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    OXY
    Earnings call· Mar 2025(Q1 FY25)

    OCCIDENTAL PETROLEUM CORP /DE/ Q1 FY25 earnings call OXY

    May 8, 2025 Source

    Executive summary

    Occidental Petroleum Q1 FY25 — Strong Operational Performance and Debt Reduction

    Occidental delivered strong Q1 FY25 results across all segments, driven by operational efficiencies and strategic debt reduction. The company is proactively adjusting capital and operating expenses in response to market volatility, while maintaining its full-year production outlook. Long-term value creation and balance sheet strengthening remain core priorities, supported by strategic asset management and low-carbon initiatives.

    Highlights

    5

    • Generated $3 billion in operating cash flow before working capital in Q1.

    • Permian unconventional well costs reduced by over 10%, surpassing the 5%-7% target.

    • OxyChem delivered $215 million on an adjusted basis, exceeding expectations.

    • Midstream and marketing significantly outperformed guidance, driven by gas marketing optimization.

    • Retired $2.3 billion in debt year-to-date, reducing annual interest expense by $370 million.

    Concerns

    3

    • Uncertainty around demand, policy, and supply is creating headwinds and increasing commodity price volatility.

    • Gulf of America production guidance revised down due to discretionary capital optimization.

    • Midstream earnings are expected to decrease in Q2 due to declining commodity prices.

    Guidance & targets

    7
    CategoryTargetConfidence
    Full-year operating cost
    $8.65 per BOE
    medium materiality
    High
    Full-year capital guidance
    reduced by $200 million
    high materiality
    High
    Total company production
    maintained
    high materiality
    High
    Midstream full-year earnings
    raised by $40 million
    medium materiality
    High
    Battleground project startup
    mid-next year
    medium materiality
    High
    Incremental pretax free cash flow from non-oil and gas sources
    $1 billion
    high materiality
    High
    Incremental pretax free cash flow from non-oil and gas sources
    further expansion
    high materiality
    Medium

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    Oil & Gas
    Produced at the midpoint of production guidance. Domestic operating cost came in substantially below initial expectations, reflecting efficiency and cost management.
    Production: 1.39 million BOE per dayDomestic operating cost: $9.05 per BOE
    		————
    OxyChem
    Performance exceeded expectations despite operational challenges from winter weather, which impacted production and increased raw material costs.
    		———$215 million adjusted

    Operational metrics

    29
    Adjusted profit per diluted share
    $0.87
    Q1 FY25

    Adjusted profit for the quarter.

    Reported profit per diluted share
    $0.77
    Q1 FY25

    Reported profit for the quarter, difference largely due to mark-to-market impact of derivatives.

    Unrestricted cash balance
    $2.6 billion
    Q1 FY25

    Cash balance at the end of the first quarter.

    Debt retired year-to-date
    $2.3 billion
    YTD FY25

    Retired with cash from noncore oil and gas divestitures, common warrant proceeds, and organic cash flow.

    Debt retired past 10 months
    $6.8 billion
    LTM

    Total debt reduction over the last 10 months.

    Annual interest expense reduction
    $370 million
    Annual

    Reduction in annual interest expense due to debt repayment.

    Tax payment (federal disaster relief)
    $350 million
    Q1 FY25

    Included in Q1 working capital change, related to 2024 tax payment following Hurricane Bill.

    Tax payment (federal disaster relief)
    $110 million
    Q2 FY25

    Expected in Q2, associated with the same program.

    Divestitures production reduction
    15,000
    Q1 FY25

    Impact from first quarter divestitures.

    Permian drilling duration improvement
    15%versus last year
    Q1 FY25

    Improvement in drilling duration per well, with notable performance in the Delaware Basin.

    Permian unconventional well cost reduction
    >10%compared to last year
    Q1 FY25

    Surpassing the 5% to 7% target outlined a few months ago.

    Delaware Basin drilling rigs dropped
    2
    FY25

    Dropped due to drilling efficiency gains, with expectation to bring more wells online.

    Estimated 2025 OpEx savings
    $150 million
    FY25

    Cost actions to strengthen margins and enhance financial resilience.

    Crude transportation contracts cash flow uplift
    $200 million
    FY25

    Benefit from revised crude transportation contracts at lower rates.

    Crude transportation contracts cash flow uplift
    $400 million
    Annual

    Annual benefit from revised crude transportation contracts starting in 2026.

    Battleground project CapEx
    $600 million
    FY25

    Peak spending for the Battleground modernization and expansion project.

    Battleground project CapEx
    $300 million
    FY26

    Expected CapEx for the Battleground project in 2026.

    STRATOS spending roll-off
    $250 million
    FY26

    Expected reduction in capital investment for STRATOS in 2026.

    Beam pump failure reduction
    20%
    since 2023

    Reduction in the failure of beam pumps, leading to less need for well service work.

    Downhole maintenance rigs dropped
    >30%
    last 2 years

    Reduction in downhole maintenance rigs due to improved operating production system.

    Block 53 drilling cost per foot reduction
    50%
    last 3 years

    Efficiency improvement in drilling operations in Oman.

    Block 53 work over rig cost per barrel reduction
    50%
    last 3 years

    Efficiency improvement in artificial lift performance in Oman.

    China PVC export market share
    30%from almost 0% in 2020
    2024

    Significant growth in China's PVC exports, weighing on the export market.

    Domestic PVC demand growth
    4%-5%
    FY25

    Expected growth in domestic PVC demand.

    Total oil resources
    $14 billionvs $8 billion in 2015
    current

    Total identified oil resources.

    Proved oil reserves
    $4.6 billionvs $2.2 billion in 2015
    current

    Total proved oil reserves.

    Shale as % of proved reserves
    60%vs 16% in 2015
    current

    Proportion of proved reserves from shale assets.

    Shale as % of total resources
    55%vs 25% in 2015
    current

    Proportion of total resources from shale assets.

    Conventional resources identified
    $6 billion
    current

    Identified conventional resources in various areas.

    Industry KPIs

    4
    MetricValueDetails
    D c efficiency rig activity15%%
    Basin level production volume1.39 millionBOE per day
    Cost of supply unit cash cost$9.05per BOE
    FCF shareholder distributions$1.2 billionUSD

    Orderbook & backlog

    1
    Carbon Offtake Agreement (CF Industries)2.3 million metric tons CO2 annuallyApril 2025

    25-year agreement for transportation and geologic storage at Pelican Hub.

    Deals & partnerships

    2
    Oman governmentExtension of current Block 53 contract by 15 years to 2050.unlock more than 800 million gross barrels of additional resources15 years (to 2050)

    Agreement aims to deliver significant value to all stakeholders and closely support Oman's national objectives. Covers all reservoirs, including low decline EOR and primary production.

    CF Industries and its partners25-year carbon offtake agreement for their planned low-carbon ammonia facility in Louisiana.25 years

    Highlights growing demand for large-scale carbon management solutions and fits within disciplined growth strategy in low-carbon ventures.

    Capital programs

    2
    STRATOS Direct Air Capture facilityadvancing towards commissioning

    STRATOS continues to advance towards commissioning and start-up in West Texas.

    Battleground modernization and expansion projectunderway
    Period spend: $600 million (FY25), $300 million (FY26)

    Benefit: significant uplift in earnings

    Peak spending for the project is 2025 at $600 million, reducing to $300 million in 2026. The project is expected to start up mid-2026.

    Risks & headwinds

    3
    Commodity price volatilitycurrent environment

    null

    Mitigation: Lowered capital guidance by $200 million and implemented $150 million in OpEx savings. Permian rig reductions and project optimizations across the portfolio. Prepared to scale back activity if commodity prices weaken meaningfully.

    Challenging economic conditions in China and oversupply in PVC marketcurrent

    China's PVC export market share grown from almost 0% in 2020 to 30% in 2024.

    Mitigation: Anticipate modest domestic demand growth in caustic and PVC markets through Q2 and Q3. Expect some rationalization of domestic capacity in H2 2025 to rebalance the market.

    Pricing pressure from Gulf Coast caustic expansionscurrent

    null

    Mitigation: Rationalization of domestic capacity in the second half of the year should help rebalance the market and improve pricing.

    What to watch in Q2 FY25

    5

    Permian production growth

    Q2 FY25
    Current1.39 million BOE per day
    Targetmodest increase

    Why it matters

    Permian growth is a key driver for total company production and cash flow, especially with rig reductions.

    Looking ahead to the second quarter, the midpoint of total company production is expected to modestly increase compared to the first quarter annual low of 1.39 million BOE per day.

    Q&A highlights

    7

    Seeking more detail on the components of CapEx/OpEx reductions (infrastructure, Gulf of America, EOR OpEx) and any forward impact on 2026 production or capital.

    Richard Jackson explained Permian efficiencies (15% drilling duration improvement, 10% well cost reduction, 2-rig drop, 15 net wells online), OpEx optimization (CO2 volumes, downhole maintenance, 20% beam pump failure reduction). Ken Dillon detailed Gulf of America project rescheduling ($100M less this year, deferring one well to 2026) to optimize design and benefit from deflation. Management stated no impact on 2026 production.

    “The drilling efficiency gains give us the confidence to drop 2 drilling rigs from our Delaware Basin program this year. Thanks to accelerated cycle times and improved time to market, we expect to bring more wells online and with slightly increased production even with this reduced rig count.”

    asked by Devin McDermott · answered by Richard Jackson

    2 min read6 chapters

    Detailed Narrative

    01

    Operational Efficiencies & Cost Management

    Occidental achieved significant operational efficiencies in Q1 FY25, particularly in the Permian, where unconventional well costs were reduced by over 10% and drilling duration improved by 15%. These gains allowed the company to drop 2 drilling rigs in the Delaware Basin without impacting production, and contributed to a $150 million OpEx savings target for 2025. The company also optimized infrastructure and operational spending across domestic assets, leading to a $200 million reduction in capital guidance for the year.

    02

    Oman Expansion & Discovery

    The company is in advanced negotiations with the Oman government to extend the Block 53 contract by 15 years to 2050, which could unlock over 800 million gross barrels of additional resources. This expansion is expected to enhance Oxy's cash flow starting in 2025. Additionally, a significant gas and condensate discovery exceeding 250 million BOE was made in North Oman, advantageously located near existing infrastructure, with appraisal and development plans under evaluation.

    03

    Debt Reduction Progress

    Occidental has made substantial progress in deleveraging, retiring $2.3 billion in debt year-to-date and $6.8 billion over the past 10 months. This has reduced annual interest expense by $370 million. All 2025 maturities have been retired, providing a comfortable runway and positioning the company to strengthen its financial position and support a more meaningful return of capital to common shareholders.

    04

    Low-Carbon Ventures & 1PointFive

    The STRATOS direct air capture facility is advancing towards commissioning and start-up in West Texas in the second half of 2025. In a significant commercial development, 1PointFive signed a 25-year carbon offtake agreement with CF Industries for the transportation and geologic storage of approximately 2.3 million metric tons of CO2 annually at the Pelican Hub. This contract supports large-scale carbon management solutions without requiring near-term capital expenditures.

    05

    Market Volatility Response

    In response to heightened commodity price volatility and market uncertainty🌐, Occidental is taking proactive steps to enhance its program. The company lowered capital guidance by $200 million and implemented $150 million in estimated 2025 OpEx savings. These actions are designed to strengthen margins and enhance financial resilience with minimal impact on 2025 production, while preserving long-term operational efficiencies.

    06

    Future Cash Flow Inflection

    Occidental anticipates a significant increase in pretax free cash flow from non-oil and gas sources, projecting $1 billion in incremental cash flow in 2026, with further expansion in 2027. This uplift is driven by the completion of the Battleground modernization project, savings from revised crude transportation contracts ($400 million annually from 2026), the roll-off of STRATOS spending ($250 million), and continued interest expense reductions.

    AI-generated summary of the company’s earnings call. Not investment advice.