How OXY (Occidental Petroleum) Makes Money in 2025: A Deep-Dive With Income Statement

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Understanding how a leading energy and chemicals company like OXY (Occidental Petroleum) makes money is essential for investors and anyone interested in the business of oil, gas, and chemicals. In this post, we break down OXY's quarterly income statement (Q2 2025) using a Sankey chart to visualize the financial flows — what comes in, where it goes, and what's left as profit.

Quick OXY Overview

OXY (Occidental Petroleum) operates as a diversified energy company, primarily engaged in oil and gas exploration, production, and chemical manufacturing. Revenue comes mainly from the sale of crude oil, natural gas, and chemical products. The business is structured around two main segments: Oil & Gas and Chemicals, with a small contribution from other activities.

Revenue Breakdown

• Total Revenue (Q2 2025): $6.32B (−7.3% YoY)
  • Oil & Gas Revenue: $5.01B (79.3% of total, −8.4% YoY)
  • Chemical Revenue: $1.23B (19.4% of total, −3.7% YoY)
  • Other: $81M (1.3% of total)
  • Growth is powered by operational scale in oil and gas, though Q2 2025 saw a revenue decline due to lower commodity prices and volumes.

Gross Profit and Margins

• Gross Profit: $1.91B (30.2% gross margin)
  • Cost of Revenue: $4.41B (+3.3% YoY)
  • OXY maintains moderate margins due to its integrated operations and cost management, despite commodity price volatility.
• Most costs come from production expenses, raw materials for chemicals, and field operations.

Operating Income and Expenses

• Operating Income: $857M (−46.3% YoY, 13.6% margin)
• Operating Expenses: $1.05B (+21.0% YoY)
  • R&D: Not disclosed separately in Q2 2025
  • SG&A: $284M (+9.7% YoY, 4.5% of revenue) — covers corporate overhead, administrative functions, and sales support
  • OXY continues to control costs while investing in operational efficiency and maintaining a disciplined approach to capital allocation.

Net Income

• Pre-Tax Income: $738M (−54.9% YoY, 11.7% margin)
• Income Tax: $270M (36.6% effective tax rate)
• Net Income: $431M (−62.9% YoY, 6.8% net margin)
• OXY converts a moderate portion of sales into profit due to the capital-intensive nature of the energy sector and recent margin pressures.

What Drives OXY's Money Machine?

• Oil & Gas Production: 79%+ of revenue comes from upstream oil and gas operations, making this the core profit driver.
• Production Volumes & Commodity Prices: Earnings are highly sensitive to global oil and gas prices and OXY’s ability to sustain production volumes.
• Operational Efficiency: Strategic investments in field technology and cost control help offset commodity price swings.
• Low-Carbon Ventures: OXY is investing in carbon capture and low-carbon energy solutions, which are not yet profitable but represent future growth potential.

Visualizing OXY's Financial Flows

The Sankey chart below visualizes how each dollar flows from gross revenue, through costs and expenses, down to net income. This helps investors spot where value is created, what areas weigh on profits, and how efficiently the company operates.

• Most revenue flows into gross profit, with operating expenses (especially production and SG&A) taking the largest chunk.
• Even after significant costs, 6.8% of revenue drops to the bottom line.

Key Takeaways

• OXY's money comes overwhelmingly from oil and gas production and sales
• High gross and net margins illustrate the power of OXY's integrated energy business model, though margins are under pressure in 2025
• Heavy investment in operational efficiency and low-carbon initiatives, balanced by cost discipline in SG&A
• Ongoing growth is driven by energy demand, commodity prices, and strategic investments in new energy technologies

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FAQ About OXY's Income Statement

1. What is the main source of OXY's revenue in 2025?

OXY generates over 79% of its revenue from oil and gas production and sales. Chemical manufacturing contributes about 19%, with the remainder from other activities.

2. How profitable is OXY in Q2 2025?

OXY reported net income of $431M in Q2 2025, with a net margin of approximately 6.8%, reflecting moderate profitability driven by operational scale but pressured by lower commodity prices and rising costs.

3. What are the largest expense categories for OXY?

The biggest expenses on OXY's income statement are production costs (cost of revenue) and operating expenses, particularly Sales, General & Administrative (SG&A) costs. SG&A reached $284M in Q2 2025, as OXY prioritizes operational efficiency and disciplined cost management.

4. Why does the chemical segment operate at a lower margin?

The Chemical segment, despite generating $1.23B in revenue, posted lower margins due to higher raw material costs and competitive pricing. OXY continues to invest in efficiency and product innovation, believing these will drive long-term growth—even if the division is less profitable today.

5. How does OXY's effective tax rate compare to previous years?

OXY's effective tax rate in Q2 2025 was 36.6%, higher than in previous years. This elevated rate is primarily due to changes in geographic earnings mix and reduced tax benefits from share-based compensation.