Occidental Petroleum's Q3 Earnings Hit by Lower Oil Prices

Occidental Petroleum Corporation (OXY) reported third-quarter 2014 earnings of $1.58 per share, lagging the Zacks Consensus Estimate of $1.67 by 5.4%.

Occidental Petroleum Corporation - Earnings Surprise | FindTheBest

Quarterly earnings were down 18.9% from the prior-year figure, primarily due to lower contribution from its domestic oil and gas segments. The softer performance in the domestic oil and gas segment was due to lower crude oil realized prices, higher operating costs and DD&A expenses.

Total Revenue

Occidental Petroleum's total revenue in the reported quarter was $5.99 billion, lagging the Zacks Consensus Estimate of $6.1 billion by 2.7%.

The top line fell short of the year-ago figure by 7.0%, primarily due to lower sales from the company's Oil and Gas (down 7.3% year over year) and Midstream, Marketing and Other (down 18.1% year over year) segments. This was partially offset by higher contribution from the Chemical segment ( up 2.7% year over year).

Production, Sales and Realized Price

In the quarter under review, Occidental Petroleum's average daily oil and gas production volumes were 755 thousand barrels of oil equivalents (MBoe). A 1.6% year-over-year decline was primarily due to the absence of Hugoton production. The company sold its Hugoton assets in the first half of 2014.

The company's daily sales volumes were 750 MBoe, down 1.96% from 765 MBoe a year ago.

Realized price for worldwide crude oil plunged 9% to $94.68 per barrel from the prior-year figure of $103.95 per barrel. Worldwide realized natural gas liquids prices were $40.26 per barrel, down 1.0% from $40.53 per barrel a year ago. The volatility in marker prices was responsible for the decline in realized prices.

Financial Update

Occidental Petroleum's cash from operations in the first nine months of 2014 totaled $8.2 billion, down 16.3% year over year.

Long-term debt (including current maturities) as of Sep 30, 2014 was $6.83 billion compared with $6.94 billion as of Dec 31, 2013. The company's total debt-to-capitalization ratio was 16%, up 2% from the Dec 31, 2013 level.

In the first nine months of 2014, the company's capital expenditure was $7.3 billion compared with $6.4 billion a year ago.

Other Upcoming Releases

Marathon Oil Corp. (MRO) is slated to release its third-quarter 2014 earnings on Nov 3. The Zacks Consensus Estimate is 65 cents.

ConocoPhillips (COP) is slated to release its third-quarter 2014 earnings on Oct 30. The Zacks Consensus Estimate is $1.24.

Murphy Oil Corp. (MUR) is slated to release its third-quarter 2014 earnings on Oct 29. The Zacks Consensus Estimate is $1.09.

Our Take

Despite an earnings miss in the reported quarter, Occidental Petroleum was able to increase its daily domestic average production by 17,000 barrel of oil equivalents year over year.

We believe the focus on its exploration and production operations in the Permian Basin and the Middle East region post the spin-off of its Californian assets will help the company to further improve its domestic production.

We appreciate the company's steady share repurchase activities. During the first nine months of 2014, Occidental Petroleum repurchased around 21.2 million shares.

Occidental Petroleum currently has a Zacks Rank #3 (Hold).

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