Share Occidental Petroleum (NYSE: OXY) It is currently trading at a price 20% below the pre-Covid level observed in January 2020, but competitors’ stocks ExxonMobil (NYSE: XOM) It remains 5% lower. Does it make OXY stock a better choice than XOM? Occidental Petroleum is an independent exploration and production company with operations in the United States, Middle East, and Colombia, while ExxonMobil is a prominent integrated oil and gas major. As both companies’ finances rely on benchmark prices, lower expectations over the next few years have resulted in significant impairment costs and a shrinking asset base. While OXY stocks are a risky choice due to their high financial leverage, short-term benchmark price forecasts benefit the company’s cash flow and de-leverage goals. Interactive dashboard analysis compares historical revenue growth, revenue, multiples of valuation, and many other factors. Occidental Petroleum vs ExxonMobil: Industry buddies; which stock is a better bet?
1. Revenue growth
Occidental Petroleum growth has been much stronger than ExxonMobil in recent years, with Occidental revenue growing at an average rate of 27% from $ 10 billion in 2016 to $ 21 billion in 2019. ExxonMobil’s revenue shows an average growth rate of $ 208 billion to 8%. In addition, Occidental reported a 15% reduction in the top line compared to 31% for ExxonMobil in 2020.
- ExxonMobil’s four business segments, upstream, downstream, chemicals, enterprises and others, account for 9%, 80%, 10% and 1% of total revenue, respectively. However, asset allocation is biased towards upstream businesses and also generates most of the revenue. The company’s upstream, downstream, chemical, enterprise and other segments account for 65%, 18%, 11% and 6% of total assets, respectively.
- Occidental Petroleum’s three business segments, Oil & Gas, Chemical, and Midstream & marketing, account for 63%, 18%, and 19% of total revenue, respectively. The company’s oil and gas segment is a major revenue contributor, accounting for 78% of total assets.
- In addition to lower earnings, ExxonMobil and Occidental Petroleum reported that their 2020 impairment reduced their total wealth base by 25% (year-on-year) and 8% (year-on-year), respectively.
2. Returns (profit)
The two companies have incurred significant impairment costs over the last two years and will compare their ability to generate funds. In 2018, ExxonMobil generated $ 36 billion in operating cash and total revenue of $ 290 billion. This means that the operating cash flow margin is 12.4%. Occidental Petroleum, on the other hand, had total revenue of $ 18.9 billion, operating cash flow of $ 7.6 billion and a margin of 40%.
- Interestingly, Occidental’s cash-generating capacity appears to be significantly higher than ExxonMobil, but the difference is primarily due to Exxon’s downstream operations, which operate with very thin margins. Exxon’s downstream presence also makes its product portfolio more diverse and less prone to oil price volatility.
- In 2018, Exxon invested $ 16 billion in real estate, plants and equipment and returned $ 14 billion in dividends to shareholders. In particular, the company returned 40% of its operating cash to shareholders as a dividend.
- In 2018, Occidental Petroleum used $ 3.2 billion in investment activities and returned $ 3.5 billion through dividends and repurchases to shareholders. Therefore, the company returned 47% of its operating cash to shareholders.
- In 2019, Occidental acquired Anadarko Petroleum
This will lead to a $ 28 billion surge in long-term debt. (((Related: Renewable energy bank?Choose BP stock from Exxon)
- Regular dividend payments are a major shareholder return policy adopted by the oil and gas industry, and ExxonMobil has done so during the pandemic, despite impairment costs and uncertain macroeconomic recovery. Was maintained. On the contrary, Occidental’s high interest rate costs led to the suspension and sale of dividends to strengthen its balance sheet.
In 2020, ExxonMobil and Occidental Petroleum reported long-term debt of $ 47 billion and $ 35 billion, respectively. OXY stocks are a riskier bet than XOM, given that Occidental’s earnings are significantly lower and longer-term debt is higher than ExxonMobil.
- Higher financial leverage, coupled with continued earnings growth, is a boon to generate surplus equity returns. However, as earnings decline, interest expense puts pressure on the finances, limiting dividend payments and capital expenditures.
- Therefore, Occidental’s higher financial leverage may support strong cash generation in today’s high benchmark price environment. (((Related: Why ExxonMobil Stocks Are Not A Good Choice For The Energy Sector)
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