The stock chart for Occidental Petroleum (NYSE: OXY) seems to be telling a story of volatility and struggle. Shares have declined by over 11% in the last three months and by a larger 30% over the past year. For many investors, such a downward trend is an unambiguous signal to stay away.
Yet, a different story is unfolding within the company itself. Beneath the surface of this negative market sentiment, Occidental has been methodically improving its operations and strengthening its finances. This growing gap between Occidental’s stock price and its fundamental health is where investment opportunities are often found. A closer look reveals an energy producer that is becoming more efficient, financially healthier, and uniquely positioned for the future of the energy sector.
How Permian Profits Are Healing the Balance Sheet
At the heart of Occidental’s value is its premier position in the Permian Basin, America's most important oil-producing region. This is the company’s powerful cash flow engine, and it is running more efficiently than ever. The recent integration of CrownRock assets has fortified Occidental’s portfolio with high-quality, low-cost inventory, securing a strong operational base for years to come.
This operational strength directly fuels the strategic transformation of Occidental's balance sheet. The steady profits generated from the Permian are being used to tackle the primary concern that has weighed on the stock: its significant debt. The results of this disciplined approach are clear.
- Aggressive Deleveraging: In the last ten months alone, Occidental has successfully repaid over $6.8 billion in debt.
- Cleared Near-Term Risk: The company has already retired all of its 2025 debt maturities, removing a major financial hurdle ahead of schedule.
- Improved Financial Health: Its debt-to-equity ratio (D/E), a key measure of financial risk, now stands at a much more manageable 0.90.
This focused strategy of turning operational profits into financial strength demonstrates a clear commitment to de-risking the company. It establishes a sustainable foundation for future growth and, importantly, enhances shareholder returns.
Why Buffett’s Billion-Dollar Vote of Confidence in Occidental Matters
It is impossible to analyze Occidental without noting the position of its largest and most famous shareholder: Warren Buffett’s Berkshire Hathaway (NYSE: BRK.A). Holding a stake of nearly 28%, Berkshire’s investment represents a multi-billion-dollar, high-conviction bet on Occidental’s assets, management, and long-term strategy.
This endorsement is multi-layered. Beyond its massive common stock ownership, Berkshire also holds preferred shares that pay a substantial dividend.
In addition, it holds warrants, which are contracts giving it the right to buy millions more shares at a set price in the future. This deep, financially intertwined relationship signals a powerful belief in the company’s future value.
For investors, it serves as a significant vote of confidence that starkly contrasts the stock's recent performance.
How Occidental Is Building a New Revenue Stream
Beyond its oil and gas operations, Occidental is actively pioneering a new industry that could fundamentally reshape its future valuation. Through its Low Carbon Ventures (LCV) business, the company is establishing itself as a leader in Direct Air Capture (DAC), a technology designed to remove CO2 directly from the atmosphere.
Its flagship project, Stratos, is on track to become the world’s largest DAC facility when it begins commercial operations in mid-2025. This is a tangible business that is already winning over major customers. A recent agreement with JPMorgan Chase (NYSE: JPM) to purchase 50,000 metric tons of carbon removal credits provides powerful commercial validation. This proves that there is a growing and paying market for this technology.
This venture provides Occidental with a unique, long-term growth catalyst that is not tied to volatile oil prices, an asset that most of its peers do not possess and one that the market may not be fully pricing in.
A Balanced View on the Path Forward
No investment is without risk. For Occidental, profitability remains sensitive to the unpredictable swings of oil and gas prices. Furthermore, the capital required to build its innovative DAC business is substantial.
However, the company’s strategy includes clear factors to manage these challenges. Its portfolio of low-cost Permian assets provides a strong cushion against weaker commodity prices. At the same time, securing commercial offtake agreements, like the one with JPMorgan, helps de-risk the financial commitment to its carbon capture projects by locking in future revenue.
An Opportunity Based on Fundamentals
Occidental Petroleum’s current market valuation appears to be driven more by its recent stock chart than by its forward-looking fundamentals. A deeper review of the company reveals a different reality: a core business that is growing more efficient, a balance sheet that is rapidly healing, and a leadership position in a new, high-growth industry.
This progress, powerfully endorsed by a major investment from Berkshire Hathaway, suggests a fundamental strength not reflected in the current share price.
For investors focused on underlying value, the current disconnect presents an attractive entry point into a company well-positioned for the modern energy landscape.
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The article "Why Occidental's Price Dip Signals a Buying Opportunity" first appeared on MarketBeat.
