A Buffett Buyout at Occidental

Occidental Petroleum (OXY), one of many best-performing shares within the S&P 500, posted sturdy third quarter figures, with revenues at $9.5 billion, up 40% YoY, in comparison with $6.8 billion a 12 months in the past, reviews Todd Shaver, editor of Bull Market Report.

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The corporate posted a revenue of $2.5 billion, or $2.44 per share, in comparison with $840 million, or $0.87 per share throughout the identical interval final 12 months, with a beat on the highest line, and a slight miss on the backside.

The corporate had a stellar quarter throughout the board, with manufacturing exceeding steering by 25,000 barrels of oil equal per day, at practically 1.2 million barrels per day.

Occidental’s midstream and downstream segments, particularly OxyChem, and its advertising and marketing enterprise exceeded steering with a revenue of $580 million, and $100 million, respectively, which additional led to a rise within the full-year steering for all three.

Occidental Petroleum represents a exceptional turnaround story, from the verge of a disaster in mid-2020, when it posted a staggering lack of $17 per share, with monumental debt on its books, to the perfect performer amongst vitality shares this 12 months, after a monumental 560% rally.

The inventory has since gained the approval of Warren Buffett who at the moment owns a 21% stake within the firm. We wouldn’t be shocked to see Warren purchase extra, and we wouldn’t be shocked to see Warren make a proposal for the entire firm.

Whereas its stellar efficiency is usually owing to the elevated vitality costs this 12 months, the corporate has since made efficient use of this disaster to basically realign its steadiness sheet.

This contains investing the majority of its money flows to pare down its extreme debt, with $1.3 billion in repayments throughout the third quarter alone, and $9.6 billion YTD. The face worth of its debt now stands at $19 billion, down from practically $40 billion in 2020.

The corporate continues to generate strong money move, at $4.3 billion throughout the third quarter, of which $1.8 billion was used for repurchases, bringing YTD inventory buybacks to $2.6 billion of the $3 billion tranche that was accepted by the Board.

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We are able to see a brand new tranche being licensed when the primary one is depleted. Administration loves shopping for again inventory. Because the debt ranges drop, the corporate will improve its rewards for shareholders, particularly with the US authorities promising to supply help for crude oil costs every time it falls under $80 a barrel.

Its strong liquidity profile consists of $1.4 billion in money, a quantity that can transfer steadily increased as the corporate continues to execute at this excessive stage. Our goal value is $90, and we consider it may possibly get there by the top of the 12 months or early subsequent.

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