Warren Buffett-backed Occidental Petroleum (OXY) recently reported a decline in Q1 profits as oil prices retreated, causing its shares to edge down after the market closed on Tuesday. The company saw a 42% decrease in Q1 earnings to 63 cents per share, with revenue also falling by 17% to $5.975 billion. Despite the decline, Occidental Petroleum’s total average global production remained steady at 1.172 million barrels of oil equivalent per day, near the mid-point of its guidance.
Analysts had expected a sharper drop in first-quarter earnings, with EPS falling 47% to 58 cents and sales totaling $6.7 billion. The company ended the quarter with operating cash flow of $2 billion, highlighting its focus on executing across its diversified portfolio for free cash flow growth.
Chief Executive Vicki Hollub expressed confidence in the company’s performance, stating, ‘We are executing in all areas of our diversified portfolio and positioned for free cash flow growth.’ Occidental Petroleum’s results come in the wake of better-than-expected earnings from Permian Basin producer Diamondback Energy (FANG) and declines in earnings and revenue from industry giants Exxon Mobil (XOM) and Chevron (CVX).
Despite the challenges faced by the energy sector, Warren Buffett maintains a 6.8% stake in Chevron (CVX), one of the industry’s key players. Occidental Petroleum’s stock saw a slight decline of 0.6% after regular market action on Tuesday, with shares trading at 65.07. The stock had experienced a 5% drop the previous week, falling below its 50-day moving average. While OXY shares have shown an 8% gain in 2024, they remain down by 10% from their April 12 high.
Global factors such as geopolitical risks in the Middle East, uncertain demand growth in China, and rising U.S. stockpiles have influenced oil prices in recent weeks. U.S. prices have dipped below $80 per barrel, with Brent crude futures trading below $83 per barrel on Tuesday. U.S. crude oil futures settled around $78 per barrel the same day.
Despite the evolving energy landscape, financial institutions like UBS anticipate that fossil fuels, including crude oil, will continue to play a significant role in the global energy mix for years to come. The bank projects that oil demand will rise into the 2030s, even as renewables gain traction in the market.
Warren Buffett’s continued interest in Occidental Petroleum is evident through his increased stake in the company over the past year. With a strategic focus on the energy sector, Buffett’s investment decisions reflect a long-term vision for growth and stability in the evolving market.
