One of the largest international energy companies, Occidental Petroleum Corporation (NYSE:OXY) , is reportedly considering vending its overseas resources to boost share price by funding a stock buyback. There is another possibility that it may divide its strategic business units into three separate entities in an effort to restructure operations and improve market capitalization through stock price appreciation.
Occidental Petroleum Corporation (NYSE:OXY) has been active in the oil and gas production sector in the U.S. and in the international arena since the mid 1980’s. The company has three operational divisions. Its Oil and gas segment is responsible for exploration, development, and production of various condensates such as oil and natural gas liquids (NGLs). A subsidiary called OxyChem operates in the chemical industry, including production and marketing of chemical substances such as Vinyls.
The last strategic business unit (SBU) is called Midstream and Marketing, which deals with various operations such as transportation, storage, marketing, and processing diverse range of products such as Oil, Natural Gas, Carbon Dioxide, and Power.
Situation analysis
According to a recent study by Thomson Reuters, Occidental Petroleum Corporation (NYSE:OXY) is losing market capitalization and shareholder value is depreciating as net profit in the first quarter of 2013 fell to $1.36 billion from $1.56 billion. This constituted a fall in net profit to $1.68 per share from previous year’s $1.92 per share. This undesirable financial situation is illustrated further by a fall in revenue of 6% to $5.87 billion in the first quarter of 2013.
As a reaction to the dim first-quarter financial performance, Occidental’s share price fell from around $88 in February to below $78. As a result, top management has been devising various strategies to recover.
Others in the field
With over $73 billion in market capitalization, Occidental Petroleum Corporation (NYSE:OXY) is currently trading at around $93. Zacks Equity Research has ranked it as a “Hold” as the P/E ratio is currently 16.5 compared to 17.7 of the S&P 500 index. Competitors of Occidental are also poised for market appreciation as crude oil value is going up, which will directly contribute to better industry-wide profits.
One of the Warren Buffett’s Berkshire Hathaway favorite is National-Oilwell Varco, Inc. (NYSE:NOV) . It currently has a P/E ratio of 12.81 and gross margin of 25.32% compared to the industry’s 18.98 P/E ratio and 24.56% gross margin. The company’s CEO, Mr. Pete Miller, issued an optimistic outlook based on the upcoming expansions in China, Latin America, and Southeast Asia.
Another upcoming major player in the sector is Apache Corporation (NYSE:APA). Apache Corporation (NYSE:APA) has strong presence in the North American energy market. One of the biggest growth factors for it is the 50% stake in the LNG export facility based in British Columbia, Canada. Its share price is currently trading below the industry P/E ratio at 17.99, and its operating margin is 28.46, performing way better than industry’s operating margin of 22.55.
