Analyst Says Occidental’s Q4 Oil Guidance Is Weak, Debt Progress Is a Highlight

November 10 - ** The U.S. shale oil producer Occidental Petroleum OXY.N reported third-quarter profits that exceeded Wall Street expectations, as rising oil prices partially offset the impact of declining production.

** According to data compiled by London Stock Exchange Group (LSEG), the Houston-based shale oil producer (link) posted adjusted earnings per share of $1.91 in the three months ended September 30, compared to the market expectation of $1.46.

** For this quarter, the company expects daily production to be between 1.43 million and 1.47 million barrels of oil equivalent per day (boepd), with average daily production in the Permian Basin projected to range between 820,000 and 840,000 boepd.

** In the three months ended September 30, the company’s average realized price rose by 32.6% to $85.91 per barrel.

The outlook for crude oil in the fourth quarter is weak, with debt reduction becoming the focus

** Jefferies (“Hold” rating maintained, target price: $60) noted that fourth-quarter crude oil production is projected at about 703,000 barrels per day (bopd), below Wall Street’s estimate of 727,000 bopd, mainly due to Gulf of Mexico production declines—the region was impacted by third-party natural gas pipeline bottlenecks and hurricanes, and production sharing contract mechanisms also weighed on oil output.

** The report also noted that OXY has achieved its $10 billion principal debt target and has set a new target of $6 billion; it is expected that once the company reaches a net cash status, share buybacks will resume.

** Truist Securities (“Hold”, target price: $64) stated that OXY’s implied fourth-quarter crude oil production is about 3% below market consensus expectations.

** The brokerage said that deleveraging could accelerate improvements in the company’s $4 billion sustainable cash flow, and provide additional interest cost savings, as the original plan was based on the $10 billion principal debt target.

** Raymond James (“Outperform”) said that the fourth-quarter production guidance is about 2% lower than its estimate and 1% below market expectations, reflecting shutdowns in the Gulf of Mexico, the impact of international production sharing contracts, and temporary timing effects on Permian Basin oil production.

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