Release Date: May 08, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Occidental Petroleum Corp (OXY, Financial) generated $3 billion in operating cash flow before working capital in the first quarter, showcasing strong financial performance.
• The company achieved a 15% improvement in drilling duration per well in the Permian, leading to a 10% reduction in unconventional well costs, surpassing their initial target.
• OXY is in advanced negotiations to extend the Block 53 contract in Oman by 15 years, potentially unlocking over 800 million gross barrels of additional resources.
• The midstream and marketing business outperformed expectations, driven by strong gas marketing optimization in the Permian.
• OxyChem delivered $215 million on an adjusted basis, overcoming operational challenges and extending its market leadership as a low-cost operator.

Negative Points

• The company faces heightened volatility and uncertainty in the macro environment, impacting commodity price stability.
• OXY's Gulf of America production guidance was revised down due to discretionary capital optimization, including deferring a development well into 2026.
• The company is experiencing elevated domestic operating expenses per BOE due to production mix shifts and maintenance activities.
• Uncertainty around global trade and economic conditions in China is impacting the chemical segment's pricing and demand.
• OXY is closely monitoring the evolving macro backdrop and may need to scale back activity if commodity prices weaken significantly.

Q & A Highlights

Q: Can you elaborate on the CapEx and OpEx reductions for this year, particularly in the Permian and Gulf of America, and any impacts on 2026 production or capital? A: Vicki Hollub, CEO, explained that the reductions are a mix of efficiency gains and timeline adjustments. Richard Jackson, SVP, highlighted that the Permian rig cuts are due to improved drilling efficiencies, allowing for more wells with fewer rigs. Ken Dillon, SVP, noted that Gulf of America projects have been optimized for design and cost, with no impact on drilling and completion funds. These changes are expected to be sustainable without affecting future production.

Q: How is the free cash flow inflection over the next few years broken down between operating cash flow and capital spending reductions? A: Sunil Mathew, CFO, detailed that the Chemicals segment will see a $300 million CapEx reduction in 2026, with an additional $160 million in operating cash flow from the Battleground project. Midstream will benefit from $400 million in lower transportation contract rates, and STRATOS spending will decrease by $250 million. Interest expense reductions will add $135 million, totaling a $1 billion improvement in cash flow by 2026.

Q: What is the strategy for potential disposals to accelerate deleveraging, and how does it relate to the current debt maturity profile? A: Vicki Hollub, CEO, stated that while specific plans can't be disclosed, the company aims to pay off 2026 maturities early. The focus is on maintaining a healthy cash balance while reducing debt, with potential disposals evaluated based on value, not necessarily tied to the midstream ramp-up.

Q: Could you provide more details on the new opportunities in Oman, particularly Block 53 and the North Oman discovery? A: Sunil Mathew, CFO, and Ken Dillon, SVP, expressed excitement about the Block 53 extension and North Oman gas discovery. The Block 53 extension is expected to enhance cash flow, with significant inventory potential and operational efficiencies. The North Oman discovery is being appraised, with early production data being gathered.

Q: How is the low-carbon ventures business progressing, particularly with STRATOS, and what impact could policy changes have on returns? A: Vicki Hollub, CEO, and Richard Jackson, SVP, highlighted the strong voluntary compliance market for carbon reduction credits. The focus is on R&D progress and cost reductions in direct air capture technology. STRATOS is expected to come online in the second half of the year, with partnerships and market support being key to future decisions.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.