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Can Occidental Petroleum Reduce Its Net Losses in 4Q16?

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Updated

EPS estimates

Occidental Petroleum (OXY) plans to report its 4Q16 and fiscal 2016 earnings on February 9, 2017, before the market opens. For 4Q16, excluding any one-time items, the current consensus EPS (earnings per share) estimate for Occidental Petroleum (OXY) is -$0.02 per share. This equates to a consensus net income estimate of about -$10 million.

On a year-over-year basis, Occidental Petroleum is expected to reduce its losses more than 92% in 4Q16 compared to 4Q15. OXY reported adjusted EPS of -$0.17 per share in 4Q15.

On a sequential basis, excluding any one-time items, Occidental Petroleum’s 4Q16 consensus net income estimate is higher, which should allow the company to see an ~91% loss reduction from 3Q15.

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How OXY’s net income performed in 3Q16

In its most recent earnings release in November 2016, Occidental Petroleum (OXY) reported lower adjusted net income of about -$112 million in 3Q16 from 3Q15. OXY’s adjusted EPS was lower at about -$0.15 per share in 3Q16 from $0.03 per share in 3Q15.

Despite substantially lower revenues in 3Q16, which we’ll discuss in Part 2, Occidental Petroleum reported higher adjusted operating income of -$189 million in 3Q16 compared to -$499 million in 3Q15. OXY’s operating expenses fell ~19% to ~$3.0 billion in 3Q16 from ~$3.7 billion in 3Q15, which positively impacted OXY’s adjusted operating income in 3Q16.

However, lower benefits from domestic and foreign income taxes, higher interest and debt expenses, and higher exploration expenses in 3Q16 decreased OXY’s adjusted net income in 3Q16 from 3Q15.

Reported net income

Occidental Petroleum’s (OXY) 3Q16 adjusted net income excludes its one-time charges of ~$129 million, the majority of which were related to its Midstream and Marketing segments. OXY’s reported net income on a GAAP[1. generally accepted accounting practices] basis was higher on a YoY basis at -$241 million, or -$0.32 per share, in 3Q16 from -$2.6 billion, or -$3.42 per share, in 3Q15.

OXY’s peers Marathon Oil (MRO), Diamondback Energy (FANG), and EOG Resources reported net income of approximately -$97 million (-$0.23 per share), -$2.2 million (-$0.03 per share), and -$190 million (-$0.35 per share), respectively, in 3Q16.

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Fiscal 2016 EPS estimates

For fiscal 2016, excluding any one-time items, Wall Street analysts expect Occidental Petroleum to report lower adjusted net income of about -$690 million, or -$0.90 a share, from ~$91 million, or $0.12 a share, in 2015.

Series overview

In this pre-earnings series, we’ll look at Occidental Petroleum’s (OXY) revenues expectations, recent dividend payment, and how Wall Street analysts view OXY ahead of its earnings release. We’ll also examine Occidental Petroleum’s production guidance, capex guidance, cash flow estimates, institutional investor activity in OXY stock, and how the company’s stock reacted to past earnings.

Lets start with OXY’s revenues estimates.

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