Occidental Petroleum Corporation (OXY) reported fourth-quarter 2014 adjusted earnings of 72 cents per share, surpassing the Zacks Consensus Estimate of 68 cents by 5.9%. On a year-over-year basis, however, quarterly earnings plunged 50.7% primarily due to lower crude oil and natural liquids (NGL) realized prices, an increase in depreciation, depletion and amortization expenses and a rise in operating costs as a result of increased workover and maintenance activities.
On a GAAP basis, the company posted a loss of $4.41 per share in the fourth quarter against earnings of $2.04 per share a year ago. The variance between GAAP and adjusted earnings was due to the combined impact of charges from domestic, foreign, chemical and midstream asset impairments and assets under the Joslyn project, a charge associated with mark-to-market adjustments for the California Resources Corporation investments and foreign tax legislation and dividend tax effects, and spin-off charges. This was partially offset by gains from the sale of the BridgeTex Pipeline and a portion of its investment in the Plains All American Pipeline, GP, and tax effect of pre-tax adjustments.
In 2014, adjusted earnings stood at $4.83 per share, missing the Zacks Consensus Estimate of $5.87 by 17.7%. Annual earnings decreased 16.1% from the year-ago figure.
The company’s GAAP earnings per share were 79 cents in 2014 compared with $7.32 a year ago.
Total Revenue
In the quarter under review, Occidental Petroleum's total revenue was $4.31 billion, beating the Zacks Consensus Estimate by 9.2%. The top line dropped 15.3% from $5.09 billion a year ago, primarily due to lower Oil and Gas (23.4% year over year) revenue. This was partially offset by higher contribution from the Midstream, Marketing and Other (38.3%) and Chemical (1.1%) operations.
The company’s total revenue was $19.3 billion in 2014, down 4.3% year over year, missing the Zacks Consensus Estimate by 13.8%.
Quarterly Highlights
Occidental Petroleum’s average daily net oil, liquids and gas production volume was 616,000 barrels of oil equivalents (BOE). The 7.1% year-over-year increase was primarily due to higher contribution from the Permian Resources operations coupled with operational improvements.
The company’s daily sales volume was 635,000 BOE, up 3.3% from 615,000 BOE a year ago due to higher sales volumes in the U.S. and the Middle East/North Africa.
Realized price for worldwide crude oil decreased 27.9% year over year to $71.58 per barrel.
Worldwide realized NGL prices were $27.39 per barrel compared with $40.44 per barrel a year ago.
Worldwide natural gas prices edged up 1.8% year over year to $2.21 per thousand cubic feet (MCF).
Business Update
In 2014, Occidental Petroleum’s domestic reserve replacement ratio stood at 266%, while the total company replacement ratio was 174%. The company’s proved reserves were 2.82 billion BOE at the end of 2014.
Financial Update
As of Dec 31, 2014, Occidental Petroleum had long-term debt (including current maturities) of $6.84 billion compared with $6.94 billion as of Dec 31, 2013. The company’s total debt-to-capitalization ratio was 16%, higher than the Dec 31, 2013 level.
In 2014, the company’s cash from operations was $9.4 billion, down from $10.4 billion in the prior-year period.
In the fourth quarter, Occidental Petroleum’s total capital expenditure was $2.99 billion compared with $1.95 billion in the year-ago period.
Guidance
For 2015, Occidental Petroleum provided a capital expenditure guidance of $5.8 billion.
The company expects oil and gas production to increase 6%–10% in 2015, considering the commencement of the Al Hosn Gas Project.
Other Peer Releases
Hess Corporation (HES) reported fourth-quarter 2014 adjusted earnings from continuing operation of 18 cents per share, lagging the Zacks Consensus Estimate of 28 cents.
Murphy Oil Corporation (MUR) reported fourth-quarter 2014 adjusted earnings of 39 cents per share, surpassing the Zacks Consensus Estimate by 56%.
Zacks Rank
Occidental Petroleum currently has a Zacks Rank #5 (Strong Sell). However, a better-ranked stock in the same sector is Midstates Petroleum Company, Inc. (MPO), carrying a Zacks Rank #2 (Buy).
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