OXY - Embedded Expectations Analysis - 2020 02 06
ï€ Occidental Petroleum Corporation (OXY:USA) currently trades below historical averages relative to UAFRS-based (Uniform) Assets, with a 1.1x Uniform P/B. At these levels, the market has muted expectations for the firm, and management may be concerned about their Anadarko acquisition, drilling operations, and low-carbon initiativesï€ Specifically, management may be exaggerating their ability to address industry headwinds and better execute CO2 enhanced oil recovery through their Anadarko acquisition, and they may be concerned about the value of their investments in new technologies. Moreover, they may be overstating the efficiency of their drilling operations, and they may lack confidence in their ability to compete in the Permian midstream business and sustain capital savings. Finally, management may be exaggerating the cash flow generation potential of their low-carbon initiatives
Occidental Petroleum has three reporting segments: oil and gas, which explores for, develops and produces oil and condensate, natural gas liquids (NGL) and natural gas; chemical, which mainly manufactures and markets basic chemicals (chlorine, caustic soda, chlorinated organics, potassium chemicals, ethylene dichloride, chlorinated isocyanurates, sodium silicates and calcium chloride) and vinyls (vinyl chloride monomer, polyvinyl chloride and ethylene); and marketing and midstream, which purchases, markets, gathers, processes, transports and stores oil, condensate, NGL, natural gas, carbon dioxide and power.
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- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
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- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
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