Occidental Petroleum Corporation OXY is trading above its 200-day simple moving average (“SMA”), signaling a bullish trend. The company is gaining from its focus on the Permian Basin and contributions from acquired assets.
Occidental’s investment plans and production growth support its cash flow generation capacity. The company completed the acquisition of CrownRock L.P., which will further expand and strengthen operations in the Permian Basin. The new discovery of high-quality oil in the Bandit prospect in the Gulf of America will definitely boost production volumes of Occidental in the long-term.
However, due to the ongoing crisis in the Middle East and logistics disruption, it will reduce Occidental’s sulfur sales volume from the area in the second quarter.
OXY’s 200-Day SMA
Image Source: Zacks Investment Research
Another operator in the same industry, Devon Energy Corporation DVN, has a multi-basin portfolio and focuses on high-margin assets that hold significant long-term growth potential. Devon’s cost management initiatives, acquisitions and strategic investments to upgrade and expand its assets will act as tailwinds. The company is also currently trading above its 200-day SMA.
In the past six months, shares of Occidental have gained 42%, while the industry has rallied 35.2% in the same time period.
Price Performance (Six Months)
Image Source: Zacks Investment Research
Should you consider adding OXY stock to your portfolio only based on positive price movements? Let’s delve deeper and find out the factors that can help investors decide whether it is a good entry point to add OXY stock to their portfolio.
Major Catalysts Supporting Occidental’s Outlook
Occidental has continued to benefit from the strategic focus on the Permian Basin, while further expanding its footprint in the region through acquisitions. The acquisition of CrownRock L.P. is expected to enhance and broaden the company’s Permian operations. Occidental also holds nearly a decade’s worth of high-return drilling inventory in the basin under current economic and technical conditions. In addition, production from the CrownRock assets is anticipated to contribute meaningfully to the company’s overall output growth.
Permian Basin assets continue to be a key contributor to Occidental’s production. Permian output is projected at 783-803 thousand barrels of oil equivalent per day (Mboe/d), while total company production is expected at 1,390-1,430 Mboe/d in second-quarter 2026. For 2026, Occidental plans to bring online 460-510 wells in the Permian region and 150-170 wells in the Rockies region, which is likely to boost production volumes.
Occidental announced that it has discovered oil at the Bandit prospect in the Gulf of America. Drilling at Green Canyon Block 680 confirmed extensive, high-quality Miocene sands saturated with oil throughout the entire section. The new discovery of high-quality oil in the Gulf of America will definitely boost production volumes of Occidental in the long-term. The company expects production from the Gulf of America in the range of 130-136 Mboe/d for 2026.
Occidental benefits from its position as a low-cost operator with high-quality assets across multiple regions. This gives OXY a competitive edge over its peers. The company’s strong cost discipline, capital efficiency, technology integration and midstream optimization are expected to support its performance, with plans to achieve $500 million in sustainable cost reductions in 2026 from 2025 levels.
Occidental is divesting non-core assets and generating cash flow, which is being utilized to reduce its outstanding debts. It is working consistently to strengthen the balance sheet and has been successful in repaying debts worth $15.6 billion in the past 22 months, reducing annual interest expenses by $830 million. Through ongoing debt payment, Occidental’s management has reduced its principal debts to $13.2 billion and plans to bring the debt further to $10 billion. The debt reduction will increase financial flexibility and improve the margins of the company.
Headwinds for Occidental Stock
Occidental’s operating results are influenced by shifts in demand and the volatility of both global and local commodity prices. As of Dec. 31, 2025, the company had no active commodity hedges in place, leaving it fully exposed to market fluctuations. A significant decline in commodity prices from current levels could adversely affect OXY’s financial performance.
Occidental’s Earnings Estimates Are Moving North
The Zacks Consensus Estimate for Occidental’s 2026 and 2027 earnings per share indicates an increase of 145.62% and 36.84%, respectively, in the past 60 days.
Image Source: Zacks Investment Research
The same for Devon Energy’s 2026 and 2027 earnings per share indicates an increase of 24.56% and 5.7%, respectively, in the past 60 days.
OXY Stock’s Earnings Surprise History
The stable performance of the company allowed its earnings to surpass estimates in each of the past four quarters, the average surprise being 49.72%.
Image Source: Zacks Investment Research
Another company, ConocoPhillips COP, has low-risk and cost-effective operations spread across North America, Asia, Australia and Europe. ConocoPhillips is poised for a robust production outlook, benefiting from its extensive, untapped drilling locations across prolific shale plays. COP’s earnings beat estimates in three out of the past four reported quarters and missed in one quarter, resulting in an average surprise of 5.78%.
Occidental’s ROE Lower Than the Industry
Return on equity (“ROE”) is a key indicator of a company’s financial performance. It reflects how effectively a corporation uses shareholders' equity to generate profits and is widely regarded as a measure of profitability and operational efficiency.
Occidental’s ROE is lower than the industry average in the trailing 12 months. ROE of OXY was 9.65% compared with the industry average of 10.93%.
Image Source: Zacks Investment Research
Occidental’s Long-Term Debt to Capital
Debt plays a vital role in the oil and gas industry, where companies require heavy capital investments for exploration, drilling, production and infrastructure expansion. Borrowed capital allows firms to pursue major projects, grow reserves and fund acquisitions while preserving liquidity. Prudent debt management also enables companies to navigate commodity price swings and maintain long-term growth momentum.
Currently, courtesy of efficient debt management, Occidental’s long-term debt to capital is pegged at 27.82% lower than its industry average of 29.2%.
Image Source: Zacks Investment Research
ConocoPhillips’ long-term debt currently stands at 25.65%.
Summing Up
Occidental’s focus on lowering debt, backed by strong domestic and international operations along with acquisition-related synergies, is expected to support and enhance its overall performance.
The return on equity of the company is lower than the industry, but the rising earnings estimates, strong price performance, cost savings initiatives and focus on prolific Permian Basin make it attractive.
Given Occidental’s strong presence in the United States and ongoing efforts to reduce debt and strengthen the balance sheet, it could present an attractive opportunity for investors to consider adding this Zacks Rank #1 ( Strong Buy) stock to their portfolios.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Zacks' Research Chief Names "Stock Most Likely to Double"
Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest.
This top pick is a little-known satellite-based communications firm. Space is projected to become a trillion dollar industry, and this company's customer base is growing fast. Analysts have forecasted a major revenue breakout in 2025. Of course, all our elite picks aren't winners but this one could far surpass earlier Zacks' Stocks Set to Double like Hims & Hers Health, which shot up +209%.
Free: See Our Top Stock And 4 Runners UpWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Devon Energy Corporation (DVN): Free Stock Analysis Report
ConocoPhillips (COP): Free Stock Analysis Report
Occidental Petroleum Corporation (OXY): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).