Analyst revamps Occidental Petroleum stock price target after oil rally

Here's what could happen next to Occidental Petroleum shares.

Apr 6, 2024 - 06:30

0 29

Analyst revamps Occidental Petroleum stock price target after oil rally

J. Paul Getty had a simple formula for success: rise early, work hard, strike oil.

The famed industrialist was speaking in another era, of course, but his words are intriguing in light of the recent spike in crude oil prices.

Oil prices rose on April 5 and were on course for a second weekly gain, Reuters reported, driven by tensions in the Middle East, concerns about tightening supply, and expectations about demand growth as economies improve.

Brent crude is trading at about $91 a barrel, and U.S. West Texas Intermediate crude, closely tied to U.S. gasoline prices, finished the week at nearly $87.

On Thursday both benchmark crude oil prices settled at their highest level since October.

Brent and WTI are set to notch a more than 4% gain this week after Iran, the third-largest OPEC producer, vowed revenge against Israel for an attack that killed high-ranking Iranian military personnel.

In addition to the Middle East turmoil, ongoing Ukrainian drone attacks on refineries in Russia may have disrupted more than 15% of Russian capacity, a NATO official said.

Analysts take another look at Occidental's stock price target
Occidental Petroleum

Warren Buffett's investments in oil

Bank of America said in a recent report that geopolitical tensions had curbed oil supplies and boosted demand during the past few months.

B of A said that Freight volumes crossing through the Panama Canal and the Suez Canal have collapsed.

Global trade also faces longer travel routes as ships are diverted via the Cape of Good Hope and the Straits of Magellan.

Warren Buffett, a billionaire, has significant investments in two oil companies.

The Oracle of Omaha's Berkshire Hathaway (BRK.A) (BRK.B) owns 126.1 million shares of Chevron (CVX) valued at $1.5 billion.

The multinational investment firm also owns 27.8% of Occidental Petroleum (OXY) , according to Berkshire Hathaway's February shareholders letter, and has warrants that can "materially increase our ownership at a fixed price.

"We particularly like its vast oil and gas holdings in the United States, as well as its leadership in carbon-capture initiatives, though the economic feasibility of this technique has yet to be proven," Buffett said, "Both of these activities are very much in our country’s interest."

In November, Occidental and BlackRock, the world's biggest money manager, said they'd invest $550 million in the oil company's direct air capture plant, Stratos, in West Texas. The plant is expected to be operating by the middle of next year.

Direct air capture extracts carbon dioxide directly from the atmosphere, unlike carbon capture, which is generally carried out at the point of emissions, such as a steel plant.

The International Energy Agency said that 27 DAC plants have been commissioned worldwide to date, and plans for at least 130 DAC facilities are at various stages of development.

Buffett gives high Praise to Oxy CEO

Buffett said he had no interest in buying or managing Occidental Petroleum and had high praise for President and CEO Vicki Hollub, the first woman to head a major American oil company.

"Under Vicki Hollub’s leadership, Occidental is doing the right things for both its country and its owners," Buffett said. "No one knows what oil prices will do over the next month, year, or decade."

More Warren Buffett:

"But Vicki does know how to separate oil from rock, and that’s an uncommon talent, valuable to her shareholders and to her country," he added.

Occidental is scheduled to report first-quarter results next month.

In February, Occidental reported fourth-quarter earnings of 74 cents a share, beating the FactSet consensus estimate of 67 cents.

Revenue totaled $7.2 billion, ahead of FactSet’s call for $6.9 billion. A year earlier, Occidental earned $1.61 per share on $8.2 billion in revenue.

Analysts at Truist like what they see at Occidental.

The investment firm raised its price target on its stock to $84 from $77, affirming a buy rating.

In a research note, the firm said it remains overweight in the energy sector, given a solid 2024 commodity setup, lower pricing for potential oilfield equipment and services, largely continued routine operations for most companies in the group, and material continued shareholder returns.

Original Post