Summary
- Occidental Petroleum has been a problematic stock to cover, and the future outlook is still uncertain.
- Bank of America upgraded OXY to buy with a price target of $32 from $18 previously. Is it reasonable?
- I believe OXY will continue to drift erratically in 2020 and I recommend to trade short term the stock and avoid being too optimistic.
- Looking for a helping hand in the market? Members of The Gold And Oil Corner get exclusive ideas and guidance to navigate any climate. Get started today »
Source: Occidental Petroleum
Note: The title is using the "chasing rainbows" lyrics (from "no use for a name").
"[...] All I want to do is make sure you stop chasing rainbows. Trusting those around you is an easy thing to do. I'm not saying don't believe in someone that you don't know. Just don't go on thinking that the whole world tells the truth [...]"
Introduction
Occidental Petroleum (NYSE:OXY) is a very provocative oil company that seems to draw a lot of investors for essentially the wrong reasons. This oil company is moving the market due to excess of news headlines mixing well known large investors sparring against each other in a battle of power (Carl Icahn versus Warren Buffett) and the severity of the outcome affected by terrible timing.
Let's face it, sensational headlines often drive the market, and Occidental Petroleum had plenty of that "stuff" since the ill-timed acquisition/merger of Anadarko Petroleum that has been finalized on August 8, 2019.
I qualified the move in a preceding article as one of the worst decisions that I had the opportunity to witness in my business career. It is perhaps important to look again at the deal to understand what I mean.
"Shareholders of Anadarko Petroleum Corporation have overwhelmingly approved their company’s acquisition by Occidental Petroleum for $55 billion in a cash and stock deal, which is one of the largest mergers and acquisitions in the oil and gas industry...
Under the approved deal, Anadarko’s shareholders will receive $59.00 in cash and 0.2934 shares of Occidental’s common stock for every share of Anadarko common stock."
According to Yahoo, OXY closed at $47.13 on August 8, 2019, which means that the deal represented a total valuation of $72.83 for Anadarko shareholders compared to $63.92 previously with Chevron, based on CVX closing price on August 8, 2020, of $123.23. A whopping differential of $8.91 per share.
