Occidental Petroleum (OP/A): Potential Ecuador contract loss a minor negative, but seems discounted in share price - Goldman Sachs - May 16, 2006
We see the potential loss of Occidental Petroleum's contract for Block 15 in Ecuador as a minor negative, but think it is now reflected in its share price. The ongoing contractual dispute is not over yet and the assumption that Oxy will lose its position without any compensation may be overly pessimistic. While we would differentiate between this contract dispute and the nationalization steps taken in Bolivia and severe contract term changes in Venezuela, the net effect on Oxy may not be much different to the extent investors stop attributing value to its position. We estimate the loss of Oxy's Ecuador production would negatively impact EPS by about 6% and our net asset value estimate by $2-$4/sh, but we have made no changes at this time pending further clarity. Oxy remains OP/A rated on the strength of its Middle East and US oil business and we would add to positions on weakness.
Each of the analysts named below hereby certifies that, with respect to each subject company and its securities for which the analyst is responsible in this report, (1) all of the views expressed in this report accurately reflect his or her personal views about the subject companies and securities, and (2) no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report: Arjun Murti, Luis Ahn. |
