Occidental Petroleum Q1 2025 Earnings Preview: Mixed Sentiment Amid Commodity Volatility

The upcoming Q1 2025 earnings report for Occidental Petroleum (OXY) will serve as a litmus test for the energy sector’s ability to navigate commodity price fluctuations and operational headwinds. While the Zacks Consensus estimates project revenue growth of 18.9% year-over-year to $7.15 billion and an adjusted EPS of $0.73 (+12.3% YoY), these figures mask a complex reality: Occidental’s results will reflect both the resilience of its Permian Basin assets and the drag of plunging oil prices during the quarter.

The Oil Price Dilemma

The decline in crude oil prices—which fell from $82 per barrel in early January to $58.62 (Brent) by April—poses the most significant challenge to Occidental’s Q1 outlook. This drop, driven by weak global demand and geopolitical tensions, directly reduced revenue per barrel. The U.S. GDP contraction of 0.3% in Q1 2025 further dampened demand expectations, compounding the impact of lower prices.

Permian Production: A Silver Lining

Despite the oil price slump, Occidental’s core Permian Basin operations remain a bright spot. Production volumes are expected to stay robust at 745–765 thousand barrels of oil equivalent per day (Mboe/d), supported by the integration of the CrownRock assets. However, total output may dip slightly quarter-over-quarter due to:
- Winter weather disruptions in January, which halted drilling activity.
- Planned maintenance at key facilities like Horn Mountain and Dolphin.
- Reduced drilling activity in late 2024, lowering working interests in new wells.

Cost Discipline and Debt Reduction

Occidental’s focus on cost management has paid dividends. Domestic lease operating expenses are declining, and the company has slashed debt by $4.5 billion in 2024, with further deleveraging planned using free cash flow and divestiture proceeds. This financial strength has bolstered its balance sheet and reduced interest expenses—a positive offset to lower oil prices.

Chemical Segment Underperformance

The OxyChem division faces near-term headwinds:
- A two-week outage at the Ingleside facility in Texas.
- Supply chain disruptions from January’s winter storm.
- Rising raw material costs, particularly for petrochemical feedstocks.

These factors are expected to reduce Q1 chemical income, though long-term demand for industrial chemicals remains robust.

Market Sentiment: Caution vs. Optimism

Investors are split on Occidental’s prospects. The stock has underperformed the broader energy sector, falling 17.2% over the past three months (vs. a 9.3% decline in the industry). This reflects skepticism about oil price recovery and the company’s ability to sustain growth amid volatility.

However, bulls point to:
- Occidental’s 52-year dividend streak (2.66% yield).
- Its Smartkarma Smart Score of 3.0, driven by strong growth and resilience metrics.
- Fitch Ratings’ Positive outlook upgrade citing debt reduction progress.

Key Risks and Catalysts

• Oil Price Recovery: A rebound in crude prices above $70/b would immediately boost margins.
• Permian Expansion: Plans to increase production to 900 Mboe/d by 2027 hinge on drilling efficiency.
• Regulatory Challenges: Oxy’s carbon capture projects and partnership with Microsoft face permitting hurdles.

Conclusion

Occidental’s Q1 earnings are a microcosm of the energy sector’s struggles and strengths. While lower oil prices and operational disruptions will weigh on results, the company’s Permian assets and financial discipline position it to outperform peers in a normalized market. The Zacks model’s Hold rating and mixed analyst views underscore the duality of its situation: short-term pain, long-term gain.

Investors should monitor Permian production metrics and cost reduction progress in the earnings report. If Occidental can demonstrate resilience in this challenging environment, its shares—currently trading at an EV/EBITDA of 5.11X vs. the industry’s 4.93X—could rebound as oil prices stabilize. For now, the verdict remains split, but the Permian’s potential continues to anchor Occidental’s long-term story.