Oxy Earnings: CrownRock Transaction Should Still Close, but Not Until the Third Quarter of 2024

Following our review of no-moat Occidental Petroleum’s first-quarter results, we reduced our fair value estimate by 7% to $53 per share. Our lower fair value estimate reflects lower West Texas Intermediate oil strip prices, down to the high 70s from the mid-80s. We originally expected management to close the CrownRock acquisition by the end of the first quarter, as it said on its December 2023 special call that it hoped to. However, it now appears that the CrownRock transaction will close sometime in the third quarter of 2024 as both Occidental and CrownRock work with the US Federal Trade Commission. Production results came in quite a bit lower than we originally expected, which in turn hurt our valuation because the transaction hasn’t closed yet. We point out, however, that Occidental’s 2024 production guidance excludes the impacts from the CrownRock acquisition, and we still model a 100% probability that the deal will close.