Occidental Petroleum ( (OXY) ) has fallen by -7.16%. Read on to learn why.
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Occidental Petroleum’s stock has experienced a decline of 7.16% over the past week, largely influenced by its recent announcement to sell its OxyChem division to Berkshire Hathaway for $9.7 billion. This strategic move is aimed at reducing Occidental’s debt and refocusing on its core oil and gas operations. The company plans to use $6.5 billion from the sale to lower its debt, which is expected to save approximately $350 million annually in interest payments. This transaction is seen as a positive step for long-term shareholders, as it allows Occidental to concentrate on more profitable ventures.
Despite the potential benefits of the OxyChem sale, some analysts have expressed concerns about Occidental’s valuation, which is currently at a premium compared to its peers. The sale also comes at a time when the petrochemical sector is experiencing a downturn, which could impact the company’s free cash flow in the future. Analysts have maintained a neutral stance on Occidental’s stock, citing these valuation concerns and the potential negative impact on cash flow as reasons for caution.
Occidental plans to reinvest the capital from the OxyChem sale into its onshore oil and gas developments in the U.S., including the Permian Basin and other regions. The company is also focusing on advancing its technology for unconventional oil recovery. While these initiatives are expected to enhance Occidental’s long-term profitability, the market remains cautious about the immediate financial implications of the OxyChem transaction, contributing to the recent stock price decline.