Source: Streetwise Reports 05/12/2018
Pavel Molchanov, an analyst with Raymond James, reviewed this energy firm’s favorable first quarter production numbers and cash position.
In a May 9 research note, analyst Pavel Molchanov with Raymond James reported that Occidental Petroleum Corp. (OXY:NYSE) Q1/18 production exceeded the top end of guidance and is “on track for above-trend organic growth in 2018.” Raymond James raised its target price to $85 from $80 per share on the company, whose stock is currently trading at around $78.20 per share.
Occidental’s adjusted Q1/18 earnings per share came in at $0.92, much higher than Raymond James’ estimate of $0.67 and consensus of $0.70.
The energy company’s Q1/18 production was 609 million barrels of oil equivalent per day (609 MMboe/day). This exceeded guidance for the quarter of 592–603 MMboe/day. Resources in Q1/18 were 177 MMBoe/day, up 11% quarter over quarter (QOQ). Permian Liquids grew 5% QOQ.
The company has increased full year 2018 guidance to 645–665 MMBoe/day from 640–665, “equating to growth of 9% at the midpoint, above the long-term target of 5–8%,” Molchanov noted. Raymond James’ estimate is midrange, at 649 MMBoe/day.
The bottom line is Occidental “has plenty of cash to return to shareholders,” indicated Molchanov. Pretax income from OxyChem alone in Q1/18 was $298 million, and that was 37% higher than the amount in Q1/17.
For the energy firm, Raymond James projects free cash flow in 2018 of $3.8 billion, twice that of 2017, and even more in 2019. This $3.8 billion compares to $2.4 billion Occidental paid out in dividends last year. “The company clearly has the ability to reinstate share buyback, last seen on a meaningful scale in H1/15, and we are delighted to see management finally pulling the trigger,” wrote Molchanov. In doing so, Occidental would join other oil/gas explorers and producers, including Anadarko, Devon and Hess, and would be “notably, ahead of either Exxon or Chevron in this regard.”
Overall, Occidental has a “longstanding track record of capital discipline, a natural hedge in OxyChem and one of the highest liquids weightings among large caps,” Molchanov described. “The stock’s total return attributes, the yield plus the about-to-resume share buyback are also enticing.”
Raymond James’ rating on Occidental Petroleum is Outperform.
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Disclosures from Raymond James, Occidental Petroleum Corp., May 9, 2018
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RAYMOND JAMES RELATIONSHIP DISCLOSURES
Raymond James & Associates makes a market in shares of OXY.
( Companies Mentioned: OXY:NYSE,
From:: The Energy Report