Intrinsic Value Occidental Petroleum Corporation (OPC.DE)

• Previous Close: €38.19
• Intrinsic Value: €22.32
• Upside potential: -42%

Stock Valuation Context

Business Model And Market Position

Occidental Petroleum Corporation operates as a diversified energy company with a strong presence in oil and gas exploration, chemical manufacturing, and midstream operations. Its core revenue model is driven by upstream hydrocarbon production, complemented by value-added chemical products and midstream logistics. The company’s upstream segment focuses on high-margin assets in the Permian Basin, while its OxyChem division leverages cost-advantaged feedstocks to produce essential industrial chemicals. Occidental’s midstream and marketing segment optimizes supply chains and trading opportunities, enhancing overall profitability. As a mid-tier integrated energy player, Occidental competes with larger peers through operational efficiency and strategic asset focus. Its emphasis on carbon capture and storage (CCS) initiatives positions it as a forward-thinking player in the energy transition, though its core remains tied to fossil fuels. The company’s geographic diversification, spanning the U.S., Middle East, and Latin America, mitigates regional risks while offering growth optionality.

Revenue Profitability And Efficiency

Occidental reported EUR 26.7 billion in revenue for FY 2024, with net income of EUR 3.1 billion, reflecting a 11.4% net margin. Operating cash flow stood at EUR 11.4 billion, underscoring robust cash generation despite volatile energy prices. Capital expenditures of EUR 6.9 billion indicate sustained investment in upstream and low-carbon projects, with a focus on maintaining production discipline and operational leverage.

Earnings Power And Capital Efficiency

The company’s diluted EPS of EUR 2.44 demonstrates its ability to monetize assets efficiently, supported by a balanced portfolio. Occidental’s upstream segment benefits from high-graded Permian assets, while OxyChem delivers stable margins. Midstream operations add logistical synergies, though debt servicing costs weigh on returns. ROCE improvements hinge on oil price stability and cost containment.

Balance Sheet And Financial Health

Occidental’s financial position includes EUR 2.1 billion in cash against EUR 27.1 billion of total debt, reflecting a leveraged but manageable structure. The debt load, largely tied to past acquisitions, is being addressed through asset monetization and cash flow prioritization. Liquidity remains adequate, with operating cash flow covering interest obligations and selective reinvestment.

Growth Trends And Dividend Policy

Production growth is targeted in low-breakeven assets, with a focus on free cash flow over volume expansion. The dividend of EUR 0.85 per share offers a modest yield, with payout sustainability tied to oil prices. Shareholder returns may benefit from incremental buybacks if deleveraging progresses as planned.

Valuation And Market Expectations

At a EUR 35.6 billion market cap, Occidental trades at a premium to pure-play E&Ps, reflecting its integrated model and CCS optionality. The beta of 0.813 suggests lower volatility than peers, likely due to its chemical and midstream diversification. Investors appear to price in steady execution and energy transition adaptability.

Strategic Advantages And Outlook

Occidental’s Permian scale and chemical integration provide cost advantages, while CCS projects like Direct Air Capture offer long-term optionality. Near-term performance depends on oil prices, but strategic partnerships (e.g., with ADNOC) and debt reduction could enhance equity upside. Risks include commodity cyclicality and transition-related capex pressures.

Sources

Company filings, Bloomberg, XETRA disclosures