Occidental Petroleum NYSE: OXY executives used the company’s fourth-quarter 2025 earnings call to highlight what they described as a year of record production, sizable cost reductions, and accelerated deleveraging following the sale of OxyChem. Management also outlined a lower capital program for 2026 while forecasting relatively flat-to-slightly higher production and additional cost savings.
2025 results: record production, lower costs, stronger balance sheet
Chief Executive Officer Vicki Hollub said 2025 was “an exceptional year,” pointing to operational execution, cost reductions, and improved financial flexibility. She said that despite oil prices being down about 14% from 2024, Occidental generated $4.3 billion in free cash flow before working capital. On a normalized basis excluding OxyChem, Hollub said cash flow from operations increased 27% year over year.
Occidental reported a new annual production record of 1.4 million barrels of oil equivalent per day, exceeding the high end of guidance, while spending $300 million less in oil and gas capital than originally planned, Hollub said. She added the company reduced annual operating expenses by $275 million and posted its lowest lease operating expense per BOE since 2021.
On reserves, Hollub said Occidental achieved a 107% organic reserves replacement ratio and a 98% all-in reserves replacement ratio at a finding and development cost below its DD&A rate. Including resources discussed previously, she said the company’s total resource base stands at 16.5 billion BOE, representing more than 30 years of low-cost opportunity, and that 84% of the resource base breaks even below $50 per barrel.
OxyChem sale and debt reduction
Hollub described the sale of OxyChem as a deliberate step to strengthen the balance sheet and concentrate on high-return oil and gas assets. She said Occidental repaid $4 billion of debt in 2025 and that, following completion of the OxyChem sale earlier this year, principal debt stands at $15 billion, about $3 billion lower than before the CrownRock acquisition.
Chief Financial Officer Sunil Mathew said Occidental has repaid $13.9 billion in debt over the last 20 months. He added that the company’s near-term maturity profile is “fairly minimal,” with approximately $450 million due over the next four years.
Both Hollub and Mathew pointed to a new debt tender offer announced the morning of the call. Management said the $700 million tender is expected to reduce principal debt to $14.3 billion, reaching the near-term target previously set when Occidental announced the OxyChem transaction.
Fourth-quarter details: adjusted profit, reported loss, and cost performance
Mathew said the company delivered an adjusted profit of $0.31 per diluted share in the fourth quarter, alongside a reported loss of $0.07 per diluted share. He said the difference was largely driven by charges and transaction costs related to the OxyChem sale.
For the quarter, Mathew said Occidental generated approximately $1 billion in free cash flow despite lower realized oil prices. Production exceeded the midpoint of guidance by 21,000 BOE per day, driven by strong U.S. onshore performance, and domestic operating expense fell to $7.77 per BOE, the lowest quarterly level since 2021.
Midstream results were also a focus. Mathew said fourth-quarter adjusted pretax income exceeded guidance by $172 million, largely due to transportation optimization around unplanned maintenance on third-party pipelines out of the Permian and higher sulfur prices at Al Hosn. Hollub separately said midstream adjusted pretax income beat the midpoint of full-year guidance by more than $500 million, citing similar drivers.
2026 outlook: lower capital spending, ~1% production growth, and more savings
Management framed 2026 as a year of continued discipline with a lower capital plan. Hollub said total capital spending is expected to range from $5.5 billion to $5.9 billion, a $550 million reduction from 2025 (excluding OxyChem). Despite the lower spending, she said Occidental expects production to average approximately 1.45 million BOE per day.
Chief Operating Officer Richard Jackson said the company plans to deliver another $500 million of cost savings in 2026, including $300 million from capital and $200 million from operating and transportation costs. He said this includes about 7% lower well costs, 5% lower facility costs, and a 4% reduction in domestic operating expenses.
Mathew said Occidental expects to improve free cash flow by more than $1.2 billion in 2026, driven by the $500 million in expected oil and gas operational savings, $400 million in midstream savings (partially from improved crude transportation costs), and about $365 million in interest savings compared with 2025.
He noted that first-quarter 2026 volumes will be lower due to reduced fourth-quarter activity and working interest in U.S. onshore, the impact of Winter Storm Fern, and planned turnarounds affecting Gulf of America production in the first half. Production is expected to increase in the second quarter, he said, driven by stronger Permian volumes.
Capital allocation, dividends, buybacks, and low-carbon initiatives
Hollub said delivering a “sustainable and growing dividend” remains central to Occidental’s strategy, citing an 8% increase to the quarterly dividend announced the day before the call. Mathew said the lower sustaining capital requirement and improved cost structure support that increase.
On share repurchases, Mathew said the company intends to remain “opportunistic,” emphasizing a balanced approach as Occidental builds cash and continues deleveraging. He also said the company is preparing to resume redemption of preferred equity in August 2029, when it becomes callable without a $4-per-share return-of-capital trigger and at a lower redemption premium.
Occidental’s 2026 capital plan continues to emphasize U.S. onshore assets, with management saying about 70% of oil and gas capital will be directed to the U.S. onshore portfolio. Mathew said U.S. onshore spend is expected to decline by $400 million versus 2025, reflecting efficiency gains and lower Permian activity levels, while investment will increase by approximately $200 million in the Gulf of America, Permian EOR, and International.
Low-carbon ventures capital is expected to be about $250 million lower year over year, with Stratos construction winding down. Jackson said Stratos Phase I is in the final stage of startup and is expected online in Q2, with Phase II commissioning also beginning in Q2 and ramp-up continuing through the rest of the year.
- Total 2026 capital: $5.5 billion to $5.9 billion
- Expected 2026 production: ~1.45 million BOE/d (~1% growth)
- Expected 2026 oil & gas savings: $500 million
- Expected 2026 midstream savings: $400 million
- Expected 2026 interest savings: ~$365 million
In other updates, Hollub said Jordan Tanner will move from Vice President of Investor Relations to a leadership role in the Gulf of America. She said Babatunde Cole will become Vice President of Investor Relations, reporting to Mathew.
About Occidental Petroleum NYSE: OXY
Occidental Petroleum Corporation (OXY) is an international energy company engaged primarily in the exploration, production and marketing of oil and natural gas. The company conducts upstream activities to discover and produce hydrocarbons and operates complementary midstream and marketing functions to transport and sell its production. Occidental also owns a chemicals business that manufactures and sells industrial chemicals and related products for a range of end markets.
Occidental's operations are concentrated in the United States, with a significant presence in the Permian Basin, and it maintains exploration and production activities in several international regions, including parts of the Middle East, Latin America and Africa.
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