Q4 2024 Earnings Summary
- Occidental Petroleum is on track to meet its debt reduction targets, with management confident in reaching the net debt target of $15 billion by early 2027, indicating a strong financial position and commitment to deleveraging.
- Significant cost savings in drilling and completion, with a $1 million per well cost reduction already realized in the Midland Basin due to synergies from the CrownRock acquisition, expected to continue into 2025, enhancing operational efficiency and profitability.
- Increasing development in secondary benches in the Permian, which flow into existing facilities, allowing for potential doubling or tripling of returns due to lower costs per barrel, demonstrating strong capital efficiency and higher returns on investment.
- Potential Delay in Debt Reduction Targets: Occidental Petroleum indicated that achieving its $15 billion net debt target may be delayed to the first part of 2027 instead of late 2026. This potential delay could concern investors focused on the company's debt reduction plans.
- Uncertainty Around Asset Monetization Plans: When discussing the monetization of assets like WES, the CEO mentioned the need to consider the tax impact when divesting cash-flow-generating assets. This may indicate uncertainty or challenges in executing asset sales to reduce debt or fund other initiatives.
- Reduction in Rockies Production Due to Divestitures and Ethane Rejection: The 2025 guidance shows lower Rockies volumes, driven by adjusting gas processing to ethane rejection and the announced divestiture of non-operated Rockies interests. Reduced production from these assets could negatively impact earnings from the region.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue (Consolidated) | –4.7% decline from $7.173 billion in Q3 2024 to $6.837 billion in Q4 2024 | Despite segment-level strength in some areas, overall revenue dropped as lower commodity prices and lower sales volumes in the oil & gas and chemical segments offset gains in midstream. This decline reflects the mixed performance from previous quarters, where midstream improvements were not enough to counteract declines observed in other segments. |
Total Revenue (By Business Segments) | Reached $7.448 billion in Q4 2024 (with a strong performance in certain segments) | The segmented view shows robust domestic oil & gas and chemical numbers, while Midstream and Marketing revenue nearly doubled to $832 million, indicating that reallocation of business mix and improved asset sales positively influenced part of overall revenue trends compared to Q3 2024. |
Midstream and Marketing Revenue | +89% increase from $440 million in Q3 2024 to $832 million in Q4 2024 | The dramatic jump is attributed to asset sales gains, higher derivative gains, and improved performance in this segment. This increase contrasts with the prior period’s lower revenue and demonstrates an accelerated realization of gains, likely due to completed transactions and improved contract terms. |
Operating Income | Fell from $1,594 million in Q3 2024 to a negative $169 million in Q4 2024 | A sharp reversal in operating income stems from lower oil and gas margins, increased charges (including impairments or losses on asset sales) and higher financing expenses – notably linked to the CrownRock acquisition – which were not present in the prior period’s strong performance. |
Net Income | Shifted from a profit of $114 million (EPS of $1.04) in Q3 2024 to a loss of $120 million (EPS of –0.32) in Q4 2024 | The net income downturn closely follows the operating income decline, as lower commodity prices and transaction-related losses led to a swing from profitability to a loss. Although segments like Midstream performed well, the overall impact of lower margins in core segments and heightened charges reversed the previous period’s gains. |
Net Change in Cash | Improved to +$364 million in Q4 2024 from a –$102 million change in Q3 2024 | Enhanced operating cash flows and favorable working capital changes, combined with more robust financing inflows, outweighed the significant investing outflows (driven mainly by the CrownRock acquisition) to reverse last quarter’s negative cash change. |
Cash and Cash Equivalents | Increased by 21%, from $1,759 million in Q3 2024 to $2,132 million in Q4 2024 | The marked increase reflects the positive net change in cash in Q4, driven by improved operational results and financing activities, which helped bolster the balance despite heavy capital expenditures for acquisitions seen in the previous period. |
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Debt Reduction Target
Q: Can you reach the $15 billion net debt target by 2026–2027?
A: Vicki Hollub affirmed they still feel comfortable reaching the $15 billion net debt target by early 2027, citing confidence in their cash flow and opportunities to supplement it. -
Gulf of Mexico Outlook
Q: What is the Gulf of Mexico outlook for 2025 and beyond?
A: Ken Dillon expects 2025 production between 141,000 to 150,000 barrels per day, driven by maintenance adding 16,000 barrels per day, drilling of six wells contributing 18,000 to 22,000 barrels per day, and additional activities. Long term, they aim to maintain flat production with Gulf of America 2.0 projects, adding low F&D cost barrels. -
Permian Oil Cut Increase
Q: Is the Permian oil cut expected to be higher in 2025?
A: Richard Jackson confirmed the oil cut is increasing, with the total company oil cut rising to 52% in 2025, driven by growth in unconventional development and benefits from the OxyRock integration in the Midland Basin. Development of secondary benches in the Delaware Basin also contributes to higher oil cut and better returns. -
Midstream Business and WES Monetization
Q: What drives the midstream business, and thoughts on WES monetization?
A: Sunil Mathew outlined that expiring transportation contracts will reduce costs by $200 million in 2025 and $400 million in 2026, partially offset by FERC escalations. Vicki Hollub stated any decision on WES monetization will depend on the value proposition, including tax impacts, as WES provides significant cash flow. -
M&A Strategy
Q: Will you consider boosting international M&A?
A: Vicki Hollub indicated they prefer to grow existing international assets in Algeria, Oman, and Abu Dhabi, focusing on exploration and development opportunities rather than pursuing new international M&A. -
Drilling and Completion Efficiencies
Q: What improvements are expected in drilling and completion efficiencies?
A: Richard Jackson noted they achieved a 12% improvement in drilling and completion costs in 2024 and expect a further 7% improvement in 2025, driven by operational efficiencies and market factors. The Midland Basin saw a $1 million per well cost reduction due to the integration with OxyRock. -
Low Carbon Ventures and STRATOS Start-up
Q: How does the administration change impact the low carbon ventures business?
A: Vicki Hollub stated their strategy remains unchanged, emphasizing the need for CO₂ for energy independence and expressing optimism about the importance of technologies like direct air capture, regardless of administration changes. -
Enhanced Oil Recovery (EOR) Update
Q: Can you provide an update on EOR production levels?
A: Richard Jackson mentioned EOR production remains similar with slight declines over the last three years, but the business continues to deliver strong cash margins and has potential for growth with lower-cost CO₂. -
Rockies Program Outlook
Q: How is the Rockies program evolving in 2025 and beyond?
A: Richard Jackson explained that while activity levels are lower, efficiencies and infrastructure investments—such as the Bronco development with 140 locations at less than $50 breakeven—will provide value-added opportunities over the next few years. -
Midstream Guidance
Q: What are the key drivers for midstream business in 2025?
A: Sunil Mathew highlighted benefits from lower transportation costs due to expiring contracts and higher sulfur prices at Al Hosn, though lower distributions from WES will impact income. The midstream team remains well-positioned to capture value when opportunities arise.
Research analysts covering OCCIDENTAL PETROLEUM CORP /DE/.