| Occidental (OXY) Jumps on Plans to Exit Williston Basin | |
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Occidental Petroleum Corporation OXY gained 5.14% yesterday to close at $73.81, thanks to its better-than-expected third-quarter performance and tactical move to exit the Williston Basin operation.
Occidental is also minimizing its activities and exposure in non-core operations in the Middle East and North Africa, which include Bahrain, Iraq, Libya and Yemen. As a result of these actions, the company took impairment charges in the third quarter for its positions in Iraq and Libya.
Reasons Behind the Move
This strategic move is based on Occidental’s primary goal of aligning its business to the current environment of low commodity prices. Rather, the company expects to concentrate on its Permian Basin assets and Al Hosn project. In the third quarter of 2015, the company’s total production rose 16% year over year to 689,000 barrel of oil equivalent (BOE).
The rise in production was primarily due to higher output from the Permian Basin and Al Hosn project, offsetting Williston’s lower average daily production, which was down by 4,000 BOE year over year to 17,000 BOE.
In addition, this decision to exit non-core assets and focus more on its core and more productive operations will result in improved operating cash flow, lower future capital commitments, lower general and administration costs and better overall financial returns for its remaining asset base.
Long-Term Plans
Occidental is selling its Williston Basin assets for $600 million and intends to utilize the proceeds for its Permian Basin and Al Hosn operations, which look more promising at the moment given the depressed oil and gas price environment. Stephen I. Chazen, CEO of Occidental, made it pretty clear. He said: “For us, this $600 million, we could run four rigs in the Permian basin for a year with this money or five, somewhere in that range and generate more production than we would get out of the Bakken with the $600 million. So pretty easy decision.”
Occidental Petroleum is trying to lower its capital expenditure going forward without sacrificing on production levels. The majority of its capital budget is directed toward Permian Basin assets, which hold more promise in these difficult times. With a lowered 2016 spend, the company did not believe there was any way to allocate the necessary capital needed to effectively service its Williston Basin assets.
Our Take
We believe this to be a smart move from Occidental when prices of oil and gas are hardly showing any sign of a stable recovery.
Occidental currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the Oil &Gas sector are Suncor Energy Inc. SU, McDermott International Inc. MDR and Magellan Midstream Partners LP MMP. All three stocks currently have a Zacks Rank #2 (Buy).
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Occidental Petroleum is a oil producing company based in United states of america. Occidental Petroleum is listed in United States of America. Its market capitalisation is US$ 51.8 billions as of today (€ 48.4 billions). Its stock quote reached its highest recent level on March 16, 2012 at US$ 99.99, and its lowest recent point on October 16, 2020 at US$ 10.00. Occidental Petroleum has 764 580 032 shares outstanding. |