Occidental Petroleum (OXY)
is in a good spot in the energy sector, with its heavy concentration on liquids at a time when natural gas prices are hitting historic lows. OXY management also recently increased the dividend payout, which it has been raising consistently since 2004. The yield is now around 2.72 percent, while the stock’s price-to-earnings ratio sits at 9.52 at recent prices.
Occidental Petroleum is an oil and gas exploration and production company with three main segments. The oil and gas segment explores for, develops and produces oil and condensate, natural gas liquids (NGLs) and natural gas. The chemical segment (OxyChem) mainly manufactures and markets basic chemicals and vinyls.
The midstream, marketing and other segment (midstream and marketing) gathers, treats, processes, transports, stores, purchases and markets oil, condensate, NGLs, natural gas, carbon dioxide (CO2) and power. It also trades around its assets, including pipelines and storage capacity, and trades oil, NGLs, gas and other commodities.
Occidental’s domestic oil and gas operations are located mainly in California, Colorado, Kansas, Montana, New Mexico, North Dakota, Oklahoma, Texas, Utah and West Virginia. International operations are located in Bahrain, Bolivia, Colombia, Iraq, Libya, Oman, Qatar, the United Arab Emirates (UAE) and Yemen.
Occidental sold its Argentine operations in February 2011 and has classified them as discontinued operations on a retrospective application basis.
OxyChem owns and operates manufacturing plants at 22 domestic sites in Alabama, Georgia, Illinois, Kansas, Louisiana, Michigan, New Jersey, New York, Ohio, Pennsylvania and Texas and at two international sites in Canada and Chile and has interests in a Brazilian joint venture.
In 2011, OxyChem announced plans to build a 182,500-ton-per-year membrane chlor-alkali plant in Tennessee, which it expects to begin operating in 2013.
Occidental employed approximately 11,300 people at Dec. 31, 2011, 8,000 of whom were located in the United States. Occidental employed approximately 7,200 people in the oil and gas and midstream and marketing segments and 3,000 people in the chemical segment. An additional 1,100 people were employed in administrative and headquarters functions.
“We closed the quarter with an all-time record total company production and the sixth consecutive record domestic oil and gas production,” Steve Chazen, OXY's president and CEO, said in a recent conference call with analysts.
“As the largest liquids producer in lower 48, we increased our liquids production by 6,000 barrels a day from the fourth quarter, and by 35,000 barrels a day for the first quarter 2011. We increased our dividend rate by 17 percent to $2.16 per share.”
Occidental Petroleum has a market cap of $64.47 billion in a sector, oil, gas and consumable fuels, where the average company size is $44.19 billion. Its trailing 12-month P/E ratio is 9.52 and its five-year projected price-to-earnings-growth (PEG) ratio is 1.12, compared to 1.23 for the sector.
Its projected earnings per share growth for the coming year is 9.50 percent, compared to a sector average of 16.70 percent.
Analysts are broadly positive on OXY, with buy or outperform calls from UBS, Deutsche Bank, Citigroup Investment Research, Standard & Poor’s Equity Research, Credit Suisse, and Goldman Sachs.
“We believe Occidental will continue to benefit from favorable oil prices given its oil-heavy production and strong reserve base,” said the analysts at Zacks Investment research in mid-June.
“We also appreciate the company's consistent policy of quarterly dividend payouts that increase shareholder value. We believe these positive factors are adequately reflected in its valuation.”
Occidental Petroleum next reports on July 25.
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