This article first appeared on GuruFocus.
Occidental Petroleum (NYSE:OXY) is targeting another $4 billion reduction in principal debt as the oil producer advances plans to generate more than $4 billion in additional annual sustainable cash flow by 2030. The ambitious targets could strengthen its dividend-paying capacity and eventually support larger share repurchases, giving investors a clearer path toward shareholder returns even during periods of weaker oil prices.
Occidental is a major U.S. energy producer with operations spanning oil and natural gas production, chemicals and midstream infrastructure. Its financial performance depends heavily on commodity prices, production volumes and operating efficiency.
During its third-quarter earnings call, management established a new $6 billion principal debt milestone after reducing outstanding principal to $10 billion.
The company has retired approximately $10.4 billion in debt since the beginning of 2026, substantially improving its balance sheet.
The progress follows strong quarterly results.
Occidental generated $4.1 billion in operating cash flow from continuing operations and $2.8 billion in free cash flow before working capital, while capital expenditures totaled $1.3 billion.
Adjusted earnings reached $1.91 per share, with production averaging approximately 1.43 million barrels of oil equivalent daily.
Importantly, management believes reaching $6 billion in principal debt would reduce annual interest expenses to approximately $400 million, roughly $1 billion below 2025 levels.
That could make the company’s dividend more resilient even if West Texas Intermediate crude falls toward $50 per barrel.
However, management plans to prioritize additional debt reduction and cash accumulation before pursuing opportunistic buybacks.
Investors Takeaway
Occidental expects approximately $5.9 billion in capital expenditures during 2027 while maintaining relatively flat production.
Investors should monitor debt repayments, free cash flow, oil prices and progress toward reducing sustaining capital requirements to approximately $4.5 billion by 2030.
Another milestone is the planned August 2029 preferred equity redemption, which influences near-term capital allocation.
Lower financing costs and sustained operational efficiencies could support higher dividends and eventual buybacks.
However, weaker commodity prices or unexpected capital spending could delay debt reduction.
The critical test is whether Occidental can generate durable cash flow without depending on unusually strong oil prices.
Source: finance.yahoo.com — article syndicated from the publisher’s feed; all rights remain with the original publisher.
