Occidental Petroleum Eases Permian Basin Focus As Warren Buffett Buys More Shares

Occidental Petroleum Eases Permian Basin Focus As Warren Buffett Buys More Shares

Warren Buffett-backed Occidental Petroleum (OXY) reported a stronger-than-expected fourth-quarter performance late Wednesday. Shares inched higher in premarket trade.

Occidental Petroleum saw fourth-quarter earnings fall 54% to 74 cents per share, slightly better than FactSet consensus of 71 cents. Revenue dipped 12.7% to $7.172 billion. Analysts had predicted sales totaling $6.95 billion, according to FactSet.

Occidental Petroleum stock shed 0.5% Wednesday, ahead of earnings. In Thursday’s premarket action, shares edged a fraction higher. OXY stock has slumped below its 200-day and 50-day moving averages to begin 2024, after climbing to nearly 67 in October 2023.

U.S. oil prices eased slightly to $76.50 per barrel, as markets weigh ongoing tension in the Middle East and concerns over China’s economy.

Occidental’s results come after energy giants Exxon Mobil (XOM) and Chevron (CVX) both closed the door on 2023 with mixed earnings and revenue reports. Meanwhile, for the 2024 year, both supermajors forecast nearly flat oil production compared to 2023 levels with focus on shareholder returns.

Chevron increased its quarterly dividend 8% to $1.63, from $1.51 after buying back 5% of it stock in 2023. Exxon Mobil and Chevron handed out a combined $58.7 billion to shareholders last year and expect to continue this focus in 2024. Warren Buffett has a nearly 5.9% stake in CVX.

Occidental Petroleum: Oil Supply
The top Permian Basin outfit produced 1.2 million barrels of oil equivalent per day in Q4, about 7,000 bpd higher than in Q4 2023 and just above company guidance.

The company targeted Capital expenditures of between $6.4 billion and $6.6 billion. That included a $320 cut to shale and exploration spending, as well as idling two Permian Basin drilling rigs, while increasing spending in the Gulf of Mexico. Analysts had targeted capex of $7 billion.

Last week, OXY Chief Executive Vicki Hollub warned there could be an oil supply shortage by 2025 as the world fails to replace crude reserves.

“We’re in a situation now where in a couple of years’ time we’re going to be very short on supply,” Hollub told CNBC at the Smead Investor Oasis Conference in Phoenix, on Feb. 5.

Occidental Petroleum produced 1.22 million barrels of oil equivalent per day in Q3, up 3% compared to last year and exceeding the midpoint of its guidance.

In November, OXY slightly raised its full-year production guidance. This came after the company forecast average full-year production of 1.210 million barrels of oil equivalent per day at the end of Q2.

In Q1, OXY predicted full-year production to average 1.195 million barrels of oil equivalent per day. Management previously expected 2023 production to average 1.18 million barrels of oil equivalent per day, keeping production mostly flat compared to the 1.16 million in 2022.

Warren Buffett Keeps Buying OXY
Warren Buffett’s Berkshire Hathaway (BRKB) reported late Wednesday it had increased its stake in Occidental by 8.74% during the fourth quarter, adding more than 19.5 million shares.

In early February, ahead of earnings, Warren Buffett had also loaded up on Occidental Petroleum stock. Buffett spent around $245.7 million on more than 4.3 million shares of OXY between Feb. 1 and Feb. 5, with a price range of 56.75 to 57.98, according to a regulatory filing last week.

In December, Warren Buffett also spent $588.7 million on more than 10 million shares of OXY stock, with a price range of 55.58 to a fraction more than 57, in the days following the energy company’s $12 billion acquisition of Permian Basin producer CrownRock.

Through the latter half of 2022 Buffett loaded up on OXY, with the billionaire investor targeting shares in the $57-$61.50 price range. Warren Buffett’s Berkshire substantially increased its stake in the international oil play over the past year, putting OXY among Buffett’s top holdings.

MarketSmith charts show OXY stock finding price support around the 55-57 range, dating back to June 2022.

Buffett Bets On Big Oil
As of February, Berkshire Hathaway held a 28.3% stake in Houston-based Occidental Petroleum, according to FactSet. In August 2022, the Federal Energy Regulatory Commission granted Berkshire Hathaway approval to purchase up to 50% of available OXY stock.

However, Warren Buffett told shareholders in early 2023 he has no intention of taking over the company. Ahead of Occidental Petroleum Q3 earnings in early November, between Oct. 23-Oct. 25, Berkshire added 3.92 million OXY shares. Buffett made those OXY buys at a share price between 62.68-63.04, according to regulatory filings.

Occidental stock has an 18 Composite Rating out of 99. The Warren Buffett stock also has a 26 Relative Strength Rating and a nine EPS Rating.

By Investors / KIT NORTON , 02/15/2024.