Occidental Petroleum (OXY): Assessing Valuation After Debt Reduction and Carbon Capture Expansion

Occidental Petroleum (OXY) has been making headlines lately, and for good reason. The company has slashed $7.5 billion in debt over the past 13 months, which immediately translates into $410 million less in annual interest payments and a more resilient balance sheet. Now, with the upcoming launch of the Stratos direct air capture facility—a project set to be the largest of its kind—Occidental is signaling a move beyond traditional oil and gas by stepping boldly into the carbon credit market. The push for $500 million in cost cuts and nearly a billion dollars in new divestitures all point to a company determined to tighten operations and open up new growth channels. These moves have started to shape investor sentiment. Although Occidental’s share price is down 6% over the past year and still negative year-to-date, the past month’s 7% gain hints at renewed optimism, likely tied to its strengthened financial footing and the appeal of its carbon capture venture. Momentum that had faded during the year now appears to be picking up, especially as the company draws interest for its partnerships with names like Microsoft and Amazon, and as it continues to hedge against oil market swings. With these strategic shifts and signs of improving momentum, investors may be considering whether Occidental is undervalued and ready for a rebound, or if the market has already taken these developments and future growth prospects into account.

Most Popular Narrative: 13.2% Undervalued

According to Dzitkowskik, Occidental Petroleum could be significantly undervalued when factoring in both its traditional energy business and the emerging carbon capture opportunity.

OXY is a pioneer in CCS, investing heavily in Direct Air Capture (DAC) technology and related infrastructure (for example, the STRATOS facility in West Texas). They aim to make CCS a substantial part of their business. OXY believes CCS could be a multi-trillion-dollar global industry. Their early leadership positions them to capture a meaningful share of this market if it develops as they anticipate.

Curious how Occidental could bridge the gap between old-school energy and a potential carbon capture windfall? The narrative’s valuation is anchored on a transformation that is not fully priced in today. What ambitious profit margin assumptions and forward multiples are driving that double-digit discount? The math behind the fair value might surprise even seasoned investors.

Result: Fair Value of $55.05 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, persistent oil price volatility and uncertainty around the profitability of CCS projects could quickly challenge bullish assumptions about Occidental’s long-term trajectory.

Find out about the key risks to this Occidental Petroleum narrative.

Another View: How OXY's Market Price Stacks Up

Looking at it from a different angle, the market price tells a more cautious story. Compared to similar companies in its industry, OXY actually appears pricier than what fundamentals might suggest. Is enthusiasm for future growth already reflected in the price, or is there another shift coming?

See what the numbers say about this price — find out in our valuation breakdown.

Stay updated when valuation signals shift by adding Occidental Petroleum to your watchlist or portfolio. Alternatively, explore our screener to discover other companies that fit your criteria.

Build Your Own Occidental Petroleum Narrative

If you see things differently or prefer digging into the details on your own, you can craft a personalized narrative in just a few minutes: Do it your way.

A great starting point for your Occidental Petroleum research is our analysis highlighting 2 key rewards and 4 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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