OXY: net debt/EBITDA vs subsequent beta to Brent (N=10 quarters)
Over the past ten quarters, OXY’s balance sheet and its oil sensitivity have moved in the direction theory predicts: when net debt-to-EBITDA was higher, the stock’s subsequent beta to Brent was also higher, averaging 0.50 versus 0.38 in the low-leverage quarters. But the relationship is nowhere near conclusive. The correlation is weak and statistically indistinguishable from zero, which is exactly the kind of result worth reading closely before anyone decides what it means.
This is a small-sample study, so the nuance matters more than the headline direction. We computed each quarter’s leverage, measured OXY’s beta to Brent over the following 63 trading days, and tested whether a weaker balance sheet made the stock a more levered crude bet. The numbers point mildly that way, yet the evidence is too thin to support the thesis. The full breakdown, charts, and the necessary caveats follow.
For OXY over the past ~3 years, does its daily return’s beta to Brent crude increase in the quarter after its net debt-to-EBITDA ratio rises? Higher leverage amplifies oil-price exposure, so beta climbs when the balance sheet weakens, making OXY an even more levered bet on crude.
How this was measured
Quarterly net debt/EBITDA = (long_term_debt - cash_and_equivalents)/EBITDA. β = OLS slope of OXY daily returns on Brent daily returns over the next 63 trading days (≈ one calendar quarter), anchored on the first trading day ≥ fiscal quarter end. Only windows with ≥30 observations were used. Pearson/Spearman correlation and a Welch t-test on the high/low leverage median split test the hypothesis that higher leverage amplifies oil beta.
The key numbers
Reading the numbers
Over 10 quarters, OXY's average beta to Brent was 0.44, but the link between leverage and next-quarter beta was weak (r=0.28, p=0.43) and not statistically significant. High-leverage quarters averaged 0.50 beta vs 0.38, a gap that could easily be chance.
The charts
The scatter shows a loose cloud of points rather than a clear upward slope: quarters with higher net debt-to-EBITDA do not consistently produce higher betas to Brent. The correlation is only 0.28, and the p-value of 0.43 means a relationship this weak would often appear by chance in 10 quarters. The highest leverage point on the right is not matched by a standout beta, so the raw picture does not support the idea that a weaker balance sheet reliably amplifies oil exposure.
The high-leverage bar is taller at 0.50 versus 0.38 for low-leverage quarters, a difference of about 0.13 in beta. But the Welch test p-value of 0.38 says this gap is not statistically meaningful, so the bars should be read as roughly similar rather than proof of a leverage effect. With only five quarters in each group, the visual difference carries little confidence.
Quarter-level leverage and subsequent beta
| fiscal_date_ending | net_debt/ebitda | subsequent_beta | n_trading_days |
|---|---|---|---|
| 2023-09-30 | 4.6369 | 0.3688 | 63 |
| 2023-12-31 | 4.6809 | 0.2136 | 63 |
| 2024-03-31 | 5.5859 | 0.2832 | 63 |
| 2024-06-30 | 4.3569 | 0.4183 | 63 |
| 2024-09-30 | 6.0141 | 0.4455 | 63 |
| 2024-12-31 | 10.3925 | 0.6845 | 63 |
| 2025-03-31 | 5.822 | 0.862 | 63 |
| 2025-06-30 | 6.9102 | 0.2715 | 63 |
| 2025-09-30 | 5.163 | 0.5948 | 63 |
| 2025-12-31 | 7.321 | 0.2524 | 63 |
The takeaway
Across 10 quarterly observations, OXY's net debt/EBITDA and subsequent-quarter beta to Brent showed Pearson r = +0.281 (p = 0.432) and Spearman r = +0.115 (p = 0.751). Splitting at the median leverage (5.70), the high-leverage group had mean beta 0.50 (n = 5) vs 0.38 (n = 5) for the low-leverage group, a difference of +0.13. Welch t = +0.94, p = 0.381. The evidence is too weak to draw a firm conclusion.
The fine print
- Only quarters with available fundamentals and ≥30 subsequent trading days are included; the sample may be biased toward historically stable periods.
- Net debt uses only long-term debt minus cash; short-term debt and off-balance-sheet items are ignored.
- Beta is computed over a 63-trading-day window that starts at the fiscal quarter end, overlapping with the period before the financial statements are actually released – not a perfect point-in-time test.
- Correlation does not imply causation: collapsing oil prices could simultaneously erode EBITDA (raising leverage) and reduce recent beta estimates, creating a spurious relationship.