Why Occidental Petroleum Stock Slumped 15% in the First Half of 2025

by

In the year 2024, the stock of Occidental Petroleum (OXY), which is part of the S&P 500 index, underperformed significantly and dropped by 17%. Regrettably for its oil shareholders, this poor performance has persisted into the first half of 2025, with the value of Occidental’s shares decreasing by an additional 15%, as reported by S&P Global Market Intelligence.

2025 saw a drop in crude oil prices, which isn’t great news for any oil producer. However, one might wonder if there are factors other than oil prices at play with Occidental Petroleum’s decline, or if the market has overreacted and presented investors with an exceptional chance to purchase a stock that has earned the admiration of renowned investor Warren Buffett?

Occidental Petroleum has plenty of cash and is paying bigger dividends

2021 has been quite turbulent for crude oil prices. As early as April, benchmark oil prices plummeted to their lowest point in four years due to uncertainties surrounding tariffs and trade, among other factors. For companies like Occidental Petroleum, this dip in oil prices presents a twofold challenge: it reduces earnings and cash flow, and makes it more difficult for the company to manage its debt, which has grown substantially since its CrownRock acquisition last August.

As a fervent admirer, let me share an impressive feat! Just five months post acquisition, I proudly announce that Occidental swiftly tackled a whopping $4.5 billion debt, smashing its initial 12-month goal. In the first quarter alone, this oil titan smartly disposed of some nonessential upstream assets, as prearranged last year, and chipped away another $2.3 billion from its debt load. Quite impressive, isn’t it?

Loading widget...

Currently, Occidental has successfully repaid all its debts due by 2025, leaving only $284 million maturing within the next 14 months. Given that the company produced an impressive $2.1 billion in operating cash flow during Q1, Occidental is well-positioned to meet its debt obligations through 2026 while also having surplus cash on hand for dividend payments and other investments.

Why Occidental stock can turn around

Based on Occidental’s financial situation, with regard to cash flow and debt, it seems that the stock’s price drop might be excessive. One issue is that Occidental doesn’t protect itself against price fluctuations, which means its income and profits are very sensitive to changes in oil and gas prices. Although not hedging can potentially advantage companies like Occidental during high commodity price periods, it can have a negative impact when the prices of these commodities decrease.

To put it simply, Occidental is still producing robust cash inflows. Additionally, it manages midstream and chemical sectors, both of which performed well in the first quarter, and it’s growing its promising low carbon ventures business. In April, Occidental sealed a 25-year carbon sale contract with fertilizer giant CF Industries to increase the production of reduced-carbon products using sequestration technology.

Despite the general decline in Occidental Petroleum’s share price, which follows a trend in falling commodity prices, the company is steadily strengthening its financial position and is dedicated to increasing its dividend. In April alone, the company boosted its dividend by 9%, currently offering a yield of 2.3%. Should oil prices rebound, this undervalued oil stock could experience a rapid turnaround.

Read More

2025-07-16 21:43