OCCIDENTAL PETROLEUM CORP DE

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 experience with carbon management in EOR, major projects development and OxyChem plant operations to further the development of CCUS projects. OLCV invests in emerging low-carbon technologies that are expected to reduce Occidental’s carbon footprint and ensure the long-term sustainability of Occidental’s core businesses, and enable others to do the same.

Capital is employed to sustain or expand assets to improve the competitiveness of Occidental’s businesses. In 2024, capital expenditures related to the midstream and marketing segment totaled $880 million, before contributions from noncontrolling interests, 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 and Waha-to-Gulf-Coast gas spreads. The Midland-to-Gulf-Coast oil spreads have increased to an average of $0.49 per barrel in 2024 from an average of $0.21 per barrel in 2023. A $0.25 change in the Midland-to-Gulf-Coast oil spreads impacts 2024 operating cash flows by approximately $65 million. The Waha-to-Gulf-Coast gas spreads have increased to an average of $1.49 per MMbtu in 2024 from an average of $0.54 per MMbtu in 2023. 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 2024, compared to 2023, marketing results were impacted by higher gas marketing margin from transportation capacity optimization and higher equity method investment income from WES, partially offset by higher activities in the OLCV business.

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 49 MMbbl of oil through 2025, 794 MMbbl of NGL through 2034 and 674 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 9 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, 2024, Occidental owned all of the 2.3% non-voting general partner interest, 43.5% 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, 2024, Occidental's combined share of net income from WES and its subsidiaries was 46.0%. See Note 1 - Summary of 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 2024, the project produced 732 MMcf/d of natural gas, 106 Mbbl/d of NGL and condensate, and 13,800 tons/d of sulfur, of which Occidental’s net share was 293 MMcf/d of natural gas, 42 Mbbl/d of NGL and condensate and 5,520 tons/d of sulfur.

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 capitalize 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.

In 2024, Occidental continued the construction of STRATOS, the first commercial scale direct air capture facility in Ector County, Texas. The facility is expected to begin start-up operations in mid-2025. Occidental has 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.

Occidental helped develop 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 370,000 acres of pore space to date, and has continued to pursue permits of Class VI CO 2 injection wells with the intention of developing six sequestration hubs. 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.

Occidental owns a 41.6% interest in NET Power, which is developing a low-cost, natural gas electric power system that generates near-zero emissions and inherently captures all CO 2. NET Power Inc. is currently traded on the NYSE under the symbol “NPWR.” NET Power expects its first utility scale plant, located in the Permian, to begin power generation in the second half of 2027 or the first half of 2028.

OUTLOOK

Midstream and marketing segment results can experience volatility depending on commodity price changes, demand impacting export sales, the Midland-to-Gulf-Coast oil spreads and Waha-to-Gulf-Coast gas 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.

Recently, economy-wide cost increases affected various elements of the supply chain. Further increases could increase the cost of sequestration and other low-carbon projects. In 2024, increased interest from third parties in providing sequestration services or purchasing carbon credits indicated a growing market for OLCV products and services.

In August 2022, Congress passed the IRA which contains, among other provisions, certain tax incentives related to climate change and clean energy. Since the enactment of the IRA, the Treasury has released a substantial amount of regulatory and sub-regulatory guidance. However, much of this guidance remains unfinalized, and significant questions persist regarding its application. On January 20, 2025, the Trump Administration issued an executive order that pauses the disbursement of funds appropriated under the IRA. The ultimate impact of the IRA on Occidental’s emerging low-carbon businesses and net-zero pathway will depend on several factors, including the Treasury's statutory interpretations in the final regulatory guidance pending issuance and potential changes to the IRA incentives in future tax legislation.

Approximately $0.8 billion of Occidental’s worldwide capital budget, before contributions from noncontrolling interests, are expected to be allocated to its midstream and marketing operations in 2025.