Occidental Petroleum (OXY) -2.5% in Monday’s trading as J.P. Morgan downgraded shares to Underweight from Neutral with a $44 price target, cut from $51, citing relative valuation and the company’s above-average balance sheet leverage given a cautious stance on crude oil fundamentals.
The downgrade does not reflect operational concerns, JPM analyst Ayun Jayaram said, as Occidental’s (OXY) upstream segment, including its core franchise assets in the Permian Basin, continues to deliver strong performance in the field.
At recent strip pricing, Occidental (OXY) shares are trading at 2026-27 free cash flow/enterprise value yields of 5.2% and 6.1%, respectively, vs. 7.6% and 8.6% for its large cap peers, while the company’s leverage ratio of 1.8x is above the peer group average of 0.8x in 2026, which the analyst expects to support less cash return than peers, believing the most prudent use of excess FCF remains the balance sheet.
At the same time, Devon Energy (DVN) +0.5% as Jayaram upgraded to Overweight from Neutral in part due to an attractive relative valuation, which benefits from free cash flow accretion associated with the company’s $1 billion business optimization plan, and said the company is making notable progress, achieving ~60% of its $1 billion target in just over six months after formally launching the initiative.
In 2025, Devon’s (DVN) Delaware Basin well productivity declined on a Y/Y basis given its plan to complete a higher proportion of Wolfcamp B wells, and the analyst sees well productivity remaining consistent in 2026-27, reflecting a steadier mix of secondary zones relative to the 2025 program.