Occidental Petroleum Corporation (OXY) Earnings

Management highlights

### Core Value and Strategic Priorities - Creating long-term value is focused on increasing both return on and return of capital through market cycles, centered on four core priorities: executing from a strong balance sheet, organically improving resource base, driving ongoing cost efficiencies, and generating differentiated sustainable cash flow. - The company holds 16.5 billion BOE of total resources, providing a 30+ year low-cost development runway across conventional and unconventional assets; 88% of resources are domestic, complemented by high-quality international assets with strong partnerships and upside. - Advanced resource recovery capabilities are a core competitive advantage, applied across unconventional assets, enhanced oil recovery (EOR), Gulf of America water flood developments, and exploration to increase recovery rates and lower future base decline. A value-based, customized development approach optimized per basin/asset has delivered top-tier capital efficiency for U.S. unconventional operations. ### Balance Sheet and Capital Allocation Progress - Principal debt has been reduced to $11.8 billion, the lowest level since Q2 2019, with accelerated debt reduction cutting annualized interest expenses by ~$630 million compared to 2025. - The board approved an 8% increase to the quarterly dividend (to $0.28 per share) enabled by structural cost savings and deleveraging progress. - Capital allocation priorities are ordered: support a sustainable growing dividend, reach $10 billion principal debt milestone, build cash for August 2029 preferred equity redemption, opportunistic share repurchases, and only measured, efficiency-led value-add growth investment. Share repurchases remain a lower priority until preferred equity is redeemed. ### Sustainable Cash Flow Growth Plan to 2030 - Management targets over $4 billion of annual incremental sustainable cash flow by 2030 (95% annualized growth vs 2025), with ~85% of this improvement achievable even at much lower oil prices, driven by structural operational improvements not price reliance. - Four key drivers of improvement: 1) ongoing cost reduction (over $2 billion in total savings achieved since 2023, on track for 2026 targets with further extensions to 2030); 2) $900 million lower sustaining capital from improved capital efficiency and base decline reduction (from ~25% to 20% by 2030 via advanced recovery projects); 3) additional corporate interest savings from further debt reduction to the $10 billion principal debt milestone, plus savings from preferred equity redemption; 4) $400 million annual low-carbon venture (LCV) capital spending roll-off starting in 2027 as Stratos moves from development to operations. ### Q2 2026 Operational Highlights - Production exceeded the high end of guidance, with the company generating ~$3 billion of free cash flow before working capital, the highest quarterly level since Q3 2022. - Stratos low-carbon facility: non-technology repairs and commissioning of Trains 3 and 4 are progressing, with full plant commissioning expected around the end of 2026 and transition to operations in 2027. - Operational efficiency gains have delivered consistent production beats: Permian operations will cut 3 rigs in Q4 2026 while bringing 15 more wells online than originally planned, with full-year production guidance 7,000 BOE per day higher than initial 2026 guidance.

Guidance

- **Full-year 2026 production:** Raised total company production guidance, as stronger domestic base and new well performance fully offsets modestly lower international volumes from Middle East disruptions. - **Domestic lease operating expense:** Maintained full-year 2026 guidance at $8.10 per BOE; efficiency gains and cost discipline offset higher CO2 cost pressure from higher oil prices. Q3 2026 LOE is guided to $8.75 per BOE due to planned maintenance timing and weather contingencies in the Gulf of America. - **Midstream and Marketing:** Increased full-year 2026 adjusted income guidance by $300 million following record Q2 performance. Q3 2023 income is expected to decline as the Waha to Gulf Coast natural gas spread narrows, but this impact will be largely offset by improved upstream Permian gas price realizations. - **Full-year 2026 capital spending:** Maintained the existing guidance range of $5.5 to $5.9 billion, aligned with the original full-year plan. - **2027 Capital Spending:** Starting baseline guidance is $5.9 billion, which includes mid-cycle projects that reduce long-term base decline and sustaining capital; at this investment level, production is expected to be relatively flat compared to 2026. - **Sustainable cash flow improvement timing:** Over $1.2 billion of improvement vs 2025 is on track to be delivered in 2026; ~$700-800 million of additional improvement vs 2026 is expected in 2027, bringing cumulative progress to ~50% of the $4 billion 2030 target; the remaining 50% will be delivered between 2028 and 2029, including the $700 million annual savings from 2029 preferred equity redemption.

Segment performance

**Oil and Gas (Upstream):** Total company production averaged 1.43 million BOE per day, exceeding guidance midpoint by 23,000 BOE per day. Domestic production outperformance from strong Permian base and new well performance, plus higher Gulf of America uptime, offset lower international volumes from Middle East disruptions. Domestic lease operating expense came in at $7.80 per BOE, a 6% improvement versus guidance. No explicit revenue contribution percentage is provided for this segment in the transcript. **Midstream and Marketing:** Generated adjusted pre-tax earnings of approximately $960 million in Q2 2026, which more than doubled the guidance midpoint and set a new quarterly segment record. The strong result was driven by gas marketing optimization, strong accrued marketing margins from cargo sale timing and commodity price fluctuations, and higher sulfur prices at Allocin (partially offset by lower sulfur sales volume). Full-year 2026 guidance for the segment was increased by $300 million due to strong year-to-date performance. This segment contributed a record share of Q2 pre-tax income, with no explicit percentage of total company revenue provided.

Risks & headwinds

- Fluid geopolitical situation in the Middle East has already caused lower international production volumes, and ongoing volatility raises uncertainty for international operations, sulfur supply chains, and freight costs that impact Allocin sulfur sales realizations. Middle East sulfur supplies account for half of global seaborne exports, so regional instability creates pricing and sales volatility for the midstream segment. - Broad macroeconomic and oil price volatility creates uncertainty for capital allocation decisions, growth investment pacing, and the speed of further debt reduction beyond the $10 billion principal debt milestone. - Stratos low-carbon project development has had delayed startup, with full commissioning pushed to the end of 2026 and operations to 2027. Large-scale carbon capture development relies on partner and market demand pull-through to justify further investment, creating execution and demand risk for additional low-carbon venture projects. - Natural gas market dynamics, including ongoing additions to Permian takeaway capacity, are expected to eliminate the large Waha-Gulf Coast price dislocations that drove strong Q2 2026 midstream results, leading to lower midstream income in the second half of 2026.

Analyst Q&A

• Q: How quickly will the $4 billion 2030 sustainable cash flow improvement be delivered, and what drives oil and gas efficiency gains? /

  A: The program is front-end loaded: over $1.2 billion of improvement vs 2025 will hit in 2026, with another $700-800 million added in 2027, bringing total progress to ~50% of the full target. The remaining half is delivered between 2028-2029, including the $700 million annual savings from the 2029 preferred equity redemption. Oil and gas efficiency gains are a continuation of ongoing CAPEX and OPEX improvement initiatives that have delivered consistent outperformance in 2026.

• Q: What does "efficiency-led growth" mean for Oxy's 2027 and long-term growth strategy? /

  A: Near-term priority remains free cash flow generation and balance sheet strengthening for the most direct value creation. Any growth investment must meet strict criteria: clear positive returns, sustained cost efficiency, strong free cash flow timing, contribution to lower base decline rates, alignment with technology development milestones, and sensitivity to macro volatility. Management modeled a moderate 2% annual production growth scenario and found it would deliver even stronger free cash flow by 2030 than the current baseline no-growth plan, so growth options are being evaluated to accelerate value beyond the baseline.

• Q: What is the priority for cash flow after reaching the $10 billion principal debt milestone, and how does this impact buybacks? /

  A: After hitting the $10 billion milestone, the next focus is further net debt reduction, balanced with building cash to cover the August 2029 preferred equity redemption. If macro conditions are supportive, management will lean toward further principal debt reduction. Large continuous share repurchase programs remain a lower priority until the preferred equity is redeemed, though opportunistic small repurchases may continue. Dividend growth will be measured, tied to progress on deleveraging and sustainable cash flow growth to ensure it can be supported through cycles.

• Q: How do Oxy's advanced recovery technologies lower base decline rates and sustaining capital? /

  A: Oxy is an industry leader in water flooding, which already cut decline rates from 19% to 7% in Oman, and is now being deployed in the Gulf of America: the Marlin King water flood completed in Q2 2026 is already online, with response expected in Q1 2027, and Horn Mountain is on track for injection in H2 2027. For unconventional shale, 10 years of CO2 EOR pilots in the Permian show consistent 45%+ uplift in estimated ultimate recovery, boosting recovery from 10% to 15% (with a target of 20% long-term), which lowers overall field decline rates and reduces the need for incremental new well spending to maintain production.