Liam Denning is a Bloomberg Gadfly columnist covering energy, mining and commodities. He previously was the editor of the Wall Street Journal's "Heard on the Street" column. Before that, he wrote for the Financial Times' Lex column. He has also worked as an investment banker and consultant.

Occidental Petroleum is a distant number three in the rankings of U.S. oil majors.  In certain respects, though, it is holding its own versus truly Big Oil.

Happy Occident

Oxy's second-quarter results, released Wednesday, were largely as expected -- which counts as good in this environment (ExxonMobil, for example, missed the consensus earnings forecast by 36 percent, according to data compiled by Bloomberg).

But the more encouraging figures concern two big bugbears in the sector: free cash flow and leverage.

Stopping the Free Fall
Oxy reduced its free cash flow deficit per share by more than half relative to the full year 2015 result
Source: Bloomberg, the companies
Note: Cash flow from operations less capital expenditure, per share

All the oil majors are effectively having to borrow or sell assets to cover dividend payments. But even factoring these in, Oxy is showing some improvement in the past 12 months.

Payout Pains
All the majors are burning cash to pay dividends but Oxy has reversed the steep slide since 2013
Source: Bloomberg, the companies
Note: Free cash flow after dividends, per share.

Oxy, like all the majors, has cut back sharply on capital expenditure. Yet it expects to raise production this year toward the top end of its guidance range of 4 to 6 percent, an enviable pace at this scale. Oxy is also aggressively streamlining its portfolio, selling about $1.2 billion of assets over the past year -- which helps to keep debt in check.

Major Borrowing
Oxy's leverage has actually eased slightly relative to where it was at the end of 2015
Source: Bloomberg, the companies
Note: Net debt divided by shareholders' equity plus net debt

Despite its smaller scale, Oxy looks able to ride out further weakness in the oil market -- and because of its smaller scale and growth potential, it offers more upside than its compatriots if oil prices recover. And with a comparable dividend yield, it looks pretty competitive on that front, too.

Oxy's dividend yield is higher than Exxon's and comparable to Chevron's
Source: Bloomberg

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

  1. Occidental's market capitalization is about $56 billion versus ExxonMobil at $361 billion and Chevron at $188 billion.

To contact the author of this story:
Liam Denning in San Francisco at

To contact the editor responsible for this story:
Mark Gongloff at