Occidental Petroleum Reports Earnings, Keeps Capital Budget Steady

Occidental Petroleum (OXY) bucked the trend among E&Ps by holding its full-year capital budget steady, amid widespread inflation (steel, labor, and fuel are major inputs for upstream firms). As previously indicated, the full-year spend will probably fall in the high end of the $3.9 to $4.3 billion range.

But the firm is not immune, and its domestic operating expense guidance did creep higher by $0.50 per boe. The firmwide production outlook was similarly unchanged, although the firm inked an extension of its joint venture with Ecopetrol with an effective date of Jan. 1, 2022, which transfers some of its Permian working interest to its partner. The decrease in expected Permian volumes is offset by better-than-expected performance from other domestic assets. The extended JV, and the reallocation of capital to operated assets in the Permian, should let the firm hit the ground running, although we were already expecting mid-single-digit growth next year.

Accordingly, our fair value estimate is unchanged after incorporating these results.