Stock Analysis & Valuation Occidental Petroleum Corporation (0KAK.L)

• Previous Close: £44.97
• Sector Valuation Confidence Level: Low

Valuation method	Value, £	Upside, %
Artificial intelligence (AI)	29.50	-34
Intrinsic value (DCF)	23.74	-47
Graham-Dodd Method	22.60	-50
Graham Formula	10.90	-76

Strategic Investment Analysis

Company Overview

Occidental Petroleum Corporation (OXY) is a leading global energy company engaged in the exploration, production, and marketing of oil, natural gas, and petrochemicals. Headquartered in Houston, Texas, Occidental operates across three core segments: Oil and Gas, Chemical, and Midstream and Marketing. The company has a diversified portfolio with assets in the U.S., the Middle East, Africa, and Latin America, positioning it as a key player in the oil and gas sector. Occidental’s integrated business model allows it to capitalize on upstream production while leveraging midstream logistics and downstream chemical manufacturing. With a strong focus on sustainability, Occidental is also investing in carbon capture and low-carbon initiatives, aligning with global energy transition trends. The company’s strategic acquisitions, such as Anadarko Petroleum, have expanded its resource base and operational scale. As a London Stock Exchange-listed firm with a market cap exceeding $40 billion, Occidental remains a significant entity in the energy industry, balancing traditional hydrocarbon production with forward-looking energy solutions.

Investment Summary

Occidental Petroleum presents a mixed investment profile. On the positive side, the company benefits from a diversified asset base, strong cash flow generation ($11.4B operating cash flow in FY 2023), and strategic investments in carbon capture, which could provide long-term growth opportunities. However, Occidental carries a high debt burden ($27.1B total debt), which may constrain financial flexibility. The company’s beta of 0.813 suggests moderate volatility relative to the market, making it a relatively stable energy play. While its dividend yield (~1.5%) is modest compared to peers, Occidental’s focus on deleveraging and operational efficiency could enhance shareholder value. Investors should weigh its exposure to oil price fluctuations against its efforts in sustainability and cost management.

Competitive Analysis

Occidental Petroleum competes in a highly capital-intensive and cyclical industry dominated by integrated oil majors and independent E&P firms. Its competitive advantage lies in its geographically diversified upstream portfolio, particularly its Permian Basin assets, which provide low-cost production and scalability. The company’s chemical segment (OxyChem) is a differentiator, generating stable margins due to long-term contracts and niche product offerings. Occidental’s midstream and marketing operations further enhance integration, reducing reliance on third-party infrastructure. However, the company faces stiff competition from larger peers like ExxonMobil and Chevron, which have stronger balance sheets and greater downstream integration. Occidental’s debt-heavy capital structure, a result of the Anadarko acquisition, remains a vulnerability compared to more conservatively financed competitors. Its focus on carbon capture and sequestration (including direct air capture projects) provides a unique positioning in the energy transition, but commercialization risks persist. Occidental’s ability to balance hydrocarbon profitability with emerging low-carbon initiatives will be critical in maintaining competitiveness against both traditional oil firms and renewable energy players.

Major Competitors

• ExxonMobil Corporation (XOM): ExxonMobil is a global energy giant with superior scale, integrated refining operations, and a robust balance sheet. Its downstream and chemical segments provide earnings stability, but its Permian footprint overlaps with Occidental’s, creating direct competition. Exxon’s lower leverage and higher dividend yield make it a safer investment, though it lags in carbon capture initiatives compared to Occidental.
• Chevron Corporation (CVX): Chevron rivals Occidental in Permian Basin production and LNG exposure. Its strong free cash flow and lower debt-to-equity ratio give it greater financial flexibility. Chevron’s renewable energy investments are less pronounced than Occidental’s carbon capture focus, but its integrated model provides resilience against commodity price swings.
• ConocoPhillips (COP): ConocoPhillips is a leaner upstream competitor with a disciplined capital allocation strategy. It lacks Occidental’s chemical and midstream diversification but boasts a stronger balance sheet and higher shareholder returns. Its Permian and international assets compete directly with Occidental’s core operations.
• Equinor ASA (EQNR.OL): Equinor is a European peer with a strong offshore portfolio and aggressive renewable energy investments. Unlike Occidental, it has sovereign backing and lower debt, but its U.S. onshore presence is limited. Equinor’s wind and hydrogen projects contrast with Occidental’s carbon management focus.
• BP plc (BP.L): BP is transitioning faster toward renewables, reducing its competitive overlap with Occidental’s hydrocarbon-centric model. BP’s larger global footprint and trading operations provide diversification, but its higher breakeven costs and weaker Permian exposure compared to Occidental may limit upstream growth.