Occidental Petroleum Corporation

▲ Bull Case

• ◆Hormuz persists 18+ months + Jackson capital return: Brent $90-95/bbl sustained; OXY FCF $8-10B/yr; Jackson initiates $2-3B buyback + dividend raise; debt declines to <$8B; adj. EPS $5.50; P/E 15x = $82 (+37%)
• ◆Full Berkshire acquisition at 20-30% premium: Buffett acquires remaining 67.3% at $75-80/share (enterprise ~$75-80B); warrant exercise injects $5B; antitrust is key gating factor; acquisition premium reaches (+26-34%)
• ◆STRATOS DAC scales + carbon markets reprice: Global carbon price rises to $200+/tonne by FY2028; STRATOS 500K MT generates $100M+ annual carbon credits + CaaS contract expansion; OXY re-rates as carbon-hybrid at 20x P/E on $5B+ FCF: $90-120 (+51-101%)

▼ Bear Case

• ◆Hormuz resolves + OPEC+ unwinds + China demand miss: Brent $62-65; OXY FCF compressed to $2.5-3.5B; debt reduction stalls at $12-14B; Jackson faces pressure; adj. EPS $2.20; P/E 9x = $20 (-66%)
• ◆Jackson abandons Hollub's capital discipline: New CEO pursues M&A or accelerates capex at depressed prices; balance sheet weakens; investor confidence erodes; multiple de-rates 12x→8x; adj. EPS $3.00 at $72/bbl but P/E 8x = $24 (-60%)
• ◆STRATOS commissioning failure + 45Q tax credit risk: STRATOS DAC fails to achieve commercial operation within 2 years; 45Q credits jeopardized; reputational damage; adj. EPS unaffected but multiple de-rates as carbon option value collapses: -$2-5/share

“Is Strait of Hormuz closure a temporary 6-12 month geopolitical spike (base case: buy on normalization) or the start of structural multi-year oil repricing toward $85+/bbl? Bull: Hormuz reflects fundamental Iranian geopolitical shift; willingness to weaponize Strait as sanctions leverage creates new normal; closure may extend 18-24 months, supporting $85-90/bbl Brent. Bear: Every Hormuz crisis in 40 years has resolved; US naval assets, allied pressure, Iranian hyperinflation create strong reopening incentives within 6-12 months; OPEC+ discipline fragile; $65-75 Brent more sustainable. Base case: Hormuz normalizes within 12-18 months (55% probability). At $59.70, you pay for the 20% bull scenario — unfavorable asymmetry for new capital.”

• ◆Richard Jackson first CEO call (Q2 2026, August) — KEY capital allocation signal and debt guidance
• ◆Hormuz diplomatic resolution (6-18 months) — would normalize oil prices downward
• ◆Debt <$10B achievement (Q3-Q4 2026) — unlocks capital return expansion (buyback + dividend increase)
• ◆STRATOS commercial throughput >100K MT (2026) — validates DAC technology and secures 45Q credits
• ◆Berkshire warrant exercise decision (~$59.59 strike, 2027) — signals Buffett's ceiling view on OXY valuation
• ◆FY2026 full-year guidance (August Q2 earnings) — confirms EPS trajectory assumptions at normalized oil

• ◆Oil price normalization if Hormuz resolves (55% probability, 12 months): High severity; -30% downside to $42; no margin of safety at $59.70
• ◆Jackson strategy divergence from Hollub's discipline (20% probability): Moderate severity; M&A or capex acceleration would weaken balance sheet and investor confidence
• ◆OPEC+ voluntary cuts unwind (30% probability): High severity; additional supply overhang combined with Hormuz reopening could push Brent to $60-65
• ◆Net debt remains >$12B if oil <$70 (25% probability): Moderate severity; deleveraging thesis stalls; covenant headroom tightens
• ◆STRATOS commissioning further slipped (40% probability): Low severity; 45Q window preserved until 2032; modest option value impact
• ◆Berkshire warrant non-exercise (binary): Moderate severity; signals Buffett views current price as ceiling; removes floor sentiment support