We are also raising our 2019 eps estimate to 525 from

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We are also raising our 2019 EPS estimate to $5.25 from $2.92, which assumes continued strong pricing and higher production next year. The 2019 consensus is $4.52. FINANCIAL STRENGTH & DIVIDEND We rate Occidental’s financial strength as High, the top of our five-point scale. The company’s debt is rated A/stable by Standard & Poor’s and A3/stable by Moody’s. Fitch rates Occidental’s debt at A/negative. At the end of 1Q18, OXY’s total debt/capitalization ratio was 33.2%, up from 31.8% a year earlier. The debt/ cap ratio is slightly below the average for close peers and has averaged 22.9% over the past five years. Total outstanding debt at the end of the first quarter was $10.309 billion, up from $9.822 billion a year earlier. The company did not have any short-term borrowings in 1Q18. Occidental had cash and cash equivalents of $1.61 billion at the end of 1Q18, compared to $1.49 billion at the end of 1Q17. Cash from operating activities was $1.01 billion in 1Q18, compared to $505 million a year earlier. The company has an undrawn $2.0 billion revolving credit facility. In July 2017, the company raised its annualized dividend to $3.08 from $3.04 per share, a 1.3% increase. The shares currently yield about 3.6%. Our dividend estimates are $3.12 for 2018 and $3.16 for 2019. OXY management noted that the company has increased its dividend for 15 straight years and that it has boosted the payout by more than 500% since 2002. Occidental has an active share buyback program, but did not repurchase any shares in 1Q18. Based on positive industry fundamentals and improving operational performance, we expect the company to resume this program in the second half of 2018. MANAGEMENT & RISKS Vicki Hollub has succeeded Steve Chazen as the company’s CEO. Ms. Hollub has nearly 35 years of experience in the oil and gas industry and has been with Occidental since 1982. We view the CEO succession favorably given Ms. Hollub’s long tenure at Occidental and direct experience managing its fast-growing Permian business. OXY’s resource development has traditionally focused on returns rather than on total production. Its process includes exploration to establish a commercial resource presence, testing and gathering data to optimize well completion, pilot programs to assess the variability of well performance, and the transition to manufacturing for field development. We think this process helps Occidental to develop its acreage in a way that maximizes returns and cash flow. As a result of recent asset sales, OXY is focusing development efforts on high-return core areas of the Permian basin, as well as on parts of the Middle East. OXY’s performance, like that of peers, is tied closely to oil prices, which can cause dramatic swings in stock prices, earnings and cash flow. The company does not have any meaningful production hedges in place. OXY investors are also exposed to trends in global economic growth and interest rates.
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M ARKET U PDATE - 15 - COMPANY DESCRIPTION OXY is an international oil and gas exploration and production company with operations in the United States, Middle East and Latin America. Occidental is one of the largest U.S. oil and gas companies, based on equity market
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