Occidental Petroleum Corporation (OXY) Is Ready To Outpeform

Other energy stocks

Pioneer Natural Resources (NYSE:PXD) has concluded an agreement with Sinochem Petroleum USA, a U.S. subsidiary of the Sinochem Group, to sell 40% of its stake in about 207,000 net acres in the promising horizontal Wolfcamp Shale play in the southern portion of the Spraberry Trend Area Field, for a total sum of $1.7 billion. Sinochem will pay $500 million in cash to Pioneer at the closing, before normal closing adjustments, and will pay the remainder of $1.2 billion by absorbing some of Pioneer’s share of future drilling and facilities costs.

Pioneer looks attractive at the moment. While the company beat revenue expectations for the fourth quarter, it missed estimates on earnings per share. Compared to the fourth quarter of 2011, revenue increased significantly, along with GAAP earnings per share. Revenue for the quarter amounted to $818.7 million, compared to expectations of $779.9 million. GAAP reported sales came in 32% higher the same quarter in 2011, at $619.1 million.

Seadrill Ltd (NYSE:SDRL) has finalized a forward agreement from a commercial bank, through which it will finance its exposure to Sevan Drilling. It has divested its existing holdings of 96 million shares, and the forward agreement will provide exposure to the same number of shares. Seadrill no longer owns shares directly but is exposed though forward agreements to the 96 million shares, representing 28.52% of the outstanding shares.

Seadrill looks less attractive as an investment. The company was recently struck by maintenance issues involving blowout preventers on its ultra-deepwater drilling rigs. Because of this, Seadrill expects downtime of approximately 100 days in the fourth quarter. In the company’s third quarter earnings report, it had expected 41 days. I expect this development to dampen the company’s fourth quarter earnings results, which will be released in late February.

Conclusion

Occidental has strong and consistent earnings, with net income at more than 6% of gross revenues.  The balance sheet is solid and shows a significant asset-to-liabilities ratio. Share repurchases have been implemented over at least the past three years, demonstrating the company’s confidence in its prospects. A decent dividend yield and a diversified business mix should show that the company will stay strong for a long time.  Unlike many other energy companies, the company has produced good results as a result of volume increases in production. I think that the stock will continue to outperform. Investors should consider buying this stock today.

The article This Energy Stock Is Ready To Outpeform originally appeared on Fool.com and is written by Jordo Bivona.

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