Occidental Petroleum (OXY 3.66%), a key player in the energy sector specializing in oil and natural gas operations, released a mixed third-quarter report on Nov. 12. Earnings per diluted share were $0.98, significantly outstripping analysts' consensus estimate of about $0.74, largely due to effective cost management. Adjusted earnings were $1.00 per share. In contrast, total revenue for the quarter was $7.173 billion, fractionally above analysts' estimate of $7.124 billion. This indicates a commendable ability to maintain high sales volumes, albeit with pressure from lower prices in oil segments. Overall, the quarter highlights Occidental's operational strengths amid challenging market conditions.
| Metric | Q3 2024 Result | Q3 2024 Analysts' Estimate | Q3 2023 Result | % Change YOY |
|---|---|---|---|---|
| Earnings per share | $0.98 | $0.7417 | $1.20 | (18.3%) |
| Revenue | $7.173 billion | $7.124 billion | $7.158 billion | 0.2% |
Source: Analysts' estimates for the quarter provided by FactSet.
Occidental Petroleum: Business Overview
Occidental Petroleum is a significant entity in the exploration, development, and extraction of oil, natural gas, and natural gas liquids. Its primary operations are in the United States, but also has ventures in nations including the United Arab Emirates, Oman, and Algeria. Its business model hinges on generating and maintaining a strong hydrocarbon production base through efficient exploration techniques. A major focus is optimizing cost structures to leverage fluctuating commodity prices. Adapting to environmental regulations through initiatives in carbon capture is another strategic priority.
Quarterly Developments
During the third quarter, Occidental demonstrated commendable financial maneuvers despite setbacks in certain segments. The oil and gas operations generated a pre-tax income of $1.2 billion. Asset sale losses of $572 million took a major toll on the bottom line. One factor contributing to its year-over-year earnings decline was the decrease in average crude oil prices by 6% to $75.33 per barrel, as well as a sharp 26% drop in average domestic natural gas prices to $0.40 per thousand cubic feet. These drops were reflective of the broader market trends affecting energy prices globally.
Occidental's worldwide production averaged 1,412,000 barrels of oil equivalent per day. Notably, production in the Permian Basin exceeded guidance by 30,000 barrels of oil equivalent per day. However, in the Gulf of Mexico, its output slumped due to weather-related interruptions. These differences highlight the importance of geographic diversification.
Occidental's oxychem segment delivered pre-tax income of $304 million, close to flat quarter over quarter. In contrast, the midstream and marketing segment performed particularly well, with income of $631 million thanks largely to favorable sales of investments.
A critical achievement was the repayment of $4 billion in debt, showcasing Occidental's robust focus on financial health and debt management. The company is now almost 90% of the way to hitting its short-term debt-reduction goal. Its target of reducing principal debt below $15 billion remains a significant goal.
Outlook and Forward Guidance
Occidental has outlined several strategic priorities that highlight its leadership in sustainability, prominently through carbon management projects. Plans to inaugurate the Stratos direct air capture facility underline its commitment to environmentally friendly initiatives, in line with its longer-term renewable energy targets.
Occidental remains vigilant about the volatility in commodity prices, which poses a risk to revenue consistency. The integration of CrownRock and other assets necessitates caution. Management is preparing for these challenges, keeping a cautious but optimistic view of capital expenditures and integration risks. As such, Occidental intends to maximize its production capabilities while enhancing its core asset efficiencies.
