Occidental Petroleum (OXY) Debt Reduction Effect In Focus
Occidental Petroleum (OXY) is set to report its third-quarter results on Tuesday after the closing bell.
Last quarter, Occidental Petroleum beat analyst estimates on the top and bottom lines, with earnings of $1.03 per share on revenue of $6.82 billion. The company has beat analysts' expectations in the past four consecutive quarters.
Market expects Occidental Petroleum to report earnings of 75 cents and quarterly revenue of $7.232 billion.
Effect Of Debt Reduction To Quarter Revenue Contribution
In August, OXY has disclosed a $3 billion reduction in principal debt driven by strong organic cash flow and proceeds from divestitures. As mentioned by their CEO, this is through the rapid and significant progress of our deleveraging program along with enhancements made to their already premier portfolio.
OXY is expected to achieve nearly 85% of their near-term $4.5 billion debt reduction commitment.
Higher Production Volumes Expected
OXY’s performance is also expected to have been positively impacted by its routine flaring reduction initiatives and introduction of innovative technologies, which will further lower operating expenses.
OXY's practice is to remain exposed to market prices of commodities, so the drop in commodity prices during the third quarter is expected to have adversely impacted OXY’s earnings despite strong production in the quarter.
OXY’s third-quarter production volumes are expected in the range of 1.37-1.41 million barrels of oil equivalents (BOE) per day compared to the second-quarter production of an annual low of 1.258 million BOE per day.
The sequential improvement in production volume in the third quarter is likely to have been mainly due to the strong performance of its onshore assets and contribution from CrownRock L.P. assets.Strong volumes from the Permian Basin assets are likely to have boosted overall volumes in the third quarter.
Occidental Petroleum (OXY) Debt To Asset
OXY completed or announced divestments of approximately $1.7 billion in 2024, and investors will be looking closely at the company's debt levels in its third-quarter report.
Last quarter, analyst noted the performance of the company's OxyChem and Upstream divisions were in line with Wall Street expectations, while its Midstream division reported a significant beat. The Street will be watching these divisions again closely.
Occidental Petroleum (OXY) Cash Flow Level
Occidental Petroleum's market cap is currently $45.76B. The company's EPS TTM is $4.055; its P/E ratio is 12.47; and it has a dividend yield of 1.66%.
Occidental Petroleum is likely to have gained from its ongoing debt reduction. The company is likely to have retired debts worth $3 billion in the to-be-reported quarter, which will strengthen its balance sheet and reduce its interest expenses, boosting earnings.
This should help to improve their cash flow for 2024.
Technical Analysis - MACD and Multi-timeframe (MTF)
If we looked at how OXY stock price have been trading, it is not positive, trading below the short-term and long-term MA, this has been going on for quite some time.
Though MACD is showing upside movement possible, but we need to see how their debt reduction for the third quarter can really help push the stock price higher above the MA,
From MTF, downside signal can be seen as there is not much upside sentiment, as OXY need to show that they have the strength after their debt reduction.
Summary
There are factors that could affect OXY’s earnings, but if their debt reduction could make them to earn better with their free cash flow, then that would be beneficial for the stock price.
But we need to see how OXY would be navigating with the oil price commodity falling, as their strategy remain exposed to market prices of commodities, so the drop in commodity prices during the third quarter is expected to have adversely impacted OXY’s earnings despite strong production in the quarter.
Appreciate if you could share your thoughts in the comment section whether you think OXY would report a strong earnings but guidance and outlook could be affected by falling commodity prices.
@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.
Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
