Better Energy Stock: Diamondback Energy vs. Occidental Petroleum

Core Viewpoint - The article compares two leading oil producers, Occidental Petroleum and Diamondback Energy, focusing on their financial profiles, growth potential, and strategies in the Permian Basin. Company Overview - Occidental Petroleum has a diversified portfolio with operations in the Permian Basin, Rockies, U.S. Gulf of Mexico, and international locations, along with midstream and petrochemical units [2] - Diamondback Energy is a pure play in the Permian Basin, having expanded its position significantly through acquisitions, including a $26 billion merger with Endeavor Energy Resources [12] Financial Profiles - Occidental Petroleum aims to reduce its net debt below $10 billion in the near term and to $6 billion to $8 billion in the long term by retaining 50% of its excess free cash flow and selling noncore assets [3] - As of the third quarter, Occidental's debt exceeded $25 billion, and it is retaining all free cash flow to reduce this debt until it falls below $15 billion [4][9] - Diamondback Energy ended the third quarter with $12.7 billion in net debt, which is considered low for its scale, leading to credit rating upgrades [8] - Diamondback plans to return half of its free cash flow to investors, with a history of 8% quarterly dividend growth since 2018 and a share repurchase program [14] Growth Potential - Occidental's position in the Permian includes 2.9 million acres producing 729,000 BOE/d, bolstered by a recent $12 billion acquisition of CrownRock, which added 170,000 BOE/d and increased its drilling inventory by 33% [7] - Diamondback's combined production with Endeavor is expected to exceed 816,000 BOE/d, with over 6,100 drilling locations remaining at a break-even level of less than $40 per barrel [12] Investment Outlook - Given the volatile oil market, Diamondback Energy is viewed as the better investment due to its stronger financial position, ability to repay debt, and capacity for share repurchases, which Occidental cannot pursue until its debt is significantly reduced [16]