Occidental Petroleum Seeks to Reduce Debt and Costs Amid High Oil Prices

Occidental Petroleum (OXY) has pulled back from its 52-week high, and that's seen as an opportunity for investors to buy in. The energy company's stock price has been boosted by high oil prices, which have made it one of the best-performing groups among S&P 500 sectors this year.

The war in Iran is driving up crude prices, benefiting Occidental's operations. While the company's shares are down 11% from their 52-week high as of September 4, they're still up 7.1% over the past month, suggesting that the correction may not deepen.

One reason to buy into Occidental is its efforts to reduce debt and costs. The company has pared its liabilities by $8.6 billion through the sale of its OxyChem unit to Berkshire Hathaway in January. At the end of the second quarter, Occidental's debt stood at $11.8 billion, but it's working towards a goal of getting it down to $10 billion.

If successful, this will save the company $740 million in yearly interest expenses. With strong balance sheets and attractive cash-flow characteristics, Occidental is following Warren Buffett's investment philosophy. Berkshire Hathaway's stake in Occidental was initiated when Buffett was still at the helm of the conglomerate, and the stock has been on a rally since CEO Greg Abel took over.

The company is also prioritizing cost reductions, having trimmed costs by $2 billion since 2023, with another $500 million in store this year. This focus on operational efficiencies will allow Occidental to grow production 2% per year through 2028 without sacrificing output.