OXY Q1 2025: Capex Cuts, Midstream Gains to Boost FCF by $1B
- Lower Capital Spending: Management expects the capital expenditure profile to decline next year, implying improved free cash flow generation and a more efficient allocation of capital going forward.
- Oman Growth Opportunities: The advanced negotiations to extend the Block 53 contract and the significant discovery in North Oman suggest potential for unlocking substantial additional resources and generating cash flow uplift starting in 2025.
- Operational Efficiency and Asset Transformation: The call highlighted a decade-long transformation with strengthened shale operations and cost reductions across segments, which positions the company for margin expansion and sustained long‐term growth.
| Metric | YoY Change | Reason |
|---|---|---|
Production | FY 2025 full‐year production is expected to average approximately 1.42 million BOE/day (mid‐single digit growth over FY 2024), though Q1 2025 volumes are lower versus Q4 2024. | Q4 2024 saw record U.S. production driven by high operability and strong well performance. In contrast, Q1 2025 experienced reduced activity due to severe winter weather, maintenance turnarounds at Horn Mountain, Al Hosn, and Dolphin, and a lower working interest in new Permian wells, which together dampened early‐year volumes. |
Earnings (EPS) | Q4 2024 had an adjusted EPS of $0.80 per diluted share while also recording a loss of $0.32 per diluted share; Q1 2025 earnings are expected to face similar downward pressure. | The strong performance in Q4 was partially offset by a loss linked to increased long-term environmental remediation liabilities following a Federal Court ruling. Continuing operational challenges and lower Q1 production remain likely to pressure EPS compared to the previous quarter’s mixed results. |
Cash Flow & Debt | Q4 2024 free cash flow reached approximately $1.4 billion with a marked debt reduction of $500 million; Q1 2025 may see shifts due to increased operating and capital demands. | Robust Q4 cash generation enabled significant liquidity improvements and debt repayment. However, with Q1 2025’s heightened overhead expenses ($670 million for Q1 and $2.6 billion for FY 2025) coupled with increased capital expenditures, free cash flow is likely to face downward pressure relative to the previous period’s strong performance. |
Capital Expenditures | FY 2025 guidance of $7.4–7.6 billion, representing an increase relative to prior periods. | The front‐weighted capital investment plan for FY 2025 is designed to accelerate production growth and extend asset life, building on prior operational successes despite the earlier periods enjoying relatively lower capital intensity. |
Commodity Prices | Q1 2025 realized prices were reported at $70.80 per barrel for U.S. oil, $72.59 per barrel for international oil, and $2.42 per Mcf for U.S. natural gas, reflecting ongoing volatility from prior periods. | While previous periods were influenced by fluctuating market conditions, Q1 2025 prices continue to reflect the impact of global supply-demand dynamics, OPEC actions, and geopolitical events, which remain significant factors affecting revenue generation and overall margins compared to earlier periods. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
2025 Full-Year Production | FY 2025 | Expected to average approximately 1.42 million BOE per day | no guidance | no current guidance |
Oil Cut | FY 2025 | Total company oil cut is expected to increase to 52% | no guidance | no current guidance |
Permian Production Growth | FY 2025 | Expected to grow by more than 15% | no guidance | no current guidance |
CrownRock Production | FY 2025 | Expected to average over 170,000 BOE per day, representing >5% growth | no guidance | no current guidance |
Rockies Production | FY 2025 | Expected to remain flat | no guidance | no current guidance |
U.S. Offshore Production | FY 2025 | Expected to increase relative to 2024 | no guidance | no current guidance |
First Quarter 2025 Production | FY 2025 | Expected to decrease from Q4 2024 due to reduced activity | no guidance | no current guidance |
Capital Expenditures (2025) | FY 2025 | Expected to be between $7.4 billion and $7.6 billion | no guidance | no current guidance |
OxyChem Pretax Income (2025) | FY 2025 | Guided to a midpoint of $1 billion | no guidance | no current guidance |
Midstream Earnings (2025) | FY 2025 | Expected to be slightly lower than 2024 | no guidance | no current guidance |
Debt Reduction | FY 2025 | Proceeds from $1.2 billion in divestitures will be applied to debt reduction | no guidance | no current guidance |
Dividend Growth | FY 2025 | Announced a 9% increase in the common dividend | no guidance | no current guidance |
STRATOS Contribution | FY 2025 | Minimal contribution expected in 2025 | no guidance | no current guidance |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Capital Expenditure Management | In Q3 and Q2 2024, Occidental discussed detailed CapEx guidance, increased spending for growth projects, and normalization plans (e.g., Q3 2024 details of CapEx levels and Q2 2024 emphasis on efficiency) | Q1 2025 focused on CapEx reductions, efficiency gains, and a weighted spending approach with optimized infrastructure investments | Consistent focus on balancing growth with tighter, more efficient spending; a continued commitment to cost control and operational optimization |
Debt Reduction and Deleveraging Strategy | In Q2, Q3, and Q4 2024, executives highlighted aggressive debt repayment plans, large divestiture proceeds, and strong progress toward a $15 billion principal debt target (e.g., Q3’s $4B repaid, Q4’s $4.5B repayment achievements) | Q1 2025 emphasized retiring all 2025 maturities, significant year-to-date debt reductions, and ongoing deleveraging to enhance financial resilience | Continued strong focus on deleveraging with a disciplined, strategic approach that leverages divestitures and operational cash flow to strengthen the balance sheet |
Operational Efficiency and Cost Reduction | Q2, Q3, and Q4 2024 earnings provided extensive updates on cost reductions through improved drilling, well cost efficiencies, and the integration of CrownRock assets, with clear achievements in lowering operating expenses and optimizing operations | Q1 2025 reported a 15% improvement in drilling duration, over‑target cost reductions in the Permian, and enhanced savings via CrownRock integration | Increasing operational efficiencies with evolving integration strategies and further cost reductions, indicating a maturing and more effective execution |
Direct Air Capture and Carbon Capture Initiatives | Earlier quarters (Q2–Q4 2024) featured progress on STRATOS, DOE funding, and foundational CDR agreements as well as discussions on technology innovations to lower costs and scale DAC projects | Q1 2025 continued the emphasis by discussing the DAC business as a bridge to EOR, further R&D progress yielding cost reductions, and a milestone for STRATOS in H2 2025 | Steady progress and scaling of low‐carbon initiatives; evolving R&D efforts and integration with core operations underscore future growth potential in climate solutions |
Asset Monetization and Divestiture Risks | Q2 2024 provided extensive details on divestiture programs and strategic asset sales for debt reduction, while Q3 2024 mentioned progress in asset sales and Q4 2024 discussed tax impacts and divestiture proceeds | Q1 2025 presented a value-based strategy for divestitures, emphasizing strategic alignment and the use of asset sales to bolster the balance sheet | Consistent, strategically aligned approach; the focus remains on maximizing value through timely divestitures while mitigating associated risks |
Regional Growth and Exploration Opportunities | Q2 and Q4 2024 focused on Permian and Gulf of Mexico opportunities, with Q3 2024 highlighting strong performance in the Permian and challenges in the Gulf; Oman received minimal or no attention in earlier quarters | Q1 2025 introduced new emphasis on Oman with a Block 53 extension and significant discoveries, alongside continued efficiency and growth in the Permian and adjustments in the Gulf of Mexico | Emerging diversification with new exploration opportunities in Oman augmenting established plays in the Permian and Gulf, potentially impacting long‑term growth |
Government Support and Policy Dependence | Only Q3 2024 briefly tied government support to catalyzing DAC investments, highlighting the role of external support, while Q2 and Q4 2024 did not mention this topic | Q1 2025 did not feature any commentary on government support or policy dependence | Reduced emphasis; compared to earlier mentions in Q3 2024, government support is less in focus in Q1 2025, suggesting a shift toward internally driven strategies |
Oil Price and Market Environment Uncertainties | Q3 2024 included detailed commentary on commodity volatility, macro uncertainty, and cautious capital allocation, whereas Q2 2024 provided little on this topic | Q1 2025 revisited the uncertainties in oil prices and broader market volatility, with proactive measures such as CapEx reductions and cost savings to offset risks | Renewed emphasis on market uncertainties with proactive responses in capital and operational adjustments, reflecting a cautious stance toward longer‑term price recovery |
-
Free Cash Flow
Q: Breakdown: operating cash vs CapEx reduction?
A: Management detailed that free cash flow improvement is driven by lower chemical project spending (Battleground saving $300M in 2026 with an additional $160M operating cash uplift), midstream contract benefits (rising from $200M to $400M), and about $135M in interest savings, combining for roughly $1B improvement (index ). -
Deleveraging
Q: How will you accelerate debt reduction?
A: They emphasized a disciplined approach to deleveraging, aiming to retire maturities—especially those due in 2026—using proceeds from asset divestitures and organic cash flow, ensuring a shallower debt profile (index ). -
Capital Spending
Q: Will you replace major project CapEx with new projects?
A: Management indicated they do not plan to reinvest the full cost of current projects; instead, normalized spending will be lower next year without additional capital replacement (indexes ). -
Asset Divestitures
Q: Will you dispose of assets to support deleveraging?
A: They noted that any divestitures will be value-based, selling assets when the right opportunity presents itself to accelerate debt reduction, though no specific decisions have been announced (index ). -
US Oil Supply
Q: What is the outlook for U.S. production?
A: Management expects that, aside from the Permian’s current modest growth, overall U.S. production may plateau sooner than previously anticipated, with a peak likely between 2027–2030 (index ). -
Oman Opportunities
Q: What’s attractive about Block 53 and North Oman?
A: They are excited about extending the Block 53 contract, seeing the potential for over 800M barrels additional resources, and highlighted a North Oman gas discovery with resources over 250M barrels oil equivalent that could boost cash flow (index ). -
Low-Carbon Ventures
Q: How are low-carbon projects progressing amid policy changes?
A: The team is advancing STRATOS and direct air capture technologies, noting promising cost improvements and strong market support from voluntary compliance initiatives (index ). -
CapEx & OpEx Efficiency
Q: Detail other cost-saving buckets beyond rig cuts?
A: Management described continued efficiencies across infrastructure, enhanced oil recovery, and general operating expense reductions achieved via optimized supply chains and maintenance practices (index ). -
Production Impact
Q: Will rig reductions hurt future production?
A: They reassured that, through accelerated drilling efficiencies and operational improvements—adding net wells despite a two-rig drop—production remains robust for 2026 and 2027 (index ). -
Midstream Recontracting
Q: Any new midstream contracting adjustments?
A: They confirmed that the previously scheduled recontracting remains unchanged, with expected benefits on oil transportation rates already integrated into guidance (index ). -
EOR Efficiency
Q: How will enhanced oil recovery lower costs?
A: Management noted that improved CO2 management and reduced maintenance requirements have led to lower direct costs and improved margins in their EOR operations (index ). -
Chemicals Outlook
Q: What is the future guidance for chemicals earnings?
A: Despite Q1 disruptions from weather and raw material price hikes, they expect improvements in the second half of 2025 as market conditions stabilize and capacity rationalization progresses (index ).