Roth upgrades Occidental Petroleum to Buy, citing stronger leverage to oil prices

what happened

Shares of Occidental Petroleum rose slightly on Monday after Roth Capital lifted its rating on the company to Buy from Neutral, according to Seeking Alpha. Analyst Leo Mariani highlighted the company's high sensitivity to crude prices, a stronger balance sheet, a solid set of drilling locations and a slower production decline than peers. He noted that 49% of output is oil, about 18% of that oil sells at a premium to Brent, and Occidental has no oil hedges for 2027 and beyond, so it keeps full exposure to higher prices.

Mariani expects the company to keep directing most of its free cash flow to debt repayment until gross debt falls to $10 billion, a level he considers very likely to be reached soon. After that, buybacks in 2027 become an option, although building cash for the preferred redemption in August 2029 remains the top priority. The plan, based on $65 WTI and flat production from 2025 to 2030, targets $4 billion of extra free cash flow through $1.4 billion lower sustaining capital spending and $2.6 billion of cost cuts, of which $1.7 billion comes from interest expense, preferred dividends and G&A.

why it matters

For energy investors, the upgrade reinforces the view that Occidental is a higher-beta way to hold oil exposure. Unhedged volumes mean that moves in Brent and WTI feed quickly into cash flow, in both directions. The debt and cost plan matters because it determines how much free cash flow reaches shareholders as leverage declines.

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