Occidental Petroleum Posts Strong Q3 Gains Amid Cost Cuts

URGENT UPDATE: Occidental Petroleum has just reported impressive third-quarter earnings, showcasing a strong operational performance that drives immediate investor interest. Net production surged by 5% sequentially to 1,465 mboe/d, demonstrating the company’s increasing efficiency despite lower investments.

The company’s cash operating costs have significantly decreased, plunging 9% to $14.28 per boe. Furthermore, capital expenditures for oil and gas fell by 14% to $1.3 billion. Occidental also used this cash to pay down debt, contributing $1.3 billion towards reducing its liabilities while distributing $400 million in dividends to shareholders.

Why does this matter NOW? As Occidental navigates a competitive energy landscape, its efforts to streamline operations and focus on low-cost reservoirs like the Delaware Basin are crucial. Investors are particularly attentive, given the company’s elevated debt levels compared to its peers. This financial strategy is essential, as equity investors typically expect substantial returns from free cash flow.

In a move that could further bolster its financial position, Occidental is selling its OxyChem division for $9.7 billion. While some analysts express concern about timing—arguing that selling during a low chemicals cycle may not be ideal—this sale could enhance the company’s flexibility for stock buybacks and further debt reduction.

The bottom line? Morningstar has revised its fair value estimate for Occidental shares to $64.00 from $63.00, highlighting improvements in cost and capital efficiency. Currently, this 4-star stock trades at over a 30% discount to its estimated underlying value, although it carries a Very High Uncertainty Rating, indicating a higher risk than its U.S. shale counterparts.

In terms of operational performance, Occidental is seeing tangible improvements at the wellsite. The company has successfully reduced well costs by 38% in Midland and increased oil extraction by 22% in this low-cost reservoir since the beginning of 2023.

As investors digest these results, all eyes are on how Occidental will leverage its enhanced cash flow and reduced costs in the coming quarters. The potential for further debt reduction and stock buybacks could signal a shift in investor sentiment, making this a crucial moment for the company.

Stay tuned for more updates as the situation develops.