The mid-east crisis has taken its toll on Occidental Petroleum Corporation‘s (OXY) outlook as more than a third of total oil and gas production of the company comes from this region. Occidental has lowered its production expectation for the first quarter 2011 for a number of reasons, primarily for the disruptions in the Middle East.
The initial first quarter 2011 production guidance was 740,000 to 750,000 barrels of oil equivalent per day (boed), which Occidental lowered by 29,000 boed.
Political trouble in Libya and Yemen along with lower-than-expected capital spending in Iraq has reduced the production outlook by 15,000 boed; the oil price fluctuation will impact production by 7,000 boed while the inconsistent weather in Permia and Midcontinent will dent production by another 7,000 boed.
Besides lowering the production expectation, the company also reduced its sales expectation for first quarter 2011. The initial sales expectation of 725,000 boed was trimmed by 15,000 boed.
Occidental also provided capital expenditure guidance of $6.1 billion for 2011, up substantially from the year-ago level of $3.9 billion (excluding Argentina). With a view to further expand its operation the company has reserved 8% of the total capital expenditure for new acquisitions.
The mid-east turmoil is affecting all the oil firms operating in the region. This region provides for 34% of the global oil demand and, in a scenario of lingering instability, it will likely have a serious impact on the global oil market. Recently, oil service provider Halliburton Company (HAL) lowered its earnings expectation for first quarter 2011 due to disturbance in the Middle East and inclement weather conditions in North America and Australia.
Occidental Petroleum currently has a Zacks #3 Rank (short-term Hold rating). We also maintain a long-term Neutral rating on the stock.
Based in Los Angeles, California, Occidental Petroleum along with its subsidiaries operates as an oil and gas exploration and production company. Occidental has operations in the United States, Middle East/North Africa and Latin America.
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