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Occidental Petroleum’s OXY share price has dropped 19.8% in the past month compared with its industry’s decline of 12.7%. In the same period, the Zacks Oil & Energy sector has declined 11.9%.
OXY’s exposure to fluctuating commodity prices remains a concern. As of Dec. 31, 2024, there were no active commodity hedges in place, so if the commodity prices drop substantially, it can adversely impact Occidental’s performance.
Price Performance (One Month)
Image Source: Zacks Investment Research
Other operators in the same space, such as ConocoPhillips COP and Hess Corporation (HES), have lost 13% and 15%, respectively, in the past month. Crude oil prices have dropped recently due to concerns over global trade, which has impacted the share price of the majority of oil and gas operators.
Should you consider adding OXY stock to your portfolio only based on the softness in share prices? Let’s delve deeper and find out factors that can help investors decide whether it is a good entry point to add OXY stock to their portfolio.
Strong Performance of Domestic and International Assets
Occidental's persistent focus on Permian resources has been beneficial for the company. Its core development area in the Permian region has been recording solid results.
The company expects total production in 2025 in the range of 1,385-1445 thousand barrels of oil equivalent per day (Mboe/d), out of which Permian region production is expected in the range of 754-786 Mboe/d.
International production volume in 2025 is expected in the range of 226-236 Mboe/d. The company is utilizing advanced seismic waves to discover new oil and gas reservoirs. Seismic surveys are crucial in oil and gas exploration because they allow company officials to identify promising areas for drilling with greater accuracy than traditional methods.
Free Cash Flow and Debt Reduction
Occidental’s top priority is to strengthen its balance sheet and lower capital servicing expenses. In 2024, the company achieved its near-term debt reduction target of $4.5 billion seven months ahead of schedule. It intends to use its free cash flow and proceeds from non-core asset divestiture to redeem its outstanding debts and strengthen its balance sheet.
Occidental’s management aims to reduce more outstanding debt through the first half of 2027 through its free cash flow and proceeds from non-core asset sales. The consistent decline in outstanding debts will reduce the company’s interest expenses, improve its margins and strengthen its balance sheet.
OXY’s Systematic Capital Expenditure
Occidental, being a low-cost operator with high-quality assets in different locations across the globe, has a competitive advantage over its peers. The systematic capital investment has allowed the company to strengthen its infrastructure. In 2024, it invested more than $7 billion to strengthen and expand its existing operations and aims to invest in the range of $7.4-$7.6 billion in 2025.
Among the other operators in this space, Hess is expected to invest $4.5 billion in 2025, while ConocoPhillips is expected to invest $12.5 in the same period to further strengthen its operation.