Occidental Petroleum: Leading the Energy Transition with Oil Production and Carbon Capture Innovation
Strategic Evolution of an Energy Giant
Occidental Petroleum (Oxy), one of the world’s largest independent oil and gas producers, has caught the attention of Warren Buffett to such an extent that Berkshire Hathaway might own the stock forever.
The investment giant’s conviction in Occidental continues to grow, with recent purchases of 8.9 million shares for $405 million, bringing Berkshire’s total ownership to over 264 million shares worth almost $12.5 billion, representing more than 28% of Occidental’s outstanding shares.
Carbon Capture Leadership
Occidental is making significant strides in carbon capture and storage (CCS) technology. The company is constructing the world’s largest direct air capture facility in the Permian Basin, scheduled to be operational by mid-2026, with several more facilities under development. The company believes its carbon capture operations could eventually match its oil and gas revenue.
Current Operations and Financial Performance
The company has demonstrated strong operational performance, producing an average of nearly 1.5 million barrels of oil equivalent per day in the fourth quarter, exceeding production guidance. Capital spending is projected between $7.4 billion and $7.6 billion this year, with most investments directed toward developing oil and gas resources in the Permian and Rockies regions.
Future Outlook and Strategic Initiatives
A major focus is the Stratos carbon capture and storage hub, which is on track to commence operations this year. The company plans to have half its capacity, totaling 250,000 tonnes, online by year’s end, with full capacity expected by mid-2026. This project aims to reduce carbon emissions while generating steady cash flow through carbon credits and net-zero oil sales.
The company’s exceptional operations have led to record production and strong free cash flow, enabling debt reduction, shareholder returns through growing dividends, and business expansion. Investments in chemicals and carbon capture are expected to make future cash flows more resilient.
Market Position and Share Performance
Occidental’s shares have experienced a significant correction, falling nearly 32% from their all-time high reached last April, with a 17% drop in 2024 due to weakening oil prices. However, West Texas Crude Oil has recently shown signs of stabilization, holding around $65 a barrel, with potential for stronger performance if prices move above $70.
