Occidental Petroleum: Turn the oil shock to your advantage

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.