Wells Fargo double upgrades this oil and gas stock on improved capital efficiency and Permian productivity

Wells Fargo believes that shares of Occidental Petroleum could rise on stronger Permian productivity and improved capital intensity. The bank double upgraded the oil and gas stock to an overweight rating from underweight. Analyst Sam Margolin also hiked his price target to $69 from $47. Shares of Occidental Petroleum have surged 35% this year and are up 21% in the past 12 months. Margolin’s revised forecast implies an additional gain of 24%. OXY 1Y mountain OXY 1Y chart “Our prior UW rating was driven by return of capital constraints as a result of the [preferred] equity, which (barring a $4/sh return of capital trigger) are unlikely to be redeemed until 2029,” the analyst wrote. “While that constraint remains (unless oil stays at > $100), the step change in capital efficiency reflected in 4Q25 earnings supports regular dividend growth and buyback opportunities in the intervening year.” The analyst believes that if oil prices remain elevated, Occidental Petroleum could redeem these preferred shares in the second half of this year, freeing up more cash to return to shareholders. He added that in a normalized backdrop, the company “still offers peer-leading dividend growth.” Margolin cited the company’s capital efficiency trends in the Permian Basin as a catalyst. Occidental Petroleum has adjusted its spending plan in the region to $3.1 billion from $3.9 billion, while maintaining production growth at the same time. “This capability is enabled by a combination of factors, including strong underlying productivity, pivot to child wells, and enhanced oil recovery (EOR) which dampens observable base decline,” the analyst added. “We believe OXY can produce slightly ahead of guidance in 2026 (6% growth) and resume an accelerated growth trend in 2027 back to $3.5B in capital.” Margolin added: “In a normalized oil price scenario, we still believe OXY can deliver peer-leading regular dividend growth with Permian production above guidance.”