Occidental upgraded as Evercore sees deleveraging driving cash flow upside

Investing.com -- Occidental Petroleum was upgraded to "Outperform" from "Underperform" by Evercore ISI, which also raised its price target to $65 from $58, arguing the oil producer is poised to benefit from a stronger balance sheet and improved capital efficiency after an extended period of underperformance.

The brokerage said Occidental's deleveraging efforts and structurally lower operating costs have reshaped its free cash flow profile, allowing the company to better capitalize on underlying crude oil fundamentals. Evercore expects the improvements to support a return to shareholder distributions, including the potential resumption of share buybacks in the second half of 2028.

The upgrade marks a notable shift in Wall Street's view on Occidental after a prolonged period of lagging peers, reflecting growing confidence that the company's aggressive debt reduction and operational improvements have fundamentally strengthened its financial profile. Evercore argues the market has yet to fully price in the company's ability to generate higher free cash flow and resume meaningful shareholder returns even without a sharp increase in oil prices.

While Evercore noted Occidental's projected free cash flow per share growth through 2030 trails some large-cap exploration and production peers, it said the investment case rests on improving fundamentals from a deeply discounted valuation rather than superior production growth. The firm believes investors are underestimating the durability of the company's efficiency gains and the benefits of its simplified capital structure.

Evercore also cited lower well costs, declining maintenance capital requirements and the company's long-life resource base across U.S. onshore assets, enhanced oil recovery operations, the Gulf of America and the Persian Gulf as factors supporting a more resilient long-term cash generation profile.

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