Occidental Q1 Beat Signals Resilience, But Can Berkshire’s Stake Keep Momentum?

Occidental Petroleum’s Q1 2025 earnings report delivered a mixed but ultimately encouraging performance, with adjusted earnings per share (EPS) outpacing expectations despite a revenue shortfall. The results, paired with ongoing debt reduction and Berkshire Hathaway’s continued stake-building, suggest the oil giant is navigating a challenging energy market with cautious optimism. However, questions linger about whether these gains can sustain momentum amid persistent headwinds.

The quarter’s highlights included an adjusted EPS of $0.87, a 19.18% beat against estimates, driven by stronger oil prices and cost-cutting in core operations like the Permian Basin. Revenue of $6.84 billion fell short of forecasts, though this was partly offset by robust cash flow ($2.1 billion operating cash flow) and a $200 million reduction in 2025 capital spending. Meanwhile, Berkshire Hathaway’s 28.2% equity stake—bolstered by $444.9 million in recent purchases—remains a critical factor in investor sentiment.

Operational Gains Offset Revenue Misses

Occidental’s Q1 success hinged on two pillars: operational efficiency and commodity price resilience. The Oil and Gas segment reported pre-tax income of $1.7 billion, up from $1.2 billion in Q4 2024, fueled by a 2% rise in crude oil prices to $71.07/barrel and a 19% jump in natural gas liquids (NGL) prices to $25.94/barrel. This outperformance underscores Occidental’s exposure to NGLs, which remain in demand for petrochemicals—a strategic advantage in a shifting energy landscape.

The OxyChem division also defied expectations, posting $185 million in pre-tax income despite declining PVC and caustic soda prices. This beat was aided by cost controls and strong demand for industrial chemicals. Meanwhile, Midstream and Marketing delivered a $127 million upside to guidance, highlighting the value of Occidental’s integrated supply chain.

Debt Reduction and Capital Discipline

Debt management remains a key focus. Year-to-date debt repayments totaled $2.3 billion, with just $284 million due in the next 14 months—a stark improvement from earlier forecasts. CEO Vicki Hollub emphasized that Occidental’s reduced capital spending and Permian cost savings ($150 million in 2025 cuts) will further bolster free cash flow.

Berkshire’s Stake: A Vote of Confidence, Not a Takeover Play

Berkshire’s $12.4 billion equity stake and $8.5 billion in preferred shares reflect Warren Buffett’s long-term bet on Occidental’s asset quality and Hollub’s leadership. Notably, Berkshire has added 6 million shares in the past six months, signaling patience rather than urgency. Hollub’s clarification that Buffett “has no intention of acquiring the company” underscores this strategic patience—a stance that could deter short-term speculators but reassure investors in Occidental’s standalone viability.

Analyst ratings remain divided. Morgan Stanley and Wolfe Research’s bullish calls contrast with Goldman Sachs’ “Sell” rating, which cites valuation concerns and Occidental’s heavy reliance on capital-intensive projects. The median price target of $52.50, however, suggests a cautious middle ground, aligning with Occidental’s free cash flow trajectory but lagging its recent stock performance.

Conclusion: A Slightly Bullish Outlook, But Risks Remain

Occidental’s Q1 results and Berkshire’s stake reinforce its position as a survivor in a cyclical industry. The company’s debt reduction, operational cost discipline, and exposure to higher-margin NGLs and chemicals provide a solid foundation. With $1.2 billion in free cash flow before working capital and a manageable debt load, Occidental is well-positioned to weather energy price volatility.

However, risks persist. The revenue miss hints at execution challenges in a slowing global economy, and Goldman Sachs’ valuation critique is not unfounded—Occidental’s current market cap of $44 billion (as of Q1) must be weighed against its $12.4 billion in Berkshire equity, suggesting limited upside if oil prices stagnate.

The “slightly bullish” moniker is apt: Occidental is no growth miracle, but its balance sheet and strategic partnerships (like its carbon capture initiatives) offer a safe harbor in an uncertain market. Investors should monitor Q2 production metrics and Berkshire’s trading activity as key indicators of sustained momentum. For now, the Permian Basin’s productivity—and Buffett’s wallet—remain the best proxies for Occidental’s future.