Author Topic: Nice dip today .. what are you buying?  (Read 3978 times)

BicycleB

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Re: Nice dip today .. what are you buying?
« Reply #50 on: April 21, 2021, 08:59:38 AM »
Today is the one year anniversary of WTI going negative, so yes, Occidental and everyone else in OG has had an absolutely terrible trailing twelve months, hence the awful eps and the very low share price. 

I'm not going to go into all the details (the oil industry is pretty COMPLEX) but OXY can produce a barrel of oil for considerably less (some estimate ~$25/barrel for production costs(!)) than what they are selling it for right now (and have been since November).  They produce millions of barrels of oil every week (~1.1m barrels a day), so each week the price of oil stays > $60, they are a free cash flow producing machine.   Example: Let's say a barrel of oil costs them $40 (conservative estimate) to produce and they are selling it for $60 (current WTI is $62.61) that's $20/barrel profit, so $20*$1.1m = $22m/day.  They are making 22 million dollars a DAY in free cash flow from their crude oil sales alone.  Which translates into $1.98b for a quarter.  This doesn't take into account their natural gas production, their pretrochemical companies or their new work in carbon capture and all their other ancillary business lines.
They have long-term debt issues, yes, but manageable with prices above $~45.  I'm not making a bet so much on OXY being some great company, but rather them being an efficient producer and that Saudi Arabia/OPEC+ is going to do what it has to to keep oil prices high for at least 2021 and 2022, and if they can, beyond that as well.  And this is what will drive up the price of OXYs shares.

Here is a good video that looks at several of the biggest Permian Field players, their market caps, production and share prices.  https://www.youtube.com/watch?v=Xu14F8xLa1k   You can skip to 8:25 to get to OXY but it's interesting to see how they compare to the other firms in terms of production (2nd largest in the Permian basin).  This guys channel is pretty good to follow to keep up with the company. 
I fully expect them to blow analysts expectations out of the water for Q1, but whether or not Wall St. will care is another matter. 
This is a medium term length play for me.  I'm not looking for a quick flip, hence the interest in warrants that don't expire until 2027.

Thanks!

ETA: And just like that, I am the proud owner of a little tiny stack of warrants. The school of hard knocks begins a new lesson (that'll be my fault, not yours! You are not advisor, I'm a big boy, etc.)
« Last Edit: April 21, 2021, 09:06:47 AM by BicycleB »

MustacheAndaHalf

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Re: Nice dip today .. what are you buying?
« Reply #51 on: April 22, 2021, 08:24:39 AM »
To compare OXY-WT warrants with OXY call options of the same strike ($22/sh):

OXY calls expiring 2022-Jan (8 months) cost $5.65/sh
OXY calls expiring 2023-Jan (20 months) cost $7.40/sh
OXY-WT warrants expiring 2027-Aug (76 months) cost $10.28/sh

So 2022 costs $1.85, and the 5 years after that cost $2.88... seems like those warrants are underpriced.  But they're rather long term, which probably isn't that appealing for the market, and especially not for options traders.

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I watched the entire "Mr Oxy" YouTube video, which was interesting.  He compares various companies by their production, and OXY stands out as the value pick.  On the downside, they have more debt than other companies (but Mr Oxy says the debt can be easily serviced, and their cashflow is really large for their market cap).

I'm at least waiting for OXY to recover to it's 2019 market cap, then I'll have to decide.  But that's another +50% to +110% from here, so with the current market ups and downs, I expect to hold for awhile.