OCCIDENTAL PETROLEUM CORP /DE/ (OXY) stock intrinsic value fair value estimate & owner earnings analysis

Occidental is now essentially an oil and gas producer. It sold its chemicals business, OxyChem, to Berkshire Hathaway for $9.7 billion (closed January 2, 2026). What remains is oil and gas in the Permian Basin (West Texas and southeast New Mexico), the DJ Basin in Colorado, the offshore Gulf of America, Oman and Algeria, plus a midstream and marketing arm and a low-carbon unit building the STRATOS direct-air-capture plant in Ector County, Texas. Production was 1,434 thousand barrels of oil equivalent a day in 2025, up from 1,327 in 2024 and 1,223 in 2023, mostly because of the 2024 CrownRock purchase ($8.8 billion in cash). How we measured earnings. We start with operating cash flow from continuing operations, remove swings in working capital, then deduct stock compensation and all capital spending. We treat all capital spending as maintenance: oil and gas revenue moves with price rather than volume, so reading a price spike as growth would understate what it costs to hold production flat. Adding back the interest paid to lenders gives the cash the business produces before its creditors: $5.43, $5.19 and $5.26 per share in 2023, 2024 and 2025 (about $5.0 to $5.3 billion a year), even though WTI fell from $75.72 in 2024 to $64.81 in 2025; a full year of CrownRock volumes offset the lower price. In 2025 working capital absorbed $1.07 billion; leaving that in, the three-year median is $5.27 per share, so the level does not depend on the adjustment. We anchor on the 2023 to 2025 median of $5.26 per share (about $5.3 billion) because those are the years that match today's company, with CrownRock in and OxyChem out. Earlier years include OxyChem, and 2022 was a price peak. The first half of 2026 was stronger (continuing operating cash flow of $6.5 billion against $4.8 billion a year earlier), but a level moves only on sustained results, so none of it is added. Per-share pre-lender cash flow grew 1.4% in 2025 ($5.19 to $5.26); the base case assumes no growth in year one. Our earlier estimates were built on a different basis and are not comparable with these. What the shareholders owe ahead of themselves. At June 30, 2026, after repaying about $8.7 billion of debt in the first half, Occidental had roughly $11.8 billion of borrowings and $0.9 billion of finance leases, against $4.15 billion of cash, of which we count $3.15 billion as spare. Principal due is light before 2030 ($24 million in 2026, $48 million in 2027, $14 million in 2028 and $367 million in 2029 as of the February filing). Berkshire's preferred stock, about $8.5 billion at 8% ($679 million a year), cannot be redeemed by the company before August 2029 and can then be redeemed at 105%; unpaid dividends compound at 9%, and a provision requires redemption at a 10% premium for distributions to common holders above $4.00 a share in a 12-month period. We value it at about $9.3 billion (dividends until August 2029 plus redemption at 105%). We also deduct $0.64 billion for outside investors' interests (including BlackRock's STRATOS venture) and $1.67 billion of environmental reserves retained for the sold chemicals business, whose spending no longer runs through continuing cash flow. In the base and bull cases these claims total about $21.3 billion. Base case: $33.6 per share. Pre-lender cash flow stays at $5.26 billion a year for ten years, then declines 10% a year. Evidence: three consecutive years at $5.0 to $5.3 billion; proved reserves of 4,603 million barrels of oil equivalent at the end of 2025 against 4,612 a year earlier, after producing about 523 million, with 72% already developed. We credit no growth, no STRATOS income, no production increase and none of the strong 2026 prices. Planned 2026 capital spending of $5.5 to $5.9 billion is below 2025's $6.4 billion, and that cushion is also not credited. The business is worth $55.2 billion, the claims above are $21.3 billion, leaving $34.0 billion; the $22 warrants (30.4 million outstanding at year-end 2025) add $0.7 billion of cash and 30 million shares, giving $33.6 per share. Bear case: $8.6 per share. The 2020 collapse is repeated in years two and three, with WTI at that year's $39.40. Occidental's own sensitivity is about $240 million of pre-tax cash per $1 of WTI; a $25.41 fall from 2025's $64.81 is about $6.1 billion pre-tax, roughly $4.8 billion after a 21% tax assumption, cutting cash flow to about $0.5 billion. Capital spending was cut from $6.4 billion to $2.5 billion in 2020; we assume only a one-third cut, so cash flow is about $2.5 billion in each of those years. Prices then recover only to 2019's $57.03, and two years of underinvestment cost some volume, so cash flow is $3.4 billion a year through year ten, then declines 15% a year. The business is worth $32.9 billion. Claims are $24.3 billion: the same debt, plus $1.0 billion for refinancing roughly $10 billion of notes due 2030 and later about two points above normal, the preferred staying outstanding at 8% (about $11.3 billion), and the other items above. That leaves $8.6 billion. Cash flow never falls below $2.5 billion, which still covers an estimated $1.4 billion of interest and preferred dividends. Bull case: $58.2 per share. WTI holds at 2024's $75.72 (about $7.3 billion a year, from the same sensitivity), with a slower 8% decline after year ten. The business is worth $80.5 billion, claims are $21.2 billion, leaving $59.3 billion; after the $22 warrants, $58.2 per share, just below the $59.59 strike of Berkshire's 83.9 million warrants, which would dilute value above that level. Checks against the facts. The 2025 working-capital outflow could have signalled a permanently shrinking business, but the unadjusted median is almost identical ($5.27), so the anchor holds either way. Reserve replacement is the weakest link: 2025 shows one year of reserves held flat while spending $5.6 billion on oil and gas, and nothing beyond that is assumed, which is why the far years decline. Not reconciled from the filings: how much overhead remains after the OxyChem sale, and legacy tort claims retained by the company, which are not quantified. Why the margin-of-safety price is $18. Earnings level: we are fairly sure of $5 billion-plus at roughly $65 oil, since it held at two different price levels ($75.72 and $64.81), but oil prices matter far more than anything else: $1 of WTI moves cash flow by about $0.19 billion after tax (our estimate). Worst plausible outcome: oil at 2020's level for longer than two years. Cash flow of about $2.5 billion against roughly $21 billion of claims ahead of common would leave the shares worth only about $2. The company would survive, because little principal falls due before 2030, but common holders would carry almost all of the loss. If we are wrong about price and sustained WTI is $55, the shares are worth about $14; if reserves stop being replaced after five years, about $23; if both, about $7. The price assumes a three-to-five-year holding period, and the common dividend pays about $1.05 a year ($523 million in the first half of 2026). From $18, either single mistake leaves most of the price intact and the base case implies well above 20% a year; a higher price would leave no room for the oil-price error that is the most likely one.