OXY(OXY) - 2025 Q4 - Earnings Call Transcript

Financial Performance and Key Metrics - In 2025, the company generated $4.3 billion in free cash flow before working capital, despite a 14% decline in oil prices from 2024 [4][5] - Cash flow from operations increased by 27% year-over-year on a normalized basis, excluding OxyChem [4] - The company repaid $4 billion in debt, reducing principal debt to $15 billion, with a tender offer expected to lower it further to $14.3 billion [5][22] Operational Achievements - The company set a new annual production record of 1.4 million barrels of oil equivalent per day, exceeding guidance while spending $300 million less in capital than planned [6] - Achieved a 107% organic reserves replacement ratio and a 98% all-in reserves replacement ratio at a finding and development cost below the DD&A rate [6][7] - Total resource base now stands at 16.5 billion barrels of oil equivalent, with 84% of this resource breaking even below $50 per barrel [7][8] Business Line Performance - The midstream segment delivered strong results, with adjusted pretax income surpassing guidance by over $500 million, driven by gas marketing optimization and higher sulfur prices [7][21] - The company achieved record safety performance across global operations in 2025, launching a remote operations command center to enhance safety and operational efficiency [7][8] Strategic Direction and Industry Position - The company aims to maintain production through safe operations and deliver a sustainable and growing dividend, with an 8% increase announced for the quarterly dividend [10][23] - Focus on investing in high-return oil and gas projects while advancing mid-cycle projects to reduce sustaining capital requirements over time [10][25] - The company is positioned to drive sustainable free cash flow growth and deliver long-term value to shareholders [4][10] Management Commentary on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to unlock further value through disciplined capital allocation and strong operational performance [20][23] - The company expects to improve free cash flow by more than $1.2 billion in 2026, driven by operational savings and interest savings [23] - Management highlighted the importance of maintaining flexibility in capital spending to adapt to market conditions [25][28] Other Important Information - The company completed the sale of OxyChem, which was a strategic move to strengthen the balance sheet and focus on high-return oil and gas assets [3][5] - The company plans to enter 2026 with a capital spending range of $5.5 billion to $5.9 billion, reflecting a reduction from 2025 [10][25] Q&A Session Summary Question: Can you walk through the lower CapEx guidance relative to the previous quarter? - Management explained that the reduction was due to improved project optimization and cost efficiencies achieved by the teams [34][36] Question: What is the outlook for the Horn Mountain waterflood project? - Management indicated that the project is expected to support a sustaining production profile with lower declines due to ongoing initiatives [41][42] Question: How sustainable are the cost savings into 2027? - Management noted that the structural savings achieved are expected to continue, with a focus on operational efficiencies and well performance [55][59] Question: What is the status of the low-carbon ventures and their impact on cash flow? - Management confirmed that capital for low-carbon ventures will decrease as STRATOS ramps up, and partnerships are anticipated to help move forward with future opportunities [74]