- OxyChem Sale Proceeds $8 billion in proceeds, allocating $6.5 billion to reduce debt to below $15 billion, cutting annual interest expenses by over $350 million.
- Q3 Financial Performance $3.2 billion operating cash flow, $1.5 billion free cash flow before working capital, and $1.3 billion debt repayment, reducing principal debt to $20.8 billion.
- Operational Output 1.47 million BOE/day production, with Permian Basin contributing 800,000 BOE/day (record high), and lowest lease operating expense per barrel since 2021.
- Capital Allocation Shift $250 million redirected to Gulf of Mexico/Oman projects, $400 million reallocated to Permian short-cycle projects, and $100 million Lower Carbon Ventures (LCV) CapEx in 2026.
Debt Reduction and Shareholder Returns
The sale of OxyChem will provide approximately $8 billion in proceeds, with $6.5 billion allocated to debt reduction, targeting a post-transaction debt level of less than $15 billion. This will lower annual interest expenses by over $350 million. The company plans to broaden its return of capital program, including share repurchases, once the debt target is achieved. With a current Net Debt / EBITDA ratio of 0.18 and a Free Cash Flow Yield of 9.22%, OXY's ability to generate cash and reduce debt is evident.
Operational Performance and Guidance
OXY's teams delivered strong operational performance, with a focus on cost management and efficiency improvements, achieving the lowest quarterly lease operating expense per barrel since 2021. The company raised its full-year guidance for the Oil and Gas and Midstream and Marketing segments. OXY expects to generate strong cash flow in 2025, with a target of $55-60 WTI price. The company's unconventional assets are expected to benefit from enhanced oil recovery using CO2, potentially doubling the recovery rate.
Capital Expenditure and Production Guidance
The capital expenditure (CapEx) guidance for next year is expected to be between $6.3 billion and $6.7 billion. The company plans to increase investment in the Gulf of America waterflood projects and in Oman, with an additional $250 million allocation. OXY expects to spend $6.3-6.7 billion in 2026, with production expected to be flat to up 2%, driven primarily by unconventional Permian growth.
Valuation and Outlook
With a P/B Ratio of 1.14 and an ROE of 5.39%, OXY's valuation seems reasonable. The company's transformation, strategic rationale for selling OxyChem, and strong operational performance position it for future growth. As the company enters a period of stability and potential harvesting of its existing assets, investors can expect a more predictable cash flow generation. The current valuation metrics suggest that the market has already priced in some of the positive developments, but the company's ability to generate strong cash flow and reduce debt is a positive sign.