Occidental Beats on Earnings, Misses Revs - Analyst Blog

Occidental Petroleum Corporation OXY reported first-quarter 2014 earnings of $1.75 per share, beating the Zacks Consensus Estimate of $1.70 by 2.9%. Quarterly earnings were 3.6% higher than the prior-year figure, primarily due to higher revenues and a decline in share counts.

Total Revenue

Occidental Petroleum's total revenue in the reported quarter was $6,088 million, lagging behind the Zacks Consensus Estimate of $6,178 million by 1.5%. However, the top line surged 3.7% from the year-ago figure, primarily on the back of higher sales from the company's Oil and Gas (up 5.3% year over year) and Chemical (up 3.8% year over year) segments. This was partially offset by lower revenues from Midstream, Marketing and Other (down 4% year over year) segment.

Production, Sales and Realized Price

In the quarter under review, Occidental Petroleum's average daily oil and gas production volumes were 745 thousand barrels of oil equivalents (MBoe). A 2.4% year-over-year decline was primarily due to lower overall domestic production as a result of a reduction in domestic gas drilling and lower production from the Middle East/North African operations.

The company's daily sales volumes were 735 MBoe, down 1.5% from 746 MBoe a year ago.

Realized price for worldwide crude oil edged up 0.9% to $99.00 per barrel from the prior-year figure of $98.07 per barrel. Domestic crude oil prices jumped 4.8% year over year to $95.94 per barrel. Middle East/North Africa crude oil prices decreased roughly 3% year over year.

Domestic gas prices increased 48.4% year over year to $4.57 per thousand cubic feet (Mcf).

Worldwide realized natural gas liquids NGL prices were $46.05 per barrel, up 14.4% from $40.27 per barrel a year ago.

Financial Update

Occidental Petroleum's cash from operations in the first three months of 2014 totaled $2.7 billion, flat with the year-ago comparable period.

Long-term debt (including current maturities) as of Mar 31, 2014 was $6.88 billion versus $6.94 billion as of Dec 31, 2013. The company's total debt-to-capitalization ratio is 14%, flat with the Dec 31, 2013 level.

In the first three months of 2014, the company's capital expenditure was $2.27 billion compared with $2.07 billion a year ago.

Peer Comparison

Hess Corp. HES reported adjusted first-quarter 2014 earnings of $1.38 per share, surpassing the Zacks Consensus Estimate of $1.01.

Our Take

Occidental Petroleum continues to follow several initiatives to improve its future performance. We appreciate the company's steady share repurchase activities. During first quarter 2014, Occidental Petroleum repurchased around 10.5 million shares. This initiative will enable the company to reduce its cost of equity, thereby improving future margins.

In addition, Occidental Petroleum's steady progress in growth projects along with simultaneous strategic asset divestment will enable the company to improve its future performance.

Occidental Petroleum currently has a Zacks Rank #3 (Hold). However, some better-ranked stocks in the same industry include Clayton Williams Energy, Inc. CWEI and Marathon Oil Corp. MRO. While Clayton Williams holds a Zacks Rank #1 (Strong Buy), Marathon Oil carries a Zacks Rank #2 (Buy).