By Vallari Srivastava and Sheila Dang

Aug 6 (Reuters) - U.S. oil producer Occidental Petroleum (OXY.N) said on Thursday it expects flat production and capital spending in 2027, adding that it would continue to prioritize debt-reduction efforts.

Speaking on a post-earnings conference call, Chief Financial Officer Sunil Mathew said the company expects the starting point for capital spending to be $5.9 billion in 2027, including investments in mid-cycle projects.

“At that level of investment, you can assume relatively flat production in line with 2026,” he added.

For the full-year 2026, Occidental expects its production to be up to 1.45 million barrels of oil equivalent per day on capital spending of $5.5 billion to $5.9 billion.

Occidental also expects sustaining capital — a measure of capital spending that excludes multi-year projects, exploration and growth projects — of up to $5.1 billion in 2027.

Mathew said continued investment in mid-cycle projects will help reduce Occidental’s base decline and ultimately reduce its sustaining capital.

The oil producer is targeting sustaining capital of $4.5 billion in 2030.

KEEPING EYE ON DEBT REDUCTION

Occidental CEO Richard Jackson said the company is on track to increase its free cash flow this year by more than $1.2 billion and that a “clear pathway” exists to add more than $4 billion in annual cash flow by 2030 even before considering the benefit of higher oil prices.

That additional cash will be used to reduce debt and strengthen the balance sheet ahead of Occidental’s planned redemption of Berkshire Hathaway’s (BRKa.N) preferred equity stake beginning in 2029, Mathew said.

Share buybacks will be a lower priority until the company reduces the preferred equity, he added. Berkshire’s investment requires Occidental to pay an 8% annual dividend, a higher payout than the typical junk bond now offers. Investors have said that the expensive equity has been a drag on Occidental’s stock compared with its peers. Occidental, which reported its biggest quarterly profit since 2022 on Wednesday, said its immediate cash flow priority remains to reduce principal debt to $10 billion.

The company will continue to focus on further reducing net debt once it achieves the $10 billion principal debt milestone, Mathew said.

Occidental shares closed 4.1% higher at $56.04 on Thursday.