(Reuters) - Shares of Occidental Petroleum Corp, the largest oil and gas producer in the Permian basin, fell as much as 6 percent on Thursday after the company raised its capital expenditure budget for the year by $1.1 billion.
Permian producers are under pressure from investors to increase production while reining in expenses. Investors punished the world's largest publicly traded oil producer Exxon Mobil in March when it said it plans to double annual earnings by 2025 through heavier investments here
Houston-based Occidental, which was the biggest drag on the S&P Energy Index, boosted its spending target to $5 billion from $3.9 billion, surpassing analysts’ estimates.
“We believe additional clarity on longer term Permian Resources growth outlook ... will make the capex raise easier to digest,” Cowen & Co analysts said.
Occidental’s production rose 6 percent to 639,000 barrels of oil equivalent per day in the second quarter ended June 30. Output jumped in the Permian and Oman, a key international area of operations for the company.
It also lowered the top end of its total production guidance range while boosting the lower end. Occidental now expects production in the range of 650,000 boe/d to 664,000 boe/d, compared with its earlier guidance of 645,000 boe/d to 665,000 boe/d.
“The disproportionate raise of 2018 capex relative to production guidance are going to be a hurdle for the stock near term,” Jefferies analyst Jason Gammel said.
The company’s shares were down 5 percent at $77.
Reporting by Laharee Chatterjee and Anirban Paul in Bengaluru