Summary

• Occidental Petroleum is not just an oil and gas company anymore.
• The company is leveraging decades of experience managing carbon dioxide into new business ventures with a capital-light approach taking joint venture partners that bring something to the table.
• We think Occidental can be bought at present levels by risk-tolerant investors for future growth and income.

Introduction

Anyone want to read another doom and gloom article on Occidental Petroleum (OXY)? I didn’t think so.

I’ve got good news, you’re not going to read one here. This article will have a very specific focus, so I am going to link another very positive article on OXY, as it covers all the oil and gas and financial business I am going to skip in this article.

I have written extensively on this company since mid-2019. I initially fell under the spell cast by the spectacular assets Occidental Petroleum acquired from Anadarko, along with the potential of the promised synergies and divestiture program for non-core assets. This allowed me to look past the monumental debt the company racked up in so doing. In a scenario where oil prices continued the upward trend they were exhibiting at the time of this deal, I would be a bit ebullient as I looked back on it.

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A master reset at the loss-making and debt-laden AirAsia X Bhd (AAX) has been a long time coming.

It could have dragged its financial woes on and on but the Covid-19 pandemic, which has thrashed the aviation industry globally, may very well have forced the hand of low-cost, long-haul associate of AirAsia Group Bhd. It could still be a blessing in disguise, depending on how the restructuring plan for its RM63.5bil debt turns out.

The pandemic, which has grounded the airline’s entire fleet since the second quarter of 2020, has delivered the hard reset button to AAX to do some soul searching and to right its wrongs before it prepares for take-off again.

From the very beginning, sceptics had doubted whether a business model of a long-haul budget airline would work, seeing how the late Sir Freddie Laker’s Skytrain went bust in the 80s.

Thirteen years down the road, it would seem like AAX might go down the same road and prove its critics right.

Ever since it went public in 2013, it has only been profitable in 2016 and 2017. It made its debut on Bursa Malaysia at RM1.26, and as of yesterday, the share price closed at a mere four sen.

As of the first half ended June 30 this year, AAX had raked up accumulated losses of RM854.94mil.

Will AAX rise again from its ashes, or will this be the fatal blow that sends the airline to its untimely demise?

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16 Oct 2020

Mah Sing Group Bhd, a property developer, has its eyes set on becoming a rubber glove manufacturer with a production of 30 billion gloves per year.

At a signing ceremony yesterday, it announced plans to diversify into glove manufacturing and other related healthcare products via subsidiary Mah Sing Healthcare Sdn Bhd to take advantage of the boom in glove demand caused by the coronavirus (Covid-19) pandemic.

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AirAsia X Bhd (AAX), now at an existential crossroads, is in dire need of massive debt forgiveness from its creditors, or be prepared to shut its business down for good.

The low-cost, medium-haul airline, which has grounded all its flights due to the Covid-19 outbreak, is asking creditors and suppliers to forgo over RM63bil in liability and instead accept a maximum RM200mil in payment.

While the proposal may sound atrocious, analysts think many creditors would, in fact, accept the offer.

After all, if the proposed debt restructuring fails, the creditors will get close to nothing as AAX will be liquidated.

AAX’s aircraft lessors, in particular, may also struggle to redeploy their aircraft to other airlines during the pandemic, according to CGS-CIMB Research analyst Raymond Yap.

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Summary

• Occidental Petroleum announced the sale of its Colombian assets at a direct cheap multiple to Carlyle Group.
• This represents a near total move out of Colombia after decades working in the region, helping the country shift to oil exporter status.
• This transaction, among others, is an example of how a bad balance sheet can force companies to sell great assets for pennies on the dollar.

In continued asset sale news, Occidental Petroleum (OXY) has announced that it sold its onshore holdings in Colombia to the Carlyle Group (CG). Receiving $700mm upfront with the potential for another $125mm payout if certain commodity price and production targets are met, investors would be forgiven if they thought this was a great deal. After all, critics have long hammered the company on liquidity concerns, primarily revolving around its upcoming refinancing maturity wall. Tie this sale into the news that Warren Buffett would see his preferreds paid for with cash instead of with stock, and investors would be forgiven if they thought the future outlook appeared wonderful.

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Summary

• Occidental Petroleum has an impressive low cost portfolio of assets, supported by prior year capital spending.
• The company recently announced it would pay its $200 million quarterly payment to Warren Buffett in cash. That’s a sign of financial strength.
• The company continues to have a significant amount of debt, but that debt is manageable. Managing that debt could actually result in enormous shareholder returns, despite anything else.
• Occidental Petroleum’s shareholder returns in the coming years depend heavily on OPEC+ maintaining production cuts.

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Summary

• Shares trend lower as oil can’t break out.
• Cash dividend to Buffett is a curious move.
• Next debt raise will be interesting to watch.

About a month ago, I detailed how shares of Occidental Petroleum (OXY) could easily see the single digits again. Oil prices just were not breaking higher, despite normally positive catalysts such as an improving US economy and multiple Gulf of Mexico tropical systems.

On Tuesday, shares in fact fell below the $10 mark, and they now sit less than a dollar away from the stock’s multi-year low.

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Summary

• The cruise lines continue to struggle to restart operations.
• The market has been as bullish on the cruise lines as the airlines despite airline passenger traffic up to 35% of 2019 levels.
• Carnival stands to burn another $3 billion in cash, if cruises don’t restart meaningfully until the Spring.

Since the cruise lines were forced to start shutting down back in April, the market has seemed to want to invest in the shutdown sector while ignoring the operating airline sector. The latest bullish analyst call has investors piling back into Carnival Corp. (CCL), yet the sector remains un-investable. My investment thesis remains Neutral on the stock until more progress is made on returning to cruising regardless of the virus.

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（吉隆坡18日讯）顶级手套（TOPGLOV,7113,主板医疗保健组）全年净利升411.96%至18亿6700万令吉，冠病未平复而分析员看好强劲需求可持续，预期下个财政年表现特别亮眼，全年净利突破百亿令吉！

联昌研究、马银行研究与达证券，各预测该集团2021财政年净利逾103亿、112亿与102亿令吉。

亮眼业绩推动股价走高，周五闭市该股涨19仙或2.4％，报7令吉98仙。

该集团第四季净利暴增1642%至12亿9199万5000令吉新高，第四季业绩超越预期，联昌调高未来两个新财政年净利95%至178%。

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