Occidental Petroleum Corporation · NYSE:OXY
Occidental Petroleum — Q1 2017 Earnings Presentation
32 slides from Occidental Petroleum's earnings presentation, May 4, 2017
Slide 1: First Quarter 2017 Earnings Conference Call
First Quarter 2017 Earnings Conference Call Occidental Petroleum Corporation May 4, 2017
Slide 2: Cautionary Statements
Cautionary Statements Forward-Looking Statements Portions of this presentation contain forward-looking statements and involve risks and uncertainties that could materially affect expected results of operations, liquidity, cash flows and business prospects. Actual results may differ from anticipated
Slide 3: Opening Remarks
Opening Remarks • Returns-focused portfolio optimization • Differentiated value-based approach • Pathway to cash flow breakeven* * Cash Flow Breakeven after Dividend and Growth Capital 3
Slide 4: Multi-year Returns Focused Portfolio Optimization
Multi-year Returns Focused Portfolio Optimization Set to generate both returns to shareholders and value-based growth Divested assets that did not generate competitive Investing in Invested assets within higher assetscash withmargin and highest corporate returns or free cash flow lower capitalcash i
Slide 5: Divestiture Proceeds to be Reinvested into Higher-Margin Permian Resources
Divestiture Proceeds to be Reinvested into Higher-Margin Permian Resources Permian Resources Cost Structure $16 - $19 / • ~9 Mboed replaces South boe Texas Gas properties’ operating cash flows. • We expect to reach this replacement volume by early 2018. Development Opex G&A Production Cash Costs Cos
Slide 6: Differentiated Value-Based Approach
Differentiated Creating shareholder value over the long-term Value-Based Approach • Culture of innovative technology and process – Subsurface characterization • More Oil – Integrated development planning – Oxy Drilling Dynamics • Less Cost – Innovative facility designs – Long-term base management –
Slide 7: Cash Flow Priorities
Cash Flow Priorities 1. Base/Maintenance Capital 2. Dividends 3. Growth Capital Subject to Returns and 4. Acquisitions Market 5. Share Repurchases Conditions 7
Slide 8: Pathway to Cashflow Breakeven
Pathway to Cashflow Breakeven Executing a plan to fund a growing dividend and 5% – 8% growth at $50 WTI. Pathway: Milestones: > Grow high margin production with low > 80 Mboed of production growth capital intensity > Ample options to self-fund growth > Continue to invest in low decline, free cash •
Slide 9: Occidental Petroleum
Occidental Petroleum • Financial Highlights • Differentiated Development • Guidance 9
Slide 10: First Quarter 2017 Core Results
First Quarter 2017 Core Results Results Total company production (boed) 584,000 Total Permian Resources production (boed) 129,000 Permian Resources oil production (bod) 78,000 +7% QoQ Reported and Core diluted EPS $0.15 1Q17 CFFO before Working Capital & Other $1.1 billion 1Q17 Capital Expenditures
Slide 11: YTD 2017 Cash Flow and Cash Balance Reconciliation
YTD 2017 Cash Flow and Cash Balance Reconciliation ($ in billions) $1.1 ($0.4) ($0.8) $2.2 ($0.6) $1.5 Beginning Cash Balance CFFO Before Working Change in Working Capital Expenditures Dividends Ending Cash Balance 1/1/17 Capital Capital 3/31/17 11
Slide 12: Occidental Petroleum
Occidental Petroleum • Financial Highlights • Differentiated Development • Guidance 12
Slide 13: Successful Start-up of Ingleside Ethylene Cracker
Successful Start-up of Ingleside Ethylene Cracker • On time and on budget • Not a merchant plant • JV structure and supply agreements with Mexichem ensures returns above cost of capital for both parties • Differentiated Value based approach 13
Slide 14: Chemicals Market Overview
Market Overview 250 Chemicals Pre-Tax Earnings (EBIT)1 200 • Major industry consolidation $ Millions 150 complete 100 • Caustic soda supply- 50 demand balance 0 continues to improve 2Q17E 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 • PVC d
Slide 15: Domestic O&G
Domestic O&G • Maximize value of portfolio • Differentiated value-based approach • Innovative technology 15
Slide 16: Maximize Value of Portfolio - Low Capital Intensity Drives Value
Maximize Value of Portfolio - Low Capital Intensity Drives Value Multi-Year Permian Resources Growth All-In Capital Intensity 2015 / 2016 $54 MM 300 STX Sale Re-invested 11 – 13 rigs 15 20 18 < $30MM 2017 $33 MM 250 at exit 16 Annual Wedge 2018 $29 MM Production (Mboed) 14 Rig Count 14 200 30% CAGR
Slide 17: Greater Sand Dunes Value Based Development Increases Returns
Greater Sand Dunes Value Based Development Increases Returns • Currently three play leading Three high-return development benches benches under development 300 Current* 3rd Bone Spring 250 > Modular development 200 Cumulative Mboe 4,500 ft Laterals Current* 2nd Bone Spring > Area appraisal continues
Slide 18: Greater Barilla Draw Value Based Development Increases Returns
Greater Barilla Draw Value Based Development Increases Returns • Red Bull South Active and Wolfcamp B Improvement = frac optimization to drive results Improving 150 > 2 rigs currently operating 125 Cumulative Mboe 100 > 3 wells drilled and 3 wells online Oxy WC B 7,500ft Fracs since acquisition date
Slide 19: Midland Basin - Merchant Value Based Development Increases Returns
Midland Basin - Merchant Value Based Development Increases Returns Wolfcamp B Improvement = two high return development benches • Currently two play leading 175 benches under development 150 All WC A Wells Cumulative Oil - Mbo > Landing point optimized flow units 125 100 New WC B Design > Wolfcamp B
Slide 20: Single Location Sequenced Lateral (SL2) Lower Costs
SL2 Single Location Sequenced Lateral (SL2) Lower Costs SL2 Potentially Lowers Secondary Bench BE by $5: > Lowers well cost by $0.5 - $1.0MM > Reduces operating costs by over 50% > Sequencing increases facilities utilization > One artificial lift system saves $0.2MM per lateral Project Timeline: > P
Slide 21: Logistic & Maintenance Hub Value Chain Partnerships Lower Costs
Logistic & Maintenance Hub Value Chain Partnerships Lower Costs Underway • Secures supply availability Service company yard OCTG Laydown Yard • $500 – $750k savings per well • • Maintenance Stimulation & Cement • • ~20 railcar spots Dedicated truck entry/exit • Service directional tools • Staging, r
Slide 22: Occidental Petroleum
Occidental Petroleum • Financial Highlights • Differentiated Development • Guidance 22
Slide 23: 2Q17 and FY 2017 Guidance Summary
2Q17 and FY 2017 Guidance Summary Oil & Gas Segment DD&A – FY 2017E • Oil & Gas: ~$15.00 / boe • FY 2017E Total Production • Chemicals and Midstream: $685 MM > 595,000 – 615,000 boed > Permian Resources production of 140,000 – 150,000 boed Midstream • 2Q17E Production • $5 – $15 MM pre-tax income in
Slide 24: Permian Resources Results and Guidance
Permian Resources Results and Guidance • Total production grew 5% from Q4 16 to 129 Mboed Oil NGL Gas > Oil production up 7% from Q4 16 to 78 Mbod 140 - 150 135 - 140 129 124 • Increased activity in 1Q 2017 > Exited Q1 with 7 rigs 110 > 21 wells online in 1Q17 vs. 16 in 4Q16 > Added 5 top tier perfo
Slide 25: Appendix
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Slide 26: Company-wide Oil & Gas
Oil and Gas 607 6 1 (30) Company-wide Oil & Gas Production (Mboed) Production 584 Results 4Q16 Permian Other Domestic International 1Q17 8 (1) 0 303 Production (Mboed) Domestic Oil & Gas 296 4Q16 Oil NGLs Natural Gas 1Q17 Production (Mboed) International Oil & Gas 311 (12) (6) (12) 281 4Q16 Oil NGLs
Slide 27: Oil and Gas Realized Prices
Oil and Gas Realized Prices Realized Prices Benchmark Prices Worldwide Worldwide Domestic Nat. Oil ($/bbl) NGLs ($/bbl) Gas ($/mmbtu) WTI Brent NYMEX 1Q17 49.04 21.59 2.68 51.91 54.66 3.26 WTI % 94% 42% 82%* Brent % 90% 39% 4Q16 45.08 18.36 2.39 49.29 51.13 2.95 WTI % 91% 37% 81%* Brent % 88% 36% 1Q
Slide 28: Permian Resources 2017 Focused Development
Permian Resources 2017 Focused Development New Mexico NW Shelf Greater Sand Dunes – 2,000+ Locations • Contiguous Midland Basin Acreage NM Delaware Basin • Multi-bench TX Delaware Basin Central Basin • Capable Platform Infrastructure • Valuable Growth Greater Barilla Draw – 5,000+ Locations Permian
Slide 29: Increased Total Horizontal Drilling Locations ~37%
Increased Total Horizontal Drilling Locations ~37% Permian Resources Inventory 4Q16 Locations within 300,000 of 650,000 net acres in Basin Development Areas • Added 1,250 locations BE < $50 12,000 ~11,650 ~11,650 • Added 3,150 total locations Midland Basin 2016 • Increased average length 10,000 Adde
Slide 30: Outstanding Results in Greater Sand Dunes Area Multi-Bench Development
Outstanding Results in Greater Sand Dunes Area Multi‐Bench Development Recent Well Results Barilla GreaterDraw Type Log Sand Dunes Target Formation Lateral Peak 24 Hr Peak 30 Day Well Name Oil (%) Length (ft) (boed) (boed) Brushy Canyon Federal 23 13H 4,376 899 833 90% Avalon James 29 38H 4,730 1,13
Slide 31: Improving Results in Greater Barilla Draw Area Multi-Bench Development
Improving Results in Greater Barilla Draw Area Multi‐Bench Development Recent Well Results Barilla GreaterDraw BarillaType DrawLog – Drilled 228 Wells Across 8 Benches Target Formation Lateral Peak 24 Hr Peak 30 Day Oil Well Name Length (ft) (boed) (boed) (%) Avalon Evaluating 1st Bone Spring Evalua
Slide 32: Permian Resources Non-Operated Assets
2015+ Non‐Operated Activity Permian Resources Non-Operated New Mexico NW Shelf Assets Midland Basin NM Delaware • Significant OBO Basin Central Basin position delivers Greater Sand Dunes Platform ~13% of domestic TX Delaware Basin production • Leveraged to deliver high returns, Greater Barilla Draw