Mizuho Upgrades Occidental Petroleum, Says Worst Is In The Rear View Mirror

Occidental Petroleum Corporation OXY was the worst performing exploration & production (E&P) stock in 2019. The worst seems to be over and there is rising visibility into the company achieving sustainable dividend growth in 2022 and beyond, according to Mizuho Securities.

The Analyst

Mizuho’s Paul Sankey upgraded Occidental Petroleum from Neutral to Buy, while raising the price target from $44 to $58.

The Thesis

Occidental Petroleum’s stock came under significant pressure last year following the acquisition of Anadarko Petroleum Corporation APC and associated financial burden, Sankey said in the upgrade note.

The company seems poised to resume generating a sustainable breakeven of $40 per barrel in 2021 and could begin growing its dividend by 5%-6% annually in 2022, the analyst mentioned.

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Sankey noted that data collated supports Occidental Petroleum’s claim of Permian being among the highest-rate oil wells in the Delaware Basin. He further wrote, “We expect APC wells to continue to improve as OXY transitions the acreage to full field development, and we believe the capital synergy targets (largely Permian-based) are more than achievable.”

While Street expectations for production growth is flat for 2021, the company has projected 5% growth, which appears “achievable,” Sankey said.

Price Action

Shares of Occidental Petroleum were down 1.37% at $44.65 on Wednesday.