Occidental Petroleum’s Volume Growth Supports Appreciation Potential
Kurt Wulff (McDep Associates) submits:
Buy-recommended Occidental Petroleum (OXY) offers unlevered appreciation potential of 23% to a McDep Ratio of 1.0 where stock price would equal Net Present Value (NPV) of $95 a share. Fourth quarter results released today disclosed unlevered cash flow (Ebitda) meeting our expectations of three months ago, helped by growth in oil and gas volume of 5% compared to fourth quarter 2008 and 3% compared to third quarter 2009. Management expects volume growth in 2010 of 5-8%, which would be better than our projection and would possibly warrant an increase in estimated NPV.
A new discovery in California, announced with second quarter results, is contributing to rising natural gas production in that state. Chairman Irani emphasized on the earnings call that year-end reserves, to be reported in a few weeks, will show that 200% of production has been replaced. Meanwhile the trend for oil, 82% of the value in OXY, continues up with futures prices for the next six years at $84 a barrel compared to the 40-week average of $81. OXY stock is also above its 200-day average of $73 a share, which defines an uptrend by that measure.
Investing, Long Term Investment, stock market | admin March 2, 2010
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