Occidental Petroleum Reports Strong Q3 Gains, Cuts Costs Urgently

UPDATE: Occidental Petroleum has just announced impressive third-quarter results, revealing a 5% sequential increase in net production to 1,465 mboe/d. The company’s focus on efficiency is paying off as cash operating costs plummeted by 9% to $14.28 per boe, positioning it favorably despite higher debt levels compared to peers.

The financial report, released earlier today, shows a significant drop in capital expenditures, which fell 14% to $1.3 billion. Notably, Occidental has strategically utilized $1.3 billion of cash to pay down debt, while also allocating $400 million towards dividends. This balance between debt repayment and shareholder returns reflects a keen effort to enhance capital efficiency.

Why is this crucial? As E&P investors increasingly demand capital returns, Occidental’s improved efficiency is vital for maintaining investor confidence. Despite the company’s very high uncertainty rating, the latest figures suggest that OXY is becoming more adept at managing costs, especially in its core operations, including the low-cost reservoirs of the Delaware Basin.

In a broader context, the sale of OxyChem for $9.7 billion is expected to further strengthen Occidental’s balance sheet. However, analysts express concerns regarding the timing, noting that the sale occurs at a downturn in the chemicals cycle, potentially limiting returns.

The bottom line is clear: Morningstar has raised its fair value estimate for Occidental to $64 per share, up from $63, underscoring the company’s enhanced cost and capital efficiency. Currently, OXY trades at over a 30% discount to its underlying value, making it an attractive prospect for investors willing to navigate the inherent risks.

As of now, Occidental is witnessing improvements at the wellsite, having achieved a stunning 38% reduction in Midland well costs this year and an impressive 22% increase in oil extraction rates.

Looking ahead, all eyes will be on Occidental as they continue to implement strategies aimed at enhancing financial flexibility. Investors and analysts alike will be monitoring how these developments unfold, especially in light of the company’s efforts to balance debt reduction with shareholder value.

Stay tuned for more updates as the situation develops.