Occidental Hits $10B Debt Target on $2.8B Q3 Free Cash Flow

Occidental Petroleum achieved its $10 billion principal debt target in the third quarter of 2026 while generating $2.8 billion of free cash flow, giving the company additional capacity to reduce leverage and pursue its longer-term capital-return priorities. The oil producer retired $10.4 billion of debt during the first nine months of the year and established a new principal debt milestone of $6 billion.

The debt reduction has generated about $740 million in run-rate interest savings compared with 2025, Occidental said. The company plans to continue reducing principal and net debt as it prepares for preferred equity redemption in August 2029. Opportunistic share repurchases are expected to resume only after the balance sheet reaches a net-cash position.

Production and cash flow exceed key benchmarks

Occidental reported third-quarter adjusted diluted earnings of $1.91 per share from continuing operations, compared with reported diluted earnings of $1.61 per share. Cash flow from operations before working capital totaled $4.1 billion, while net capital expenditures were $1.3 billion.

Free cash flow from continuing operations, excluding working-capital movements, reached $2.8 billion. Year-to-date free cash flow was $7.5 billion, the company’s highest level since 2022. Occidental ended September with $3.9 billion of unrestricted cash.

Worldwide production averaged 1.427 million barrels of oil equivalent per day, exceeding the midpoint of the company’s guidance range. Permian production benefited from stronger base performance, while the Rockies recorded stronger base and new-well results as well as nonrecurring volumes from wells operated by others.

Those gains were partly offset by a third-party pipeline outage and extended maintenance in the Gulf of America, where full production was restored in late October. International output was also affected by gas-processing mode changes.

Occidental’s U.S. onshore assets produced 1.093 million boe per day during the quarter, including 812,000 boe per day from the Permian and 281,000 boe per day from the Rockies and other domestic operations. Gulf of America production was 110,000 boe per day, while international operations produced 224,000 boe per day.

Midstream adjusted pre-tax income was $309 million, above the high end of guidance. The outperformance reflected higher sulfur prices and sales volumes at Al Hosn and timing effects related to U.S. Gulf Coast crude cargo sales. These benefits were partly offset by crude-pricing volatility in other marketing activities.

Fourth-quarter production guidance

For the fourth quarter, Occidental expects total production of 1.43 million to 1.47 million boe per day. The forecast includes 820,000 to 840,000 boe per day from the Permian, 271,000 to 277,000 from the Rockies and other assets, 112,000 to 120,000 from the Gulf of America, and 227,000 to 233,000 from international operations.

Domestic operating costs are expected to average $8.65 per boe, with transportation costs of $3.35 per boe. Occidental forecast fourth-quarter net capital expenditures of about $1.3 billion, overhead expense of approximately $650 million and interest expense of about $130 million. Its adjusted effective tax rate from continuing operations is expected to be 21% to 23%.

Midstream pre-tax income is projected at $100 million to $200 million. The outlook incorporates lower sulfur pricing and sales volumes at Al Hosn, expected timing effects from crude export cargoes and narrower natural-gas transportation differentials.

Cost reductions support 2030 cash-flow plan

Occidental expects to generate more than $4 billion of additional annual sustainable cash flow by 2030 compared with 2025, representing an increase of about 95%. The company said approximately 85% of the projected growth could be delivered even at lower commodity prices.

The plan combines oil and gas operating efficiencies, midstream savings, lower Low Carbon Ventures capital requirements, reduced corporate costs and a decline in sustaining capital. Occidental is targeting a reduction in its corporate base production decline rate from about 25% to 20%, which would lower the investment needed to maintain production.

Other milestones include a 12% reduction in U.S. onshore new-well costs, a 10% decrease in domestic lease operating and transportation expenses, and a 10% improvement in workforce efficiency. For 2026, U.S. unconventional well costs remain on track to improve by 7% from 2025, supported by longer laterals, greater use of simultaneous completions and more wells per pad.

Management said future growth would be measured and efficiency-led, with decisions based on returns, costs, free-cash-flow timing, decline rates, technology, portfolio optimization and the commodity-price outlook. Maintaining safe operations, strengthening the balance sheet, sustaining base production and supporting a sustainable and growing dividend remain the company’s foundational cash-flow priorities.

STRATOS advances toward start-up

Occidental completed commissioning for all trains and central processing facilities at its STRATOS direct-air-capture project and received Class VI permits for carbon dioxide sequestration. The facility has captured more than 2,000 tonnes of atmospheric carbon dioxide in pellet form while building inventory.

The company expects calciner recommissioning and full plant start-up activities to begin around year-end, after structural component repairs that it said are unrelated to the process and technology. The updated STRATOS capital cost estimate is $1.8 billion, reflecting project phasing, inflation and anticipated repair expenses. Occidental said its total company capital outlook remains within its full-year 2026 guidance range.

The company also signed fixed-fee carbon dioxide offtake agreements with multiple developers for about 2 million tonnes per year of supply from Delaware Basin gas-processing facilities, with potential expansion to roughly 4 million tonnes. Initial deliveries for Occidental’s Permian enhanced-oil-recovery operations are expected in 2029.

Occidental’s outlook remains exposed to oil and natural-gas prices, operating disruptions, cost changes, project execution, permitting, geopolitical developments and its ability to complete asset monetizations and further debt reduction. Based on expected 2026 production and operating levels, the company estimated that annualized cash flow changes by about $265 million for every $1-per-barrel movement in oil prices and by approximately $105 million for every $0.50-per-MMBtu change in natural-gas prices, before taxes and excluding hedging effects.