1 Energy Stock With a Big Catalyst in 2014

Occidental Petroleum had a fairly solid 2013. The company kept pace with the market for most of the year, only recently dropping off and underperforming. That could change in 2014 as the company has a massive catalyst that could unlock billions in value and send its shares higher.

Many analysts on Wall Street see the company selling its oil and gas operations in the Middle East and North Africa in the year ahead. These operations are worth an estimated $22 billion, which is more value than investors currently ascribe to Occidental Petroleum credit for the assets. Many analysts suggest the company could sell a partial stake in these assets for $8-$10 billion and use that cash to buy back stock and pay down some of its debt.

Analysts at Merrill Lynch, for example, see Occidental Petroleum's shares being worth up to $130 if the company makes such a move. In fact, Merrill Lynch recently named Occidental Petroleum as one of its top energy stocks for 2014. Others aren't quite as bullish as the average price target for the stock is $108.45 for the next 12 months.

One option for Occidental is to pursue a deal similar to Apache Corp . In a deal with China's Sinopec, Apache was able to sell a 33% stake in its Egyptian operations for $3.1 billion. That enabled it to retain the upside from future production while cashing in on an undervalued asset. Apache used a portion of those cash proceeds to strengthen its balance sheet.

Occidental apparently already has a coalition of Middle Eastern buyers interested in bidding for its overseas assets according to a recent report by Reuters. The report pointed to two sources that said Occidental would sell about a 40% stake in these assets to a joint venture of three Persian Gulf-based oil companies. That sale, combined with Occidental putting the cash to use has the potential to provide a nice boost to its stock price in 2014.

Investors have already seen this plan work out well in the past for some of Occidental's rivals. Both ConocoPhillips and Devon Energy have shed international assets to buy back stock, pay a higher dividend, and reinvest into faster growing areas like North America.

While ConocoPhillips has held on to several of its international assets, it has shed properties in Kazakhstan, Algeria, and Nigeria. Those sales brought in $9 billion for the company. Meanwhile, Devon Energy sold all of its international operations other than those it owns in Canada. Overall, that has enabled the company to buy back 20% of its stock while also growing its dividend, reducing its debt, and growing its higher margin liquids production.

Investors like these value unlocking moves, especially at a time when America is undergoing such an energy boom. Investors would rather see these companies shed riskier international assets in places like the Middle East and Northern Africa and exchange that risk for America's shale growth. That's why it's pretty likely we'll see Occidental unload a stake in these risker assets in 2014 and pursue a course similar to Apache, Devon, and ConocoPhillips.

Three more companies focusing on America's energy boom
Record oil and natural gas production is revolutionizing the United States' energy position. While Occidental Petroleum is a energy top producer in the U.S. it is not profiting from the boom as much as some of its peers. For a look at three companies that are really profiting from the boom check our special free report, "3 Stocks for the American Energy Bonanza." Don't miss out on this timely opportunity; click here to access your report -- it's absolutely free. 

The article 1 Energy Stock With a Big Catalyst in 2014 originally appeared on Fool.com.

Fool contributor Matt DiLallo owns shares of ConocoPhillips. The Motley Fool owns shares of Devon Energy. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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