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Understanding Occidental Petroleum’s 2Q17 Earnings

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Part 4
Understanding Occidental Petroleum’s 2Q17 Earnings PART 4 OF 8

Did Occidental Petroleum Generate Positive Free Cash Flow in 2Q17?

Operating cash flow

For 2Q17, Occidental Petroleum (OXY) reported operating cash flow of ~$1.9 billion, which is ~29% higher than Wall Street analysts’ expectations for ~$1.4 billion in cash flow. On a year-over-year basis, OXY’s 2Q17 cash flow is ~64% higher than ~$1.1 billion in 2Q16.

Due to lower realized crude oil (USO) and natural gas (UNG) prices, Occidental Petroleum’s cash flow dropped steeply in 1Q15. In 1Q15, Occidental Petroleum reported its lowest-ever cash flow of $561.0 million since 2004. In 2015 and 2016, Occidental Petroleum reported lower cash flows when compared with the preceding years. In 2Q17, OXY reported its highest cash flow since 1Q15.

Did Occidental Petroleum Generate Positive Free Cash Flow in 2Q17?

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Free cash flow

In 2Q17, Occidental Petroleum spent ~$1.1 billion in capital expenditures. OXY’s free cash flow is positive at ~$720.0 million (~$0.94 per share). At the end of 2Q17, Occidental Petroleum’s cash balance stood at ~$2.2 billion.

Capital expenditures

In 2Q17, Occidental Petroleum’s capital expenditures were ~$1.1 billion, ~78% higher than OXY’s capital expenditures of ~$636.0 million in 2Q16. OXY’s 2Q17 capital expenditures are higher due to the ~$358.0 million spent on asset purchases. Excluding the asset purchases, OXY spent ~$779.0 million on its business segments in 2Q17.

Out of this, OXY spent $298.0 million on Permian Resources, $87.0 million on Permian EOR (enhanced oil recovery), $135.0 million on Middle East operations, $73.0 million on its Chemical business, and $89.0 million on its Midstream and Marketing business.

For fiscal 2017, Occidental Petroleum expects higher capital expenditure in the range of $3.0 billion–$3.6 billion. OXY’s fiscal 2017 capital expenditure guidance is much higher when compared with OXY’s fiscal 2016 capital expenditures of $2.9 billion.

OXY plans to devote the majority of its fiscal 2017 capital budget to crude oil and natural gas development, with Permian resources receiving the largest increase in capital.

Other upstream players

The S&P 500 ETF (SPY) contains energy companies like Devon Energy (DVN) and ConocoPhillips (COP). DVN and COP reported cash flows of $1.53 per share and $1.47 per share, respectively, in 2Q17.

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