Occidental Earnings: Strong, Low-Cost Production Evident Across all US Onshore Basins

Key Morningstar Metrics for Occidental Petroleum

• Fair Value Estimate: $63.00
• Morningstar Rating: ★★★★
• Morningstar Economic Moat Rating: None
• Morningstar Uncertainty Rating: Very High

What We Thought of Occidental Petroleum’s Earnings

Occidental Petroleum OXY posted fourth-quarter daily production volumes that marginally exceeded both the midpoint of guidance and our expectations, which we modeled toward the lower end of the prior guide. Yet encouragingly, stronger-than-expected production didn’t come at the expense of higher unit costs. In fact, on a dollar per barrel of oil equivalent basis, cash operating costs (lease operating expenses, transportation costs, and general administrative expenses) of $14.72 were over 6% below what we earmarked.

Furthermore, Oxy’s capital expenditures on upstream operations were in line with expectations, as was the company’s 2025 production guidance (though we did lower our unit cost expectations, which helped our valuation). We have enough confidence to raise our fair value estimate by 2% to $63 per share.

Total daily production reached 1,463 thousand barrels of oil equivalent per day. While production strength was evident across all three hydrocarbons, oil production of 736 thousand barrels per day was better than we hoped. Oil production strength was broad-based across all US onshore basins, with the Permian delivering 3%-4% production growth. The Permian makes up over half of oil production, and unsurprisingly is a low-cost source of hydrocarbons, as it is across the entirety of our US shale coverage.

Even so, Oxy’s six-month cumulative oil production appears to be materially outperforming the industry average. Still, the Permian isn’t the only source of upstream oil strength. In fact, Oxy grew oil production in the Rockies between 8% and 9%, and it is also materially outperforming peers in basins like the DJ and Powder River there.