Occidental Petroleum (NYSE: OXY), part of Warren Buffett’s Berkshire Hathaway (NYSE: BRK.A) portfolio, has extended losses to levels not seen in over two years.
At the end of the December 4 trading session, OXY was valued at $48.90, down 2.98% for the day, marking the stock’s lowest close since March 2022 and a breach of the ‘danger zone.’
The zone lies below the crucial $49 to $50 range, which has been a key support for the energy company since early 2022.
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This support was key by anchoring Occidental Petroleum to a yearly high of about $67. Nevertheless, the OXY share price plunged over 18% in 2024, failing to capitalize on the recent post-election market boom.
Why OXY stock is down
It’s worth noting that there is no standout, specific reason for OXY’s bearish sentiment, especially given its strong underlying fundamentals.
Indeed, the 2024 decline in OXY’s stock price has been primarily attributed to falling oil prices tied to cooling economic concerns and an excess oil supply due to high production by U.S.-based firms. The stock’s returns are significantly influenced by fluctuating demand and volatile commodity prices.
At the same time, the energy firm recorded no active commodity hedges at the start of the year, making it vulnerable to major price declines.
Overall, OXY may be affected by the challenges of operating in a highly competitive industry, including securing new reserves and maintaining production levels.
From the financial perspective, during the third quarter of 2024, the company reported better-than-expected results, with the key highlight being the repayment of 90% of its short-term debt reduction target.
Other metrics showed $1 per share earnings, down 7% compared to $1.08 a year ago, while revenue totaled $7.17 billion. Before the earnings call, analysts had predicted Q3 EPS would fall 37% to $0.74 per share, with sales totaling $7.12 billion.
Meanwhile, Wall Street remains mainly mixed on OXY’s prospects. To summarize the analysts’ views, Stephens raised the price target from $70 to $71 on November 13 with an ‘overweight’ rating. Analyst Mike Scialla based the decision on the company’s third-quarter performance, which exceeded consensus expectations in several key areas.
Citigroup’s Scott Grube reduced his target from $57 to $56 and set a ‘neutral’ rating on November 26. He cited Occidental Petroleum’s opportunities to sustain recent efficiency improvements, unlock additional synergies, and enhance long-term gas monetization efforts.
Finally, Raymond James forecasted OXY to trade at $78, up $1 from their last update based on the firm’s positive Q3 returns.
Buffett’s confidence in OXY stock
On the other hand, Buffett continues to show confidence in OXY, terming it his favorite energy stock. The ‘Oracle of Omaha’ holds a 28.2% stake in the Houston-based firm, $10 billion in preferred stock, and warrants for 83.9 million additional shares worth $5 billion.
Interestingly, in August 2022, regulators approved Berkshire’s acquisition of up to 50% of Occidental, but Buffett has stressed that taking over the firm is not part of his plans. His bet on OXY has suffered losses, contrasting with his well-known investment prowess.
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