Coronavirus crash: is Occidental Petroleum currently a ‘buy’?

Be greedy when others are fearful, so the saying goes.

In April 2019, Warren Buffet announced that Berkshire Hathaway would provide Occidental Petroleum Corporation (OXY) with a US$10 billion equity investment.

The purpose of this investment? Help Occidental finance what would become a US$57 billion deal to acquire Anadarko Petroleum Corp.

That deal was finalised in May 2019, with Occidental acquiring Anadarko ‘for $59.00 in cash and 0.2934 shares of Occidental common stock per share of Anadarko common stock.’

At the time it looked like a juicy play on Buffett’s part, with it being noted that that Berkshire Hathaway will receive:

‘A warrant to purchase up to 80.0 million shares of Occidental common stock at an exercise price of $62.50 per share.’

Better still, it was flagged that:

‘The preferred stock will accrue dividends at 8% per annum (or with respect to dividends that are accrued and unpaid, 9%).’

For reference, in April 2019 Brent Crude hovered around US$70 per barrel and Occidental’s share price was trading close to US$65 per share.

How times have changed!

Over the last month the Coronavirus crisis kickstarted a supply-demand stock that has seen oil prices collapse.

Brent Crude oil prices currently hover near US$36 per barrel (somewhat above their weekly low of US$27.34 per barrel); while Occidental’s share price has been smashed: it last traded at US$11.80 per share, shedding 17% yesterday alone and currently sits ~80% lower from when Buffet struck that US$10 billion deal.

To find out more about what caused oil prices to collapse – as well as three currencies set to be most impacted by the current oil situation – click here now.

If volatile commodity prices kick-started OXY’s fall from grace, a 11 March announcement from the firm noting that Occidental would be slashing its dividend and aggressively cutting its capital spending almost certainly expedited this descent.

The company’s next quarterly dividend would come in at $0.11 per share – down from $0.79 per share.

Positively at least, ‘these actions lower our cash flow breakeven level to the low $30s WTI, excluding the benefit of our hedges, positioning us to succeed in a low commodity price environment,’ Occidental’s CEO Vicki Hollub said.

Occidental Petroleum share price: so is it a ‘buy’?

To answer the question of our headline, the decisive answer is no: analysts on average, don’t think Occidental Petroleum is a ‘buy’. Looking at the specifics, as it stands, OXY has 6 buy ratings, an overwhelming 17 hold ratings and 2 sell ratings, according to Bloomberg Data.

Interestingly though, Occidental Petroleum’s average 12-month price target seems well out of whack, currently sitting at US$41.45 per share – so as to imply potential upside of ~250% from yesterday’s price levels.

One is left wondering if these analysts are being greedy when others are fearful?

How to trade Occidental

What do you make of this situation: has Occidental been oversold or is the market reacting rationally to the current oil situation? Trade accordingly. For example, you can trade Occidental shares – both LONG and SHORT – through IG’s world-class trading platform now.

To buy (long) or sell (short) Occidental with CFDs, follow these simple steps:

  • Create an IG Trading Account or log in to your existing account
  • Enter ‘Occidental Petroleum’ or ‘OXY’ in the search bar and select it
  • Choose your position size
  • Click on ‘buy’ or ‘sell’ in the deal ticket
  • Confirm the trade

IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.

Please see important Research Disclaimer.

Seize a share opportunity today

Go long or short on thousands of international stocks.

  • Increase your market exposure with leverage
  • Get spreads from just 0.1% on major global shares
  • Trade CFDs straight into order books with direct market access

Live prices on most popular markets

  • Forex
  • Shares
  • Indices
liveprices.javascriptrequired
liveprices.javascriptrequired

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

liveprices.javascriptrequired

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.

The Momentum Report

Get the week’s momentum report sent directly to your inbox every Monday for FREE. The Week Ahead gives you a full calendar of upcoming key events to monitor in the coming week, as well as commentary and insight from our expert analysts on the major indices to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.