Why Is Occidental Petroleum (OXY) Up 9.1% Since Its Last Earnings Report?

It has been about a month since the last earnings report for Occidental Petroleum Corporation OXY. Shares have added about 9.1% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is OXY due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Occidental Q1 Earnings Beat Estimates, Guidance Up

Occidental Petroleum Corporation reported first-quarter 2018 earnings of 92 cents per share, beating the Zacks Consensus Estimate of 71 cents by 29.6%. In the year-ago quarter, the company had reported earnings of 15 cents per share.

GAAP earnings were 92 cents per share compared with 15 cents reported in first-quarter 2017.

Total Revenues

Occidental Petroleum's total revenues came in at $3,825 million, beating the Zacks Consensus Estimate of $3,696 million by 3.5%. The top line increased 28.5% year over year from $2,978 million reported a year ago.

The year-over-year improvement in total revenues in the first quarter was owing to the strong performance from its three business segments.

Production & Sales

Occidental Petroleum’s average daily net oil, liquids and gas production volume increased to 609,000 barrels of oil equivalent per day (boe/d), up from 584,000 boe/d reported in the year-ago quarter. This improvement in the production volume was due to increased drilling activity and well productivity in the Permian Resources region.

Occidental Petroleum’s production was better than its first-quarter guidance in the range of 592,000-603,000 boe/d.

In the reported quarter, total sales volume was 610,000 boe/d compared with 583,000 boe/d recorded in the year-ago quarter.

Realized Prices

Realized prices for crude oil in the first quarter increased 24.5% year over year to $61.04 per barrel worldwide.

Worldwide realized NGL prices increased 17.4% to $25.35 per barrel.

However, domestic natural gas prices were down 23.1% to $2.06 per thousand cubic feet.

Highlights of the Release

Pre-tax income from its Chemical Segment in the first quarter was $298 million, up 75.3% year over year. The improvement was due to higher realized prices across most product lines and the start-up of the Geismar, LA plant expansion in December 2017 to produce 4CPe, a new raw material used in making next-generation refrigerant.

Midstream and Marketing segment’s pretax income was $179 million against a loss of $47 million in the year-ago quarter. The improvement was due to lower operating expenses and improved operational efficiency at the Seminole San Andres CO2 plant, acquired in 2017.

Financial Position

As of Mar 31, 2018, Occidental Petroleum had cash and cash equivalents of $1,606 million compared with $1,672 million as of Dec 31, 2017.

As of Mar 31, 2018, the company had long-term debt (net of current portion) of $10,309 million compared with $9,328 million as of Dec 31, 2017.

In the first quarter of 2018, cash from operations was $1,009 million, up 99.8% from $505 million in the prior-year period.

In first-quarter 2018, Occidental Petroleum’s total capital expenditure was $1,032 million higher compared with $752 million invested in the year-ago quarter.

Guidance

Occidental Petroleum expects second-quarter production to be in the range of 628,000-648,000 boe/d and Permian Resources production within 188,000-198,000 boe/d.

The company expects 2018 production between 645,000 and 665,000 boe/d, up from the prior expected range of 640,000-665,000 boe/d.
 
Occidental expects 2018 Permian Resources production in the range of 198,000-210,000 boe/d, up from the prior guidance of 195,000-209,000 boe/d.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. There have been five revisions higher for the current quarter. Last month, the consensus estimate has shifted by 35.9% due to these changes.

Occidental Petroleum Corporation Price and Consensus

 

Occidental Petroleum Corporation Price and Consensus | Occidental Petroleum Corporation Quote

VGM Scores

At this time, OXY has a great Growth Score of A, a grade with the same score on the momentum front. However, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Zacks' style scores indicate that the company's stock is suitable for growth and momentum investors.

Outlook

Estimates have been trending upward for the stock and the magnitude of these revisions looks promising. It comes with little surprise OXY has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.

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