Occidental Petroleum: Turn the oil shock to your advantage
Meanwhile, gasoline prices, up about 20% in the past six months alone, and about 100% in the past four years, show few signs of moderating in the months ahead.
It's the era of high oil/energy prices, and until a readily-available, affordable energy substitute is found and/or oil prices decline, the oil / oil services sector will be in demand, which bodes well for Occidental Petroleum Corporation (NYSE: OXY).
Occidental has what analysts like: a geographically diverse reserve base, demonstrated production, substantial liquidity, and a 185% organic reserve replacement rate.
More positives: Occidental has done a pretty good job containing costs, with estimated, per barrel finding/development costs below the sector's average. The Reuters FY 2008/FY 2009 earnings per share (EPS) consensus estimates for OXY are $8.12 to $7.81.
The risks? Analysts are keeping an eye on OXY's long-term debt, and the company remains vulnerable to sustained slumps in oil/natural gas prices. But as long as oil remains above $70 per barrel -- which is likely -- Occidental looks like it will perform reasonably well in the immediate years ahead.
Finally, Occidental's modest p/e of 13 lowers the risk/return for the stock, unless you see oil heading under $70 per barrel. But don't hold your breath waiting for that to occur.
The First Call mean rating for OXY is: Buy [19 firms]. Mean 2008 target: $89.00 [high: $100, low: $62].
Stock Analysis: Occidental Petroleum is a moderate-risk stock not suitable for low-risk investors. Investors with an investment horizon longer than 1 year should be rewarded from OXY's shares. More-cautious investors may choose to wait until OXY pulls back to around $85-86, but keep in mind that OXY's shares may not retreat to that level. Sell/ Stop Loss if you were to purchase shares in this company: $62.
Disclosure: Lazzaro has no positions in stocks. In addition to private real estate holdings, he owns corporate and municipal bonds, and cash certificates of deposit.
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Reader Comments (Page 1 of 1)
5-07-2008 @ 12:04AM
Mike Sanders said...
The oil game looks good, very long term. Short term, I see a sharp pullback... Oil is over-extended!
I'm not sure about OXY, individually, but I would short oil, now! Short positions carry a significant risk, as does oil... This is not something for a begginer to try, but if you understand commodities and short selling, a small wager on lower crude prices, short-term, may be somewhat profitable. Long-term, oil will probably march higher... Call it a correction, to an over-extended run, if you will.
This does not represent the opinion of AOL, Time-Warner, or the majority of oil speculaters. The current price of oil is $120.21, for the record.