OCCIDENTAL PETROLEUM CORP /DE/ Q1 FY2025 earnings call

Key Highlights

• All 3 segments delivered strong first quarter results, with $3 billion in operating cash flow before working capital generated. Oil and gas production was at the midpoint of guidance, and domestic operating cost was below expectations.
• Promising developments in Oman: advanced negotiations to extend Block 53 contract by 15 years to 2050, with potential to unlock over 800 million gross barrels of additional resources; significant gas and condensate discovery in North Oman with estimated resources over 250 million BOE.
• Debt reduction progress: retired $2.3 billion in debt year-to-date, with all 2025 maturities retired.
• Proactive steps in macro environment: reduced capital guidance by $200 million and achieved $150 million in OpEx savings through efficiency initiatives like rig reductions and well cost improvements.
• Low-carbon portfolio advancements: 1PointFive signed a 25-year carbon offtake agreement for carbon storage at Pelican hub, and STRATOS progressing towards commissioning.

The oil and gas business produced at just over 1.39 million BOE per day, at the midpoint of production guidance, with domestic oil and gas operating cost of $9.05 per BOE. The segment generated $3 billion in operating cash flow before working capital in the first quarter. OxyChem delivered $215 million on an adjusted basis, overcoming winter weather operational challenges. The midstream and marketing business significantly outperformed the high end of its guidance range for the first quarter, driven by strong gas marketing in the Permian and a healthy sulfur market in Al Hosn.

Guidance

• Total company production midpoint expected to modestly increase in Q2 compared to Q1, maintaining full year production guidance despite some adjustments in production mix.
• Reduced full year operating cost guidance from $9 to $8.65 per BOE.
• Raised midstream's full year guidance range by $40 million.
• Reduced capital guidance range by $200 million, expected to deliver a positive cash impact of $350 million in 2025 through a combination of capital and OpEx reductions.

Risks

• Macro environment volatility and uncertainty impacting oil markets, including pressure from OPEC+ volumes and trade policies.
• Uncertainty around global trade affecting the chemical business, with potential supply imbalances and pricing pressures.
• Commodity price fluctuations posing challenges to midstream and marketing segments, especially in terms of cargo sales and delivery timing.

Q: Devin McDermott asked about CapEx and OpEx reductions, including impacts on 2026 production and capital.

A: Richard Jackson and Vicki Hollub discussed efficiency gains, infrastructure optimization, and OpEx levers like CO2 volume and price optimization, noting sustainable impacts on cash flow without sacrificing long-term production.

Q: Doug Leggett inquired about deleveraging and replacement of capital spending after major projects.

A: Vicki Hollub stated capital would be lower next year, with no immediate plans to replace it with new projects, but noting flexibility in the portfolio.

Q: Arun Jayaram asked about divestitures and opportunities in Oman.

A: Vicki Hollub emphasized value-based divestitures, and Ken Dillon and Sunil Mathew highlighted excitement around Oman's Block 53 extension and North Oman gas discovery, noting PSC resilience and potential cash flow uplift.

Q: Neil Mehta questioned low-carbon ventures and oil macro outlook.

A: Vicki Hollub and Richard Jackson discussed voluntary carbon markets, R&D progress in DAC, and views on U.S. oil supply plateauing in the Permian sooner than expected.

Q: Jean Ann Salisbury asked about midstream recontracting and EOR operating costs.

A: Sunil Mathew confirmed no new midstream recontracting, and Richard Jackson explained EOR cost efficiencies enhancing portfolio competitiveness without production impact.

Q: Paul Cheng asked about CapEx/OpEx impacts and international opportunities.

A: Vicki Hollub detailed portfolio transformation, resource growth in Oman, Algeria, and Gulf of America, and potential value unlock from debt reduction.

Q: Leo Mariani inquired about CapEx/OpEx cuts and production impact.

A: Vicki Hollub stated decisions were made to protect long-term cash flow, with efficiencies expected to maintain production without near-term impact.