Occidental Petroleum’s 2026 Earnings Call: Share Buyback Priorities and Sustaining Capital Targets Don’t Match

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Date of Call: Aug 6, 2026

Financials Results

• EPS: $2.40 per diluted share (adjusted), $2.75 per diluted share (reported)

Guidance:

• Q3 production expected between 1.4 and 1.44 million BOE/day.
• Q3 domestic LOE expected at $8.75 per BOE; full-year guidance maintained at $8.10 per BOE.
• Full-year capital guidance maintained at $5.5 to $5.9 billion.
• 2027 starting capital spending expected at $5.9 billion, with relatively flat production vs. 2026.
• Expect to deliver $4 billion annual sustainable cash flow improvement by 2030 vs. 2025, with 85% achievable at lower prices.
• Full-year midstream and marketing guidance raised by $300 million.
• Q3 midstream and marketing income expected to decline due to narrowing gas spreads, offset by stronger upstream gas realizations.
• Dividend raised 8% to $0.28 per share, with sustainable and growing dividend a foundational priority.
• Principal debt reduced to $11.8 billion; target is $10 billion milestone to lower interest expense by ~$740M vs. 2025.

Business Commentary:

Strong Financial Performance and Cash Flow:

• Occidental reported $3 billion of free cash flow before working capital in Q2, marking the highest quarterly free cash flow since Q3 2022.
• This performance was driven by strong operational execution, cost discipline, and higher commodity prices.

Debt Reduction and Dividend Growth:

• The company reduced its principal debt to $11.8 billion, achieving a $630 million reduction in go-forward annualized interest compared to 2025.
• This structural savings enabled an 8% increase in the quarterly dividend, demonstrating the strength of their balance sheet and commitment to capital allocation.

Production and Operational Efficiency:

• Total production for the quarter averaged 1.43 million BOE per day, exceeding the midpoint of guidance by 23,000 BOE per day.
• The outperformance was attributed to strong operational performance across assets, particularly in the Permian and Gulf of America, and maintenance schedule optimization.

Sustainable Cash Flow Growth:

• Occidental's plans are set to deliver $4 billion of annual sustainable cash flow improvement by 2030, representing a 95% annualized growth compared to 2025.
• This growth is driven by durable improvements across the business, including lower costs, lower sustaining capital, and a stronger balance sheet, and can be achieved without increasing production.

Midstream and Marketing Segment Performance:

• The midstream and marketing segment reported adjusted earnings of $960 million, setting a new quarterly record and more than doubling the midpoint of guidance.
• The strong performance was driven by gas marketing optimization, stronger crude marketing margins, and higher sulfur prices, despite lower sulfur sales.

Sentiment Analysis:

Overall Tone: Positive

• "We continue to deliver strong 2026 results." "The consistency of these results continue to reflect the quality of our team and the strength of our assets." "We expect to deliver more than the targeted $1.2 billion of free cash flow improvement for this year." "We see a clear pathway to add over $4 billion of annual sustainable cash flow by 2030." "Our outlook is supported by a stronger balance sheet, a more efficient cost structure, and a portfolio that gives us flexibility across price environments."

Q&A:

• Question from Nitin Kumar (Mizuho): Could you talk through the rateability and progression of the cash flow inflection, and unpack the oil and gas efficiencies?
  Response: Management is on track to achieve >$1.2B cash flow improvement in 2026. For 2027, sustainable cash flow improvement is expected to be $700-800M relative to 2026, driven by Stratos capital roll-off and interest savings. Beyond 2027, ~$1.3B improvement is expected between 2028-2029. Oil and gas efficiencies are a continuation of 2026 operating efficiencies.

• Question from Nitin Kumar (Mizuho): How are you thinking about efficiency-led growth for 2027 and beyond?
  Response: Growth must be measured, efficiency-led, and value-additive. Considerations include returns, cost efficiency, capital efficiency, decline rate, technology advancement, and macro conditions. Internal scenarios show that a moderate growth scenario (2% CAGR) could improve free cash flow beyond the baseline plan.

• Question from Doug Legate (Wolf Research): Is the interpretation correct that buybacks will be secondary to preferred redemption, leading to continued net debt reduction and cash build? Also, how will you reduce sustaining capital?
  Response: Yes, after reaching the $10B principal debt milestone, focus will be on further reducing net debt, balancing with cash build for the 2029 preferred redemption. Share repurchases will be opportunistic and lower priority until then. Sustaining capital reduction is driven by advanced recovery projects (e.g., water floods, EOR) lowering decline rates, along with base performance improvements and operational efficiencies.

• Question from Neil Mehta (Goldman Sachs): How will you approach taking sustainable costs out of the business?
  Response: Sustainable cost reduction will continue through drilling efficiency, global cost collaboration, and scaling efficiencies. Examples include Permian well cost reductions and Simulfrac expansion. The focus is on doing more with less, as evidenced by adding more wells while reducing rigs.

• Question from Neil Mehta (Goldman Sachs): How does LCV (low-carbon ventures) fit into the multi-year plan?
  Response: Carbon capture and CCUS technology add value by supporting core business costs (30% of EOR barrel cost). DAC and other technologies are at meaningful milestones but require partners to move forward. The focus is on bringing partners in for development.

• Question from Betty Jiang (Barclays): What is the quantum of growth capital you're willing to spend above sustaining capital in a mid-cycle environment?
  Response: For 2027, starting capital is $5.9B. Sustaining capital (excluding multi-year projects, exploration, and growth) is ~$5.0-$5.1B. Growth includes mid-cycle projects (e.g., Gulf of America water flood, Permian EOR) which help reduce future sustaining capital toward the 2030 target of $4.5B.

• Question from Betty Jiang (Barclays): Can you discuss the cadence and contribution of the Rockies asset?
  Response: The Powder River Basin (PRB) is becoming more important due to strong asset quality and operational efficiencies. Well productivity is 41% above industry average, and well costs are down ~10%. The shift is from DJ Basin to PRB, with higher margin oil production replacing lower margin gas.

• Question from Arun Jayaram (JP Morgan): How is Oxy applying advanced recovery techniques in unconventional reservoirs, and what are the results?
  Response: Oxy has seen >45% EUR uplift in CO2 EOR pilots in the Permian, with potential to reach 15-20% recovery. The approach is customized by basin and integrates EOR technologies (e.g., surfactants with CO2). Commercial projects are planned to come online by 2028-2029, which will help lower decline rates.

• Question from Arun Jayaram (JP Morgan): Can you discuss the puts and takes for midstream and marketing in the second half?
  Response: Q3 midstream income expected to decline due to narrowing Baja-Gulf Coast gas spreads, but this will be largely offset by stronger upstream gas realizations. Sulfur pricing is volatile due to Middle East disruptions. The spread is expected to normalize as Permian takeaway capacity increases.

• Question from Sam Margolin (Wells Fargo): Is there an opportunity to rebase the midstream business given changes in the Permian?
  Response: Midstream's primary purpose is to ensure product delivery. The company will continue to look at the landscape but remains centered on delivering value within capital allocation priorities.

• Question from Sam Margolin (Wells Fargo): How have you maintained well performance and productivity while changing the development model in the Permian?
  Response: Strong well performance is core, with secondary bench development in the Delaware Basin 40% higher than industry average. This is due to subsurface work and efficient fracturing. The focus on capital efficiency (under $20M per thousand BOE) and de-risking inventory supports sustained productivity.

Contradiction Point 1

Cash Flow Priorities and Capital Allocation Post-Debt Reduction

Contradiction on the priority of share repurchases versus dividend growth after reaching the $10B debt target.

What are your thoughts on the company's Q4 performance? - Doug Legate (Wolf Research)

2026Q2: After reaching the $10B principal debt milestone, the focus is on further reducing net debt... Share repurchases will be opportunistic and a lower priority until after the preferred redemption. - [Richard Jackson](CEO), [Sunil Matthews](CFO), and [Ken Dillon](CFO)

Does prioritizing preferred redemptions over buybacks imply a reduction in net debt and an increase in cash reserves? - Doug Leggate (Wolfe Research)

2026Q1: Once there [at $10B debt], options will be reassessed... 1) building cash to redeem preferred equity... 3) opportunistic share repurchases if there is a major oil price/share price dislocation. - [Sunil Mathew](CFO)

Contradiction Point 2

Sustaining Capital Reduction Plan and Targets

Contradiction on the timeline and specifics for reducing sustaining capital.

Betty Jiang (Barclays) - Betty Jiang (Barclays)

2026Q2: The $900M reduction is driven by... [factors]... and operational efficiencies... This, combined with... is expected to lower sustaining capital to $4.5B by 2030. - [Sunil Matthews](CFO)

What is the amount of growth capital you're willing to spend above sustaining capital in a mid-cycle price environment, and how are you balancing short- and long-cycle projects? - Arun Jayaram (JPMorgan)

2026Q1: The 2027 sustaining capital starting point is ~$5.9B, with potential for increases driven by the macro. - [Richard Jackson](CEO) and [Sunil Mathew](CFO)

Contradiction Point 3

Sustaining Capital Outlook & Reduction Plan

Contradiction on the magnitude and drivers of future sustaining capital reduction.

Doug Legate (Wolf Research) - Doug Legate (Wolf Research)

2026Q2: The $900M reduction is driven by... Advanced Recovery projects... improved well costs... and operational efficiencies... lowering sustaining capital to $4.5B by 2030. - [Richard Jackson](CEO), [Sunil Matthews](CFO), and [Ken Dillon](CFO)

How will prioritizing preferred redemptions over buybacks impact net debt and cash, and what is the plan to reduce sustaining capital by $900M? - Douglas George Blyth Leggate (Wolfe Research)

2025Q4: The $4.1B sustaining capital figure is based on a $40 per barrel oil price assumption... This reduction is due to operational efficiencies, allowing higher production (35k BOE/day additional) at lower sustaining capital. - [Sunil Mathew](CFO)

Contradiction Point 4

Low-Carbon Ventures (LCV) Capital Trajectory

Contradiction on whether LCV capital is being significantly reduced or maintained for future projects.

Okay, let's see. The user wants me to take the input "Sam Margolin (Wells Fargo)" and turn it into a concise earnings-call question. The rules are pretty strict: only one line, end with a question mark if possible, no explanations or extra text.First, I need to figure out what the input represents. It looks like a person's name with their company in parentheses. In the context of earnings calls, this is likely an analyst or representative from Wells Fargo asking a question. The task is to rephrase this into a question that would be asked during an earnings call.Earnings call questions usually start with "What are your thoughts on..." or "How do you address..." regarding specific aspects like revenue, growth, challenges, etc. Since the input doesn't specify the topic, I need to make a generic question that fits the format. Common questions might relate to financial performance, future projections, market challenges, or strategic moves.But the input doesn't give any specific details. So, the safest bet is to create a general question that could be asked by an analyst from that firm. For example, "What are your thoughts on the recent financial results and future guidance?" That covers a typical topic and uses the name appropriately.Wait, the input is just the name and company. The user might expect a question that includes the name. But the example in the rules shows that if the input isn't a clear question, you output it as-is. However, in this case, it's a name of a person from a company, which is typically part of a question in an earnings call context. So, the correct approach is to form a question that includes the name as the asker.But the user wants the output to be the question itself, not the speaker. Wait, the instruction says to rewrite the input into one concise earnings-call question. So maybe the input is the speaker's name, and the task is to create a question that this person might ask. However, the user's example shows that if the input isn't a question, they output it as-is. But here, the input is a name, not a question. However, in the context of an earnings call, when someone like Sam Margolin from Wells Fargo asks a question, the question would be phrased as "Sam Margolin (Wells Fargo) asks..." but the user wants the output to be the question, not the attribution.Wait, the user's example says if the input isn't a question, output it as-is. But here, the input isn't a question. So according to the rules, if the input isn't a question, output it as-is. However, maybe the user expects that the input is part of a question. For example, in earnings calls, it's common to have the speaker's name and company followed by their question. But the user wants the output to be the question itself, not the speaker. But the input is only the speaker's name. So, according to the rules, since the input is not a question, we have to output it as-is. However, maybe the user expects that the input is part of forming a question, like "Sam Margolin (Wells Fargo) asks..." but the user's instruction says to rewrite the input into one concise earnings-call question. So perhaps the input is part of the question, and the task is to form the question using that name. For example, "What are your thoughts on the recent earnings, Sam Margolin (Wells Fargo)?" But that would include the name in the question, which might not be standard. Typically, in earnings calls, the question is asked, and the speaker is mentioned before the question. But the user's instruction is to rewrite the input into a question. So maybe the input is the speaker's name, and the output is the question that they would ask. For example, "What are your thoughts on the recent financial results?" But the user wants the output to be the question, and the input is the speaker. But according to the rules, if the input isn't a question, output as-is. However, the input is a person's name, which is not a question. So the correct output would be the input as-is. But maybe the user expects that the input is part of the question. Hmm. This is a bit confusing. Let me check the rules again.The rules state: If the input is NOT a question, is too vague, or lacks enough information to form a clear earnings-call question, output the input EXACTLY as-is. The input here is "Sam Margolin (Wells Fargo)", which is not a question. So according to the rules, we should output it as-is. However, maybe the user wants to form a question that includes the name as the asker. For example, "What are your thoughts on the recent earnings, Sam Margolin (Wells Fargo)?" But that's not standard. In earnings calls, the question is asked - Sam Margolin (Wells Fargo)

2026Q2: Oxy will continue to participate in the evolving landscape but will stay centered on core delivery and capital allocation priorities. - [Richard Jackson](CEO)

Okay, let me try to figure out how to approach this. The user wants me to rewrite the input into one concise earnings-call question. The rules are pretty strict: only one line, no extra text, must end with a question mark if possible. If the input isn't a question or is too vague, I leave it as-is.The input given is: "Given the strategic asset positions and potential local gas sinks in the Permian, is there an opportunity to rebase the midstream business?" First, I need to check if this is already a question. Yes, it starts with "Given..." and ends with a question mark. But maybe it's too wordy. The task is to make it concise. Let's break it down. The key elements are strategic asset positions, potential local gas sinks in the Permian, and the opportunity to rebase the midstream business.The original question is already a clear question. But maybe "rebase" isn't the best term here. Wait, "rebase" might be a typo for "reposition" or "refocus"? But assuming the user meant "rebase" as in adjusting the base or foundation. However, in business terms, "rebase" isn't standard. Maybe the intended term is "refocus" or "reposition." But since the user wrote "rebase," I should stick with that unless it's a clear error. The question is about whether there's an opportunity to adjust the midstream business given certain assets and gas sinks in the Permian. To make it concise, perhaps shorten "strategic asset positions" to "strategic assets" and "potential local gas sinks" to "local gas sinks." The location is the Permian, which is a known oil and gas region, so that's fine. So the rewritten question could be: "Can the midstream business be rebased leveraging strategic assets and local gas sinks in the Permian?" But wait, the original uses "is there an opportunity to rebase," so maybe "Is there an opportunity to rebase the midstream business leveraging strategic assets and local gas sinks in the Permian?" But that's almost the same as the original. The original is already concise. Maybe it's already as concise as it can be without losing meaning. Alternatively, maybe "Given the Permian's strategic assets and local gas sinks, is there an opportunity to rebase the midstream business?" That shortens "strategic asset positions" to "strategic assets" and moves "Permian" closer to the front. That might be better. But according to the rules, if the input is already a clear question, maybe I don't need to change it. The user says if the input is a question and can be made into a clear one, rewrite it. But if it's already clear, perhaps leave it. Wait, the instruction says "If the input is NOT a question, is too vague, or lacks enough information to form a clear earnings-call question, output the input EXACTLY as-is..." So if it is a question and can be made more concise, we should rewrite. The original is a question. It's a bit long. Let me see if I can make it more concise without changing the meaning. The original is: "Given the strategic asset positions and potential local gas sinks in the Permian, is there an opportunity to rebase the midstream business?" Possible concise version: "Is there an opportunity to rebase the midstream business using strategic assets and local gas sinks in the Permian?" That removes "positions" and "potential," which might be okay. But "potential" could be important. However, in the context of an earnings call, conciseness is key. The term "rebase" is a bit unclear, but assuming it's intentional. Alternatively, maybe "Can strategic assets and local gas sinks in the Permian enable rebasing of the midstream business?" But the user wants exactly one line. The original is already a valid question. However, the user might want it more concise. Let me check the character count. Original is 73 characters. The rewritten version could be shorter. Alternatively, "Is there an opportunity to rebase the midstream business in the Permian using strategic assets and local gas sinks?" But the original structure is "Given X, is there an opportunity to Y?" Which is a standard question structure. Maybe the user wants to keep that structure but make it more direct. I think the original is already a valid question, but perhaps the user wants it slightly rephrased. However, since the instruction says to output the input as-is if it's a clear question, but if it can be rewritten into a more concise one, do so. Given that, the original is a clear question but maybe can be made more concise. So the final answer would be the rewritten version. Let me go with: "Is there an opportunity to - Douglas George Blyth Leggate (Wolfe Research)

2025Q4: LCV capital will drop after STRATOS completion... The company expects to partner on future DAC and sequestration projects to leverage economics and de-risking. - [Richard Jackson](CEO)

Contradiction Point 5

Buyback Priority Relative to Debt Reduction & Cash Build

Contradiction on the stated priority of share repurchases versus debt reduction and cash accumulation.

Doug Legate (Wolf Research) - Doug Legate (Wolf Research)

2026Q2: Share repurchases will be opportunistic and a lower priority until after the preferred redemption. - [Richard Jackson](CEO), [Sunil Matthews](CFO), and [Ken Dillon](CFO)

Does prioritizing preferred redemption over buybacks mean net debt will decrease and cash increase? - Nitin Kumar (Mizuho Securities USA LLC)

2025Q4: The top return of capital priority is a sustainable and growing dividend... The balanced, opportunistic approach allows the company to be flexible. - [Sunil Mathew](CFO)

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