Occidental Petroleum CorporationOXYNYSE

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DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $129.89 per share(market-calibrated)

+142.3%

Upside to Fair Value

Current

$53.61

Pure Model

$139.68

Fair Value

$129.89

Bull Case

$158.79

Bear Case

$131.83

Market Reality Check

Model Terminal Growth

2.00%

Market-Implied Growth

0.50%

Calibrated Growth

1.48%

Fair value uses 65% model / 35% market-implied terminal growth. Pure model: $139.68.

What's Driving This Ratingfor OXY

↓

CapEx normalizing toward maintenance

Historical CapEx is 24.92% of revenue (heavy investment phase). Model fades this to 5.50% by Year 10, freeing up ~$5.0B in annual FCF. This is the biggest driver of long-term cash flow improvement.

✓

Premium margins already priced in

EBIT margin of 24.98% is already well above sector average. The model holds this level — there's limited room for margin expansion to drive upside. Valuation depends primarily on revenue growth.

⚠

Analyst growth decelerates sharply

Revenue growth drops from -2.61% in Year 1 to -0.85% by Year 5 (per analyst consensus). That's below the 2.00% terminal rate, so growth re-accelerates in Years 6-10 — a generous assumption. This growth deceleration is a key reason the model may undervalue the stock if growth re-accelerates.

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $163.39/share (29.1x terminal FCF) while exit multiple gives $115.96/share (19.6x terminal FCF). The base case averages both methods.

🎯

Market pricing in lower growth than model

The market implies only 0.50% perpetual growth — 150bps below the model's 2.00%. This suggests the market sees headwinds or risks not in the model.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 71.38% indicates efficient cash generation. FCF reaches $8.3B by Year 10 (32.48% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)0.37

Market Risk Premium4.50%

*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)

Cost of Equity (Re)6.17%

Cost of Debt

Pre-tax Cost of Debt4.73%

Tax Rate30.00%

After-tax Cost of Debt3.31%

Equity Weight (E/V)68.58%

Debt Weight (D/V)31.42%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (68.58% × 6.17%) + (31.42% × 3.31%)

= 5.50%

10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)

Year	Year 1	Year 3	Year 5	Year 7	Year 10
Revenue	$21.0B	$24.0B	$24.5B	$24.5B	$25.5B
EBIT	$5.3B	$6.0B	$6.1B	$6.1B	$6.4B
Tax	$1.6B	$1.8B	$1.8B	$1.8B	$1.9B
NOPAT	$3.7B	$4.2B	$4.3B	$4.3B	$4.5B
+ Depreciation	$4.3B	$4.9B	$5.0B	$5.0B	$5.2B
- Capex	$5.2B	$4.9B	$4.0B	$2.9B	$1.4B
- Δ NWC	-$9M	$23M	-$3M	$1M	$8M
Free Cash Flow	$2.8B	$4.2B	$5.3B	$6.4B	$8.3B
Discount Factor	0.948	0.852	0.765	0.687	0.585
Present Value	$2.6B	$3.5B	$4.1B	$4.4B	$4.9B

FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$8.3B

Terminal Growth Rate2.00%

WACC5.50%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$241.7B

PV of Terminal Value$141.5B

Exit Multiple Method

Year 10 EBITDA$11.6B

Exit Multiple (EV/EBITDA)14.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$162.7B

PV of Terminal Value$95.2B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$39.9B

PV of Terminal Value$141.5B

Enterprise Value$181.4B

(-) Net Debt$22.0B

Equity Value$159.4B

Shares Outstanding976M

Price per Share$163.39

Exit Multiple Method

PV of Projected FCFs$39.9B

PV of Terminal Value$95.2B

Enterprise Value$135.1B

(-) Net Debt$22.0B

Equity Value$113.1B

Shares Outstanding976M

Price per Share$115.96

Pure Model Fair Value

$139.68

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	1.00%	1.50%	2.00%	2.50%	3.00%
3.50%	$204.21	$235.40	$224.81	$214.72	$205.11
4.50%	$153.43	$167.05	$186.12	$214.72	$205.11
5.50%	$123.01	$130.30	$139.68	$152.18	$169.68
6.50%	$102.12	$106.50	$111.86	$118.56	$127.17
7.50%	$86.56	$89.40	$92.76	$96.79	$101.72

How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.

Scenario Analysis

Bear Case

$131.83

145.9% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 0.46

Base Case

$139.68

160.5% vs current

• Analyst consensus
• Terminal growth: 2.0%
• Beta: 0.37

Bull Case

$158.79

196.2% vs current

• +25% vs analyst consensus
• Terminal growth: 2.5%
• Beta: 0.32

Key Assumptions & Drivers✓ Using Analyst Consensus Estimates• Energy Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth-2.61%

Year 3 Revenue Growth6.24%

Year 5 Revenue Growth-0.85%

Year 7 Revenue Growth0.29%

Year 10 Revenue Growth2.00%

Terminal Growth Rate2.00%

Margin & Efficiency

Current EBIT Margin24.98%

Tax Rate30.00%

Historical Capex / Rev24.92%

Terminal Capex / Rev5.50%

NWC / Revenue1.61%

Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.

Institutional-Grade Methodology

Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta

Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 14x EV/EBITDA (Energy sector)

This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.

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