Do you have your eye on oil and natural gas powerhouse Occidental Petroleum (OXY 0.02%) stock? Or, maybe you already own it, and now just want to better understand what makes it tick? Here are the big three narratives shaping this stock's performance.
1. Occidental's costs are below the industry norm
Occidental Petroleum doesn't report an official "all-in cash cost" as some other names in the energy sector do these days. But it is well established as a low-cost leader in the fossil fuel space, typically able to break even when crude oil prices are less than $60 per barrel. Indeed, for some of its fields, its breakeven point is under $50 per barrel, while nearly half of its wells are capable of breaking even when oil prices are under $40 per barrel.
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This is no mere stroke of luck either. Occidental Petroleum has made a point of acquiring and developing assets in the U.S. Permian Basin -- where it can cost effectively scale up -- while shedding projects that don't align with its core competencies in the shale segment of the oil and natural gas market.
Even if crude prices remain suppressed (as the U.S. Energy Information Administration predicts they will through 2026), this company can still turn a profit.
2. Occidental Petroleum is leading the carbon-capture charge
The company isn't just extracting oil and natural gas from the ground, however. It's working on technologies that suck some of the carbon dioxide generated by the use of fossil fuels out of the air.
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It's called direct air capture. While the technology has worked on smaller, more experimental scales, Occidental's facility in Ector County, Texas, will be the biggest of its kind when it becomes operational within the next few weeks. The company says it will remove up to 500,000 metric tons of carbon dioxide from the air per year. This puts Occidental in a leading position within an industry that Precedence Research believes could be worth more than $18 billion by 2034.
More than that, though, if it can be made to work effectively at industrial scale, carbon capture technology will prolong the marketability of crude oil.
3. Warren Buffett loves it
Finally, not that you should only own stocks touted by well-known stock pickers, but to the extent it matters, Warren Buffett loves Occidental Petroleum. As he wrote in early 2024, "No one knows what oil prices will do over the next month, year, or decade. But [Occidental CEO] Vicki [Hollub] does know how to separate oil from rock, and that's an uncommon talent." Further elaborating on Occidental, Buffett added, "We particularly like its vast oil and gas holdings in the United States, as well as its leadership in carbon-capture initiatives."
And he's putting his money where his mouth is. Buffett's Berkshire Hathaway owns nearly 265 million shares of Occidental Petroleum worth a total of $11 billion -- about 26.9% of the energy company. That makes it Berkshire's seventh-biggest stock holding.
