Occidental Petroleum missed first-quarter earnings views Tuesday as sagging oil and natural gas prices weighed down profits. Meanwhile, Warren Buffett told investors over the weekend he has no intention to take over Occidental Petroleum even though he and Berkshire Hathaway "love" their current OXY shares.
Warren Buffett: Occidental Petroleum Earnings
Estimates: Wall Street forecast EPS falling 42% to $1.24 in the first quarter, according to FactSet. Analysts predicted revenue dropping around 11% to $7.46 billion. For the year, consensus views call for a 43% earnings decline and a drop of nearly 17% in revenue.
Results: Occidental Petroleum reported revenue slipping 13% to $7.26 billion in Q1. OXY earnings sank 48% to $1.09 per share.
Pre-tax income from oil and natural gas sank 36% to $1.6 billion in Q1 due to lower worldwide crude oil and U.S. natural gas prices.
Occidental Petroleum produced 1.22 million barrels of oil equivalent per day in the first quarter, up 13% from last year. OXY raised its full-year production guidance to average 1.195 million barrels of oil equivalent per day. Occidental Petroleum executives 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.
Cash flow from operations came in at $2.9 billion, falling 10% compared to Q1 2022. Meanwhile, free cash flow dropped 33% in Q1, totaling $1.69 billion. Occidental Petroleum repurchased $752 million worth of stock, on pace for its 2023 $3 billion repurchase program.
At the end of Q4, OXY announced plans to return $3 billion to shareholders through share buybacks in 2023. Occidental Petroleum also increased its dividend by 38%. In 2022, Occidental Petroleum returned $562 million to shareholders in the fourth quarter, and a total $3 billion in both buybacks and dividends.
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The Inflation Challenge
In late February, Occidental Petroleum missed analysts' fourth-quarter earnings targets. OXY reported earnings falling 9% to $1.61 per share in Q4 while revenue increased 4% to $8.22 billion. On the year, EPS ballooned 267% to $9.35, while sales shot up 43% to $36.63 billion.
In February, Hollub told investors during the Q4 earnings call that OXY anticipated "inflation will continue to be a challenge" for the energy sector in 2023. The CEO added the expectation is of a 15% inflation impact on OXY's domestic oil and gas business compared to 2022.
U.S. crude oil futures dropped 1% to around $72.94 Wednesday. This follows four consecutive days of increases after oil prices slumped below $64 in midday trade Thursday amid concerns with the banking sector, a possible U.S. debt default and fear of a recession.
U.S. natural gas hovered around $2.42 per million British thermal units Wednesday.
Natural gas futures undercut the $2 mark in late February 2023 for the first time since September 2020. Natural gas prices have declined around 80% from their August 2022 peak of $10.
Warren Buffett And OXY Stock
Occidental Petroleum stock fell 3.6% to 56.83 Wednesday during market trade. Ahead of earnings Tuesday, shares traded flat.
Through the latter half of 2022 Buffett loaded up on OXY , with the billionaire investor targeting shares in the $57-$61.5 price range.
Berkshire has substantially increased its stake in the international oil play over the past year, putting OXY among Buffett's top holdings. Ahead of earnings, the "Oracle of Omaha" said Saturday his company has no plan to maneuver into a position of control.
"We will not be making any offer for control of Occidental," Buffett said during Berkshire Hathaway's annual shareholder meeting.
After a buying spree in March, Buffett currently has a 23.5% stake in the Houston-based energy company, or roughly 211 million shares. In August, 2022, the Federal Energy Regulatory Commission granted Buffett and Berkshire Hathaway approval to purchase up to 50% of available OXY stock.
"We love the shares we have," Buffett said Saturday. "We may or may not own more in the future but we certainly have warrants on a very substantial amount of stock.
"I'm glad we have them," Buffett added.
Occidental Petroleum stock ranks third in the Oil & Gas-International Exploration and Production industry group. OXY has a Composite Rating of 60. Occidental Petroleum stock has a 36 Relative Strength Rating. Shares have an EPS Rating of 66.
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