OCCIDENTAL PETROLEUM CORP DE

MANAGEMENT’S DISCUSSION AND ANALYSIS

MIDSTREAM AND MARKETING SEGMENT

The midstream and marketing segment strives to maximize value by optimizing the use of its gathering, processing, transportation, storage and terminal commitments and by providing the oil and gas segment access to domestic and international markets. To generate returns, the segment evaluates opportunities across the value chain and uses its assets to provide services to Occidental’s subsidiaries, as well as third parties. The midstream and marketing segment operates or contracts for services on gathering systems, gas plants, co-generation facilities and storage facilities and invests in entities that conduct similar activities.

This segment also seeks to minimize the costs of gas and power used in Occidental’s various businesses. Also included in the midstream and marketing segment is OLCV. OLCV seeks to leverage Occidental’s carbon management expertise through the development of CCUS projects, and invests in emerging low-carbon technologies that are expected to reduce Occidental’s carbon footprint and enable others to do the same. Capital is employed to sustain or expand assets to improve the competitiveness of Occidental’s businesses. In 2023, capital expenditures related to the midstream and marketing segment totaled $656 million, the majority of which were related to the construction of STRATOS.

BUSINESS ENVIRONMENT

Midstream and marketing segment earnings are affected by the performance of its various businesses, including its marketing, gathering and transportation, gas processing and power-generation assets. The marketing business aggregates, markets and stores Occidental and third-party volumes. Marketing performance is affected primarily by commodity price changes and margins in oil and gas transportation and storage programs. The marketing business results can experience significant volatility depending on commodity prices and the Midland-to-Gulf-Coast oil spreads. The Midland-to-Gulf-Coast oil spreads have decreased from an average of $0.36 per barrel in 2022 to $0.21 per barrel in 2023. A $0.25 change in the Midland-to-Gulf-Coast oil spreads impacts total year operating cash flows by approximately $65 million. Gas gathering, processing and transportation results are affected by fluctuations in commodity prices and the volumes that are processed and transported through the segment’s plants, as well as the margins obtained on related services from investments in which Occidental has an equity interest.

MARKETING

The marketing group markets substantially all of Occidental’s oil, NGL and natural gas production and optimizes its transportation and storage capacity. Occidental’s third-party marketing activities focus on purchasing oil, NGL and natural gas for resale from parties whose oil and gas supply is located near its transportation and storage capacity. These purchases allow Occidental to aggregate volumes to better utilize and optimize its assets. In 2023, compared to the prior year, marketing results were impacted by the timing of crude oil sales, partially offset by higher gas marketing margin from transportation capacity optimization.

DELIVERY AND TRANSPORTATION COMMITMENTS

Occidental has made long-term commitments to certain refineries and other buyers to deliver oil, NGL and natural gas. The total amount contracted to be delivered is approximately 58 MMbbl of oil through 2025, 795 MMbbl of NGL through 2034 and 812 Bcf of gas through 2029. The price for these deliveries is set at the time of delivery of the product.

Occidental has crude pipeline take-or-pay capacity of approximately 850 Mbbl/d to the Gulf Coast, leased crude storage capacity of approximately 10 MMbbl and capacity at the crude terminal of approximately 525 Mbbl/d. Certain of Occidental's crude pipeline take-or-pay agreements expire in 2025 and its Midstream business is well-positioned to benefit from potential reductions in crude oil transportation rates from the Permian to the Gulf Coast.

PIPELINE

Occidental’s pipeline business mainly consists of its 24.5% ownership interest in DEL. DEL owns and operates a 230-mile-long, 48-inch-diameter natural gas pipeline, known as the Dolphin Pipeline, which transports dry natural gas from Qatar to the UAE and Oman. The Dolphin Pipeline has capacity to transport up to 3.2 Bcf/d and currently transports approximately 2.0 Bcf/d and up to 2.2 Bcf/d in the summer months.

GAS PROCESSING, GATHERING AND CO 2

Occidental processes its own and third-party domestic wet gas to extract NGL and other gas byproducts, including CO 2 and delivers dry gas to pipelines. Margins primarily result from the difference between inlet costs of wet gas and market prices for NGL.

WES is a publicly traded limited partnership with its limited partner units traded on the NYSE under the ticker symbol “WES.” As of December 31, 2023, Occidental owned all of the 2.3% non-voting general partner interest, 48.8% of the WES limited partner units, and a 2% non-voting limited partner interest in WES Operating, a subsidiary of WES. As of December 31, 2023, Occidental's combined share of net income from WES and its subsidiaries was 51.0%. See Note 1 - Summary of

MANAGEMENT’S DISCUSSION AND ANALYSIS

Significant Accounting Policies in the Notes to Consolidated Financial Statements in Part II Item 8 of this Form 10-K for more information regarding Occidental’s equity method investment in WES. WES owns gathering systems, plants and pipelines and earns revenue from fee-based and service-based contracts with Occidental and third parties.

Occidental’s 40% participating interest in Al Hosn Gas also includes sour gas processing facilities that are designed to process 1.45 Bcf/d of natural gas and separate it into salable gas, condensate, NGL and sulfur. In 2023, the project produced 666 MMcf/d of natural gas, 95 Mbbl/d of NGL and condensate, and 12,450 tons/d of sulfur, of which Occidental’s net share was 267 MMcf/d of natural gas, 38 Mbbl/d of NGL and condensate and 4,980 tons/d of sulfur.

In 2023, compared to the prior year, gas processing, gathering and CO 2 results decreased primarily due to lower sulfur and NGL prices.

POWER GENERATION FACILITIES

Earnings from power and steam generation facilities are derived from sales to affiliates and third parties.

LOW-CARBON VENTURES

OLCV was formed to execute on Occidental’s vision to reduce global emissions and provide a more sustainable future through the development of low-carbon energy and products. OLCV capitalizes on Occidental’s extensive experience in utilizing CO 2 in its development of CCUS projects and providing services to third parties to facilitate the implementation of their CCUS projects. Moreover, OLCV is fostering emerging technologies, including DAC and low-carbon power sources, and other business models with the potential to position Occidental as a leader in the production of low-carbon energy and products.

Occidental has developed standards and protocols recognized by the EPA for monitoring, reporting and verifying the amount, safety and permanence of CO 2 stored through secure geologic sequestration. Occidental holds four EPA-approved monitoring, reporting and verification plans for geologic sequestration through EOR production. OLCV has acquired access to over 300,000 acres of pore space to date, and has commenced permitting of Class VI CO 2 sequestration wells with the EPA with the intention of developing five sequestration hubs on this acreage.

In March 2019, OLCV acquired an interest in NET Power, then a limited liability company based in Durham, North Carolina. NET Power is developing a low-cost, natural gas electric power system that generates near-zero emissions and inherently captures all CO 2, unlocking the potential to produce electricity at a lower cost than existing power plants. In June 2023, OLCV invested an additional$351 million in NET Power as part of NET Power’s merger with a special purpose acquisition company. NET Power Inc. is currently traded on the NYSE under the symbol “NPWR.”

In May 2023, Occidental began the construction of STRATOS, the world’s largest direct air capture plant in Ector County, Texas. The facility, which uses Carbon Engineering’s technology, is expected to be commercially operational in mid-2025. In November 2023, Occidental entered into a joint venture agreement with BlackRock, through a fund managed by its Diversified Infrastructure business, for the development of STRATOS. The agreement provides $550 million of committed investment from BlackRock's fund.

In August 2023, Occidental entered into an agreement with Carbon Engineering Ltd., its equity method investee, to purchase the remaining 68% interest not already owned by Occidental or its affiliates for total cash consideration of approximately $1.1 billion, resulting in Carbon Engineering becoming a wholly owned subsidiary of Occidental. Because Occidental acquired control of Carbon Engineering in the 2023 purchase, Occidental remeasured its previously held 32% equity interest at its acquisition-date fair value and recognized a gain of $283 million. The purchase price will be made in three approximately equal annual payments, with the first payment made at closing. This transaction closed on November 3, 2023, and Occidental made the first payment of $349 million. The remaining two payments will be paid on the first and second anniversaries of closing. With this purchase Occidental intends to accelerate technological innovation and cost reductions in Carbon Engineering's direct air capture technology. The transaction qualifies as a business combination and was accounted for using the acquisition method of accounting.

OLCV is also currently conducting front-end engineering design work and feasibility studies on a number of projects to capture and sequester CO 2, either from the atmosphere or from industrial point sources. The profitability of sequestration projects is dependent upon the costs of developing, building and operating sequestration infrastructure, demand for sequestration services from emitters and the availability of certain tax attributes and credits generated from the capture and storage of CO 2.

In August 2022, Congress passed the Inflation Reduction Act that contains, among other provisions, certain tax incentives related to climate change and clean energy. These incentives may attract more third-party investment of OLCV’s projects which may help accelerate certain projects. The ultimate impact of the Inflation Reduction Act on Occidental’s emerging low-carbon businesses and net-zero pathway will depend on a number of factors, interpretations and assumptions as well as additional regulatory guidance.

OUTLOOK

Midstream and marketing segment results can experience volatility depending on commodity price changes, demand impacting export sales and the Midland-to-Gulf-Coast oil spreads. Gas gathering, processing and transportation results are affected by fluctuations in commodity prices and the volumes that are processed and transported through the segment’s plants, as well as the margins obtained on related services from investments in which Occidental has an equity interest.

MANAGEMENT’S DISCUSSION AND ANALYSIS

Throughout 2023, the U.S. experienced economy-wide cost increases, which could increase the cost of sequestration and other low-carbon projects. In 2023, increased interest from third parties in providing sequestration services or purchasing carbon credits indicated a growing market for OLCV products and services. Additionally, grants, credits and other tax-advantaged low-carbon attributes continue to be actively discussed at both state and federal levels. These trends of increasing interest from third parties and funding at state and federal levels are expected to continue, which Occidental believes will enhance the economics of CCUS projects.

Approximately $0.8 billion of Occidental’s worldwide capital budget is expected to be allocated to its midstream and marketing operations in 2024.