OXY: Upcoming Unit Sale Will Drive Faster Debt Reduction And Cash Returns

Analysts have trimmed their average price target on Occidental Petroleum by about $1 per share to roughly the low $50s. This reflects more cautious oil macro assumptions, updated 2025 to 2026 guidance and modeling, and a balanced view of the OxyChem divestiture that improves leverage but tempers near term valuation upside.

Analyst Commentary

Analyst views on Occidental are mixed, with price target changes clustering in the mid 40s to low 50s and ratings largely centered around Neutral or Equal Weight. The OxyChem divestiture, evolving commodity assumptions, and updated 2025 to 2026 frameworks are the primary drivers of these revisions.

Bullish Takeaways

• Bullish analysts see the OxyChem sale as a catalyst for faster balance sheet normalization, highlighting the planned multibillion dollar debt paydown and progress toward a sub $15B net debt target by 2025 end.
• Some models attribute incremental per share value from the transaction, even after higher environmental liability assumptions, supporting the view that the deal is modestly accretive to equity value over time.
• Upward price target revisions around the mid 40s reflect confidence that Occidental can sustain competitive capital efficiency and cash generation in its core E&P portfolio despite a more challenging macro backdrop.
• Supportive forecasts for industry fundamentals, including expectations for constructive longer term commodity margins versus market fear, underpin the argument that current valuation embeds a discount to intrinsic value.

Bearish Takeaways

• Bearish analysts argue that the OxyChem divestiture is dilutive across key return and valuation metrics, with the remaining preferred equity overhang constraining buybacks and broader shareholder distributions.
• Several reduced price targets point to a less favorable risk reward as oil macro assumptions are revised lower, while gas oriented peers are viewed as offering better upside versus current commodity strips.
• Concern that the transaction proceeds fall short of earlier market expectations, combined with no transfer of legacy environmental liabilities, leads some to question the overall economic attractiveness of the sale.
• Relative to large cap peers, Occidental is increasingly viewed as less compelling on a free cash flow yield and multiple basis, with limited near term catalysts to drive a material re rating without stronger commodity support.

What's in the News

• Berkshire Hathaway is reportedly close to a roughly $10 billion deal to acquire Occidental's OxyChem petrochemical business, with an agreement potentially finalized within days (Wall Street Journal).
• Reports indicate Occidental has been running a sale process for OxyChem that would mark its largest divestiture to date, aimed at accelerating debt reduction and portfolio simplification (Financial Times).
• Occidental's third quarter 2025 production exceeded the high end of guidance, reaching 1.465 million barrels of oil equivalent per day, supported by strong contributions from the Permian, Rockies and international assets.
• The company raised its total production guidance for the fourth quarter of 2025 to a midpoint of 1.46 million BOE per day, reflecting continued strong performance across all three domestic assets despite a scheduled turnaround at Al Hosn.
• Multiple media and market reports emphasize that Berkshire, already Occidental's largest shareholder, would deepen its exposure to the company and the chemicals value chain if the OxyChem transaction proceeds as indicated (Wall Street Journal, Financial Times).

Valuation Changes

• Fair Value: Trimmed slightly from about $50.21 to approximately $50.08 per share, reflecting modestly more conservative assumptions.
• Discount Rate: Risen slightly from roughly 7.16 percent to about 7.17 percent, indicating a marginally higher required return on capital.
• Revenue Growth: Essentially unchanged, with projected long term revenue contraction holding around negative 1.82 percent.
• Net Profit Margin: Eased slightly from about 9.41 percent to roughly 9.33 percent, signaling a modest reduction in expected profitability.
• Future P/E: Edged up from roughly 29.69x to about 29.89x, implying a small increase in the valuation multiple applied to forward earnings.