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    OXY
    Earnings call· Jun 2025(Q2 FY25)

    OCCIDENTAL PETROLEUM CORP /DE/ Q2 FY25 earnings call OXY

    Aug 7, 2025 Source

    Executive summary

    Occidental Q2 FY25 — Strong Cash Flow, Debt Reduction & Carbon Capture Progress

    Occidental delivered strong Q2 FY25 results, driven by robust operating cash flow and significant debt reduction ahead of schedule. The company made substantial progress in its carbon management initiatives with STRATOS nearing operation, while operational efficiencies and portfolio high-grading efforts continued to strengthen the balance sheet and asset base. Despite some commodity price headwinds and segment-specific challenges, the focus remains on cost optimization and strategic investments in EOR and low-carbon solutions.

    Highlights

    5

    • Generated $2.6 billion of operating cash flow in Q2 FY25.

    • Repaid $7.5 billion of debt in the last 13 months, reducing CrownRock acquisition debt by nearly 70%.

    • STRATOS Trains 1 & 2 moved to operations, on track to start CO2 capture this year.

    • Oil and gas business produced 1.4 million BOE per day in Q2 FY25, exceeding guidance midpoint.

    • Achieved $500 million in total cost reductions for FY25 relative to the original plan.

    Concerns

    3

    • OxyChem pre-tax income came in below guidance in Q2 FY25 due to weaker caustic and PVC pricing.

    • Full year OxyChem guidance lowered to $800 million to $900 million due to market oversupply.

    • Offshore second half production guidance reduced due to third-party constraints and program timing in the Gulf of America.

    Guidance & targets

    13
    CategoryTargetConfidence
    Adjusted Effective Tax Rate
    approximately 32%
    medium materiality
    High
    Adjusted Effective Tax Rate
    similar range to 32%
    medium materiality
    High
    Total Company Production
    1.42 million to 1.46 million BOE per day
    high materiality
    High
    Total Company Production
    maintained
    high materiality
    High
    Total Company Oil Cut
    slightly reduce
    medium materiality
    Medium
    Midstream & Marketing Full Year Guidance
    raised by $85 million
    medium materiality
    High
    OxyChem Full Year Pre-Tax Income
    $800 million to $900 million
    medium materiality
    High
    Capital Guidance Range
    reduced by $100 million
    high materiality
    High
    Cash Tax Reduction (One Big Beautiful Bill)
    $700 million to $800 million
    high materiality
    High
    Cash Tax Reduction (One Big Beautiful Bill)
    35% of $700M-$800M
    high materiality
    High
    Cash Tax Reduction (One Big Beautiful Bill)
    65% of $700M-$800M
    high materiality
    High
    OxyChem Spend Reduction
    $300 million
    medium materiality
    High
    LCV Spend Reduction
    $250 million
    medium materiality
    High

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    Oil and Gas
    Exceeded midpoint of production guidance in Q2 FY25. Achieved higher CFO in H1 FY25 despite lower oil prices due to additional production and operating cost reductions. Strong well performance in Gulf of America (Horn Mountain, Caesar Tonga) ramping up.
    Production volume: 1.4 million BOE per dayU.S. onshore lease operating expense: $8.55 per barrelInternational OpEx reduction: $50 million (estimated for the year)Permian unconventional well costs reduction: 13% (YTD vs 2024)Delaware Basin drilling times improvement: 20%Onshore production transitioned to ruthless operations: 40%
    		————
    Midstream & Marketing
    Generated positive earnings on an adjusted basis, outperforming the high end of guidance in Q2 FY25. Driven by improved crude marketing margins, gas marketing optimization, higher sulfur pricing, and new oil transportation contracts.
    		———$206 million (adjusted basis)
    Low Carbon Ventures
    Achieved significant milestone with STRATOS, moving Trains 1 & 2 to operations and commencing wet commissioning. Signed two additional commercial agreements for CDR sales with JPMorgan and Palo Alto Networks.
    STRATOS Trains 1 & 2 status: Moving to operationsSTRATOS CO2 capture: On track to start this yearSTRATOS CDR volumes contracted: Majority through 2030
    		————

    Operational metrics

    16
    Adjusted EPS
    $0.39
    Q2 FY25
    Reported EPS
    $0.26
    Q2 FY25
    Unrestricted Cash
    $2.3 billion
    End of Q2 FY25

    After warrant proceeds and debt repayments.

    Debt Repaid
    $7.5 billionahead of target
    Last 13 months

    Far exceeding near-term goal of paying down $4.5 billion within 12 months of CrownRock acquisition close.

    Annual Interest Expense Reduction
    $410 million
    Annual

    Resulting from debt repayments.

    Divestitures Announced
    $950 million
    Since Q1 FY25 end

    Additional divestitures of non-core, largely non-operated assets in U.S. onshore business.

    Total Cost Reductions
    $500 millionrelative to original plan
    FY25

    Combined reductions from U.S. onshore operating cost improvements, international OpEx, and capital guidance reductions.

    Cash Tax Benefits from One Big Beautiful Bill
    $700 million to $800 million
    FY25-FY26

    Estimated reduction in cash taxes relative to prior law.

    Oil Production Rates
    1.395 million BOE per dayvs 1.215 million BOE per day in H1 FY24
    H1 FY25

    Absolute operating cost in these two periods were essentially the same despite increased production.

    WTI Price Average
    $11 per barrel lowervs H1 FY24
    H1 FY25

    Despite lower WTI prices, company achieved higher CFO.

    U.S. Onshore Operating Cost Savings
    $150 million
    FY25

    Expected savings through significant cost reductions.

    Permian Unconventional Well Cost Reduction
    13%vs 2024
    YTD

    Collectively, advancements in drilling and completion efficiencies.

    Delaware Basin Drilling Times Improvement
    20%
    Q2 FY25

    Bringing well costs below 2025 target.

    Onshore Production to Ruthless Operations
    40%
    Q2 FY25

    Transitioned by integrating automation, field sensors, and AI to prioritize lease operating routes.

    CO2 EOR Potential in United States
    50 billion to 70 billion barrels
    Future

    Additional oil that could be recovered using CO2 EOR, extending energy independence by 10 years.

    Total Resources
    over 14 billion barrels
    Future

    Much of which is well suited for EOR application.

    Industry KPIs

    5
    MetricValueDetails
    D c efficiency rig activity20%%
    Realized price differential$11 per barrel lowerUSD
    Basin level production volume1.4 million BOE per dayBOE/day
    Cost of supply unit cash cost$8.55per barrel
    FCF shareholder distributions~$700 millionUSD

    Orderbook & backlog

    2
    STRATOS CDR volumes contractedMajority of volumes through 2030Q2 FY25

    Demonstrates strength of growing CDR market and increasing appetite for durable carbon removal technologies.

    Divestiture pipeline$580 millionQ2 FY25

    Expected to close in Q3 FY25. Part of $950 million additional divestitures announced since Q1 FY25 end.

    Deals & partnerships

    3
    JPMorganCommercial agreement for carbon dioxide removal cells

    One of two additional commercial agreements signed for CDR cells.

    Palo Alto NetworksCommercial agreement for carbon dioxide removal cells

    One of two additional commercial agreements signed for CDR cells.

    XRGAgreement to evaluate a potential joint venture to develop a DAC facility in South Texas

    XRG is UAE's investment company and gas, chemicals, and low carbon energy solutions. Highlights Oxy's unique capabilities and confidence in DAC.

    Capital programs

    2
    STRATOS Direct Air Capture Facilityunderway
    Start: 2 years ago (groundbreaking)

    Benefit: CO2 capture

    Trains 1 & 2 now moving over to operations, commenced wet commissioning. Incorporating R&D from Carbon Engineering Innovation Centre into Phase 2 to improve economics and accelerate cost down curve for future DAC projects.

    Battleground Expansionunderway

    Construction schedule for the battleground expansion is a driver for the remaining 2025 capital spend being weighted to Q3.

    Risks & headwinds

    4
    Lower oil pricesH1 FY25

    WTI averaged $11 per barrel lower in H1 FY25 vs H1 FY24

    Mitigation: Achieved higher CFO through additional production and operating cost reductions.

    Third-party constraints in Gulf of AmericaH2 FY25

    Production impacts, prompting a reduction in offshore second half production guidance

    Mitigation: Outperformance in Rockies and uplift in Oman volumes partially offset impacts; modified pumps in Eastern GOM to handle constraints.

    OxyChem market oversupplyQ2 FY25 and FY25 outlook

    Weaker-than-anticipated pricing for caustic and PVC; full year guidance lowered to $800M-$900M

    Mitigation: Demand held firm, but excess supply compressed margins. Not expecting meaningful impact of capacity rationalization in 2026.

    Narrowing Waha to Gulf Coast natural gas spreadQ3 FY25

    Anticipated more muted Q3 for Midstream & Marketing

    Mitigation: Prepared for marketing optimization opportunities as they arise.

    What to watch in Q3 FY25

    5

    STRATOS CO2 Capture Start

    This year
    CurrentTrains 1 & 2 moved to operations, commenced wet commissioning
    TargetStart capturing CO2 this year

    Why it matters

    Verifies the commercial startup and operational success of the flagship Direct Air Capture facility, a key component of Oxy's low-carbon strategy.

    STRATOS has achieved a significant milestone, and we're on track to start capturing CO2 this year.

    Q&A highlights

    8

    Clarification on the $700M-$800M cash tax tailwinds, specifically the 35% in '25 and balance in '26, and its impact on the cash tax rate in '26.

    Sunil confirmed the split of benefits (35% in '25, balance in '26). He explained that the adjusted income effective tax rate would not be impacted, but there would be an increased deferred tax expense due to accelerated depreciation and R&D expensing for cash tax purposes. Beyond '26, the benefits depend on capital trajectory and domestic spending proportion, with 90% of current capital being domestic.

    “the adjusted income effective tax rate will not be impacted by the cash tax benefit, but what you're going to see is an increased deferred tax expense, primarily driven by the acceleration of depreciation and R&D expenses for cash tax purpose.”

    asked by Arun Jayaram · answered by Sunil Mathew

    2 min read6 chapters

    Detailed Narrative

    01

    Debt Reduction and Portfolio High-Grading

    Occidental has made significant strides in debt reduction, repaying $7.5 billion of debt in the last 13 months, well ahead of the target set after the CrownRock acquisition. This equates to almost a 70% reduction of the debt raised for the acquisition and reduces annual interest expense by approximately $410 million. The company also announced $950 million of additional divestitures since the end of Q1 FY25, bringing the total announced divestitures to nearly $4 billion since January 2024, strengthening the balance sheet and improving the debt maturity profile.

    02

    STRATOS and Carbon Management Advancements

    The STRATOS Direct Air Capture (DAC) facility has achieved a significant milestone, with Trains 1 & 2 moving to operations and on track to start capturing CO2 this year. The majority of STRATOS volumes through 2030 are now contracted, demonstrating strong market demand for Carbon Dioxide Removal (CDR) credits. Occidental also announced an agreement to evaluate a potential joint venture with XRG to develop a DAC facility in South Texas, highlighting the company's leadership in DAC technology and its strategic importance for Enhanced Oil Recovery (EOR).

    03

    Operational Efficiencies and Cost Savings

    The company achieved higher cash flow from operations in H1 FY25 despite lower oil prices, driven by additional production and significant cost reductions. U.S. onshore operations are expected to deliver $150 million in operating cost savings this year, with per-barrel costs reduced to $8.55. International operations anticipate $50 million in OpEx reductions. Permian unconventional well costs have seen a 13% reduction year-to-date compared to 2024, with Delaware Basin drilling times improving by 20%.

    04

    U.S. Oil Production Outlook and EOR Potential

    Occidental believes U.S. oil production could peak between 2027 and 2030. The company emphasizes the critical role of CO2 Enhanced Oil Recovery (EOR), which could recover an additional 50 billion to 70 billion barrels of oil in the United States, potentially extending energy independence by 10 years. With over 50 years of experience in carbon management and nearly 3 billion barrels of Permian EOR conventional resources, Oxy is uniquely positioned to leverage DAC technology for EOR, addressing the current constraint of CO2 availability.

    05

    Impact of the One Big Beautiful Bill

    The recently enacted 'One Big Beautiful Bill' is expected to provide significant cash tax benefits to Occidental, estimated at $700 million to $800 million in total reduction. Approximately 35% of this benefit is expected in 2025, with the remainder in 2026. These benefits are primarily due to changes in bonus depreciation, R&D expensing, and limitations on interest deductibility, further strengthening the company's financial position.

    06

    Oman Mukhaizna Contract Extension

    The Mukhaizna contract extension in Oman has led to an uplift in production volumes and improved economics, making the project more competitive. The drilling rigs are operating at their lowest cost per foot and highest feet per day rates ever, with artificial lift equipment showing highest reliability. The company sees multiple stacked pays across the large block, offering opportunities for sustainable production and potential future capital allocation, possibly through partnerships.

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