Q3 2025 Occidental Petroleum Corp Earnings Call

Good afternoon and welcome to Occidental's third quarter 2025 earnings conference call.

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I would now like to turn the conference over to Jordan Tanner, Vice President of Investor Relations. Please go ahead.

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

On the call with us today are Vicki Hollub, President and Chief Executive Officer.

Sonno. Matthew, Senior Vice President and Chief Financial Officer.

And Chief Operating Officer.

And Ken Dylan, Senior Vice President and President of International Oil and Gas Operations.

This afternoon, we will refer to sites 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'll also reference a few non-GAAP financial measures today; reconciliation to the nearest corresponding GAAP measure can be found in the schedules to our earnings release and on our website. I'll now turn the call over to Vicki.

Thank you, Jordan, and good afternoon, everyone.

I want to take a moment to recognize Veterans Day and express our deep gratitude to all veterans and their families for their service.

Today, I will address our recently announced sale of Oxygen, outline the strategic rationale, and highlight our third quarter performance.

Richard will provide details on our oil and gas operations, and Sunil will review our third quarter financials, fourth quarter guidance, and considerations for the year ahead.

The sale of oxygen is a pivotal step in our transformation. The decision was driven by the scale, quality, and diversity of the oil and gas portfolio we have built over the last decade.

Since 2015, we have more than doubled our total resource potential and our production.

Going from total resources of 8 billion barrels of oil, equivalent to 16.5 billion barrels of oil, and from production of 650,000 BOE per day to over 1.4 million BOE per day.

We now have a higher quality portfolio, with Oxy's lowest ever geopolitical risk. As we have shifted the percentage of our oil and gas production from 50% domestic to 83% domestic.

And our portfolio has a development Runway of 30 plus years, that includes High return short cycle, higher decline unconventional assets complemented by solid return. Lower decline, mid-cycle development opportunities in our conventional oil and gas assets.

Our substantial oil and gas runway, along with our demonstrated expertise in maximizing resource recovery, created the foundation for accelerating value to our shareholders through this camp.

The proceeds will be used to immediately strengthen our balance sheet, allowing us to significantly de-lever and achieve our principal debt target of less than $15 billion.

This will reinforce our financial resilience and agility to navigate changing market conditions.

With greater financial flexibility, we can broaden our return of capital program and accelerate our shareholder returns.

This will enhance our approach to delivering value to our shareholders by increasing cash returns and continuing to rebalance enterprise value through net debt reduction.

Our strength and financial foundation will enable us to accelerate the development of our industry-leading oil and gas portfolio. By focusing capital on our permanent unconventional assets, including unconventional CO2 floods, along with our Gulf of America water floods, and in the future, our Bakia gas and condensate discovery in Amman.

We're excited about all the opportunities ahead to apply our subsurface expertise for greater resource recovery, and the opportunities to advance our various loan decline enhanced oil recovery projects, particularly our CO2 EOR projects.

Now, turning to the third quarter, our teams delivered another strong quarter of operational performance, generating $3.2 billion in operating cash flow and $1.5 billion in free cash flow before working capital.

Notably, we exceeded last year's third quarter operating cash flow despite WTI prices that were more than ten dollars per barrel lower than the third quarter of this year.

Our team's continued focus on cost management and efficiency improvements also led to our lowest quarterly lease operating expense per barrel across our full oil and gas segment since 2021.

This ongoing improvement in portfolio and operational performance underscores the quality of our resources and the exceptional caliber of our teams.

Who continue to bring forward value by delivering more with less.

In the third quarter, our oil and gas business produced approximately 1.47 million barrels of oil equivalent per day, exceeding the high end of our guidance range.

The premium Basin contributed 800,000 barrels per day, which is the highest quarterly permanent production in Oxy history.

Initially, I'll go over our Gulf of the America assets. We outperformed the high end of guidance, benefiting from favorable weather and achieving the highest uptime in our operating history.

Our Midstream and Marketing segment delivered another incredible quarter, generating positive adjusted earnings and surpassing the high end of guidance.

Our teams expertly navigated market volatility to maximize margins through strategic gas marketing, helping to offset challenging gas price realizations.

Higher sulfur prices in alhos further contributed to the quarter's results.

As shown in our third-quarter results, we remain focused on generating free cash flows at lower oil prices and maintaining flexibility in our capital and development programs to support near- and long-term value creation.

Richard will now provide more details on our third quarter operational highlights.

And how we are positioned to generate stronger returns and higher free cash flow.

Thank you, Vicki. I appreciate the opportunity to share the progress we are making in our operations and how we are positioning our plans going into 2026.

In all parts of our oil and gas business, we are making significant advancements through a focus on three key areas: resource improvement, cost efficiency, and operating ability to generate free cash flow across a range of oil price scenarios.

Today, I will focus on our puran operations, where there have been several meaningful updates across these three areas. I look forward to sharing more from our other teams in future calls.

First, let me begin by highlighting our strong third quarter results. As Vicki noted, domestic production exceeded guidance with strong contributions from all business units in the Permian, Rockies, and Gulf of Mexico.

This strong performance and record results were achieved while sustaining our outlook for lower capital and improved operating costs for the year.

Compared to our original 2025 guidance.

We have reduced capital expenditures by $1 million and operating costs by $170 million. We appreciate our team's continued efforts to exceed expectations.

Importantly, this performance is part of our continued track record of cost efficiency. We recently highlighted that since 2023, we have realized $2 billion in annualized cost savings across our U.S. onshore operations, driven by continuous operational improvements in drilling, completions, and operating expense categories, as well as a value-focused supply chain management approach. We are seeing similar improvements across all of our operating teams and look forward to these efficiencies continuing into 2026.

Building more on Vicki's introductory comments, we have made important progress in our organic oil and gas resource improvement across the portfolio.

Today, I will focus on the Puran, as it plays an essential role in our near- and long-term results.

We have recently expanded our proven resource base by 2.5 billion Boe, which now represents approximately 70% of Oxy's total resources of approximately 16.5 billion Boe.

We achieved this organic resource expansion through subsurface characterization and the application of advanced recovery technologies.

Our deep Purant resources are both low-cost and provide operational flexibility to support free cash flow across a wide range of oil price scenarios when combined with our ongoing cost efficiencies and technical recovery advancements. This places the Purant as a core value driver for Oxy's future.

To start and the Delaware Basin. We continue to be a leader in new well performance across both our primary and secondary benches. Importantly, our secondary bench wells outperform the industry average by 10% when compared to all benches, primary and secondary, in the basin.

In addition to improving productivity, the secondary benches also enable us to efficiently utilize existing infrastructure that was built to support our primary development.

As a result, we have extended our resources through increased secondary bench development while lowering our overall development costs, leading to a 16% lower capital intensity since 2022.

Additionally, over the last few years, we have significantly transformed our position and performance in the Midland Basin. Today, these development projects are incredibly competitive in our Oxy portfolio.

This process began with a base and wide subsurface characterization initiative and targeted development program to more fully understand the resource potential in the basin.

Driven by both continued operational improvements and refined subsurface designs.

Since 2023, our new wells have shown a 22% increase in 6-month cumulative oil production per thousand feet, while the industry average has declined about 5% over the same period.

We have also reduced well costs by 38%. Since 2023, these step changes have created an expanded deep bench opportunity, allowing us to organically add top-tier Barnett resources across 115,000 acres in our Midland and Central Basin platform operating areas. Again, we highlight that our new well performance in the Barnett is outperforming the industry average by 18% since 2020. Another resource opportunity and key differentiator for Oxy is the expansion of enhanced oil recovery into our unconventional shale.

As the leader in conventional CO2 EOR, we are leveraging our decades-long investment and expertise into these assets.

Since 2017, we have advanced unconventional EOR and our Permian and Rockies business units, completing multiple demonstrations where we have achieved positive and consistent results.

These projects have delivered over 45% oil uplift, but we believe that with continued optimization, our commercial projects have the capability to deliver up to 100% production uplift.

We're now moving into commercial development with three initial projects in a current pipeline of 30 more ready for development. These mid-cycle projects offer low decline rates and competitive returns. Our unique and sizable Permian base and CO2 infrastructure give us an advantage as we scale. These developments over time represent a resource opportunity of over 2 billion barrels of oil equivalent (Boe).

We also continue to advance our existing conventional assets, with approximately $2 billion of undeveloped resources and low development costs. These mid-cycle projects are also meaningful as part of our future resources.

Recent improvements and cost structure, including $80 million of our 2025 domestic operating cost, reductions continue to improve the returns and investment priority within our portfolio.

Beyond CO2, we are progressing a suite of complementary recovery technologies, including infield drilling precision, well placement and spacing, next-generation fracturing, and other methods of EOR. We believe our ability to organically expand our low-cost resource base through subsurface characterization, continued cost efficiency, and advanced recovery technologies gives us a competitive advantage to deliver long-term value.

As we look ahead to 2026, we continue to actively manage our operational scenarios for a disciplined approach to resilient free cash flow, even in challenging oil price environments.

Our approach begins with a focus on operational and cost efficiency. Overactivity reductions preserve future free cash flow and maintain optimized activity across our assets. A key part of this approach is working closely with our service company partners to capture supply chain savings, improving value for both parties.

Beyond that, we selectively defer multi-year facilities and construction process projects, allowing us to invest opportunistically in these projects when conditions are more favorable.

We also regularly review and optimize our operating expense activities to enable us to scale and time activities for maximum free cash flow.

Finally, we evaluate capital and development activity adjustments. Always with the focus on achieving the most efficient capital to cash flow outcome at much lower oil prices, capital flexibility becomes critical. We remain committed to investing wisely, preserving optionality, and delivering value through efficient execution.

As we enter 2026, we're targeting a 55 to 60 performance.

Looking ahead, we have a deep portfolio of short-cycle, high-return and mid-cycle, low-decline assets that can deliver strong cash flow. We are focused on sustaining momentum by driving cost efficiency, advancing recovery technologies, and optimizing our operations. Lastly, I'd like to thank all of our teams for their continued performance, especially in safety, as we look at the year strongly. I'll also look forward to working closer with many of you for the first time or again in my new role. Thank you for your time today, and I'll now turn the call over to Sill for the financial discussion.

Thank you, Richard.

In the third quarter, we generated a record reported profit of $0.65 per diluted share.

Focus on capital efficiency enabled us to generate approximately $1.5 billion in free cash flow before working capital.

We are experiencing a negative working capital change, primarily driven by the timing of semi-annual interest payments on our debt and payments within our oil and gas segment.

During the quarter, we repaid $1.3 billion of debt, bringing our total year-to-date debt repayment to $3.6 billion and reducing our principal debt balance to $20.8 billion.

A strong financial performance can largely be attributed to higher volumes across the U.S. portfolio, which more than offset slightly lower-than-expected production from our international assets.

New well and basins production outperformance in the Permian and Rockies, as well as higher uptime and favorable weather in the Gulf of Mexico, enabled us to exceed the high end of guidance across all of our domestic oil and gas assets.

This production outperformance and a continued focus on delivering operational cost efficiencies led to lower domestic lease operating expenses in the quarter, notably outperforming guidance at $0.08 and $0.11 per Boe.

Part of the outperformance also reflected the timing of certain offshore production engineering activities, which shifted into the fourth quarter.

In the Midstream and Marketing segment, we continue to capture value through optimizing our gas marketing positions out of the Permian Basin.

and higher, sulfur pricing in Alosim.

Both were significant catalysts in the segment, generating positive earnings on an adjusted basis of $1.1 billion and $153 million, about the midpoint of guidance.

Looking ahead, we are increasing our full-year guidance for our oil and gas and midstream and marketing segments as a result of our strong third quarter outperformance and improved expectations for the fourth quarter.

In oil and gas, we are racing our fourth quarter. Total company production guidance from last quarter's implied guidance is to a midpoint of 1.46 million Boe per day.

This is driven by the expectation for continued strong performance across all three domestic assets, which should more than offset impacts from a scheduled turnaround at Halos in the fourth quarter.

Other midstream and marketing pre-tax income guidance assumes that our teams will capture gas marketing optimization benefits from the wider permanent Gulf Coast spread observed already in the fourth quarter.

We expect fully a pre-tax income from the segment to come in approximately $400 million above our general guidance, largely due to those gas marketing opportunities and stronger than anticipated sulfur pricing from alum.

Due to continued softness in the global chlorovinyl market, our third quarter oxychem tax income came in below guidance at $197 million.

We are guiding to $140 million for the next full quarter.

Beginning in the fourth quarter, oxygen will be classified as discontinued operations.

We are in the process of evaluating the potential impact of Oxygen's classification on our fourth quarter adjusted effective tax rate, and we will provide a further update early next year.

Total company capital spend, net of non-controlling interest, of approximately $1.7 billion was in line with our expectations for the third quarter. We expect to remain within our previously guided range for 2025 capital.

As we shed the oxygen transaction marks, this is a significant milestone for our company as it will strengthen our financial position and enhance our ability to return capital to our shareholders.

the all cash nature of this transaction will enable us to accelerate our debt reduction efforts and Achieve our post Crown, Rock, principal debt Target of less than 15 billion dollars

Of the roughly 8 billion dollars in transaction. Net proceeds, we plan to use approximately 6.5 billion to reduce debt.

Uh initial focus is on the 4 billion dollars of debt maturing in the next 3 years.

Ensuring in 2026, which we can call it part, and for the remaining $2.7 billion, we may largely use make-whole provisions to ensure certainty.

Beyond that, we will be opportunistic, taking into consideration redemption prices and the impact on our maturity profile.

This will meaningfully improve our credit metrics and is expected to lower our annual interest expense by more than $350 million, while providing a very manageable near-term debt maturity schedule.

The remaining 1.5 billion. In net proceeds, will go to cash on the balance sheet.

By significantly lowering our debt burden and building cash on hand, we will create a stronger, more resilient balance sheet.

With the achievement of our post. Crown Rock, principal debt Target

Oxy will be positioned to broaden our return of capital program and adopt a more flexible framework for delivering value to our shareholders.

We will be opportunistic with the share repurchase program.

Our decisions and priorities will be driven by a range of factors, including the macro conditions, commodity prices, market valuations relative to Oxy's intrinsic value, cash on the balance sheet, and the timeline to August 2029.

We plan to resume the redemption of the preferred in August 2029, when the preferred equity becomes scalable with a lower redemption premium and does not have the $4 per share return of capital trigger.

Now, I would like to share how we are approaching our Capital program for 2026.

Last quarter, we discussed the potential to allocate capital to mid-cycle conventional oil lessons.

We are planning to increase investment in the Gulf of America water flood projects and in Oman, given both projects, high oil prices, waiting and favorable based decline rates combined with the enhanced economics in Oman following a contract extension.

Approximately an additional $20,050 million could be allocated to these areas as capital rolls off in the ILCB portfolio.

Considering the recent commodity prices, volatility, and oil market outlook, we are evaluating multiple capital scenarios across our U.S. onshore portfolio.

With the oxygen sale, a U.S. onshore capital will comprise an even greater proportion of the total company investment program.

Which provides flexibility should the macro environment deteriorate?

As Richard mentioned, we have an incredible runway of high-quality oil and gas opportunities and sustained momentum in delivering value through greater capital efficiency.

We plan to reallocate up to 400 million dollars to these short cycle, High return projects primarily in the Perrine.

Any additional allocation of capital next year will be undertaken in a thoughtful manner with an eye to the oil market given oversupply concerns.

The Quantum of that reallocation will depend on the macroeconomic environment, and we plan to share more on our 2026 capital budget. During our fourth quarter, call pending board approval. I will now turn the call over to Wicca for closing remarks.

Thank you, soil. As we highlighted, the oxygen cell represents more than just a business decision and marks the final major milestone in the strategic transformation that we've been pursuing for years.

With this step, we're accelerating opportunities to extend our advantaged, low-cost resource position and leveraging integrated technologies to deliver differentiated recovery and superior value.

We are confident that these actions will further strengthen our competitive position.

With that, we'll now open the call for questions. As Jordan mentioned, Dylan is joining us today for the Q&A session.

Thank you. We will now begin the question-and-answer session.

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At this time, we will pause momentarily to assemble our roster.

And today's first question comes from Doug Legate with Wolf Research. Please go ahead.

I think is, uh, yeah, good afternoon. I'm trying to put them in New York. I was trying to figure out what time zone. I was in Vicky. I um, maybe the first question is for senil, actually, is, is on the capitol guidance. That that you just talked about there, the soft Outlook, if I'm doing the math correctly. So you dropped about 300 million,

You know, from the beginning of this year. So you're 72.

But 900 was chemicals, as I understand it for next year and I believe this year was 450 on Dax. So that's about 1.35. I'm trying to kind of get to the range for next year. So if you add back to 650, you talked about, are we in the ballpark to think that spending next year? Should be done about 700 million dollars in on your base on your remarks. And now,

Yes. So Doug, uh, you're right on the way you're approaching it. Like you said, midpoint, uh, for capex guidance for this year, 7.2 billion.

Uh, chemicals is $900 million. So we back out that you are at $6.3 billion. Uh, like I mentioned, we are going to increase CapEx in the Gulf of America, waterfront projects, and Oman.

Uh, which is around 250 million, which will be largely offset by the role of capital in our low carbon Venture portfolio. So, you're back to the 6.3 billion and, uh, with respect to us onshore, uh, like I mentioned, in my prepared remarks, we are looking at potentially investing up to 400 million. So so you start with 6.3 and, uh, it could be, you know, somewhere between 6.3

To $6.7 billion, uh, depending on the macro environment. And the other thing I would highlight is, like I said, uh, you know, with this increase in spending in U.S. onshore, a proportion of U.S. onshore capex as a percentage of the total capex will increase. What that means is a lot more flexibility. Be if the macro is, uh, going to become more unfavorable. And, uh, so that is one important thing. And I think, like Richard said, uh, you know, in his prepared remarks, the way we think about capital allocation for U.S. onshore, if you were to adjust our capital program, I mean, first, we look at our, uh, efficiency, both operating efficiency and what we are seeing in the market. Second is potentially how we can defer some of our facilities spending. And the last thing would be in terms of activity. So, I think from a capital point of view, you're looking at somewhere between $6.3 billion to $6.7 billion, with a larger proportion of U.S. onshore capex, where we have a lot more flexibility.

The streets obviously very smart, so, because it's sitting at 6 and a half right now. So, that's, that's really helpful. Thank you for that. Um, my, my follow-up, if I may is, is for Richard, it'll take advantage and also wish him. Congratulations for your new role. Richard, I'm I'm, I'm thinking a permanent field trip. Might be on the uh, in the offing but uh, we'll take that 1 off line. Um, my my question is, you did say you've added 2 and a half billion barrels of resource. Mostly in the premium, um, you've obviously got it looks like sector leading. Drilling?

Our last 4 cost now. And uh, and clearly the break evens in the barn in the uh the the burnout are coming down. So my my question is you haven't given us a resource but uh drilling backlog or a break even for those sustaining capital for the portfolio. So I wonder if you could address those, where does this leave your drilling inventory and what would you say is the sustaining Capital break even at this point for the portfolio?

Hey, Doug, this is Richard great. Great to hear from you and, and appreciate that for sure. Always enjoy our our peryam visits. Um, let me start, uh, just sort of addressing generally why resources? I think, you know, uh, for a long time. We've been trying to characterize our strong unconventional, uh, resource base. And and the way to do that was to talk about drilling inventory and think about breaking things against that. I think as we look forward, you know, as we're explaining today, we're so much more than that. Uh, we we have our, uh, you know, big opportunities on our conventional assets and and just felt like, uh, moving to more of a, of a resource explanation was a better representation of of what we are in the value that we have. If we sort of break down that 2.5 billion Barrel Permian, uh add you know, most of that much of that is coming from continued unconventional.

Every business, you know, for a long time and so, you know, much of that continues and that would be a direct translation to the, to the drilling inventory that we've disclosed previously, but the other piece is, is the eor. And, you know, and we, we highlight the, the, uh, unconventionally or um, today, but, but also across our conventional position. And so in total, we just felt like that was the right way to think about it. Um, in terms of the, um, Barnett, you know, the obviously big piece of that, uh, you know, becoming competitive in our portfolio is, is the drilling cost Improvement and just very pleased with the progress, uh, by the teams, uh, in the middle and based on what they've been able to do. But we're seeing that across all of our basins, I think we highlight in 1 of the slides about a 14% total reduction in well cost all of our unconventional drilling same in the Rockies. So um so in general that's improving our resource base and so I think going forward to the break even you know we'll continue

To characterize, uh, that resource base with a break, even. Uh, I think we've talked about our, our projects for the year, our annual program. Uh, are all less than 40 dollar break even and so um, on a project basis that we expect that to continue and like we've shown in the past it's always improving the resource um you know, expanding it. Yes. But improving is the most important uh component uh of it. And cost is a big part of that.

Thank you. And our next question today comes from Maroon Junior with JP Morgan. Please go ahead.

Yeah, good afternoon. Uh, my first question is maybe on slide 16. Um, perhaps for Richard, I was wondering if you could maybe give us more details on the demonstration pilot. Um looks like in this example your highlighting, you know, CO2 injection around 3 years after um you know initial production from from the, from the well, but I was wondering if you could just talk about the applicability of this on older Wells, that may have been completed. You know, 6, 7 years ago, and maybe just a little bit about about the math around the 2 billion, Boe resource opportunity that would be helpful.

Yeah, great, appreciate that. That question a lot. The example, we're highlighting on that slide uh in in the Midland Basin. Uh it was with with CO2. Uh, the these Wells were originally online in about mid 2015, so your your questions perfect. Um, while they apply to Historic Wells, like we're showing here, they also apply to more recent vintage as well and I'll walk through that math in a second but just a little bit on that pilate. Again, that's about a 45% uplift. We had 5 um injection cycles that were completed over those 3 years. Uh we stopped and saw this

45% uplift.

If we modeled out continued cycles of CO2 injection, this is where we get to the 60 and even 100% production uplift and so that um you know, that that's where that comes from. If we look at the 2 billion Barrel, if you think about, you know, recovery factors in the, you know, 8 to 12% with unconventional,

If you look at this 45 to 100% uplift, now you're talking about reaching, uh, recovery factors in the 15% so that, you know, is like a little bit more for the oil and perhaps a little bit less for the gas in a, in a oil reservoir. Um, but if you look across, you know, the Drizzt unconventional acreage where we have this opportunity, that's how we began to account for the 2 billion barrels of unconventional e or uh, you know, as I mentioned. And um, you know, we we've got 3 projects that uh, will be uh, working into commercial development over the next couple of years. Those are, uh, really spread between New Mexico, Texas, Delaware, and the Midland Basin. So again, it's it's sort of uh, an approach that can be applied to multiple areas and then, you know, based on these, this technical work, we have another 30 development ready projects across these basins, that will be be ready.

To develop. And so, you know, again, as we think about the role of mid-cycle low decline cash flow in our Outlook, uh, we believe these can be, uh, very meaningful as we look. Uh, look forward into future years.

These water flood projects can do to your productive capacity, uh, in the Gulf of America. Maybe just thoughts on on on Gulf, um, output. As we think about, you know, 2026,

All right. Uh good afternoon. Um we now have to water flood projects FID in Goa.

These will result in improved, recoveries of nearly 150 million Boe and significant reductions in Decline rates over time.

Potentially, these could lead to good declines going from 20% today to 10% and 2030 and 7% by 2035. So a significant impact on the base,

first up is that the king field, which is a tieback to Marlin. It'll be a dump flood, which requires very limited facilities that will be on stream in Q2 next year.

This will lead to potential extension in field life of around 10 years.

Horn Mountain. We've used the latest OBN seismic with our in-house developed tools to place. The first injectors will be drilled in Q1 2027, and in parallel, facilities will be installed in Horn Mountain, leading to a target injection date of Q2 2027.

And unexpected response State during late summer 2027.

We've been ready to go for some time, and all the long-lead items have now been placed.

Um, returns are expected in the 40% to 50% range for these projects.

So overall, you know, last time I talked about improving, well, performance this time talking about lower Decline and as you can see, we've had improved reliability, both on rotating equipment and general facilities.

We are worried about whether a bit, including, I would say, being able to get through a lot of fabric maintenance work in this time period.

So overall still working on next year's plan.

Uh, part of that is tying the construction activities for the water to the planned maintenance required offshore so that we only take the platforms down once and don't have multiple interruptions.

Staggered. Uh, turnarounds.

Thank you. And my next question for today, is from Neil, Mara, with Goldman Sachs, please go ahead.

Yeah, good morning, Vicky more. Good morning team. Uh you know this is an important time for Stratos as you guys are ramping this project up and so uh as the rubber hits the road just wanted to understand what what the gating items are and uh, early thoughts uh around startup activities.

Good afternoon. Yeah. Overall, the Stratos Phase 1 stock-up is proceeding well.

Since we last talked, we've commissioned the central processing unit with water.

Another major milestone was achieved: starting up the process compression facilities required for CO2 injection.

Siemens energy team, I have to say including the CEO and the execs have been incredibly supportive of the project. This is a large complex machine which basically started up first time.

We've now started loading the first films of pellets and chemicals, and we continue to start up the other unit operations.

So the next step or the centrifuge is, and then after that is the cal sign. These are the two remaining operations before we export the CO2.

We continue to optimize each of the units during startup as we always do.

And while that does cost us some time now, it will pay tremendous dividends going forward.

Priorities are to learn for long-term capture efficiency, and uptime.

So overall, we expect to be circulating KOH this quarter and injecting CO2 in Q1.

Thanks.

Okay, uh, with respect to the, uh, return of capital. Um,

We, we definitely want to uh take out the um all that we can the 6 and a half billion dollars of debt first, and then beyond that, um, we are going to opportunistically buy back shares and we and it has to make sense. It's a value calculation for us, uh, to determine whether to do that or whether it's best to, um, uh, to take down some more debt, um, or, you know, uh, put more into the, um, into the business. But 1 thing with respect to the use of cash, I want to make very clear to everybody and that is that um, that we're not going to aggressively put lots of extra barrels into an oversupplied market. So when we're talking about the possibilities here on the call, I want you to understand that that we have. Um, we definitely have plans to be very flexible in that and I think Richard may have an opportunity later to share more on uh what that's going to look like. But we are going to stay within our means in terms of um of

Using the cash that we have but not taking down. Uh too much cash, off the balance sheet? We'll try to uh maintain about 3 to 4 billion on the ballot sheet, as we go forward and the Legacy liabilities with respect to oxygen. Uh, the bulk of those liabilities are outside the operating areas that were purchased, and

And uh, they there's very little, um, cash being spent or, um, uh, or any necessary, activities Beyond, what's already happening within those assets, operating assets that were bought everything else is outside. It made no sense to for those liabilities to go. And what they're costing us is is right now is somewhere in the neighborhood, you know, of 20 million or so, um, on an annual basis. The, the the liability that's the largest of course, is the paycheck, but that paycheck is, it's going to be spread over 20 to 30 years. So this is going to take a lot of time to um, to develop that and to work that. And so this really has minimal impact on us to to maintain these. Um, it's it's really not um, not material to what we do.

and the, um,

the the, uh,

Sure. Um, so Neil like again, I mentioned in my prepared remarks, uh, now that we've got a debt Target below, our uh, goal of, uh, less than 15 billion dollars. And as Vicki outlined, we're going to be opportunistic with respect to, uh, share repurchase. It's going to be driven by, you know, the macro conditions, uh, where our stock prices trading cash and balance sheet because our ultimate goal is to start the or resume the Redemption of the preferred once we get to August 2029.

So, what you're likely to see is, as we get towards August 2029, we're going to start building up cash on our balance sheet.

So, there is no formula as such in terms of share repurchase, but we are just going to be opportunistic, considering or keeping in mind that by August 2029, we want to build cash on the balance sheet.

Thank you. And next question, today comes from Paul Chen with

Discussion Bank, please go ahead.

Thank you. Good morning. Uh, so you can, can I just, um, clarify that you, uh, in your, uh, 2026 capex? Uh, you're saying that you, uh, going to uh, redirect say, 250 minutes from the l l lcv into the, uh, government and woman. So, yes, that means that, uh, lcv we're not going to spend any money at all and also that I think for Richard, can you talk about the 400 million dollar uh that on the uh uh quick payback on so project what kind of production uh contribution which is expect uh for 2026. Um the second question you know expiration uh with your resource seems like you are the funding more ways to get uh resource from the onshore market. So yes that means that expiration will remain sort of like not the most important.

Uh, aspect for your program over the next several years. Thank you.

So, uh, Paul, with respect to LCV capex, for next year, we think it's going to be around $100 million.

Uh, as we roll off Capital uh, with the completion of Stratus.

And they'll talk about it. I I I mentioned in my uh, remarks a sort of a Target initial plan of 55 to 60. And what what that means is, uh, really if you think about continuing activity this year, uh that would be you know, up to that that 400 million dollars that snail talked about. So actually flat in terms of resources that we would go from this year into next year. Uh, in terms of what that make up for next year, might look like for eor. It's actually it's it's it's light. It's about a hundred million dollars between eor and unconventional. Eor. And so it's it's fairly light next year. Um, and it's actually pretty Capital efficient as we look in the out years because we're not drilling Wells. We're using CO2 in terms of the recovery, but but also want to highlight. Um, we work, we work. Scenarios below the 55 plan and that's 1 of the advantages of, uh, the allocation of capital.

Into the US Honore, we have plans that go below uh, $50, uh, to be able to adjust to really carry oxy in total, um, in terms of cash flow to meet a break, even and obviously cover, uh, cover our uses of cash. So we have that mapped out, uh, we we've done it in the past. Um, that's why we wanted to go into some detail, on the the thought, process of how we react to lower oil prices, obviously, we like to, uh, work through a

Efficiency first, uh, but we do have that activity flexibility in our operations. Especially in the US, uh, to adjust in lower Pool, price scenarios,

And then in following up, and then go up. We are, we've already started deferring, some exploration from next year into the following years and then Oman. These are not really big e, expiration. These are step out Wells, very close to our existing facilities which can be brought online incredibly quickly.

Thank you. And our next question comes from James West at Milius Research. Please, go ahead.

Hey, good afternoon, everyone.

So uh, Vicki, maybe a bigger picture question for you. A lot of moving Parts. The last, you know, several years, uh with Oxi, uh, lots of changes in the portfolio. Um, you've been busy is the key here um, with the oxychem sale or we going into now a quieter uh period maybe a harvesting type uh type of a period.

Absolutely. And and I'm thankful to be at this point finally. Um, yeah, we've gone through, you know, there was a lot as you said, going on, but but this is where we wanted to be and this is where we needed to be. So we've done uh, everything that we set out to do with respect to uh being mostly a US company and and with very high quality, high margin assets. And, uh, in assets that can sustain over the long term and we think that our portfolio is so much differentiated from anybody else because we, we not only have the High, um, High return. Uh, but High decline shell. It's complemented and will be complemented in the future by the conventional assets and uh, conventional uh, eor, uh, along with unconditional eor. And when we look at where our portfolio stands today, of the the um our production where we've our total development 45.

Percent's conventional and 55 percent's unconventional going into the future. We um we have a ratio of um looks like about of the total of 16 and a half billion that we have in in resource about 65% is unconventional 35% conventional but the, um, the beauty of the unconventional is what Richard talked about. And that is the um, the fact that in the unconventional we are going to be able to do

To use CO2 for enhanced oil recovery in the unconventional, it's going to recover. We Believe up to, uh, the same amount as primary production. So we'll, we'll get a 100% of, um, of what we got before. So, we're doubling our total recovery from the unconventional so that'll be actually low decline as well over time. So, we think that, uh, versus um, a pure shell player, uh, or versus those, that that have assets, that are difficult to manage the international and in foreign countries, we think that that we're much better positioned with this with this portfolio. So, so, yes, we're we're done with with anything that's, um, any big Acquisitions or anything like that.

Great. Thanks. Vicky.

Thank you.

And the next question today comes from Matt Portillo at TPH. Please go ahead.

Good afternoon. Maybe just a question to start out on the DJ you highlighted in Q3 strong. Well, performance drove upside to your production figures. I was curious if you could just maybe comment on in the Rockies if you've changed anything on the completion or spacing design or what's really driving the outperformance there.

Yeah, thanks a big part of that beat really, the last couple of quarters. That's been our base production. And so, um, you know, a lot of work, we've talked about, in the past we've been doing around artificial lift, uh, even using some analytics to improve our efficiency on that. So that, that was the biggest part of it. We have had, um, better new well performance as well. I wouldn't call it, um, major changes. We just continue to tweak sort of our subsurface designs and um, you know, our flow back, uh, the base actually, the production operations that support the base, also help our new well production. And so a lot of that do well beat is just uh better up time on some of our processing facilities.

Great. And then maybe just a follow-up on the inventory. I was wondering if you might be able to comment on your views around your, your DJ inventory and and how you might be able to flex

uh, capital and kind of a lower commodity price environment just thinking through kind of the remaining locations left and and obviously some of the upside that you've highlighted here in the Parian, um, how you can Flex Capital between those 2 basins.

Yeah, that's great. Yeah we you know we've been largely uh, working in the DJ around an optimized uh, Activity Set. We've had a couple of Rigs and 1 fried core and so that that's been a a big piece of it. Continuing to show efficiencies like I said, on will cost earlier. I think, in the in the Rockies, as we look to the Future excited about the Powder River Basin. Uh, we continue to make progress there. Uh, we we sort of have been working similar to the way I describe the Midland Basin, um you know, where we uh, first were sort of proving out the productivity of the wells, really in the 23 24 time frame. And then in 25, we've had a partial riggear, where we flexed the rig up to the Powder River Basin. We've had, you know, really drilling record after drilling record up there. Uh, We've improved about more than 25% versus the last year in terms of drilling, uh, performance. So, that was a bigger part of it. And so now really is

We looked at 20, uh, 6 and Beyond, we have that opportunity to flex, uh, from the Rockies to the Powder River Basin. And so, uh, again don't really see a increase in capital just more optimization in terms of that portfolio, uh, for the Rockies. Um, you know, with that

Thank you. And our next question. Today comes from Neil Dickman at William Blair. Please go ahead.

Yeah, good afternoon guys. Um speaking of my questions just on the low um turn me in uh well talk that you all showed for maybe 3 Richard is is the larger projects contribute to that or what was the main driver that exceptionally low cost?

Yeah, great. Great question. Um, you know, we've

been on this Mission, the last couple of years to really, um, relook at, uh, both the operational efficiency of our operations. And, you know, working like I mentioned, uh, earlier around our contracts and service contracts. And so it's really been, uh, a bit of both. I'd say the scale and the Midland Basin certainly helped. Um, you know, we were able to combine really the best of the best from oxy and uh our Crown Rock Legacy, Crown Rock team and and really just worked on you know that piece of it but the scale was certainly helped. So I do agree with that but from an efficiency or from a contract standpoint, I think we were also uh entering a period where we uh make sure

We were getting, you know, the right contracts for the right type of work. And so, uh, we've done a lot of work on that. We're fairly short right now in terms of contract term. And so, we're working hard with our partners there to kind of, think about how it looks going into 2026 and making sure we got. You know, those 2 pieces put together correctly,

Great point. And then just to follow up Richard you talked a lot on the invention that you are today and the amount of possible recovery is there. I'm curious. What, what type of returns I assume the returns around some of that incremental upside would be quite a very, very positive. I would think correct.

Highlight a 25 to 35% kind of where we're at today. And so you know, if we're able to increase the uplift like we're talking about, those are only going to get better. So the goal obviously is to be competitive in our portfolio and so the teams will be working on that and that again that's the beauty of the portfolio that we have. It's it, it's not so much expansion but it's the competition uh, to make sure that we're putting, you know, Capital uh, where best place for the returns that we want.

Thank you. And I final question for you is from Leo Mariani with Roth. Please go ahead.

Yeah, hi, good morning. Um, really appreciate all the details on on 26. Um, you certainly talked about the the range of capitals 6.3 6.7 billion, uh, very helpful. Could you give us just some some high level indications of? What would you kind of expect production to do in that range? Is that kind of a a maintenance range for production maybe at the lower end and maybe you see a modest amount of growth at the high end, what can you kind of tell us about kind of associated production?

so, in terms of production, you would be looking something close to Flat to, uh, potentially up to 2%,

Growth.

Okay, that's very helpful. And I guess, any specific areas that largely kind of unconventional. Uh, that kind of provides the growth. Uh, you know, for next year is that kind of the flex piece uh, is really uh, that 400 million, which I guess is mostly unconventional Parian.

That's right. So, the, the growth will be largely driven by, uh, unconventional Parrilla.

Right. And as I mentioned, that the flex down, we'll we'll go after efficiency first to maintain activity, uh, but in position to be able to cut activity as required based on the macro.

Thank you. And that concludes our question and answer session.

I'd like to turn the conference back over to Vicky Holland. So any closing remarks

before we close, I want to express sincere appreciation to the entire oxy Kim team for their steadfast commitment to safety and operational excellence. Their achievements have contributed significant value of the years and we're confident that oxy Kim will continue to thrive under new ownership. Uh, so thank you all for your questions. And for joining our call today,

Thank you. Today's conference has now concluded and we thank you all for attending today's presentation. You may now disconnect your lives and have a wonderful day.