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UPDATE: Citigroup Upgrades Occidental Petroleum

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Shares of Occidental Petroleum (NYSE: OXY) on Friday jumped one percent after Citigroup upgraded the stock.

Faisel Khan, CFA, led the research and upgraded to Buy from Neutral on restructuring Pro Forma Analysis. The firm also increased its price target from $111.0 to $103.0 per share.

“We estimate OXY (post spin) could support dividend growth of 10% per annum through 2020.”

The firm cited "returns trending higher" as a reason why it made the upgrade. It believes that upstream returns on capital will rise from 10 percent (last year) to 19 percent by the end of 2020. These gains would be supported by the spin-off of California Resource Corp, upstream asset sales worth 1.4 billion, the start-up of the Al Hosn project in the UAE, and a ‘focused' effort on drilling in the Permian.

"The company is a high investment grade company (A) and we feel that the stabilization of the oil price warrants a lower than High Risk rating."

The firm also cited some risk factors, such as the risk of a shark pullback in oil prices damaging OXY's earnings outlook and OXY operating in areas of geopolitical risk such as Iraq and Libya.

Posted-In: Citigroup Faisel KhanEarnings News Guidance


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