Investing.com -- Occidental Petroleum Corporation (NYSE:OXY) shares were given a "Neutral" rating by analysts at Goldman Sachs on Wednesday.

In a note to clients, the Goldman Sachs analysts said Occidental's roughly $12 billion cash-and-stock acquisition of CrownRock, which closed in August, increases the firm's scale in the Permian Basin, the biggest US shale oilfield.

"[W]e see this as a positive given [Occidental]’s track record of execution in the [Permian Basin]," the analysts said.

However, they flagged that the deal also increases the group's ratio of net debt to earnings before interest, tax, depreciation and amortization, adding that this represents a shift in Occidental's free cash flow allocation priorities "back to debt reduction over capital returns."

They noted that Occidental's share price has underperformed US energy majors by 16% since the CrownRock agreement was first announced last December, arguing that the trend in part "reflects [its] less favorable leverage post-deal" compared to its peers, as well as decreased investor confidence in global oil demand.

"We believe the focus for investors and the company in the near-term will be on debt reduction, and while shares trade at a discount to peers, we see a less clear path for the shares to re-rate higher pending further progress towards debt reduction and a shift from debt reduction to capital returns," the Goldman Sachs analysts said.

Houston, Texas-based Occidental agreed to buy CrownRock, joining a wave of shale consolidation at the time that included Exxon Mobil 's (NYSE:XOM) $60 billion swoop for Pioneer Natural Resources (NYSE:PXD) and Chevron Corp's (NYSE:CVX) $30 billion purchase of Hess (NYSE:HES).

Large producers, flush with cash after oil prices jumped following the outbreak of the war in Ukraine, were hunting for acquisitions to expand their access to prime drilling sites.

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