Pitch: Thesis centers on the shift of capital return strategy from debt reduction to buybacks/dividends after the leverage target is reached this year. OXY’s capital return program is the last in the large-cap O&G space. OXY has a 22% FCF yield to the equity right now that is going almost 100% to debt paydown and now buybacks. A number of industry-wide as well as company-specific catalysts.
Valuation: OXY deserves a discount to peers due to CEO credibility and higher financial gearing. Using on lower than peer multiples results in $83/share target based on EBITDA (6x), FCF (7x), and DCF approaches.
Exp. gain: +45% to $83/share.
Full OXY write-up (free guest account required):