Citi predicts 40% upside ahead for Occidental Petroleum, is bullish on new carbon capture business
Citi initiated coverage of Occidental Petroleum with a bullish call and sees significant upside ahead for the energy company. The firm believes Occidental's low-carbon business can drive growth for the company, particularly its development of technology to capture carbon dioxide from the air. "If OXY can deliver a cash positive direct air capture system, we foresee terminal value accretion, potentially material," Citi's Scott Gruber said in a note Monday. Citi rated Occidental Petroleum a buy and set a $35 target price on the stock, implying 38.6% upside from its Monday closing price of $25.25 per share. The company's subsidiary Occidental Low Carbon Ventures has multiple opportunities that could boost the stock, Citi noted. However, Citi sees the most compelling growth opportunity in direct air capture. "Even more exciting, OXY is leading the effort to capture carbon directly from the air," Gruber said. Citi highlighted Occidental's equity stake in Carbon Engineering, which will provide technology to capture carbon dioxide at an Occidental oil field in Texas. That will be the largest direct air capture facility in the world, Citi pointed out. The firm also said Occidental's free cash flow yield — a company's free cash flow per share divided by the share price — is attractive when compared with peers. Shares of Occidental Petroleum have outperformed the market this year, up 45.9% in 2021 compared with the S & P 500's 20.6% gain. —CNBC's Michael Bloom contributed reporting.

The Occidental Petroleum headquarters in Los Angeles. Reed Saxon | AP