Earnings from major oil companies have been less than impressive in spite of a considerable rise in profits as a result of high oil prices. The most recent earnings reports have revealed several oil and gas outfits that have come out stronger than competitors and could offer a strong potential upside in the remainder of the year.
Occidental Petroleum (OXY)-Occidental succeeded in surpassing Wall St. earnings expectations and increasing North American production, among the goals of many domestic oil and gas companies, as the nation attempts to be more self-sufficient with energy creation. Third quarter 2011 operating earnings added a massive 47.3 percent to $2.18 per share from precious levels of $1.48 per share.
Occidental underperformed last quarter, which has depleted the share price by around 17 percent over the last six month period. Now, the company could have significant upside against many larger cap competitors that underperformed in spite of a number of factors in their favor. Last week OXY outperformed the larger sector as high domestic volume and plans to increase the number of wells drilled in California from 107 to around 154 has prompted more optimism on shares.
One analyst that covers that shares, Edward Westlake of Credit Suisse projects that the stock may have as much as a 40 percent upside based on the new earnings.
Chevron (CVX)- Like Occidental Chevron impressed after beating Wall Street expectations during the third quarter. Net income for the company reached $7.83 billion of $3.92 per share from previous levels of $3.77 billion in the year-earlier quarter, Revenue added 29.6 percent.
Strong earnings and cash flow seemed to indicate the company was able to effectively leverage the higher price of crude unlike many of its major competitors. Additionaly, Chevron’s recent decision to develop the Wheatstone LNG projects was cited as a “major milestone” by the company’s Chairman and CEO John Watson. Watson believers that the Wheatstone development willm continue to help supply strength by activating the massive energy resourced in their Australia interests and serve to help meet growing energy demand in the Asia-Pacific region.
Taking advantage of emerging market growth and the trend toward natural gas could be a boon for the company especially as oil production for the company looked a little light for the quarter.
One analyst surveyed by MarketWatch, Phillip Weiss of Argast lauded the oil and gas company for the best unit profitability among the major competitors.
Between the two companies, though both had strong earnings, Occidental appears better positioned for growth given that they have fallen YTD whereas Chevron is up nearly 17 percent. Additionally, Occidental’s increased production and shale interests in South Texas and the Williston Basin are solid growth prospects that could help push it much higher from current levels.