Occidental (OXY): A 31% Beat - And It Was $11.54 Of Oil

Occidental Petroleum Corporation (OXY) Q2 2026 — Q2 adjusted EPS from continuing operations $2.40 vs a $1.83 bar - a 31.1% beat. GAAP reported EPS was HIGHER at $2.75, because items affecting comparability were a net GAIN of $368M after tax. Revenue $8,065M, up 53.4% and 14.0% above the $7,074M estimate. Free cash flow before working capital $3,021M, the highest since Q3 2022. Production 1,433 Mboe/d, above the high end of guidance. Quarterly dividend raised 8% to $0.28. The 8-K was accepted at 4:16 p.m. ET on Aug 5, so $53.81 is the pre-print close and $56.04 (+4.14%) is the reaction. Occidental beat by 31% and the stock rose 4.1%. This episode is about what that beat actually was. First, the basis: $2.40 is ADJUSTED from continuing operations and $1.83 is a non-GAAP estimate, so the pair is honest - and GAAP was HIGHER at $2.75 because items affecting comparability were a net $368M GAIN, not an impairment. Second, the beat in barrels: $0.57 x 1,012.2M diluted shares is $577M after tax, or $749M pre-tax at the 23% rate, spread over 64.9 million barrels of oil sold - $11.54 a barrel. WTI averaged $92.79; the Street's deck was about $81. Third, the sequential move is 99% price: realised oil went $69.91 to $96.78 (+$26.87), worth $1.33 a share, against an actual move of $1.34, while production went 1,426 to 1,433 Mboe/d. Fourth, the line nobody wrote down - domestic realised natural gas was MINUS $1.48/Mcf, minus 51% of a $2.89 NYMEX, which on 1,867 MMcf/d is MINUS $251M of revenue and a $416M quarter-on-quarter swing. Fifth, the preferred is now the expensive money: interest and debt expense was $108M in the quarter while the $8,287M Berkshire preferred took $170M, and that balance has not moved in six quarters. Sixth, they sold OxyChem to Berkshire for $9,472M net and a $3.1B gain but RETAINED the legacy environmental liabilities - $1,853M booked across 149 sites, up to $1.9B more reasonably possible, plus a guaranty to Berkshire. Seventh, record free cash flow and zero shares bought under the announced program, while $22-strike warrants took basic shares from 941.3M to 997.1M. THE CALL: HOLD (3/5, A SUPERB QUARTER, AND THE PRICE ALREADY ASSUMES $75 OIL FOREVER) — base-case value ~$55.0 vs ~$56.04 today. KEY METRICS: - CALL: HOLD 3/5, fair value ~$55 vs the $56.04 close (-2%). Street: 52 analysts, Buy, $65.15 avg target. We DIFFER and are more cautious. - Adj EPS $2.40 vs $1.83 (+31.1%); GAAP $2.75. Rev $8,065M +53.4%. FCF before WC $3,021M. Production 1,433 Mboe/d, above guidance. - The beat is $11.54/bbl of unmodelled oil. WTI $92.79. Domestic gas realised MINUS $1.48/Mcf. Preferred $170M/qtr vs $108M of interest. What to watch: UP: a redemption of any part of the Berkshire preferred (worth roughly $3 a share we are not carrying); an actual buyback under the $1,223M already authorised; Permian gas realisations turning positive as new takeaway arrives; or principal debt reaching the $10.0B milestone early. BEAR: WTI back under $70, a fourth straight quarter of falling international volumes, capital spending rising to defend flat production, or another quarter of negative Waha gas. Also on YouTube: @ChargedAlpha DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.