Occidental maintains focus on debt reduction and sees a flat output and spending in 2027
Occidental Petroleum, a U.S. oil company, said Thursday that it expects production and capital expenditure to remain flat in 2027. It also stated that debt reduction efforts would continue to be a priority.
Sunil Mathew, the Chief Financial Officer, said that the company expects to start capital expenditures at $5.9 billion by 2027. This includes investments in midcycle projects.
He added that "at this level of investment you can expect relatively flat production by 2026."
Occidental's production is expected to reach 1.45 million?barrels equivalent to oil per day in 2026 with capital expenditures between $5.5 billion and $5.9 billion.
Occidental expects to spend up to $5,1?billion on sustaining?capital in 2027. This is a measure that excludes exploration projects and multi-year capital projects.
Mathew stated that continued investment in midcycle projects would help Occidental reduce its base decline, and eventually reduce its sustaining 'capital.
The oil producer aims to have a capital sustaining of $4.5 billion by 2030.
KEEPING AN EYE ON DEBT REDUCTION
Occidental CEO Richard Jackson?said that the company was on track to increase free cash flow in this year by over $1.2 billion. He also said there is a "clear path" to adding more than $4 billion annually cash flow by 2030, even without considering the benefits of higher oil prices.
Mathew stated that the additional cash would be used to reduce debt - and strengthen the balance sheet - ahead of Occidental redeeming Berkshire Hathaway preferred equity stakes beginning in 2029.
He added that share buybacks would be a lower priority until preferred equity was reduced by the company. Berkshire’s investment requires Occidental to pay an annual dividend of 8%, which is higher than what a typical junk bond offers. Investors claim that Occidental’s stock has suffered because of the high equity costs. Occidental reported its largest quarterly profit since the year 2022 on Tuesday. It said that its cash flow 'priority' is to reduce principal debt by $10?billion.
Mathew stated that the company would continue to "focus" on further reducing its net debt after it reaches the milestone of $10 billion in principal debt.
Occidental's shares closed Thursday at $56.04 - a 4.1% increase. Reporting by Vallari Shrivastava from Bengaluru, Sheila Dang from Houston and Matthew Lewis.
(source: Reuters)
