Oil and gas company Occidental Petroleum Corporation (OXY – Get Rating) in Houston, Tex., conducts exploration and production activities in the United States. The energy company’s strong operational performance in its last reported quarter helped generate its highest…
level of free cash flow for the second consecutive quarter in a decade. So far this year, the stock has surged 94.3% in price as the demand for petroleum products rebounded.
Furthermore, oil prices hit a three-year peak on October 4 after OPEC+ confirmed it would stick to its policy of increasing output gradually. OXY’s continued improvement in average global production should position it to capitalize on the growing demand.
However, an unexpected increase in U.S. crude inventories has caused oil prices to decline recently. And even though investors’ increasing risk-tolerance in the energy space bodes well for the stock, concerns related to the volatility in crude oil prices and Hurricane Ida-induced oil production losses could lead to OXY suffering a price pullback in the near term.
Here’s what could influence OXY’s performance in the coming months:
Volatility in Energy Industry
The price of Brent crude oil fell 0.2%, to $80.92 per barrel, on October 7, extending its losses from the previous session and pulling back from multi-year highs as the United States considers selling oil from its strategic reserves and Russia announced that it could stabilize the natural gas market to help cool off the surge in prices. Moreover, the surprising increase in U.S. crude inventories could weigh on prices.
An OPEC+ source recently said that the oil market is still “fragile” and there is “no guarantee” of stability in crude prices. In addition, fears surrounding the fourth wave of COVID-19, which could threaten the global demand and pace of economic recovery, might further trigger volatility in the energy sector. This could add to investors’ concerns surrounding OXY.
Mixed Growth Estimates
Analysts expect OXY’s revenues to increase 87.9% in the next quarter (ending December 2021) and 51.2% in the current year. But it is estimated to decline 1% in its fiscal year 2022. The company’s EPS is expected to rise 176.9% year-over-year to $0.6 next quarter and 134.8% from its year-ago value to $1.36 in 2021. However, OXY’s EPS is expected to decline at a 5.2% rate per annum over the next five years.
Robust Financials
OXY’s non-GAAP operating cash flow before working capital rose 361.7% year-over-year to $2.71 billion in the second quarter, ended June 30, 2021. The company’s net sales for the quarter totaled $6.01 billion, up 101.9% from the year-ago value. Furthermore…
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