Occidental Petroleum (NYSE:OXY), one of the leading oil and gas producers, reported a steep drop in its second-quarter earnings, reflecting lower oil and gas prices compared to the elevated levels seen last year due to the Russia-Ukraine war. OXY shares were down more than 2% in Thursday’s pre-market trading. Warren Buffett’s Berkshire Hathaway (BRK.A) (BRK.B) owns 25% of OXY common stock and is the company’s largest shareholder.
Occidental bought back $522 million of Berkshire Hathaway’s preferred stock in the second quarter, bringing its year-to-date redemptions to 12% of Berkshire’s initial $10 billion investment. This investment was used to fund Occidental’s acquisition of Anadarko Petroleum in 2019.
OXY’s Q2 Earnings Disappoint
Occidental’s second-quarter adjusted earnings per share (EPS) plunged more than 78% year-over-year to $0.68. Revenue fell 37% to $6.73 billion. The company missed analysts’ adjusted EPS estimate of $0.73 and revenue forecast of $6.93 billion.
The company’s oil and gas sales fell to $4.94 billion from $7.70 billion due to a decline in energy prices and lower domestic crude oil volumes. As per the company, the average realized price for oil plunged to $73.59 per barrel in Q2 2023 from $107.72 per barrel in the prior-year quarter. Further, average realized natural gas liquids (NGL) prices declined about 55% year-over-year to $19.08 per barrel.
Meanwhile, production increased to 1.22 million barrels of oil equivalent per day (boepd) from 1.15 million boepd in Q2 2022. Consequently, the company raised its full-year oil and gas production guidance outlook to an average of 1.21 million boepd from the previous outlook of 1.195 million boepd.
Also, Occidental has decided not to pursue future exploration in Wyoming’s Powder River Basin. Accordingly, it recorded a $164 million after-tax impairment charge in Q2 2023.
The company repurchased $425 million of its stock in the second quarter, bringing the year-to-date purchases to about 40% of the $3.0 billion repurchase program.
Is Occidental a Buy, Sell, or Hold?
Wall Street’s Moderate Buy consensus rating on Occidental Petroleum stock is based on seven Buys, five Holds, and one Sell. At $67, the average price target implies 9% upside. Shares are down 2.4% year-to-date. OXY was the best-performing stock of the S&P 500 (SPX) Index last year to soaring energy prices and Buffett’s growing interest in it.