Occidental Petroleum OXY is expected to report a year-over-year decline in its top and bottom lines when it reports 2024 results on Feb. 18, after market close.

Find the latest earnings estimates and surprises on Zacks Earnings Calendar.

The Zacks Consensus Estimate for OXY’s fourth-quarter revenues is pegged at $7.14 billion, indicating a decline of 5.2% from the year-ago reported figure.

The Zacks Consensus Estimate for earnings is pegged at 67 cents per share. The Zacks Consensus Estimate for OXY’s fourth-quarter earnings indicates a decline of 9.46% from the year-ago reported figure.

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Earnings Surprise History

OXY’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 18.71%.

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What the Zacks Model Unveils

Our model predicts a likely earnings beat for OXY this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. That is the case here, as you can see below.

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Earnings ESP: OXY has an Earnings ESP of +3.00%.

Zacks Rank: Occidental Petroleum currently carries a Zacks Rank #3.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Some other stocks in the same sector that have the combination of factors indicating an earnings beat this season are Range Resources Corporation RRC, Comstock Resources, Inc. CRK and DT Midstream, Inc. DTM. RRC, CRK and DTM have an Earnings ESP of +4.28%, +12.50% and +0.28%, respectively, and currently carry a Zacks Rank of 2 each.

Factors Likely to Have Shaped OXY’s Q4 Earnings

Permian Resources assets remain a consistent contributor to the firm’s overall production. Production from Permian is expected in the range of 751-769 thousand barrels of oil equivalent per day (Mboe/d) for fourth-quarter 2024 and the company expects total production in the band of 1,430-1,470 Mboe/d in fourth-quarter 2024. Occidental Petroleum raised its fourth-quarter production volume by 9,000 boe/d due to the addition of high-quality CrownRock assets in its portfolio.

OXY’s fourth-quarter performance is also expected to have been positively impacted by its routine flaring reduction initiatives and introduction of innovative technologies, which will further lower operating expenses. Positive production trends in the Permian basin should more than offset the adverse impact to fourth quarter production related to the Gulf of Mexico's ongoing well workovers and disruption from Hurricane Rafael.

Occidental Petroleum is likely to have gained from its ongoing debt reduction. The company retired debts worth $4 billion in the third quarter, and more will be retired in the fourth quarter, strengthening its balance sheet and reducing its interest expenses, boosting earnings.

The company is also expanding its operations internationally. Production from the International operation is expected to be 228-234 Mboe/d in the fourth quarter of 2024.

Occidental Petroleum expects its lease operating expenses to register a greater than 20% year-over-year reduction per barrel in the fourth quarter. This improvement is driven by increased uptime, improved CO2 utilization, and the integration of low-cost, high-margin CrownRock barrels in OXY’s existing production portfolio.

Chemical segment is expected to have positively contributed in fourth-quarter due to expected uptick in caustic soda pricing due to European supply disruptions. The Midstream and Marketing segment is likely to have captured some natural gas transportation optimization benefits in the to-be-reported quarter, which all contributed toward fourth-quarter earnings.

OXY’s Price Performance

OXY shares have lost 2.8% in the past three months compared with the industry’s decline of 7%.

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OXY Stock Trading at a Premium

Occidental Petroleum’s shares are somewhat expensive on a relative basis, with its current trailing 12-month Enterprise Value/Earnings before Interest Tax Depreciation and Amortization (EV/EBITDA TTM) being 5.74X compared with its industry average of 4.7X.

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Investment Thesis

Occidental Petroleum's strong domestic operation and focus on Permian resources have been beneficial for the company. Its core development area in the Permian region has been recording solid results. Contribution from acquired CrownRock assets is likely to have boosted production volumes in the fourth quarter.

Occidental Petroleum’s practice is to remain exposed to market prices of commodities, so the drop in commodity prices during the fourth quarter is expected to have adversely impacted the company’s earnings despite strong production in the quarter.

Summing Up

Occidental Petroleum’s third-quarter earnings are expected to have benefited from strong production volumes coming from domestic operations. The company’s cash flow generation, initiative to lower debts, and contribution from acquisition are expected to have boosted its performance. Chemical and Midstream and Marketing segments are also expected to have contributed to fourth-quarter earnings.

Occidental Petroleum currently has a Zacks Rank #3. Hence, those who already own this stock would do well to retain it in their portfolio and other should wait for a better entry point.

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