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Is Occidental Petroleum Stock a Buy Now?
OXYOXY(OXY) The Motley Fool·2025-03-27 08:43

Core Viewpoint - Occidental Petroleum has experienced a decline in stock price due to falling oil prices, but it has several catalysts unrelated to oil that could enhance shareholder value in the future [1]. Group 1: Debt Management - Occidental Petroleum completed a 12billionacquisitionofCrownRock,whichisexpectedtoincreasefreecashflowby12 billion acquisition of CrownRock, which is expected to increase free cash flow by 1 billion in the first year based on WTI averaging 70perbarrel[2].−Thecompanyassumed70 per barrel [2]. - The company assumed 1.2 billion of CrownRock's existing debt and issued 9.1billionofnewdebtfortheacquisition,raisingconcernsabouttheimpactofoilpricevolatilityonitsfinancials[3].−Occidentalhasrapidlyrepaiddebt,achievingitstargetofreducingdebtbyatleast9.1 billion of new debt for the acquisition, raising concerns about the impact of oil price volatility on its financials [3]. - Occidental has rapidly repaid debt, achieving its target of reducing debt by at least 4.5 billion within 12 months of the acquisition seven months ahead of schedule [4]. - The company aims to continue reducing debt by retaining free cash flow and selling noncore assets, which will lower interest expenses and enhance future cash flow [5]. Group 2: Expansion of Non-Oil Businesses - Occidental is investing significantly in its oil and gas operations, with 5.3billionspentoncapitalprojectslastyearandplanstoinvestanadditional5.3 billion spent on capital projects last year and plans to invest an additional 5.8 billion to 6billionthisyear[6].−Thecompanyisalsofocusingonexpandingitschemicalsbusiness,OxyChem,withover6 billion this year [6]. - The company is also focusing on expanding its chemicals business, OxyChem, with over 1.5 billion allocated for various projects, including the modernization of the Battleground plant, expected to generate 325millioninannualizedEBITDAby2026[7].−Occidentalisdevelopingcarboncaptureandstorage(CCS)projects,includingtheSTRATOSdirectaircaptureprojectinTexas,whichaimstocapture250,000tonsofCO2annually,withoperationsexpectedtostartin2025[8].−ThecompanyseesCCSasapotential325 million in annualized EBITDA by 2026 [7]. - Occidental is developing carbon capture and storage (CCS) projects, including the STRATOS direct air capture project in Texas, which aims to capture 250,000 tons of CO2 annually, with operations expected to start in 2025 [8]. - The company sees CCS as a potential 3 trillion to $5 trillion global industry, believing it could generate earnings and cash flow comparable to its current oil and gas production [9]. Group 3: Long-Term Value Catalysts - While oil prices will influence Occidental's stock price in the short term, the company has several long-term value catalysts unrelated to oil prices, including debt repayment, expansion of OxyChem, and development of a lower-carbon energy business [11].