Occidental Petroleum Corporation is listed on the New York Stock Exchange under the ticker symbol OXY. Recent events triggered investors to wonder if OXY is worth considering as a long-term investment for retirement portfolios. While any investment represents a calculated risk, those preparing for their golden years search for the best options to help supplement retirement. There is no concrete answer to the question, but savvy investors can weigh the factors that determine the likelihood of investments to render a strong return in the years ahead. For your information and consideration, we look at the company profile, recent trends, and the opinions of forecasters and analysts about the strength of OXY stock as a long-term investment. We're looking at potentials for growth, sustainability, and predicted market trends in our assessment.
What is OXY?
Reuters describes Occidental Petroleum as an energy company operating under three segments labeled as midstream and marketing, chemical, and oil and gas. OCP actively conducts ongoing exploration for resources and production of energy solutions. They're active in all exploration and production activities within the United States with facilities in Colorado, New Mexico, Texas, and an offshore operation in the Gulf of Mexico. Occidental Petroleum Corporation is also active in North Africa and the Middle East. Occidental locates oil deposits, extracts them, and develops oil products including oil, condensate, gas, natural gas, and natural gas liquids under its gas and oil division. The chemical division focuses on manufacturing vinyl products and basic chemicals and marketing them throughout the world through the division called OxyChem.
The midstream and marketing division is responsible for marketing purchases. It gathers oil, stores it, processes the products, and transports them. A subdivision of midstream and marketing is OLCV, an acronym for the company's business involving low carbon ventures. Warren Buffet supports the operations of Occidental Petroleum CorporationCEO and chairman of Berkshire Hathaway, Warren Buffett, recently decided to invest in OXY shares. The financial firm purchased 136.4 million shares of Occidental Petroleum. Berkshire Hathaway now owns 14 percent of the company with a value of $7.7 billion. Buffet's investments in Occidental Petroleum began in 2019 to back its acquisition of Anadarko Petroleum, for which he received preferred stock with an eight percent yearly dividend, according to Forbes. Buffet explained that the company is run correctly by OXY's chief executive officer Vicki Hollub.
He agrees with its sustenance of cash flows by running the operations efficiently. Occidental is increasing the quarterly dividend, implementing a plant to repurchase shares, and reducing debt. Other factors influenced BH's decision to invest in Occidental shares. Buffet weighted the long-term perspective on oil prices, OXY's domestic production, and the 80 percent coming to the US for 2022 from the Permian Basin, projected to be a successful venture fueled his speculation that investment was sound. Furthermore, he purchased common shares after examining the earnings for the fourth quarter.
Is Buffet's investment a valid reason to consider OXY stock?
Warren Buffet is known for accuracy in calculating risk and landing on the plus side of his decisions, however, he doesn't always share his rationale or expected outcomes when investing. He's one of the most respected businessmen and investors in the United States. He understands the intricacies of investing and when to make a move with short-term gambles and when to invest in long-term stocks. His indication that Occidental Petroleum is a good bet for the long-term is a substantial vote for the solidity of the stock and the company behind the share values. Buffet's rationale for the recent investment is exacerbated by the Russian-Ukrainian conflict which affects the sales of Russia's gas and oil products. In turn, the value of gas and oil produced in the United States, or in other countries for US consumption, increases.
Occidental's commitment to funnel eighty percent of its oil production back into the country creates the ideal scenario for investors to get in early before the events take place. If you follow Buffet's history may appear to be a no-brainer that he's made a sound business decision for Berkshire Hathaway, but is an investment in OXY stock a good choice for the average investor, and are we getting the whole picture? Speculation that Buffet may be thinking about acquiring Occidental Petroleum in the future. BH owns multiple energy companies, pipelines, and utility companies. He may be considering leveraging high stakes through the purchase of additional shares as he has the right to exercise warrants for the actions. It's speculative, but dependent on Occidental's attitude in the matter as Buffet detests unfriendly acquisitions and refuses to participate in hostile takeovers. These are all considerations to make when deciding if OXY stock is a solid long-term investment.
Recent activities of Occidental Petroleum with pros and cons
Occidental Petroleum took a hit when it acquired Anadarko for an inflated price a few years back. It took a toll on the balance sheet in the takeover, elevating its debt when OXY was near zero debt for the purchase. Oxy has managed to decrease the dept since the acquisition lowering it from $40 billion in 2019 to $26 billion currently. Selling assets and reducing debt organically through savvy leadership is responsible for the turnaround. OXY stock performance has been strong due to the Berkshire Hathaway investment combined with decent oil prices. Elevated oil prices contribute to the solidity of the stock, according to Seeking Alpha. Hence, gauging its value as a long-term investment is dependent on the price of oil and forecasts of the future.
Things to consider
If oil prices remain high Occidental stocks will remain a solid bet for long-term investment. Another factor plays into the formula to consider. Occidental's debt level is a factor in its vulnerability to loss. Should oil prices decline rapidly, Occidental stock will also decline in value, posing a risk to investors if the debt is still high. Occidental is taking measures to further reduce its debt to its former near-zero balance but it takes time. The company has already made impressive strides in accomplishing the feat, hence, Buffet's glowing review of the executive leadership. Continued strong cash flows will also help Oxy's stock values. These are three things to keep an eye on if you're watching OXY stock. We must point out that Oxy is attempting to drive shareholder value through capital allocation policies. It's planning to reduce production by three percent in 2022 to focus on other aspects of the business. It's not a deal-breaker but it doesn't help their cause either.
Observations of OXY stock value
Analysts point out that the price of OXY stock appears to be at a fair value. The shares are inexpensive, but the valuation of OXY is in the middle when compared to other energy companies. Exxon Mobile is more diversified and offers a lower risk. EOG's balance sheet is stronger with similar trade values and CNQ shares are offered at a discount with a strong balance sheet and numerous attractive features. The comparison game leaves investors with good options with the other energy companies with some lower risks. The consensus is that OXY stock is predicted to continue performing well enough to make it a solid long-term investment barring unforeseen trends. Much depends on the future of oil prices.
What is the prediction for OXY stock in five years?
Looking to the future for potential investment for the long-term is rhetorical and based on long-term speculation that would require a crystal ball or an insight into an uncertain future that none of us can accurately predict. Nobody knows what will happen in the global arena with various markets and economic conditions. Trends come and go under the influence of political situations, natural disasters, the rise and fall of nations, and war and peace. A conservative assumption puts OXY's production in decline by $2 billion because of declining production in 2023 and in years past that. Oxy's generation of a free cash flow is predicted over the next five years to be $42 billion to bring debt levels back to near-zero. The company is looking at a debt reduction of $20 billion with buybacks and rising dividends, which creates a lovely scenario for investors over five years. Some assumptions are purely conjecturing. Others remain based on the history of Occidental's leadership and its commitment to debt reduction with smart readjustments.
Is OXY Stock a solid long-term investment compared to Exxon?
Forbes points out that Occidental Petroleum shares fell 20 percent below the levels before the Covid-19 pandemic, while Exxon shares hit a low of five percent. it put OXY at a higher risk for investment from various factors, some of which we addressed. One cannot consider a single aspect of the company by assigning significant weight. It's not helpful when calculating risks versus potential benefits of a stock. Occidental Petroleum surged ahead of Excon in its average growth rate in 2019 and 2020 with stable growth. Occidental also achieved superior capabilities for cash generation with a margin of 40 percent compared to Exxon's 12.4 percent. The third consideration is the category that OXY falls behind compared to Exxon Mobile. Lower revenues and higher long-term debt are more significant for OXY than Exxon, putting it in a higher risk category.
Should I Buy, Sell, or Hold? What do the experts say?
OXY stock retains a high potential for delivering attractive returns on investment in the years ahead. Some forecasts put other energy companies at a lower risk, but CNN Business offers its opinions based on the suggestions of 24 analysts projecting the 12-month price estimates. They foresee OXY stock rising and falling. They further recommend that Occidental Petroleum Corporation stock is at a hold rating. If you own shares, they suggest you hold steady. Analysts are making a slow turn to a bullish stance on the prospects of OXY for short and long-term investors. They further posit that OXy is in a solid position currently.
Is OXY stock a solid long-term investment?
We've reviewed the past performance of Occidental Petroleum Corporation with its ups and downs and its highs and lows. Executives at OXY are making wise choices in repairing the damage to its balance sheet caused by its takeover of Anadarko. The level of debt increased from near-zero to a disturbing number for investors. Occidental moved swiftly with efficient remediation measures to return the company to its former debt balance while its cash flow increased. Comparing OXY stock to other investment options in the energy industry yields mixed reviews. There's no escape from its status as a higher risk than some other energy companies., however, the potential for substantial gain is also a consideration. Stock market analysts have split opinions on OXY, but most agree that it's taken responsible measures and OXY is on a positive trajectory. Barring unforeseen circumstances, enough analysts and forecasters see the stock yielding acceptable or better returns for investors. Any investment involves risk, but we accept the risks for the potential gains. It's wise to consult with your investment advisor before making a final decision. Our vote is for OXY stock as a solid long-term investment.
Written by Allen Lee
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