Cairn Investment Group
  • Account Access
  • Team
  • Our Journey
  • The Why
  • The How
  • News & Events
  • Cairns of the World

News & Events

Company Spotlight :: Occidental Petroleum Corp.

11/17/2017

 

11/17/2017    ::    Ticker: OXY    ::    Div. Yield: 4.46%    ::    Closing Price: $68.40

COMPANY DESCRIPTION

Headquartered in Houston, TX, Occidental Petroleum is an international oil/gas exploration and production company with operations in the US, Latin America and the Middle East. The company operates three segments: oil/gas exploration, chemicals, and midstream/marketing.
​
With the company for over 35 years, Vicki Hollub became CEO in 2016.

COMPANY HIGHLIGHTS AND FINANCIALS

​Occidental Petroleum is the largest producer of oil in the Permian Basin (New Mexico and Texas). Since 2013 they have been reorganizing their asset base focusing on acquiring low cost, high return assets in the Permian Basin. This included spinning off their California oil/gas assets into a separate company, selling their non-core assets in the Middle East and North Dakota, further concentrating their effort in the lucrative Permian Basin. This strategy has strengthened the company’s profitability potential even if oil/gas markets come under pricing pressure. Occidental Petroleum also operates a chemicals segment, accounting for 35% of sales, manufacturing basic chemicals and vinyls.

KEY POINTS

  • One of the largest Exploration and Production companies by market cap.
  • Good financial health with over $1.2 billion in cash and Net Debt to Capital of 50%.
  • Compelling upside as valuations and growth remain attractive.
  • Consistent and growing dividend with a yield of 4.46%.

VALUATION AND RISKS

Occidental Petroleum is trading in line with their historical valuations and below fair value based on scenario analysis of free cash flow growth. Occidental has a dividend yield of 4.46% and generates over $1.3 billion in free cash flow, giving them the flexibility to continue to raise their dividend over time. The company forecasts their cash dividend will be raised if West Texas Intermediate (WTI) crude oil stays over $50 per barrel with the current dividend maintained at a WTI price above $40.00 per barrel. On a free cash flow basis, we expect the company to grow cash flow in the mid-single digits over the next decade, due to the company’s shift to higher margin assets. Modeling our conservative assumption places a price of $80 on the shares which is almost a 20% increase based on the share price as of the date of this report. If our conservative assumptions turn out to still be overly optimistic, we feel there is a margin of safety built into the current price based on the company’s strong cash flow generation and balance sheet.

As we continue to monitor our investment in Occidental Petroleum, we would like to see continued discipline in regards to capital spending and their amount of leverage while continuing to grow their dividend. Continued focus on the company’s revenue breakdown and operating margins will be areas to monitor closely.

Weighing the potential rewards and risks, we are optimistic that Occidental Petroleum will be a good ​long-term investment. 
Picture

Patrick Mason, Investment Analyst, Cairn Investment Group

DOWNLOAD COMPANY SPOTLIGHT
Cairn Investment Group and its affiliates (“Cairn”) produces Company Spotlight reports (“Reports”) for its clients and the general public. The Reports are impersonal and do not provide individualized advice or recommendations for any specific investor or portfolio. Investing involves substantial risk. Cairn makes no guarantee or other promise as to any results that may be obtained from using the Reports. Past performance should not be considered indicative of future performance. No reader should make any investment decision without first conducting his or her own research and due diligence. At various times Cairn may own, buy or sell the securities discussed for purposes of investment or trading. Cairn disclaims any and all liability in the event any information, commentary, analysis, opinions, advice and/or recommendations in the Reports prove to be inaccurate, incomplete or unreliable or result in any investment or other losses.

The Reports commentary, analysis, opinions, advice and recommendations represent the then current views of Cairn, and are subject to change at any time. The information provided in the Reports is obtained from sources the author believes to be reliable. However, the author has not independently verified or otherwise investigated all such information.

​This is not a solicitation or offer to buy or sell any securities. Cairn does not receive any compensation from any of the companies featured in the Reports. Any redistribution of the Reports or the information contained therein, without the written consent of Cairn is strictly prohibited.

Comments are closed.

    Categories

    All
    Announcements
    Company Spotlights
    News
    Newsletters
    Newsletters 2022
    Newsletters 2023
    Newsletters 2024
    Newsletters 2025
    Previous Newsletters

    RSS Feed

    Introduce Yourself

    [object Object]
Submit
 

Contact Us

503.241.4901
​877.241.4901
503.241.5699 fax
500 Broadway Street
Suite 480
Vancouver, WA 98660

© 2023 Cairn Investment Group. All Rights Reserved.
  • Account Access
  • Team
  • Our Journey
  • The Why
  • The How
  • News & Events
  • Cairns of the World