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    OXY
    Earnings call· Sep 2025(Q3 FY25)

    OCCIDENTAL PETROLEUM CORP /DE/ OXY

    Nov 11, 2025 Source

    Executive summary

    Occidental Q3 FY25 — OxyChem Divestiture Accelerates Debt Reduction and Capital Returns, Permian Production Hits Record High

    Occidental's Q3 FY25 performance was highlighted by the strategic divestiture of OxyChem, a pivotal step to strengthen the balance sheet and accelerate shareholder returns. The company demonstrated strong operational execution, achieving record Permian production and significant cost efficiencies, which drove robust free cash flow generation. Management outlined a flexible capital allocation strategy for 2026, prioritizing debt reduction and opportunistic share repurchases while maintaining a disciplined approach to investment in a volatile commodity price environment.

    Highlights

    5

    • Generated $3.2 billion in operating cash flow and $1.5 billion in free cash flow before working capital in Q3 FY25.

    • Oil and gas production exceeded guidance at 1.47 million BOE per day, with Permian production reaching a record 800,000 BOE per day.

    • Achieved lowest quarterly lease operating expense per barrel across the oil and gas segment since 2021, outperforming guidance at $8.11 per BOE.

    • Midstream and Marketing segment delivered $153 million in adjusted earnings, surpassing the high end of guidance.

    • Reduced capital expenditures by $300 million and operating costs by $170 million compared to original 2025 guidance.

    Concerns

    3

    • OxyChem pretax income came in below guidance at $197 million due to continued softness in the global chlorovinyl market.

    • Experienced a negative working capital change, primarily driven by the timing of semiannual interest payments and payments within the Oil and Gas segment.

    • International assets had slightly lower-than-expected production, though offset by U.S. portfolio outperformance.

    Guidance & targets

    25
    CategoryTargetConfidence
    Principal Debt Target
    Less than $15 billion
    high materiality
    High
    Annual Interest Expense Reduction
    More than $350 million
    medium materiality
    High
    Cash on Balance Sheet (post-OxyChem sale)
    $1.5 billion
    medium materiality
    High
    Cash on Balance Sheet (long-term target)
    $3 billion to $4 billion
    medium materiality
    Medium
    Q4 FY25 Total Company Production
    1.46 million BOE per day
    high materiality
    High
    Q4 FY25 OxyChem Pretax Income
    $140 million
    medium materiality
    High
    FY25 Capital Spend
    Within previously guided range (~$7.2 billion midpoint)
    high materiality
    High
    FY25 Midstream & Marketing Pretax Income
    Approximately $400 million above original guidance
    medium materiality
    High
    2026 Capital Program (base)
    ~$6.3 billion
    high materiality
    High
    2026 Capital Program (potential increase)
    Up to $400 million
    high materiality
    Medium
    2026 Capital Program (total range)
    $6.3 billion to $6.7 billion
    high materiality
    Medium
    2026 Production Growth
    Flat to potentially up to 2%
    high materiality
    Medium
    LCV CapEx
    Around $100 million
    medium materiality
    High
    Gulf of America Waterflood Projects & Oman Investment
    Additional $250 million
    medium materiality
    High
    Unconventional EOR Production Uplift
    Up to 100%
    high materiality
    Medium
    Unconventional EOR Resource Opportunity
    Over 2 billion BOE
    high materiality
    High
    Conventional EOR Undeveloped Resources
    Approximately 2 billion BOE
    medium materiality
    High
    GoA Decline Rate Target
    10% by 2030, 7% by 2035
    medium materiality
    Medium
    King Field Waterflood On Stream
    Q2 next year
    medium materiality
    High
    Horn Mountain Waterflood Injectors Drilled
    Q1 2027
    medium materiality
    High
    Horn Mountain Waterflood Injection Date
    Q2 2027
    medium materiality
    High
    Horn Mountain Waterflood Response Date
    Late summer 2027
    medium materiality
    High
    STRATOS CO2 Injection
    Q1
    high materiality
    High
    Preferred Equity Redemption
    Resume in August 2029
    high materiality
    High
    OxyChem Adjusted Effective Tax Rate Update
    Further update early next year
    medium materiality
    High

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    Oil and Gas
    Exceeded the high end of guidance, with Permian Basin achieving its highest quarterly production in Oxy's history. Rockies and Gulf of America also outperformed. Achieved lowest quarterly lease operating expense per barrel since 2021.
    Production: 1.47 million BOE per dayPermian Production: 800,000 BOE per dayDomestic Lease Operating Expense: $8.11 per BOE
    		————
    Midstream and Marketing
    Delivered positive adjusted earnings, surpassing the high end of guidance. Teams navigated market volatility through strategic gas marketing and benefited from higher sulfur prices in Al Hosn.
    		———Adjusted earnings: $153 million
    OxyChem
    Pretax income came in below guidance due to continued softness in the global chlorovinyl market. Will be classified as discontinued operations starting Q4 FY25.
    		———Pretax income: $197 million

    Operational metrics

    23
    Debt repaid
    $1.3 billion
    Q3 FY25

    Debt repaid during the third quarter.

    Debt repaid year-to-date
    $3.6 billion
    YTD Q3 FY25

    Total debt repayment year-to-date.

    Principal debt balance
    $20.8 billion
    Q3 FY25

    Current principal debt balance.

    Total resource potential
    16.5 billion BOEUp from 8 billion BOE in 2015
    Current

    More than doubled since 2015.

    Total production
    Over 1.4 million BOE per dayUp from 650,000 BOE per day in 2015
    Current

    More than doubled since 2015.

    Domestic production percentage
    83%Up from 50% in 2015
    Current

    Shifted percentage of oil and gas production to domestic.

    Permian resource base expansion
    2.5 billion BOE
    Recent

    Organic resource expansion through subsurface characterization and advanced recovery technologies.

    Permian resource as percentage of total
    Approximately 70%
    Current

    Represents a significant portion of Oxy's total resources.

    Delaware Basin secondary bench wells outperformance
    10%vs. industry average
    Current

    Outperformed industry average for all benches.

    Delaware Basin capital intensity reduction
    16%
    Since 2022

    Lowering overall development costs.

    Midland Basin new wells 6-month cumulative oil production increase
    22%vs. industry average decline of 5%
    Since 2023

    Industry average declined about 5% over the same period.

    Midland Basin well cost reduction
    38%
    Since 2023

    Step changes created an expanded deep bench opportunity.

    Barnett new wells outperformance
    18%vs. industry average
    Since 2020

    New well performance outperforming industry average.

    Unconventional EOR oil uplift (demonstration projects)
    Over 45%
    Demonstration projects

    Achieved positive and consistent results in multiple demonstrations.

    Conventional EOR cost reductions
    $80 million
    FY25

    Part of 2025 domestic operating cost reductions, improving returns and investment priority.

    Gulf of America waterflood projects improved recoveries
    Nearly 150 million BOE
    Long-term

    Expected from two FID'd waterflood projects.

    Gulf of America waterflood projects returns
    40% to 50%
    Projected

    Expected returns for the King Field and Horn Mountain waterflood projects.

    OxyChem legacy liabilities annual cost
    Somewhere in the neighborhood of $20 million
    Annual

    Cost to maintain legacy liabilities not transferred with OxyChem sale, considered minimal and not material.

    Powder River Basin drilling performance improvement
    More than 25%
    Vs. last year

    Achieved drilling record after drilling record.

    Project breakeven
    Less than $40
    Annual programs

    Breakeven for current annual programs, expected to continue.

    Capital expenditures reduction
    $300 millionvs. original guidance
    FY25

    Reduction in capital expenditures for the year.

    Operating costs reduction
    $170 millionvs. original guidance
    FY25

    Reduction in operating costs for the year.

    Annualized cost savings (U.S. onshore)
    $2 billion
    Since 2023

    Realized across U.S. onshore operations driven by continuous operational improvements.

    Industry KPIs

    5
    MetricValueDetails
    D c efficiency rig activity16%%
    Basin level production volume800,000BOE/d
    Cost of supply unit cash cost$8.11USD/BOE
    FCF shareholder distributions$1.5 billionUSD
    Weather event volume earnings impactFavorable weather

    Deals & partnerships

    2
    Not named (buyer of OxyChem)Sale of OxyChem business~$8 billion net proceeds

    Pivotal step in transformation, strengthens balance sheet, accelerates debt reduction to less than $15 billion target, enhances return of capital program.

    CrownRockAcquisition of assets to strengthen acreage position and achieve scale in Midland Basin

    Enabled operational efficiencies and led to industry-leading well costs and performance when combined with Oxy's existing teams.

    Capital programs

    3
    STRATOS Phase 1underway

    Benefit: CO2 capture

    Commissioned the central processing unit with water, started process compression facilities, and began loading pellets and chemicals. Priorities are long-term capture efficiency and uptime. Siemens Energy team has been supportive.

    King Field Waterfloodunderway

    Benefit: Improved recoveries of nearly 150 million BOE; 10-year field life extension

    FID'd in Gulf of America, tieback to Marlin, requires very limited facilities. Expected returns are 40-50%.

    Horn Mountain Waterfloodunderway

    Benefit: Improved recoveries of nearly 150 million BOE

    FID'd in Gulf of America, utilizing latest OBN seismic and in-house tools for injector placement. Facilities will be installed in parallel. Long lead items have been placed. Expected returns are 40-50%.

    Risks & headwinds

    3
    Softness in global chlorovinyl marketQ3 FY25, expected to continue into Q4 FY25

    OxyChem pretax income of $197 million, below guidance

    Mitigation: Divestiture of OxyChem business

    Negative working capital changeQ3 FY25

    Impacted free cash flow

    Mitigation: Primarily driven by timing of semiannual interest payments and payments within Oil and Gas segment, implying temporary nature.

    Commodity price volatility and oversupply concernsNear-term (2026)

    Influencing 2026 capital allocation decisions

    Mitigation: Evaluating multiple capital scenarios, maintaining flexibility to adapt, prioritizing efficiency over activity reductions, selectively deferring multiyear projects, optimizing operating expenses.

    What to watch in Q4 FY25

    5

    2026 Capital Budget

    Q4 FY25 earnings call
    Current$6.3 billion to $6.7 billion (range)
    TargetFinalized 2026 capital budget

    Why it matters

    The final capital budget will dictate the company's investment levels and growth trajectory for the upcoming year, impacting production and cash flow.

    We plan to share more on our 2026 capital budget during our fourth quarter call, pending Board approval.

    Q&A highlights

    5

    Clarification on the 2026 CapEx range, considering the OxyChem sale and LCV capital. Also, details on the 2.5 billion BOE Permian resource add, drilling inventory, and sustaining capital breakeven.

    Sunil confirmed the 2026 CapEx range could be $6.3 billion to $6.7 billion, with increased flexibility due to a larger proportion of U.S. onshore CapEx. Richard explained the 2.5 billion BOE resource add comes from unconventional shale improvements and EOR, representing a shift from drilling inventory to a broader resource explanation. He noted annual programs are less than $40 breakeven and cost efficiency is continuously improving the resource base.

    “So you start with $6.3 billion, and it could be somewhere between $6.3 billion to $6.7 billion, depending on the macro environment.”

    asked by Douglas George Blyth Leggate · answered by Sunil Mathew

    2 min read5 chapters

    Detailed Narrative

    01

    OxyChem Divestiture and Strategic Transformation

    Occidental announced the sale of OxyChem, marking a pivotal step in its strategic transformation. This decision was driven by the significant growth and quality of its oil and gas portfolio, which has more than doubled its total resource potential and production since 2015. The divestiture reinforces the company's focus on its core oil and gas assets, particularly in the Permian, and reduces geopolitical risk by increasing domestic production to 83% of the total.

    02

    Balance Sheet Strengthening and Capital Return

    The proceeds from the OxyChem sale, approximately $8 billion net, will be primarily used to strengthen the balance sheet. $6.5 billion is allocated to debt reduction, aiming to achieve a principal debt target of less than $15 billion and reduce annual interest expense by over $350 million. The remaining $1.5 billion will be held as cash. This enhanced financial flexibility will enable a broader return of capital program, including opportunistic share repurchases, with a focus on resuming preferred equity redemption in August 2029.

    03

    Permian Resource Expansion and Operational Efficiency

    Occidental has organically expanded its Permian resource base by 2.5 billion BOE, now representing approximately 70% of its total resources. This expansion is attributed to subsurface characterization and advanced recovery technologies. The company has achieved significant cost efficiencies, including a 16% reduction in capital intensity in the Delaware Basin since 2022 and a 38% reduction in well costs in the Midland Basin since 2023, leading to industry-leading performance in new wells.

    04

    Enhanced Oil Recovery (EOR) Strategy

    Leveraging its expertise in conventional CO2 EOR, Occidental is expanding EOR into unconventional shale assets. Demonstration projects have shown over 45% oil uplift, with potential for up to 100% uplift in commercial projects. This represents a resource opportunity of over 2 billion BOE in unconventional EOR, with 3 initial commercial projects and a pipeline of 30 more ready for development. The company also has approximately 2 billion BOE of undeveloped resources in conventional EOR assets.

    05

    2026 Capital Allocation and Flexibility

    For 2026, Occidental is targeting a capital program between $6.3 billion and $6.7 billion, with a base plan of $6.3 billion after accounting for the OxyChem divestiture and LCV capital roll-off. An additional $250 million will be allocated to Gulf of America waterflood projects and Oman, and up to $400 million could be reallocated to short-cycle, high-return Permian projects. This flexible approach allows the company to adapt to market conditions and maintain resilient free cash flow, targeting flat to 2% production growth.

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