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Will Capital Discipline and Rate Environment Fuel Occidental's Growth?

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Key Takeaways

  • Occidental will invest $3.5-$3.7B in 2025 on Permian assets and further strengthen operations in the basin.
  • Declining interest rates ease OXY's debt burden, supporting cash flow and future reinvestment.
  • OXY's earnings beat estimates for four straight quarters, with an average surprise of 24.34%.

Occidental Petroleum Corporation (OXY - Free Report) reinforces its long-term value proposition through systematic capital investment, especially in its core Permian Basin operations and low-carbon ventures. The company has prioritized high-return projects, allocating capital toward enhancing production efficiency, reducing breakeven costs, and expanding carbon capture and storage capabilities. OXY aims to invest in the range of $7.2-$7.4 billion in 2025, out of which $3.5-$3.7 billion will be in the Permian Basin.

By focusing capital on tier-one assets and technology-driven enhancements, Occidental has improved well productivity and reduced lifting costs across its portfolio. This operational efficiency enables the company to maintain strong margins and generate consistent cash returns, which have supported shareholder-friendly initiatives. 

The decline in interest rates is emerging as a significant tailwind for Occidental, given the capital-intensive business model and the sizable debt load it accumulated following the Anadarko acquisition. Lower borrowing costs ease the refinancing burden and reduce interest expenses, directly supporting improved earnings and cash flow. More interest rate reduction is expected in the second half of 2025, which will further benefit this capital-intensive company.

Occidental is benefiting from a dual advantage, value-accretive capital allocation that strengthens its core operations and a favorable macroeconomic backdrop that lowers the cost of capital. As energy markets normalize and monetary policy eases, Occidental is well-positioned to accelerate deleveraging and reinvest in low-carbon growth platforms. Occidental offers a compelling opportunity for investors seeking energy exposure with strong operational leverage and improving financial flexibility.

Oil & Gas Companies Are Making Long-Term Investments

Along with Occidental, ExxonMobil (XOM - Free Report) and Chevron (CVX - Free Report) , operating in the Permian Basin, are ramping up capital expenditures, resulting in production growth and long-term resource development.
 
ExxonMobil plans to invest around $140 billion in major high-return projects and Permian basin development through 2030. It expects a return of more than 30% over the investment life. ExxonMobil expanded operations in the Permian through the Pioneer Natural Resources acquisition.

Chevron has allocated a $4.5-$5 billion capital expenditure budget for the Permian Basin in 2025. This investment supports Chevron’s goal to reach 1 million boe/d in the basin by 2025 end, leveraging advanced drilling technologies.

OXY’s Shares Are Trading at a Premium

Occidental’s shares are currently expensive on a relative basis, with its current trailing 12-month Enterprise Value/Earnings before Interest, Tax, Depreciation and Amortization (EV/EBITDA TTM) being 5.15X compared with the industry average of 4.85X.

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OXY Stock’s Earnings Surprise History

Due to the stable performance, the company’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 24.34%.

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Occidental’s ROE Lower Than the Industry

Occidental’s return on equity ("ROE") is lower than the industry average in the trailing 12 months. ROE of OXY was 16.6% compared with the industry average of 16.89%.

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OXY’s Zacks Rank

Occidental currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.


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