OCCIDENTAL PETROLEUM CORP /DE/ (OXY)

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read together with the Consolidated Condensed Financial Statements and the notes to the Consolidated Condensed Financial Statements, which are included in this report in Part I, Item 1; the information set forth in Risk Factors under Part II, Item 1A; the Consolidated Financial Statements and the notes to the Consolidated Financial Statements, which are included in Part II, Item 8 of the 2025 Form 10-K; and the information set forth in Risk Factors under Part I, Item 1A of the 2025 Form 10-K.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Portions of this report contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact are "forward-looking statements" for purposes of federal and state securities laws, including, but not limited to: any projections of earnings, revenue or other financial items or future financial position or sources of financing; any statements of the plans, strategies and objectives of management for future operations or business strategy; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing. Words such as "estimate," "project," "predict," "will," "would," "should," "could," "may," "might," "anticipate," "plan," "intend," "believe," "expect," "aim," "goal," "target," "objective," "commit," "advance," "guidance," "priority," "focus," "assumption," "likely" or similar expressions that convey the prospective nature of events or outcomes are generally indicative of forward-looking statements. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this report unless an earlier date is specified. Unless legally required, the Company does not undertake any obligation to update, modify or withdraw any forward-looking statement as a result of new information, future events or otherwise.

Actual outcomes or results may differ from anticipated results, sometimes materially. Forward-looking and other statements regarding the Company's sustainability efforts and aspirations are not an indication that these statements are necessarily material to investors or require disclosure in the Company's filings with the SEC. In addition, historical, current and forward-looking sustainability-related statements may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve and definitions, assumptions, data sources and estimates or measurements that are subject to change in the future, including through rulemaking or guidance. Factors that could cause results to differ from those projected or assumed in any forward-looking statement include, but are not limited to: general economic conditions, including slowdowns and recessions, domestically or internationally; the Company's indebtedness and other payment obligations, including the need to generate sufficient cash flows to fund operations; the Company's ability to successfully monetize select assets and repay or refinance debt and the impact of changes in the Company's credit ratings or future increases in interest rates; assumptions about energy markets; global and local commodity and commodity-futures pricing fluctuations and volatility; supply and demand considerations for, and the prices of, the Company's products and services; actions by OPEC and non-OPEC oil producing countries; results from operations and competitive conditions; future impairments of the Company's proved and unproved oil and gas properties or equity investments, or write-downs of productive assets, causing charges to earnings; unexpected changes in costs; government actions (including the effects of announced or future tariff increases and other geopolitical, trade, tariff, fiscal and regulatory uncertainties), war (including the Russia-Ukraine war and conflicts in the Middle East) and political conditions and events (such as in Latin America); inflation, its impact on markets and economic activity and related monetary policy actions by governments in response to inflation; availability of capital resources, levels of capital expenditures and contractual obligations; the regulatory approval environment, including the Company's ability to timely obtain or maintain permits or other government approvals, including those necessary for drilling and/or development projects; the Company's ability to successfully complete, or any material delay of, field developments, expansion projects, capital expenditures, efficiency projects, acquisitions or divestitures; risks associated with acquisitions, mergers and joint ventures, such as difficulties integrating businesses, uncertainty associated with financial projections or projected synergies, restructuring, increased costs and adverse tax consequences; uncertainties and liabilities associated with acquired and divested properties and businesses, including retained liabilities and indemnification obligations associated with the chemical business; uncertainties about the estimated quantities of oil, NGL and natural gas reserves; lower-than-expected production from development projects or acquisitions; the Company's ability to realize the anticipated benefits from prior or future streamlining actions to reduce fixed costs, simplify or improve processes and improve the Company's competitiveness; exploration, drilling and other operational risks; disruptions to, capacity constraints in, or other limitations on the pipeline systems that deliver the Company's oil and natural gas and other processing and transportation considerations; volatility in the securities, capital or credit markets, including capital market disruptions and instability of financial institutions; HSE risks, costs and liability under existing or future federal, regional, state, provincial, tribal, local and international HSE laws, regulations and litigation (including related to climate change or remedial actions or assessments); legislative or regulatory changes, including changes relating to hydraulic fracturing or other oil and natural gas operations, retroactive royalty or production tax regimes, and deep-water and onshore drilling and permitting regulations; the Company's ability to recognize intended benefits from its business strategies and initiatives, such as the Company's low-carbon ventures businesses and announced GHG emissions reduction targets or net-zero goals; changes in government grant or loan programs; potential liability resulting from pending or future litigation, government investigations and other proceedings; disruption or interruption of production or facility damage due to accidents, chemical releases, labor unrest, weather, power outages, natural disasters, cyber-attacks, terrorist acts or insurgent activity; the scope and duration of global or regional health pandemics or epidemics and actions taken by government authorities and other third parties in connection therewith; the creditworthiness and performance of the Company's counterparties, including financial institutions, operating partners and other parties; failure of risk management; the Company's ability to retain and hire key personnel; supply, transportation and labor constraints; reorganization or restructuring of the Company's operations; changes in state, federal or international tax rates, deductions, incentives or credits; and actions by third parties that are beyond the Company's control.

Additional information concerning these and other factors that may cause the Company's results of operations and financial position to differ from expectations can be found in the Company's other filings with the SEC, including the Company's 2025 Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

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CURRENT BUSINESS OUTLOOK

The Company's financial results are significantly influenced by crude oil prices and, to a lesser extent, NGL and natural gas prices and commodity market differentials. The average WTI price per barrel was $92.79 for the three months ended June 30, 2026, compared with $71.93 for the three months ended March 31, 2026. The average WTI price per barrel was $82.36 for the six months ended June 30, 2026, compared with $67.58 for the six months ended June 30, 2025.

Changes in commodity prices may affect the Company's capital allocation decisions, including the level and timing of investments, which could affect future production volumes. Oil prices are expected to remain volatile due to a variety of factors, including geopolitical developments, macroeconomic conditions and their impact on global energy demand, actions by OPEC and non-OPEC producing countries, and changes in U.S. trade policy.

Commodity prices during the second quarter benefited in part from risk premiums associated with the conflict involving Iran and resulting disruptions to regional energy markets and trade flows. Although shipping activity through the Strait of Hormuz improved during portions of the quarter following diplomatic efforts, recent developments have underscored the continued fragility of those conditions. Ongoing geopolitical uncertainty, potential disruptions to maritime transportation and energy infrastructure, and evolving governmental responses could continue to influence commodity prices and contribute to market volatility. The duration, scope and ultimate outcome of the conflict remain uncertain and could continue to affect energy markets, global economic conditions and commodity prices.

Recent U.S. trade policy actions, including the implementation of tariff replacement measures, could also affect the Company's operations and financial performance. Although the Company has not experienced a material impact to date, tariffs or tariff replacement measures imposed on suppliers could increase costs over time. In addition, broader economic impacts and uncertainty associated with evolving trade policies could affect demand for the Company's products and the prices realized for its production.

STRATEGIC PRIORITIES

The Company is focused on delivering a unique shareholder value proposition with its portfolio of oil and gas and midstream and marketing assets, as well as its ongoing development of carbon management and sequestration solutions and GHG emissions reduction efforts. The Company conducts its operations with an emphasis on technical expertise, HSE, sustainability and social responsibility, and is advancing integrated technologies in CO2, power and midstream to enable differentiated resource recovery and value.

In order to maximize shareholder returns, the Company intends to:

■Maintain safe and responsible operations;

■Execute from a strong balance sheet;

■Deliver a sustainable and growing dividend; and

■Sustain base production.

In August 2026, the Board increased the quarterly dividend by 8% to $0.28 per share, which will be payable on October 15, 2026 to shareholders of record as of September 10, 2026.

OXYCHEM TRANSACTION

The Company completed the sale of OxyChem on January 2, 2026 in an all-cash transaction for an adjusted sales price of $9.5 billion, subject to additional post-closing adjustments. The transaction resulted in a gain of approximately $3.1 billion, net of taxes. OxyChem is reported as discontinued operations, with its assets and liabilities classified as held for sale as of December 31, 2025.

See Note 1 - General in the Notes to Consolidated Condensed Financial Statements in Part I, Item 1 of this Form 10-Q for additional information regarding the OxyChem Transaction.

DEBT

As of June 30, 2026, the Company's debt was rated Baa3 by Moody's Investors Service, BBB by Fitch Rati

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ITEM 7.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read together with the Consolidated Financial Statements and the Notes to Consolidated Financial Statements, which are included in this Form 10-K in Item 8 and the information set forth in Risk Factors under Part 1, Item 1A. The following sections include a discussion of results for fiscal 2025 compared to fiscal 2024 as well as certain 2023 results. The comparative results for fiscal 2024 with fiscal 2023 generally have not been included in this Form 10-K, but may be found in “Part II - Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.

CURRENT BUSINESS OUTLOOK AND STRATEGY

GENERAL

The Company’s financial results are significantly influenced by oil prices, and to a lesser extent, NGL and natural gas prices, and commodity market differentials. Oil prices have been and are expected to remain volatile due to shifts in energy supply and demand, ongoing geopolitical factors and OPEC supply actions. In 2025, compared to 2024, the average annual WTI price per barrel decreased to $64.81 from $75.72, and the average annual Brent price per barrel decreased to $68.18 from $79.79.

The Company’s costs are influenced by inflationary trends, market conditions, the availability and cost of oilfield services, electricity, and CO₂, and other operational expenditures. In April 2025, a U.S. tariff policy was announced that imposed a 10% base tariff rate on most imports, with higher rates applied to certain countries. Since then, the U.S. has negotiated trade deals, and certain tariff rates have been adjusted or paused amid ongoing litigation. These tariffs may increase the Company’s supplier costs and affect demand and prices for its products. The Company works to manage inflation impacts by capitalizing on operational efficiencies, locking in pricing on longer-term contracts and working closely with vendors to secure the supply of critical materials. Seasonality is not a primary driver of changes in the Company’s consolidated quarterly earnings.

STRATEGY

The Company is focused on delivering a unique shareholder value proposition with its portfolio of oil and gas and midstream and marketing assets, as well as its ongoing development of carbon management and storage solutions and GHG emissions reduction efforts. The Company conducts its operations with a priority on HSE, sustainability and social responsibility. In order to maximize shareholder returns, the Company will:

■    Maintain production base to preserve asset base integrity and longevity;

■Deliver a sustainable and growing dividend;

■Prioritize excess cash flow and proceeds from divestitures, including the OxyChem Transaction, for deleveraging until principal debt is approximately $14.3 billion, after which available cash will be allocated to opportunistic share repurchases and/or further net debt reduction;

■Enhance its asset base with investments in its cash-generative oil and gas business; and

■Advance integrated technologies in CO2, power and midstream to enable differentiated resource recovery and value.

OXYCHEM TRANSACTION

In October 2025, the Company announced entry into a purchase and sale agreement with Berkshire Hathaway to sell all of the issued and outstanding equity interests in OxyChem in an all-cash transaction for $9.7 billion. The sale was completed on January 2, 2026, resulting in an estimated gain of $3.2 billion, net of taxes and subject to post-closing adjustments. As a result, OxyChem’s results of operations, cash flows and the related retained liabilities and indemnification obligations are reported as discontinued operations in the Company’s Consolidated Statements of Operations and Cash Flows for all periods presented, with its assets and liabilities reclassified as held for sale in the Company’s Consolidated Balance Sheets.

An Occidental subsidiary, Environmental Resource Holdings, LLC (ERH), has retained legacy tort claims and environmental liabilities primarily associated with historical operations outside of the footprint of the operating facilities that were sold. Glenn Springs Holdings, Inc. will continue to manage the remedial activities at environmental sites on behalf of ERH. The Company expects to expend funds for remediation over many years based on the approved workplans.

CAPITAL INVESTMENT

In 2025, the Company invested $5.6 billion in high-return oil and gas assets to generate long-term free cash flow throughout the commodity cycle. In the midstream and marketing segment, the Company invested $0.7 billion before contributions from noncontrolling interest, primarily related to STRATOS.

DEBT

In 2025, the Company used proceeds from divestitures and cash on hand to repay approximately $4.0 billion of debt. Subsequent to December 31, 2025, but before the date of this filing, the Company used proceeds from the OxyChem Transaction to pay or satisfy and discharge an additional $5.4 billion of debt.

As of the date of this filing, the principal debt outstanding was approximately $15 billion, of which $24 million is due in 2026, $48 million in 2027, $14 million in 2028, $367 million in 2029 and $14.6 billion due in 2030 and thereafter.

For detailed information on the Company’s debt activity, see Note 5 - Long-Term Debt in the notes to the Consolidated Condensed Financial Statements in Part II, Item 8 of this Form 10-K.

SHAREHOLDER RETURN PRIORITIES

Capital is returned to shareholders through the Company’s dividend and share repurchases. In 2025, the Company declared dividends to common shareholders of $945 million, or $0.96 per share. As of December 31, 2025, $1.2 billion remained of the Company’s $3.0 billion share repurchase program, which the Board authorized in February 2023. After using the proceeds from the OxyChem Transaction to reduce the principal of outstanding debt to approximately $15 billion, the Company’s shareholder return priorities are to continue to provide a sustainable and growing dividend and further reduce principal debt to approximately $14.3 billion. Available cash will be allocated, as appropriate, to opportunistic share repurchases and/or further debt reduction.

SUSTAINABILITY STRATEGY

The Company’s sustainability strategy is organized around four pillars: principles of governance, people, planet, and prosperity. The Company integrates these sustainability pillars into our strategic planning and investment decision-making processes.

In 2020, the Company was the first U.S. oil and gas company to announce goals to achieve net-zero GHG emissions for its total emissions inventory including use of sold products. These goals include achieving net-zero GHG emissions (i) from its operations and energy use before 2040, with an ambition to do so before 2035, and (ii) from its total carbon inventory, including the use of its sold products, with an ambition to do so before 2050. In 2020, the Company also set various interim targets, including 2025 carbon and methane intensity targets, and the Company was the first U.S. oil and gas company to endorse the World Bank’s initiative for zero routine flaring by 2030. In 2022, the Board of Directors adopted the Company’s updated HSE and Sustainability Principles, based on engagement with shareholders, employees and other stakeholders. The HSE and Sustainability Principles reinforce the alignment among the Company’s core values, goals and strategies, underpin its Operating Management System, and help to guide the workforce across its operations. In 2023, the Company was an original signatory to the Oil and Gas Decarbonization Charter, committed funding to the World Bank’s Global Flaring and Methane Reduction Partnership, and established a new, medium-term 2030 methane intensity target. In 2025, the Company established a new, medium-term 2030 CO2 equivalent intensity target.

The Company seeks to meet its sustainability and environmental goals by implementing practices and technologies to reduce operational emissions coupled with its development and commercialization of technologies that lower both GHG emissions from industrial processes and existing atmospheric concentrations of CO2. The Company believes that carbon removal technologies, including DAC and CCUS, can, with incentives necessary for their development and deployment, provide essential CO2 reductions to assist the world’s transition to a lower carbon-intensive economy. Through fiscal 2024, the Company reduced estimated methane emissions by approximately 78.6% from 2019 and 40% from 2023, along with a 28.7% reduction in CO2 equivalent emissions since 2019. The following actions helped the Company advance its low-carbon business strategy in 2025:

■Completed construction of STRATOS central processing facilities and obtained Class VI permits to sequester CO2, with operations expected to begin in 2026.

■Actively progressed its sequestration hub plans, with five sequestration hubs in various stages of development primarily in the Permian Basin and across the Texas and Louisiana Gulf Coast; and

■Implemented emissions reduction projects involving hundreds of facilities and wells and thousands of pieces of equipment across its oil and gas operations.

The future costs associated with emissions reduction, carbon removal and CCUS to meet the Company’s long-term net-zero GHG goals may be substantial and the execution of its plans and net-zero pathway depends on securing third-party capital investments. As reflected by the joint venture with BlackRock, the Company is pursuing multiple avenues to fund these projects including project financing, long-term carbon removal or CCUS agreements, and identifying business opportunities with stakeholders in carbon-intensive industries.

KEY PERFORMANCE INDICATORS

The Company seeks to meet its strategic goals by continually measuring its success against key performance indicators that drive total stockholder return. In addition to efficient capital allocation and deployment discussed below in the section titled “Oil and Gas Segment - Business Strategy,” the Company believes its most significant performance indicators are:

OPERATIONAL

■Total spend per barrel - In 2026, the Company will continue our emphasis on controlling total costs from a per-barrel perspective. Total spend per barrel is the sum of capital spending, general and administrative expenses, other operating and non-operating expenses and oil and gas lease operating costs divided by global oil, NGL and natural gas sales volumes.

■Daily production - the Company seeks to maximize field operability and minimize production down-time.

FINANCIAL

■CROCE - CROCE is calculated as (i) the cash

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