Warren Buffett-backed Occidental Petroleum reported better-than-expected third-quarter earnings and revenue late Tuesday, even as quarterly profit fell more than 50%. Buffett, who bought up OXY stock through the first half of the year, has not cooled on the energy play — snapping up an additional 4 million shares in late October ahead of earnings. OXY shares advanced Wednesday.
Occidental Petroleum saw third-quarter earnings drop 52% to $1.18 per share as revenue declined 24% to $7.16 billion. Analysts predicted EPS of 88 cents and sales totaling $7.05 billion. The top Permian Basin outfit produced 1.22 million barrels of oil equivalent per day in Q3, up 3% compared to last year and exceeding the mid-point of its guidance.
OXY also slightly raised its full-year production guidance. Analysts expect OXY to produce 1.215 million barrels of oil equivalent per day in 2023.
"Our teams continued their outstanding performance across all three of our business segments resulting in our strongest earnings and cash flow from operations to date this year," Chief Executive Vicki Hollub said in the earnings release.
Occidental Petroleum stock gained 1.6% to 61.16 Wednesday during market action. On Tuesday, OXY declined 2.5% to 60.23. Shares have traded sideways in 2023, up a fraction after ending 2022 at 62.99.
OXY Follows Chevron And Exxon
Occidental's results come after energy giants Exxon Mobil and Chevron both reported worse-than-expected Q3 profit. EPS for the U.S. supermajors declined more than 40% as results ran up against earnings boosted by the 2022 oil price spike.
U.S. oil prices and natural gas prices have eased in 2023. On Wednesday, U.S. crude prices slid 0.7%, falling below $77 per barrel to their lowest since August. In late October, West Texas Intermediate prices advanced to around $90 per barrel as circumstances in the Middle East rattled the oil market.
What Do The Exxon Mobil And Chevron Deals Say About The Oil Industry's Future?
Meanwhile, Warren Buffett's Berkshire Hathaway reported Saturday its third-quarter operating profit shot up 41% to $10.8 billion. The conglomerate's insurance businesses led the way, while the utilities, energy and railroad businesses had profit declines.
Berkshire's after-tax operating earnings rose 42% to about $7,436 per class A share, easily topping the FactSet consensus of $6,540.
Berkshire Hathaway holds a 25.78% stake in Houston-based Occidental Petroleum. Buffett told shareholders earlier this year he has no intention of taking over the company. Ahead of earnings, between Oct. 23-Oct. 25, Berkshire added 3.92 million OXY shares. The billionaire investor targeted an OXY share price between 62.68-63.04, according to regulatory filings.
The Buffett purchases of OXY began the same day Chevron announced it's deal for Hess. Occidental, which had been discussed as a possible suitor to Hess, saw shares fall 3.6% that day.
Warren Buffett: Occidental Petroleum Earnings
Occidental Petroleum earnings have averaged a decline of more than 39% over the last three quarters.
On Tuesday, Occidental Petroleum reported oil and gas pre-tax income for the third quarter was $2 billion, up from $1.1 billion in Q2. The company said this increase was primarily driven by higher domestic crude oil prices and volumes. OXY said average worldwide realized crude oil and natural gas liquids (NGL) prices increased by approximately 10% from the prior quarter to $80.70 per barrel and $21.04 per barrel, respectively.
Meanwhile, income from the company's OxyChem business totaled $373 million in Q3, falling 14% sequentially due to lower caustic soda prices.
In a separate release Tuesday, Occidental Petroleum announced BlackRock will invest $550 million in Stratos, a direct air capture (DAC) facility in Texas. Stratos is designed to capture up to 500,000 tons of carbon dioxide per year and "construction activities" are about 30% complete, according to OXY. The facility is expected to be commercially operational in mid-2025.
In the second quarter, Occidental Petroleum reported EPS of 68 cents, down 78% vs. 2022, as sales fell 37% to $6.7 billion. In Q2, Occidental produced 1.218 million barrels of oil equivalent per day, and forecast average full-year production of 1.210 million barrels of oil equivalent per day.
In Q1, OXY forecast full-year production guidance to average 1.195 million barrels of oil equivalent per day. Management previously forecast 2023 production to average 1.18 million barrels of oil equivalent per day, keeping production mostly flat compared to the 1.16 million in 2022.
Occidental Petroleum is the top producer in the Permian Basin and analysts expect more industry consolidation following Exxon's deal for Pioneer Natural Resources and Chevron's merger with Hess.
Occidental stock has a 43 Composite Rating out of 99. The Warren Buffett stock also has a 42 Relative Strength Rating and a nine EPS Rating.
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