Occidental Petroleum: A Natural Gas Stock to Consider Now?

Occidental Petroleum Corporation (OXY) has been a subject of interest for investors in the natural gas sector, with its stock price performance and strategic initiatives driving market sentiment. As of February 2025, the company's stock price has experienced a decline of approximately 16.58% over the past year, which has raised questions about its long-term prospects. This article aims to analyze Occidental Petroleum's recent performance, strategic focus, and potential growth opportunities to determine if it is the best natural gas stock to buy now.

Debt Reduction Strategy and Long-term Growth Prospects

Occidental Petroleum has been focusing on reducing its debt levels, which has led to a downgrade by Goldman Sachs due to the company's prioritization of debt reduction over immediate capital returns to shareholders. While this strategy has resulted in underperformance compared to its peers, it has also improved the company's financial health and stability. Reducing debt can lead to increased profitability, enhanced creditworthiness, and reduced default risks. However, prioritizing debt reduction over capital returns may lead to missed opportunities for growth and shareholder disappointment. Occidental Petroleum must balance its debt reduction efforts with investments in growth projects and capital returns to shareholders to ensure long-term success.

Permian Basin Operations and Future Outlook

Occidental Petroleum's Permian Basin operations are expected to continue to be a significant driver of the company's overall performance in the coming years. The Permian Basin is one of the most prolific oil and gas producing regions in the United States, and Occidental Petroleum has a substantial presence there. The company's focus on increasing production, improving efficiency, and expanding partnerships in this region is likely to result in increased cash flow and profitability. Occidental Petroleum's joint venture with Ecopetrol in the Permian Basin is expected to help the company increase its production and cash flow from the region.

Analyst Ratings and Price Targets

The average analyst rating for Occidental Petroleum stock from 17 stock analysts is "Hold," with a 12-month stock price forecast of $60.56, which is an increase of 26.01% from the latest price. This indicates that analysts believe the stock is likely to perform similarly to the overall market, with a potential upside of 26.01%. However, the company's valuation ratios, such as P/E ratio, EV/Sales, and EV/EBITDA, are generally in line with or slightly below its peers in the natural gas sector, suggesting that it may be undervalued compared to its peers.

Conclusion

Occidental Petroleum Corporation (OXY) has experienced a decline in its stock price over the past year, driven by its focus on debt reduction and strategic acquisitions. While this strategy has led to underperformance compared to its peers, the company's valuation ratios suggest that it may be undervalued. Occidental Petroleum's Permian Basin operations are expected to continue to be a significant driver of the company's overall performance in the coming years, with the company focusing on increasing production, improving efficiency, and expanding partnerships in this region. Analysts have a "Hold" rating on the stock, with a potential upside of 26.01%. Overall, Occidental Petroleum is a natural gas stock to consider now, given its undervalued status and potential growth opportunities in the Permian Basin. However, investors should carefully evaluate the company's debt reduction strategy and balance its long-term growth prospects with its focus on debt reduction.