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Occidental Petroleum Earnings: Well Performance Drives Productivity Gains

Oxy’s results came in a bit above our forecast.

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Occidental Petroleum logo on building.

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What We Thought of Occidental Petroleum’s Earnings

Nothing in Occidental Petroleum’s OXY latest report materially alters our long-term view of the firm. Results were broadly in line with our expectations, though earnings came in a bit above our forecast, based on a lower tax outlay than we initially expected. While we foresee puts and takes in Oxy’s cost structure and expected Permian production, we maintain our $56 fair value estimate.

Oxy’s oil and gas business delivered 1,234 thousand barrels of oil equivalent per day, or mboe/d, in the fourth quarter. While results were within the range of prior guidance, they still exceeded the midpoint by 8 mboe/d despite a third-party outage in the eastern Gulf of Mexico, which posed a 28 mboe/d headwind. Aside from that, Oxy’s portfolio reflected broad-based strength in productivity. The Rockies, which represent roughly 20% of the company’s current sub-$40 breakeven inventory, particularly outperformed the midpoint of guidance by 19 mboe/d. Well performance has been a key driver of production in Oxy’s portfolio, with the DJ basin especially lifting results in the Rockies.

Cumulative recoveries also improved last year in the Delaware and Midland basins, though at least part of the improvement in the Permian appears driven by well designs for longer laterals. Longer laterals typically see diminishing returns over time, and any productivity gains could see offsets from higher costs like drilling. That said, near-term cumulative production appears strong relative to peers, so we still consider this a positive development, particularly given the attractive acreage the Permian boasts.

Occidental Petroleum Stock Price

Data as of Source: Morningstar Direct.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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About the Authors

Joshua Aguilar

Director of Equity Research, Resources
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Joshua Aguilar is the director of resources equity research for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc.

Aguilar joined Morningstar in 2016 as an associate on the financials team, and he was promoted to analyst on the industrials team in 2018 and to senior analyst in 2022. He has served as associates coordinator since 2021 and led Morningstar's diversity efforts as DEI co-chair since 2020. Aguilar has been a mentor to several associates on their paths to becoming analysts. He also has hosted a Morningstar earnings town hall, participated in analyzing Morningstar stock, and been a strong contributor through both client interactions and his General Electric stock call. Aguilar co-authored an Outstanding Research Achievement-winning piece with colleague Kris Inton on CEO compensation in 2021. He also has taught Morningstar's model to new hires for many years as part of the valuation committee.

Before joining Morningstar, Aguilar was a practicing business transactional attorney in Florida. He graduated magna cum laude with a bachelor's degree in political science and criminology from the University of Florida. He also has a Master of Business Administration from Rollins College and a Juris Doctor from Wake Forest University.

Samuel Siampaus

Associate Equity Analyst

Sam Siampaus is an associate equity analyst for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. He is on the energy and resources team and supports coverage of lithium producers and chemical companies.

Before joining Morningstar's equity research team in 2021, Siampaus spent over a year as a financial product consultant at Morningstar. He was responsible for supporting Morningstar's Office and Direct platforms and consulting with users on product offerings.

Siampaus holds a bachelor's degree in finance and economics with an emphasis in investment management from the University of Dayton.

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