Warren Buffett-backed Occidental Petroleum (OXY) is set to report its third-quarter earnings and revenue this week. Analysts are predicting a quarterly profit decline of over 60%. Despite this, Buffett remains bullish on the energy company, as he purchased an additional 4 million shares in late October.
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Occidental’s results come on the back of disappointing third-quarter earnings from energy giants Exxon Mobil (XOM) and Chevron (CVX). Both companies reported a decline in Q3 profit of over 40% due to the impact of the 2022 oil price spike.
Oil and natural gas prices in the US have eased in 2023, with US crude prices hovering below $82 per barrel. However, prices briefly spiked to around $90 per barrel in late October as tensions in the Middle East rattled the oil market.
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On the other hand, Warren Buffett’s Berkshire Hathaway (BRKB) reported a significant increase in third-quarter operating profit, which surged by 41% to $10.8 billion. The conglomerate’s insurance businesses led the way, while its utilities, energy, and railroad businesses experienced declines in profit.
Berkshire Hathaway’s after-tax operating earnings also rose by 42% to approximately $7,436 per class A share, surpassing the FactSet consensus of $6,540.
Buffett’s company holds a 25.78% stake in Houston-based Occidental Petroleum. Despite his substantial investment, Buffett stated earlier this year that he has no plans to take over the company. Berkshire Hathaway increased its holdings in OXY between October 23 and October 25, adding 3.92 million shares at a targeted share price range of $62.68-$63.04, as per regulatory filings.
Interestingly, Buffett’s purchases of Occidental Petroleum began on the same day that Chevron announced its deal with Hess (HES). As a potential suitor for Hess, Occidental Petroleum saw its shares drop 3.6% on that day.
Occidental Petroleum stock experienced a slight decline of 0.4% during Monday’s market session, closing at $62.73. On Friday, the Warren Buffett stock also dropped 0.4% to $63.01. After trading sideways in 2023, the stock has shown minimal gains after closing 2022 at $62.99.
Warren Buffett: Occidental Petroleum Earnings
Estimates: Wall Street analysts forecast OXY earnings to fall by 64% to 88 cents per share, with revenue declining by 25% to $7.05 billion.
Earnings: Official announcement to be made on Tuesday.
Occidental Petroleum’s earnings have consistently declined by over 39% in the past three quarters. In the second quarter, the company reported EPS of 68 cents, down 78% compared to 2022, with sales falling by 37% to $6.7 billion.
In the second quarter of 2023, OXY’s pretax income from oil and gas was $1.1 billion, a 73% decrease from Q2 2022. This decline was attributed to lower prices of domestic natural gas, natural gas liquids (NGL), and lower volumes of domestic crude oil.
According to Occidental Petroleum, the average Q2 worldwide crude oil prices dropped by 22% to $73.59 per barrel. Additionally, average worldwide NGL prices decreased from $545 to $19.08 per barrel in Q2.
Occidental produced an average of 1.218 million barrels of oil equivalent per day in Q2, surpassing the midpoint of its guidance. The company expects its full-year production average to be 1.210 million barrels of oil equivalent per day.
During Q1, OXY projected full-year production to average 1.195 million barrels of oil equivalent per day. Executives previously forecasted 2023 production to remain mostly flat at 1.18 million barrels of oil equivalent per day, similar to the production level of 1.16 million barrels in 2022.
As the leading producer in the Permian Basin, Occidental Petroleum is expected to witness further industry consolidation following Exxon’s acquisition of Pioneer Natural Resources (PXD) and Chevron’s merger with Hess.
Occidental stock currently has a Composite Rating of 53 out of 99. It also holds a Relative Strength Rating of 57 and an EPS Rating of nine, as per Warren Buffett’s stock selection criteria.
For further coverage, please follow Kit Norton on X, formerly known as Twitter, @KitNorton.
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