Occidental Petroleum stock price target raised to $65 by Mizuho on strong shale assets

Investing.com - Mizuho (NYSE:MFG) raised its price target on Occidental Petroleum (NYSE:OXY) to $65.00 from $58.00 on Monday, while maintaining a Neutral rating on the stock. The new target represents significant upside from the current trading price of $45.07, with InvestingPro analysis suggesting the stock is currently undervalued.

The investment firm expects Occidental to miss consensus EBITDA estimates by approximately 8% in the second quarter of 2025, with front-weighted capital spending significantly impacting free cash flow, which Mizuho projects will be 53% below street expectations. For context, Occidental’s current EBITDA stands at $13.68 billion, with InvestingPro data showing a robust financial health score of 2.51 (GOOD).

According to Mizuho’s analysis of Occidental’s recent 8-K filing, the company is experiencing a small impact to oil volumes in the Gulf of America, modest strength in oil and liquids pricing, and weak U.S. natural gas realizations.

The firm attributes its projected free cash flow miss primarily to heavy spending during the quarter, with approximately 55% of the 2025 budget allocated to the first half of the year, along with a high effective cash tax rate of 36-37%. Mizuho notes these headwinds are not expected to continue into the second half of 2025, based on previous management commentary.

Despite maintaining a Neutral rating due to Occidental’s debt level of approximately 1.7 times net debt to EBITDA compared to peers at less than 0.5 times, Mizuho awarded the company’s U.S. shale assets a top "A+" rating in its ARCHIE Shale Book Inventory Report Card, which contributed to the price target increase. Notably, InvestingPro data reveals the company has maintained dividend payments for 52 consecutive years, with a current yield of 2.07%. Get access to 6 more exclusive InvestingPro Tips and a comprehensive Pro Research Report covering OXY’s complete financial picture.

In other recent news, Occidental Petroleum has reported its first-quarter 2025 financial results, exceeding analyst expectations. The company achieved an adjusted earnings per share (EPS) of $0.87, surpassing the forecasted $0.69, and generated revenue of $6.84 billion, which was higher than the anticipated $6.71 billion. Additionally, Occidental produced $3 billion in operating cash flow and $1.2 billion in free cash flow during the quarter. In a strategic move, Occidental has entered into an agreement with ADNOC’s XRG to explore a joint venture for a Direct Air Capture facility in South Texas, aiming to capture 500,000 tonnes of carbon dioxide annually.

Furthermore, JPMorgan recently downgraded its price target for Occidental Petroleum from $52 to $47, maintaining a Neutral rating. This decision was influenced by Occidental’s efforts to reduce costs amidst challenging oil price conditions. The company has announced a 15% reduction in drilling cycle times in the Permian Basin, resulting in a 10% decrease in well costs year-over-year. Occidental plans to cut its full-year capital expenditure by $200 million, with significant savings expected in the Permian and Gulf of Mexico operations.

Occidental is also negotiating to extend its Block 53 contract in Oman by 15 years, potentially unlocking substantial resources at the Mukhaizna Field through enhanced recovery methods. The company is targeting a $1 billion cash flow boost in 2026, attributed to revised midstream contracts, reduced interest expenses, and the completion of strategic projects. These developments reflect Occidental’s ongoing efforts to optimize operations and strengthen its financial position.

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