Occidental Petroleum Corporation Q4 FY2025 earnings call

2025 was an exceptional year with teams working safely and delivering operational excellence and cost reductions. Sale of OxyChem strengthened balance sheet. 2025 production record, strong reserves replacement, midstream strong performance, and record safety. 2026 priorities: maintain production base via safe operations, sustain and grow dividend (8% increase announced), strengthen financial position and be opportunistic in share repurchases and net debt reductions. Capital plan for 2026 ranges $5.5 billion to $5.9 billion, ~70% to U.S. onshore portfolio. 2026 operational priorities: extend and improve low-cost resource base, further drive cost efficiency, generate resilient free cash flow at any price. Expected $500 million cost savings in 2026, $300 million from capital, $200 million from operating and transportation costs. STRATOS Phase 1 expected online in Q2 2026, Phase 2 begins commissioning in Q2 with operational ramp-up through rest of year. GOA's Horn Mountain waterflood project to begin initial uplift in late 2027.

2025 demonstrated the resilience of Oxy's business. Even with oil prices down around 14% from 2024, it generated $4.3 billion in free cash flow before working capital. On a normalized basis and excluding OxyChem, cash flow from operations increased by 27% year-over-year. Debt reduction was a top priority in 2025, with $4 billion in debt repaid and principal debt standing at $15 billion after OxyChem sale, with a tender offer expected to further reduce it to $14.3 billion. Operationally, 2025 set a new annual production record of 1.4 million barrels of oil equivalent per day, exceeding guidance high end, with油气 capital spending $300 million less than planned, operating expenses reduced by $275 million, and lease operating expense per barrel of oil equivalent at lowest since 2021. Reserves replacement was strong with 107% organic reserves replacement ratio and 98% all-in reserves replacement ratio, total resource base at 16.5 billion barrels of oil equivalent, 84% of which breaks even below $50 per barrel. Midstream had adjusted pretax income surpassing guidance midpoint by over $500 million.

2026 capital spending expected $5.5 billion to $5.9 billion, a $550 million reduction from 2025. Expected to improve free cash flow by over $1.2 billion in 2026, largely from $500 million annual operational savings in oil and gas, $400 million in midstream savings, and ~$365 million in interest savings. 2026 production expected average ~1.45 million barrels of oil equivalent per day. First quarter volumes lower due to reduced fourth quarter activity, winter storm impact, and planned turnarounds, with production expected to increase in second quarter.

Q: Arun Jayaram asked about moving pieces of much lower CapEx guide relative to third quarter soft guide.

A: Vicki said teams doing exceptional work, Richard walked through details like $300 million reduced oil and gas, $100 million lower exploration, $200 million increase in mid-cycle, and structural cost savings in U.S. unconventional.

Q: Nitin Kumar asked about sub-30 bucket in reserves and reluctance to buybacks.

A: Vicki said U.S. unconventional inventory improvement with primary and secondary benches lowering costs, Sunil said focused on deleveraging first, then considering buybacks with better macro view in second half, and dividend as top return of capital priority.

Q: Wei Jiang asked about sustainability of 2027 cost savings and Rockies dynamics.

A: Sunil said 2027 capital depends on sustaining capital, efficiency, and well performance, Richard walked through structural savings, production trajectory in Permian and Rockies.

Q: Doug Leggate asked about sustaining capital at $40 oil, LCV in 2027, and midstream drag.

A: Sunil explained sustaining capital calculation, Richard talked about STRATOS capital rolling off and partnership opportunities.

Q: Neil Mehta asked about operational observations and macro view.

A: Richard mentioned strong resource base, Gulf of America waterfloods, technology use, Vicki talked about macro fundamentals, reserve replacement ratio, and industry supply-demand balance.