Occidental (OXY) Q2 2026: Sale Leaves Costs Behind
Occidental’s OxyChem sale reduced borrowing, but taxes and retained environmental obligations left costs behind. The transaction closed on January 2, 2026, at an adjusted price of $9.5 billion, subject to further closing adjustments. Cash flows classified as discontinued operations included a $926 million operating outflow in the first half, mainly for transaction-related tax payments—not losses from six months of running the sold business. Meanwhile, stronger oil prices lifted earnings in Occidental’s remaining operations. 10-Q, Note 1 and liquidity discussion.
1. The sale reduced borrowing without clearing every obligation
1-1. Cash rose while the asset base shrank
The removal of OxyChem’s assets explains much of the smaller balance sheet; the remaining business also tied up more cash in receivables—amounts customers owe—and inventory. Dollar amounts below are in millions unless otherwise indicated; $M means million dollars.
| Item ($M) | Dec. 31, 2025 | June 30, 2026 | Change |
|---|---|---|---|
| Cash and equivalents | 1,968 | 4,150 | +110.9% |
| Trade receivables | 2,575 | 3,142 | +22.0% |
| Inventory | 1,823 | 2,185 | +19.9% |
| Property and equipment, net | 63,643 | 62,600 | −1.6% |
| Assets held for sale, current and non-current | 6,520 | 0 | −100.0% |
| Total assets | 84,186 | 80,358 | −4.5% |
Commodity inventory rose from $601M to $915M, explaining most of the inventory increase. Higher balances absorb cash, but the filing does not establish that collection problems caused the receivables increase. Intangible assets are not separately presented on the condensed balance sheet. 10-Q, balance sheets, p. 2; Note 1, pp. 9–10.
1-2. Debt fell while payables and accrued liabilities rose
Debt including finance leases fell from $22,396M to $13,743M. Accounts payable rose from $3,285M to $3,572M, while accrued liabilities—obligations recorded but not yet paid—increased from $3,592M to $4,117M. These latter balances include operating, tax and other obligations; they are not all borrowings.
Only $62M of principal matures in calendar 2027–2028, or about 0.5% of $11,818M in face-value borrowings, the principal owed before accounting adjustments. This limits refinancing needs in those two calendar years. The $11,818M figure excludes finance leases and differs in accounting basis from the $13,743M debt figure above. The calendar-year schedule does not isolate the exact amount due within three years of the balance-sheet date, and an average contractual interest rate is not separately disclosed; substantially all debt is fixed-rate. Operating lease assets were $829M against $883M of related liabilities. 10-Q, Note 1; Note 3, pp. 13–14; liquidity discussion, p. 36.
1-3. Retained earnings include the disposal windfall
Retained earnings—accumulated profits after dividends, not a cash balance—rose from $21,891M to $27,350M, helped by the sale-related profit. Common stock plus additional paid-in capital, the combined recorded capital contributed by common shareholders, rose from $21,251M to $21,632M; preferred stock remained $8,287M. Treasury stock, the deduction for repurchased shares, increased from $15,597M to $15,714M, while accumulated other comprehensive income, which records certain gains and losses outside net income, slipped from $202M to $191M. Total equity, including outside investors’ interests in consolidated subsidiaries, reached $42,381M. The sale-driven increase is not recurring earning power. 10-Q, balance sheets and equity statements, pp. 2, 6.
2. The remaining business improved, but not every gain repeats
2-1. Quarterly recovery followed falling annual earnings
Earnings from continuing operations—the businesses Occidental retained—improved sharply, meaning the recovery extends beyond the OxyChem sale. Read the full-year columns separately from the quarterly comparison; all sales figures exclude the discontinued chemical business. FY denotes a full fiscal year, while Q2 covers April through June.
| Item ($M, except margin) | FY2023 | FY2024 | FY2025 | Q2 2025 | Q2 2026 |
|---|---|---|---|---|---|
| Net sales | 23,156 | 22,019 | 21,593 | 5,258 | 8,065 |
| Continuing pretax income | 4,662 | 4,024 | 3,128 | 560 | 3,915 |
| Continuing net income | 3,332 | 2,866 | 2,107 | 338 | 3,000 |
| Continuing net income / sales | 14.4% | 13.0% | 9.8% | 6.4% | 37.2% |
| Total net income, including discontinued operations | 4,696 | 3,078 | 2,369 | 468 | 2,996 |
Across the three annual observations, sales declined at a 3.4% compound annual rate: (21,593 / 23,156)^(1/2) − 1. That is the average annual pace over a two-year interval. The statements mix operating and non-operating expenses without a consolidated operating-profit subtotal, so calculating an operating margin or measuring how operating profit responds to sales growth would require additional assumptions. The 37.2% quarterly ratio therefore means $37.20 of continuing net income per $100 of sales, including non-operating effects; it is not an operating margin. 2025 10-K, statements of operations, p. 60; Q2 10-Q, p. 3.
Q2 continuing income of $3,000M included $368M of net after-tax benefits from items the company identifies as affecting comparisons between periods. Subtracting them leaves $2,632M. This calculation is a non-GAAP measure, meaning it adjusts earnings reported under U.S. accounting rules. It removes identified effects from derivatives—contracts whose value changes with underlying prices—asset sales, early debt repayment and retirement costs, together with their tax effects. Even this measure retains crude-marketing profits caused partly by the timing between purchases and sales; it is not guaranteed recurring profit. 10-Q, comparability table, p. 31; midstream discussion, p. 34.
The $2,632M calculation is at the consolidated continuing-operations level, before allocating earnings among common shareholders and other interests. It should not be confused with the approximately $2.4 billion of adjusted income attributable to common shareholders, or $2.40 per diluted share, highlighted in Occidental’s earnings release. Occidental Q2 2026 earnings release.
2-2. Selected costs changed little, while earnings rose despite more shares
Oil and gas lease operating expense, the cost of running producing properties, fell from $1,135M to $1,117M as quarterly sales rose 53.4%. Administrative expense edged from $257M to $262M, and depreciation, depletion and amortization—the accounting allocation of asset costs over their useful lives or production—rose from $1,823M to $1,847M. These selected expenses do not represent all company costs, and the sales growth applies to the whole continuing business. The filing does not split these expenses into fixed and variable components.
Diluted earnings per share, which allows for shares potentially created by instruments such as options, rose from $0.26 to $2.75. Diluted average shares increased from 1,010.4M to 1,012.2M, so a smaller share count did not produce the improvement. The earnings allocated to common shareholders also reflect securities entitled to share in profits and a prior-year adjustment related to warrants, which give holders the right to buy shares. 10-Q, p. 3; Note 9, pp. 23–24.
3. Sale taxes limited the improvement in reported operating cash
Continuing operations generated more cash, but discontinued operations absorbed part of that improvement. Sale proceeds appear in investing activities, while the related tax payments appear in operating activities. That distinction is central to this first-half comparison. H1 covers January through June.
| Item ($M) | H1 2025 | H1 2026 | Change ($M) |
|---|---|---|---|
| Continuing operating cash | 4,761 | 6,478 | +1,717 |
| Discontinued operating cash | 347 | −926 | −1,273 |
| Total operating cash | 5,108 | 5,552 | +444 |
| Total investing cash | −2,730 | 6,066 | +8,796 |
| Total financing cash | −2,175 | −9,476 | −7,301 |
| Ending cash, including restricted cash | 2,360 | 4,188 | +1,828 |
| Capital expenditures, continuing operations | 3,387 | 3,143 | −244 |
The ending-cash row compares June 2026 with June 2025; its $1,828M change is not the cash increase during the first half of 2026. Cash including restricted amounts rose by $2,142M during that half-year, from $2,046M to $4,188M. Restricted cash is subject to limits on its use, explaining why this total exceeds the $4,150M cash-and-equivalents balance in Section 1. 10-Q, cash-flow statement, p. 7; Note 1, p. 9.
Total operating cash minus continuing capital expenditures was $2,409M, versus $1,721M. This calculation includes discontinued operating cash but excludes discontinued investing expenditures; it is not a fully comparable measure of cash left after investment across all businesses. On a consistent continuing-business basis, the same calculation gives $3,335M versus $1,374M, before separately reported adjustments for the timing of capital-spending payments. Capital spending equaled 23.6% of first-half sales ($3,143M / $13,295M); the filing does not quantify spending to maintain existing production separately from spending for growth. 10-Q, cash-flow statement, p. 7; liquidity discussion, pp. 35–36.
Total operating cash divided by total net income was 2.62 in FY2023, 3.72 in FY2024 and 4.45 in FY2025. These ratios measure operating cash generated per dollar of accounting profit. The underlying pairs were $12,308M/$4,696M, $11,439M/$3,078M and $10,532M/$2,369M. The rising ratios did not mean rising cash generation: operating cash fell, but accounting profit fell faster.
The first-half 2026 ratio fell to 0.87 ($5,552M/$6,355M), but discontinued earnings contributed $3,119M; the continuing-business ratio remained 2.00 ($6,478M/$3,236M). The sale distorts the headline ratio because its profit enters net income while its proceeds enter investing cash flow. Receivables and inventory also absorbed $566M and $334M of operating cash. 2025 10-K, pp. 60, 63; Q2 10-Q, p. 7.
4. Strong oil prices coexist with weak gas and retained cleanup risk
The quarter reflects an oil-price upswing, not a broad improvement across every product. These operating measures show why sales growth cannot be treated as volume growth.
| Indicator | Q1 2026 | Q2 2026 |
|---|---|---|
| Daily sales, thousand barrels of oil equivalent | 1,428 | 1,433 |
| Worldwide realized oil price, $/barrel | 69.91 | 96.78 |
| U.S. realized gas price, $/thousand cubic feet | 1.01 | −1.48 |
Oil-equivalent volumes combine oil and gas by energy content, not selling value. Realized prices measure the prices Occidental received. Higher oil receipts supported earnings while negative domestic gas realizations exposed regional pricing pressure. Management attributed part of the oil-price increase to Middle East disruption. 10-Q, business discussion, p. 29; operating tables, pp. 32–34.
Weak prices received for domestic gas did not prevent gains in the separate midstream and marketing business, which transports and trades commodities. The earnings release attributed higher gas margins there to better use of transportation capacity, while higher crude margins benefited from the timing of sales. This distinction helps explain why production prices and marketing profits could move in different directions. Occidental Q2 2026 earnings release.
The longer cycle cautions against extending this quarter indefinitely. Annual West Texas Intermediate (WTI) oil reference prices used to value reserves were $39.57, $66.56, $93.67, $78.22, $75.48 and $65.34 per barrel in 2020–2025. Their six-year mean was $69.81, with the pandemic year marking the low. These first-day-of-month averages differ in method and period from the $92.79 quarterly WTI marker average Occidental reported for Q2 2026. The series illustrate the wide price swings faced by a business whose earnings depend heavily on oil. 2022 10-K, proved-reserves discussion, p. 33; 2025 10-K, proved-reserves discussion; Q2 10-Q, business discussion, p. 29.
The company’s $92.79 marker should not be presented as a verified EIA spot-price average. The U.S. Energy Information Administration reports monthly WTI Cushing spot averages of $100.32, $102.13 and $84.81 for April, May and June 2026, respectively. Those observations do not reconcile to the company’s quarterly figure; the sources reviewed do not explain the difference. The $92.79 figure is therefore retained specifically as Occidental’s reported benchmark. EIA spot-price data; Occidental Q2 2026 earnings release.
Occidental retained legacy environmental liabilities and obligations to reimburse the buyer for certain covered liabilities after selling OxyChem. Group cleanup reserves—recorded estimates of future costs, rather than a separate cash fund—were $1,853M, with reasonably possible additional losses of up to $1.9 billion beyond recorded amounts. That additional exposure is uncertain, and these group totals are not exclusively OxyChem obligations. 10-Q, Notes 1 and 7, pp. 8, 20–21.
Carbon capture adds a separate execution risk. The BlackRock joint venture is developing a facility designed to remove carbon dioxide directly from the air. It held $1.3 billion of construction in progress, and Occidental may owe additional payments if construction or operating thresholds are missed. Those assets represent capital committed before dependable operating returns are established. 10-Q, Note 1, pp. 8–9.
5. Lower debt buys flexibility, not immunity from the cycle
Occidental’s remaining operations improved, while disposal proceeds accelerated debt reduction. First-half debt payments of $8,695M substantially exceeded $839M of dividends and $117M of treasury-share purchases. The purchases were outside the publicly announced repurchase program, and $295M of cash proceeds from issuing common stock also supported financing. 10-Q, p. 7; share-repurchase disclosure, p. 37.
The company is benefiting from a price-led recovery after weaker annual earnings. If oil prices fall and marketing timing benefits fade, maintaining cash generation will depend more heavily on spending discipline. Lower debt helps absorb that pressure, but the tax cost and retained obligations mean the OxyChem sale is not a clean break from every cost of the business.
This analysis is based on filings submitted to the U.S. Securities and Exchange Commission, supplemented by Occidental’s earnings release and EIA price data, and is provided for informational purposes only. It is not investment advice. Source: SEC 10-Q, filed August 5, 2026; historical comparisons use SEC 10-K filings.
