Oxy – well oiled? – eToro

Oil and gas exploration company Occidental Petroleum, or Oxy as the company is known, has had a rough ride so far this year.

The outbreak of Covid-19 caused the price of oil to plummet as supplies quickly exceeded demand. At one stage, the oil price fell below zero as storage facilities reached capacity.

Houston-based Oxy’s share price tumbled between March and April as the coronavirus pandemic spread, prompting miners of fossil fuels to shut down operations indefinitely.

It is fair to say that even as conditions have improved, much of the mining sector is now out of favour among investors, with Oxy among many companies to have taken a hit. 

However, Occidental has something else weighing on its value – it was saddled with $40bn of debt following the acquisition of Anadarko Petroleum.

The rather controversial deal to buy Anadarko completed in August last year, with Occidental beating Chevron to acquire its oil rival. Warren Buffett’s Berkshire Hathaway helped to finance the deal.

But, since then, Occidental’s market capitalisation, which had been around $50bn before the acquisition, has dwindled to $13bn.

Oxy recently announced it was slashing its dividend – yet again – to $0.01 per share, having previously reduced its quarterly dividend to $0.11 cents a share in March.

But with the oil price having rallied to around $38 for WTI Crude and $41 for Brent Crude, as countries including China, the UK and US have eased lockdown restrictions, more cars and lorries are back on the roads and there are signs the sector is on its way to a recovery – albeit a long one.

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Oxy has been one of the energy stocks shaking off its worries to lead energy stocks higher.

At the end of May, Oxy shareholders voted to give activist billionaire investor Carl Icahn three seats on the board. Mr Icahn was fairly critical about the Anadarko acquisition and it is hoped his new advisory position will help turnaround the company’s fortunes.

With a share price below 42% below where it started the year, but seeming to gain each day, Oxy could be one recovery story to come out of the recent crisis. 

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