Investment research report for OXY

Table of Contents

Executive Summary
Valuation Analysis
Industry and Competitors Analysis
Financial Analysis
Earnings Call Multi-Year Analysis
Financial Statements Multi Year
Insider Trading Analysis
Management Compensation Benchmark Analysis
Proxy Statement Analysis
News Analysis
Technical Indicators Analysis
Financial Statements Annual
Financial Statements Quarterly
Earnings Call Analysis

Executive Summary

Company Description

Occidental Petroleum Corporation is a leading oil and gas exploration and production company with a diversified portfolio of assets across the United States and international markets. The company has a strong presence in the Permian Basin, Rockies, and Gulf of Mexico regions, as well as operations in Oman, Algeria, and other countries. Occidental is also actively pursuing low-carbon initiatives, including carbon capture, utilization, and storage (CCUS) and direct air capture technologies.

Financial Strength and Capital Allocation

Occidental has demonstrated robust financial performance, with strong revenue, profitability, and cash flow generation. The company has been focused on strengthening its balance sheet by reducing debt levels and maintaining a disciplined capital allocation strategy. Occidental has also been returning capital to shareholders through dividends and share repurchases, reflecting its commitment to shareholder value creation.

Operational Excellence and Growth Prospects

Occidental has a substantial asset base, including significant proved oil and gas reserves, providing visibility into long-term production potential. The company has been investing in exploration and development activities to maintain and grow its reserves, while also focusing on operational efficiency and cost management. Occidental’s diversified portfolio, including its chemical and midstream operations, provides additional growth opportunities and cash flow diversification.

Strategic Positioning and Competitive Landscape

Occidental operates in a competitive industry landscape, with peers such as Pioneer Natural Resources, ConocoPhillips, and Diamondback Energy. The company’s competitive advantages include its operational excellence, technical expertise, and strategic focus on low-carbon initiatives. Occidental’s partnership with Berkshire Hathaway, which has been steadily increasing its stake in the company, further strengthens its financial position and strategic positioning.

Back to Table of Contents

Valuation Analysis

PE Ratio

The PE ratio for the company OXY is as follows:
– Low: -68.78228695763228
– Base: -9.654157404450414
– High: 49.473972148731455

PB Ratio

The PB ratio for the company OXY is as follows:
– Low: 0.899481294787299
– Base: 1.7901078987509964
– High: 2.680734502714694

Dividend Per Share (DPS) Growth

The DPS growth for the company OXY is as follows:
– Low: -22.61%
– Medium: -8.34%
– High: -2.71%

Unable to provide price targets since this company’s financials are highly unstable. We recommend not to hold this stock in your portfolio.

Back to Table of Contents

Industry and Competitors Analysis

Overview

Based on the information provided, OXY (Occidental Petroleum Corporation) operates in the oil and gas exploration and production industry. The key competitors mentioned in the data are:

  1. PXD (Pioneer Natural Resources Company)
  2. CTRA (Coterra Energy Inc.)
  3. FANG (Diamondback Energy, Inc.)
  4. COP (ConocoPhillips)
  5. EOG (EOG Resources, Inc.)
  6. DVN (Devon Energy Corporation)
  7. MRO (Marathon Oil Corporation)
  8. APA (APA Corporation)
  9. PR (Permian Resources Corporation)

These companies are all engaged in the exploration, development, and production of oil and natural gas, primarily in the United States and some international regions.

Competitive Positioning

In terms of competitive positioning, based on the financial metrics provided, OXY appears to be a significant player in the industry with a market capitalization of around $55.9 billion and total assets of $74 billion as of 2023. However, it’s important to note that the data provided is limited, and a more comprehensive analysis would be required to fully assess OXY’s competitive positioning relative to its peers.

Some key factors that could influence OXY’s competitive positioning include its resource base, production levels, operational efficiency, cost structure, financial strength, and strategic focus (e.g., geographic areas, asset types, etc.).

Back to Table of Contents

Chart of Competitors

"Chart of Competitors"

Back to Table of Contents

Financial Analysis

Financial Strength

The company has a moderate debt-equity ratio around 0.7 in recent quarters, indicating a reasonable level of leverage. Interest coverage ratios have generally been above 3-4x, suggesting the company can comfortably service its debt obligations from operating profits. Return on equity and return on assets have fluctuated significantly but have been positive in most recent quarters, indicating profitability.

Potential for Growth

Revenue growth has been volatile, with some quarters showing strong growth and others declines year-over-year. The analyst estimates suggest modest revenue growth expectations of around 3-5% annually over the next few years. Capital expenditures (inferred from growth capex ratios) appear to be relatively low, which could limit future production/revenue growth.

Competitive Advantage

Limited insights can be derived solely from this financial data. However, the company’s ability to maintain profitability and generate free cash flow suggests some competitive strengths.

Quality of Management

Management appears focused on maintaining a reasonable debt level and generating shareholder returns through dividends and share buybacks when profitable. However, the volatility in financial performance could indicate some challenges in execution and adapting to industry cycles.

Shareholder Friendliness

The company pays dividends, though the payout ratio fluctuates based on earnings. Share repurchases have been used to return capital to shareholders in some periods.

Valuation

The price-to-earnings ratio has varied significantly based on earnings volatility but has generally been in the single-digit to mid-teen range in recent years. The price-to-book ratio has mostly stayed below 2x, which could suggest a relatively undervalued stock at times.

Overall, OXY appears to be a reasonably financially stable company operating in a cyclical industry. Its growth prospects seem modest based on analyst projections. The company focuses on maintaining prudent leverage while returning capital to shareholders through dividends and buybacks when profitable.

Back to Table of Contents

Chart of Key Per Share Metrics

"Chart of Key Per Share Metrics"

Back to Table of Contents

Chart of Absolute Metrics

"Chart of Absolute Metrics"

Back to Table of Contents

Earnings Call Multi-Year Analysis

Operational Excellence

Occidental has consistently demonstrated strong operational performance across its oil and gas, chemical, and midstream businesses. The company has set new records for drilling speed, production rates, and cost efficiency through innovation, supply chain optimization, and technical expertise. This operational excellence drives robust financial results and cash flow generation.

Balance Sheet Strength and Debt Reduction

A top priority for Occidental is reducing debt levels and strengthening its balance sheet. The company has made significant progress in repaying debt and aims to reach a net debt target of around $15-20 billion before increasing shareholder returns. Lowering debt will improve cash flow resilience and financial flexibility.

Shareholder Returns

With debt reduction targets being met, Occidental is shifting its focus towards returning more capital to shareholders. This includes increasing the common dividend, initiating share repurchase programs, and potentially redeeming preferred equity. The company aims to maintain a sustainable dividend and active buyback program.

Capital Discipline and Flexibility

Occidental is taking a disciplined approach to capital allocation, prioritizing sustaining its asset base and high-return projects over aggressive production growth. The company maintains flexibility to adjust spending levels based on market conditions and emphasizes financial returns over growth metrics.

Diversified Portfolio

Occidental’s diversified portfolio, including its chemical (OxyChem) and midstream businesses, provides cash flow stability and helps offset volatility in the oil and gas segment. The company’s chemical business, in particular, has been a strong performer, contributing significant earnings and cash flow.

Low-Carbon Initiatives

Occidental is positioning itself as a leader in carbon management, including direct air capture, carbon capture, utilization, and storage (CCUS), and developing low-carbon fuels. The company sees significant opportunities in leveraging its expertise in CO2 handling and enhanced oil recovery to support the energy transition.

Cautious Outlook

While optimistic about its long-term prospects, Occidental remains cautious in its near-term outlook, acknowledging inflationary pressures, macroeconomic uncertainties, and potential demand impacts. The company emphasizes maintaining financial discipline and flexibility to navigate market volatility.

Overall, the key insights highlight Occidental’s focus on operational excellence, financial discipline, balance sheet strength, shareholder returns, portfolio diversification, and positioning for the energy transition. The company appears well-positioned for long-term value creation through its strategic priorities and prudent approach to capital allocation.

Back to Table of Contents

Financial Statements Multi Year

Financial Performance

Occidental has shown strong financial performance in recent years, with robust revenue, profitability, and cash flow generation. However, its performance can be cyclical due to fluctuations in commodity prices.

Asset Base and Reserves

The company has a substantial asset base, including significant proved oil and gas reserves, providing visibility into long-term production potential. Occidental has been actively investing in exploration and development activities to maintain and grow its reserves.

Debt Management

Occidental has a significant debt load, but it has been actively working to reduce its debt levels and strengthen its balance sheet. The company’s strong cash flow generation has supported its debt repayment efforts.

Capital Allocation

Occidental has been disciplined in its capital allocation, focusing on high-return projects and maintaining production levels. The company has also been returning capital to shareholders through dividends and share repurchases.

Operational Efficiency

The company has demonstrated effective cost management and operational efficiency, contributing to its strong profitability margins.

Diversification

While Occidental’s core business is oil and gas exploration and production, it has diversified its portfolio through investments in chemical operations, midstream assets, and low-carbon ventures, providing potential growth opportunities.

Environmental Liabilities

Occidental has significant environmental remediation liabilities, primarily related to the Diamond Alkali Superfund Site, which could pose potential risks and require ongoing monitoring.

Overall, Occidental Petroleum’s financial statements suggest a company with a strong operational and financial performance, a robust asset base, and a focus on debt management, capital allocation, and shareholder returns. However, long-term investors should consider the cyclical nature of the energy industry, environmental liabilities, and the company’s ability to navigate the transition towards a low-carbon future.

Back to Table of Contents

Insider Trading Analysis

Berkshire Hathaway Inc. has been steadily increasing its stake in Occidental Petroleum, with over 250 million shares owned as of the most recent transactions. This suggests Berkshire sees long-term value in the company.

Several Occidental executives, including the CEO Vicki Hollub and other senior leaders, have been granted large stock and option awards as part of their compensation. This aligns their interests with shareholders.

There have been some smaller open market purchases by executives like William Klesse, indicating confidence in the company’s prospects.

Recent Transactions

The most recent transactions are dominated by Berkshire Hathaway’s large purchases, totaling over 10 million shares in the past few months. This indicates Berkshire’s conviction in Occidental’s outlook.

In contrast, insider selling has been limited, with only a few small sales by executives like Stephen Chazen. This suggests insiders are not cashing out despite the stock’s strong performance.

The executive stock/option awards in early 2024 demonstrate Occidental’s focus on incentivizing and retaining its leadership team.

Implications

For long-term investors, the Berkshire Hathaway accumulation and lack of insider selling are positive signals. Berkshire’s involvement suggests the stock is undervalued, and executives appear to share this view.

The executive compensation structure ties leadership closely to shareholder returns, which should promote sound long-term decision-making.

In the short-term, Berkshire’s large purchases could provide support for the stock price and attract additional investor interest.

Overall, the insider trading patterns indicate Occidental Petroleum has strong long-term prospects, with both the major shareholder (Berkshire) and company insiders expressing confidence in the company’s future.

Back to Table of Contents

Management Compensation Benchmark Analysis

Base Salary Portion of Total Compensation

Based on the executive compensation details provided for Occidental Petroleum Corporation (OXY), the key insights are:

The base salary portion of total compensation for the executives at OXY is relatively low, averaging around 13.75% across all years and executives reported. This suggests that the executives’ compensation is more heavily weighted towards variable, performance-based components like stock awards and incentive plan compensation.

Comparison to Peers

Comparing to the other companies:

  • The average base salary portion for PXD executives is 14.09%, slightly higher than OXY.
  • The average base salary portion for CTRA executives is 18.53%, significantly higher than OXY.
  • The average base salary portion for FANG executives is 12.85%, slightly lower than OXY.
  • The average base salary portion for COP executives is 14.38%, slightly higher than OXY.
  • The average base salary portion for DVN executives is 13.92%, slightly higher than OXY.

Alignment with Shareholder Value Creation

The low base salary portion of total compensation at OXY suggests that the executives’ pay is more closely tied to the company’s performance through variable compensation components like stock awards and incentive plans. This alignment of executive compensation with shareholder value creation is generally considered a positive practice.

In summary, the executive compensation structure at OXY appears to be more heavily weighted towards variable, performance-based pay compared to base salary, which is in line with best practices for aligning executive interests with long-term shareholder value. The company’s approach seems comparable to or slightly more performance-oriented than some of its industry peers.

Back to Table of Contents

Proxy Statement Analysis

Limitations of the Proxy Statement

The following analysis is based on the latest proxy statement of OXY. Based on the information provided, I do not have enough confidence to provide insights on whether the executives at Occidental Petroleum Corporation are compensated in a way that aligns with creating long-term shareholder value. The document appears to focus primarily on the company’s lobbying activities and disclosures, rather than executive compensation practices.

Information Needed for Comprehensive Analysis

To assess the alignment of executive compensation with long-term shareholder value creation, I would need additional information such as:

  1. Details on the company’s executive compensation structure, including the mix of base salary, short-term incentives, and long-term incentives.
  2. Information on the specific performance metrics and targets used for determining executive incentive payouts, and how these metrics align with long-term strategic objectives and shareholder interests.
  3. Analysis of the vesting periods and holding requirements for equity-based compensation, to ensure executives have a long-term stake in the company’s performance.
  4. Evaluation of the company’s clawback policies and their effectiveness in recouping compensation in cases of misconduct or financial restatements.
  5. Comparison of the company’s executive compensation practices with industry peers and best practices for promoting long-term value creation.

Conclusion

Without access to this type of information, I cannot provide confident insights on the alignment of executive compensation with long-term shareholder value creation at Occidental Petroleum Corporation.

Back to Table of Contents

News Analysis

Positive Factors

Based on the recent news articles, here are the key points and potential impacts for a long-term investor in Occidental Petroleum (OXY) stock:

  1. Warren Buffett’s Berkshire Hathaway has been aggressively buying OXY shares, increasing its stake to nearly 29% as of June 2024. This shows Buffett’s strong conviction in the company’s prospects.

  2. OXY is benefiting from high oil prices, strong production growth in the Permian Basin, and its investments in low-carbon ventures like carbon capture and direct air capture technology.

  3. The company is generating robust free cash flows, allowing it to increase dividends, buy back shares, and pursue acquisitions like the $12 billion deal for CrownRock.

  4. OXY’s leverage to rising oil prices and its focus on shareholder returns through buybacks and dividends make it attractive in the current environment.

  5. Analysts are generally positive on OXY, with some seeing significant upside potential as the company executes on its strategy.

Potential Risks

  1. Overdependence on the volatile oil and gas sector, which is cyclical and subject to fluctuations in commodity prices.

  2. Concerns about OXY’s debt levels, though the company is working to reduce debt through asset sales and cash flows.

  3. Uncertainty around the long-term demand for fossil fuels as the world transitions to cleaner energy sources.

  4. Regulatory risks related to environmental policies and carbon emissions.

  5. Competition from other major oil companies and potential consolidation in the industry.

Overall, the sentiment towards OXY seems positive, driven by Buffett’s continued buying, strong cash flows, and the company’s efforts to position itself for the energy transition. However, investors should be aware of the inherent risks in the oil and gas sector. For long-term investors, OXY could be a compelling opportunity if they believe in the company’s strategy and are comfortable with the risks involved.

Back to Table of Contents

Technical Indicators Analysis

Next Week Trading

The recent price action and technical indicators suggest a neutral to slightly bearish outlook for the next week. The TEMA (Triple Exponential Moving Average) has been declining, indicating a potential downward trend. The RSI (Relative Strength Index) is in the neutral range, not signaling overbought or oversold conditions. The short-term SMA (Simple Moving Average) of 20 days is below the longer-term SMAs of 50 and 200 days, suggesting a possible near-term bearish crossover. A short-term trader may consider taking a cautious approach and waiting for clearer directional signals before making trading decisions.

Resistance and Support Levels

The current price is trading around the 50-day SMA, which could act as a key support level. The 200-day SMA is also close by and could provide additional support. On the upside, the 52-week high around $71 could act as a significant resistance level. A breakout above this level could signal a more bullish trend.

Short-Term Investor

The recent decline in the TEMA and the neutral RSI reading suggest a cautious short-term outlook. Short-term investors may want to monitor the price action and technical indicators closely for any signs of a trend reversal before taking a position. A break above the 50-day SMA or a bullish crossover of the TEMA could be a potential buy signal, while a break below the 200-day SMA could indicate a bearish trend.

Long-Term Investor

For long-term investors, the overall technical picture appears relatively stable. The 200-day SMA is still above the current price, and the ADX (Average Directional Index) is not indicating a strong trend in either direction. Long-term investors may want to maintain their positions or consider adding to their holdings on any significant pullbacks, as the company’s fundamentals and long-term prospects appear favorable.

Back to Table of Contents

Chart of Valuation History

"Chart of Valuation History"

Back to Table of Contents

Financial Statements Annual

Financial Statements Annual 2024 Q3

Strong Financial Performance

Revenues of $28.26 billion, up from $27.16 billion in 2022, reflecting higher commodity prices and production volumes. Gross profit of $10.11 billion with a gross profit margin of 35.8%, indicating solid operational efficiency. EBITDA of $13.95 billion with an EBITDA margin of 49.4%, demonstrating the company’s ability to generate substantial cash flow. Net income of $3.75 billion with a net income margin of 13.3%, showcasing the company’s profitability.

Robust Reserves and Production

Total proved reserves of 3,982 million barrels of oil equivalent (MMboe), up from 3,817 MMboe in 2022, driven by successful exploration and development activities. Proved developed reserves of 2,750 MMboe, representing 69% of total proved reserves, indicating a strong base of producing assets. Total production of 446 thousand barrels of oil equivalent per day (Mboed), up from 423 Mboed in 2022, reflecting the company’s operational capabilities.

Disciplined Capital Allocation

Capital expenditures of $5.94 billion, focused on high-return projects and maintaining production levels. Free cash flow generation of $6.06 billion, providing the company with financial flexibility and the ability to return capital to shareholders. Debt reduction, with total debt decreasing to $20.91 billion and net debt decreasing to $19.49 billion, strengthening the company’s balance sheet.

Shareholder Returns

Dividends paid of $1.37 billion, demonstrating the company’s commitment to returning capital to shareholders. Share repurchases of $3.46 billion, reflecting the company’s confidence in its long-term prospects and the desire to enhance shareholder value.

Overall, Occidental Petroleum Corporation’s 2023 financial statements showcase its ability to generate strong financial results, maintain a robust asset base, allocate capital prudently, and deliver value to its shareholders. The company’s focus on operational excellence, cost discipline, and strategic initiatives positions it well for continued success in the future.

Financial Statements Annual for Occidental Petroleum Corporation 2024 2024 Q2

Strong Financial Performance

Revenues of $28.26 billion, up from $27.16 billion in 2022, reflecting higher commodity prices and production volumes. Gross profit of $10.11 billion with a gross profit margin of 35.8%, indicating solid operational efficiency. EBITDA of $13.95 billion, representing an EBITDA margin of 49.4%, showcasing the company’s ability to generate substantial cash flows. Net income of $3.75 billion with an EPS of $4.22, demonstrating profitability and shareholder value creation.

Robust Reserves and Production

Total proved reserves of 3,982 million barrels of oil equivalent (MMboe), up from 3,817 MMboe in 2022, driven by successful exploration and development activities. Proved developed reserves of 2,750 MMboe, accounting for 69% of total proved reserves, indicating a strong base of producing assets. Oil and gas production of 446 thousand barrels of oil equivalent per day (Mboed), a slight increase from 423 Mboed in 2022, reflecting the company’s operational capabilities.

Disciplined Capital Allocation

Capital expenditures of $5.94 billion, focused on high-return projects and maintaining production levels. Free cash flow generation of $6.06 billion, enabling the company to reduce debt, return capital to shareholders, and invest in future growth. Debt reduction, with net debt decreasing to $19.49 billion from $19.69 billion in 2022, strengthening the balance sheet.

Shareholder Returns

Dividends paid of $1.37 billion, demonstrating the company’s commitment to returning capital to shareholders. Share repurchases of $3.46 billion, reflecting the management’s confidence in the company’s long-term prospects.

Overall, Occidental Petroleum’s 2023 financial results showcase its ability to navigate market conditions, maintain operational excellence, and deliver strong financial performance and shareholder returns. The company’s focus on disciplined capital allocation, debt reduction, and strategic investments positions it well for continued growth and value creation.

Financial Statements Annual 2023 Q3

Strong Financial Performance

Occidental reported robust financial results in 2022, with revenue of $36.6 billion, gross profit of $17.6 billion, and net income of $13.3 billion. The company’s profitability metrics were impressive, with an operating income margin of 39.9% and a net income margin of 36.3%. Occidental generated substantial cash flow from operations of $16.8 billion and free cash flow of $12.5 billion, indicating strong operational efficiency.

Debt Management and Capital Allocation

Occidental has a significant debt load, with total debt of $20.8 billion and net debt of $19.8 billion as of the end of 2022. However, the company has been actively managing its debt, repaying $9.5 billion in debt during the year. Occidental has also been returning capital to shareholders, with $3.1 billion in share repurchases and $1.2 billion in dividends paid in 2022.

Asset Base and Reserves

Occidental’s property, plant, and equipment (PP&E) net of depreciation stood at $59.3 billion, indicating a substantial asset base. The company’s long-term investments of $3.2 billion and other non-current assets suggest a diversified portfolio beyond its core oil and gas operations. Occidental’s proven oil and gas reserves, as evaluated by an independent engineering firm, provide visibility into the company’s long-term production potential.

Operational Efficiency and Cost Management

Occidental’s cost of revenue was $19.0 billion, representing 51.9% of its total revenue, indicating effective cost management. The company’s selling, general, and administrative expenses of $945 million were relatively low, contributing to its strong profitability. Occidental’s depreciation and amortization expenses of $6.9 billion suggest a well-maintained asset base.

Shareholder-Friendly Initiatives

The company’s 2015 Long-Term Incentive Plan, which includes various equity-based awards, aligns the interests of management with those of shareholders. Occidental’s executive severance and change-in-control plans provide stability and retention incentives for key personnel, which can be beneficial for long-term investors.

Overall, Occidental Petroleum’s 2022 financial statements demonstrate a strong operational and financial performance, with a focus on debt management, capital allocation, and shareholder-friendly initiatives. These factors suggest that the company is well-positioned to navigate the challenges and opportunities in the energy industry, which could be of interest to long-term investors.

Financial Statements Annual for Occidental Petroleum Corporation 2023 2023 Q2

Strong Financial Performance

Occidental reported robust financial results in 2022, with revenue of $36.6 billion, gross profit of $17.6 billion, and net income of $13.3 billion. The company’s profitability metrics were impressive, with an operating income margin of 39.9% and a net income margin of 36.3%. Occidental generated substantial cash flow from operations of $16.8 billion and free cash flow of $12.5 billion, indicating strong operational efficiency.

Debt Management and Capital Allocation

Occidental has a significant debt load, with total debt of $20.8 billion and net debt of $19.8 billion as of the end of 2022. However, the company has been actively managing its debt, repaying $9.5 billion in debt during the year. Occidental has also been returning capital to shareholders, with $3.1 billion in share repurchases and $1.2 billion in dividends paid in 2022.

Asset Base and Reserves

Occidental’s property, plant, and equipment (PP&E) net of depreciation stood at $59.3 billion, indicating a substantial asset base. The company’s long-term investments of $3.2 billion and other non-current assets suggest a diversified portfolio beyond its core oil and gas operations. Occidental’s proven oil and gas reserves, as evaluated by an independent engineering firm, provide visibility into the company’s long-term production potential.

Operational Efficiency and Cost Management

Occidental’s cost of revenue was $19.0 billion, representing 51.9% of its total revenue, indicating effective cost management. The company’s selling, general, and administrative expenses of $945 million were relatively low, contributing to its strong profitability. Occidental’s depreciation and amortization expenses of $6.9 billion suggest a well-maintained asset base.

Shareholder-Friendly Initiatives

The company’s 2015 Long-Term Incentive Plan, which includes various equity-based awards, aligns the interests of management with those of shareholders. Occidental’s executive severance and change-in-control plans provide stability and retention incentives for key personnel, which can be beneficial for long-term investors.

Overall, Occidental Petroleum’s 2022 financial statements demonstrate a strong operational and financial performance, with a focus on debt management, capital allocation, and shareholder-friendly initiatives. These factors suggest that the company is well-positioned to navigate the challenges and opportunities in the energy industry, which could be of interest to long-term investors.

Financial Statements Annual 2022 Q3

Strong operational performance

Total sales from ongoing operations were 1,166 Mboed (thousand barrels of oil equivalent per day) in 2021, compared to 1,291 Mboed in 2020 and 952 Mboed in 2019. The company has a significant presence in the Permian Basin, Rockies, and Gulf of Mexico regions in the United States, as well as international operations in Algeria, Oman, and other locations.

Improved financial results

Revenue increased to $25,956 million in 2021, up from $17,910 million in 2020. Gross profit increased to $7,850 million in 2021, compared to $3,524 million in 2020. Net income was $2,322 million in 2021, a significant improvement from a net loss of $15,693 million in 2020. The company generated strong free cash flow of $7,480 million in 2021.

Strengthened balance sheet

Cash and cash equivalents stood at $2,764 million as of December 31, 2021. Total assets were $75,036 million, with property, plant, and equipment (net) of $60,656 million. Total debt decreased to $30,388 million, with net debt of $27,624 million. Stockholders’ equity increased to $20,327 million.

Operational and development activities

The company had a total of 21,858 gross productive oil wells and 4,573 gross productive gas wells as of December 31, 2021. Occidental was participating in 24 gross exploratory and development wells being drilled, and 89 gross exploratory and development wells pending completion as of the end of 2021. The company had 7,548 thousand gross developed acres and 9,667 thousand gross undeveloped acres as of December 31, 2021.

Reserves and production

Occidental had 17 MMboe (million barrels of oil equivalent) of proved undeveloped reserves primarily assigned to U.S. onshore development wells as of December 31, 2021. The company was participating in 167 gross pressure-maintenance projects in the United States and 42 gross projects internationally, primarily consisting of waterfloods and CO2 floods.

Overall, Occidental Petroleum Corporation demonstrated a strong operational and financial performance in 2021, with improved profitability, strengthened balance sheet, and ongoing development activities across its asset base.

Financial Statements Annual for Occidental Petroleum Corporation 2022 2022 Q2

Strong financial performance in 2021

Occidental Petroleum Corporation reported a strong financial performance in 2021. The key highlights include:

  • Revenue of $25,956 million, up significantly from $17,064 million in 2020.
  • Gross profit of $7,850 million, with a gross profit margin of 30.2%.
  • Net income of $2,322 million, a significant improvement from a net loss of $15,693 million in 2020.
  • Earnings per share (EPS) of $1.62, up from a loss per share of $16.26 in 2020.

Improved liquidity and reduced debt

Occidental Petroleum Corporation has also made progress in improving its liquidity and reducing debt:

  • Cash and cash equivalents of $2,764 million, up from $2,194 million in 2020.
  • Total debt reduced to $30,388 million from $36,151 million in 2020.
  • Net debt (total debt minus cash and cash equivalents) decreased to $27,624 million from $33,957 million in 2020.

Operational highlights

The company’s operational highlights include:

  • Total sales volumes from ongoing operations of 1,166 thousand barrels of oil equivalent per day (Mboed), down from 1,291 Mboed in 2020.
  • Proved oil and gas reserves of 2,808 million barrels of oil equivalent (MMboe) in the United States and 1,984 MMboe internationally.
  • Participating in 24 gross exploratory and development wells being drilled, with 89 gross exploratory and development wells pending completion.

Sustainability and environmental initiatives

Occidental Petroleum Corporation is actively pursuing sustainability and environmental initiatives:

  • The company is actively pursuing carbon capture, utilization, and storage (CCUS) projects to reduce its carbon footprint.
  • Occidental has set a target to achieve net-zero greenhouse gas emissions by 2050.

Overall, the financial statements indicate that Occidental Petroleum Corporation has made significant progress in improving its financial position and operational performance in 2021 compared to the previous year, despite the challenges posed by the COVID-19 pandemic. The company’s focus on reducing debt, improving liquidity, and advancing its sustainability initiatives suggest a positive outlook for the future.

Back to Table of Contents

Financial Statements Quarterly

Financial Statements Quarterly 2024 Q3

Revenue and Profitability

Revenues declined to $5.975 billion in Q1 2024 compared to $7.225 billion in Q1 2023, primarily due to lower crude oil, NGL, and natural gas prices. Net income declined to $888 million in Q1 2024 compared to $1.263 billion in Q1 2023, mainly due to lower commodity prices and volumes. The operating income margin declined to 17.1% in Q1 2024 from 23.7% in Q1 2023.

Segment Performance

The Oil & Gas segment earnings declined to $1.238 billion in Q1 2024 from $1.640 billion in Q1 2023, primarily due to lower domestic crude oil volumes and commodity prices. The Chemical segment earnings declined to $254 million in Q1 2024 from $472 million in Q1 2023, mainly due to lower caustic soda prices, partially offset by improved demand and lower costs. The Midstream & Marketing segment had a loss of $33 million in Q1 2024 compared to earnings of $2 million in Q1 2023, driven by higher losses from equity method investments and increased expenses in the low-carbon ventures business.

Cash Flows and Liquidity

Cash flow from operations declined to $2.007 billion in Q1 2024 from $2.870 billion in Q1 2023, primarily due to lower sales volumes and commodity prices. Capital expenditures increased to $1.732 billion in Q1 2024 from $1.461 billion in Q1 2023, focused on short and medium-cycle projects. Occidental had $1.272 billion in cash and cash equivalents and $40 billion of available borrowing capacity under its revolving credit facility as of March 31, 2024.

Acquisition and Financing

Occidental entered into an agreement to acquire CrownRock LP for $12 billion, which is expected to be financed with new debt, equity issuance, and assumption of CrownRock’s existing debt. Occidental secured $5.3 billion in acquisition financing, including a $5.3 billion bridge loan facility, a $2.0 billion 364-day term loan, and a $2.7 billion two-year term loan.

Sustainability and Environmental Matters

Occidental continues to invest in its low-carbon ventures business, including the development of a commercial-scale direct air capture facility in partnership with BlackRock. Occidental is involved in various environmental remediation activities, primarily related to the Diamond Alkali Superfund Site, with estimated liabilities of $1.001 billion as of March 31, 2024.

Overall, Occidental faced challenges in Q1 2024 due to lower commodity prices and volumes, which impacted its financial performance across the business segments. The company is focused on maximizing cash flow through investments in short and medium-cycle projects, advancing its low-carbon initiatives, and strengthening its asset base through the CrownRock acquisition.

Financial Statements Quarterly 2024 Q2

Strong financial performance

Occidental reported robust financial results for Q4 2023, with revenue of $7.17 billion, gross profit of $2.41 billion, and net income of $1.20 billion. This represents a significant improvement compared to the prior year period.

Improved operational efficiency

Occidental’s operating expenses decreased to $1.08 billion in Q4 2023, down from $1.72 billion in the prior year quarter, indicating improved operational efficiency and cost management.

Healthy cash flow generation

Occidental generated $3.24 billion in net cash from operating activities in Q4 2023, which enabled the company to fund capital expenditures of $1.52 billion and still have $1.72 billion in free cash flow.

Deleveraging and shareholder returns

Occidental used its strong cash flow to reduce debt, redeem preferred stock, and return capital to shareholders. The company repaid $929 million in debt, redeemed $1.66 billion in preferred stock, and paid $330 million in dividends during the quarter.

Balanced portfolio

Occidental’s diversified business model, with contributions from the oil and gas, chemical, and midstream and marketing segments, helped mitigate the impact of volatile commodity prices and provided a more stable financial performance.

Sustainability initiatives

Occidental continued to invest in its low-carbon ventures, including the announced joint venture with BlackRock for the development of a large-scale Direct Air Capture plant, demonstrating its commitment to reducing greenhouse gas emissions.

Overall, Occidental’s Q4 2023 results showcase the company’s ability to navigate a challenging macroeconomic environment, optimize its operations, and maintain a strong financial position to support its strategic priorities, including debt reduction, shareholder returns, and investments in low-carbon technologies.

Financial Statements Quarterly 2024 Q1

Revenue and Profitability

Revenue was $7.16 billion, with a gross profit margin of 83.2%. Operating income was $4.77 billion, with an operating income margin of 66.6%. Net income was $1.38 billion, with a net income margin of 19.2%.

Cash Flow and Capital Expenditures

Cash flow from operations was $3.13 billion. Capital expenditures were $1.62 billion, resulting in free cash flow of $1.51 billion.

Balance Sheet Strength

Cash and cash equivalents were $611 million. Total assets were $71.83 billion, with $29.31 billion in total stockholders’ equity. Total debt was $20.71 billion, resulting in net debt of $20.10 billion.

Shareholder Returns

Occidental paid $347 million in dividends and repurchased $1.11 billion of common stock. Occidental also redeemed $1.17 billion of preferred stock, including a $117 million redemption premium.

Operational Highlights

Oil and gas production averaged 1,218 Mboed, with increases in international sales volumes. The chemical segment saw lower realized caustic soda and PVC pricing, partially offset by lower ethylene and energy costs. The midstream and marketing segment was impacted by the timing of crude oil sales and lower equity income from Western Midstream Partners.

Overall, Occidental maintained strong profitability and cash flow generation in Q3 2023, despite some headwinds in commodity prices and chemical margins. The company continued to focus on shareholder returns through dividends and share repurchases, while also reducing financial leverage through preferred stock redemptions.

Financial Statements Quarterly 2023 Q4

Strong financial performance

Occidental reported robust financial results for Q2 2023, with revenue of $6.7 billion, gross profit of $2.2 billion, and net income of $860 million.

Improved operational efficiency

The company’s operating expenses were well-managed, with selling, general, and administrative expenses at $277 million and depreciation and amortization at $1.7 billion, indicating operational efficiency.

Healthy cash flow and liquidity

Occidental generated $3.1 billion in cash flow from operations and had $486 million in cash and cash equivalents as of June 30, 2023. This provides the company with ample liquidity to fund its operations and investments.

Shareholder returns

Occidental paid $368 million in dividends and repurchased $1.4 billion of its common stock during the quarter, demonstrating its commitment to returning capital to shareholders.

Debt management

Occidental’s total debt stood at $20.7 billion, with a net debt position of $20.2 billion. The company has no remaining debt maturities in 2023, indicating prudent debt management.

Segment performance

The oil and gas segment was the primary driver of Occidental’s profitability, contributing $1.6 billion in operating income. The chemical and midstream and marketing segments also contributed positively to the overall results.

Environmental liabilities

Occidental continues to be involved in environmental remediation activities, with $1.0 billion in environmental remediation liabilities as of June 30, 2023. This remains an area of focus and potential risk for the company.

Overall, Occidental’s Q2 2023 financial results demonstrate its ability to generate strong cash flows, maintain financial discipline, and deliver shareholder returns, despite the ongoing challenges in the energy and chemical markets.

Financial Statements Quarterly for Occidental Petroleum Corporation 2023 Q3 2023 Q3

Strong financial performance in 2022 driven by higher commodity prices

Revenues and earnings increased significantly year-over-year, with net income from continuing operations reaching $11.4 billion for the first 9 months of 2022 compared to $1.2 billion in the same period of 2021. The increase was primarily due to higher realized prices for oil, natural gas liquids, and natural gas, which more than offset higher operating costs.

Debt reduction and improved financial flexibility

Occidental repaid $8.3 billion of long-term debt during the first 9 months of 2022, reducing its total debt to $20.7 billion as of September 30, 2022. This debt reduction, along with the company’s strong cash flow generation, has improved Occidental’s financial flexibility and credit profile, with credit rating upgrades from major agencies.

Shareholder returns and capital allocation

Occidental declared $369 million in common stock dividends and repurchased $2.5 billion of its shares during the first 9 months of 2022. The company has a $30 billion share repurchase program in place, of which $562 million remained as of September 30, 2022. Occidental is balancing debt reduction, shareholder returns, and capital investment to sustain production and generate strong cash flows.

Operational performance and production

Occidental’s oil and gas segment saw a decrease in production volumes compared to the prior year, primarily due to the impact of rising commodity prices on production sharing contracts and the planned shutdown of the Al Hosn Gas facility. However, the company has been able to maintain production levels in its core Permian Basin assets through increased development activity.

Exposure to macroeconomic and geopolitical risks

Occidental’s results are highly dependent on oil, natural gas, and chemical prices, which have been volatile due to factors such as the Russia-Ukraine war and the broader macroeconomic environment. The company’s operations and financial performance could be impacted by further changes in commodity prices, inflation, interest rates, and other external factors.

Overall, Occidental has demonstrated strong financial and operational performance in 2022, driven by higher commodity prices. The company’s focus on debt reduction, shareholder returns, and capital discipline positions it well to navigate the current market environment, but it remains exposed to macroeconomic and geopolitical risks.

Back to Table of Contents

Earnings Call Analysis

Earnings Call Analysis 2024 Q2

Operational Excellence

Occidental demonstrated strong operational execution across its portfolio, with robust production results in the Permian Basin and Rockies, as well as outperformance in the Midstream and Chemicals segments.

Secondary Bench Development

Occidental is achieving impressive performance by applying its proprietary subsurface workflows to secondary benches in the Delaware Basin, extending its runway of Tier 1 locations and improving financial returns.

Capital Efficiency

Occidental is driving capital efficiency through innovative well design, exceptional execution, and proactive supply chain management, resulting in tangible well cost reductions.

Diversified Cash Flow

Occidental’s diversified asset portfolio, including Midstream and Chemicals, provides cash flow resiliency throughout the commodity cycle, with the Midstream business demonstrating the ability to capture value from regional pricing disparities.

Inorganic Growth and Divestitures

The CrownRock acquisition is expected to provide free cash flow accretion and portfolio high-grading, while the planned $4.5 billion to $6 billion divestiture program will be used to deleverage the balance sheet.

Long-term Value Creation

Occidental is focused on expanding resilient cash flow and enhancing shareholder value through initiatives such as OxyChem plant enhancements, Midstream asset optimization, and debt repayment, which are expected to generate over $1 billion in annual cash flow improvements.

The key takeaway is that Occidental is demonstrating operational excellence, capital discipline, and a diversified portfolio approach to create long-term value for shareholders, despite the challenges posed by the external environment.

Earnings Call Analysis 2024 Q1

Operational Excellence

Occidental delivered strong operational performance in 2023, exceeding production guidance across its business segments. This was driven by record well productivity in the Permian, Rockies, and international assets like Oman and UAE.

Portfolio Optimization

Occidental is high-grading its oil and gas portfolio through organic development, appraisal work, and strategic acquisitions like CrownRock. This is strengthening its short-cycle, high-return shale assets as well as its lower-decline conventional assets.

Capital Allocation

Occidental is taking a balanced approach, allocating capital to short-cycle unconventional assets as well as longer-cycle mid-cycle investments in conventional assets like Permian EOR and Gulf of Mexico. This is aimed at delivering production growth while also building cash flow resilience.

Low-Carbon Ventures

Occidental is making significant progress in its low-carbon ventures, including the acquisition of Carbon Engineering, the STRATOS joint venture with BlackRock, and securing more carbon dioxide offtake customers. These initiatives are expected to provide cash flow and carbon reduction benefits.

Deleveraging and Shareholder Returns

Occidental is focused on deleveraging its balance sheet, targeting $15 billion in principal debt. This will enable it to increase its common dividend and share repurchases in the future. Asset sales and the CrownRock acquisition are expected to support this deleveraging effort.

Overall, Occidental is positioning itself as a capital-efficient, diversified energy company with a strong focus on operational excellence, portfolio optimization, and low-carbon initiatives to deliver sustainable and growing returns for shareholders.

Earnings Call Analysis 2023 Q4

Operational Excellence

Occidental’s teams delivered exceptional operational performance across its oil & gas, chemical, and midstream businesses, exceeding production guidance and driving strong financial results.

Shareholder Returns

Occidental is actively returning capital to shareholders through share repurchases and dividend payments, having completed 60% of its $3 billion buyback program.

Direct Air Capture (DAC) Progress

Occidental’s subsidiary 1PointFive is making significant progress in developing its DAC technology, securing partnerships with major players like BlackRock and ADNOC. This positions Occidental to play a leading role in the growing carbon removal market.

Cost Reduction Focus

Occidental is focused on accelerating cost reductions for its DAC technology through innovations and integrating Carbon Engineering’s expertise. This is expected to increase demand for its carbon removal credits.

Flexible Capital Deployment

Occidental does not feel compelled to pursue M&A and is focused on optimizing its existing portfolio. It plans to continue prioritizing share repurchases based on market conditions.

Cautious on Chemical Outlook

While Occidental sees early signs of PVC and caustic soda price improvements, it remains cautious on the near-term fundamentals due to macroeconomic uncertainty and demand impacts from rising interest rates.

Overall, Occidental appears to be executing well operationally and making strategic progress in its low-carbon business, positioning it well for long-term value creation. The company’s focus on shareholder returns and capital discipline is also noteworthy.

Earnings Call Analysis 2023 Q3

Operational Excellence

Occidental’s teams have consistently outperformed on operational metrics, setting new company records for drilling speed, continuous frac pumping time, and production from assets like the Rockies, Permian, and international operations. This operational excellence is driving higher production and lower costs.

Portfolio Strength

Occidental has a diverse portfolio of short-cycle shale assets and longer-cycle conventional assets, which provides cash flow resilience through commodity cycles. The midstream and chemical businesses also contribute to this diversification.

Subsurface Expertise

Occidental has developed a highly sophisticated subsurface modeling and characterization capability that is allowing them to continuously improve well productivity and reserve additions, even in mature basins like the Permian and DJ. This proprietary expertise is a key competitive advantage.

Shareholder Returns

Occidental is focused on creating value per share through production growth, reserve additions at low F&D costs, and share buybacks. They have been actively redeeming preferred equity to further enhance common shareholder returns.

Carbon Management

Occidental is positioning itself to be a leader in carbon capture, utilization and storage (CCUS), including through partnerships like the one announced with ADNOC to develop a carbon management platform.

The key takeaway is that Occidental’s operational excellence, portfolio strength, technical capabilities, and strategic focus on shareholder returns and carbon management position it well for long-term value creation. Investors should be critical of any company statements that do not align with these demonstrated strengths.

Earnings Call Analysis 2023 Q2

Operational Excellence and Disciplined Capital Spending

Occidental has demonstrated strong operational performance and disciplined capital spending, enabling it to make progress on its shareholder return framework. This includes meaningful share repurchases and preferred equity redemptions.

Asset Quality and Productivity Improvements

Despite some concerns expressed by analysts, Occidental emphasizes the high quality of its asset portfolio and continued improvements in well productivity and operational efficiency across its Permian, Rockies, and Gulf of Mexico assets. The company highlights innovative techniques and optimization efforts by its technical teams.

Cautious but Flexible Capital Allocation

Occidental’s 2023 capital plan remains focused on sustaining its asset base, while maintaining flexibility to rapidly adjust activity levels if commodity prices decline. The company is prioritizing share repurchases and preferred equity redemptions over production growth.

Diversified Cash Flow Streams

In addition to its oil and gas business, Occidental is investing in its chemical and low-carbon ventures, which are expected to contribute meaningful incremental cash flow in the coming years, providing diversification beyond commodity price volatility.

Shareholder Value Focus

Occidental is clearly focused on transferring enterprise value to its common shareholders through share repurchases and preferred equity redemptions. This is a key priority for the company’s cash flow allocation.

Overall, the call suggests Occidental is well-positioned with high-quality assets, operational excellence, and a disciplined approach to capital allocation that prioritizes shareholder returns. The company appears to be navigating the current environment effectively while investing in future growth opportunities.

Earnings Call Analysis 2023 Q1

Operational and Financial Performance

Occidental delivered record net income of $12.5 billion in 2022, with a return on capital employed of 28%. The company generated $13.6 billion in free cash flow before working capital, enabling it to retire over $10.5 billion in debt and repurchase $3 billion in common shares. Occidental’s Permian production grew by 90,000 BOE/d in 2022, driven by strong well productivity and efficiency gains. The company replaced over 140% of its production at a cost of $6.50/BOE, less than half of its current DD&A per barrel.

Capital Allocation and Shareholder Returns

Occidental is shifting its focus to share repurchases, dividend growth, and a capital program that strengthens its sustainability. The company’s Board authorized a 38% increase in the common dividend and a new $3 billion share repurchase program. Occidental plans to partially redeem its preferred equity as it exceeds the $4 per share threshold for common shareholder distributions.

Low-Carbon Initiatives

Occidental is progressing its pathway to net zero, with investments in direct air capture, carbon sequestration hubs, and emission reduction projects. The company’s first direct air capture plant is expected to be commercially operational by mid-2025, a few months later than the original target due to supply chain challenges. Occidental is working with Energy Transfer to build a pipeline network to support its point source carbon capture and sequestration business.

Inflation and Cost Management

Occidental expects approximately 15% inflation impact on its domestic Oil & Gas business in 2023 compared to 2022. The company is leveraging its supply chain competencies and focusing on capital efficiency to offset inflationary pressures.

Production Outlook and Asset Performance

Occidental’s 2023 production is expected to average 1.18 million BOE/d, with lower production in the first quarter due to scheduled maintenance. The company’s Rockies production is likely to be lower in 2023 due to the reduced activity levels in recent years, but is expected to stabilize in the second half of the year. Occidental’s Gulf of Mexico assets and international operations, including the Al Hosn expansion project, are expected to contribute to the company’s production profile.

Overall, Occidental’s focus on operational excellence, financial discipline, and its diversified portfolio of assets, including its growing low-carbon initiatives, position it well for long-term sustainability and value creation for shareholders.

Earnings Call Analysis 2022 Q4

Operational and financial performance

Occidental delivered strong operational and financial results in Q3 2022, exceeding production guidance and generating substantial free cash flow. This enabled them to advance their shareholder return framework and further strengthen their balance sheet.

Debt reduction

Occidental has made significant progress in reducing its debt, with the goal of lowering the face value of debt to the high teens by the end of 2022. This is expected to result in over $350 million in annual interest and financing cost savings.

Capital allocation shift

Going forward, Occidental plans to shift its free cash flow allocation more towards shareholder returns, including a sustainable dividend and active share repurchase program, rather than further debt reduction.

Productivity improvements

Occidental continues to see impressive well performance, particularly in the Delaware Basin, with record-breaking initial production rates. This demonstrates the quality of their asset base and subsurface expertise.

Low Carbon business

Occidental is making progress on its low-carbon strategy, including breaking ground on the world’s largest direct air capture plant and securing significant acreage for CO2 sequestration hubs. The passage of the Inflation Reduction Act is expected to accelerate the development of these projects.

Inflation impact

Occidental acknowledges the challenge of forecasting the impact of inflation on its capital expenditures, which makes it difficult to provide a clear outlook on sustaining capital for 2023.

Flexibility and optionality

Occidental emphasizes the importance of maintaining flexibility in its capital and spending plans to adapt to a changing macro environment, rather than committing to a specific growth target for oil and gas production.

Overall, the key insights highlight Occidental’s focus on strengthening its balance sheet, returning capital to shareholders, and advancing its low-carbon strategy, while maintaining operational excellence and flexibility in a volatile market environment.

Earnings Call Analysis 2022 Q3

Debt Reduction and Shareholder Returns

Occidental has exceeded its near-term debt reduction goal, repaying over $8 billion in debt so far this year. With the debt reduction target met, Occidental has initiated a $3 billion share repurchase program and plans to introduce a sustainable common dividend in 2023. Occidental aims to maintain leverage around 1x debt-to-EBITDA or less than $15 billion in gross debt to enhance equity returns and shareholder distributions.

Operational Performance

Occidental’s oil and gas, chemical, and midstream segments all performed well in Q2, with the chemical business (OxyChem) reporting record earnings. Occidental is expanding and modernizing its Battleground chemical plant, a $1.1 billion project expected to increase cash flow through improved margins and higher product volumes. Occidental has enhanced its Permian Basin joint venture with EcoPetrol, adding acreage in the Delaware Basin with a capital carry.

Low-Carbon Ventures

Occidental is making progress on its direct air capture and carbon capture, utilization, and storage (CCUS) initiatives, with the potential for the Inflation Reduction Act to accelerate these efforts. Occidental is selective in its low-carbon investments, focusing on technologies that fit its strategy and can improve its core business.

Cautious Outlook

Occidental expects a softer second half of the year for its chemical business compared to the record Q2, citing macroeconomic trends and seasonal declines. The company is closely monitoring inflationary pressures, particularly in the Permian Basin, and has reallocated capital to address these challenges. Occidental remains cautious in its production growth plans, prioritizing debt reduction, share repurchases, and a sustainable dividend over rapid production growth.

Overall, Occidental is focused on strengthening its balance sheet, returning capital to shareholders, and selectively investing in high-return projects, including in its low-carbon ventures. The company is taking a prudent approach, cognizant of macroeconomic uncertainties, while positioning itself for long-term value creation.

Earnings Call Analysis 2022 Q2

Operational and financial performance

Occidental reported its highest adjusted earnings in over a decade, with strong free cash flow generation. This was driven by operational excellence, disciplined capital allocation, and higher commodity prices.

Debt reduction and shareholder returns

Occidental is focused on reducing debt, with a near-term goal of repaying $5 billion and lowering net debt to $20 billion. Once this is achieved, they will initiate a $3 billion share repurchase program. The company aims to reduce gross debt to the high teens before transitioning to more shareholder returns.

Production and growth

Occidental expects production growth from Q2 through the end of 2022, supported by strong well performance in the Rockies and Permian. However, the pace of permitting in Colorado may limit Rockies activity in the second half of 2022, with activity reallocated to the Permian.

Inflationary pressures

Occidental is facing inflationary pressures, especially on materials and services, which may lead them to spend near the top end of their $3.9-$4.3 billion capital guidance range for 2022.

Diversified business model

Occidental’s chemical and midstream segments continue to perform well, providing diversification and contributing to the strong financial results.

Low-carbon strategy

Occidental is advancing its low-carbon business strategy, leveraging its assets and capabilities in carbon management, including CCUS, to deliver climate and business solutions.

The key takeaway is that Occidental is focused on strengthening its balance sheet, returning capital to shareholders, and diversifying its business model, while also investing in its low-carbon strategy – all of which should position the company well for the long term.

Earnings Call Analysis 2022 Q1

Operational and Financial Performance

Oxy delivered strong operational and financial performance in 2021, setting multiple records for free cash flow generation and debt reduction. The company’s focus on operational efficiency and capital discipline enabled it to generate significant cash flow and strengthen its balance sheet.

Shareholder Return Framework

Oxy is shifting its cash flow priorities to return more capital to shareholders, including increasing the common dividend and reactivating a share repurchase program. The company aims to maintain a sustainable dividend and active buyback program while continuing to prioritize debt reduction to regain an investment-grade credit rating.

Low-Carbon Initiatives

Oxy is advancing its low-carbon strategy, including the development of direct air capture technology and other carbon management projects. The company plans to provide a detailed update on its low-carbon business at an investor event in March 2023.

Production and Capital Allocation

Oxy’s 2022 capital plan is focused on sustaining production and investing in high-return projects, rather than pursuing production growth. The company has the flexibility to quickly adapt its capital spending in response to changes in the macro environment.

Analyst Insights

Analysts questioned Oxy’s plans for debt reduction, share buybacks, and the potential for production growth or other capital allocation priorities in the future. The company emphasized its focus on balance sheet strength and shareholder returns, while remaining cautious about committing to significant production growth or other major investments without clear long-term demand support.

Overall, the key insights highlight Oxy’s operational excellence, financial discipline, and commitment to transitioning towards a lower-carbon future, while prioritizing shareholder returns and balance sheet strength.

Earnings Call Analysis 2021 Q4

Debt Reduction and Balance Sheet Improvement

Occidental is focused on reducing debt and strengthening its balance sheet, with a target of reaching $25 billion in net debt. This is a priority before considering other uses of cash flow. As Occidental approaches the $25 billion net debt target, it plans to first focus on increasing its fixed dividend before considering other options like share buybacks. Reducing debt and interest costs will improve Occidental’s cash flow breakeven and provide more flexibility in the commodity price cycle.

Operational Excellence and Efficiency

Occidental’s operational teams continue to set new records for drilling speed, production, and cost efficiency across its assets in the Permian, Rockies, Gulf of Mexico, and Oman. The company’s focus on innovation, supply chain optimization, and use of dual-fuel equipment has enabled it to increase production while maintaining capital discipline.

Diversified Business Model

Occidental’s Chemical (OxyChem) and Midstream and Marketing segments have provided strong and consistent cash flow, helping to offset volatility in the Oil and Gas segment. OxyChem’s performance has been exceptional, with record earnings in the third quarter, and the company expects an even stronger fourth quarter.

Carbon Management Opportunities

Occidental sees a significant opportunity to transition into a “carbon management company” by leveraging its expertise in CO2 handling and enhanced oil recovery. The company believes direct air capture and providing net-zero or net-negative carbon fuels will be critical for the energy transition, and it aims to be a leader in this space.

Cautious Approach to Growth

Occidental is not prioritizing production growth at this time, focusing instead on debt reduction, dividend restoration, and potential carbon management initiatives. Any future growth capital will be carefully evaluated to ensure it supports the company’s cash flow priorities and does not compromise its financial discipline.

Overall, the key insights suggest that Occidental is taking a prudent, financially disciplined approach to navigate the current environment, with a focus on strengthening its balance sheet and positioning the company for long-term value creation.

Earnings Call Analysis for Occidental Petroleum Corporation 2021 Q3 2021 Q3

Operational and Financial Performance

Occidental generated the highest level of free cash flow in over a decade, driven by strong operational performance, cost discipline, and capital efficiency. The company’s Oil & Gas, Chemicals, and Midstream & Marketing segments all outperformed in the quarter. Occidental set new efficiency records across its portfolio, including drilling, completion, and production metrics.

Deleveraging and Balance Sheet Improvement

Occidental launched a $3 billion debt tender offer, representing a significant step forward in its deleveraging efforts. The company plans to continue evaluating options for additional debt reduction, including calling bonds, executing tenders, and repurchasing debt. Occidental is focused on maintaining a strong liquidity position, regaining investment-grade metrics, and preserving financial discipline.

Divestiture Program

Occidental expects to close at least $2 billion in divestitures post-Colombia, prioritizing value over meeting a deadline. The company is open to opportunistic divestitures, monetizing assets that are unlikely to be developed in the near future.

Chemicals Business and Integration with Low Carbon Ventures

Occidental’s Chemicals business, particularly the PVC and caustic soda segments, is performing strongly and is expected to deliver record earnings in 2021. The company plans to leverage Chemicals’ expertise, integration, and production capabilities to support the development of its Low Carbon Ventures business, including the Direct Air Capture facility.

Capital Allocation and Future Priorities

Occidental remains focused on deleveraging and reducing debt as its top priority, with the potential to shift towards returning additional capital to shareholders once it reaches a more sustainable debt level. The company is open to exploring joint venture opportunities in the Permian Basin to leverage its operational expertise and drive further efficiencies. Occidental is making progress on its Direct Air Capture project, with plans to build the largest facility of its kind in the world by 2024.

Overall, the key insights highlight Occidental’s focus on operational excellence, balance sheet improvement, and strategic initiatives to position the company for long-term success, while also exploring opportunities to participate in the energy transition.

Back to Table of Contents

The information provided on this blog is for informational purposes only and should not be considered as financial advice. You should consult with a qualified financial professional before making any investment decisions. Past performance is not indicative of future results. Investing involves risk, including the potential loss of principal.