uploads///OXY FCF Trend

Why Occidental Petroleum’s Operating Cash Flow Increased in 2017

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Aug. 18 2020, Updated 9:31 a.m. ET

Occidental Petroleum’s normalized free cash flow in 2017

As we saw in part one of this series, Occidental Petroleum (OXY) had normalized free cash flow (or FCF) of ~7% in 2017, which is the seventh highest among the upstream producers we have been tracking. To know more about our normalized free cash flow methodology and filtering criteria, refer to part one of this series. In this part, we’ll study OXY’s free cash flows and normalized free cash flows in detail.

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Occidental Petroleum’s free cash flow trend

For full-year 2017, Occidental Petroleum (OXY) reported positive free cash flow (or FCF) of ~$333 million, which is much higher than its FCF of ~-$1.4 billion in 2016. In the last four quarters, Occidental Petroleum’s (OXY) FCF showed a mixed trend.

Occidental Petroleum’s normalized free cash flow trend

For full-year 2017, Occidental Petroleum’s (OXY) normalized FCF (free cash flow) increased from -41% in 2016 to ~7% in 2017. The steep increase in OXY’s normalized FCF in 2017 can be attributed to the steep increase in its OCF (operating cash flow) and the marginal decrease in capital expenditures in 2017 when compared with 2016.

Occidental Petroleum’s OCF increased strongly by ~48% to ~$5.0 billion in 2017 from ~$3.4 billion in 2016. The year-over-year increase in Occidental Petroleum’s 2017 production from ongoing operations coupled with higher realized prices for crude oil (USO), natural gas liquids, and natural gas, affected OXY’s OCF positively. OXY reported ~26% higher worldwide crude oil (USO) realized prices of $48.93 per barrel in 2017 from $38.73 per barrel in 2016.

In contrast to higher OCF in 2017, Occidental Petroleum’s capital expenditures decreased marginally by ~2% to ~$4.7 billion in 2017 from ~$4.8 billion in 2016. From 1Q17 to 4Q17, OXY’s normalized free cash flow showed a mixed trend.

Occidental Petroleum’s stock performance in 2018

Year-to-date in 2018, OXY’s stock is down -10.5% and has underperformed the Energy Select Sector SPDR Fund (XLE), which represents an index of stocks across the energy sector. Year-to-date in 2018, XLE is down ~6.4%. In comparison, crude oil (USO) is up ~6.4% in 2018.

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