Occidental Petroleum (OXY 1.80%) and Energy Transfer (ET 0.55%) represent two different ways to profit from the growing demand for oil and natural gas. Occidental, better known as Oxy, is a leading upstream company with a much smaller midstream business. Energy Transfer, which operates as a master limited partnership (MLP), is a leading midstream company.
Oxy's stock has risen 34% year-to-date, while Energy Transfer's shares have risen 17%. Let's see why Oxy outperformed Energy Transfer -- and if it's still the better overall investment.
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Why is Oxy outperforming Energy Transfer?
The spot price of WTI crude oil has risen more than 90% this year to about $110 per barrel. Most of that gain occurred after the outbreak of the Iran war in late February, which severely throttled oil and natural gas shipments through the Strait of Hormuz.
Upstream companies primarily focus on oil and natural gas extraction, so rising oil prices boost their revenues much faster than their expenses. Oxy's upstream business can keep generating massive profits as long as oil stays above its breakeven price of roughly $60 per barrel.
Midstream companies charge upstream and downstream companies "tolls" to transport those resources through their pipelines and infrastructure. That business model insulates them from volatile commodity prices, but they also see fewer benefits from soaring oil prices.
Since Oxy generates most of its revenue from its upstream business, higher oil prices drove its stock price higher. This January, it sold OxyChem, its downstream refining and chemical production business, which has more negative exposure to rising oil prices. As a top upstream player, Oxy attracted more attention than midstream and downstream companies.
NYSE: OXY
Key Data Points
Energy Transfer operates more than 140,000 miles of pipeline across 44 states. It transports natural gas, liquefied natural gas (LNG), natural gas liquids (NGLs), crude oil, and other refined products through its pipelines. It also helps export some natural gas products overseas.
Midstream companies indirectly benefit from higher oil and gas prices because they drive upstream companies to increase drilling and production. That higher production drives more resources through their pipelines, which boosts their adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) and cash flows. So while higher oil prices generated tailwinds for Energy Transfer, they weren't as strong as the tailwinds for upstream companies.
NYSE: ET
Key Data Points
Energy Transfer's business model is also a bit harder to understand than Oxy's. As an MLP, it blends a return of capital with its own income to deliver more tax-efficient distributions than traditional dividends. However, that income needs to be reported on a separate K-1 tax form every year, making it a less straightforward investment than other oil stocks.
Which stock is the better value?
For 2026, analysts expect Oxy's revenue and EPS to increase 19% and 283%, respectively. That would end its three-year streak of declining revenues and earnings. It would also indicate it's finally overcoming its badly timed, debt-driven acquisition of Anadarko in 2019. At $55, its stock looks undervalued at 14 times next year's earnings.
They also expect Oxy's adjusted EBITDA, which excludes its one-time expenses, to increase 29%. With an enterprise value of $63.5 billion, it trades at just four times that estimate. It also pays a decent forward yield of nearly 2%.
As for Energy Transfer, analysts expect its revenue and earnings per unit (EPU) to rise 27% and 22%, respectively, in 2026. They also expect its adjusted EBITDA to grow 16%.
At $19 with an enterprise value of $135.2 billion, Energy Transfer also looks like a bargain at 13 times and 7 times this year's earnings and adjusted EBITDA, respectively. However, it pays a much higher forward yield of 6.9%.
Which stock is the better long-term play?
Oxy has been a hotter oil stock than Energy Transfer this year, but that rally will fizzle out when oil prices retreat. Therefore, I believe Energy Transfer is still the better overall investment for income-seeking investors who want a simpler stock to buy, hold, and forget -- even though it's less exposed to soaring oil prices and requires more tax forms than Oxy.
