Occidental Petroleum Corporation · NYSE:OXY
Occidental Petroleum — Q3 2016 Earnings Presentation
35 slides from Occidental Petroleum's earnings presentation, Nov 1, 2016
Slide 1: Third Quarter 2016 Conference Call
OCCIDENTAL PETROLEUM CORPORATION Third Quarter 2016 Conference Call November 1, 2016
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: Key Messages
Third Quarter 2016 Key Messages • Cost reductions continue Total Spend per BOE declined to ~$27.50 / boe Year to Date • Operational excellence On track to exceed high end of 4% - 6% production growth guidance • Optimal capital allocation On track for original ~$3 billion 2016 capital budget* •
Slide 4: Total Spend per BOE Continued Decline
Third Quarter 2016 Total Spend per BOE Continued Decline Capital Spending* + G&A + All Operating Costs Total Spend per BOE = Global Oil & Gas Sales Volumes • Internal performance metric to focus on ~$62.00 operational efficiency, especially in consideration of the sharp decline in commodity prices ~
Slide 5: Core Production Growth & Reduced Production Costs
Third Quarter 2016 Core Production Growth & Reduced Production Costs Total Company Production* Production Costs* (MBOED) ($/boe) $11.76 605 578 $10.81 3Q 2015 3Q 2016 3Q 2015 3Q 2016 * Ongoing operations; excludes Williston and Piceance Basins, Iraq, and Bahrain 5
Slide 6: Production Outlook
Third Quarter 2016 Production Outlook • The increases in production from Al Hosn and Oman’s Block 62, along with strong year over year production growth from Permian Resources will help us exceed the higher end of our production guidance for 2016 of 4% to 6% growth – Record high production at Al Hos
Slide 7: Capital Program
Third Quarter 2016 Capital Program 2016 Capital Budget ($ in millions) • On track to meet ~$3 billion capital budget* $687 $657 $642 • Increased activity in Permian Permian Permian Resources Permian Resources Resources Resources • Seasonal maintenance in Remaining Remaining Chemicals and project Rem
Slide 8: Ingleside Ethylene Cracker
Third Quarter 2016 Ingleside Ethylene Cracker Ingleside Ethylene Cracker – September 2016 • Ingleside Ethylene LLC − 50% / 50% JV with Mexichem − $1.5 Billion for a 1.2 Billion lb/yr cracker, pipeline to Markham and storage − 20-year supply agreement with Mexichem • Commercial operation in Q1 2017 −
Slide 9: Ingleside Oil Terminal
Third Quarter 2016 Ingleside Oil Terminal • Terminal will have total oil storage capacity of ~2 million barrels and throughput capacity of ~300 thousand barrels per day • Three loadings of crude oil have shipped since commissioning First Shipments in October Ingleside Export Facility Phase One 9
Slide 10: Committed Project Capital Declining
Third Quarter 2016 Committed Project Capital Declining Committed Project Capital • Multiple long-term investments to ($ in millions) drive cash flow and earnings $1,300 growth – Al Hosn – Ethylene cracker JV – Ingleside terminal $800 – Gas processing • Increased flexibility on capital $500 budget in
Slide 11: Permian Resources Acquisitions
Third Quarter 2016 Permian Resources Acquisitions • 35,000 net acres in Reeves and Pecos counties, Texas, in the Southern Delaware Basin – ~7,000 BOED of net production (72% oil) from 68 horizontal wells • Including this transaction, Occidental’s overall position in the leasehold area encompasses ne
Slide 12: Permian Resources Acquisitions
Third Quarter 2016 Permian Resources Acquisitions • Proximity to other key development areas, such as Permian Resources Drilling Inventory – Year End 2015* Barilla Draw, allows for Based on Q4 2015 Costs 100% infrastructure efficiencies and contiguous position enables longer lateral well development
Slide 13: Permian EOR Acquisitions
Third Quarter 2016 Permian EOR Acquisitions Acquired Working Interests • Acquired working interests in producing oil and gas CO2 floods and related EOR infrastructure, increasing Occidental’s ownership in several properties where it is currently the operator or an existing working interest partner •
Slide 14: Core Results
Third Quarter 2016 Core Results Results • Total oil production (Bbl/d) 371,000 ~(3%) YoY* • Total production (BOED) 605,000 • Core results** ($112) million • Core diluted EPS** ($0.15) • 3Q16 CFFO before Working Capital & Other*** $860 million • 3Q16 Capital Expenditures $642 million • Cash balance
Slide 15: Oil and Gas Total Company Production – Ongoing Operations
Third Quarter 2016 Oil and Gas Total Company Production – Ongoing Operations • In 3Q 2016, total company oil and gas production volumes averaged 605,000 BOED, a decrease of 4,000 BOE in daily production from 2Q 2016. Company-wide Oil & Gas Production* (MBOED) 609 (6) (2) 4 605 2Q16 Permian Other Dom
Slide 16: Oil and Gas Domestic Production
Third Quarter 2016 Oil and Gas Domestic Production Domestic Oil & Gas Production* (MBOED) 302 (9) 300 3 (2) 294 3Q15 2Q16 Oil NGLs Natural Gas 3Q16 *Excludes Williston and Piceance production volumes 16
Slide 17: Oil and Gas International Production
Third Quarter 2016 Oil and Gas International Production • International production was up 4,000 BOED in 3Q 2016 with Al Hosn running at full capacity and the Block 62 in Oman ramp-up, offset by Colombia. International Oil & Gas Production* (MBOED) 9 311 307 (6) 1 278 3Q15 2Q16 Oil NGLs Natural Gas 3
Slide 18: Oil & Gas Realized Prices
Third Quarter 2016 Oil & Gas Realized Prices Realized Prices Benchmark Prices Worldwide Worldwide Domestic Nat. Oil ($/bbl) NGLs ($/bbl) Gas ($/mmbtu) WTI Brent NYMEX 3Q16 $41.49 $14.99 $2.30 $44.94 $46.98 $2.70 WTI % 92% 33% 85%* Brent % 88% 32% 2Q16 $39.66 $14.59 $1.46 $45.59 $46.97 $1.97 WTI % 87
Slide 19: YTD (as of 9/30/2016) Cash Flow
Third Quarter 2016 YTD (as of 9/30/2016) Cash Flow ($ in millions) $2,375 ($775) 3Q16 ($1,980) Debt / Capital 27% $4,400 ($1,720) $870 $3,180 $10 Beginning Cash CFFO Before Change in Capital Dividends Debt Asset Sale Ending Cash Balance Working Capital Working Capital Expenditures Retire/Proceeds Pr
Slide 20: FY and 4Q 2016 Production Outlook
Third Quarter 2016 FY and 4Q 2016 Production Outlook • FY 2016 Total Production Outlook – Core Assets (Excludes Iraq, Bahrain & Piceance) – Total volumes of 600,000 – 605,000 BOED • 4Q16 Total Production Outlook – Core Assets – Total production of 600,000 – 610,000 BOED – Domestic production • Permi
Slide 21: 4Q16 & FY 2016 Guidance Summary
Third Quarter 2016 4Q16 & FY 2016 Guidance Summary Oil & Gas Segment DD&A – FY 2016E • FY 2016E Total Production – Core Assets • Oil & Gas: ~$15.50 / BOE – 600,000 – 605,000 BOED • Chemicals and Midstream: $655 mm • 4Q16E Production – Core Assets Exploration Expense – Total production of 600,000 – 6
Slide 22: Permian Resources Production
Third Quarter 2016 Permian Resources Production • Total production grew 4% year-over- year to 121 MBOED Oil NGL Gas MBOED • 3Q 2016 activity was down compared to 2Q 2016 128 126 ~124 – 9 wells online in 3Q vs 14 in 2Q 121 ~120 110 – Improved well productivity and base management contributing to mode
Slide 23: Manufacturing Mode: Drilling / Completions
Third Quarter 2016 – Permian Resources Manufacturing Mode: Drilling / Completions Move to Manufacturing Mode Significantly Reduced Well Cost Permian Resources Cost ($MM) / 1,000' of Perforated Lateral 2.0 1.8 1.72 1.6 0.8 1.52 $MM / 1,000' of Lateral 1.4 0.8 1.2 1.09 1.0 0.95 0.5 0.8 0.5 0.8 0.66 0.
Slide 24: Southeast New Mexico Recent Performance
Third Quarter 2016 – Permian Resources Southeast New Mexico Recent Performance Optimization efforts have significantly increased value Cedar Canyon Area 2nd Bone Spring 4,500' • 3rd Quarter – New frac design includes increasing 250 proppant, tighter cluster spacing, and slickwater to 200 3Q16 Design
Slide 25: Texas Delaware Basin Recent Performance
Third Quarter 2016 – Permian Resources Texas Delaware Basin Recent Performance Increasing value through subsurface characterization and well design optimization Optimizing completion design and lateral length • Testing various proppant loads and decreased cluster spacing • Increasing lateral lengt
Slide 26: East Midland Basin Recent Performance
Third Quarter 2016 – Permian Resources East Midland Basin Recent Performance Adapting Operational Efficiencies to Stacked Pay Transfer Drilling Dynamics and Improved Completions Designs to multiple bench development • Record drilling performance of 12.5 days for Wolfcamp B 7,500’ horizontal • Redu
Slide 27: Permian Resources Continued Opex Reduction
Third Quarter Earnings 2016 – Permian Resources Continued Opex Reduction • Continued focus on reducing field operating costs during 2016 − Surface expense $/boe reduced 50% from Q2 2015 − Company operated operating expense down 28% ($/boe) from Q2 2015 − Reduced Opex/BOE for 8 consecutive quarters.
Slide 28: Production Optimization
Third Quarter 2016 – Permian Resources Production Optimization Permian Resources Production • Focused on maximizing production Optimization (MBOEPD) 8 from existing wells. 7.0 Cumulative Net MBOEPD 7 − High return, quick payback projects 6.0 6.2 6 5.4 with low development cost 5 4.7 − Developing add
Slide 29: Increasing Activity
Third Quarter 2016 – Permian Resources Increasing Activity • Expect to drive double digit production growth in Permian Permian Resources Drilling Activity Resources 35 • Actively trading and 30 + swapping acreage to core up position 25 • Wells Drilled ~10,000 acres traded to enable longer-lateral 20
Slide 30: Permian EOR
Third Quarter 2016 Permian EOR CO2 Supply & Processing • Stable and low-decline base production at an advantaged cost • Permian EOR business remains profitable in the current downturn. • EOR business expected to generate free cash flow this year in the current oil price environment. • Drilling costs
Slide 31: World Leader in Enhanced Oil Recovery
Third Quarter 2016 World Leader in Enhanced Oil Recovery U.S. CO2 EOR Projects 3,500 Size of bubble = CO2 EOR 3,000 Production Volume Number of Injection Wells Oxy 2,500 2,000 All of Oxy’s CO2 operations 1,500 Kinder Morgan are in the Permian Basin Apache 1,000 Chevron Exxon 500 Denbury Hess Anadark
Slide 32: South Hobbs: CO2 Flood and Expansion Areas
Third Quarter 2016 South Hobbs: CO2 Flood and Expansion Areas Main Oil Column CO2 Flood: Residual Oil Zone (“ROZ”) Potential: • Started CO2 injection into Phase 1 in September • Four pattern initial development to begin in 2016 2015 (ahead of schedule) • Full ROZ expansion ~50 patterns; 80 MMBOE • P
Slide 33: Residual Oil Zone Development
Third Quarter 2016 Residual Oil Zone Development • The ROZ development is a vertical expansion of the CO2 flooded interval. • The ROZ underlies most of our major EOR properties with current projects in South Hobbs and West Seminole and can be developed between $3 and $7 per BOE. • Completed 94 well
Slide 34: Permian Summary
Third Quarter 2016 Permian Summary • Expect to increase to 8 rigs in 4Q16 Oil NGL Gas MBOED • Successfully enhancing completion methods across Permian Resources 273 270 255 264 260 ~265 acreage position 222 • Achieving better than expected results in both Permian businesses which will allow us to in
Slide 35: Third Quarter 2016 Conference Call Q&A
THIRD QUARTER 2016 CONFERENCE CALL Q&A