Occidental Petroleum (NYSE:OXY) reported first-quarter financial results on Wednesday. The transcript from the company’s first-quarter earnings call has been provided below.
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Summary
Occidental Petroleum reported strong financial performance with adjusted earnings of $1.06 per diluted share and free cash flow of $1.7 billion in Q1 2026, bolstered by higher commodity prices and operational efficiency.
Strategic initiatives include a focus on subsurface capability, operational excellence, lower decline rates, and portfolio optimization, with 83% of production now concentrated in the U.S. to ensure stability.
The company is targeting a $10 billion principal debt reduction, with future capital allocation focused on dividend growth, opportunistic share repurchases, and selective reinvestment based on macroeconomic conditions.
Operational highlights include a production increase to over 1.4 million boe per day, a new exploration discovery in the Gulf of America, and completion of the second phase of the Stratos project, despite some non-process component issues.
CEO Vicki Holub announced her retirement, with Richard Jackson succeeding her, emphasizing continuity in strategic direction and execution of existing plans.
Full Transcript
OPERATOR
Good afternoon and welcome to Occidental Petroleum’s first quarter 2026 earnings conference call. All participants will be in a listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today’s presentation there will be an opportunity to ask questions. To ask a question you may press star then one on your touchtone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Babatunde Kolee, Vice President of Investor Relations. Please go ahead.
Babatunde Kole
Thank you, Betsy and good afternoon everyone. Thank you for participating in Occidental’s first quarter 2026 earnings conference call. On the call with us today are Vicki Hollub, President and Chief Executive Officer, Sunil Matthew, Senior Vice President and Chief Financial Officer, Richard Jackson, Senior Vice President and Chief Operating Officer, and Ken Dillon, Senior Vice President and President, International Oil and Gas Operations. This afternoon we will refer to slides available on the Investor section of our website. The presentation includes a cautionary statement on slide 2 regarding forward looking statements that will be made on the call this afternoon. We will also reference a few non GAAP financial measures today. Reconciliations to the nearest corresponding GAAP measure can be found in the schedules to our earnings release and on our website. I will now turn the call over to Vicki.
Vicki Hollub
Thank you Babatunde 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 prices, long term value is created by companies that execute consistently across cycles while protecting their people and assets. During this period, OXY 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 10 years, we have fundamentally transformed Oxy’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 non core 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 to differentiators for OXY 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 build both scale and depth. Since 2015, we more than doubled production, going from 650,000 BOE per day to over 1.4 million per day. We also more than doubled our reserves and resources, increasing reserves from 2.2 to 4.6 billion barrels of oil equivalent and total resources from 8 billion BOE to approximately 16.5 billion. 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 unconditional assets and the other half anchored in lower decline assets across eor, the Gulf of Mexico, 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 site 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 Mexico 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’ve built, OXY 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 continue 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’m sure you saw, I will be retiring as President and CEO of Occidental 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 Oxy’s board and Richard will join the Board as well on June 1st. I’ve worked with Richard for almost 20 years and have always been impressed with his drive for excellence, his 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’ve built at Oxy. As our Oxy 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 development. This is our forte. Oxy’s future is in excellent hands. With that, I’ll now turn the call over to Richard to discuss our forward trajectory in more detail.
Richard Jackson (Senior Vice President and Chief Operating Officer)
Thank you Vicky. I appreciate being able to speak with you all today and I’m grateful for the opportunity in front of us at Oxy. It’s a privilege to be part of our team and I’m 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 Oxy. Her vision of transformation combined with a strong drive to deliver has positioned us where we are today. More personally, all of us at Oxy recognize and appreciate the impact Vickie 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 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’re 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 US 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. Bates 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 two. Beyond well performance, we will continue to improve our resources through advanced recovery across four differentiated capabilities, US Unconventional secondary bench development, expansion of EOR across the portfolio, low cost development and water flood projects in the Gulf of America and focused exploration strategy in both our GOA 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’ve delivered $2 billion in annual cost savings through operational efficiencies and in 2026 we’re 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 pathway 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 for 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 price, enabling us to generate substantial incremental cash during these times. Simply put, advantaged resources, lower costs 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 and gas and midstream and marketing segments. In the first quarter we delivered 1.426 million boe per day production, a 21,000 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 US Onshore oil and gas cost savings this quarter where we are delivering top tier capital efficiency. We’re building on the successful improvements we have made over the last few years and we’re 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 GOA exploration discovery we’ve had in the last three years, highlighting our subsurface capability and success of our infrastructure adjacent capital efficient exploration approach. I also want to provide an update on Stratos Project. The construction of phase two is now complete. This is the second 250,000 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 one 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 one 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. Quarter While still early in our assessment for repair, we do not expect this to impact oxy’s capital range for the year. I want to close again by thanking Vickie for her leadership and commitment to oxy. Many of us have grown and developed together over the years and the team and capability we’ve built is one of the strengths I’m most proud to be a part of. We’ve made important progress, but we also recognize there’s more to do. Our focus will be on consistent execution of our priorities to deliver enhanced durable value for our shareholders shareholders, employees and partners. I’ll now turn the call over to Sunil to review the financials.
Sunil Matthew (Senior Vice President and Chief Financial Officer)
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 oxycam 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 the first quarter of 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 semi annual interest payments, annual property taxes and compensation plan payments. As Vicky and Richard highlighted, our oil and 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 Mexico, drove domestic outperformance exceeding the midpoint of guidance by 33,000 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 …
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