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On Friday, JPMorgan adjusted its price target on shares of Occidental Petroleum (NYSE:OXY), bringing it down from $52.00 to $47.00, while keeping a Neutral rating on the stock. Currently trading at $41.44, InvestingPro analysis suggests the stock is undervalued, with analysts’ targets ranging from $38 to $64. The company maintains strong fundamentals with a Fair Financial Health score and has maintained dividend payments for 52 consecutive years. The firm’s analysts cited Occidental’s first-quarter performance, highlighting management’s efforts to reduce costs amid tougher oil price conditions. The company reported a 15% reduction in drilling cycle times in the Permian Basin and improvements in frac efficiency, leading to a 10% drop in well costs year-over-year, surpassing their initial target of 5-7%. These efficiency gains have contributed to maintaining a healthy 64% gross profit margin and generating $4.1 billion in free cash flow over the last twelve months.
These efficiencies will result in Occidental decommissioning two Permian rigs in 2025 but also bringing 15 additional wells online. Overall, the company aims to cut its full-year capital expenditure by $200 million, split evenly between the Permian and Gulf of Mexico (GoA) operations. Additionally, Occidental is targeting a $150 million reduction in operational expenses in 2025, with a significant portion expected in the second half of the year.
Occidental’s strategy also includes renegotiating crude oil transport agreements, which is projected to enhance cash flow by $200 million in 2025 and $400 million in 2026. The firm anticipates a $1.0 billion cash flow boost in 2026, attributed to revised midstream contracts, the completion of the Battleground project in OxyChem, reduced interest expenses, and the completion of the STRATOS project.
Production-wise, Occidental expects a slight increase in oil and gas output, including higher Permian volumes and the resumption of GoA volumes after platform maintenance. This is expected to offset the impacts of a scheduled turnaround at Al Hosn and asset sales in the Rockies. In Oman, the company is in the final stages of negotiations to extend its Block 53 contract by 15 years, potentially unlocking significant resources at the Mukhaizna Field through enhanced recovery methods. While the exact financial benefits of this extension were not disclosed, it is anticipated to contribute positively to the company’s cash flow in 2025. For detailed analysis and additional insights, including 6 more exclusive ProTips and comprehensive valuation metrics, visit InvestingPro.
In other recent news, Occidental Petroleum Corporation reported a strong financial performance for the first quarter of 2025, surpassing analyst expectations. The company announced adjusted earnings per share of $0.87, exceeding the forecasted $0.69, while revenue reached $6.84 billion, surpassing projections of $6.71 billion. Occidental’s strategic advancements in the Permian Basin and Direct Air Capture technology were emphasized during the earnings call. Additionally, the company generated $3 billion in operating cash flow and $1.2 billion in free cash flow, reflecting robust operational efficiency. Occidental is also engaged in advanced negotiations with the Oman government to extend the Block 53 contract, which could unlock significant resources. The company remains focused on debt reduction, having retired $2.3 billion in debt year-to-date, and anticipates further improvements in free cash flow from non-oil and gas sources by 2026. Analyst feedback from firms such as Morgan Stanley (NYSE:MS) and JPMorgan highlighted Occidental’s efficiency gains and strategic focus on enhancing cash flow and operational resilience.
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