OXY(OXY) - 2025 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported a profit of $0.65 per diluted share for Q3 2025, generating approximately $1.5 billion in free cash flow before working capital adjustments [22][24] - Operating cash flow reached $3.2 billion, exceeding last year's Q3 performance despite lower WTI prices [8][22] - The principal debt balance was reduced to $20.8 billion after repaying $1.3 billion of debt in the quarter, with a total year-to-date repayment of $3.6 billion [22][28] Business Line Data and Key Metrics Changes - The oil and gas business produced approximately 1.47 million barrels of oil equivalent (BOE) per day, exceeding guidance, with the Permian Basin contributing 800,000 BOE per day, marking the highest quarterly production in Oxy's history [9][22] - The midstream and marketing segment generated positive adjusted earnings of $153 million, surpassing guidance due to strategic gas marketing and higher sulfur prices [23][24] Market Data and Key Metrics Changes - The company shifted its oil and gas production from 50% domestic to 83% domestic, reducing geopolitical risk [5] - The ongoing improvement in portfolio and operational performance was highlighted, with the lowest quarterly lease operating expense per barrel since 2021 at $8.11 per BOE [8][23] Company Strategy and Development Direction - The sale of OxyChem is a pivotal step in the company's transformation, aimed at strengthening the balance sheet and enhancing shareholder returns [4][7] - The company plans to focus capital on Permian unconventional assets and Gulf of Mexico water floods, with an emphasis on low-decline enhanced oil recovery projects [7][30] - The company is targeting a $55-$60 WTI plan for 2026, with flexibility to adapt to market conditions while improving cost efficiency [21][29] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate changing market conditions and emphasized a disciplined approach to capital allocation [20][21] - The company aims to maintain a strong balance sheet with a cash reserve of $3 billion to $4 billion while being opportunistic in share repurchases [54][57] - Management highlighted the importance of operational efficiency and cost management to sustain free cash flow even in challenging oil price environments [20][62] Other Important Information - The company has a development runway of over 30 years, focusing on high-return, short-cycle, and lower decline assets [5][7] - The OxyChem transaction is expected to lower annual interest expenses by more than $350 million and improve credit metrics significantly [28] Q&A Session Summary Question: Capital spending outlook for next year - Management indicated that capital spending for next year could be between $6.3 billion and $6.7 billion, with a larger proportion allocated to U.S. onshore projects for flexibility [34][35] Question: Resource and drilling backlog - Management emphasized the importance of resource characterization over drilling inventory, highlighting advancements in unconventional shale improvements [37][38] Question: CO2 injection applicability on older wells - Management confirmed that CO2 injection techniques can be applied to both older and more recent wells, with significant potential for production uplift [41][42] Question: Return of capital strategy - Management stated that debt reduction will be prioritized before opportunistically repurchasing shares, maintaining a flexible approach to capital allocation [54][57] Question: Exploration focus in the coming years - Management indicated that exploration will remain a lower priority as the company focuses on optimizing existing resources and enhancing recovery techniques [59][60]