On Wednesday, Stephens, a financial services firm, adjusted the price target for Occidental Petroleum (NYSE: NYSE:OXY) shares to $71 from the previous $70, while maintaining an Overweight rating on the stock. The firm's analyst highlighted the company's third-quarter performance, which surpassed consensus expectations in several key areas.
Occidental's production, cash flow per share (CFPS), and free cash flow (FCF) for the quarter were reported to be 2%, 10%, and 31% higher than what industry analysts had anticipated, respectively.
The analyst attributed the strong quarterly results to the exceptional performance of wells in the Permian Basin and higher-than-expected income from midstream and marketing operations. Occidental Petroleum's proactive efforts to strengthen its balance sheet were also noted, with the company repaying $4 billion of its debt in the quarter, following divestitures of non-core assets.
Further, the company's development of its first Direct Air Capture (DAC) facility is proceeding as planned. The facility is anticipated to start operations in mid-2025, although it is expected to operate at half of its projected capacity by mid-2026. This move is part of Occidental's broader strategy to enhance its environmental credentials and invest in technology that could reduce carbon emissions.
However, the outlook for the fourth quarter of 2024 was slightly less optimistic. The guidance provided by Occidental suggests that oil production might be 3% lower than consensus estimates, while capital expenditures could be 2% higher. In response to these projections and the recent performance, Stephens revised its net asset value (NAV) per share and the target price for Occidental's stock to $71.
Occidental Petroleum is an international oil and gas exploration and production company with operations primarily in the United States, the Middle East, and Latin America. The Overweight rating suggests that Stephens expects the stock to outperform the average total return of the stocks the firm covers over the next 6 to 12 months.
In other recent news, Occidental Petroleum has made significant strides in its financial performance. The company successfully reduced its principal debt by $3 billion in Q3 2024, achieving nearly 85% of its $4.5 billion debt reduction target. This was facilitated by robust cash flow and strategic divestitures, including the public offering of common units in Western Midstream Partners (NYSE:WES).
Occidental's acquisition of CrownRock marked a significant milestone, increasing its presence in the Permian Basin and shifting its focus toward further debt reduction. BofA Securities, Goldman Sachs (NYSE:GS), and Mizuho (NYSE:MFG) have all maintained a Neutral rating on Occidental Petroleum in light of these developments.
However, escalating tensions in the Middle East and the impending Hurricane Francine have prompted oil and gas producers, including Occidental, to halt operations in the Gulf of Mexico. Analysts from Truist Securities have maintained a Hold rating for Occidental, citing the company's Q3 2024 performance which reflected average realized prices aligning with market expectations.
These are the recent developments that investors should be aware of.
InvestingPro Insights
Occidental Petroleum's recent performance and future outlook, as discussed in the article, can be further contextualized with real-time data from InvestingPro. The company's P/E ratio of 11.59 suggests that the stock may be undervalued relative to its earnings, aligning with Stephens' Overweight rating and increased price target. This valuation metric, combined with OXY's market cap of $47.03 billion, indicates that investors are still pricing in growth potential despite recent market challenges.
InvestingPro Tips highlight that Occidental has maintained dividend payments for 51 consecutive years and has raised its dividend for 3 consecutive years. This demonstrates the company's commitment to shareholder returns, even as it focuses on debt repayment and investment in new technologies like the Direct Air Capture facility. The current dividend yield of 1.75% may be attractive to income-focused investors.
It's worth noting that OXY is trading near its 52-week low, which could present a potential entry point for investors who share Stephens' optimistic outlook. However, investors should also consider that 16 analysts have revised their earnings downwards for the upcoming period, suggesting some caution in short-term expectations.
For a more comprehensive analysis, InvestingPro offers additional tips and insights that could be valuable for investors considering Occidental Petroleum's stock.
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