2024-04-20 00:47:27 ET
Summary
- Occidental is the largest acreage holder in the prolific Permian Basin with significant unconventional and EOR operations.
- Occidental's value is derived from proved reserves, and its enterprise value suggests it is trading close to fair value, but future growth potential is substantial.
- Occidental is well positioned to benefit from gradual production volume growth as well as mid-cycle oil price appreciation.
Global oil markets remain as uncertain as ever. As we write, tensions between Israel and Iran are escalating, raising concerns about potential disruptions in a key oil-producing region. Meanwhile, in Guyana, output projections continue to rise with new discoveries, amid ongoing uncertainty about Chinese demand trends. It's a delicate balance between supply and demand, with limited price flexibility and constrained inventories. A small misjudgment can send markets into turmoil, reminiscent of the early days of the COVID-19 lockdowns.
This article is about Occidental ( OXY ), a company that leases huge swaths of land in the prolific Permian basin and builds extensive infrastructure on top of it hoping to pull oil from down under. With uncertain production levels and selling prices, this venture initially didn't catch our eye as viable long-term investment. However, significant purchases by Berkshire Hathaway ( BRK.B ) and comments of its Chairman piqued our curiosity. Occidental's stock price, once below $30, now hovers around $66 per share. Yet, questions linger about peak global oil demand and short-term price fluctuations, adding to the uncertainty surrounding oil recovery efforts....
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For further details see:
Occidental: Decades Of Growth Ahead