Warren Buffett energy stock Occidental Petroleum posted mixed financial results late Tuesday, missing earnings views while topping revenue estimates. The oil producer also announced it had returned nearly $2 billion to investors in the third quarter while production remained mostly flat. OXY stock traded down Wednesday.
The report from Occidental Petroleum comes after fellow shale producer Diamondback Energy beat earnings estimates while also announcing it had returned nearly $900 million to shareholders.
Energy Stocks: Occidental Petroleum Earnings
Estimates: Wall Street predicted Occidental Petroleum earnings per share of $2.48, a 185% gain, and $9.1 billion in revenue, a 34% increase, according to FactSet. Analysts expected capital expenditures of $1.2 billion, up 100% vs. a year ago.
Results: Occidental Petroleum reported EPS of $2.44, an increase of 180% compared to last year. Sales came in at $9.5 billion, a 40% gain year over year.
The oil producer said it returned $1.8 billion to shareholders through stock buybacks during the third quarter. So far in 2022, OXY has returned $2.6 billion to its stockholders, the company reported.
Occidental Petroleum reported capital spending of $1.1 billion, while production came in at 1.18 million barrels of oil equivalent per day in the third quarter, an increase of less than 1% compared to Q3 2021.
OXY Stock
Occidental Petroleum stock dropped 9.2% to 67.93 during Wednesday market trading. Ahead of earnings Tuesday, shares traded flat around 74.80. OXY stock recently cleared a cup-with-handle buy point of 72.14. The buy range extends to 75.75, according to MarketSmith analysis. Energy stock OXY is currently outperforming the S&P 500, with its RS line at a three-year high.
Houston-based Occidental Petroleum's business exposure is primarily in oil, natural gas liquids and natural gas. It also has a petrochemicals segment that has performed well in recent quarters.
OXY beat estimates when it reported record second quarter profits on Aug. 2. Occidental earnings shot up 888% to $3.16 per share. Revenue increased 81% to $10.7 billion. That was driven primarily by increased oil prices, as oil production volumes remained in line with guidance.
Is OXY Stock A Buy Or A Sell Right Now?
Billionaire investor Warren Buffett has been on an OXY stock buying spree this year, with his Berkshire Hathaway adding more than 20 million shares to its portfolio since July. Berkshire Hathaway has increased its OXY stake to around 21%, according to SEC filings, with warrants to push his holdings above 25%.
Occidental Petroleum ranks fifth in the Oil & Gas-International Exploration and Production industry group. OXY shares have a perfect Composite Rating of 99. OXY has a stellar 98 Relative Strength Rating. The energy stock has an EPS Rating of 80.
Energy Stocks: Diamondback Energy Earnings
Estimates: The Street forecast Diamondback Energy earnings rocketing 119% to $6.45 per share. Analysts expected revenue to gain 26% year over year, to $2.4 billion in Q3. Capital spending was predicted to be $492 million, up 5% from last quarter and a 26% increase vs. last year.
Results: Diamondback Energy reported EPS increasing 120% to $6.48. Third-quarter revenue came in at $2.4 billion, up 26% compared to last year. The company had $491 million in capital expenditures, coming in just below views.
Diamondback Energy also reported that it returned $874 million to its shareholders through repurchasing stock and dividends. This represents around 75% of the company's $1.16 billion third-quarter free cash flow.
Diamondback Energy produced 390,630 barrels of oil equivalent per day in Q3, a 2% increase compared to Q2 and a 3% decrease compared to a year ago.
"We focused on cost control, working to mitigate inflationary pressures associated with the variable components of our cost structure through improved operational techniques," CEO Travis Stice said in a statement Monday.
FANG Stock
Diamondback Energy stock fell 3.7% to 157.55 Wednesday after narrowly rising a fraction higher to 163.55 on Tuesday. FANG stock had recently broke out past an official 162.34 buy point from a cup-base pattern, according to MarketSmith analysis. But that's 18% above the 50-day moving average. Shares shot up 47% since they hit recent lows of 110.97 on Sept. 26.
The Midland, Texas-based energy company primarily produces oil but has significant natural gas operations as well. In Q2, earnings per share increased 194% to $7.07. Revenue climbed 59% to $2.7 billion. Capital spending on operating and nonoperating drilling in Q2 was $468 million.
Well completion services, materials and labor are increasingly expensive and difficult to procure, and much of the drilling has gone to simply holding output levels steady. Spiking oil prices have made holding production steady a winning strategy. Analysts project Diamondback earnings for all of 2022 will rise 126% to $25.50 a share on a 41% sales increase to $9.6 billion.
Shale energy stock Diamondback Energy ranks ninth in the Oil & Gas-U.S. Exploration and Production industry group. FANG shares have a perfect Composite Rating of 99. The stock has a 96 Relative Strength Rating, an exclusive IBD Stock Checkup gauge for share-price movement. The EPS rating is 95.
Energy Stocks And The Oil And Gas Market
The financial reports from OXY and FANG come as President Joe Biden has ramped up criticism of oil producers, but also as oil prices move higher again.
Biden has called on companies to pay higher taxes to lower fuel costs for consumers. The president also said Friday he plans to talk directly with oil companies soon.
U.S. crude oil futures dropped 3.7% to 85.65 per barrel Wednesday, adding to a 2.8% loss Tuesday and dropping back below the $90 mark. Prices rose nearly 9% in October, the first monthly advance since May. Entering November, the production cut of 2 million barrels per day from the Organization of the Petroleum Exporting Countries and its key allies including Russia, known as OPEC+, is officially in effect.
Meanwhile, U.S. natural gas prices fell 3.7% Wednesday to 6.28 per million British thermal units. On Tuesday, futures dropped 8.5% after surging 4.6% Monday. U.S. natural gas futures are up about 53% since the start of the year. However, they are around 40% off 14-year highs hit in August.
Oil Companies Prioritize Buybacks Over Production Gains
This week's financial views from Diamondback Energy and Occidental Petroleum follow a number of energy stocks that announced earnings last week.
Devon Energy reported third-quarter EPS jumping 96% to $2.18 and sales rising 20% to $4.15 billion. Energy stock Marathon Oil topped earnings and sales views, and energy stock Marathon Petroleum reported earnings exploding 969% to $7.81 per share. The week prior, Pioneer Natural Resources beat earnings estimates but missed on revenue.
Please follow Kit Norton on Twitter @KitNorton for more coverage.
