Benzinga | May 27, 2021 11:40AM EDT

Why Goldman Sachs Is Turning Bullish On Occidental Petroleum

The potential upside to commodity prices in 2021 and 2022 should boost Occidental Petroleum Corporation's (NYSE:OXY) free cash flows, resulting in net debt reduction, according to Goldman Sachs.

The Occidental Petroleum Analyst: Neil Mehta upgraded Occidental Petroleum from Neutral to Buy while keeping the price target unchanged at $31.

The Occidental Petroleum Takeaways: The company's stock has underperformed peers by 55% since it announced the acquisition of Anadarko Petroleum in April 2019, Mehta said in the upgrade note.

Occidental Petroleum's stock has underperformed SPDR S&P Oil & Gas Exploration & Production ETF (NYSE:XOP) by 4% year-to-date, the analyst said.

"While we think debt reduction will continue to be the main focal point for OXY over the medium-term, we believe the extent of underperformance is unwarranted," he said.

Mehta cited Exxon Mobil Corporation's (NYSE:XOM) "turnaround story and recent equity performance" as a "positive parallel."

The analyst said Occidental Petroleum "has the potential to generate 26% total return."

OXY Price Action: Shares of Occidental Petroleum were up 2.53% at $25.93 at last check.