Q2 2025 Occidental Petroleum Corp Earnings Call

Good afternoon and welcome to Occidental's second quarter 2025 earnings conference call. All participants will be in 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 1 on your touchtone phone. To withdraw your question, please press star then 2. Please note, this event is being recorded. I would now like to turn the conference over to Jordan Tanner, Vice President of Investor Relations. Please go ahead.

Thank you, Drew. Good afternoon, everyone, and thank you for participating in Occidental's second quarter 2025 earnings conference call.

On the call with us today are Vicki Hollub, President and Chief Executive Officer; Sunil Mathew, Senior Vice President and Chief Financial Officer; and Richard Jackson, President of Operations, U.S. Onshore Resources and Carbon Management.

And Ken Dylan, 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 the cautionary statement on slide 2 regarding forward-looking statements that will be made on the call this afternoon. We'll also reference a few non-GAAP financial measures today.

Reconciliations to the nearest corresponding gap measure can be found in the schedules to our earnings release and on our website. I'll now turn the call over to Vicky.

Thank you, Jordan, and good afternoon, everyone.

Despite much lower oil prices in the first half of 2025—in fact, WTI averaged $11 per barrel lower in the first half of 2025. For reference, those cash flows we are talking about are cash flows before working capital.

Next, I'd like to congratulate our teams for their ability to optimize our portfolio in a way that strengthened our future development plans while creating divestment opportunities that along with cash flow made it possible for us to repay 7 and a half billion dollars of debt in less than a year from closing, the crown Rock acquisition, that's well ahead of Target.

This equates to almost a 70% reduction of the debt raised for the acquisition.

I am also pleased to report that Stratos has achieved a significant milestone, and we are on track to start capturing CO2 this year. This timing is perfect, as there is growing momentum behind direct capture to generate meaningful value from CO2, enhanced oil recovery, or EOR, in carbon dioxide removal credits, or CDRs.

Before I turn the call over to Snell, I'll now provide a little more detail on operations, debt reduction, and Stratus.

In the second quarter, our oil and gas business produced 1.4 million Boe per day, exceeding the midpoint of our production guidance. This reflects both the operational strength of our teams and the calendar caliber of our diverse portfolio, with outperformance in the Rockies and an uplift to our Oman volumes due to the Mazna.

Contract extension more than offsetting production impacts, primarily due to third-party constraints in the Gulf of Mexico.

Back to cash flow generation, despite much lower oil prices, the teams achieved higher cash flow from operations (CFO) this year versus the same period last year. This is due in part to the additional production from Crown Rock, as well as some production growth from Legacy Oxy.

But important to note is that our oil and gas teams were able to achieve enough operating cost reductions to offset the operating costs associated with the incremental $180,000 Boe per day of production. In other words, despite oil production rates of 1.395 million Boe per day in the first half of this year versus 1.215 million barrels of oil equivalent per day in the first half of 2024, absolute operating costs in those two periods were essentially the same.

I'll highlight some of those activities that have contributed to reductions in our total cost structure.

In our onshore U.S. operations, we announced in our first quarter earnings call $150 million in expected operating cost savings this year, through significant cost reductions.

As I just highlighted, holding absolute cost levels with increased production resulted in a meaningful reduction of per barrel cost to 855 cents.

By integrating automation, building sensors, and using artificial intelligence to prioritize lease operator routes, we have transitioned approximately 40% of our onshore production to Route this operations. In our EOR business, increased field interconnectivity has enabled us to optimize our use of recycled CO2, and advanced subsurface modeling has helped to improve the effectiveness of each molecule we inject, thus enabling us to reduce our purchased CO2 volumes.

In our international operations, we have implemented similar efficiencies to reduce OPEX for the year by an estimated $50 million. I mean, I'm sorry.

We are confident in the sustainability of these cost reductions, as the majority are structural in nature.

Across the Parian, our teams have consistently driven down well costs through enhanced efficiencies, enabling us to reduce the midpoint of our capital guidance by an additional $100 million this quarter.

In the Delaware Basin, drilling times have improved by 20%, bringing well costs below our 2025 target.

Meanwhile, in the Midland Basin, our best-of-the-best workshops have facilitated the rapid sharing of valuable, well-designed, and operational insights across the organization, yielding impressive results.

In the first half of this year, costs for both our Legacy Midland Basin assets and our Crown Rock assets were lower than the expectations we set earlier this year.

Collectively, these advancements have resulted in a 13% reduction in year-to-date Puran, unconventional well cost compared to 2024.

The capital efficiencies, along with continued improvements in recoveries, have yielded robust economics from secondary benches and have helped to sustain year-on-year improvements in our capital intensity.

We also delivered a strong offshore performance.

Of the best at Horn Mountain, and 22 years, and the best at Caesar Tonga in 13 years.

Both are on production now and ramping up through the end of the year.

This is due to the success of our subsurface engineering and the resource potential across our existing fields, which will be enhanced by future water flooding that will unlock significant value going forward.

Our midstream and marketing segment had another impressive quarter, generating positive earnings on an adjusted basis and outperforming the high end of guidance.

This was largely due to improved crude marketing, margins, gas marketing, optimization, and higher sulfur pricing.

We also benefited from new oil transportation contracts that began during the second quarter.

Turning now to the low quarter, low-carbon Ventures business.

In just two years, Groundbreaking Stratos has achieved a significant milestone with Trains 1 and 2. Now moving over to operations.

We've commenced wet commissioning with water circulation, and we are on track to start capturing CO2 this year.

We are immensely proud of the achievements today and the exceptional record of safety performance as we advance towards commercial startup.

As I've shared in the past, we see a missed value from taking a phased approach to Stratus development, even though this is the first-of-its-kind facility at this scale. We're already benefiting from continuous evaluation and learning along the way.

For example, we've been able to capture lessons from commissioning as we move into operations and are incorporating the latest R&D out of our Carbon Engineering Innovation Center into Phase 2.

Not only will this improve the project's economics when the full capacity is online, but it will accelerate the cost down curve for future DE projects.

That's the first quarter. We've signed 2 additional commercial agreements for carbon dioxide removal cells with JP Morgan and Palo Alto Networks.

The majority of volumes through 2030 from Stratos are now contracted, demonstrating the strength of the growing CDR market and the increasing appetite for durable carbon removal technologies.

We also announced an agreement to evaluate a potential joint venture to develop a DAC facility in South Texas with XRG, which is the UAE's investment company in gas chemicals and low-carbon energy solutions.

Agreements like this, along with the U.S. Department of Energy support, highlight Oxy's unique capabilities and signal confidence in DAC as an industrial technology to provide both high-integrity carbon removal and support energy development through enhanced oil recovery in the United States.

The recently enacted $1 big, beautiful bill included a number of provisions that will help Oxy continue to deliver differential value to our shareholders.

One of these is the extension and expansion of the Q4 45. Credit is driven by the recognition of the need to capture CO2 for use in energy, to support U.S. energy security.

The new law levels the playing field between carbon storage and utilization pathways, like Direct Air Capture (DAC), which can and likely will play an important role across global energy supply chains and carbon management.

We believe in carbon capture and DAC, in particular.

Will be instrumental in shaping the future energy landscape.

First captured CO2 can be used for enhanced oil recovery in conventional and shale reservoirs.

We believe this proven technology could recover an additional 50 to 70 billion barrels of oil in the United States, which could extend our energy independence by 10 years.

Second, CO2 is removed from the atmosphere via DAC. This can be used today to address submissions related to products or services specifically CDRs from DAC. It can be paired with any fuel or energy source to provide a low-cost, scalable solution for growing low-carbon intensity fuel or energy markets.

Oxy is uniquely positioned to deliver both our leadership and DAC technology, sequestration, and E operations.

We have over 50 years of experience in carbon management and nearly 3 billion barrels of Permian EOR conventional resources.

Along with extensive CO2 infrastructure in the Permian, we have our expanded U.S. unconventional runway.

And our well-positioned sequestration hubs,

As the largest acreage holder in the Permian, we have the scale, along with the ability to add secondary benches and EOR, to provide lower emissions barrels and further support U.S. energy security.

That's the end of the first quarter. We announced $950 million of additional divestitures, selling non-core, largely non-operated assets and our U.S. onshore business.

This brings our total of announced domestic tourist spending to nearly $4 billion since January of 2024, enabling us to accelerate our debt repayments and improve our balance sheet.

Through our high-grading efforts, we have strengthened our portfolio, identifying assets with limited near-term opportunities and growing our inventory of competitive, high-margin opportunities.

We have seen tremendous success so far across our Crown Rock acreage, realizing significant improvements in well cost and efficiencies, and it keeps getting better.

We expect value creation to expand as we continue to harness cross-operational synergies throughout our permanent operations.

I'll now hand the call over to Sill to review our financial performance and discuss our second-half guidance in more detail.

Thank you. Ricky, in the second quarter, we generated an adjusted profit of $0.39 per diluted share and a reported profit of $0.26 per share.

Investment income, partially offset by positive mark-to-market adjustments.

Strong operational performance and a continued focus on capital. Efficiencies enabled us to generate approximately $700 million in free cash flow before working capital.

Despite lower realized oil prices and high market volatility.

We had a positive working capital change, primarily driven by reductions in commodity prices.

Fewer battery shipments on the water and lower interest payments, which is typical for the second and fourth quarters.

These impacts were partially offset by a $110 million tax payment related to 2024.

After warrant proceeds and debt repayments, we exited the quarter with approximately $2.3 billion of unrestricted cash on the balance sheet.

Our effective tax rate increased in the second quarter due to a shift in the jurisdictional mix of income, driven by lower anticipated full-year oil prices compared to original expectations.

We are guiding to an adjusted effective tax rate of approximately 32% for the third quarter, with our fully effective tax rate in a similar range based on current commodity prices.

Our strong operational and financial performance can largely be attributed to higher volumes across our U.S. onshore and international portfolio, offsetting lower-than-expected production out of the Gulf of Mexico.

New well and basin production outperformance in the Rockies and the net production uplift in Oman from the Muka contract. Extension enabled us to outperform the midpoint of guidance.

Uh, domestic lease operating expense in the second quarter notably outperformed guidance at $0.08555 per barrel.

This outperformance was due in large part to early success in delivering us onshore operating cost improvements, plus timing impacts of offshore production. Engineering work is shifting from the second to the third quarter.

As Wiki shared, this reflects our commitment to achieving operational efficiencies and continuous improvement, with notable savings realized in the premium.

Looking ahead, the outlook for the second half of the year remains strong.

In the third quarter, we expect our total company production range to increase to 1.42 to 1.46 million BOE per day as we sustain operational momentum and anticipate higher volumes in all of our main operating areas.

Though we expect a quarter-on-quarter increase in produced volumes in the Gulf of Mexico, the recent curtailment and the shift in program timing will have lingering effects, prompting a reduction in our offshore second half production guidance.

We are maintaining total company production guidance for the year, as we have a stronger outlook on new well performance across our U.S. onshore assets and an increase in production in Oman from our mmmkay. Now, contract extensions are expected to offset lower volumes in the Gulf of Mexico.

This modified production is expected to slightly reduce annual total company oil cuts.

Generating positive earnings on an adjusted basis of approximately $206 million at about the midpoint of guidance.

This was largely driven by enhanced growth marketing, route marketing margins due to timing impacts of cargo sales, and fluctuations in commodity prices.

We also benefited from gas marketing optimization and higher sulfur prices at Alocen during the quarter.

Given the strong portion of performance, we have raised our Midstream and marketing guidance by $85 million.

We anticipate a more muted third quarter, assuming the VAHI to Gulf Coast natural gas spread continues to narrow. We will be prepared for any marketing optimization opportunities as they arise.

Our second-quarter Oxy, CAM pre-tax income came in below guidance due to weaker-than-anticipated pricing for caustic and PVC.

Demand remained firm, but excess supply in both the global and domestic markets compressed margins.

While the domestic PVC demand is typically strongest in the third quarter, it is not expected to be strong enough to offset the oversupply in the market.

Based on these market conditions, we are lowering Occidental's full-year guidance range to $800 million to $900 million.

Turning now to our capital program.

We expect the remaining 2025 capital spend to be more weighted to the third quarter, due to the timing of oil and gas activities and the construction scheduled for the Battleground expansion.

Continued momentum in operational efficiencies across our Perrine assets has enabled us to further reduce our 2025 capital guidance range by $100 million, without impacting total company production.

Together with the $50 million in operating cost reductions from our international assets and the cost reductions of $350 million announced in May, we now expect $500 million in total reductions relative to the original plan.

In the first quarter earnings call, we highlighted several key non-oil and gas items contributing to incremental pre-tax free cash flow in 2026.

Another impactful driver is the recent passing of the $1 big beautiful bill.

In addition to the benefits, Vicki highlighted from the preservation of 45Q, credits, and EO parities.

The bill will provide significant cash tax benefits to Oxy for the remainder of 2025 and 2026 relative to prior law.

Based on our preliminary assessment, we estimate a potential $700 to $800 million reduction in cash taxes, with roughly 35% expected to be realized in 2025 and the remainder in 2026.

These benefits are primarily due to changes to bonus depreciation, R&D expensing and limitations, or interest deductibles.

Before I close, I would like to provide an update on our strengthening financial position.

As Wiki shared, I put portfolio. High-grading efforts are progressing with the announcement of $950 million of additional diverse teachers. Since the end of the first quarter,

Of this $370 million, we expect the remaining $580 million to close in the third quarter.

This brings the total of announced diverse stitches to nearly $4 billion since the first quarter of 2024.

the success of our Diversity Program to date.

Coupled with warrant proceeds and strong free cash flow, we have been able to be ahead of the schedule on the debt reduction targets outlined when we announced the Crown Rock acquisitions.

In the last 13 months, we repaid approximately $7.5 billion of debt, far exceeding our near-term goal of paying down $4.5 billion of debt within 12 months of closing the CrownRock acquisition.

This reduces annual interest expense by approximately $410 million and also results in a much more manageable debt maturity profile.

We are extremely pleased with the progress of our Diversity Program and the trajectory of our debt reduction plans.

Together with recent step changes in operational efficiency and key non-oil and gas catalysts.

Support a stronger foundation for delivering long-term shareholder value. I will now turn the call back over to Vicky.

Thank you, SEL.

To close, I'd like to reiterate the strength of our Upstream portfolio. I believe we have built Oxy's best-ever portfolio of high-quality, complementary assets. These are our diversified mix of short-cycle, high-return unconventional assets, along with lower decline, solid return conventional reservoirs.

We have the best talent and capabilities in our history. With our team's continued focus on performance and innovation, we are enabling ourselves to deliver outstanding results and to position us for the future. We have an incredible runway in front of us, with over 14 billion barrels in total resources, much of which is well suited for E&P application.

Our industry-leading experience in carbon management and EOR operations is a key differentiator for Oxy and will enable us to unlock additional resources and deliver long-term value for our shareholders.

With that, we'll now open the call for questions.

As Jordan mentioned, Richard Jackson and Ken Dylan are here with us today for the Q&A session.

We will now begin the question-and-answer session. To ask your question, please press star, then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys to withdraw your question.

Please press star. Then 2

Please limit questions to 1 primary question and 1 follow-up. If you have further questions, you may re-enter the question Queue. At this time, we will pause momentarily to assemble our roster.

The first question comes from Arun.

Verum with JP Morgan.

Please go ahead.

Yeah. Good afternoon. I I still I wanted to just follow up on the cash tax rate um or your uh expectations of Tailwinds from the 1, big beautiful. Bill, you mentioned 700 to 800 million of of of Tailwind. Um I think you said 35% in 25 um and the balance and and in 26 uh is that correct and and maybe help us think about what that would translate into a cash tax rate. Um, perhaps in in in 26,

I don't know. Firstly, that is correct. Uh, 35% of the $700 to $800 million benefits will be in 2025, and the balance is going to be in 2026.

So the way we look at it is that just adjusted income effective tax rate will not be impacted by the cash tax benefit. But what you're going to see is an increased deferred tax expense, primarily driven by the acceleration of depreciation and R&D expensing for cash tax purposes. So you can go based on the guidance in terms of the book tax rate, but what you're going to see the difference is in the deferred tax expense increasing due to this benefit.

The next question comes from Doug. Luggage with wolf research. Please go ahead.

Uh, thank you, uh, for taking my question, guys. Um, Vicki, it has been a long time since we, uh, heard much about Mahna. I seem to remember when Ray had that contract signed, gosh, about 20 years ago now. Um, the press has you committing $30 billion over through 2050.

And if I recall, there are significant cost recovery benefits from stepping back up to spending. So I just wonder if you can walk us through what the free cash implications are. We obviously saw the initial step up in production in Q2.

Uh, yeah. Um, I'd say, Doug, that that was an incredible agreement that we made with Oman because the benefits both Oxy and Oman, and allows us the flexibility and possibility to invest over there. Because now the economics will be comparable.

And Ken, did you have anything to add?

Yeah, Captain and dogs can, um,

I can't really comment on specific numbers around the contract, but if you think of that number being both capital and expense, perhaps, and then you look at our equity in the bot, which is less than 50%.

We have produced 640 million barrels to date.

and,

Originally, it was very focused on the steam floods, you know, with all the work we've done there, what we see is multiple stack pays across a very large block and in the north we've been producing delay, it Wells for some time now which are totally different and don't need any any steam. So we see the, the extension is a win-win for oxy and the government and sustainable, and the senil said in the last call, you'll see the numbers rolling through the books over time.

And you'll no doubt that we much prefer those areas that have stacked pay and give you multiple options and, um, lower cost and infrastructure. Ultimately.

Uh, will be limited to 1. Or can I have a follow-up?

Do you have a follow-up?

Okay, thanks. Um, so my follow-up, Vicki, is the billion dollars of non-core asset sales kind of came out of nowhere, especially the sale to Enterprise. So, I wonder if you could take a kind of five-year forward look, or however long you would like to put on it, and say, well, we actually have another X billion dollars of non-core asset sales that kind of augment the free cash flow in terms of the leveraging. What would the scale of that non-core asset bucket look like for potential sales over the last?

Period of time.

Thanks.

Well, you know, another thing that we have is, we have scattered acreage that, uh, goes all the way from here through the Rockies and into, um, even the Virginia's. So we, we have a lot of Acres because of the, the Acquisitions that have been made over time to create what we have today. Uh, a lot of that has not a lot of value, but needs to be cleaned up accumulated and sold. And so at some point we'll sell that those would not be big dollars though. And So currently, I think the team is working on rounding that up and getting that ready for sale.

I apologize. I have Room Durham for his follow-up. Please go ahead.

His line is disconnected. We'll go to the next person. Betty, Jen with Barkley's.

Please go ahead.

Hi, good afternoon. Thank you for taking my questions. Um, Vicki, just giving your comment about OBB's benefit.

On 45Q and the carbon business, I was wondering if that changes your strategic focus around the carbon business, um, towards potentially more point source opportunities for EOR purposes.

Um, just given that you are the utilization, parity, you mentioned.

Yeah, we have, um, we've always been interested in point source capture. In fact, we -- that's what kicked off our, um,

Our desire to get, and then to, um, make the technology of direct air capture better, because since 2008, from about 2008 until we found direct air capture, we were trying to get point source capture. But back then.

Uh the carbon credits for that kind of capture were so low that we couldn't convince uh any industry to to do it. And so now with the parody for, um, CO2 enhanced oil recovery, we we've never given up on that effort. So we've continued that and so we'll continue looking for point source and there's quite a bit of um, emissions that are within pipelines that could be gotten could that could get the CO2 to the Parian. So we'll still be working that. And now what I'm hoping this will do is it'll make um the industrial sources of CO2 more willing to um to work out an arrangement with us.

It's Betty. Just one quick one. This is Richard to add, I would say one of the tailwinds that is helping is natural gas, particularly in power generation, especially in places like the Permian. For us, we see that link not only for the power supply but also as a source of CO2. Additionally, we're able to incorporate carbon capture into some of those installations.

Got it, that makes sense. Um, it's very impactful for that. You are a business for sure. Um, my follow-up actually back to cash taxes. What would be the cash tax saving potential beyond 2027? Do you go back to where it was before or do you continue to expect savings?

Around 90% of it is domestic, and we don't expect any significant change in that mix. The reason we highlighted the '26 estimate is because we have the Battleground Expansion Project that is expected to come online next year. We are expecting more 100% bonus depreciation qualifying assets in '26 compared to '25.

Hey, once again. We'll try again, Arun. Uh, with JP Morgan. Please go ahead with your follow-up questions, sir.

Yeah, thanks for that. Apologies about that. Uh, I forget how to use a phone. Um, a quick question on the Gulf of Mexico. I wanted to get your thoughts on how you think about the production capacity in the Gulf of Mexico trending over a multi-year basis as you implement some of your Gulf of Mexico 2.0 projects. Uh, I know this year was also impacted by a higher degree of turnarounds and maintenance.

Yeah, I think looking forward, the first layer of the builds in as the water floods, which we've talked about briefly before. Having those projects online will reduce the.

Average decline rate for fields leads to flat, low-cost, steady barrels. We have a large number of projects lined up for most of our facilities. If you look in the East, some of the modifications we made recently offshore increase the capacity from our Eastern facilities. I think in the Central Gulf area, as Vicky mentioned at the start of this, we're seeing wells that are coming in with very large EURs. One of them could potentially end up as one of the best Gulf wells we have ever drilled.

So, I think the combination of the subsurface engineering that's been carried out along with the, the Geo signs. I think layered on to what we've done over the last 3 years, in terms of getting equipment, reliability, and availability up means that we're positioned incredibly well going forward for for the the production ramp up.

The next question comes from Nitten Kumar with Mizuho. Please go ahead.

Okay. Um, good afternoon everyone, and thanks for taking my questions. I want to start off on the pretty impressive cost savings. You highlighted both in the Delaware and the Midland, um, capex. So the year was only down about 100 million. So

Give me a budget for next year, but as I think about rolling those savings, could you talk about how Lower 48 spending might trend in 2026, given the efficiencies you’re seeing?

Yeah. Um, I would say that you're you're right that we um, next year we're we will have a reduction in our oxygen spend by about 300 million reduction in LCB by 250 million that along with the efficiencies that, uh, that the onshore team is building and achieving, that could create some opportunities for higher Capital. I'm, you want to comment some on that, Richard sure. No, I appreciate the opportunity that the team's done, astounding job across capital, and operating expense. But, uh, speaking to the capital, um, again, like you said, we've another incremental, 100 million down this quarter. This is on top of the hundred million dollars in the first quarter. So hundred million dollars below our original, uh, original plan. You know, for us, uh, we do see opportunities, uh, going forward to not only sustain that but continue to improve it. We are having, you know, good success. Um really

Continue to the left, uh, on our schedule. We'll, uh, anticipate that to make sure we, uh, have the right bridge into that 2026 activity.

And I'd say the other uh, place that we could shift some Capital would be to the um uh to the lower decline, low f&d high margin water flood projects that Ken is genned up for the Gulf of America.

Well, those are very complicated.

That's a perfect segue to my next question. So I appreciate you taking me up but I was going to follow up on a runs question. Um you know as you put behind the Horn Mountain pipeline issues that that have dogged the um G of America this year. What would be a good steady? Sort of run rate for the Gulf of America. Let's say in 26 and 27 from a production standpoint and could you help us bridge the gap from, you know where we are today between new developments. These water floods Etc uh basic lines and also a return of sort of curtail uh uh constrained production right now.

Hi, good afternoon. Thanks for the question. Um, I think if we maybe did it in reverse order, you know, um, operationally we experienced a mix of things, including pipeline constraints. But as Vicki highlighted, we've also seen incredibly positive results in our wells this year. Um, we modified our pumps in the eastern Gome to handle.

The constraints this work was done successfully in Q2, with really great work by our teams, both onshore and offshore.

Uh, going forward this year, you know, we were, uh,

Part by the later, rival of a stimulation vessel.

which had been doing work for another operator, but these elements have all been built into a ramp-up plan, and we expect a very strong exit rate, as you can see from the numbers.

Terms of next year. Next year's guidance with the Gulf. It's all about optimization and planning.

Over the last few years, as you know, we've really improved the availability in plant uptime.

The next phase of our OPEX optimization is to move to turnarounds every 2 years.

And that multi-year schedule is being poured at the moment, including mapping resources, both internally and externally, and tying to vendors that can provide services over the long term.

So, we're considering starting that next year. So, more information to come on the 26th, presumably of this year.

The next question comes from the old man.

Goldman Sachs, please go ahead.

Yeah, that's it. Thanks so much. I was looking at slide 34. You talk about Advanced, sir, subsurface, characterization and technological improvements and I think a lot of investors are just wondering what inning are we in terms of digital application and the oil field. And how how are you, how are you employing it? And um, do you think it's going to fundamentally change? Uh the industry and our ability to uh to drive volume?

um,

We?

Are so excited.

To start building our AI capabilities. I think we've talked on this um, on the calls. Uh, previously about our AI effort in the, uh, Gulf of America. That that subsurface is so incredibly complex that we do, believe that we can make a big difference with the project that we're working right now and we expect that maybe by the end of this year, we'll be prepared to start uh having the team look at um actually executing some things in the the year to 2 years following. Um so Gulf of Mexico or Gulf of America that's going to be an area that where AI was is really going to be applicable. It's already helping us with the subsurface and um in the Permian and in the other onshore areas in the US, it's also helping with not just the subsurface is helping with operational efficiencies.

uh, so we

We have really put a big effort into making sure that we have actually focused teams. These are teams that are focused on specific areas: one is right now working in operations, the other is working in the Gulf of Mexico. Then we have a group that's addressing the broader challenges of logistics and supply chain, and things like that. So we've put a big effort forth on it, and I do believe it's going to deliver significant results.

We've got a contrast with maturity in a number of these key basins and limited exploration success on the oil side, at least. And so, how do you see the U.S. production profile evolving over the next 5 years?

Well, we've been talking about this a lot. Um, we believe that the U.S. could hit peak production between 2027 and 2030. We've modeled that based on Hubbert curves and the current data that we have. We've taken the model down to look at conventional separate from unconventional and also to look at EOR.

Uh, so we believe that right now, um, there's going to be significant potential and maybe the extension of, um,

Of our US Energy independence by by about 10 years with the development of 50 to 70 billion, barrels of oil developed by uh, and through CO2 eor. So, it's to us incredibly important because energy Independence for the United States, um, really impacts our ability to keep maintain our leverage in the world. So we believe this is um, um, critically important. And for us, it's it's always been a strategy to use CO2 for enhanced oil recovery. We're a company, that's always been known for getting the, the most up barrels out of any Reservoir that we work and CO2 is in our experience over the 50 years that we've been doing it.

Been able to get more than any other technique that we've tried Beyond primary production and water flooding. Uh, so we do believe that out of the uh, estimated 1 and a half trillion barrels of oil. That the United States has in terms of Total Resource in the ground. Currently, only 22% will be recovered unless we can apply CO2. Eor and CO2, eor will get us, double digit increases uh from that amount we believe and again the 50 to 70 billion barrels. So we're working on that, that's our strategy, we're working the technology to get the CO2 because the other challenge is that there's not enough natural naturally occurring CO2 in the United States to support uh the development of that kind of volume.

Thank you, appreciate it.

Hey.

Paul Cheng with Scotia Bank, please go ahead. Uh, thank you. Uh, good morning, Mickey. Well, good afternoon, you guys. Um

Vicky on Oman. Uh, the time sounds, fantastic. And you guys know what to do and that's a lot of opportunity. If the activity level right now is being constrained by your, uh, capital or that if there any other thing is constraining this, the activity level so that you can't do or go uh a bit faster.

Well, what's happened with this contract is certainly going to make that project a lot more competitive. So there's.

There's, uh, no restrictions with respect to what we can consider there. But the main restriction for us, in terms of capital and for the industry itself, is right now we have an oversupplied market. And so there's, uh, there's, in our view, no reason for companies to get too aggressive with growth right now. You just, you're just making the problem worse if we do that. And for us,

We are absolutely determined to get our debt down sooner rather than later. So we are now running at a level where our activity level is designed to ensure that we can maintain our production and that we... we...

Generate the projects that the pace that we need to. So we're not looking for growth as as Richard had said, we're looking for the activities that can help us, continue to optimize reduce our cost and lower our cost structure. And I can tell you that our every 1 of our asset teams, including, uh, Midstream and um, and chemicals works every day to find ways to lower our costs. Because we believe at the end of the day, um, it's going to be the lower cost company uh that that really uh is profitable through all the cycles and the 1 that has the sustainability over time with the portfolio. We have we have the chance to, to do that and

When we're doing it now, we'll continue doing it. But, um, the next step is to get our DAC cost down to the point where the CO2 cost enables us to generate maximum returns from those CO2 floods.

And, um, with respect to Oman in particular, it's ultimately going to be a place where there will be incremental capital. We'll just have to figure out when that's going to be.

Build on what Vicki said. You know, in the same way that us onshore is improving, both in terms of capital efficiency and operational efficiency.

In Block 53, our drilling rigs are now running at their lowest cost per foot and their highest feet per day rates.

Ever.

Our Opex efficiency and artificial lift equipment are running at their highest reliability ever. Our workover rigs are performing at their best level ever, all accomplished with the best safety performance, thanks in great part to our teams in the center. We are also utilizing AI, so we're doing more.

just doing a much smarter, and it's a combination of.

the engineering-related activities, but it's also through the supply chain also,

And we're working supply chain around the world, and we're seeing the effects roll through onshore, effects rolling through offshore, and rolling through inner assets around the world. We see more opportunities to come. So it's a lot more with less also.

Can can I just uh, continue on this subject? Because uh let's assume say several year down the road. You guys already uh restore your balance sheet and that there's a call on oil. And so the oil is needed at that point I trying to understand that how big is the scale of the Oman business can get to. Uh, and what is the constraint Factor at that moment?

They they constrained for us would be um our value proposition because it's not just about growth for us. Um, our value proposition is that we want to deliver a, a growing dividend but at a moderate Pace. We want to uh, we want to um, in the near term lower our debt. But over time over time we want to add share repurchases to our program in addition to investing um appropriately in our organic uh assets. So so we will over time need to increase our our production but it would be at the appropriate time and when there's, um,

When that happens, we'll allocate Capital based on not just what the returns are but how it fits within our our uh long term plan. Because as we said our, our portfolio is diverse. We have the high return shell, the high decline. We have the low return assets like a man and where a man comes in is providing us those lower Decline and

And lower, um, capital cost projects.

Sure.

Just maybe I could add something to that. If you look at the portfolio, $80 million.

What we have is a number of blocks where we already have partners. If you look at the South, it's predominantly heavy oil, but with some lighter oil in the Northwest. It's light oil, and then in the East, it's gas. We mentioned our Bia discovery recently. Some of these blocks we do not operate, so we have opportunities to use partnerships as a way of funding projects also to accelerate things, but without digging into our own capital going forward. So we have a huge range of options with very low option cost at the moment as we work through things.

The next question comes from Kevin McKie with Pickering Energy Partners. Please go ahead.

Hey, good morning. Thanks for taking my question. I wanted to ask about the trajectory of Oxy's Kim income. Do you view the PVC oversupply and price decreases as temporary? And how is that factored into your outlook for a big free cash flow uplift in Kim's next year?

Just 1 for me. Thank you.

In terms of the 26 market, it's going to a large extent depend on the timing of the supply-demand balance.

And, uh, currently, the global supply-demand for PVC and caustic is being burdened by additional Chinese capacity, which, uh, again, is burning the export prices and ultimately burning the domestic prices.

So, if you look at the Chinese exports on the PVC side, it's grown from almost nothing in 2020 to almost 30% currently. The same with caustic; it's been increasing and it's still growing. So,

Also, we believe that the integrated margins between PVC and caustic are close to the variable cost of many international producers, including China.

So, we don't anticipate further sustained declines in margins, but as far as 2026 goes, we believe it is more likely to be what we saw in 2025.

Thank you.

The next question comes from Matt Portillo with TPH. Please go ahead.

Good afternoon. Uh, just a question on the Puran. I'm curious as you guys think about.

The production in the base, and we've seen a little bit of a downtick in the oil cut and a rise in your gas and NGO recovery. I was curious if that is a function of...

the secondary zones being developed, or if you're seeing just better recoveries overall in the gas and NGL side. As you look into the back half of this year, especially given the high tail count in Q2, do you expect that oil cut to stabilize or even improve a bit into the second half of 2025?

Yeah, great. I appreciate the question. Let me walk through a few few pieces of that, I would say, overall um us onshore. So if you're looking at at permi and plus Rockies, uh, as we think about uh not only 25 versus 24 but also second half versus first half, we expect that uh, to to go up a bit with respect to the puran. Uh, we we do expect an increase in the second half of the Year from where we have been in the first half and you, you got it. Exactly right. We have, uh, much more um, you know, secondary benches as a part of our our portfolio. The good news is I think, you know, as part of our our strategy, it's really reusing the infrastructure and so, you know, being able to refill, um, existing, um, you know, production processing equipment can deliver, uh, exceptional returns. And so, that is a big part of it, really. The oil cut is a

is a outcome of that. Well, mix. It's, um, you know, drilling completion efficiencies as we've moved production to the, to the left that can change some of our outlooks. And so, those are really the variables that change it. But um, you know, as you say we do expect it to stabilize and and actually increase uh, in the in the second half of the year.

Great. And then as a follow-up in the Parian, there's been a lot of industry discussion around water handling and disposal in the Basin. As you're a very large player, I'm just curious how you guys are looking at that business. Any constraints that might be on the horizon and any opportunities that you may see to further reduce your costs?

On the waterfront, especially if you developed these secondary zones, which I think in some cases, tend to carry a higher water cut.

Right. No, but great question. A couple aspects to that I'd almost start with where you sit on the secondary benches. I would say, 1 1, key thing, that, um, I think we've done really well, and this is with respect to our wealth performance, which is continued to outpace. Uh, really the industry is is thinking about, um, where well, placement to optimize the oil, not the water. And so, I think we've had great success just from that standpoint starting in the subsurface as you think about, you know, as it comes to surface. Um, you know, obviously having the Partnerships having the long, um, sort of connection, uh, with uh, Western Midstream and others thinking about that, takeaway. Uh, we've tried to be proactive for the last several years, looking at that. And then, the final thing I would notice just the, the technology. I think, you know, we continue to highlight, um, you know, our technology advancements and Recycling and others, and we do think that's going to be a meaningful part of

Uh, the solution going forward. And so Midland Basin has been, you know, uh, a big thing, we've highlighted, but we actually do quite a bit in the Delaware Basin as well. It's another Synergy that Crown Rock brought, um, you know, into our portfolio, uh, as well. So, uh, you're exactly right. It's a very important thing to watch. I think we're well positioned to maintain our cost structure and really, you know, be smart about uh, that water as we go into the future.

The next question comes from Mark, excuse me, Scott Gruber with Citigroup. Please, go ahead.

Conventional oil but but surely you are has been, you know, in the uh, call it evaluation phase. Uh, for for a number of years is shale eor economically viable. Now at at current crude prices and you know with the 45 Q enhancement, is it really just a CO2 availability, constraint that needs to be addressed um and if it is economically viable, just some thoughts on potential timing of a commercial Shale poor project. Thank you.

All right, it's, it's really more about the availability of the CO2. That's my deck is so important for us and that's why going and looking at point source, uh, capture to get it to. The Parian is important. And we're, we're doing that work and, uh, trying to get prepared for it. But we have right now, uh, the, uh, conventional. CO2 floods are taking as much almost as much, CO2 as we, um, can get right now, uh, reasonably for the life of the floods. Uh, so it's going to take a little while for us to, to make the, uh, shell CO2 happen. But it is going to be economical and our teams are getting prepared for, uh, for a project in, um, in the Delaware Basin. And so we'll be putting uh that on within the next um uh probably year to 2 years. Um so we do we have modeled in enough, we've done 4 pilots, we've done the modeling, the pilots were better than the model, so we've uh recalibrated. So we know that it will work. It's just a matter of um,

Getting the incremental CO2 and then noon. We've also tested the some reservoirs in North Oman and CO2 enhanced oil recovery did well there if 2. So that's going to be another place where we'll apply. Hopefully uh Dax Andor net power, net power as you know. Um it not only generates electricity to run the equipment, but it creates CO2 is a side stream pure CO2 that can be used in EOS so we'd like to apply that in um in Oman as well as in the Parian.

Uh it's interesting. It's good to hear. Um, and then turning to a a, you know, a second uh potential back facility in south Texas does the potential JV and contribution from xrg tilt you towards sanctioning that project, if you can work through the details or would you look to, you know, forward, sell a certain percentage of the volumes. Just some thoughts on on the factors that could impact your decision to uh sanction a second facility.

but we, we

Still do we we have doe grants so that as well. So that's going to be helpful. But we do intend to FID and um, the timing is is not set yet, but we will, if I did, uh, we're going to take advantage of some of the Innovations that's being developed right now in carbon engineering to make sure that we get that in the second facility, just like, we're getting in and then Phase 2 of the current facility.

Um, but we, we will FID. We've got a lot of interest in others that want to be a part of that, and a lot of interest in the, in the sales and we we pre-sold, the credits for, uh, Stratos and so we'll pre-sale for for that 1 too. But probably not sign contracts, until we've done the fid.

In the interest of time, this concludes our question and answer session. I would like to turn the conference back over to Vicki Hollub for any closing remarks.

I just want to thank you all for joining our call and for

And have a great day. Bye.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.