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Following the acquisition of Anadarko Petroleum Corporation (NYSE:APC) in August last year, shares of Occidental Petroleum Corporation (NYSE:OXY) have declined 32%, underperforming peers.
Occidental Petroleum now has a peer-leading dividend yield of 7%, which is sufficiently covered by its strong and growing free cash flows, according to Morgan Stanley.
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The Analyst
Morgan Stanley’s Devin McDermott upgraded Occidental Petroleum from Equal-Weight to Overweight, while raising the price target from $51 to $59.
The Thesis
The mega-merger with Anadarko Petroleum drove Occidental Petroleum’s share price to a 15-year low in December, McDermott said in the upgrade note.
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Looking ahead, Occidental Petroleum seems poised to become “one of the more differentiated rate of change stories among large cap E&Ps (Exploration & Production) and global majors,” the analyst wrote.
He added that the company would achieve this by successfully executing operational improvements, realizing merger synergies of more than $2 billion and achieving total asset sales of over $15 billion for debt reduction.
“We see a clear path for the stock to re-rate higher through debt reduction, synergy realization & operational improvements,” McDermott said. He further mentioned that the company could maintain a best-in-class dividend yield, with “room for long-term growth under most scenarios.”
Price Action
Shares of Occidental Petroleum had risen 1.22% to $46.46 at time of publication.
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Crypto Whales Are Loading Up — Are You?
New research shows the biggest crypto buyers are back. And this time? They could hold for the possibility that Bitcoin will surpass $100,000 in 2024. You don’t want to miss the next massive crypto bull run like we saw in 2020 and 2021. To know exactly what’s going on and what to buy… Get Access To Benzinga’s Best Crypto Research and Investments For Only $1.