OXY · Forward model · Midstream & Marketing · Bear case
What has to happen in Midstream & Marketing
Model as of
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Midstream & Marketing
A spread and optionality business bolted onto the upstream: Permian-to-Gulf-Coast pipeline capacity, crude export terminals, the Dolphin Pipeline, Al Hosn, Permian EOR gas processing and a 39.0% combined share of net income from Western Midstream. Reported net sales are small and volatile and the economics live in pre-tax income, which is the only thing management guides. The basis quarter produced $961M of adjusted pre-tax income, beating the 2018 record, on the same Waha dislocation that made the upstream's realised gas price negative - and management guided the very next quarter to between negative $100M and positive $100M.
Latest: $177M (2030Q4E)
| Period | Value |
|---|---|
| 2024Q1 | −$68M |
| 2024Q2 | $111M |
| 2024Q3 | $258M |
| 2024Q4 | $13M |
| 2025Q1 | $21M |
| 2025Q2 | $249M |
| 2025Q3 | $115M |
| 2025Q4 | $306M |
| 2026Q1 | $255M |
| 2026Q2 | $1.18B |
| 2026Q3E | $173M |
| 2026Q4E | $174M |
| 2027Q1E | $175M |
| 2027Q2E | $175M |
| 2027Q3E | $175M |
| 2027Q4E | $175M |
| 2028Q1E | $176M |
| 2028Q2E | $176M |
| 2028Q3E | $176M |
| 2028Q4E | $176M |
| 2029Q1E | $176M |
| 2029Q2E | $176M |
| 2029Q3E | $176M |
| 2029Q4E | $177M |
| 2030Q1E | $177M |
| 2030Q2E | $177M |
| 2030Q3E | $177M |
| 2030Q4E | $177M |
Assumptions & reasoning
- Every quarter is shown net of intersegment eliminations, because eliminations are intersegment midstream services sold to Oil & Gas. Both components are printed lines of Schedule 4 and the two verticals sum to the reported Net sales total to the dollar in all ten quarters, so these points are marked estimated only because the subtraction is ours, not because any figure is apportioned.
- The basis quarter is a windfall, not a run rate, so the model steps the level down rather than decaying it: a one-off -85.4% step lands the projection at $173M a quarter, which is the 2025 four-quarter mean of $172.75M. A compounding decline would have taken the line below its own history and then kept going.
- The calibration target is guided pre-tax income, not revenue. Modelled 3Q26 EBITDA of $158M less the guided midstream and corporate DD&A of about $115M is roughly $43M of pre-tax income, inside the guided negative $100M to positive $100M. Adding the disclosed $961M of 2026 Q2 adjusted pre-tax income and a derived $322M for 2026 Q1 - the reported negative $87M plus the disclosed $409M of before-tax mark-to-market derivative loss - puts FY26 near $1.37B, inside the guided $1,300-1,500M.
- The 90.7% basis margin is derived, not assumed: $961M of disclosed adjusted pre-tax income plus about $113M of segment DD&A over $1,183M of net sales. It is above 90% because most of what this segment earns is trading margin, cargo timing and equity income from Western Midstream, none of which passes through its own revenue line.
- Western Midstream is diluting: Occidental transferred 15.3 million WES units in February 2026 and recognised a $220M gain in June 2026 from a pro-rata ownership reduction, which is why the terminal margin glides down to 88% rather than holding at the basis level.