Occidental Petroleum Posts Mixed Q3 Earnings: Optimism Persists Despite Profit Declines and Rising Production

Occidental Petroleum (NYSE: OXY) has unveiled its earnings report for the third quarter, showcasing a mixed bag for stock traders. While the oil and gas titan experienced a downturn in profits from its primary operations, overall earnings exceeded analysts' expectations, adding a dash of optimism to investor sentiment.

Like many of its industry counterparts, Occidental has faced challenges due to declining oil and gas prices. The company disclosed that its average worldwide realized crude oil prices fell by 6% during the quarter ending on September 30, hitting $75.33 per barrel. Similarly, prices for natural gas liquids took a 4% dive, settling at $20.47 a barrel. Additionally, the company was impacted by losses stemming from asset sales, totaling $572 million. Earlier this year, Occidental divested properties for a cumulative $970 million to sources including Permian Resources and an undisclosed buyer, with the goal of alleviating its substantial debt load, partly incurred from its $12 billion acquisition of CrownRock.

Despite these headwinds, there were notable improvements in other areas. By the end of the quarter, Occidental had successfully reduced its long-term debt to $25.46 billion, achieving a $4 billion decrease—nearly 90% of its immediate repayment objective. However, operating income from oil and gas extraction fell by 25% compared to the previous quarter, coming in at $1.2 billion. The company's chemicals segment also took a hit, reporting earnings of $304 million, down from $373 million year-over-year. Yet, a silver lining emerged from the midstream sector, which gained traction due to derivatives and a significant $490 million sale of shares in Western Midstream Partners (NYSE: WES).

On a positive note, Occidental's oil production saw a notable increase, climbing by 15.7% to reach 1.4 million barrels of oil equivalent per day, largely attributed to the CrownRock acquisition. Looking ahead to fiscal year 2024, the company is optimistic, projecting an increase in oil production to 661,000 barrels per day, up from 588,000 in the previous year. Moreover, Occidental reported adjusted earnings for the latest quarter at $977 million, or $1.00 per share, surpassing analysts' estimates of $0.74 per share.

Wolfe Research, led by analyst Doug Leggate, commented on the earnings performance, stating, "[The] strong third-quarter earnings underscore Occidental's ability to deleverage from one of the industry's most capital-efficient portfolios." In response to these results, shares of Occidental experienced a slight uptick in premarket trading, indicating a budding confidence among investors.