How Will Occidental Petroleum (OXY) Stock React To Its Dolphin Energy Sales Negotiation?

NEW YORK (TheStreet) -- Occidental Petroleum (OXY)  is in negotiations to sell at least a fifth of its 24.5% stake in Dolphin Energy to Mubadala Development, an Abu Dhabi-owned investment firm, according to the Wall Street Journal.

Mubadala already owns a 51% steak in the Dolphin Energy pipeline project, valued at $3.5 billion,  which has the capacity to transport up to 3.2 billion cf/day of gas from Qatar to the United Arab Emirates and Oman.

Reports also suggest that Occidental Petroleum may be in talks to sell up to a 30% stake in its $10 billion Shah natural gas project to Mubadala.

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TheStreet Ratings team rates OCCIDENTAL PETROLEUM CORP as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"We rate OCCIDENTAL PETROLEUM CORP (OXY) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins, increase in net income, largely solid financial position with reasonable debt levels by most measures and increase in stock price during the past year. We feel these strengths outweigh the fact that the company shows weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • OXY's revenue growth has slightly outpaced the industry average of 3.0%. Since the same quarter one year prior, revenues slightly increased by 5.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • 48.97% is the gross profit margin for OCCIDENTAL PETROLEUM CORP which we consider to be strong. Regardless of OXY's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, OXY's net profit margin of 22.80% significantly outperformed against the industry.
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Oil, Gas & Consumable Fuels industry average. The net income increased by 8.2% when compared to the same quarter one year prior, going from $1,322.00 million to $1,431.00 million.
  • OXY's debt-to-equity ratio is very low at 0.16 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.93 is somewhat weak and could be cause for future problems.
  • The stock price has risen over the past year, but, despite its earnings growth and some other positive factors, it has underperformed the S&P 500 so far. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • You can view the full analysis from the report here: OXY Ratings Report

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