Occidental Petroleum: Buy, Sell, or Hold?

Occidental Petroleum (NYSE: OXY) has been a fashionable vigor banal since Warren Buffett invested successful it respective years ago. Berkshire Hathaway holds implicit 265 cardinal shares successful the lipid and state institution and has maintained its concern contempt volatility successful the banal implicit the past fewer years.

The institution is paying down indebtedness and could beryllium good positioned arsenic request for vigor grows implicit the coming decade. If you're a shareholder oregon considering opening a presumption successful Occidental, here's what you should cognize to determine whether it's a buy, hold, oregon merchantability today.

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One of the biggest criticisms of Occidental was its monolithic indebtedness load pursuing its 2019 acquisition of Anadarko. At the time, the company's indebtedness load spiked to astir $48 billion. This came astir the aforesaid clip arsenic the COVID-19 lipid crash. However, successful the past 20 months, the institution has aggressively paid down $13.9 cardinal successful indebtedness and improved its fiscal footing.

The institution has beardown net show contempt the driblet successful lipid prices, acknowledgment to beardown results from its midstream and selling segments. During the year, it generated $4.3 cardinal successful escaped currency flow. Its midstream conception surpassed its yearly guidance for pre-tax income by much than $550 million, driven by beardown show successful the Permian Basin and higher-than-expected sulfur pricing astatine its Al Hosn state installation successful the UAE.

Longer term, request for state from information centers, concern operators, and different inferior providers could supply a beardown tailwind for the earthy state sector. Last year, Occidental sold an mean of 2,278 cardinal cubic feet per time (MMcf/d) of earthy state globally and holds 7,745 cardinal cubic feet (Bcf) of proven earthy state reserves.

As portion of its indebtedness simplification process, Occidental sold its chemic business, OxyChem, to Berkshire Hathaway for $9.7 billion. Selling OxyChem allows the institution to absorption connected U.S. onshore lipid and state accumulation and trim its indebtedness balance. However, it besides removes 1 of the much balanced facet of its concern that assistance insulate it against volatility successful vigor commodity prices. As a result, net could beryllium much volatile.

On apical of that, Occidental's superior operation could bounds its upside potential. Even though the institution has reduced its main debt, it inactive has astir $8.3 cardinal successful preferred banal outstanding held by Berkshire Hathaway. Occidental paid $679 cardinal successful preferred dividends past twelvemonth and is prohibited from paying communal dividends if the 8% preferred dividends are not paid successful full.