Occidental's Q2 2026 EPS jumped to $2.75 from $0.26 as realized oil hit $96.78/bbl on Iran-conflict risk premiums, while OxyChem sale proceeds cut principal debt to $11.8B from $20.4B.
Revenue
$8.1B
+53.4% YoY
Net income
$2.8B
+874.7% YoY
Diluted EPS
$2.75
+957.7% YoY
Operating margin
45.0%
Occidental's Q2 2026: $97 oil lifts profit nearly tenfold, and the OxyChem cash cuts debt to $11.8 billion
Occidental Petroleum (OXY) earned $2.81 billion for common shareholders in the quarter ended June 30, 2026, or $2.75 per diluted share. A year earlier it earned $288 million, or $0.26. Almost all of the increase came from the oil price. Occidental's average realized crude price (what it actually received per barrel, as opposed to a benchmark quote) was $96.78, up from $63.76 a year earlier. The 10-Q says second-quarter prices "benefited in part from risk premiums associated with the conflict involving Iran and resulting disruptions to regional energy markets and trade flows." Production barely changed: 1,433 thousand barrels of oil equivalent per day (Mboed), against 1,400 a year earlier.
This is also the first set of results since Occidental sold its chemicals business, OxyChem, to Berkshire Hathaway on January 2, 2026, for an adjusted price of $9.5 billion. OxyChem is now reported as a discontinued operation: its results sit on a separate line below profit from the continuing business, and prior-year figures have been restated to match. As a result, Occidental now reports only two segments, Oil and Gas and Midstream and Marketing. The sale proceeds went almost entirely into repaying debt.
Key figures
Metric
Q2 2026
Q2 2025
YoY Change
Net sales
$8,065M
$5,258M
+53.4%
Operating margin (see note)
45.0%
15.1%
+29.9 pts
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Operating margin is the share of sales left after the costs of running the business and before interest and tax. Occidental doesn't report an operating income line, so we calculated it as net sales minus total costs and deductions excluding interest expense: $3,627M ÷ $8,065M this year, and $792M ÷ $5,258M a year ago. That calculation excludes asset-sale gains and equity-investment income. "Barrels of oil equivalent" (boe) adds natural gas to oil production at 6,000 cubic feet of gas per barrel. NGLs (natural gas liquids) are products such as ethane and propane that are separated out of the gas stream.
What drove the quarter: price, not volume
The filing's price/volume breakdown shows how little volume mattered. From Q1 to Q2 2026, U.S. oil revenue rose from $3,873M to $5,417M. Of that $1.54 billion increase, $1,488M came from higher prices and only $56M from higher volumes. Occidental's realized oil price was 104% of WTI in Q2, compared with 97% in Q1, so it captured slightly more than the whole benchmark move.
Natural gas worked in the opposite direction. Occidental's average realized U.S. gas price was negative: –$1.48 per thousand cubic feet, against $1.33 a year earlier and while the NYMEX benchmark averaged $2.89. A negative realized price means that, on average, Occidental paid more to have its gas gathered, processed and transported than the gas sold for. In the price/volume table, U.S. gas revenue swung from +$164M in Q1 to –$250M in Q2, and the entire $414M decline came from price. The filing describes this only as "lower domestic realized natural gas prices" and doesn't give a cause. Gas is a by-product of Occidental's oil wells, so production continues whatever gas sells for.
The Midstream and Marketing segment partly offset this. Midstream is the business of moving, storing and trading oil and gas. The MD&A credits its improvement partly to "higher gas margins from transportation capacity optimizations" in the Permian. Occidental holds pipeline capacity out of the Permian Basin in West Texas and New Mexico, and that capacity was worth more when gas trapped in the basin was priced so far below prices elsewhere. The oil and gas segment and the midstream segment were on opposite sides of the same price gap.
Segment results
Segment pre-tax income
Q2 2026
Q2 2025
Q1 2026
Oil and Gas
$2,849M
$934M
$1,017M
Midstream and Marketing
$1,338M
$39M
–$87M
Corporate and eliminations
–$164M
–$142M
–$108M
Interest and debt expense, net
–$108M
–$271M
–$432M
Oil and Gas tripled its pre-tax income from a year earlier. The MD&A attributes the increase from Q1 to "higher realized crude oil and NGL prices and derivative gains, partially offset by lower domestic natural gas realizations." Derivatives are contracts that lock in or limit future selling prices. Occidental has crude oil "collars", which set both a floor and a ceiling on part of its oil price. They produced a $105M gain in Q2 after a $339M loss in Q1, so the first half shows a net $234M loss on hedges during a period of rising prices.
By region, U.S. production rose to 1,228 Mboed from 1,167. The Permian reached 804 Mboed, up from 770, and the Gulf of America reached 144, up from 125. The company says both business units beat expectations. International production fell to 205 Mboed from 233. The Al Hosn gas project in the UAE dropped to 74 Mboed from 84, and Oman to 68 from 76. The MD&A links the lower international volumes to "disruptions resulting from conflict in the Middle East," so the same conflict that raised Occidental's oil prices also reduced its Gulf output.
Midstream and Marketing went from $39M a year ago, and an $87M loss in Q1, to $1,338M. Two things inflate that number:
$377M of the total is one-time items. These are $178M of derivative gains and $199M of net gains on asset sales and other items, which include a $220M gain from the reduction in Occidental's ownership of Western Midstream (WES) that followed an acquisition by WES. Occidental did not sell any shares; its ownership percentage fell because WES grew.
Some of the rest comes from timing. The MD&A credits "higher crude margins driven by the timing impact of crude marketing, reflecting the lag between the purchase of crude volumes and their subsequent sale." When prices are rising, oil bought at last month's price and sold at this month's price shows a profit. That effect reverses when prices fall, so this part of the segment's result shouldn't be treated as recurring.
GAAP vs. adjusted: why $2.75 and $2.40 differ
Occidental's adjusted EPS of $2.40 (a company-defined measure that removes items it considers non-recurring) is lower than the reported $2.75. The Q2 one-time items were net gains: after tax they added $368M to continuing operations. They consisted of the midstream gains above, the crude hedge gain, and a $47M gain on early debt repayment, partly offset by $39M of early-retirement costs. The two measures moved very differently from Q1 to Q2. Reported EPS fell 12% from Q1's $3.13 because Q1 included the ~$3.1 billion after-tax gain on the OxyChem sale. Adjusted EPS more than doubled, from $1.06 to $2.40. The adjusted figure gives the better picture of how the business itself performed.
The tax rate also helped. The effective tax rate on continuing operations fell to 23% from 40% a year earlier. The 10-Q attributes Occidental's tax rate mainly to its geographic mix of income: U.S. profit is taxed at 21%, while some international operations are taxed at up to 55%. With much more profit earned in the U.S. at these oil prices, the blended rate dropped.
The balance sheet: OxyChem proceeds went to debt repayment
Occidental took on a large amount of debt for its 2024 acquisition of CrownRock, a Permian producer. The OxyChem sale was largely intended to pay that debt down, and the numbers show it happening:
Principal debt fell from $20.4 billion at December 31, 2025 to $11.8 billion at June 30, 2026. That is $8.6 billion repaid in six months, including $1.9 billion in Q2 alone, funded by after-tax OxyChem proceeds and operating cash flow. Retiring bonds early cost a net $190M in the first half.
The repayments cleared every 2026 maturity and nearly all of 2027's: only $48M is due in 2027, $14M in 2028 and $352M in 2029.
Net interest expense fell to $108M from $271M a year earlier. That figure includes the $47M early-repayment gain, so on an underlying basis interest was roughly $155M, still about 43% lower.
Period-end cash was $4.2 billion, and nothing was drawn on the $4.2 billion revolving credit facility. Principal debt minus cash comes to about $7.6 billion.
On a non-GAAP basis, Q2 cash generation was the strongest in almost four years. Operating cash flow from continuing operations was $5.1 billion, or $4.6 billion before working-capital changes (short-term swings in receivables and payables). Capital spending was $1.6 billion, leaving $3.0 billion of free cash flow before working capital. That is the highest since Q3 2022 and four times the $754M of Q2 2025. The board raised the quarterly dividend 8% to $0.28 per share, payable October 15, 2026, its second increase this year. Buybacks were negligible: about 637,000 shares in Q2, and the release gives no sign that a larger program has started. The share count rose to ~999.7 million because warrant holders exercised options to buy stock at $22.
Takeaway: Q2's roughly tenfold profit increase came from the oil price, which the company links partly to the Iran conflict, and not from growth in the business: production rose only 2.4% from a year earlier. The durable change is the balance sheet. Debt has fallen from $20.4 billion to $11.8 billion since December, interest costs are down by about 40%, and there are almost no maturities before 2030. Occidental is now much less exposed to an oil-price decline than it was a year ago, even though these earnings depend on oil staying near $90.
What to watch next
Guidance. The earnings release and 10-Q say Q2 production and midstream results beat the top of guidance, but neither document gives a numerical Q3 or full-year outlook, so we don't quote one here. The release gives a single stated target: getting principal debt from $11.8 billion to a $10.0 billion milestone. At Q2's pace of free cash flow, that is roughly $1.8 billion away, or less than one more quarter of debt repayment if prices hold.
Our read:
Earnings depend almost entirely on the oil price. At Q2's volumes, each $1 change in the realized oil price is worth roughly $65M of quarterly revenue before tax and royalties (about 714,000 barrels a day of oil sales × ~91 days). The 10-Q itself calls the conditions around the Strait of Hormuz fragile. If the conflict premium fades, oil-segment profit falls quickly and part of the midstream gain reverses with it, because the crude-timing gain that helped in a rising market becomes a loss in a falling one.
Gas is a real problem. A negative realized U.S. gas price means every additional unit of associated gas costs money until more pipeline capacity out of the Permian opens. The midstream business profits from the same price gap, which offsets part of the loss, but the offset isn't guaranteed to continue.
International volumes are the weak spot. Middle East production fell from 233 Mboed to 205 Mboed year over year. A return to 2025 levels would add back about 28 Mboed. Further disruption would reduce it again.
Capital allocation is the next decision. Once the $10 billion debt target is reached, the choice between more debt repayment, larger buybacks and higher dividends will show how management expects to use cash at this price level. The Q2 filing points to dividends so far: a second 8% increase this year.