Key Highlights

● Total company production for the quarter stayed within guidance despite temporary Gulf of America curtailments.

● A third-party gas pipeline constraint and maintenance curtailed some Gulf output in September.

● Oil collars trimmed Operating Cash Flow by roughly $90 million.

● Results arrive Monday after the close, with a conference call Tuesday afternoon Eastern time.

Occidental Petroleum (NYSE:OXY) gave the market an early look at its third quarter in a mid-October filing, and the most newsworthy item was a problem rather than a milestone. In September the company temporarily curtailed production at certain Gulf of America facilities, citing a constraint on a third-party gas pipeline and maintenance work, and it said only part of the affected Volume had come back.

The disclosure was framed with reassurance. Total company production for the quarter, even after counting the downtime, landed within the guidance range, and the filing added a set of price and cost data points that outside observers use to build estimates. Full results are due on Monday after the market closes, followed by a conference call on Tuesday afternoon Eastern time.

Readers following Oil and Gas Stocks will recognize the theme, since Midstream bottlenecks and realized price gaps often matter as much as headline benchmarks.

What did Occidental disclose in its pre-earnings filing?

The document was an exhibit to a current report titled as a set of third-quarter Earnings items. Occidental published a similar exhibit before earlier reports, listing items that management expects to affect results. The company stressed that it was not a complete statement of the quarter and that numbers remained subject to finalization.

It covered four areas: production, pricing and realizations, a few cost and mix measures, and the effect of hedges. The headline on production was that total company volume fell within the guidance range, which the company had set before the quarter began. The surprise lay in the explanation that some volume had been interrupted.

The filing contained no estimate of earnings per share, no revised guidance and no commentary on Capital spending. Readers looking for those items will have to wait for the full release.

What went wrong in the Gulf of America?

According to the filing, the company temporarily curtailed production at certain Gulf of America facilities in September. Two causes were named: a constraint on a gas pipeline owned by a third party and maintenance activities. Output has been partly restored, and the rest is expected to come back once the pipeline issue is resolved.

Net sales volumes from the Gulf for the quarter were estimated at about 110,000 barrels of oil equivalent a day. That compares with roughly 144,000 in the second quarter, when the unit outperformed expectations. The gap illustrates the size of the interruption, though the filing does not state the volumes lost.

Offshore production depends on shared infrastructure, so a bottleneck at a third-party pipeline can force wells to shut in even when the platform itself is working. The period of recovery is therefore partly outside the operator's control, a point that readers should keep in mind when interpreting the phrase about expected restoration.

How did prices and realizations compare with benchmarks?

Occidental reported a worldwide realized oil price of about $86 a barrel for the quarter, essentially equal to the average West Texas Intermediate price and about 6% below Brent. Realized Natural Gas liquids prices were about $25 a barrel, roughly 29% of the crude benchmark.

Natural gas was the weak spot. The company's domestic realized gas price was only a little over $1.5 per thousand cubic feet, about 54% of the benchmark, which was close to $3. In the second quarter, realized domestic gas prices had been negative, reflecting pipeline constraints and local oversupply in parts of the Permian Basin, so the third-quarter figure marks an improvement from that low.

These relationships are central to the company's economics. A large share of its output is oil, and the crude realization sits near the benchmark, but gas and liquids often trade at steep discounts in the Permian, which drags down the blended price per equivalent barrel.

What does the production mix look like?

Oil accounted for about 49% of total company production in the quarter, according to the filing, and the rest was natural gas liquids and gas. That mix is a feature of the company's large Permian Basin position in Texas and New Mexico, where wells produce a lot of associated gas and liquids alongside crude.

The company also estimated domestic Lease operating costs at about $8.5 per barrel of oil equivalent, a metric that tracks the day-to-day expense of keeping wells running. Cost per barrel is sensitive to volume, so a quarter with Gulf downtime can push the unit figure up even if spending is stable.

International production, much of it from Oman, Algeria and the United Arab Emirates, was lower in the second quarter than in the first, with the Al Hosn gas project the main reason. Whether the third quarter showed more of the same will become clear in the release.

How did the hedges affect cash flow?

The filing said settlements on Crude Oil collars reduced operating cash flow before Working Capital by $94 million in the quarter. A collar sets a floor and a ceiling for the price, so when the market trades above the ceiling, the company pays the difference to the counterparty.

With oil prices elevated amid the conflict in the Middle East, the ceilings were exceeded and the hedges cost money. That is the intended trade-off of a collar: it protects against a sharp fall in prices in exchange for giving up part of the gain in a spike.

The amount is small relative to a quarterly operating cash flow of several billion dollars, and it will appear as a reduction in cash flow but not in volumes. Readers should note that collars are accounted for with specific rules, and the net effect on reported earnings can differ from the cash effect.

What did the previous quarter look like?

The second-quarter release showed net earnings attributable to common stock of about $2.8 billion, or $2.75 a share, and adjusted earnings of about $2.4 billion, or $2.40 a share from continuing operations. Total production of about 1,430,000 barrels of oil equivalent a day beat the top of the guidance range, with the Permian at roughly 800,000 and the Gulf at about 144,000.

Average West Texas Intermediate was about $93 and Brent about 97, and the company realized about $97 on its oil. Oil and gas pre-tax earnings rose to about $2.8 billion from about $1 billion in the first quarter. The midstream and Marketing segment earned about $1.3 billion, a swing from a small loss, helped by crude sales timing and gas transportation optimization.

The comparison matters because benchmark oil prices were lower in the third quarter than in the second, as the filing shows. A decline in the average price would normally pull sequential earnings down, other things equal.

What happened to Debt and cash flow?

Operating cash flow from continuing operations in the second quarter was about $5 billion, or $4.6 billion before working capital changes. Capital spending was about $1.6 billion, leaving free cash flow before working capital of about $3 billion, which the company described as the highest since the third quarter of 2022.

Principal debt fell by close to $2 billion to roughly $11.8 billion, moving toward a stated goal of $10 billion. Cash ended the quarter at about four and a sixth billion. The first-quarter results had been boosted by a large gain from discontinued operations, tied to the sale of a major Business that is not named in the release excerpt reviewed here.

Debt reduction has been the dominant theme of the company's financial planning, and the pace of progress toward the goal is a regular topic on the call.

Why do Permian gas prices matter so much?

The Permian Basin produces far more associated gas than local pipelines and processing plants can always handle. When takeaway capacity is tight, gas in the basin can trade at deep discounts to the national benchmark and has even turned negative for stretches, as the company's second-quarter figure shows. A producer with a large Permian position, as Occidental has, feels that effect directly.

New pipelines and processing plants have been added across the basin in recent years, and the third-quarter realization of well over $1 a unit, while still far below the benchmark, points to some easing. Still, a quarter or two of improvement does not settle the question of whether local oversupply is gone.

Readers who track the sector often compare realized gas ratios across operators, since the percentage of the benchmark that a company receives reveals how its marketing contracts and pipeline access work in practice.

How large is the Gulf of America in the overall mix?

Offshore Gulf production is a minority of the company's total but an important one, because the barrels are oil-rich and carry high unit margins relative to onshore wells with heavy gas content. At roughly 110,000 barrels of oil equivalent a day in the third quarter, the offshore unit represented under a tenth of company output.

That is why the curtailment is described as temporary and manageable in the filing, and why total company volume stayed inside the guidance range. The Permian, at around 800,000 barrels a day in the second quarter, carries most of the weight, and its outperformance can cover a shortfall elsewhere.

The distinction matters for interpretation. A shortfall in a high-margin unit can have a larger effect on earnings than the same number of barrels from a lower-margin one, so the volume-based reassurance should not be read as a statement about earnings.

What role does the midstream and marketing business play?

Midstream and marketing is the segment that gathers, transports and markets the company's output and third-party volumes, and it also includes Equity earnings from Western Midstream. In the second quarter it earned roughly $1.33 billion before taxes, a swing from a small loss in the first quarter, as crude sales timing and gas transportation optimization worked in its favor.

This business is lumpy by nature. It earns money when it can move barrels between markets at favorable differentials, and it can lose money when spreads narrow or timing effects reverse. For that reason, the company usually guides to a range for the segment rather than a point estimate.

The pipeline constraint in the Gulf is relevant here as well, since third-party pipeline capacity is also a Factor in how the company markets its gas. The call may show whether the segment gained or gave back some of the second-quarter swing.

What does the Dividend look like for Occidental Petroleum?

The quarterly dividend was set at $0.28 a share, about 8% higher than the previous year, and the August release said it was payable in mid-October to owners of record in early September. The company has described a priority order for cash: pay down debt first, then raise distributions.

The chief executive quoted in the release said the company expects significant free cash flow growth by the end of the decade. The release did not offer numerical figures for that statement, and it should be read as a general aim rather than a guidance item.

Average diluted shares for the third quarter were about 1.013 billion, according to the preliminary filing. That is the denominator for per-share earnings, which will help outside observers check the results when they arrive.

When will Occidental report and what is the schedule?

The company announced at the start of October that it would release third-quarter results after the market closes on Monday, with a conference call on Tuesday at one in the afternoon Eastern time. A webcast is available through the stock owner section of its website, and a recording is posted several hours after the call.

The timing is later than some peers, which means that its results arrive after much of the sector has already reported. Earlier reports from other producers have already shown strong cash flows from elevated prices, so attention will focus on how Occidental's Gulf downtime and Permian gas discounts affected its own numbers.

Occidental has a habit of previewing the quarter with an exhibit, so much of the raw data is already public before the formal release.

What uncertainties are worth noting?

The first is the pipeline: the filing says the remaining Gulf volumes will come back after the constraint is resolved, but it gives no date. If the issue persists, the effect could extend into the current quarter.

The second is price. Both oil and gas benchmarks moved during the year, and realized differentials in the Permian are volatile. The third is regulation and geopolitics, which the company lists among its cautionary factors, along with tariffs and OPEC decisions. As a member of the S&P 500, the stock is also followed as part of overall index energy earnings.

The full release may revise or add to them.