Warren Buffett Still Bets On This Energy Play As Wall Street Predicts EPS Falling 60%

Warren Buffett-backed Occidental Petroleum (OXY) reports third-quarter earnings and revenue this week with analysts expecting quarterly profit to fall more than 60%. Buffett, who bought up OXY stock through the first half of the year, has not cooled on the energy play — snapping up an additional four million shares in late October.

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Occidental Petroleum announces third-quarter earnings after energy giants Exxon Mobil (XOM) and Chevron (CVX), another Warren Buffett stock, recently reported worse-than-expected Q3 profit. EPS for both declined more than 40% as results ran up against earnings boosted by the 2022 oil price  spike.

U.S. oil prices and natural gas prices have eased in 2023. On Monday, U.S. crude prices gained around 1.4%, but held below $82 per barrel. In late October, West Texas Intermediate prices advanced to around $90 per barrel as circumstances in the Middle East rattled the oil market.

What Do The Exxon Mobil And Chevron Deals Say About The Oil Industry’s Future?

Meanwhile, Warren Buffett’s Berkshire Hathaway (BRKB) reported Saturday its third-quarter operating profit shot up 41% to $10.8 billion. The conglomerate’s insurance businesses led the way, while the utilities, energy and railroad businesses had profit declines.

Berkshire’s after-tax operating earnings rose 42% to about $7,436 per class A share, easily topping the FactSet consensus of $6,540.

Warren Buffett’s Berkshire Hathaway holds a 25.78% stake in Houston-based Occidental Petroleum. Buffett told shareholders earlier this year he has no intention of taking over the company. Ahead of earnings, between Oct. 23-Oct. 25, Berkshire added 3.92 million OXY shares. The billionaire investor targeted an OXY share price between 62.68-63.04, according to regulatory filings.

The Buffett purchases of OXY began the same day Chevron announced it’s deal for Hess (HES). Occidental, which had been discussed as a possible suitor to Hess, saw shares fall 3.6% that day.

Occidental Petroleum stock edged up 0.6% during Monday’s premarket action. On Friday, the Warren Buffett stock dropped 0.4% to 63.01 Shares have traded sideways in 2023, up a fraction after ending 2022 at 62.99.

Warren Buffett: Occidental Petroleum Earnings

Estimates: Wall Street forecasts OXY earnings falling 64% to 88 cents per share with revenue declining 25% to $7.05 billion

Earnings: Check late Tuesday.

Occidental Petroleum earnings have averaged a decline of more than 39% over the last three quarters. In the second quarter, Occidental Petroleum reported EPS of 68 cents, down 78% vs. 2022, as sales fell 37% to $6.7 billion.

OXY announced oil and gas pretax income for the second quarter of 2023 was $1.1 billion, down 73% from Q2 2022, due to lower domestic natural gas and natural gas liquids prices (NGL) as well as lower domestic crude oil volumes.

The Houston-based oil producer’s average Q2 worldwide crude oil prices fell 22% to $73.59 per barrel, according to OXY. Meanwhile, the company said average worldwide NGL prices decreased 545 $19.08 per barrel in Q2.

Occidental produced 1.218 million barrels of oil equivalent per day, exceeding the midpoint of its guidance. OXY said it expects average full-year production of 1.210 million barrels of oil equivalent per day.

In Q1, OXY forecast full-year production guidance to average 1.195 million barrels of oil equivalent per day. Occidental Petroleum executives previously forecast 2023 production to average 1.18 million barrels of oil equivalent per day, keeping production mostly flat compared to the 1.16 million in 2022.

Occidental Petroleum is the top producer in the Permian Basin and analysts expect more industry consolidation following Exxon’s deal for Pioneer Natural Resources (PXD) and Chevron’s merger with Hess.

The Warren Buffett stock has a 53 Composite Rating of 99. Occidental Petroleum stock has a 57 Relative Strength Rating and a nine EPS Rating.

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