that clarified its intention to reduce debt and reward shareholders rather than boost production; CEO Vicki Hollub said on Friday that the company has "no need and no intent to invest in production growth."
Occidental still needs to reduce its net debt position by about half to achieve an investment-grade rating, but Monday's tender offer to buy back $2.5B of debt showed it is serious about getting there.
Analysts at MKM Partners maintain their Buy rating for Occidental while raising their price target to $50 from $42, pointing to "an incrementally stronger chemicals business EBIT outlook, the base effect of 2%-3% higher 2022 production, and higher liquids price realizations," saying Occidental can generate ~$2B in annual EBIT as well as $6.9B of free cash flow in 2022, with Nymex oil at ~$70/bbl and natural gas at $3.60/Mcf.
During 2022-26, MKM sees Occidental generating $24.9B of free cash flow, equal to 55%-60% of the company's market capitalization.
Occidental is beginning to execute its Anadarko post-acquisition strategy even if it took longer than expected, and the success of the strategy may finally start to show up in the company's cash flow, Long Player writes in a bullish analysis posted recently on Seeking Alpha.