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Occidental Earnings: CrownRock Transaction Should Still Close, but Not Until the Third Quarter

Reducing our fair value estimate of Oxy stock.

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Occidental Petroleum logo on building.
Securities In This Article
Occidental Petroleum Corp
(OXY)

Key Morningstar Metrics for Occidental Petroleum

What We Thought of Occidental Petroleum’s Earnings

Following our review of Occidental Petroleum’s OXY first-quarter results, we’ve reduced our fair value estimate by 7% to $53 per share. This reflects lower West Texas Intermediate oil strip prices, down to the high 70s from the mid-80s.

We originally expected the CrownRock acquisition to close by the end of the first quarter, as management said it hoped to during its December 2023 special call. However, it now appears the transaction will close sometime in the third quarter of 2024 as both Oxy and CrownRock work with the US Federal Trade Commission. Production results came in quite lower than we expected, which hurt our valuation because the transaction hasn’t closed yet. However, we point out that Oxy’s 2024 production guidance excludes the impacts from the CrownRock acquisition, and we still model a 100% probability that the deal will close.

During the first quarter, Oxy delivered a total hydrocarbon production of 1,172 thousand barrels of oil equivalent per day. Total production fell just slightly below the midpoint of guidance, with various puts and takes. The Rockies exhibited better-than-expected growth thanks to strong well performance in the DJ Basin and better production uptime, among other factors. However, better production there was more than offset by the outage of a third-party pipeline in the Gulf of Mexico. That said, Oxy’s midstream and chemical businesses outperformed the company’s guidance.

We expect the accelerated ramp-up of a 20-well pad to support continued production improvements in the Rockies. More importantly, production improvements won’t come at the expense of costs. In fact, well design improvements should continue to drive down costs, as seen in both the Rockies and the Permian.

Occidental Petroleum Stock vs. Morningstar Fair Value Estimate

Source: Morningstar Direct.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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About the Authors

Joshua Aguilar

Sector Director
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Joshua Aguilar is the director of resources equity research for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc.

Aguilar joined Morningstar in 2016 as an associate on the financials team, and he was promoted to analyst on the industrials team in 2018 and to senior analyst in 2022. He has served as associates coordinator since 2021 and led Morningstar's diversity efforts as DEI co-chair since 2020. Aguilar has been a mentor to several associates on their paths to becoming analysts. He also has hosted a Morningstar earnings town hall, participated in analyzing Morningstar stock, and been a strong contributor through both client interactions and his General Electric stock call. Aguilar co-authored an Outstanding Research Achievement-winning piece with colleague Kris Inton on CEO compensation in 2021. He also has taught Morningstar's model to new hires for many years as part of the valuation committee.

Before joining Morningstar, Aguilar was a practicing business transactional attorney in Florida. He graduated magna cum laude with a bachelor's degree in political science and criminology from the University of Florida. He also has a Master of Business Administration from Rollins College and a Juris Doctor from Wake Forest University.

Samuel Siampaus

Associate Equity Analyst

Sam Siampaus is an equity analyst on the communication services team for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. He covers wireless towers, data centers, telecommunication equipment, and Canadian telecoms.

Before joining Morningstar's equity research team in 2021, Siampaus spent over a year as a financial product consultant at Morningstar. He was responsible for supporting Morningstar's Office and Direct platforms and consulting with users on product offerings.

Siampaus holds a bachelor's degree in finance and economics with an emphasis in investment management from the University of Dayton.

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