Occidental Petroleum's (OXY 0.31%) fortunes largely depend on oil and gas prices. Higher prices boost its profits, while sinking prices weigh on its earnings. The latter was the case in the first quarter.

However, the oil company sees several catalysts on the horizon that could boost its earnings in the future. Here's a look at its recent quarter and why it's so optimistic about the future.

Drilling down into Occidental Petroleum's first-quarter earnings

Occidental Petroleum reported $604 million, or $0.63 per share, of adjusted net income in the first quarter. That was down from the fourth quarter ($710 million or $0.74 per share) and the year-ago period ($1.1 billion or $1.09 per share).

The primary issue was lower oil and gas prices. The company's oil and gas segment reported $1.2 billion of pre-tax income, down from $1.6 billion in the fourth quarter. Occidental sold its oil at an average of $76.04 per barrel in the period, down 4% from the fourth quarter. It also captured a much lower price for its natural gas output (down 14%).

Production was around what it anticipated, at nearly 1.2 million barrels of oil equivalent per day (BOE/d). That was down slightly from more than 1.2 million BOE/d in the fourth quarter. The company overcame an extended third-party outage in the eastern Gulf of Mexico, thanks to strong production in the Rockies.

The company's oil and gas business delivered muted results in the first quarter, but its other segments were stronger. Occidental's midstream and marketing segment exceeded its guidance for pre-tax income by about $100 million.

Meanwhile, OxyChem's earnings beat the company's expectations by roughly $10 million in the quarter. Occidental capitalized on higher crude margins and improved pricing for some of the chemicals it produces.

A rebound could be coming down the pipeline

Despite lower oil and gas prices, Occidental delivered solid results in the first quarter. It executed well, which enabled it to generate strong cash flow. The company produced over $2.4 billion in operating cash flow and $720 million in free cash flow. While those numbers were down from recent periods, they were solid given the weakness in oil and gas prices.

Even better days could lie ahead. "We are executing in all areas of our diversified portfolio and positioned for free-cash-flow growth," stated CEO Vicki Hollob in the first-quarter earnings release.

The biggest near-term growth catalyst is the company's pending acquisition of CrownRock. Occidental agreed to buy the oil company for $12 billion in December, which will add about 170,000 BOE/d of high-margin oil production.

The company estimates that the CrownRock deal will boost its annual free cash flow by about $1 billion, assuming oil averages $70 per barrel. While crude oil prices are lower this year, they're closer to $80 a barrel these days, suggesting the deal will deliver even more incremental free cash flow.

The company has several additional cash-flow growth drivers. For example, it expects its investment in master limited partnership (MLP) Western Midstream to supply more than $200 million of incremental annual cash distributions starting this year. Western recently optimized its portfolio and capital structure, positioning it to significantly increase its cash distribution.

Meanwhile, contract expirations at Occidental's midstream business will drive sustained cost savings starting next year, boosting its free cash flow. On top of that, OxyChem is investing heavily in expanding its capacity and modernizing some of its facilities. Those investments should start paying off over the next couple of years.

Occidental Petroleum believes it can deliver over $1 billion in incremental annual free cash flow from these segments, which produce steadier cash flow than its oil and gas business.

Occidental's profit slump could be over soon

Occidental's earnings and cash flow declined during the first quarter due to lower oil and gas prices. However, several catalysts could drive an improvement in the future. That upside, especially from its more stable non-oil businesses, makes it a compelling long-term investment opportunity.