OCCIDENTAL PETROLEUM CORP /DE/ Q3 FY2026 earnings call

• Debt Reduction Milestones: Achieved a $10 billion principal debt repayment milestone in Q3 2026, bringing total YTD repayments to $10.4 billion. Established a new target milestone of reducing principal debt to $6 billion.
• Production Outperformance: U.S. Onshore production exceeded guidance midpoint by 20,000 BOE/day. New Mexico hit record gross operated production of 284,000 BOE/day (up ~23% since Jan). Powder River Basin saw >70% growth vs. Q1 due to 27 new wells. Gulf of America (GOA) faced constraints but maintained progress on water flood programs.
• Advanced Recovery & Efficiency: AI surveillance covers 68% of artificial lift wells, contributing to a 7% annual production uplift and 22% reduction in failure frequency. Overall base decline rate reduced from ~25% to 20%. Unconventional well performance is 10% above industry average.
• EOR Expansion: Secured off-take agreements for 2 million metric tons/year of anthropogenic CO2 (15% of 2026 needs). Conventional sidetrack program added 10,000 BOE/day. Identified 500 additional sidetrack candidates and 200+ million BOE of development-ready conventional horizontal resources.
• Stratos Project: Non-technology repairs ongoing; structural supports being added. Commissioning unit operations progressing. Captured >2,000 metric tons of atmospheric CO2. Full plant startup targeted for end of year, transitioning to operations in 2027.
• Cost Discipline: Tracking toward a 7% improvement in new oil costs and 3% improvement in domestic LOE/transportation despite higher input costs. Domestic LOE outperformed guidance at $8.54/BOE.

The provided transcript does not explicitly break down financial performance by distinct product segments (e.g., Oil & Gas vs. Chemicals) with specific revenue contribution percentages or absolute dollar figures for each segment. The report focuses on consolidated results, noting Total Company Production of 1.43 million BOE/day and Adjusted Pre-tax Income of $309 million from Midstream and Marketing. Domestic Lease Operating Expense (LOE) was reported at $8.54 per BOE.

• Q4 2026 Production: Expected between 1.43 and 1.47 million BOE/day, reflecting GOA pipeline constraints and hurricane impacts. Excluding temporary downtime, full-year guidance is slightly above prior quarter's guidance.
• Full Year 2026 Capital Spending: Maintained within original guidance range, with Q4 spend estimated at ~$1.3 billion.
• Midstream/Marketing: Full-year adjusted pre-tax income guidance of $2 billion maintained. Q4 expectations include lower gas marketing income and sulfur pricing.
• 2027 Outlook: Starting capital spending assumed at ~$5.9 billion. Production expected to be relatively flat on a BOE basis, with slight increase on an oil basis. Sustainable cash flow improvement of $700-$800 million expected in 2027 vs. 2026.
• Long-term Targets: Pathway to add >$4 billion in annual sustainable cash flow by 2030 (approx. 95% increase vs. 2025). Sustaining capital targeted to reduce to ~$4.5 billion by 2030.

• Gulf of America Operational Constraints: Third-party gas pipeline constraints and maintenance activities caused production curtailments in Q3, extending into Q4. Hurricane impact also affected late Q3 volumes.
• Commodity Price Volatility: Guidance and cash flow projections are sensitive to oil prices. At lower prices ($50 WTI), focus shifts to principal debt reduction and sustaining dividends rather than aggressive capital returns.
• Stratos Project Execution: Potential incremental costs due to technology/operational improvements and inflation, though management expects minimal spend in 2027.
• International Exploration Risk: Modest investment exploration opportunities (Trinidad, Peru, Colombia) carry standard exploration risks with post-2030 development timelines.

Q: Analyst asked about the rationale behind the new $6 billion principal debt milestone and the timeline for achieving it, questioning if it would allow for capital returns in 2028. / A: Management explained that the $6 billion target aligns with maintaining a Debt-to-EBITDA ratio of approximately 1x at $50 WTI, ensuring the strongest balance sheet in a decade. They anticipate meaningful progress toward this milestone in 2027 under mid-cycle prices, potentially reaching a net cash position which would enable opportunistic share repurchases and accelerated return of capital beyond dividend growth.

Q: Analyst inquired whether the $4 billion cash flow improvement plan implies that reduced sustaining capital from lower decline rates would lead to lower absolute capex or if capital would be redirected for growth. / A: CEO clarified that growth will be 'measured and efficiency-led.' While sustainable cash flow improves without growth via cost efficiencies and lower decline, any future growth investments will be highly selective and focused on high-return opportunities. The primary goal is improving free cash flow timing and sustainability rather than pursuing aggressive volume growth at the expense of capital discipline.

Q: Analyst asked about the strategic value of the new low-cost CO2 off-take agreements for the EOR business and the long-term potential of such supply sources. / A: Management highlighted that CO2 and power constitute ~30% of EOR barrel costs. These deals cover ~15% of current purchases but signal access to ~50 million tons/year of potential anthropogenic CO2 from gas processing and power generation. This partnership model reduces cost risk and provides optionality to expand EOR in both conventional Central Basin Platform and unconventional Delaware Basin areas using existing infrastructure.

Q: Analyst sought details on the trajectory of Gulf of America production in 2027, given recent outages and the shift toward water floods. / A: Ken Dillon noted that 2027 capital will front-load water injection wells (costing ~$100M each, taking 4 months to drill/completion), likely delaying some production benefits. While overall BOE production may see a modest reduction due to deferring exploration, the strategy prioritizes mid-cycle projects that reduce base decline. Permian and Rockies are expected to offset GOA softness, resulting in flat to slightly increased oil production overall.

Q: Analyst questioned the framework for dividend growth and how AI is currently utilized in operations beyond surveillance. / A: CEO stated dividends are anchored to sustainable cash flow at $50 WTI, supported by interest savings (~$1B lower vs. 2025 at $6B debt) and operational efficiencies. Regarding AI, 50% of AI-surveilled wells operate autonomously (e.g., optimizing gas lift networks in Delaware). AI also aids subsurface characterization using well data for seismic interpretation and optimizes steam injection patterns in Manantial EOR, significantly lowering equipment failure rates.