Earnings Call Insights: Occidental Petroleum Corporation (OXY) Q3 2025
Management View
- CEO Vicki Hollub announced the sale of OxyChem as a “pivotal step in our transformation,” explaining that “the proceeds will be used to immediately strengthen our balance sheet, allowing us to significantly deleverage and achieve our principal debt target of less than $15 billion.” Hollub highlighted the doubling of total resource potential and production since 2015, noting a shift to 83% domestic oil and gas production and a development runway of 30-plus years. The CEO emphasized that “our substantial oil and gas runway, along with our demonstrated expertise in maximizing resource recovery, created the foundation for accelerating value to our shareholders through the divestiture of OxyChem.”
- Hollub reported operating cash flow of $3.2 billion and free cash flow before working capital of $1.5 billion for the quarter, stating, “we exceeded last year’s third-quarter operating cash flow despite WTI prices that were more than $10 per barrel lower in the third quarter of this year.” She also pointed to record oil and gas production of approximately 1.47 million barrels of oil equivalent per day, with the Permian Basin contributing 800,000 BOE per day, “the highest quarterly Permian production in Oxy’s history.”
- COO Richard Jackson detailed a $2.5 billion BOE expansion in the Permian resource base, now accounting for approximately 70% of Occidental’s total resources. Jackson emphasized, “our secondary bench wells outperformed the industry average by 10% when compared to all benches, primary and secondary in the basin,” and described a 16% lower capital intensity since 2022.
- Jackson reported a 22% increase in Midland Basin new wells’ 6-month cumulative oil production per 1,000 feet since 2023, with a 38% reduction in well costs. He noted, “our new well performance in the Barnett is outperforming the industry average by 18% since 2020.”
- CFO Sunil Mathew stated, “in the third quarter, we generated a reported profit of $0.65 per diluted share,” and highlighted $1.5 billion in free cash flow before working capital. Mathew confirmed debt repayment of $1.3 billion during the quarter, reducing principal debt to $20.8 billion, and projected that the OxyChem transaction would “lower our annual interest expense by more than $350 million while providing a very manageable near-term debt maturity schedule.”
Outlook
- Mathew announced an increase in full year guidance for Oil and Gas and Midstream and Marketing segments, stating, “we are raising our fourth quarter total company production guidance from last quarter’s implied guidance to a midpoint of 1.46 million BOE per day.”
- Mathew described plans to use approximately $6.5 billion of the anticipated $8 billion OxyChem sale proceeds to reduce debt, aiming to “achieve our post-CrownRock principal debt target of less than $15 billion” and to “broaden our return of capital program and adopt a more flexible framework for delivering value to our shareholders.”
- The company is “planning to increase investment in the Gulf of America waterflood projects and in Oman,” with “approximately an additional $250 million” allocated and up to “$400 million to these short-cycle, high-return projects, primarily in the Permian.”
Financial Results
- Reported profit was $0.65 per diluted share for the third quarter. Operating cash flow totaled $3.2 billion, and free cash flow before working capital was $1.5 billion.
- Oil and gas production reached approximately 1.47 million BOE per day, with the Permian Basin at 800,000 BOE per day, and Midstream and Marketing adjusted earnings of $153 million.
- Domestic lease operating expenses came in at $8.11 per BOE, and $1.3 billion of debt was repaid in the quarter.
Q&A
- Douglas George Blyth Leggate, Wolfe Research: Asked about capital guidance and sustaining capital breakeven. Mathew confirmed, “you’re looking at somewhere between $6.3 billion to $6.7 billion with a larger proportion of U.S. onshore CapEx where we have a lot more flexibility.”
- Leggate also inquired about Permian drilling inventory and breakevens. Jackson responded, “our annual programs are all less than $40 breakeven.”
- Arun Jayaram, JPMorgan: Asked about CO2 EOR pilots and resource uplift math. Jackson explained, “we had 5 injection cycles… we stopped and saw this 45% uplift. If we modeled out continued cycles… this is where we get to the 60% and even 100% production uplift.”
- Jayaram followed up on Gulf of America waterflood projects. Kenneth Dillon stated, “these will result in improved recoveries of nearly 150 million BOE and significant reductions in decline rates over time.”
- Neil Mehta, Goldman Sachs: Inquired about STRATOS project and return of capital strategy. Dillon said, “overall, the STRATOS Phase 1 start-up is proceeding well.” Hollub responded on capital, “we definitely want to take out the — all that we can, the $6.5 billion of debt first. And then beyond that, we are going to opportunistically buy back shares.”
- Paul Cheng, Scotiabank: Queried about LCV spend and production contribution from quick payback onshore projects. Mathew indicated LCV CapEx for next year at “around $100 million.” Jackson added, “in terms of production, you would be looking something close to flat to potentially up to 2% growth.”
- Additional questions covered Rockies performance, DJ inventory flex, Permian well costs, and EOR returns.
Sentiment Analysis
- Analysts pressed on capital allocation, drilling inventory, and production growth flexibility. Tone was generally constructive but persistent, seeking clarity on capital deployment and production outlook.
- Management presented a confident tone in both prepared remarks and Q&A, frequently referencing operational outperformance and cost efficiency. Hollub stated, “we are confident that these actions will further strengthen our competitive position.”
- Compared to the previous quarter, management’s tone was more assertive about capital flexibility and debt reduction milestones, while analysts maintained a consistently probing but neutral stance.
Quarter-over-Quarter Comparison
- Guidance for fourth quarter production was raised vs. the previous quarter’s implied guidance.
- Strategic focus shifted from portfolio optimization and high-grading in Q2 to executing on the OxyChem divestiture and deploying proceeds toward debt reduction and capital returns in Q3.
- Management’s confidence in operational efficiency and resource expansion was more pronounced, especially around Permian performance and EOR projects.
- Key metrics including operating cash flow, production levels, and cost reductions all showed improvement from the previous quarter.
- Analysts’ questions shifted from divestiture and cost efficiency in Q2 to production flexibility and capital allocation plans in Q3.
Risks and Concerns
- Continued softness in the global chlorovinyl market impacted OxyChem results, with guidance for OxyChem pretax income at $140 million for the next quarter.
- Management noted the need for capital flexibility in response to “recent commodity price volatility and oil market outlook” and signaled readiness to “invest opportunistically in these projects when conditions are more favorable.”
- Analysts raised concerns about legacy liabilities associated with OxyChem, which Hollub addressed by noting minimal ongoing cash impact.
Final Takeaway
Occidental’s third quarter showcased a decisive transformation with the OxyChem sale, substantial debt reduction, and record-setting Permian performance. Management articulated a disciplined approach to capital allocation, increased operational flexibility, and a commitment to shareholder returns, underpinned by an expanded resource base and ongoing cost efficiencies. The company is positioned to accelerate value creation through its streamlined portfolio and enhanced financial resilience.