Occidental (OXY) Q1 2026 Earnings Transcript

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Date

Wednesday, May 6, 2026 at 1 p.m. ET

Call participants

• President and Chief Executive Officer — Vicki Hollub
• Incoming President and Chief Executive Officer — Richard Jackson
• Chief Financial Officer — Sunil Mathew
• Executive Vice President, Operations — Kenneth Dillon

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Takeaways

• Production -- Delivered 1.43 million BOE per day, exceeding the high end of guidance, with domestic performance surpassing midpoint expectations by 33 thousand BOE per day, and partially offset by lower international output from Middle East disruptions and PSC effects.
• Adjusted earnings -- Reported at $1.06 per diluted share, while GAAP earnings reached $3.13 per diluted share, with the variance mainly due to the OxyChem sale gain, derivative losses, and debt retirement premiums.
• Free cash flow -- Generated approximately $1.7 billion before working capital, representing an increase of about 52% from continuing operations, aided by cost and operational efficiency, despite oil prices similar to 2025.
• Cash position -- Ended the quarter with over $3.8 billion in unrestricted cash.
• Debt reduction -- Principal debt reduced to $13.3 billion, down from $20.8 billion at the end of Q3 2025, establishing a new annual interest payment run rate of $845 million, which is $550 million lower than the prior year, according to Mathew.
• Capital spending -- Capital expenditures remained aligned with guidance, totaling within the $5.5 billion to $5.9 billion range, with activity weighted toward the first half of the year.
• Lease operating expense -- Domestic lease operating expense was $7.85 per BOE, achieving a 5% improvement compared to first-quarter guidance, attributed to Gulf of America maintenance and higher production.
• Midstream earnings -- Produced adjusted positive earnings approximately $400 million above the midpoint of guidance, primarily due to gas marketing optimization and higher sulfur prices at Alosund, with some offset from lower sulfur sales.
• Cost savings -- Achieved $2 billion in annual cost savings since 2023, and currently on track to deliver an additional $500 million in oil, gas, and cost reductions in 2026 across well, facility, operating, and transportation costs.
• Guidance updates -- Full-year production guidance midpoint adjusted to 1.44 million BOE per day, and full-year Midstream guidance midpoint raised by $800 million to $1.1 billion due to year-to-date performance.
• Hedging actions -- Initiated oil price collars on 100 thousand barrels per day for March-December 2026, with a $55 WTI floor and an average $76 WTI ceiling, described by Mathew as "an operational decision and not a change in our hedging strategy."
• Board and leadership transition -- Richard Jackson named as incoming President and CEO effective June 1, with Vicki Hollub to continue as Board member; both joining the Board on that date.
• Stratos carbon capture progress -- Phase 2 construction completed, bringing second 250 thousand tons per year module on line; Phase 1 commissioning identified a non-technology related facility issue, under evaluation for repair timeline; no expected impact to annual capital range.
• Exploration and asset optimization -- Announced Bandit discovery in Gulf of America, the third Gulf of America exploration discovery in three years; EOR portfolio further optimized by increasing working interest in core floods, while divesting noncore assets.

Summary

Occidental Petroleum (NYSE:OXY) reported operational outperformance across multiple business lines, highlighted by production above guidance and substantial free cash flow gains even in a flat oil price environment. Capital allocation priorities centered on continued debt reduction, disciplined investment, and maintaining balance sheet strength. Management emphasized that disciplined capital deployment and improved cost structure enable dividend growth and reinvestment options regardless of oil price volatility. Strategic actions include targeted EOR optimizations, execution of midstream marketing opportunities, and selective hedging as a tactical, non-permanent risk management tool. The leadership transition from Hollub to Jackson is set for June 1, with significant emphasis on execution continuity and resource-driven value creation.

• Jackson said, "In 2025, we were top tier in every basin where we operate, delivering at least 10% better new well performance than industry average on a six-month oil-per-lateral-foot basis."
• Mathew designated the near-term cash flow priority as: "to reduce principal debt to $10 billion," highlighting flexibility to pursue net debt reduction, preferred equity redemption, or opportunistic share repurchases after reaching that level.
• Operational constraints at Alosund and PSC terms are forecast to modestly impact Middle East volumes, with anticipated normalization before quarter-end, and partial offset through strong domestic execution.
• Dividend growth is a pivotal commitment, with Mathew stating, "cash flow improvement between preferred dividend and interest payment will be approximately $1.2 billion better compared to 2025," post-preferred redemption.
• Efficiencies, including a targeted 7% new well cost improvement in 2026, are preserving capital guidance within the announced range, despite inflationary pressures in service and supply chain inputs.
• Management communicated that the company's resource base and operational model are purpose-built to deliver "significant cash flow at any price," supporting shareholder returns and opportunistic reinvestment through cyclic markets.

Industry glossary

• PSC (Production Sharing Contract): An oil and gas agreement structure dictating how production volumes and revenue are split between resource holders (often governments) and operators.
• EOR (Enhanced Oil Recovery): A set of techniques, including CO2 injection and waterflooding, used to maximize extraction of oil from mature reservoirs.
• BOE (Barrel of Oil Equivalent): A unit of measure combining oil, natural gas, and other hydrocarbons based on energy content equivalency.
• Waha-to-Gulf Coast spread: The price differential between natural gas sold at the Waha hub (West Texas) and the U.S. Gulf Coast, indicative of pipeline capacity constraints and regional supply-demand imbalances.
• LCV: Refers to "Low Carbon Ventures," Occidental Petroleum's portfolio of carbon management and emissions reduction projects, including direct air capture.

Full Conference Call Transcript

Vicki Hollub: Thank you, and good afternoon, everyone. I want to take a moment to acknowledge the ongoing challenges and uncertainty in the Middle East. First and foremost, I want to thank our frontline employees in the region for their professionalism and focus under very difficult conditions. Their safety remains our top priority, and, thankfully, our teams continue to operate safely with no adverse impacts to our personnel. I also want to recognize the continued support of our partners and host governments in the UAE, Oman, and Qatar. Their collaboration and shared focus on safety and asset integrity remain critical as conditions continue to evolve. Recent developments have driven sharp price movements and increased volatility across global markets.

These dynamics underscore how quickly supply expectations and trade flows can change, and why reliability, resilience, and financial strength matter. While volatility can influence near-term price, long-term value is created by companies that execute consistently across cycles while protecting their people and assets. During this period, Occidental Petroleum Corporation executed as we planned. More importantly, we demonstrated that the strategy we have built over more than a decade can perform well through disruption. Over the past ten years, we have fundamentally transformed Occidental Petroleum Corporation's portfolio to emphasize quality, balance, and durability.

From the beginning, we operated with clear conviction that the world will continue to need oil for decades to come and that the Permian would play a critical role in meeting that demand. That conviction shaped a strategy grounded in subsurface capability and operational excellence to lower full-cycle cost across the portfolio. As we sharpened that focus, we exited noncore assets and redirected capital to competitive positions where our technical capabilities could create the greatest value. We invested consistently in our people, knowing that subsurface expertise and disciplined execution would be key differentiators for Occidental Petroleum Corporation over the long term. As part of that deliberate work, we shifted to a substantially more domestic portfolio.

Today, 83% of our current production and 88% of our total oil and gas resources are in the United States, concentrating our operations in a more stable operating environment. Recent global events reinforce the importance of those decisions. Through this transformation, we built both scale and depth. Since 2015, we more than doubled production, going from 150 thousand BOE per day to over 1.4 million BOE per day. We also more than doubled our reserves and resources, increasing reserves from 2.2 billion BOE to 4.6 billion BOE and total resources from 8 billion BOE to approximately 16.5 billion BOE. These resources are high quality and low cost, with a runway of more than 30 years.

At the same time, we diversified and balanced our mix of assets in the portfolio, with roughly half of our resources in short-cycle, unconventional assets and the other half anchored in lower-decline assets across EOR, the Gulf Of America, Oman, Abu Dhabi, and Algeria. This balance positions us to reduce our base decline to below 20% by the end of the decade and support lower sustaining capital over time. Subsurface and technical excellence have also been core to our success. Over the past decade, we have invested in data acquisition, reservoir characterization, and development design to build a superior understanding of the subsurface.

This enables us to optimize development plans by basin, section, and formation rather than rely on a one-size-fits-all approach. Our teams have delivered, and the data backs it up. Quarter after quarter, we have achieved industry-leading unconventional well performance across every basin in which we operate. Since 2016, we have maintained a reserve replacement ratio above 100%. This capability continues to expand and improve our resource base, unlocking new opportunities across EOR, the Gulf Of America, and our international assets. Looking ahead, this capability will only get stronger as we combine our data and technical foundation with advanced analytics and AI to further optimize development and performance.

Today, with the portfolio, resource base, and capabilities we have built, Occidental Petroleum Corporation is positioned to deliver even greater value for decades to come. In the first quarter of this year, we remained disciplined in our capital allocation, maintaining a steady development program aligned with our 2026 plan. And we continued to prioritize balance sheet strength to preserve flexibility and support sustainable shareholder returns. Our first quarter results reflect that progress. Now I want to take a minute to reflect on the leadership succession plan we announced last week.

As I am sure you saw, I will be retiring as President and CEO of Occidental Petroleum Corporation on June 1, and with the approval of the Board of Directors, Richard Jackson will succeed me as President and CEO. I will continue to serve on Occidental Petroleum Corporation's Board, and Richard will join the Board as well on June 1. I have worked with Richard for almost 20 years and have always been impressed with his drive for excellence, integrity, and ethics. He brings deep experience across our business and a strong track record of execution, making him a great choice for the next phase of our strategy, which includes the development of our extensive portfolio.

The Board and I have full confidence in his leadership as he carries forward the strong performance and foundation we have built at Occidental Petroleum Corporation. As Occidental Petroleum Corporation enters this next phase, I also have great confidence in our innovative leadership team and our employees who will continue to excel at what we do best, and that is oil and gas development and operations. This is our forte. Occidental Petroleum Corporation's future is in excellent hands. With that, I will now turn the call over to Richard to discuss our forward trajectory in more detail.

Richard Jackson: Thank you, Vicki. I appreciate being able to speak with you all today, and I am grateful for the opportunity in front of us at Occidental Petroleum Corporation. It is a privilege to be part of our team, and I am looking forward to my new role to help support and drive value delivery. I want to start by acknowledging the strong foundation that Vicki's leadership has built over the last decade. It has been a remarkable transformation of resources and capability across Occidental Petroleum Corporation. Her vision of transformation combined with a strong drive to deliver has positioned us where we are today.

More personally, all of us at Occidental Petroleum Corporation recognize and appreciate the impact Vicki has had on our team and on each of us individually. Her passion to develop our team and her people-first approach is something that will endure and shape how we grow together in the future. As we look forward, our focus now is on execution and delivery. As Vicki noted, we have a 30-plus year resource base that is high quality, right-sized, and balanced. We believe each of these are important to help drive our results across any cycle. We are operating from a well-understood resource position with significant value upside and are now set for organic development to achieve our objectives.

Our focus starts with continuing to improve our advantaged resource base through sustained improvements in new well performance and base production. Today, we are a leader in U.S. unconventional well performance where much of our future resource development will occur. In 2025, we were top tier in every basin where we operate, delivering at least 10% better new well performance than industry average on a six-month oil-per-lateral-foot basis. We continue to see opportunity for further new well performance improvement across our global assets. Base production is also a key contributor to our results, where we have improved uptime in all operating areas.

I want to give special recognition to our Gulf Of America team whose focus on maintenance and platform reliability has led to strong base production performance, with a record topside uptime of 98% in Q1. Beyond well performance, we will continue to improve our resources through advanced recovery across four differentiated capabilities: U.S. unconventional secondary bench development; expansion of EOR across the portfolio; low-cost development and waterflood projects in the Gulf Of America; and a focused exploration strategy in both our Gulf Of America and our international operating areas. These are all areas where our subsurface capabilities and approach are delivering results and where we have significant opportunities to unlock more value.

Another key focus will be continuing to deliver cost efficiencies. Since 2023, we have delivered $2 billion in annual cost savings through operational efficiencies. And in 2026, we are on track for an additional $500 million in oil and gas cost savings across new well and facility costs, operating costs, and transportation. Looking ahead in the near term, we see a clear path to grow free cash flow and value at any price, with significant upside opportunities. Our value improvement starts with executing from a strong balance sheet, continuing to organically improve our resources, and further driving cost efficiencies.

2026 is an important first step as we are targeting more than $1.2 billion of incremental free cash flow relative to 2025 before the positive impacts of higher prices. As a next step, we are developing plans to deliver significant additional cash flow by 2029 through continued oil and gas cost efficiency and lower decline rates, improvements from midstream and LCV, and lower corporate costs driven from lower debt interest and workforce efficiency. Our forward plan gives us a clear pathway to grow value through any cycle. At lower prices, we will be able to sustain production and grow the dividend.

At higher prices, we have the opportunity to further accelerate value by adding measured reinvestment and share repurchases aligned with our disciplined cash flow priorities. We will also remain leveraged to higher oil prices, enabling us to generate substantial incremental cash during these times. Simply put, advantaged resources, lower cost, and lower decline rates drive lower sustaining capital and durable free cash flow to grow value in any cycle. Now let me turn to our first quarter results and progress. In our Middle East operations, our core focus has been on the safety of our people and operations. We want to thank our teams and partners as we continue to work through the events in the region.

Sunil will talk through these impacts as he covers guidance for the second quarter and total year. We exceeded the high end of guidance in both our Oil & Gas and Midstream & Marketing segments in the first quarter. We delivered 1.426 million BOE per day production, a 21 thousand BOE per day beat against the midpoint of guidance, largely driven by strong new well performance and uptime across our domestic portfolio. We also made strong progress on our U.S. onshore oil and gas cost savings this quarter, where we are delivering top-tier capital efficiency.

We are building on the successful improvements we have made over the last few years, and we are on track to deliver approximately 7% new well cost improvement in our 2026 plan. Additionally, last month, we announced the Bandit discovery in the Gulf Of America. This is the third Gulf Of America exploration discovery we have had in the last three years, highlighting our subsurface capability and the success of our infrastructure-adjacent, capital-efficient exploration approach. I also want to provide an update on Stratos. The construction of Phase 2 is now complete. This is the second 250 thousand tons per year of capacity and includes the final two air contactor trains and updated pellet reactors based on the new design.

We also completed commissioning of the Phase 1 unit operations, which includes operating air contactors and the central processing facility. During commissioning, the technology and process unit operations performed as expected. After these Phase 1 commissioning activities, we identified an issue related to non-process components of the facility unrelated to the technology. We are currently evaluating the repair timeline and assessing the impact on the operation schedule and will provide an update next quarter. While still early in our assessment for repair, we do not expect this to impact capital range for the year. I want to close again by thanking Vicki for her leadership and commitment to Occidental Petroleum Corporation.

Many of us have grown and developed together over the years, and the team and capability we have built is one of the strengths I am most proud to be a part of. We have made important progress, but we also recognize there is more to do. Our focus will be on consistent execution of our priorities to deliver enhanced, durable value for our shareholders, employees, and partners. I will now turn the call over to Sunil to review the financials.

Sunil Mathew: Thank you, Richard. In the first quarter of 2026, we generated adjusted earnings of $1.06 per diluted share, and reported earnings of $3.13 per diluted share. The difference was largely driven by the gain on the OxyChem sale, partially offset by the impact of derivative losses and early debt retirement premiums. Strong operational execution along with higher commodity prices enabled us to generate approximately $1.7 billion of free cash flow before working capital in the first quarter, and we exited the quarter with more than $3.8 billion of unrestricted cash. Even with oil prices roughly in line with 2025, we generated approximately 52% higher free cash flow from continuing operations, demonstrating our continued focus on cost and operational efficiency.

We had higher first-quarter working capital use driven primarily by higher receivables associated with stronger oil prices in March. This was in addition to normal first-quarter items, including semiannual interest payments, annual property taxes, and compensation plan payments. As Vicki and Richard highlighted, our Oil & Gas and Midstream segments delivered exceptional results and exceeded our original expectations. Our production averaged 1.43 million BOE per day in the quarter, exceeding the high end of guidance. Strong base and new well performance in the Permian and Rockies, along with strong uptime in the Gulf Of America, drove domestic outperformance, exceeding the midpoint of guidance by 33 thousand BOE per day.

This was partially offset by lower international production due to Middle East disruptions and PSC impacts due to higher oil prices. We also continue to deliver on our cost efficiency targets. Domestic lease operating expense outperformed at $7.85 per BOE, a 5% improvement compared to our first quarter guidance, due to maintenance schedule optimization in the Gulf Of America and higher production. Our Midstream segment outperformed in the first quarter, generating positive earnings on an adjusted basis of approximately $400 million above the midpoint of guidance. This was driven by gas marketing optimization and higher sulfur prices at Alosund, partially offset by lower sulfur sales.

We also benefited from higher crude marketing margins due to timing impacts of cargo sales and fluctuations in commodity prices, which are offset in mark-to-market. While the duration of these impacts remains uncertain, our performance highlights the ability of our Midstream business to capture value during periods of volatility. We have continued to make significant progress on our deleveraging. We reduced principal debt below the $14.3 billion level announced on our last call, and today, our principal debt stands at $13.3 billion. This brings a go-forward run rate on interest payments to $845 million per year, which is approximately $550 million lower than our interest payment in 2025.

This progress reflects the strength and durability of our free cash flow and our continued commitment to disciplined capital allocation. Our near-term cash flow priority is to reduce principal debt to $10 billion. Reaching this milestone will further strengthen the balance sheet and enhance our financial flexibility across cycles. As discussed on our fourth quarter call, near-term debt maturities remain low, with $450 million due through 2029. This provides meaningful support through periods of market volatility. In the current environment, higher oil prices are generating incremental cash flow that continues to support this deleveraging path.

After we achieve the $10 billion principal debt milestone, we will reassess our cash flow priorities based on the macro environment, including the appropriate balance between building cash on the balance sheet ahead of preferred equity redemption in August 2029, additional principal debt reduction, and opportunistic share repurchases. Any increase in reinvestment would be driven by clear macro conditions and supported by continued cost and operating efficiency. Until these conditions are met, we intend to remain disciplined and balanced in how we deploy incremental cash flow. We are well positioned to increase reinvestment from a highly advantaged resource base at the appropriate time. Let me briefly comment on hedging.

We have not historically been active in hedging as we believe we create shareholder value over the long term by maintaining exposure to commodity prices. That said, we have selectively hedged under specific circumstances. In February, prior to the conflict escalation in the Middle East, we put in place a modest amount of oil hedges using costless collars. At that time, we saw increased downside oil price risk and an opportunity to take measured action to preserve operational momentum and support our 2026 capital plan with a steady development program and without using the balance sheet.

We hedged 100 thousand barrels of oil per day from March through December 2026 with a floor of $55 WTI and a volume-weighted average ceiling of approximately $76 WTI. This was primarily an operational decision and not a change in our hedging strategy. As volatility increased and prices moved higher, we stopped adding new hedges and do not intend to do more. Looking ahead to the second quarter, we expect performance to remain strong, reflecting disciplined execution and durable efficiency gains across our domestic portfolio. Our forward outlook incorporates a few discrete impacts driven primarily by two factors. First, in the Middle East, modest operational constraints at Alosan are expected to impact volumes.

These began in mid-March and are anticipated to normalize before the end of the second quarter. In addition, higher prices under PSC terms will result in lower net production. Second, we executed transactions to further optimize our EOR portfolio, increasing working interest in our core operated floods while divesting scattered noncore fields and associated facilities. While this lowers our EOR production modestly, these actions are free cash flow accretive, shifting the portfolio toward higher-margin, oilier production and meaningfully lower operating costs. Overall, this improves both the quality and durability of our EOR asset base. Strong U.S. onshore execution is expected to partially offset the impact of our EOR portfolio optimization.

In the Permian, unconventional production is expected to increase in the second quarter, supported by higher activity and resilient base performance. In the Rockies, second quarter volumes are expected to be roughly flat excluding prior-period adjustments. In the Gulf Of America, second quarter volumes are expected to decline modestly, reflecting planned facility maintenance and the beginning of tropical weather season. As a result of the Middle East disruptions and strategic EOR actions, we are adjusting the midpoint of full-year production guidance to 1.44 million BOE per day. We are maintaining our previous guidance for domestic lease operating expense, as increasing CO2 cost pressure related to higher oil prices is offset by the benefits of the EOR optimization transactions.

Turning to Midstream, we expect earnings to remain strong in the second quarter, driven by gas marketing optimization opportunities, given the wide Waha-to-Gulf Coast natural gas spread seen quarter to date. Our guidance assumes impacts to sulfur sales in the quarter due to disruption in logistics from the ongoing Middle East conflict. We expect sales to normalize in the second half of the year, recognizing conditions in the region can change quickly. Given strong performance year to date, we are raising the midpoint of full-year Midstream guidance to $1.1 billion, an increase of approximately $800 million from the full-year guidance provided on our last call.

We continue to expect the Waha-to-Gulf Coast spread to narrow later this year as additional pipeline capacity comes online, and we believe we remain well positioned to capture marketing optimization opportunities as they emerge. Capital spending in the first quarter was in line with our 2026 plan, with activity weighted toward the first half of the year. We are maintaining our full-year capital guidance range of $5.5 billion to $5.9 billion, with second quarter capital expected to be higher than the first quarter. Even in a highly dynamic macro environment, our outlook remains strong.

Our short-cycle U.S. onshore portfolio continues to be a key competitive advantage, with low breakevens enabling efficient, stable activity while providing significant capital flexibility in extreme price scenarios. We complement our U.S. unconventional onshore investments with selective lower-decline, mid-cycle investments that reduce sustaining capital and strengthen cash flow durability across price environments. Together with continued balance sheet progress and disciplined capital allocation, we are well positioned for the future, delivering strong, consistent operational results, providing resilience through volatility, and the ability to opportunistically return capital. I will now turn the call back to Vicki.

Vicki Hollub: Thank you, Sunil. Since becoming CEO in 2016, I have worked with our Board and management team to operate with integrity and discipline, and we have invested in technical capabilities that differentiate Occidental Petroleum Corporation. And we built a portfolio designed to endure. The progress we have made reflects that focus and, above all, the expertise and commitment of our people. I again want to thank our leadership team and our employees throughout the company for their performance over the past ten years. They consistently exceeded my expectations with incredible passion, perseverance, and loyalty. I also want to thank our Board for their strong guidance and support.

In addition, I want our owners to know that I very much appreciated your trust and long-term perspective. I found our one-on-one meetings to be very valuable and informative. It has been a privilege to spend my 45-year career at Occidental Petroleum Corporation and to lead this company alongside such talented and dedicated employees. With that, we will be happy to take your questions. As well, Unknown Speaker and Kenneth Dillon will join us today for the Q&A. We will now open the call for questions.

Operator: To ask a question, you may press star then 1 on your touch tone phone. If you are using a speaker phone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. Please limit questions to one primary question and one follow-up. If you have further questions, you may reenter the question queue. At this time, we will pause momentarily to assemble our roster. The first question today comes from Doug Leggate with Wolfe Research. Please go ahead.

Doug Leggate: Thanks. Good afternoon, I think it is, everybody. Vicki, it has been fun watching you reposition the company. I am sure you are not going to miss us, but we are all going to miss you. So congratulations, and good luck to you. Now, Richard, you are taking the seat, obviously, and I think the obvious question to ask is, if anything, how do you see things for Occidental Petroleum Corporation strategically? I do not know if you are able to give your top priorities, but as CEO what does the strategy look like under Richard Jackson's tenure? I have a follow-up, please.

Richard Jackson: Great to be with you, Doug. Appreciate the question. I will start with a couple of perspectives. Near term, there are several things that we are very focused on in terms of delivery, and I think that is a key thing that I will continue to repeat. First, execution of our current program—2026 as we go into 2027—is critical. We came out this year very proud of the program that we put together; I think it really highlights the efficiency that we have in the program and the quality of the resources that we have been talking about.

So we certainly want to spend time with our teams making sure that we have those put together with our partners as we extend those opportunities to our global operations. So focusing on near-term execution is critical. The second piece maybe gets a bit more strategic. One thing we have been working on—and we mentioned it in our script—is free cash flow improvement near term.

This year was a big step with the free cash flow that we identified, but over the next several years, we feel like there are some very clear drivers that, at any price, will significantly improve our cash flow outlook: continuing cost efficiency; our lower decline of production that is coming forward—having the opportunity this year to invest in things like the Gulf waterfloods and even EOR is significantly contributing to lower decline as we go over the next few years; improvements in our Midstream and LCV; and, of course, debt interest as we continue to make great progress on deleveraging. Being very clear on that free cash flow plan is important, and then that turns into a value plan.

For us, it is simple: drive sustainable cash flow up—both free cash flow and cash from operations—and drive our sustaining capital down through lower cost and lower decline. When we do that, we are built to generate significant cash flow at any price. At lower prices, we can continue to grow our dividend; at higher prices, we get the opportunity to further grow our dividend, reinvest in this high-quality resource base, and look at opportunistic share repurchases. We want to be aligned on those plans, articulate the clear drivers, and engage to help our investors understand when and how these improvements show up. The last thing I will say is our people.

We have great people, and these are opportunities to work on growth, succession planning, and how we continue to develop. We have been doing quite a bit of work on workforce—whether that is technologies like AI or relooking at our processes and priorities—to make sure we are focused on the delivery I am describing. Those are the big ones that we will be focused on initially. We look forward to delivering in the near term as well.

Doug Leggate: Well, congratulations to you as well, Richard. It has been fun watching you evolve as well. My follow-up, if you do not mind: I am looking at Slide 20. Sunil, you talked about getting to the $10 billion principal debt milestone. Obviously, your net debt is sitting a little over $11 billion, at least it was before you paid down the May bonds. But the next line item on Slide 20 says ongoing net debt reduction. I really want to understand what that means. Are you prepared to take this balance sheet to a level that essentially prepositions to redeem the prefs when they come due? That would essentially mean zero net debt. What are you signaling? Thank you.

Sunil Mathew: Hi, Doug. Just to put things in context, let me first walk through the progress we have made with respect to deleveraging in the last six months. At the end of Q3 last year, our principal debt was approximately $20.8 billion, and since December, we have paid down $7.5 billion. Today, principal debt is $13.3 billion, which is below the target we set in Q4 last year of $14.3 billion. We want to further strengthen our balance sheet, so near-term focus in terms of cash flow priority is to reduce principal debt to $10 billion. Once we get to the $10 billion of principal debt, we will reassess based on the macro, and we have multiple options.

One is build cash on the balance sheet to redeem the preferred in August 2029, when we can redeem the preferred without the $4 per share return of capital trigger. Like you mentioned, that is the option of reducing net debt and being ready to redeem the preferred in August 2029. The other option is reduce principal debt beyond $10 billion. And the third is opportunistic share repurchases if there is a major dislocation between share price and oil price. We do not have a specific net debt target; ultimately, it is going to depend on the macro, and we will take the appropriate action at that point based on what we believe maximizes shareholder value.

As we also think about potential reinvestment opportunities—once we have clarity on the macro and supported by continued cost and operating efficiency—that is something we would consider because of the portfolio that we have and our operational performance. The last thing I want to highlight is what Richard mentioned about having a sustainable and growing dividend even at low oil price. In 2029, after we have redeemed the preferred—and even if you were to assume no principal debt reduction after $10 billion—the cash flow improvement between preferred dividend and interest payment will be approximately $1.2 billion better compared to 2025. Our current common dividend payment is approximately $1 billion.

That implies a significant opportunity to have a sustainable and growing dividend even at lower oil prices.

Operator: The next question comes from Nitin Kumar with Mizuho. Please go ahead.

Nitin Kumar: Hi. Good afternoon, everyone. Vicki, first of all, congratulations on the milestone, and thanks for your support over the years. Richard, you have been very clear about this new $10 billion target—that is the first priority. A lot of your peers have formulaic return-of-cash programs in place. You are still talking about opportunistic buybacks. What is the hesitation in adopting something like that? Is it because you feel the macro is too volatile, or are there any other reasons for not adopting something like that?

Richard Jackson: Thank you for that. You are right—we have preferred not to have a formula-based approach to our returns. For us, the cash flow priorities lay out how we think about, and then—as I walked through—the value proposition of how we turn what we do into shareholder value. Having flexibility through uncertainties has given us advantages to be able to move and do that. What does not change are the fundamentals of driving the cost efficiency into our program. If you think about how we create additional cash—capital efficiency, lower operating expense, and lower decline—that is where we are fundamentally focused. In terms of our cash flow priorities, bigger picture, dividend—as Sunil mentioned—is where we go.

If we think about share repurchases, we do want to be able to create those opportunities, but as we look to the future, especially as we build an even stronger balance sheet, continuing share repurchases through the cycles gives us opportunity and it even helps our dividend growth as we are able to do that on a consistent basis. So, for us, a lot of what we do focuses on the opportunity to grow the dividend as we put these pieces together.

Nitin Kumar: Thank you for that clarity. And then just, you talked about discipline and maybe staying the course on at least 2026 and not chasing growth. One of your peers talked about increased nonoperated activity in the Delaware Basin. Anything that you are seeing on the ground—you have a big position and a big operation there—in terms of others chasing growth?

Richard Jackson: I think we are managing that. That was one of the uncertainties we had early in terms of our capital range for the year. Our teams have been continuing to work that and have not seen anything that has put us out of our plan. The teams have done, even after the EOR optimization that we talked about, strong work—the core components of our production were strong, with over 9 thousand barrels per day on the total year that we improved. In the Permian, we are growing; Gulf Of America, we are growing. As we have been able to think through the current price environment, within our plan and within our spend, we are seeing time-to-market optimization.

We are seeing opportunities in our operating expense categories, both in Gulf Of America and EOR, to accelerate. These have been the controllables that we have been really focused on—staying within plan for the year.

Operator: The next question comes from Arun Jayaram with JPMorgan. Please go ahead.

Arun Jayaram: Vicki, I also wanted to express my best to you as you move into the next chapter. And Richard, congratulations to you as well. My question is: you are targeting principal debt to reach a $10 billion number this year, given the improvement in strip pricing. How are you thinking about capital allocation post reaching this objective? Richard, you mentioned the potential to shift into some measured reinvestment to deliver a modicum of growth. Walk us through how that pivot into a little bit more reinvestment could look like for Occidental Petroleum Corporation. Is this a 2026 opportunity or more longer dated? And talk to us about between short cycle and long cycle where your thought process is.

Richard Jackson: Appreciate that. This year, we know delivery is critical—it always is—but we really wanted to demonstrate the capital efficiency that we have in the program, and certainly the milestone of $10 billion and what we are able to deliver this year is helping. For reinvestment conditions, a few things: the macro being more clear is important. Obviously, the dollar we spend today does not turn into production—or at least peak production—until next year. The efficiencies that we are delivering this year are largely built on what I call development efficiencies—more wells per pad, longer laterals, more simul-frac. These take integrated development planning to put together.

While we are always looking to improve the program and optimize, these are things that are more difficult to change without impacting that efficiency, so clear macro support before we add is important. Decline rate is another. We like what we are doing this year in terms of investment into EOR and the Gulf waterfloods. Being able to go from mid‑20s toward 20% or less over the next few years in terms of decline rate reduces our sustaining capital by hundreds of millions of dollars, which gives us more headroom for return of capital. At low prices, that is important to establish. When we do feel like reinvestment comes, we want to provide clear outcomes—returns, cash flow timing, decline rate.

We want to demonstrate that everything we do improves the value proposition we talk about. When I say measured, it is taking that approach. With that said, we have an amazing resource base, very balanced, and we have the opportunity to accelerate value over the long term whether we are sustaining or growing production. Getting that balance right between short-cycle and mid-cycle is really important.

Sunil Mathew: I just want to add, in the last quarter we mentioned that for 2027, you can use $5.9 billion as a starting point for sustaining capital. The assumptions behind that $5.9 billion were: U.S. onshore capital assumed to be flat compared to this year, with growth largely driven by capital efficiency—like what we have been demonstrating for the last few years—and the balance between unconventional and conventional to manage base decline and reduce sustaining capital. In Gulf Of America next year, related to the on‑mountain waterflood projects, we will be drilling two injectors, so you will see some increase in Gulf Of America next year. Exploration—we typically participate in three wells with around 30% working interest.

This year, we reduced exploration activity, so that might go back to on average around $150 million, which is what we have done over the last few years. And then you have the roll-off of the LCV capital. So $5.9 billion would be a starting point in terms of sustaining capital. Any increase in reinvestment is largely going to be driven by the macro, but we are well positioned to do it at the appropriate time.

Arun Jayaram: That is super clear. For my follow-up: service companies are talking about pushing some price on rigs, frac, and consumables. You reiterated your CapEx range at $5.5 to $5.9 billion for the full year. Can you talk about these inflationary pressures, and does it change where you expect to land within that range?

Richard Jackson: I will start, but invite Kenneth to add. Our approximately 7% new well cost improvement is largely driven by efficiencies today. We have seen some ups and downs in pricing but are largely holding flat. We work closely with our service partners on performance—addressing their needs in terms of utilization or pricing while ensuring our performance is delivered. We are more levered to the cost of the well, so we have worked with them to continue to drive our cost down. Diesel and other items are playing a role, but not a major role. We do not see inflation impacting our range, and our cost improvement is intact through efficiencies. Kenneth?

Kenneth Dillon: Middle East supply chain has been a huge success during this period. Everyone has worked really well, so we have not had any shortages in production due to material deliveries or costs. All of our vendors have really stuck with us. We have seen increases in some areas offset by others. We still see vendors really interested in market share as opposed to individual line-item wins. Given our scale and mass in each of our locations, that is paying off for us, especially as we concentrate activities on one pad. Utilization becomes really clear for the vendors. Overall, a very good story by supply chain.

Operator: The next question comes from Analyst with Barclays. Please go ahead.

Analyst: Hi, team. I want to share my congratulations to Vicki and Richard as well. My first question is a bigger picture one. Your Slide 3 really laid out what Occidental Petroleum Corporation was focused on in the last ten years versus where the next ten years could look like. You already have built the foundation for the portfolio today. Where do you think is the biggest opportunity to extract value from the current portfolio from here in the next phase—this execution phase? The free cash flow expansion we can clearly see, but where are you most excited—whether that is the resource expansion or from the cost efficiency side?

Richard Jackson: Great question. There is a lot to be excited about. Our advanced recovery—whether in the Gulf Of America with waterfloods, CO2 EOR, our conventional opportunities, and now our unconventional even internationally—will be a distinct advantage over the next ten years. This has been building for some time. It translates to lower sustaining capital and more value for our shareholders. Operational excellence continues—we have a great team that understands how to put things together not only for CapEx but also operating expense and base production. One of the best things we demonstrated over the last year was production uptime in the base. Workforce efficiency is another—being innovative and deploying technology. AI is taking on a larger role across all disciplines.

Partnership does not change—we have done a great job internationally creating win-wins, like our exploration program. Oman is a great example of how we are different in exploration: taking more difficult new reservoirs and growing them to scale near existing facilities. All of these come together to drive the value proposition, starting with the resource—we are in an outstanding position today.

Analyst: That sounds great. Maybe digging a bit more into the base optimization—I appreciate the focus on mitigating decline. Can we get an update on the unconventional EOR projects? What do you need to see to scale these projects, and what are some of the limiting factors longer term?

Richard Jackson: We have the three commercial projects that we talked about starting. Most of this year is getting early construction and long-lead items moving—mainly compression. Those are expected online in 2028. We have continued demo work, including in the Midland Basin around Barnett—we are happy about our primary production and now excited about CO2 EOR there, seeing very good results on our first cycle. Proof points continue on CO2 EOR. Another item in EOR: we have had success with some sidetracks in San Andres on the Central Basin Platform edge and in the Platform. We optimized the program to actually add production this year.

One advantage of the EOR divestment and acquisition optimization is concentrating our working interest where these opportunities lie. Today, EOR is about 100 thousand barrels per day. We are concentrated with the right low-cost structure and advantages to take into both our conventional and unconventional assets.

Operator: The next question comes from Neil Singhvi Mehta with Goldman Sachs. Please go ahead.

Neil Singhvi Mehta: Congratulations, Vicki, and congratulations, Rich, as well. Maybe, Vicki, give you an opportunity to share your perspective. The last ten years have been very volatile for the energy sector. Any perspective on the decade ahead—what leaves you optimistic, and what are the biggest concerns that we as an investment community should be spending time on?

Vicki Hollub: Volatility is going to be with us forever. It has always been volatile and will continue to be. It seems more volatile now because we see the numbers as they change daily. A lot of things have happened in the history of our industry—going back to the Suez Crisis, Yom Kippur, Iranian Revolution, Iran-Iraq war, price wars, and more. When oil prices changed dramatically in real terms was around the PDVSA strike in Venezuela, the Iraq war, Asian growth, and a weaker dollar—that is when WTI prices started being driven up. Through all the volatility, some things are consistent. From January 1974 to today, WTI averaged $76.32 in real prices.

If you look at this century—from 2001 to now—the average real price was $81.67. If you take out the nine years in this century that prices were above $100, that still takes prices to a healthy level at $66.76. We tend to remember the bad prices and times versus when things were okay, and that is why we built our portfolio to last through cycles and be able to create value for our shareholders now and going forward. Two big things are important.

First, pricing—I think if you are built to last and make it with cash flow generation through the cycles and a dividend that you can support in years when prices are lower, you must be prepared to pay the dividend through cycles. Second, in the U.S., we expect that between 2027 and 2030, the U.S. is going to hit a plateau; production will then start to decline. Where we sit today is with a better inventory than any company with respect to our U.S. base.

We will be prepared in the U.S. to help offset that decline because we not only have great assets in the United States, we have the ability—as Richard described—to apply EOR to get more oil out of the reservoirs we have, and we will do that internationally as well. Internationally, we are in places where we have great relationships with the government—Oman, Abu Dhabi, and Algeria. Now that resources are becoming a real issue for some companies—because 80% of the current oil reserves in the world are held by NOCs or governments—trying to get reserves if you do not have a strong and large inventory today is getting more challenging.

Going to international locations where we decided, as part of this transformation, not to go to may offer better contracts in bad places, but that usually does not end with a better result. We believe that for decades to come, oil is going to be needed, and peak supply will occur before peak demand—not just for the United States, but for the world. We are perfectly positioned with where we are today—the capabilities and the portfolio—to help address that.

Neil Singhvi Mehta: Really great perspective, Vicki. The follow-up: you are now long inventory through M&A and good reserve replacement, so the probability of needing to do large M&A is diminished. Richard, I would love your perspective as well. Is that the view the leadership team shares—really an organic story?

Vicki Hollub: We did not go through what we went through to build this portfolio to let it sit there for 30 years. Richard, to you. We are very focused on organic development.

Richard Jackson: What has been done has put us in an outstanding place. Our responsibility now is to extract value from it. We are laser-focused on the fundamentals—capital efficiency, operating efficiency, and subsurface work. There will be opportunities around assets to continue to improve—trades and other things—but we could not be more excited about the balance and what I like to call the right-sized resource base that we have. We work to deliver the most value. We look at a lot of scenarios—we are put together to deliver the most value. That is clearly what we are focused on. We are excited to do that and appreciative of what we have to work with.

Vicki Hollub: Thank you, Neil, for the question and helping us to clarify that. And with that, we are done with the Q&A. Thank you all for joining us and for your questions, and have a great day.

Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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