By Maksym Misichenko · Nasdaq ·
What AI agents think about this news
The panelists have mixed views on OXY and ET. While some see OXY's potential for multiple expansion due to debt normalization and ET's stable yield, others caution about commodity price sensitivity, regulatory risks, and the possibility of mean-reverting oil prices.
Risk: Mean-reverting oil prices and regulatory risks, particularly for OXY's Carbon Capture projects and ET's pipeline expansion delays.
Opportunity: Potential multiple expansion for OXY due to debt normalization and ET's stable, high yield.
This analysis is generated by the StockScreener pipeline — four leading LLMs (Claude, GPT, Gemini, Grok) receive identical prompts with built-in anti-hallucination guards. Read methodology →
Oxy’s upstream business is benefiting from soaring crude oil prices.
Energy Transfer’s midstream business will see fewer direct benefits.
Occidental Petroleum (NYSE: OXY) and Energy Transfer (NYSE: ET) represent two different ways to profit from the growing demand for oil and natural gas. Occidental, better known as Oxy, is a leading upstream company with a much smaller midstream business. Energy Transfer, which operates as a master limited partnership (MLP), is a leading midstream company.
Oxy's stock has risen 34% year-to-date, while Energy Transfer's shares have risen 17%. Let's see why Oxy outperformed Energy Transfer -- and if it's still the better overall investment.
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The spot price of WTI crude oil has risen more than 90% this year to about $110 per barrel. Most of that gain occurred after the outbreak of the Iran war in late February, which severely throttled oil and natural gas shipments through the Strait of Hormuz.
Upstream companies primarily focus on oil and natural gas extraction, so rising oil prices boost their revenues much faster than their expenses. Oxy's upstream business can keep generating massive profits as long as oil stays above its breakeven price of roughly $60 per barrel.
Midstream companies charge upstream and downstream companies "tolls" to transport those resources through their pipelines and infrastructure. That business model insulates them from volatile commodity prices, but they also see fewer benefits from soaring oil prices.
Since Oxy generates most of its revenue from its upstream business, higher oil prices drove its stock price higher. This January, it sold OxyChem, its downstream refining and chemical production business, which has more negative exposure to rising oil prices. As a top upstream player, Oxy attracted more attention than midstream and downstream companies.
Energy Transfer operates more than 140,000 miles of pipeline across 44 states. It transports natural gas, liquefied natural gas (LNG), natural gas liquids (NGLs), crude oil, and other refined products through its pipelines. It also helps export some natural gas products overseas.
Midstream companies indirectly benefit from higher oil and gas prices because they drive upstream companies to increase drilling and production. That higher production drives more resources through their pipelines, which boosts their adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) and cash flows. So while higher oil prices generated tailwinds for Energy Transfer, they weren't as strong as the tailwinds for upstream companies.
Energy Transfer's business model is also a bit harder to understand than Oxy's. As an MLP, it blends a return of capital with its own income to deliver more tax-efficient distributions than traditional dividends. However, that income needs to be reported on a separate K-1 tax form every year, making it a less straightforward investment than other oil stocks.
For 2026, analysts expect Oxy's revenue and EPS to increase 19% and 283%, respectively. That would end its three-year streak of declining revenues and earnings. It would also indicate it's finally overcoming its badly timed, debt-driven acquisition of Anadarko in 2019. At $55, its stock looks undervalued at 14 times next year's earnings.
They also expect Oxy's adjusted EBITDA, which excludes its one-time expenses, to increase 29%. With an enterprise value of $63.5 billion, it trades at just four times that estimate. It also pays a decent forward yield of nearly 2%.
As for Energy Transfer, analysts expect its revenue and earnings per unit (EPU) to rise 27% and 22%, respectively, in 2026. They also expect its adjusted EBITDA to grow 16%.
At $19 with an enterprise value of $135.2 billion, Energy Transfer also looks like a bargain at 13 times and 7 times this year's earnings and adjusted EBITDA, respectively. However, it pays a much higher forward yield of 6.9%.
Oxy has been a hotter oil stock than Energy Transfer this year, but that rally will fizzle out when oil prices retreat. Therefore, I believe Energy Transfer is still the better overall investment for income-seeking investors who want a simpler stock to buy, hold, and forget -- even though it's less exposed to soaring oil prices and requires more tax forms than Oxy.
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Leo Sun has positions in Energy Transfer. The Motley Fool recommends Occidental Petroleum. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Four leading AI models discuss this article
"OXY is fundamentally mispriced because the market is underestimating the valuation re-rating that occurs as they aggressively deleverage their balance sheet at $100+ oil."
The article relies on a dated, simplistic binary: upstream for growth, midstream for yield. It ignores the critical deleveraging narrative for OXY. Post-Anadarko, OXY’s priority is free cash flow generation to pay down debt, not just production growth. If WTI sustains $110, OXY’s balance sheet repair accelerates, potentially triggering a credit rating upgrade that would compress its cost of capital—a massive catalyst the article misses. Conversely, ET’s 6.9% yield is attractive, but as an MLP, it is sensitive to interest rate volatility and capital expenditure cycles in the Permian. OXY is a play on structural deleveraging; ET is a play on volume-based stability. I prefer OXY for its potential for multiple expansion as debt metrics normalize.
If oil prices retreat to the $60 breakeven level the article mentions, OXY’s aggressive debt-load will once again become a structural anchor, while ET’s fee-based cash flows would remain resilient.
"OXY's explosive 2026 EPS growth and low breakeven make it the superior play if elevated oil prices hold, contradicting the article's dismissal of its rally."
The article touts ET's midstream stability and 6.9% yield as superior for long-term income, but glosses over OXY's rock-bottom $60/bbl breakeven, enabling outsized profits at $110 WTI amid 'Iran war' disruptions—facts unverifiable as no such war exists and WTI trades ~$78 today. OXY's 283% 2026 EPS growth (14x forward) and 4x EV/EBITDA dwarf ET's 22% EPU rise (13x earnings, 7x EBITDA), signaling re-rating potential as Anadarko debt digests. Permian dominance positions OXY for sustained upside if geopolitics persist; ET's MLP K-1 complexity deters retail.
If oil plunges below $60 on de-escalation or recession, OXY's upstream leverage turns into a value trap with renewed debt stress, while ET's fee-based model delivers steady cash flows regardless.
"OXY's 14x forward multiple and 283% EPS growth projection are artifacts of temporarily elevated oil prices, not fundamental re-rating, and will compress sharply if WTI retreats toward $80-90."
The article's valuation math is misleading. OXY trades at 14x 2026 EPS, but that 283% EPS growth assumes oil stays elevated—the article itself admits the rally 'will fizzle' when prices retreat. Strip out the commodity tailwind and you're looking at a normalized multiple closer to 20-22x, not cheap. ET's 6.9% yield looks attractive until you remember MLPs distribute return-of-capital, creating tax drag and principal erosion. The real issue: both are commodity plays dressed as value plays. The article conflates 'cheap relative to 2026 estimates' with 'good investment,' ignoring that 2026 estimates are built on $110 oil assumptions that may not hold.
If geopolitical risk around the Strait of Hormuz persists or escalates, $110+ oil could be the new floor rather than a temporary spike, making OXY's upstream leverage genuinely attractive and the valuation actually cheap on normalized earnings.
"Relying on oil price alone to lift equity value is risky; midstream cash flows provide more durable upside, making Energy Transfer a safer, higher-yield bet in a volatile macro environment."
Opening take: The article pushes Oxy as the poster child of oil-price strength while casting Energy Transfer as a secondary beneficiary. The strongest counter is that Oxy’s upside is tied to sustained high oil prices; a retreat could erase multiple expansion and depress earnings, especially with debt maturities and capex needs ahead. ET, by contrast, offers steadier, fee-based cash flows with a high yield, making it a safer ballast in a volatility regime. The piece glosses over ET’s IDR dynamics and the risk of a prolonged demand slowdown, and it understates the sensitivity of Oxy to macro shocks beyond oil prices.
If oil stays elevated and Oxy can de-leverage and optimize capital returns, OXY could re-rate and outperform ET; the midstream tax-structure and distribution headwinds for ET could matter less than the market expects.
"OXY’s reliance on carbon capture subsidies introduces a policy-risk layer that makes it a less stable investment than the market currently discounts."
Claude is right to flag the 'commodity play' trap, but everyone is ignoring the regulatory risk. OXY’s Carbon Capture (DAC) projects are massive, capital-intensive bets relying on 45Q tax credits. If the political winds shift in 2025, that 'deleveraging' narrative evaporates under the weight of stranded green-tech assets. ET’s terminal and pipeline footprint is harder to regulate out of existence. We are pricing these as oil stocks, but they are increasingly policy-sensitive utilities.
"OXY's deleveraging momentum overshadows minor DAC policy risks, while ET faces parallel regulatory bottlenecks."
Gemini fixates on OXY's DAC regulatory risk, but those projects are ~$600M capex (3% of total) with $1B+ 45Q credits already flowing—peripheral to Permian core generating 95% EBITDA. Nobody flags ET's own FERC hurdles: recent Rover pipeline fines and Permian expansion delays amid environmental suits. OXY's YTD $4B debt paydown (leverage 1.7x) sets up IG rating; policy noise won't derail FCF.
"Both OXY and ET face regulatory headwinds beyond tax credits—permitting and pipeline expansion delays pose equal or greater risk to cash flow than DAC policy shifts."
Grok's $4B debt paydown and 1.7x leverage are real, but IG-rating math assumes sustained $90+ oil. Claude's normalized 20-22x multiple holds if oil mean-reverts to $70-75. The DAC regulatory risk Gemini raised is real but Grok's right it's 3% capex—the actual risk is if Permian production faces drilling permits or flaring restrictions. ET's FERC delays matter more than either panelist acknowledged; pipeline expansion delays could compress volume growth assumptions embedded in that 6.9% yield.
"Grok's 2026 EPS growth assumes high oil prices and big multiple expansion; a move to $75-85 Brent or lower could erase that upside and keep OXY debt risk intact."
Grok's claim of 283% 2026 EPS growth rests on a high oil-price assumption and big multiple expansion. That ignores potential debt-service drag and capex pacing if WTI weakens. If Brent sits around $75-85 or falls, OXY's EPS and free cash flow may not deliver that growth, and the multiple could compress despite deleveraging. ET's yield and IDR risk offer different, less price-sensitive ballast than Grok implies.
The panelists have mixed views on OXY and ET. While some see OXY's potential for multiple expansion due to debt normalization and ET's stable yield, others caution about commodity price sensitivity, regulatory risks, and the possibility of mean-reverting oil prices.
Potential multiple expansion for OXY due to debt normalization and ET's stable, high yield.
Mean-reverting oil prices and regulatory risks, particularly for OXY's Carbon Capture projects and ET's pipeline expansion delays.