Occidental Petroleum Corporation (OXY) reported second-quarter 2014 adjusted earnings of $1.79 per share, surpassing the Zacks Consensus Estimate of $1.75 by 2.3%. On a year-over-year basis, quarterly earnings increased 13.3% primarily on the back of higher revenues and a lower share count.
On a GAAP basis, the company’s earnings per share were $1.82 compared with $1.64 a year ago. The variance between GAAP and adjusted earnings was due to the combined impact of an after-tax gain related to the sale of Hugoton oil and gas assets, an after-tax charge for the impairment of certain non-producing domestic oil and gas acreage and continuing costs associated with the spin-off of the Californian operations.
Total Revenue
In the second quarter, Occidental Petroleum's total revenue was $6,275 million, beating the Zacks Consensus Estimate of $5,991 million by 4.7%. The top line increased 5.2% from $5,962 million a year ago.
The outperformance was driven by strong contribution from all its segments – Oil and Gas (up 1.8% year over year), Chemical (up 4.6%) and Midstream, Marketing and Other (up 97%).
Production, Sales and Realized Prices
In the quarter under review, Occidental Petroleum’s average daily net oil, liquids and gas production volume was 742,000 barrels of oil equivalents (BOE). A 3.9% year-over-year decline was primarily due to lower production from the company’s international operations as a result of continual field and port strikes in Libya, insurgent activities in Colombia and a decrease in cost recovery barrels in Iraq. This was partially offset by strong contribution from its domestic operations, primarily from the Californian and Permian assets.
The company’s daily sales volume in the reported quarter was 741,000 BOE, down 3% from 764,000 BOE a year ago mainly owing to lower oil and natural gas sales in the Middle East/North Africa, and a decline in natural gas sales in the U.S.
Realized price for worldwide crude oil edged up 2.5% to $100.38 per barrel from the prior-year figure of $97.91 per barrel.
Worldwide realized natural gas liquids (NGL) prices were $42.82 per barrel, up 10.4% from $38.78 per barrel a year ago.
Domestic natural gas prices increased 12% year over year to $4.28 per thousand cubic feet (MCF).
Financial Update
As of Jun 30, 2014, Occidental Petroleum had long-term debt (including current maturities) of $6.8 billion versus $6.9 billion as of Dec 31, 2013. The company’s total debt-to-capitalization ratio was 13%, lower than the Dec 31, 2013 level.
During the first half of 2014, the company’s cash from operations was $5.6 billion, down from $6.2 billion in the prior-year period.
In the second quarter 2014, Occidental Petroleum’s total capital expenditure was $2.7 billion compared with $2.2 billion in the year-ago period.
Peer Comparison
Hess Corporation (HES) reported adjusted second-quarter 2014 earnings of $1.38 per share, surpassing the Zacks Consensus Estimate of $1.20.
Murphy Oil Corporation (MUR) reported second-quarter 2014 adjusted earnings of 90 cents per share, missing the Zacks Consensus Estimate of $1.13 by 20.4%.
Zacks Rank
Occidental Petroleum currently has a Zacks Rank #3 (Hold). However, a better-ranked stock in the same industry is ConocoPhillips (COP), which carries a Zacks Rank #2 (Buy).
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