Intrinsic Value Occidental Petroleum Corporation (0KAK.L)

• Previous Close: £44.97
• Intrinsic Value: £23.74
• Upside potential: -47%

Stock Valuation Context

Business Model And Market Position

Occidental Petroleum Corporation operates as a diversified energy company with a strong presence in upstream exploration and production, midstream logistics, and chemical manufacturing. Its core revenue model is driven by hydrocarbon extraction, processing, and marketing, with significant operations in the U.S., Middle East, Africa, and Latin America. The company’s Oil and Gas segment focuses on crude oil, natural gas liquids (NGLs), and natural gas production, while its Chemical segment produces essential industrial chemicals like chlorine, caustic soda, and vinyls. The Midstream and Marketing segment enhances value through logistics, trading, and storage solutions. Occidental’s vertically integrated structure allows it to capture margins across the energy value chain, positioning it as a resilient player in volatile commodity markets. Its strategic investments in carbon capture and low-carbon initiatives reflect a forward-looking approach to energy transition, differentiating it from pure-play upstream peers. The company’s geographic diversification and technological expertise in enhanced oil recovery (EOR) further solidify its competitive edge in the global energy sector.

Revenue Profitability And Efficiency

Occidental reported revenue of $27.1 billion for the latest fiscal period, with net income of $3.04 billion, reflecting a diluted EPS of $2.44. Operating cash flow stood at $11.44 billion, underscoring robust cash generation despite capital expenditures of $7.02 billion. The company’s ability to maintain profitability amid fluctuating oil prices highlights its operational efficiency and cost discipline.

Earnings Power And Capital Efficiency

The company’s earnings power is supported by its diversified asset base and midstream integration, which mitigate commodity price volatility. Occidental’s capital efficiency is evident in its strategic reinvestment of operating cash flow into high-return projects, including EOR and decarbonization initiatives, while maintaining a disciplined approach to debt management.

Balance Sheet And Financial Health

Occidental’s balance sheet shows $2.14 billion in cash and equivalents against total debt of $27.1 billion, indicating a leveraged but manageable position. The company’s focus on deleveraging and free cash flow generation supports its financial stability, though its debt load remains a key monitorable for investors.

Growth Trends And Dividend Policy

Growth is driven by organic projects in the Permian Basin and international expansions, complemented by a dividend yield of approximately 1.5% ($0.90 per share). Occidental’s capital allocation prioritizes reinvestment and debt reduction, with dividends secondary to balance sheet strengthening.

Valuation And Market Expectations

With a market cap of $40.6 billion and a beta of 0.81, Occidental trades at a discount to integrated peers, reflecting investor caution around leverage and commodity exposure. However, its carbon capture ventures and EOR leadership could unlock long-term value if energy transition trends accelerate.

Strategic Advantages And Outlook

Occidental’s strengths lie in its integrated model, technological leadership in EOR, and early-mover positioning in carbon management. The outlook hinges on oil price stability, successful debt reduction, and execution of low-carbon initiatives, which could redefine its role in a transitioning energy landscape.

Sources

Company filings, Bloomberg