Citi: Occidental Petroleum (OXY.US) Q3 cash flow surpasses expectations, accelerated debt repayment cannot hide concerns over Q4 output

According to Golden Ten Data APP, Citi has issued a research report maintaining its "Neutral" rating on Occidental Petroleum (OXY.US) with a target price of $65. The bank noted in a report that Occidental Petroleum's third quarter cash flow per share (CFPS) exceeded expectations, benefitting from operating and capital expenditure controls, and the company repaid $1.8 billion of debt. However, Q4 production guidance was weak, impacted by contract factors and equipment maintenance, which may offset the positive factors.

The bank stated that Occidental Petroleum's Q3 cash flow per share was $4.06, 23% and 13% higher than Citi’s forecast and LSEG market consensus, respectively. The report said this outperformance was mainly due to lower-than-expected unit operating costs, while total production was broadly in line with the market consensus. Specifically, oil production was 697,000 barrels of oil equivalent per day, 3% lower than the market consensus, but a slight outperformance in NGLs and natural gas production offset this impact.

Capital expenditures also performed strongly, coming in 6% and 2% lower than Citi’s forecast and market consensus, respectively. After excluding non-comparable items, midstream and marketing pre-tax revenue exceeded the company’s guidance upper limit.

Looking ahead to the fourth quarter, Citi pointed out that Occidental Petroleum's production guidance is 2% lower than market consensus, mainly dragged down by weaker oil production, due to factors including product sharing contract (PSC) impact and GOA maintenance. The report believes that although Q3 CFPS was better than expected, the weaker Q4 oil production guidance may dampen this positive, and the company's stock price is expected to react neutrally at the open.

On the debt side, Occidental Petroleum used its strong cash flow in the third quarter to repay approximately $1.8 billion in principal debt. The report said the company has reached its $10 billion principal debt target and has set a new $6 billion debt milestone.

In addition, Occidental Petroleum announced it had signed fixed-fee CO₂ offtake agreements with several project developers. These developers will invest in building CCUS facilities and pipelines in the Permian Basin. The contracts cover the offtake of about 2 million tonnes of CO₂ per year, with the potential to expand to around 4 million tonnes per year; initial deliveries are expected in 2029, and unit costs for captured CO₂ may decrease by up to 75%.