Occidental Petroleum (OXY) Q2 FY26 earnings call: guidance and Q&A

Can you detail the timing and progression of the $4 billion cash flow improvement plan, and elaborate on the oil and gas efficiencies?

The plan is front-end loaded, with $1.2 billion expected in 2026 and an additional $700-$800 million in 2027, totaling approximately $2 billion by 2027. Oil and gas efficiencies are a continuation of 2026 trends, including CapEx and OpEx savings. The remaining $1.3 billion is expected between 2028-2029, after the preferred redemption. The company is exploring moderate growth scenarios that could further improve free cash flow by 2030.

“So, between '26 and '27, it's going to be around $2 billion, which is approximately or close to 50% of the $4 billion savings. And as you think beyond 2027, there is $700 million of the preferred redemption in August 2029, and that leaves around $1.3 billion, which we expect to achieve between '28 and '29.”

asked by Nitin Kumar · answered by Sunil Mathew

How does Occidental think about 'efficiency-led growth' for 2027 and longer term, especially given the supportive macro environment?

Efficiency-led growth means driving continuous efficiency, as demonstrated by U.S. production offsetting Middle East disruptions. Reinvestment decisions are guided by returns, cost efficiency, free cash flow timing, decline rates, technology advancement (e.g., unconventional EOR), and macro conditions. Internal scenarios show that a moderate growth CAGR of around 2% with balanced short-cycle and mid-cycle investments could lead to even better free cash flow improvement than the baseline $4 billion plan by 2030.

“What we've outlined today is sort of a sustaining CapEx scenario, which is without any production growth. But we also looked at a moderate growth scenario where looking at a production CAGR of around 2%. And what we saw was with the balanced investment between short-cycle and mid-cycle investments, our free cash flow improvement is actually better than what we have outlined today by the time we got to 2030.”

asked by Nitin Kumar · answered by Sunil Mathew

Is the interpretation correct that buybacks are secondary to preferred redemption, implying net debt reduction and cash build-up? Also, how will sustaining capital decline, specifically regarding EOR and CO2 huff and puff?

Yes, the preference is for net debt reduction and building cash for the preferred redemption in August 2029, with share repurchases remaining opportunistic and a lower priority until then. Sustaining capital reduction is driven by lower decline rates from advanced recovery projects like waterfloods (e.g., Horn Mountain, Marlin King, Oman) and EOR, as well as base performance improvements. New projects like sidetracks in Central Basin platform EOR assets also contribute to low-cost production adds and derisking opportunities.

“But considering the current volatility in oil prices, we do not want to give a new milestone at this point. And share repurchases will be opportunistic, like you said, and you highlighted, any large continuous share repurchase program will be lower priority until the redemption of the preferred in August 29.”

asked by Douglas George Blyth Leggate · answered by Sunil Mathew

How will Occidental achieve sustainable cost savings beyond interest expense reductions?

Cost savings are driven by continuous drilling efficiency improvements (50% better well delivery per rig), expansion of simulfrac, and a global perspective on cost and efficiency across assets. The company aims to scale successful initiatives and is intentional about challenging teams to deliver more. For example, dropping three rigs in Q4 while still expecting 15 more wells online in the Permian demonstrates doing 'more with less'.

“So a data point around that based on the efficiencies we have seen so far in Permian, the plan is to drop three rigs in Q4. And -- but we're actually expecting to have 15 more wells online in Permian.”

asked by Neil Mehta · answered by Sunil Mathew

How is Oxy applying advanced recovery techniques to shale, what are the resource recovery results, and how does it mitigate decline rates?

Occidental has 10 years of CO2 EOR pilots in Permian unconventional reservoirs (Midland and Delaware Basins), showing consistent 45% uplift in Estimated Ultimate Recovery (EUR), potentially increasing recovery from 10% to 15-20%. The approach is customized by basin, and combines techniques like surfactants and CO2. Commercial projects will come online in late 2028-2029, contributing to lower decline rates. The Central Basin Platform horizontals are an early opportunity to apply these learnings.

“We've seen consistent more than 45% uplift in terms of EUR. So if you're thinking about 10% average recovery in an unconventional well, now you're talking getting up to 15%. We think ultimately, as we continue to cycle CO2, that can get up to 20%.”

asked by Arun Jayaram · answered by Richard Jackson

How has Occidental maintained leadership in well performance and productivity despite a significant change in its Permian development model, focusing on different zones?

The company's core focus remains on primary benches and unconventional well performance, which continues to be steady or improving. They derisk secondary benches as development proceeds, utilizing midstream infrastructure and taking advantage of development areas for capital efficiency. In the Delaware Basin, secondary bench development is 40% higher than the industry average (2024-2026), and 6-month oil productivity is 21% higher than the industry benchmark. This confidence has allowed increasing secondary bench activity from less than 10% to mid-40s.

“When you look at the Delaware specifically, our secondary bench development, we're about 40% higher than the industry average 2024 to 2026. So a lot of that is due to just the work the teams are doing on the subsurface, how do we identify these high-quality targets, how do we frac it -- similar on the six-month oil stat we're about 21% higher than the industry benchmark.”

asked by Sam Margolin · answered by Babatunde Cole