Warren Buffett-backed Occidental Petroleum (OXY) reported better-than-expected second-quarter earnings late Wednesday, with the energy producer's profit growing more than 50% vs. a year ago. OXY shares fell Friday but ended the week up more than 1%.
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Occidental Petroleum announced Wednesday that Q2 EPS came in at $1.03 per share, surging 51% compared to Q2 2023, with sales increasing around 2% to $6.817 billion. Analysts expected Occidental Petroleum Q2 profit to come in at 78 cents per share with revenue of $6.93 billion. The company saw first-quarter earnings crater 42% and sales decline 17%.
Total company production in Q2 totaled 1.258 million barrels of oil equivalent per day, up 3% vs. Q2 2023 and slightly exceeding the mid-point of its guidance. Occidental Petroleum reported this was led by production in the Permian Basin and Gulf of Mexico. In Q1, production was 1.172 million barrels of oil equivalent per day, down 4% compared to a year ago.
Investors are also looking for the company's plan to reduce debt and its plans associated with its $12 billion acquisition of Permian Basin producer CrownRock. The deal adds 94,000 net Midland Basin acres and production of 170,000 barrels of oil equivalent per day to Occidental's holdings.
"The strength of our operational performance resulted in impressive financial results for the second quarter of 2024," Chief Executive Vicki Hollub said Wednesday in the earnings release. "We are excited to continue building on this positive momentum across our deep and diverse asset portfolio with the addition of CrownRock."
The company added that around $2.3 billion in debt will be retired by the end of August.
Occidental Petroleum stock edged down 0.2% to 58.41 during market action on Friday, following a 4.3% advance on Thursday which broke a string of six consecutive daily declines. The stock closed out the week was up 1.3% and down around 4% in August.
OXY, Ecopetrol And Oil Prices
Occidental's second-quarter results follow Permian Basin producer Diamondback Energy (FANG) reported better-than-expected Q2 earnings and revenue on Tuesday, with EPS growing 23%. Supermajors Exxon Mobil (XOM) and Chevron (CVX) also recently announced second-quarter earnings and revenue.
Buffett has a 6.7% stake in CVX.
On Aug. 1, Occidental Petroleum reported that Colombia-based Ecopetrol (EC) "decided not to acquire any interest in the CrownRock assets," according to a regulatory filing. There had been speculation that Ecopetrol would take a 30% stake, or $3.6 billion, in CrownRock.
Ecopetrol has a joint venture in the Midland Basin with Occidental Petroleum. It has first right of refusal on participating in OXY projects or deals in the basin.
On July 29, OXY also signed a $818 million deal to sell its Barilla Draw property in the Delaware Basin to Permian Resources (PR).
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Meanwhile, geopolitical risk in the Middle East has increased as conflict begins to center between Israel and Iran. But rather than the usual spike in oil prices caused by risk of such conflict, U.S. West Texas Intermediate (WTI) oil prices traded around $76.50 per barrel on Friday. Futures for Brent crude, the international benchmark, traded above $79 per barrel Friday.
What for now appear to be healthy supplies of oil, and ongoing soft demand in China, continue to hold oil at low levels. U.S. oil prices and Brent futures have both declined around 6.5% in August and are down about 9% for the year.
Warren Buffett Keeps Buying OXY
Occidental Petroleum stock is pulled back from an April high, trading well below both its 50-day moving average and its 200-day line. OXY is down around 6% on the year. It has sunk more than 20% since the April 12 high.
While Buffett sold a hefty portion of his Apple (AAPL) holdings, the investor has kept adding OXY and this downturn has provided a buying opportunity.
Between June 5-June 17, Buffett's Berkshire Hathaway (BRKB) purchased OXY every trading day, scooping up more than 7 million shares with purchase prices around 60, according to regulatory filings.
Since the latter half of 2022 Buffett has loaded up on OXY. The billionaire investor targeted shares in the $57-$61.50 price range. Warren Buffett's Berkshire Hathaway substantially increased its stake in the international oil play over the past year, putting OXY among Buffett's top holdings.
MarketSurge charts show OXY stock finding price support around the 55-57 range, dating back to June 2022.
Buffett Won't Take Control
Berkshire Hathaway also owns $10 billion of Occidental preferred stock and has warrants to buy another 83.9 million common shares for $5 billion.
Berkshire Hathaway holds a 28.8% 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.
In December 2023, Warren Buffett also spent $588.7 million on more than 10 million shares of OXY stock, following Occidental's deal to buy CrownRock.
Occidental stock has a 46 Composite Rating out of 99. The Warren Buffett stock also has a 27 Relative Strength Rating and an 85 EPS Rating.
Please follow Kit Norton on X @KitNorton for more coverage.
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