Why Occidental Petroleum Stock's Momentum Matters: A Technical and Fundamental Deep Dive

Occidental Petroleum Corporation (OXY) has recently captured market attention with its stock price climbing above key technical levels. The energy company is currently outperforming its 50-day moving average, a sign that reflects broader strength in U.S. oil equities, particularly following geopolitical developments that have benefited the sector.

Understanding the Recent Rally and Market Backdrop

Recent momentum in Occidental shares—up 1.5% over the past month versus a 0.9% industry gain—stems from multiple catalysts. The broader U.S. oil sector has rallied on geopolitical expectations, though Occidental has no direct Venezuela exposure, unlike some competitors. The company’s recent strategic moves have also fueled investor confidence.

Transformation Through Asset Sales and Debt Reduction

A critical turning point for Occidental came with its $9.7 billion sale of its chemical business (OxyChem) to Berkshire Hathaway. The company plans to deploy $6.5 billion of these proceeds toward debt reduction, targeting a principal balance below $15 billion. This deleveraging strategy reshapes Occidental’s capital structure and positions the firm to focus exclusively on higher-return upstream oil and gas operations.

Production Growth Engines: Permian Basin and International Assets

Occidental’s growth narrative centers on two pillars. Domestically, the Permian Basin remains its production backbone, expected to contribute 795-815 thousand barrels of oil equivalents per day (Mboe/d) in Q4 2025, with total company output forecast between 1,440-1,480 Mboe/d. The company plans to bring 545-565 company-operated wells online in the Permian, further expanding production capacity.

The 2024 acquisition of CrownRock L.P. injected high-margin, low-breakeven assets into Occidental’s portfolio, demonstrating the company’s strategy of inorganic growth. Internationally, assets including Qatar’s Dolphin gas project, Oman’s Mukhaizna oilfields, and UAE’s Al Hosn Gas are expected to deliver 230-236 Mboe/d in Q4 2025, providing geographic diversification and cash flow resilience.

Operational Efficiency as a Competitive Advantage

Occidental’s cost management initiatives target $500 million in cumulative reductions throughout 2025. Since 2023, the company has achieved $2 billion in annualized cost savings across U.S. onshore operations, translating into improved cash flow and margin expansion—critical for sustaining shareholder returns.

Challenges That Cannot Be Ignored

The company’s financial performance remains vulnerable to commodity price volatility. As of December 31, 2024, Occidental held no active commodity hedges, leaving it fully exposed to market swings. Any significant decline in oil and gas prices from current levels could meaningfully pressure earnings and cash flow generation.

Valuation and Earnings Concerns

The consensus estimates paint a cautionary picture. Zacks projects Occidental’s 2025 and 2026 earnings per share to decline 34.97% and 46.56% year-over-year, respectively—steeper declines than industry peers like Chevron (projected at 26.97% and 4.14% respectively). This earnings trajectory raises questions about the sustainability of current valuations.

Trading at a trailing 12-month EV/EBITDA of 5.21X versus the industry average of 4.46X, Occidental commands a valuation premium despite these declining earnings estimates. Additionally, the company’s return on equity stands at 12.35%, lagging the industry average of 13.57%.

One Consistent Bright Spot: Earnings Surprises

Offsetting some concerns is Occidental’s track record of beating earnings expectations. Over the last four reported quarters, the company surpassed consensus estimates each time, posting an average surprise of 27.8%—suggesting management’s ability to extract value and surprises investors positively.

The Bottom Line for Occidental Stock

Occidental maintains a Zacks Rank #3 (Hold) rating. While the company’s debt reduction efforts, combined with robust Permian operations and successful acquisitions, provide structural support, investors must weigh these positives against declining earnings projections and elevated commodity price risk. The stock’s premium valuation relative to peers and below-average return on equity further temper enthusiasm. For investors seeking exposure to domestic oil production with international diversification, Occidental remains relevant—but at current levels, a cautious stance appears warranted.