Occidental Petroleum (OXY) Stock Analysis: Deleveraging, Permian Growth & CCUS Optionality

Occidental Petroleum (NYSE: OXY) sits at the crossroads of old‑world hydrocarbons and emerging low‑carbon solutions. As value investors, we see OXY as a leveraged but improving way to play U.S. liquids growth in the Permian and Gulf of America, with an added kicker from its early move into carbon capture, utilization and storage (CCUS) and direct air capture (DAC).

At the same time, this is not a simple “set it and forget it” income stock. Earnings are highly cyclical, the balance sheet is still heavier than many shale peers, and the company is in the middle of a strategic transformation: selling its chemicals business, reducing debt, integrating the CrownRock acquisition and spending real money on unproven CCUS/DAC projects. Our deep research suggests OXY skews toward a buy for investors who are comfortable with commodity and policy risk and willing to monitor execution closely, rather than a slam‑dunk strong buy you can ignore for a decade.

According to the company’s latest 10‑K filing for 2024, Occidental generated $26.7 billion in net sales and $2.4 billion in net income to common shareholders as earnings normalized from the 2022 commodity spike, when profit hit $12.5 billion (2025 10‑K). Free cash flow has come off peak levels but remains robust at several billion dollars annually, and leverage has been brought down to roughly 2x Net Debt/EBITDA. Yet the stock price, around $42–43 at the time of this deep research, is down roughly 16% over 12 months despite an EV/EBITDA multiple of about 3.5x and a P/E of ~22x on trailing earnings (FMP, Dec 2025; 2025 10‑K).

In other words, the market is not giving OXY much credit for its asset base or its progress on deleveraging. Our goal in this piece is to unpack whether that skepticism is justified, where the real risks lie, and what kind of margin of safety exists for long‑term investors.

Occidental Petroleum (OXY) overview: what kind of business are you buying?

Occidental is an integrated energy company with three major segments today:

• Oil & Gas (E&P) – the core business, focused on the U.S. Permian Basin, DJ Basin and Gulf of America, plus operations in the Middle East and North Africa under concessions and production‑sharing contracts. At year‑end 2024, OXY held 4.6 billion Boe of proved reserves (2025 10‑K).
• OxyChem (Chemicals) – a basic chemicals and vinyls business that produced $4.9 billion of sales and $1.1 billion of segment result in 2024 (2025 10‑K). It is now held for sale under a $9.7 billion agreement with Berkshire Hathaway (2025 10‑Q).
• Midstream & Marketing / Low Carbon Ventures – gathering, processing, transportation and marketing of hydrocarbons, plus Oxy Low Carbon Ventures (OLCV), which houses CCUS and DAC projects, including the flagship STRATOS plant and multiple sequestration hubs (2025 10‑K).

The core investment story, in our view, revolves around three intertwined themes:

1. Permian and Gulf of America liquids leverage

OXY is one of the largest U.S. liquids producers, with a portfolio anchored in the Permian and offshore Gulf of America. These are among the lowest‑cost and most strategically important basins globally, especially as the EIA expects the Permian to remain the main engine of U.S. crude growth through mid‑decade (EIA, Jun 2024; EIA, Oct 2025 cited in 2025 10‑K).

2. A self‑help deleveraging story

Management is explicitly running a “balance sheet first” playbook: targeting principal debt under $15 billion, prioritizing a sustainable and growing dividend, and de‑emphasizing share repurchases until leverage is firmly under control (2025 10‑K). The OxyChem sale to Berkshire is designed to accelerate that.

3. A differentiated, but unproven, CCUS/DAC platform

Through Oxy Low Carbon Ventures and projects like STRATOS, OXY is trying to convert decades of CO₂‑EOR, subsurface and chemical handling experience into a scalable carbon‑management business (2025 10‑K; SPE 2024 cited therein). If this works, it could gradually tilt earnings toward fee‑based, lower‑carbon cash flows.

The question for us is whether today’s valuation compensates you for the obvious cyclicality and the less obvious risks in CCUS and chemicals divestiture.

How is OXY performing today? Earnings, cash flow and balance sheet

According to the September 30, 2025 10‑Q, OXY generated Q3 2025 net income to common of $661 million, or $0.65 per share, on $6.7 billion in net sales. Segment contributions were approximately:

• $1.3 billion from oil & gas
• $197 million from chemicals
• $93 million from midstream & marketing (2025 10‑Q)

Nine‑month 2025 net income to common totaled $1.7 billion, or $1.68 per share. Production volumes are moving in the right direction: Q3 2025 total sales volumes averaged 1,468 Mboe/d versus 1,282 Mboe/d in Q3 2024, driven primarily by higher U.S. volumes from the CrownRock acquisition (2025 10‑Q).

On free cash flow, the company has consistently produced multi‑billion‑dollar annual FCF across the last several years, even after the 2022 peak:

• 2022–2024 free cash flow in the $3.7–5.3 billion range annually, depending on commodity prices and capex levels (company FCF history summarized in the deep research dataset).
• Quarterly FCF in 2023–2025 running roughly $4.0–5.3 billion annualized, with some quarter‑to‑quarter variability but no sign of structural collapse.

Interest coverage is roughly 3.9x, and Net Debt/EBITDA stands around 1.96x, indicating a balance sheet that is still geared but no longer distressed.

The key investor takeaway here: OXY is not a fragile, marginal producer. It’s a scaled liquids heavyweight with solid free cash flow and moderate leverage, even after absorbing the CrownRock deal. That’s the base from which the rest of the thesis – OxyChem divestiture and CCUS – plays out.

What does the OxyChem sale really mean for investors?

The announced $9.7 billion sale of OxyChem to Berkshire Hathaway is one of the most important catalysts in the story. As disclosed in the 2025 10‑Q and summarized in public sources, management intends to use the majority of proceeds to advance its sub‑$15 billion principal debt target (2025 10‑Q).

From a balance sheet perspective, that’s a big positive:

• Long‑term debt sits around $25 billion with total long‑term liabilities above $39 billion (Macrotrends, Nov 2025; 2025 10‑Q).
• Taking out a substantial chunk of principal debt with cash proceeds should reduce gross leverage, interest expense, and, over time, support credit rating upgrades toward being “well within investment grade,” a stated management goal.

But there are trade‑offs:

• OxyChem contributes a relatively stable earnings stream and some diversification away from pure upstream volatility.
• Chemical markets are currently weak, with oversupply and soft PVC/chlorinated derivatives pricing, which may depress perceived sale value and limit how much Berkshire is willing to pay for the cyclically down earnings base (2025 10‑K; 2025 10‑Q).

From our vantage point, the OxyChem sale is both an accelerant and a filter for the thesis:

• If the deal closes close to the announced terms and proceeds are used aggressively to reduce principal debt, our conviction could move toward a stronger buy. A cleaner balance sheet plus a focused liquids portfolio could justify multiple expansion.
• If the deal stalls, is blocked, or closes on significantly weaker terms with limited deleveraging, we’d likely shift toward “wait and see” or even trim risk exposure.

This is a textbook example of why we care about execution as much as valuation. The asset base itself is good; how management handles this strategic pivot will determine how much of that value accrues to common shareholders.

Is OXY stock a buy in 2025?

We view OXY as a potential buy rather than a table‑pounding strong buy. The distinction comes down to risk tolerance and time horizon.

Why we lean positive

Our deep research highlights several bullish pillars:

• Attractive asset base at a modest multipleOXY trades around 3.45x EV/EBITDA and ~22x trailing P/E, with Net Debt/EBITDA just under 2x (FMP, Dec 2025; 2025 10‑K). For a company with 4.6 billion Boe of proved reserves and large, liquids‑weighted Permian and Gulf of America positions, that looks undemanding.

• DCF upside – with big caveatsA discounted cash flow framework using historical free cash flow as a baseline implies an intrinsic value of roughly $213.53 per share versus a current price near $42.43, an implied ~80% discount [(FMP, Dec 2025)]. We treat that number cautiously, but it underscores how much pessimism is currently embedded about mid‑cycle FCF and CCUS returns.

• Deleveraging is real, not theoreticalManagement has already materially reduced near‑term maturities and used warrant exercises and operating cash flow to bring leverage down. Liquidity at year‑end 2024 included $2.1 billion of cash and $4.15 billion of undrawn revolver capacity, and by September 30, 2025, the near‑term debt wall had been pushed out significantly (2025 10‑K; 2025 10‑Q).

• Operational execution in the Gulf of America and PermianGulf of America assets ran at over 98% equipment uptime in 2024, with an 80% reduction in planned shut‑in days versus 2019, and OXY invested about $0.7 billion offshore in 2024 on tie‑back projects (2025 10‑K). CrownRock volumes are already contributing to higher U.S. production.

For value investors comfortable with commodity risk, that package – discounted multiple, strong assets, measurable deleveraging – is attractive.

Why we stop short of “strong buy”

We also see several genuine risks that warrant a margin of safety:

• High earnings cyclicalityEarnings swung from $12.5 billion in 2022 to $2.4 billion in 2024 (2025 10‑K). That is structural commodity leverage, not merely “noise,” and it means a lot of the DCF sensitivity rests on your mid‑cycle price assumptions.

• Shale decline and execution riskIndependent technical work on shale reservoirs suggests many operators were overly optimistic on long‑tail production and decline profiles [(SPE, 2020, cited in 2025 10‑K)]. OXY’s long‑term reserve and cash‑flow expectations could prove aggressive if decline rates are harsher than modeled, or if high‑grading cannot be sustained over time.

• CCUS/DAC is capital‑intensive and unproven at scaleThe filings explicitly note that CCUS and emissions‑reduction costs may be “substantial” and that external funding will be required (2025 10‑K; 2025 10‑Q). Policy support from the Inflation Reduction Act (IRA) and the OBBB framework is critical; a change in tax credits or permitting could render some projects uneconomic, leading to impairments.

• Environmental and legacy obligationsOXY has about 155 remediation sites and around $1.9 billion of related environmental liabilities, plus obligations linked to OxyChem operations even post‑sale (2025 10‑Q). These are manageable but add to the long‑tail risk profile.

Our conclusion: OXY is buyable here for investors who size positions prudently and are willing to monitor deleveraging progress, STRATOS execution and OxyChem deal status on an ongoing basis. It is not, in our view, a “set it and forget it” forever stock.

Will Occidental deliver long‑term growth, or just ride the cycle?

Looking beyond the next quarter or two, OXY’s management has outlined an ambitious long‑term vision:

• Achieve net‑zero operational and energy‑use emissions by around 2035 and net‑zero total carbon inventory by 2050.
• Build multiple CCUS/sequestration hubs supported by Department of Energy grants and federal tax incentives, transitioning from project buildout to recurring storage and service revenues (2025 10‑K; 2025 10‑Q).
• Evolve toward a more fee‑based, lower‑carbon earnings mix if CCUS/DAC scales as planned (SPE, 2024 cited in 2025 10‑K).

For us, the crux isn’t whether these goals are aspirationally “good,” but how reasonable the embedded assumptions are.

Reasonableness of assumptions

On the conservative side:

• The company is explicit about leverage targets and credit rating goals, a marked shift from the pre‑Anadarko era. Dividends and buybacks are subordinated to getting principal debt under $15 billion (2025 10‑K).
• Management’s commodity sensitivity disclosures – including quantification of how Midland‑to‑Gulf spreads impact operating cash flow – show a sober view of earnings volatility (2025 10‑K).
• CCUS filings clearly flag the dependence on tax credits, grants, and third‑party capital, rather than hand‑waving it as low‑risk growth.

On the aggressive side:

• Shale reservoir performance is a known unknown; if declines are steeper than expected or well designs fail to keep up, more capital will be needed just to maintain output [(SPE, 2020)].
• CCUS/DAC economics hinge on long‑term U.S. policy. The base case assumes sustained IRA/OBBB support and rising demand for carbon management services over decades, which is plausible but far from guaranteed (2025 10‑K; 2025 10‑Q; EIA STEO, Jan 2025).

Our base case is that OXY will be able to grow modestly in production, continue to generate robust free cash flow at mid‑cycle prices, and, if policy holds, gradually layer on a CCUS/DAC earnings stream. But we do not underwrite the carbon‑management business at full management optimism; we treat it as a valuable out‑of‑the‑money option rather than the core of the thesis.

Competitive edge: what is OXY’s moat?

We think about OXY’s moat in two layers: traditional hydrocarbon advantages and emerging CCUS/DAC positioning.

Traditional resource and infrastructure advantages

According to the 2025 10‑K, OXY’s moat in oil and gas rests on:

• Scale and liquids‑weighted inventory depth in the Permian and DJ basins, where the company has large positions and an established operating footprint.
• Operational reliability in the Gulf of America, with >98% uptime and sharply reduced shut‑in days.
• Integrated midstream and marketing that allows OXY to capture basis spreads between Midland and Gulf Coast for oil, and Waha to Gulf for gas. Management estimates a $0.25 per barrel change in the Midland‑Gulf spread shifts annual operating cash flow by about $65 million, which underscores both the opportunity and the risk here (2025 10‑K).

These are meaningful advantages, but shale physics impose a structural cap: unconventional wells have high decline rates, forcing continuous drilling just to hold production flat. That means part of this “moat” has to be re‑earned every year with capex and execution.

CCUS/DAC as an early‑mover moat

Oxy Low Carbon Ventures aims to turn OXY’s long‑standing CO₂‑EOR and subsurface expertise into a competitive edge in CCUS and DAC:

• Projects like STRATOS – a large‑scale DAC facility scheduled for mid‑2025 commissioning – are intended to capture CO₂ directly from ambient air and sequester it underground or use it for EOR (2025 10‑K).
• The company has filed 21 Class VI well applications for sequestration hubs, and is working with DOE grants and federal tax incentives to make the economics workable.
• This positions OXY differently than many shale peers who are only just beginning to explore CCUS solutions [(SPE, 2024)].

The durability of this emergent moat is uncertain. If U.S. and global policy remain supportive and OXY successfully signs long‑term offtake contracts with industrial emitters and corporate buyers of carbon removal, this could become a fee‑based business with high barriers to entry (subsurface knowledge, permitting expertise, capital intensity). If policy or capital dry up, the moat evaporates and the capex already spent may not be fully recoverable.

From our vantage point, the right mental model is: OXY is a high‑quality, but cyclical, liquids E&P with a real but still‑speculative option on becoming a leading carbon management franchise.

Risk dashboard: what could break the thesis?

Our deep research flagged several risk clusters that we think investors should monitor explicitly:

1. Commodity and spread volatility

• Oil, NGL and gas prices drive the majority of OXY’s cash flow.
• Midland‑to‑Gulf and Waha‑to‑Gulf spreads can meaningfully move midstream results and overall cash generation (2025 10‑K).

2. Leverage and refinancing

• Even after progress, OXY still carries about $25 billion of long‑term debt and over $39 billion in long‑term liabilities (2025 10‑Q).
• A sustained downturn in oil prices that pushes free cash flow well below recent levels could stall deleveraging and pressure ratings.

3. Execution risk in shale and CCUS

• Poor well performance, rising costs per barrel or operational mis‑steps in the Permian and Gulf of America would directly hit returns on capital.
• CCUS projects like STRATOS risk delays, cost overruns, or lower‑than‑expected utilization, each of which could lead to impairments.

4. Regulatory and environmental risk

• Methane fees, CCUS permitting rules and broader climate policy add cost and uncertainty (2025 10‑Q; API, Feb 2025).
• The company has 155 remediation sites and legacy OxyChem‑linked obligations that could exceed current accruals.

5. Strategic risk around OxyChem and capital allocation

• A failed or weakened OxyChem sale would leave OXY with higher leverage and potentially stranded chemical assets in a weak pricing environment.
• Large, low‑return CCUS capex could consume free cash flow without generating adequate returns, effectively eroding intrinsic value.

We track these risks through a simple monitoring framework: quarterly free cash flow and net debt, OxyChem transaction updates, STRATOS and CCUS hub milestones, credit rating commentary and major regulatory developments.

For investors looking to scale this kind of dashboard across many names, Read our AI-powered value investing guide for a deeper look at how tools like DeepValue can automate the “filings plus industry sources” grunt work behind this risk analysis.

Valuation, margin of safety and portfolio strategy

On a traditional value lens, OXY checks several boxes:

• Multiple and leverage – EV/EBITDA ~3.45x, Net Debt/EBITDA ~1.96x [(FMP, Dec 2025)].
• Asset backing – 4.6 billion Boe of proved reserves; large, low‑cost Permian and Gulf of America positions; integrated midstream; and a chemicals business being monetized through a cash sale.
• Free cash flow – multi‑billion‑dollar annual FCF across a range of commodity environments, even after the 2022 boom faded.

That said, the margin of safety is narrower than the headline discount suggests because:

• Shale decline rates and CCUS returns are genuine wildcards.
• Commodity leverage is real; a couple of years of sub‑mid‑cycle oil would materially erode equity value.
• OxyChem execution and the actual use of proceeds remain to be proven.

In portfolio terms, we think OXY makes sense as:

• A moderate‑sized position for investors comfortable with energy cyclicality, not a concentrated cornerstone.
• A leveraged play on U.S. liquids and exports, with a potential structural rerating if CCUS/DAC and deleveraging both work.
• A name where ongoing monitoring is part of the thesis, not optional.

Final thoughts: how we’d approach OXY as value investors

From our deep research, Occidental Petroleum looks like a potential buy with asymmetric upside for investors who:

• Believe in a mid‑cycle oil environment supported by modest global demand growth as outlined in EIA projections.
• Are comfortable owning a leveraged liquids E&P with significant policy and execution risk around a new low‑carbon platform.
• Are willing to size the position prudently and systematically track deleveraging progress, OxyChem outcomes and CCUS milestones.

We’d summarize the thesis as follows:

• What you are paid for today: a large, liquids‑weighted reserve base; proven ability to generate strong free cash flow through the cycle; and a credible balance‑sheet improvement trajectory, all at a compressed EV/EBITDA multiple.
• What you get for “free” or at a discount: a CCUS/DAC option that could, in a supportive policy environment, shift the mix toward higher‑quality, fee‑based revenues and support a structural rerating.
• What you must guard against: over‑extrapolating DCF upside, underestimating shale decline curves, and ignoring the possibility that CCUS/DAC investments deliver below‑hurdle returns.

In our opinion, OXY fits well for value‑oriented investors looking for leveraged but improving exposure to U.S. liquids with real, albeit uncertain, upside from carbon management. It does not fit investors seeking stable, bond‑like income or minimal macro risk.

As always, position sizing, entry price and ongoing monitoring matter as much as the initial thesis. If the OxyChem sale closes firmly, principal debt moves decisively toward or under $15 billion, and STRATOS comes online broadly on time and budget with contracted volumes, we’d be inclined to upgrade our stance toward a more conviction “buy.” If those milestones disappoint, we’d reconsider quickly.

Sources

• Occidental Petroleum 10‑K (2025) – Year Ended December 31, 2024
• Occidental Petroleum 10‑Q (Q3 2025) – Quarter Ended September 30, 2025
• Occidental Petroleum 8‑K (Q3 2025 Earnings Release)
• Occidental Petroleum 11‑K (2025)
• Occidental Petroleum DEF 14A (2025 Proxy Statement)
• Occidental Petroleum 10‑K/A (2023)