Oil company Occidental Petroleum lost on Monday, December 8, about 2% on the trading on the background of news that the rating of the company's securities from "neutral" to "below the market" (corresponds to the recommendation "sell") downgraded in JPMorgan, writes Seeking Alpha.
Also analysts reduced the forecast on target prices for Occidental Petroleum shares - from $51 to $44. The reason for this is "relative valuation and higher than average level of debt burden of the company with a cautious attitude to the fundamental factors of the oil market", the edition points out.
And the downgrade, noted JPMorgan analyst Ayun Jayaram, does not reflect operational problems, as Occidental's upstream segment, including its core franchise assets in the Permian Basin in North America, continues to perform strongly.
Details
For the most part, Seeking Alpha explains, the oil company's downgrade is due to the fact that at current prices, Occidental's shares are trading at free cash flow to enterprise value yields for 2026-2027 of 5.2% and 6.1%, respectively, versus 7.6% and 8.6% for large-cap peers. Meanwhile, Occidental Petroleum has a debt ratio of 1.8x, which is above the group average (0.8x) in 2026. The analyst expects that this will result in the company being able to provide lower distributions to shareholders than its peers, and believes that the most prudent use of excess free cash flow in such a case remains to strengthen the balance sheet.
Context
Occidental Petroleum is one of the key companies in the portfolio of Warren Buffett's conglomerate Berkshire Hathaway. As of September 30, 2025, Berkshire's portfolio held about $12.5 billion worth of Occidental shares, which corresponded to about 4% of its entire portfolio. In October, Berkshire Hathaway agreed with Occidental Petroleum to buy its petrochemicals unit, OxyChem, for $9.7 billion, the largest deal for Berkshire since 2022, CNBC noted. Occidental said at the time that the sale of OxyChem would allow the company to reduce debt and eventually resume share repurchases.
In total, Berkshire owns approximately 255.3 million common shares of Occidental Petroleum, or approximately 29% of Occidental's authorized capital stock.
Out of 30 analysts, who watch Occidental securities, 16 do not advise to buy or sell securities of the oil company (recommendation "hold"). 10 on the contrary give signals to buy (ratings "Buy" and "Overweight"). And only four recommend selling Occidental securities, according to Marketwatch.
This article was AI-translated and verified by a human editor
