Occidental Petroleum Corporation · NYSE:OXY
Occidental Petroleum — Q2 2014 Earnings Presentation
38 slides from Occidental Petroleum's earnings presentation, Jul 31, 2014
Slide 1: Second Quarter 2014 Earnings Conference Call
Occidental Petroleum Corporation Second Quarter 2014 Earnings Conference Call July 31, 2014
Slide 2: Second Quarter 2014 Earnings – Highlights
Second Quarter 2014 Earnings – Highlights Results • Domestic oil production (Bbl/d) 278,000 • Total company production (boe/d) 742,000 • Core earnings* $1.4 billion • Core diluted EPS* $1.79 • 1H14 CFFO before WC $5.7 billion • Cash balance @ 6/30/2014 $2.4 billion • 1H14 Shares repurchased 16.6 mil
Slide 3: Oil & Gas Segment Pre-Tax Earnings
Second Quarter 2014 Earnings – Oil & Gas Segment Pre-Tax Earnings PRE-TAX 2Q14 vs. 1Q14 ($ in millions) $75 ($42) ($27) $2,104 $8 $2,118 Core Results • 2Q14 $2.1 B • 1Q14 2.1 B • 2Q13 2.1 B 1Q14 Sales Price Sales Volumes Higher Operating All Others 2Q14 Costs 3
Slide 4: Earnings – Domestic versus International Operations
Second Quarter Earnings – Domestic versus International Operations • For the six months year-over-year comparison, domestic operations after-tax income was $1.4 billion an increase of ~13%. In the same six-month period, international operations core income was $1.1 billion, a decrease of ~4%. +$152
Slide 5: Oil and Gas Total Company Production
Second Quarter 2014 Earnings – Oil and Gas Total Company Production Company-wide Oil & Gas Production (mboe/d) 4 (10) 11 736 4 727 1Q14 Permian Other Domestic Colombia Other MENA 2Q14 Outages growth Note: Excludes Hugoton production 5
Slide 6: Oil and Gas Domestic Production
Second Quarter 2014 Earnings – Oil and Gas Domestic Production Domestic oil production grew 3% on a sequential quarter-over-quarter basis Domestic Oil & Gas Production (mboe/d) 8 (0) 464 456 451 2Q13 1Q14 Oil Natural Gas & 2Q14 NGLs Note: Excludes Hugoton production 6
Slide 7: Oil & Gas Realized Prices
Second Quarter 2014 Earnings – Oil & Gas Realized Prices Realized Prices Benchmark Prices Worldwide Worldwide Domestic Nat. Oil ($/bbl) NGLs ($/bbl) Gas ($/mmbtu) WTI Brent NYMEX 2Q14 $100.38 $42.82 $4.28 $102.99 $109.77 $4.55 WTI % 97% 42% 94%* Brent % 91% 39% 1Q14 $99.00 $46.05 $4.57 $98.68 $107.9
Slide 8: Oil & Gas Production Costs
Second Quarter 2013 Earnings – Oil & Gas Production Costs Production Costs ($/boe) FY13 1Q14 2Q14 YTD14 $13.76 $14.33 $14.68 $14.51 Taxes other than Income ($/boe) FY13 1Q14 2Q14 YTD14 $2.57 $2.94 $2.83 $2.88 • 2Q14 Exploration expense was $54 million 8
Slide 9: Chemical Segment Core Earnings
Second Quarter 2014 Earnings – Chemical Segment Core Earnings PRE-TAX 2Q14 vs. 1Q14 Guidance ($ in millions) 3Q14 expected to be ~$150 mm. ($2) ($17) $24 $136 ($8) $133 Core Results • 2Q14 $ 133 mm • 1Q14 136 mm • 2Q13 144 mm 1Q14 Sales Price Sales Volume / Operations / All Others 2Q14 Mix Manufactu
Slide 10: Midstream, Marketing & Other Segment Earnings
Second Quarter 2014 Earnings – Midstream, Marketing & Other Segment Earnings PRE-TAX 2Q14 vs. 1Q14 ($ in millions) $17 ($2) $219 $43 ($9) $170 Core Results • 2Q14 $219 mm • 1Q14 $170 mm • 2Q13 $48 mm 1Q14 Marketing & Gas Processing Pipelines All Others 2Q14 Trading 10
Slide 11: 1H 2014 Cash Flow
Second Quarter 2014 Earnings – 1H 2014 Cash Flow • During 1H14, CFFO declined by ~$650 million compared to 1H13. 1H14 included a tax payment related to the gain on the sale of PAGP units and 1H13 included the collection of a tax receivable. On a normalized basis, CFFO during both periods would have
Slide 12: 3Q14 & FY 2014 Guidance Summary
Second Quarter 2014 Earnings – 3Q14 & FY 2014 Guidance Summary Oil & Gas Segment * • Domestic 3Q 2014 Production* Pre-tax Income Price Sensitivity Impact − Oil – 6,000 - 8,000 bbls/d growth. (Quarter) − NGLs – modest increase. Oil +/- $1/bbl = +/- $37 mm – Natural gas – modest decline. NGL +/- $1/bb
Slide 13: California Resources Spin-Off Update
Second Quarter 2014 Earnings – California Resources Spin-Off Update • Recently announced new executive Major management team for California Resources Producing Corporation (“CRC”). Basins – Executive Chairman – Bill Albrecht – President & CEO – Todd Stevens Sacramento – CFO – Mark Smith Basin • File
Slide 14: California Resources Update
Second Quarter 2014 Earnings – California Resources Update Oil Production (Mbo/d) • 10% oil production growth 97 • Generated ~$1.2 billion of cash flow 88 from operations in 1H 2014 • Expect the CRC management team to present more detailed review of the business and its growth strategy to investors
Slide 15: Oxy Executive Leadership Team
Second Quarter 2014 Earnings – Oxy Executive Leadership Team President and Chief Executive Officer Stephen I. Chazen Vicki Hollub Willie Chiang Sandy Lowe Chris Stavros Cynthia Walker Glenn Vangolen Marcia Backus President - Oil EVP Operations President – Oil EVP & CFO EVP Strategy & EVP Business VP
Slide 16: Remaining Occidental Business
Second Quarter 2014 Earnings – Remaining Occidental Business Oil and Gas Focus Areas OxyChem United States • Leading position High FCF, moderate in the Permian Basin. growth business. • Permian Resources is a growth driver. Oxy Midstream Integrated pipeline and MENA • Al Hosn Project, marketing busi
Slide 17: Permian Resources production growth
Second Quarter 2014 Earnings – Permian Permian Resources Expect improved margins through • 7% production growth in 2Q14 drilling efficiencies, reduced well • Expect well over 20% annual oil costs and enhanced oil price production growth with acceleration realizations of horizontal drilling program
Slide 18: Earnings from Production Growth and Projects
Second Quarter 2014 Earnings – Earnings from Production Growth and Projects • Domestic production growth and start-up of the BridgeTex and Al Hosn projects are expected to offset earnings from the California separation. After-tax earnings ($ in bln) ~$5.6 ~$1.1 ~$0.5 ~$0.1 ~$0.4 ~$4.6 Domestic Produ
Slide 19: Strategic Initiative Update
Second Quarter 2014 Earnings – Strategic Initiative Update Strategic Initiatives • We will continue to focus on raising cash from our lower growth and lower margin assets. Hugoton Sale • In the Middle East, we continue to make progress in negotiations with our partners and expect to reduce our 18 Mb
Slide 20: Capitalization
Second Quarter 2014 Earnings – Capitalization • We have repurchased more than 26 mm shares since the announcement of our strategic initiatives in 4Q13. • 20.5 million remaining shares remain available under the current repurchase program. Shares Outstanding (mm) FY2013 2Q14 Weighted Average Basic 80
Slide 21: Share Repurchases
Second Quarter 2014 Earnings – Share Repurchases • Expect to further reduce our share count by ~60 mm through the cash dividend from the California separation and by ~25 mm shares from the monetization of our remaining interest in PAGP. • Coupled with the buyback of the 20.5 million shares in our cu
Slide 22: Improving ROCE
Second Quarter 2014 Earnings – Improving ROCE Return on Capital Employed • Improved capital efficiency and operating cost structure ~15% • Long-lead-time project start-ups: – Al Hosn Sour Gas ~12% – BridgeTex Pipeline • Separation of our California business will provide a natural uplift to ROCE 2013
Slide 23: Permian Resources Summary
Second Quarter 2014 Earnings – Permian Resources Summary Growing production and increasing efficiency Total Production (boe/d) 72,000 Horizontal Wells 60 Oil Production (bbls/d) 40,000 54 54 vs. 1Q-2014 8% Increase 50 vs. 1Q-2013 21% Increase 42 40 38 Well Cost vs. 2013 10% Reduction 30 vs. 2012 31%
Slide 24: Optimizing Designs to Unlock Primary Reserves
Second Quarter 2014 Earnings – Permian Resources Optimizing Designs to Unlock Primary Reserves Tremendous potential with 2 million acres and 7,000 drilling locations identified Wolfcamp Section • Deep understanding of key geologic BVW Sw TOC Brit. parameters. – Porosity, Saturation, Brittleness, Wol
Slide 25: Optimizing Designs to Unlock Primary Reserves
Second Quarter 2014 Earnings – Permian Resources Optimizing Designs to Unlock Primary Reserves Rapidly progressing characterization and initiating accelerated development at Barilla Draw. Wolfbone Microseismic & FMI Log • Conducting extensive appraisal program Map View across our acreage position. •
Slide 26: Efficiently Accelerating Development
Second Quarter 2014 Earnings – Permian Resources Efficiently Accelerating Development Secured core resources required to execute accelerated development • Ordered long lead time equipment. Drilling Rig Exit Rate • Secured favorable commercial terms by leveraging our position across our EOR and Resou
Slide 27: Batch Drilling
Second Quarter 2014 Earnings – Permian Resources Batch Drilling Achieved 24% reduction in drilling cost at South Curtis Ranch • Phase 1: Vertical Rig ‒ Efficient vertical drilling (0 to ~ 9000ft) Rig move #1 ‒ Drills first 2 hole sections – traditional design Vertical Rig ‒ Fast moving rigs (< 1 day
Slide 28: Permian Resources Infrastructure
Second Quarter 2014 Earnings – Permian Resources Infrastructure Expanding infrastructure to support acceleration and reduce costs New Ponds Barilla Draw Water Distribution System Trunk Line • New ponds - 6 produced and 3 fresh water ponds with 300,000 BBL capacity each • Water Distribution Trunk Lin
Slide 29: Texas Delaware
Second Quarter 2014 Earnings – Permian Resources Texas Delaware Completed 7 Wolfcamp A/B wells that achieved average peak production of 1,160 boe/d in Q2 Wolfcamp A / B Peak Rate 1,175 (boe/d) 1,622 Delaware Basin Dewey Lake Rustler Salado 834 Castille 30-Day Rate Lamar (boe/d) 1,118 Delaware Mounta
Slide 30: Midland Basin
Second Quarter 2014 Earnings – Permian Resources Midland Basin SCR 2818 Achieved Peak Rate of 1,102 boepd Peak Rate 752 (boe/d) 1,102 Midland Basin Dewey Lake 500 Rustler 30-Day Rate Salado (boe/d) 531 Tansill Yates Whitenhorse Seven Rivers Average to Date SCR 2818 St. Andrews Queen Grayburg Mabee S
Slide 31: Permian Resources Guidance
Second Quarter 2014 Earnings – Permian Resources Guidance Raising 2014 growth expectation to 15% to 18% • Strong 2014 performance Production (Mboe/d) • Increasing capital by $200MM to $1.9MM • Similar well count with higher percentage of horizontal wells 120+ • Production increase from incremental c
Slide 32: Midstream Focus and Advantage
Second Quarter 2014 Earnings – Midstream Focus and Advantage • Oxy has a unique competitive advantage and scale in the Permian Basin to drive key strategies Largest producer Significant midstream/infrastructure owner and operator Large marketing presence • Role is to maximize Realized Value for O
Slide 33: Oxy Domestic Midstream Assets
Second Quarter 2014 Earnings – Oxy Domestic Midstream Assets Upstream Midstream Downstream Gas Production 718 MMCF/d Processing 3.1 BCF/d Power Generation • Gas plants • 1,800 MW • CO2 plants NGL Production 72 MB/d OIEC LPG Terminal Petrochemicals • 60-100 MB/d Refining Export Markets Crude Pr
Slide 34: Key Oxy Permian Gathering and Takeaway
Second Quarter 2014 Earnings – Key Oxy Permian Gathering and Takeaway Cushing Southeast New Central/ Mexico / Midland Basins Delaware Basins Slaughter Colorado City Midland- South Houston Owned 3rd Party Corpus Christi Three key takeaway points access multiple markets 34
Slide 35: Takeaway Capacity Impact on Price
Second Quarter 2014 Earnings – Takeaway Capacity Impact on Price Adequate Constrained Midland/LLS Diffs YTD2014 ($10.30) 2H2013 ($5.84) Sun Bridge Tex 300 mbpd / 3Q14 60 mbpd / 2Q12 Longhorn Cactus 275 mbpd / 2Q13 200 mbpd / 2Q15 Rapid production growth leading infrastructure build out 35
Slide 36: Oxy Ingleside Energy Center
Second Quarter 2014 Earnings – Oxy Ingleside Energy Center OxyChem Plant • Terminaling - LPG: 60-100 MB/d (2Q 2015) - Crude/Condensate: 200-300 MB/d (1H 2016) - Storage: 2–4 MMB • Future processing options Provides flexibility and avoids congested ship channel 36
Slide 37: Permian Crude Logistics & Marketing Value
Second Quarter 2014 Earnings – Permian Crude Logistics & Marketing Value ~$2+/BBL – Advantaged Take- 4.00 away Capacity 3.50 3.00 2.50 $/BBL 2.00 $1.50/bbl avg premium 1.50 1.00 0.50 - 2012 2013 2014 (Est) 2015+ Achieved ~$1.50/bbl* premium vs. realized prices of select Permian producers. Advantaged
Slide 38: Conference Call Q&A
Second Quarter 2014 Earnings Conference Call Q&A