Occidental Petroleum (OXY, Financial) has been investing in various long-term initiatives that seem to be paying off for it now. Occidental now has many plans aiming at a better performance in the future. It is now ramping up investments in the Permian operation. It is mainly focusing on strengthening its long-term prospects by way of various investments. As such, it is counting on investments in the BridgeTex pipeline and the Al Hosn Gas project, which are expected to be one of the major growth drivers for it in the future.
Investment plans
Moving ahead, Occidental seems on track with the strategic initiatives it has taken in the past. The company had made solid investments in California oil and gas and has built a solid business. The spin-off under the California Resource is now expected to distribute approximately 310 million shares to new California Company to Occidental shareholders by the end of this calendar year. With this Occidental is expected to provide lower unit rates for cash operating costs, DD&A and F&D costs.
Occidental Petroleum is also counting on Williston and Permian Basins as it sees strong growth opportunities with this. It is further focusing on improving its operations in these areas. Occidental is now planning to operate these assets with less capital in order to generate free flow. In addition, it is now focusing on significant investments in the higher growth and return areas in the Permian Basin, driving its growth momentum.
Focus on key assets
The company is searching for other ventures which can drive its profitability. It is now shifting its focus towards Middle East and in fact is making impressive negotiations with it partners towards a partial monetization. This is expected to the business’ ability to improve its profitability further. Occidental Petroleum is confident of generating impressive cash proceeds in future once these initiatives comes in full force.
Occidental is also expecting these cash proceeds to be helpful in the future share repurchase program which will help the company to increase its cash reflecting a strong balance sheet. Occidental has further plans to invest this cash in the strategic acquisitions in the core areas of the Permian Basin.
The company is also alert about the expected soft oil prices in future. If there is a decline in the crude oil prices, Occidental is well prepared to adjust its capital program to manage its cash flows. Moreover, Occidental is expecting the oil and gas production to grow well in 2015. This will give Occidental good opportunities of capital deployment in its Permian Resources.
Conclusion
The company is confident of maintaining a strong balance sheet with impressive cash levels. This will help it to attract many investors improving its market share in the coming quarters. With its core businesses, Occidental will continue to focus on delivering moderate volume growth, generating high earnings and cash flow per share. All these initiatives will help the company to improve its financial returns in future.
