Is Occidental Petroleum’s (NYSE:OXY) Balance Sheet in Good Health?

Occidental Petroleum Corporation (NYSE:OXY) has been in the spotlight recently due to its debt levels, prompting investors to question the company’s risk profile. With $19.0 billion in debt and $1.27 billion in cash, Occidental Petroleum’s net debt stands at approximately $17.7 billion. This significant debt load, when compared to its market capitalization of $54.9 billion, raises concerns about the company’s financial health.

While debt can be a useful tool for growth, excessive debt can pose a serious risk to a company’s viability. If Occidental Petroleum is unable to meet its debt obligations, shareholders could suffer significant losses. Additionally, the company’s low debt to EBITDA ratio of 1.5 and EBIT only covering interest expenses by 6.1 times raise red flags about its ability to manage its debt effectively.

Despite these concerns, Occidental Petroleum has shown strong cash flow generation, outpacing its EBIT over the last three years. This ability to convert EBIT to free cash flow is a positive sign for the company’s financial stability.

In conclusion, while Occidental Petroleum’s debt levels may make it a risky investment, its strong cash flow generation provides some reassurance. Investors should closely monitor the company’s ability to manage its debt and continue generating cash flow to ensure its long-term sustainability.