Why Goldman Sachs Is Turning Bullish On Occidental Petroleum

The potential upside to commodity prices in 2021 and 2022 should boost Occidental Petroleum Corporation’s OXY free cash flows, resulting in net debt reduction, according to Goldman Sachs.

The Occidental Petroleum Analyst: Neil Mehta upgraded Occidental Petroleum from Neutral to Buy while keeping the price target unchanged at $31.

The Occidental Petroleum Takeaways: The company’s stock has underperformed peers by 55% since it announced the acquisition of Anadarko Petroleum in April 2019, Mehta said in the upgrade note.

Occidental Petroleum’s stock has underperformed SPDR S&P Oil & Gas Exploration & Production ETF XOP by 4% year-to-date, the analyst said. 

“While we think debt reduction will continue to be the main focal point for OXY over the medium-term, we believe the extent of underperformance is unwarranted,” he said. 

Mehta cited Exxon Mobil Corporation’s XOM “turnaround story and recent equity performance” as a “positive parallel.”

The analyst said Occidental Petroleum “has the potential to generate 26% total return.”

OXY Price Action: Shares of Occidental Petroleum were up 2.53% at $25.93 at last check.