Beyond the Skepticism: Why Occidental Petroleum’s Strategic Assets and Energy Transition Play Offer Hidden Value

Jim Cramer’s skepticism toward Occidental Petroleum (OXY) has dominated headlines, with the noted commentator highlighting the company’s debt burden, operational stumbles, and underperformance. Yet, beneath the noise lies a company positioned at the intersection of energy transition, undervalued assets, and strategic growth plays. Let us dissect Cramer’s concerns through the lens of OXY’s tangible advantages—and why this could be a rare buying opportunity in a volatile market.

The Debt Question: A Narrow Lens on a Broader Picture

Cramer’s primary critique centers on OXY’s $18 billion debt load, which he argues strains financial health. However, a deeper dive reveals nuances often overlooked. Consider OXY’s debt-to-equity ratio of 2.3x—while elevated, it aligns with peers in capital-intensive sectors like energy.
This comparison shows OXY’s leverage is within a range that still permits flexibility. Additionally, its operating cash flow of $3.8 billion (Q3 2024), supported by high-margin Permian Basin operations, provides a cushion to service debt. While Cramer emphasizes volatility, OXY’s $1.2 billion asset sales in Q1 2025 further underscore its liquidity management.

Valuation: A Discounted Bargain or a Value Trap?

Critics argue OXY’s stock has underperformed peers, with a 25% decline over 12 months (as of early 2025). Yet valuation metrics paint a compelling case:
- P/E Ratio: 7.2x (vs. Exxon’s 12.5x and Chevron’s 11.8x)
- EV/EBITDA: 4.1x (vs. industry average of 5.5x)

This discount reflects short-term concerns but overlooks OXY’s asset-rich portfolio. Its Permian Basin holdings, with 10 billion barrels of oil equivalent, and carbon capture projects—now Class VI permitted—position it as a leader in a decarbonizing economy. These assets are undervalued in current stock prices, offering a margin of safety.

Energy Transition: A Strategic Edge in the Long Game

Cramer dismisses OXY’s carbon capture initiatives as unproven, but this misses the regulatory and ESG tailwinds. The Inflation Reduction Act’s $35/ton tax credit for carbon sequestration creates a $1 billion annual revenue stream for OXY’s 1PointFive subsidiary.
Moreover, 40% of institutional investors now prioritize climate-resilient portfolios, making OXY’s leadership in carbon solutions a magnet for ESG capital. Its STRATOS Direct Air Capture facility—the largest of its kind—could become a profit driver as global net-zero mandates tighten.

The Contrarian Play: Why Now Could Be the Bottom

While Cramer’s warnings on OXY’s operational missteps (e.g., Q1 production misses) are valid, they ignore a critical inflection point. The company’s 2025-2027 growth plan includes:
- $3 billion in CAPEX cuts, improving free cash flow.
- Strategic asset sales to reduce leverage further.
- Carbon capture revenue scaling to offset oil price volatility.

This restructuring could lower its debt-to-equity ratio to 1.8x by 2027, aligning with industry norms. Meanwhile, its 1.39 MMboepd production—while below estimates—remains robust in a constrained global supply environment.

Conclusion: A Contrarian’s Opportunity in a Bear Market

Cramer’s skepticism is rooted in valid risks, but it fails to account for OXY’s undervalued assets, strategic pivot to carbon solutions, and improving balance sheet. At current prices, the stock offers a 2.5% dividend yield—a rare combination of income and growth potential. For investors with a 3-5 year horizon, OXY’s alignment with energy transition trends and underappreciated valuation metrics make it a compelling contrarian play.

Action to Take: Consider a gradual position buildup in OXY, using dips below $40/share as entry points. Pair this with a put option collar to hedge downside risk while capturing potential upside as carbon credits monetize and debt ratios improve.

The market’s myopic focus on debt and short-term misses may be pricing in too much pessimism. Occidental’s strategic assets and long-term plays could soon turn skeptics into believers.