Monday, February 8, 2010

Occidental Petroleum OXY Research Tactical Idea

We believe the share price will rise in absolute terms over the next 30 days.
This is because the stock has traded off recently, making short term valuation much more compelling. In our view, OXY's 4Q09 strong quarter (beat), strong 2009 reserve report (reserve replacement) 206%, and Analyst meeting in May (incremental data supporting growth) in addition to top tier growth and returns will likely attract fund flows and cause OXY to outperform peers when broader markets and crude reverse. We believe in higher commodity prices and resumption of global growth as seen in our 2010E EPS ($6.70 vs consensus $5.81) and are buyers on this dip. We estimate that there is about an 80%+ or "almost certain" probability for the scenario. Estimated probabilities are illustrative and assigned subjectively based on our assessment of the likelihood of the scenario.

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