OXY Occidental Petroleum
Solid Permian barrels, but mid-cycle economics don't support $56 without higher oil prices.
The story
Occidental is a Permian-heavy oil and gas producer carrying Anadarko-era debt. It sold OxyChem to Berkshire to pay down that debt, and it is betting on carbon capture (Stratos, direct air capture) for long-term optionality. The moat is scale, low-cost Delaware and Midland acreage and CO2-EOR know-how. The business is mature and cyclical: revenue follows oil prices, and production growth is modest because reinvestment largely offsets decline.
Growth stays low because Permian output grows slightly while prices hover around mid-cycle, and the OxyChem exit trims the revenue base. The 28% margin sits between the 19% trough and 41% peak reported margins and near the 29% TTM figure, reflecting mid-cycle E&P economics, not 2022 prices. Sales-to-capital of 0.8 applies to incremental growth capital rather than the depressed 0.44 book ratio, which is skewed by the Anadarko acquisition. Beta sits slightly above the 1.1 industry anchor because leverage is still high (about $19B net debt).
Value drivers
| Revenue growth (Y1) | 2.0% |
| Terminal growth | 1.0% |
| Forecast horizon | 6y |
| Target operating margin | 28.0% |
| Years to target margin | 3 |
| Sales-to-capital | 0.80 |
| Beta | 1.15 |
| Failure probability | 3.0% |
| Cost of capital (WACC) | 8.7% |
| Terminal WACC | 8.2% |
Valuation bridge
| PV of explicit FCFF | 17.50B |
| PV of terminal value | 33.18B |
| Equity value | 21.72B |
| ÷ shares → per share | $21.73 |
News
neutral -0.10 · 8 articles
- Occidental Now Trades Below Wall Street’s Raised Targets. Here’s Where the Stock Could Go
- Occidental Petroleum (OXY) Stock Declines While Market Improves: Some Information for Investors
- Can ExxonMobil Turn Carbon Capture Into a Major Growth Market?
- Chevron vs. Occidental Petroleum: Which Oil Stock Is a Better Buy in 2026?
- 3 Market-Beating Stocks Worth Your Attention
- 2 Stocks to Buy if You Think $100 Oil Will Last
- Using A Limit Order To Buy Occidental Petroleum At A Discount
- XOM Keeps Climbing. Should You Climb On?
Projected free cash flow to the firm
| Yr | Revenue | Growth | Margin | NOPAT | Reinvest | FCFF | PV |
|---|---|---|---|---|---|---|---|
| 1 | 22.10B | 2.0% | 28.8% | 4.23B | 541.77M | 3.69B | 3.39B |
| 2 | 22.50B | 1.8% | 28.4% | 4.25B | 497.35M | 3.75B | 3.18B |
| 3 | 22.86B | 1.6% | 28.0% | 4.26B | 450.05M | 3.81B | 2.97B |
| 4 | 23.18B | 1.4% | 28.0% | 4.32B | 400.09M | 3.92B | 2.81B |
| 5 | 23.46B | 1.2% | 28.0% | 4.37B | 347.74M | 4.02B | 2.65B |
| 6 | 23.70B | 1.0% | 28.0% | 4.42B | 293.26M | 4.12B | 2.50B |
Key risks
- Oil price slump below $60 WTI compresses margins and slows deleveraging
- Faster Permian well-productivity decline raises sustaining capex
- Carbon capture/DAC spending fails to earn its cost of capital
Catalysts
- Debt reduction from OxyChem proceeds leading to buybacks and a rerating
- Supply disruptions or OPEC+ discipline lifting realized prices