Occidental Petroleum Corporation (NYSE: OXY)

Occidental’s Q2 2025 financial performance reflected the challenging commodity price environment, with net income of $288 million and adjusted earnings of $396 million significantly lower than the prior year primarily due to reduced oil and gas prices. Average WTI and Brent prices for the quarter were $63.74 and $66.59 per barrel, respectively, representing substantial decreases from Q2 2024 levels.

Despite lower commodity prices, the company demonstrated operational resilience with operating cash flow of $3.0 billion, reflecting strong underlying business fundamentals and operational efficiency improvements. Free cash flow before working capital of $0.7 billion, while down from the prior year, demonstrates the company’s ability to generate substantial cash even in a lower price environment.

Worldwide realized crude oil prices averaged $63.76 per barrel, down 10% from Q1 2025, while natural gas liquids prices declined 20% to $20.71 per barrel. Domestic realized gas prices fell 45% from the prior quarter to $1.33 per thousand cubic feet, reflecting the significant volatility in natural gas markets.

The company’s focus on operational excellence and cost management enabled it to maintain strong margins despite the commodity price headwinds. Continued efficiency gains allowed Occidental to reduce its 2025 capital guidance midpoint by $100 million and international operating costs by $50 million, demonstrating management’s commitment to capital discipline.

Year-to-date debt reduction of $3.0 billion through asset sales, organic cash flow and warrant proceeds underscores the company’s commitment to strengthening its balance sheet and reducing leverage. This deleveraging strategy positions Occidental well for future growth opportunities and provides financial flexibility to navigate commodity price cycles.

Total worldwide production of 1,400 Mboed exceeded the mid-point of guidance, demonstrating the company’s operational excellence and well performance leadership. The Permian basin continued to be the primary growth driver, with production of 770 Mboed representing a 2% increase from the prior quarter.

Permian Basin performance remained strong with 770 Mboed production, driven by continued drilling efficiency and superior well performance. The basin accounted for 55% of total production and continues to generate the highest returns in the portfolio. Oil production from the Permian averaged 410 thousand barrels per day, slightly higher than the prior quarter.

Rockies & Other Domestic operations produced 272 Mboed, down 7% from the prior quarter due to natural base decline and planned maintenance activities. The company continues to focus on the highest-return opportunities in this region while maintaining operational efficiency.

Gulf of America production of 125 Mboed increased 3% quarter-over-quarter, reflecting strong offshore asset performance and operational reliability. The deepwater Gulf assets continue to provide stable, high-margin production with low operating costs.

International operations delivered 233 Mboed, up 4% from the prior quarter. The improvement was primarily driven by better performance in Oman, where production reached 76 Mboed, up from 65 Mboed in Q1 2025. The international portfolio provides geographic diversification and access to attractive fiscal terms.

Oil and Gas segment generated pre-tax income of $934 million, down from $1,697 million in Q1 2025 primarily due to the significant decline in commodity prices. Despite the revenue headwinds, the segment benefited from higher crude oil volumes and continued focus on lease operating expense management.

The Oil & Gas segment’s performance reflected the impact of lower average worldwide realized crude oil prices, which decreased 10% to $63.76 per barrel. Natural gas liquids prices fell 20% to $20.71 per barrel, while domestic gas prices declined 45% to $1.33 per thousand cubic feet, significantly pressuring segment profitability.

OxyChem segment delivered pre-tax income of $213 million, up 15% from the prior quarter, demonstrating resilience in a challenging chemical market environment. The improvement reflected improved export demand for caustic soda and polyvinyl chloride (PVC), which offset negative inventory adjustments during the quarter.

OxyChem’s performance benefited from operational stability and improved pricing for key products. The segment’s integrated manufacturing platform and global customer base provide diversification and help mitigate commodity price volatility affecting the oil and gas business.

Midstream and Marketing segment generated pre-tax income of $49 million, exceeding the high-end of guidance and representing a significant improvement from the $(77) million loss in Q1 2025. The strong performance reflected higher gas marketing margins from transportation capacity optimization in the Permian and higher sulfur prices at Al Hosn.

The Midstream segment also benefited from WES equity method investment income of $150 million during the quarter. The segment’s fee-based earnings profile provides stable cash flow generation and complements the commodity-exposed oil and gas operations.

Occidental continued to demonstrate industry-leading operational excellence and cost management capabilities during Q2 2025, enabling the company to maintain strong margins despite commodity price headwinds:

Cost Reduction Initiatives

• Capital Efficiency: Reduced 2025 capital guidance midpoint by $100 million driven by operational efficiency gains
• Operating Cost Reduction: Lowered international operating costs by $50 million through improved operational practices
• Total Cost Savings: Year-to-date realization or identification of $500 million in capital and operating cost reductions from original guidance
• Lease Operating Expense: Maintained competitive unit costs at $8.93 per BOE despite inflationary pressures

The company’s focus on unlocking lower cost resources and enhancing operational efficiencies positions it well to generate attractive returns even in lower commodity price environments. Occidental’s technological leadership and operational expertise enable it to consistently outperform industry benchmarks.

Technology and Innovation

• Advanced drilling and completion techniques driving superior well performance
• Digital transformation initiatives improving operational efficiency and reducing costs
• Enhanced data analytics and automation reducing manual processes
• Continued investment in carbon management and low-carbon technologies

Occidental’s commitment to continuous improvement and innovation ensures the company maintains its competitive advantage while positioning for long-term sustainable growth. The integration of advanced technologies across all business segments drives operational excellence and cost leadership.

Occidental continued to execute on its disciplined capital allocation strategy and deleveraging priorities during Q2 2025:

Asset Monetization and Debt Reduction

• Recent Divestitures: Announced $950 million of additional divestitures since the start of Q2 2025, with approximately $370 million already closed
• Debt Repayment: Repaid $3.0 billion of debt year-to-date through combination of asset sales, organic cash flow, and proceeds from warrants exercised
• Capital Discipline: Capital spending of $2.0 billion focused on highest-return opportunities
• Portfolio Optimization: Continued focus on divesting non-core assets to strengthen balance sheet

The company’s systematic approach to deleveraging demonstrates management’s commitment to balance sheet strength and financial flexibility. By monetizing non-core assets and directing cash flow toward debt reduction, Occidental is positioning itself for the next commodity cycle.

Strategic Priorities

• Maintaining investment in core Permian Basin operations for sustainable growth
• Advancing strategic growth projects including carbon management initiatives
• Preserving financial flexibility through reduced leverage ratios
• Continuing to high-grade portfolio through strategic asset sales

Management’s disciplined approach to capital allocation ensures that investment decisions are made based on risk-adjusted returns and long-term value creation. The focus on core assets and operational excellence provides a foundation for sustainable cash flow generation across commodity cycles.

Occidental continues to advance several strategic growth initiatives that position the company for long-term success:

Carbon Management Leadership

• Direct Air Capture (DAC): Leading the development of large-scale DAC facilities through Oxy Low Carbon Ventures
• Carbon Utilization: Advancing technologies to convert captured CO2 into valuable products
• Enhanced Oil Recovery: Leveraging CO2 for enhanced oil recovery operations in the Permian
• Technology Development: Investing in breakthrough technologies for carbon management

Occidental’s global leadership in carbon management positions the company to benefit from the growing focus on decarbonization and environmental sustainability. The integration of carbon management with core oil and gas operations creates unique value propositions.

Core Asset Development

• Continued development of premier Permian Basin acreage with industry-leading returns
• Optimization of Gulf of America deepwater assets for stable, high-margin production
• International expansion opportunities in attractive fiscal regimes
• Technology deployment to enhance recovery rates and reduce costs

The company’s focus on advancing strategic growth projects while maintaining capital discipline ensures that future investments will generate attractive returns and create long-term shareholder value.