Editor’s Note: This analysis was originally published as a stock note by Morningstar Equity Research.
Key Morningstar Metrics for Occidental Petroleum
What We Thought of Occidental Petroleum’s Earnings
Occidental Petroleum OXY reported production of 1,391 boe/d, a hair above the midpoint of guidance, while domestic operating and transportation costs per boe of $12.78 beat guidance by 2%, and net capital expenditure of $1.8 billion is running below the prior annual run-rate.
Why it matters: This is Oxy’s first report since the US announced its April 2025 tariff plan and OPEC announced it will triple its previously signaled crude production increases in May. We were happy with Oxy’s reported efficiency gains in US shale, curtailing rigs in the Permian Basin while raising production.
Oxy’s production was largely in line with our expectations, while operational costs per barrel were slightly above what we anticipated. Still, Oxy is planning on averaging $8.65 per barrel domestically, which we think can be accomplished after reported efficiency gains. While Oxy reduced capex, we were already anticipating a reduction given the oil price headwinds.
The bottom line: We maintain our fair value estimate of $59 for no-moat Oxy as nothing materially changes our long-term view of the firm.
At a 4-star rating, Oxy trades at an attractive 30% discount to our fair value estimate. We maintain our Very High Morningstar Uncertainty Rating for Oxy. Major acquisitions have saddled the company with debt. Still, reported debt repayments of $2.3 billion year to date give us confidence that deleveraging is a chief priority. Decreased leverage is key in the current environment.
Coming up: Interestingly, Oxy guided to $1 billion in incremental free cash flow through 2026, with almost half of this amount coming from its OxyChem segment, and the other half from its midstream segment.
We see Occidental’s downstream activities as an advantage to pure US shale producer peers. The midstream asset was able to deliver strong gas marketing revenue during heightened pricing volatility in the first quarter.
The author or authors do not own shares in any securities mentioned in this article.
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