Goldman Sachs: Upgrade OXY to Buy on Improving Permian and US Offshore Capital and Cost Efficiency, Downgrade TOU to Sell on Softer Gas Macro and Premium Valuation

Key Takeaways

• 1.Goldman Sachs upgrades Occidental Petroleum (OXY) to Buy from Neutral, raising its 12-month price target to $69 based on enhanced recovery techniques, deleveraging toward a $10 bn target, and a $4.0 bn cash flow improvement plan.
• 2.Tourmaline Oil (TOU) is downgraded to Sell from Buy with a lowered price target of C$49, driven by near-term softness in Western Canadian natural gas macro, widening AECO-Henry Hub differentials, and valuation premium versus peers.
• 3.Goldman Sachs marks to market its oil and gas price deck, setting 2027/2028 Brent to $80/$75 per bbl ($75/$70 WTI) and widening the 2027/2028 AECO differential to US$1.50-$1.75/MMBtu.

Table of Contents

• OXY to Buy; See Positive Rate of Change in Cash Flow Optimization Amid Deleveraging Focus
• 1) OXY's differentiated advanced recovery strategy strengthens core oil and gas business
• 2) OXY's deleveraging progress drives the potential for dividend growth
• 3) We hold a constructive view on OXY's execution of $4 bn cash flow improvement plan
• 4) We see attractive valuation at current levels and roll out our OXY model to 2030
• Valuation
• Key Risks
• TOU to Sell; See Premium Valuation Given Lower AECO Pricing Assumptions
• 1) Despite long-term progress with LNG Canada Phase 2 FID, lowering AECO price deck as we see challenging regional gas macro backdrop this decade
• 2) We see premium valuation for TOU relative to gassy peers
• 3) Higher near-term FCF generation driven by one-year NEBC infrastructure buildout pause, while sustainable FCF inflection is pushed out further
• Key Risks and what could make us more positive?
• We Also Incorporate a New Price Deck and Use $80/$75 per bbl Brent in 2027/2028 ($75/$70 per bbl WTI)

Report data

Exhibit 3: Across our E&P Coverage, we update our 2027 Brent/WTI price to $80/$75 per bbl - E&P Comp Sheet — as of September 29, 2026.