Occidental Petroleum Corporation (OXY): A Bull Case Theory 

We came across a bullish thesis on Occidental Petroleum Corporation on Open Insights’s Substack. In this article, we will summarize the bulls’ thesis on OXY. Occidental Petroleum Corporation’s share was trading at $45.40 as of October 6th. OXY’s trailing and forward P/E were 26.02 and 16.18 respectively according to Yahoo Finance.

Occidental Petroleum (“OXY”) recently sold its OXYChem business to Berkshire Hathaway for $9.7 billion in cash, translating to roughly $8 billion after taxes, while retaining ~$2 billion in environmental liabilities. OXYChem historically generated approximately $550 million in free cash flow (FCF) annually, with potential upside from the Battleground plant expansion adding $325 million in EBITDA by 2026.

Adjusting for capex and trough chemical pricing, OXYChem’s 2026 FCF is projected around $460–500 million, implying a 7–10% FCF-to-sale-price ratio. While some view this as expensive, OXY prioritized deleveraging its balance sheet, using $6.5 billion of proceeds to reduce net debt from ~$21 billion to below $15 billion, unlocking future shareholder returns via dividends and share repurchases.

Strategically, the divestiture aligns with OXY’s broader asset optimization, effectively swapping OXYChem and other non-core holdings for CrownRock (“CR”), acquired for $12.4 billion in 2024. CR, with 170,000 boepd production, generates roughly $1 billion in FCF at $70/WTI, yielding an 8% FCF return comparable to OXYChem in a down-cycle chemical market. Beyond immediate cash flow, CR provides critical Midland Basin acreage, enabling enhanced oil recovery (EOR) and operational synergies, which could further boost returns.

The market reacted negatively, largely due to messaging gaps around the divestiture and perceived costs, but OXY’s strategic moves de-risk the balance sheet, accelerate shareholder returns, and position the company for long-term growth in the Permian and Midland basins. While the immediate financial optics appeared costly, the combination of deleveraging, asset rationalization, and future FCF generation offers a compelling long-term risk/reward scenario. Investors should expect clarifying guidance in the upcoming quarterly report, which will likely resolve market skepticism and highlight OXY’s strategic positioning.

Previously we covered a bullish thesis on Occidental Petroleum Corporation (OXY) by Oliver | MMMT Wealth in April 2025, which highlighted the company’s attractive valuation amid low U.S. oil supply and potential operational leverage. The stock has appreciated approximately 14% since our coverage. The thesis still stands as OXY benefits from energy market tailwinds. Open Insights shares a similar outlook but emphasizes OXY’s OXYChem divestiture and balance sheet deleveraging.

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Disclosure: None.