Occidental’s Underperformance of Crude Oil and Natural Gas
Crude oil and natural gas prices
Last week (ended August 18, 2017), crude oil (USO) prices retreated from $48.82 per barrel to $48.66 per barrel, which was a fall of less than one percentage point. Crude prices found support at their 50-day moving average, which now stands at $46.53. Crude oil is now trading below its 200-day moving average price, which stands at $49.42.
Occidental Petroleum’s (OXY) production volume mix contains ~63% crude oil and ~14% natural gas liquids. OXY’s production volume mix thus contains ~77% liquids.
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Natural gas (UNG) prices fell ~3% last week, from $2.98 per MMbtu (million British thermal units) to $2.89 per MMbtu. OXY’s production volume mix contains ~23% natural gas.
Due to the lower crude oil (USO) and natural gas (UNG) prices last week, OXY’s stock price underperformed crude oil and natural gas prices. OXY’s stock price fell ~3%, from $61.13 to $59.15. Despite its increase on the first day of the week, OXY’s stock price fell from Tuesday to Thursday, which pushed the stock price performance into negative territory for the week.
OXY announced its 2Q17 earnings on August 2, beating EPS (earnings per share) estimates by $0.05. OXY reported an adjusted profit of $0.15 per share. The Wall Street analyst consensus estimate was $0.10 per share.
Due to declining crude last week, the Energy Select Sector SPDR ETF (XLE) underperformed the S&P 500 ETF (SPY). While SPY fell 0.58%, XLE fell ~2%. Pioneer Natural Resources (PXD) and EOG Resources (EOG) fell ~2% and ~5%, respectively, last week. Like Occidental Petroleum, Pioneer Natural Resources, and EOG Resources all have operations in the Permian Basin.
Notably, XLE generally invests at least 95% of its total assets in oil and gas companies.
In the next part, we’ll take a look at OXY’s implied volatility.