Occidental Petroleum (OXY 2.11%), a key player in the energy sector, released its first-quarter earnings for 2024 on May 7. The earnings release showcased adjusted earnings that fell 42% year over year, but still came in ahead of analyst estimates. The report also shed light on several operational challenges for the oil giant.
| Metrics | Q1 2024 | Q1 2023 | Change (YOY) |
|---|---|---|---|
| Earnings per share (adjusted) | $0.63 | $1.09 | (42%) |
| Operating cash flow | $2.01 billion | $2.87 billion | (30%) |
| Capital spending | ($1.78 billion) | ($1.46 billion) | N/A |
| Free cash flow (adjusted) | $720 million | $1.69 billion | (57%) |
| Average global production (MBOE/D) | 1,172 | 1,220 | (4%) |
Data sources: Company results from Occidental Petroleum. YOY = Year over year. Note: Free cash flow is defined as operating cash flow before working capital less capital expenditures, net of noncontrolling interest. MBOE/D = Million barrels of oil equivalent per day.
Company overview
Occidental Petroleum, also known as Oxy, is a multinational leader in the oil and gas sector. Beyond its traditional oil and gas exploration and production activities, Oxy places a significant emphasis on sustainability and innovative technology within its operations. Its increased focus on carbon management and investments in low-carbon ventures are indicative of its strategic pivot toward a sustainable energy future.
In its most recent quarters, Oxy has prioritized its low-carbon initiatives, focusing on technologies like Carbon Capture, Utilization, and Storage (CCUS), and Direct Air Capture (DAC), which could potentially redefine industry standards for emissions reduction. Alongside environmental endeavors, Oxy's chemical segment, OxyChem, shows the company's adeptness in diversifying its business model to enhance financial stability.
Quarter performance insights
Oxy's adjusted EPS in Q1 reached $0.63, exceeding FactSet's consensus forecast of $0.58 per share and demonstrating the company's operational efficiency and strategic investment. Oxy's ability to generate value amid varying market conditions was a bright spot in an otherwise rough report.
The Oil and Gas segment faced challenges, notably from fluctuating oil prices and reduced volumes. Total average global production was 1.17 million barrels of oil equivalent per day, down 4% year over year and near the mid-point of Oxy's guidance. This segment's pre-tax income saw a decline quarter over quarter due to these external pressures, although it was partially offset by decreased lease operating expenses.
Cash flow from operations came in at around $2 billion for the quarter compared with $2.87 billion in the year-ago period. Total capital expenditure rose to $1.78 billion compared with $1.46 billion in the year-ago period.
OxyChem's significant performance, registering a pre-tax income of $260 million exceeded guidance thanks to improved demand and lower costs, paints a promising picture of Oxy's diversified operations and its proactivity in navigating the market's complexities.
Looking ahead
Looking forward, management expressed optimism about maintaining its operations at current levels and furthering investments in both its core and low-carbon ventures. The company forecast Q2 global production would rise to between 1.23 million to 1.27 million barrels of oil and gas per day, but it forecast wider losses in its midstream business. Exploration expenses are estimated to be $100 million for the second quarter and $325 million for all of 2024.
Investors and stakeholders should closely monitor how Oxy's strategic focus areas, particularly in low-carbon ventures and the chemical segment, evolve in response to external pressures and opportunities. The company's ability to adapt and innovate will be crucial for its long-term success in an ever-evolving energy landscape.
