Oxy Crushes Debt Target, Unveils $6B Milestone and $2.8B Quarterly Cash Haul

Occidental Petroleum has accelerated its balance-sheet transformation, achieving its $10 billion principal debt milestone well ahead of expectations and immediately setting a new $6 billion target that management says will free up roughly $1 billion in annual interest savings compared with 2025.

The announcement came as Oxy reported third-quarter 2026 adjusted earnings of $1.91 per diluted share and GAAP earnings of $1.61. The gap reflected mark-to-market losses in marketing and crude hedges. Free cash flow for the quarter reached approximately $2.8 billion.

“This was another strong quarter for Oxy,” CEO Richard Jackson told analysts on the call. “A key highlight was achieving our $10 billion principal debt milestone, which is an important step in strengthening our financial position and creating additional capacity to deliver value.”

The company repaid $1.8 billion of principal debt during the quarter, bringing year-to-date repayments to $10.4 billion, and ended the period with $3.9 billion of unrestricted cash.

Key Financial Metrics

MetricQ3 2026Guidance / PriorChangeAdjusted EPS$1.91——GAAP EPS$1.61——Free Cash Flow~$2.8B——Total Production1.43 million BOE/dMidpoint +7,000 BOE/dBeatU.S. Onshore Production—Guidance +20,000 BOE/dBeatDomestic LOE$8.54/BOEBetter than guidanceBeatMidstream & Marketing Adj. Pre-Tax Income$309MOutperformed guidanceBeatPrincipal Debt Repaid (Q3)$1.8B——Unrestricted Cash$3.9B——
Operational Strength Across the Portfolio

Total production averaged 1.43 million barrels of oil equivalent per day, exceeding the midpoint of guidance by 7,000 BOE/d. The beat was driven by U.S. onshore assets, which outperformed by 20,000 BOE/d, more than offsetting lower volumes from the Gulf of America and international operations.

In New Mexico, Oxy achieved record gross operated production of 284,000 BOE/d, up about 23% since January. The Powder River Basin brought a record 27 wells online during the quarter—more than any prior year—driving production growth of over 70% compared with the first quarter, with average net production of 23,000 BOE/d.

Gulf of America production was curtailed by a third-party gas pipeline constraint and maintenance activities, but those volumes were fully restored by late October. International volumes were marginally lower due to a change in gas processing mode to ethane rejection at Dolphin.

Domestic lease operating expense came in at $8.54 per BOE, better than guidance, as continued operating efficiencies offset higher CO2 and diesel costs. Midstream and marketing delivered adjusted pre-tax income of $309 million, driven by stronger sulfur pricing and sales volumes at Al Hosn.

The $6 Billion Question: Debt, Dividends, and Buybacks

The new $6 billion principal debt milestone dominated the analyst Q&A. CFO Sunil Mathew explained the metric behind the target: “At principal debt of $6 billion, the debt-to-EBITDA is around one at $50 WTI, which is what we would like to maintain in the long term. Our balance sheet will be the strongest that we have been in a decade.”

Mathew added that at mid-cycle or current strip prices, the company expects meaningful progress toward the milestone in 2027 and potentially a net cash position within the year. That would open the door to opportunistic share repurchases, which management said it would prefer to deploy countercyclically.

On dividends, Jackson emphasized a framework anchored to sustainable cash flow at $50 WTI. “We look at our cash from operations, we look at our sustaining capital at $50, and we believe that cash flow is what we point to for dividend capability,” he said.

Mathew quantified the capacity: at $6 billion principal debt, interest expense savings alone will be approximately $1 billion lower than 2025. The current annual dividend payout run rate is around $1.1 billion, having risen by roughly $175 million after two 8% increases announced this year. “Interest savings alone will be around $825 million lower than 2025, which provides the opportunity for a sustainable and growing dividend,” Mathew said.

EOR: The Next Resource Frontier

Jackson devoted a significant portion of his prepared remarks to Occidental’s enhanced oil recovery portfolio, which he called a key driver of the company’s plan to add more than $4 billion of annual sustainable cash flow by 2030—an approximate 95% increase compared with 2025.

In conventional EOR, Oxy has identified 2 billion BOE of resource across its 1.2 million-acre Permian Central Basin Platform position. The company has drilled eight conventional grassroots horizontal wells in 2026 and approximately 80 EOR sidetracks year-to-date, adding 10,000 BOE/d. It has identified 500 more sidetrack candidates.

In unconventional EOR, Oxy sees another 2 billion BOE of resource, with the first three commercial projects progressing toward injection by 2029. Pilots have demonstrated approximately 45% oil production uplift.

“Where applied together, we see the potential to increase estimated ultimate recovery by 70%-140% per well,” Jackson said.

The company also signed offtake agreements with two project developers for 2 million metric tons per year of anthropogenic CO2, representing about 15% of its 2026 purchased CO2. Jackson noted that CO2 and power account for roughly 30% of the cost of an EOR barrel, making the deals a meaningful cost reduction. The projects remain subject to final investment decisions expected early next year.

STRATOS Nears Startup

The company’s direct air capture project, STRATOS, remains on track for full plant startup around the end of the year, transitioning to operations in 2027. Oxy has captured over 2,000 metric tons of atmospheric CO2 as part of building its pellet inventory.

Ken Dillon, who leads international oil and gas operations, acknowledged cost increases during the project’s life, with about 60% coming from technology and operational improvements and phasing, and the remainder from inflation, productivity, and quality assurance. He said the impact on levelized cost of capture is about 10%.

Jackson added that operational expenditure improvements of 10% or more are expected, which will more than offset capital increases. The EBITDA outlook remains $90 million-$130 million in 2028.

2027 Outlook: Flat Production, Falling Decline

Looking ahead, Occidental guided fourth-quarter production to 1.43-1.47 million BOE/d, reflecting continued Gulf of America curtailments from the third-party pipeline constraint and hurricane impacts in early October. Excluding temporary downtime, full-year 2026 production guidance is slightly above the prior outlook.

Fourth-quarter capital spending is expected to be approximately $1.3 billion, keeping full-year 2026 capex within the original guidance range. Midstream and marketing adjusted pre-tax income is expected to be approximately $2 billion for the full year.

For 2027, capital spending is planned at approximately $5.9 billion, with relatively flat production on a BOE basis and flat to slight increase in oil volumes. The program includes continued investment in mid-cycle projects—Gulf of America waterfloods, Permian EOR, and select international opportunities—expected to reduce the company’s base decline from approximately 25% to 20% and lower sustaining capital to about $4.5 billion by 2030.

Mathew said the company expects $700 million-$800 million of sustainable cash flow improvement in 2027 relative to 2026, including lower interest expense, roll-off of STRATOS capital, and oil and gas efficiencies. Combined with 2026 progress, that would bring cumulative annual sustainable cash flow improvement to approximately $2 billion by year-end 2027—nearly half of the 2030 objective.

AI Takes Center Stage

On the operational front, Oxy is leaning heavily into artificial intelligence. Approximately 9,000 artificial lift wells—68% of the total—are under AI surveillance with predictive intelligence, supporting up to 7% annual production uplift and reducing failure frequency by 22% compared with 2023. About 50% of that surveillance is autonomous, covering roughly 450,000 BOE/d in the Delaware Basin.

“The AI can work at night, and so it helps accelerate really the engineers’ access to what could be the dysfunctions,” Jackson said.

Dillon added that in Oman, AI now optimizes steam injection across every well and pattern, while in the Gulf of America, AI analyzed 155 large rotating equipment elements and identified that 55% of unplanned failures relate to seawater lift pumps. “That analysis was done in about an hour,” Dillon said. “So, if we fix one bearing, we then reduce our unplanned failures by 55%. It’s shocking the speed that this is flowing through each department.”

Analysts Press on Gulf of America and Capital Returns

Neil Mehta of Goldman Sachs asked how Oxy arrived at the $6 billion target and when it might be reached. Jackson said the milestone builds capacity for the dividend at lower prices while enabling a broader return of capital at mid-cycle. Mathew added that the company expects meaningful progress in 2027 and potentially a net cash position, though he declined to specify timing.

On Gulf of America, Mehta noted production of 110,000 BOE/d in the quarter due to outages and guidance of roughly 115,000 BOE/d in the fourth quarter. He asked whether 125,000 BOE/d was reasonable for 2027. Jackson said capital is shifting toward waterflood projects, which have a delay in production but are important for sustainable cash flow. Dillon added that Horn Mountain water injection wells will take four months to drill and complete at around $100 million each, and exploration may be deferred to 2028. Overall, production could be lower than 2026 due to timing.

Doug Leggate of Wolfe Research pushed on the dividend, invoking the “Steve Chazen school of dividend aristocracy” and pointing to Anadarko’s 80% step change in its dividend in 2021. Jackson reiterated that the framework is based on sustainable cash flow at $50 WTI, with growth measured and efficiency-led. Mathew noted that interest savings alone provide substantial capacity.

Betty Jiang of Barclays asked about the oil trajectory for 2027. Mathew guided to flat production on a BOE basis with $5.9 billion capex, and flat to slight increase in oil. Permian is expected to grow modestly, Rockies flat on BOE with an oilier Powder River Basin offsetting DJ decline, and Gulf of America could be lower due to timing of waterflood injectors. International will be impacted by production-sharing contract effects in Oman and Algeria.

Nitin Kumar of Mizuho asked about the Barnett formation, where Oxy has achieved six-month oil per foot over 12.5 and drilling costs below $750 per foot. Jackson said the company has been appraising the eastern side of the position and will return to the core for remaining wells.

Arun Jayaram of J.P. Morgan asked about exploration, and Dillon highlighted three modest opportunities—Trinidad and Tobago with Exxon, Peru, and Colombia—with mean net unrisked target volumes greater than 2 billion BOE and a post-2030 development timeframe.

Bottom Line

Occidental has transformed its balance sheet faster than expected, and management is now laying out a clear pathway to a net cash position and a growing dividend. The $6 billion debt milestone, combined with the $4 billion sustainable cash flow improvement plan, positions the company to accelerate returns to shareholders while continuing to invest in long-cycle projects like Gulf of America waterfloods and Permian EOR. With $2.8 billion of quarterly free cash flow and a production base that continues to outperform, Oxy appears well-positioned to deliver on its promises—provided commodity prices cooperate.