Updated Aug 6 at 1:53pm ET.
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Oil prices climbed after Iranian state media shared a draft plan to place new conditions on ships moving through the Strait of Hormuz. This narrow waterway is a vital choke point for global energy supplies, and any threat to traffic there usually pushes crude prices higher.
For Occidental, higher oil prices are a direct boost to the cash it brings in from its drilling operations. The company is currently using that extra cash to pay down the debt it took on for recent acquisitions, so a sustained rise in oil prices helps it reach its financial goals faster.
Source: CNBC
Barclays raised its target for the stock from $72 to $75. This adjustment comes a day after the company reported profits that were much higher than analysts expected, driven by efficient drilling and higher oil prices. The new target suggests the firm sees about 33 percent more value in the stock than where it currently trades.
Source: Barclays
Occidental earned $2.40 per share, well above the $1.83 analysts expected. This performance was driven by production levels that topped the company's own forecasts and higher realized prices for the oil it sells. The business generated $3 billion in cash after paying for its operations and equipment, its best showing in nearly four years.
The company is using this windfall to clean up its balance sheet, paying down $1.9 billion in debt during the quarter. It is now closing in on its goal of reaching $10 billion in total debt. Reaching that milestone is a key part of the plan to return more cash to shareholders through higher dividends and stock buybacks, which the company signaled by raising its dividend another 8 percent this year.
See the full quarter, and how our tracked metrics did
Source: 8-K filing
Brad Pollack took over as Senior Vice President and General Counsel on August 1. He succeeds Sylvia Kerrigan, who will stay on as a strategic adviser through next year to help with the handoff. This is a routine internal move and does not change the company's strategy or operations.
Source: GlobeNewsWire
Occidental reported that the average price it received for its oil rose more than 38 percent in the second quarter compared to the first three months of the year. This jump was largely due to higher global benchmark prices caused by conflict in the Middle East.
Because the company's costs to pump oil stay relatively steady, these price spikes flow almost directly into higher profits. This extra cash is what allowed the company to pay down nearly $2 billion in debt this quarter, moving it closer to its long-term financial targets.
Source: Reuters
Analysts recently raised their price targets for Occidental following the company's strong second-quarter earnings report. Most analysts are positive, with 26 of 52 rating the stock a buy and the average target price suggesting 16% upside.
The company has beaten profit expectations for eight straight quarters. Management consistently under-promises on what their wells can produce and then delivers more than they said they would.
| Expectation | |
|---|---|
| EPS | $1.18 |
| Revenue | $6.25B |
Reuters · Aug 5
GlobeNewsWire · Press release · Aug 5
GlobeNewsWire · Press release · Jul 31
Seeking Alpha · Opinion · Jul 12
Reuters · Jul 10
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