Replies to post #101 on Occidental Petroleum Corp (OXY)

[Timothy Smith]

Magellan Midstream and Occidental Petroleum Extend Open Season for Proposed BridgeTex Pipeline to July 18

Jul 11, 2012 5:35:00 PM
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TULSA, Okla. and HOUSTON, July 11, 2012 /PRNewswire/ -- Magellan Midstream Partners, L.P. (NYSE: MMP) and Occidental Petroleum Corporation (NYSE: OXY) announced today a one-week extension of their binding open season initiated on June 11, 2012 to solicit capacity commitments from shippers to transport crude oil from Colorado City, Texas to the Houston Gulf Coast area on the proposed BridgeTex Pipeline. Binding commitments are now due on July 18, 2012.

As previously announced, Magellan and Occidental are jointly assessing customer interest to transport up to 278,000 barrels per day of crude oil from Colorado City to Texas City. The project includes approximately 400 miles of newly-constructed pipeline from Colorado City to Houston and an expansion by Magellan of its distribution system between East Houston and Texas City. Subject to sufficient commitments from shippers and necessary permits and regulatory approvals, the proposed BridgeTex Pipeline is expected to begin service by mid-2014.

For customer inquiries about the open season, please contact Mark Daggett of Magellan at [phone] or [e-mail]. More information about the project and the open season is available at www.magellanlp.com/uploadedfiles/BridgeTex Open Season.pdf.

About Magellan Midstream Partners, L.P.

Magellan Midstream Partners, L.P. (NYSE: MMP) is a publicly traded partnership that primarily transports, stores and distributes petroleum products. The partnership owns the longest refined petroleum products pipeline system in the country, with access to more than 40% of the nation's refining capacity, and can store 80 million barrels of petroleum products such as gasoline, diesel fuel and crude oil. More information is available at www.magellanlp.com.

About Occidental Petroleum Corporation

Occidental Petroleum Corporation (NYSE: OXY) is an international oil and gas exploration and production company with operations in the United States, primarily in the Permian Basin, California and Midcontinent areas, the Middle East/North Africa and Latin America regions. Oxy is the fourth-largest U.S. oil and gas company, based on equity market capitalization. Oxy's wholly owned subsidiary OxyChem manufactures and markets chlor-alkali products and vinyls.

Oxy is committed to safeguarding the environment, protecting the safety and health of employees and neighboring communities and upholding high standards of social responsibility in all of the company's worldwide operations. More information is available at www.oxy.com.

[Timothy Smith]

OXY reports earnings on July 26th. OXY is down almost 2% today. The stock is trading down 21% from its 52 week high and has 36% upside potential based on analysts' consensus mean price targets.

The company has many fundamental positives. OXY pays a dividend with a yield of 2.54% and a payout ratio of 22.97%. OXY has a forward P/E ratio of 11.02. OXY is trading for 1.78 times book value. ROE is 18.74% and the net profit margin is 26.02%.

OXY recently named Cynthia Walker as Executive Vice President and CFO effective August 6th. Ms. Walker will assume the position from James Lienert, who has been OXY's Chief Financial Officer for the past two years.

The stock is up approximately 10% from a recent low of $75 which was tested twice. One positive is the stock is resting 1% above the 50 day sma which should provide significant support. I like the stock here.

[Timothy Smith]

Oxy is trading around $89, with a price to book of 1.8, and a forward price to earnings of 10.2. This is a slight premium over most of its peer group influenced by Oxy's strong earnings and record production as analysts look forward to a natural gas price rebound. Exxon Mobile is trading at an even larger premium, around $88 with a price to book of 2.5, and a forward price to earnings of 9.9.

By comparison, Devon is trading around $59, with a price to book of 1.1, and a forward price to earnings of 8.7. Clayton Williams is trading around $49, with a price to book of 1.5, and a forward price to earnings of 7.6, while Marathon is trading around $27, with a price to book of 1.1, and a forward price to earnings of 7.6.

Oxy's relatively low dividend and payout ratio compared to its peer group is causing some analysts to predict a dividend increase in the near future. Given Oxy's history of reliable increases, I don't think that this prediction is far off the mark. With a stronger cash balance than most of its peers, driven in part by better earnings, Oxy's dividend yield seems low.

Competitor Devon has a current yield of 1.25%, while Marathon Oil (MRO) is doing slightly better with a current yield around 2.5%. However, increased dividend or not, Oxy is a strong value play.