To The Moon

Occidental Petroleum (NYSE: OXY) is scheduled to report its earnings after the market closes on August 6th and as a shareholder, I’m definitely paying close attention. This isn't just another quarterly update for me; it's a check-in on a company I believe has long-term potential, despite the short-term market noise that often surrounds the energy sector.

Occidental (OXY)

While I do own shares, I’ve made the conscious decision not to buy more before earnings. That’s a choice rooted in discipline rather than doubt. Although I have a high degree of confidence in OXY’s business fundamentals, my risk-averse nature keeps me from adding exposure ahead of a potentially market-moving event. Post-earnings volatility can be sharp even for solid companies so I prefer to wait and evaluate the results with a clearer picture.

Undervalued and Underappreciated?

To me, Occidental looks undervalued at current levels. When comparing its valuation multiples (like price-to-earnings and price-to-cash flow) against both historical averages and peers, there’s a compelling case that the market isn’t fully pricing in its strength. Part of this could be due to legacy concerns over debt but it's worth noting that management has made meaningful progress in reducing leverage and improving the balance sheet.

OXY’s strong free cash flow generation and disciplined capital allocation make it a more resilient player in a historically volatile sector. The company has also been committed to returning capital to shareholders e.g., through dividends.

Dividend Yield: Middle of the Pack, But Reliable

While OXY’s dividend yield isn’t exceptionally high, it’s far from negligible. It strikes a healthy balance between offering income and maintaining financial flexibility. This isn’t a yield trap. It’s a company that seems focused on sustainable growth rather than overextending itself with unsustainable payouts.

Energy: Still Relevant in a Changing World

Some investors have cooled on traditional energy, with the market narrative increasingly dominated by renewables and ESG concerns. While the long-term energy transition is real, I believe it’s crucial to acknowledge that oil and gas will remain a vital part of the global energy mix for decades. Even as electric vehicles and renewables gain traction, industrial demand, aviation, petrochemicals, and emerging markets will continue to drive consumption of fossil fuels.

Occidental is also uniquely positioned in this regard. It's not just another oil major. It has made significant moves into carbon capture and enhanced oil recovery technologies. That could prove to be a differentiator in a world where carbon accountability is becoming an increasingly important theme in energy investing.

Macro Tailwinds (and Headwinds)

There are also macro dynamics worth watching e.g., Oil prices, OPEC+ decisions and geopolitical tensions in key producing regions. If crude prices increase, that’s a tailwind for OXY and its peers. On the other hand, any signs of global economic slowdown could weigh on prices and investor sentiment in the short term.

Interest rates also play a role here. A shift toward rate cuts could possibly support risk assets, boost oil demand, and lower financing costs, all of which would benefit companies like Occidental.

Final Thoughts: Cautious Confidence Ahead of Earnings

In summary, I remain bullish on OXY’s long-term prospects, but I’m playing it cautiously in the near term. The fundamentals look strong, the valuation appears attractive, and management seems to have a clear strategy for growth and capital returns.

Earnings will give us a clearer picture of how well they’re executing in this environment and whether my thesis holds. Here's hoping that the numbers affirm what I already believe: that Occidental Petroleum is a high-quality, undervalued company positioned to thrive in the energy landscape of the future.