Occidental Petroleum Corporation · NYSE:OXY
Occidental Petroleum — Q2 2016 Earnings Presentation
46 slides from Occidental Petroleum's earnings presentation, Aug 3, 2016
Slide 1: Second Quarter 2016 Earnings Conference Call
OCCIDENTAL PETROLEUM CORPORATION Second Quarter 2016 Earnings Conference Call August 3, 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
Second Quarter 2016 Key Messages • Operational excellence On track to achieve high end of 4% - 6% production growth guidance for total FY 2016 production of 590 – 600 MBOED • Optimal capital allocation On track for original ~$3 billion 2016 capital budget • Full-cycle cost leadership Cost stru
Slide 4: Core Production Growth & Reduced Production Costs
Second Quarter 2016 Core Production Growth & Reduced Production Costs Total Company Production* Production Costs* (MBOED) ($/boe) 609 $12.98 552 $10.57 2Q 2015 2Q 2016 2Q 2015 2Q 2016 * Ongoing operations; excludes Williston, Piceance, Iraq, Bahrain, Yemen production volumes 4
Slide 5: Al Hosn Update
Second Quarter 2016 Earnings Al Hosn Update • Previous capacity guidance of 60 MBOED net • Al Hosn Gas team carrying out detailed plant capacity reviews and optimizations to increase deliverability through the plant • Plant operated at an average of 69 MBOED net in May & 68 MBOED net in Q2 5
Slide 6: Oman Update – Block 62
Second Quarter 2016 Earnings Oman Update – Block 62 Oman Block 62 • Two new gas fields online (Fushaigah and Maradi Huraymah) • Maradi Huraymah Gas Plant constructed in 12 months (On time and on budget) • Current production from Block 62 ~22 MBOED (Gross) • Excellent collaboration with Oman Governme
Slide 7: Qatar Update
Second Quarter 2016 Earnings Qatar Update • Best production in 16 years in Block 12 ISSD Al Rayyan Dolphin • Well design changes enhanced production from Shuaiba D well Al Hawailah to set up enhanced development 48” Export Pipeline plan Doha ISND ISSD • Improved ESP performance Qatar Umm Sa’id Abu D
Slide 8: Colombia Update – Steam Flood Pilot
Second Quarter 2016 Earnings Colombia Update – Steam Flood Pilot • Llanos Norte (LLN) − Occidental discovered the giant Caño Limón Field in 1983 (Cumulative production = 1.3 billion barrels of oil) Oxy LLN − Currently also conducting successful exploration activities • La Cira - Infantas (LCI) − Par
Slide 9: 2016 Production Outlook
Second Quarter 2016 2016 Production Outlook • The increases in production from Al Hosn and Block 62, along with strong year over year production growth from Permian Resources will help us reach the higher end of our production guidance for 2016 of 4% to 6% growth – Record high production at Al Hosn
Slide 10: Capital Program
Second Quarter 2016 Earnings Capital Program • On track to meet ~$3 billion capital 2016 Capital Budget budget ($ in millions) • Continued improvements in project designs and capital execution have helped us do more than expected $687 $657 with our $3 billion capital budget. Permian Permian Resource
Slide 11: Capital Program
Second Quarter 2016 Earnings Capital Program • In Permian Resources, cost savings 2016 Capital Budget due to improved efficiencies will be ($ in millions) re-deployed into drilling incremental wells in 2H16 which will impact 2017 production. $687 $657 • Additional capital (~$20 million) will Permian
Slide 12: Ethylene Cracker on Schedule
Second Quarter 2016 Earnings Ethylene Cracker on Schedule • Ingleside Ethylene LLC Ingleside Ethylene Cracker – July 2016 − 50% / 50% Joint Venture with MexiChem − 1.2 billion lbs / year cracker, associated pipeline and storage − Long term supply agreement with MexiChem • Construction is on budget a
Slide 13: Ingleside Oil Terminal
Second Quarter 2016 Earnings Ingleside Oil Terminal • Terminal will have total oil storage capacity of ~2 million barrels and throughput capacity of ~300 thousand barrels per day • Project is on budget and on schedule Ingleside Export Facility Phase One Ingleside Export Dock 13
Slide 14: Total Spend per BOE Continued Decline
Second 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 15: Strong Balance Sheet
Second Quarter 2016 Earnings Strong Balance Sheet Illustrative Sources & Uses of Cash • Ended 2Q16 with $3.8 billion of cash on hand, an increase of nearly $600 million from 1Q16 1H16 Annualized Cash Flow* ~$3.5 bn • Cash flows from @ $39.52 / operations exceeded barrel capital spending in 1H16 2016
Slide 16: Strategy for Profitable Growth in 2017
Second Quarter 2016 Earnings Strategy for Profitable Growth in 2017 • Throughout this year we have consistently said that we will prudently manage our activity levels to stay positioned for profitable growth in 2017 while maintaining the flexibility necessary to maneuver through the uncertainty and
Slide 17: Strategy for Profitable Growth in 2017
Second Quarter 2016 Earnings Strategy for Profitable Growth in 2017 • We are also continuing to look for ways to expand our positions in the Permian through asset acquisitions. Objective is to pursue opportunities in both enhanced oil recovery and our Resources business which provide meaningful sy
Slide 18: Dividend Increase
Second Quarter 2016 Dividend Increase • At our board meeting in July, we announced an increase in our annual dividend rate from $3.00 to $3.04 per share. • Oxy has now increased its dividend every year for 14 consecutive years, and a total of 15 times during that period. • The dividend increase refl
Slide 19: Cash Flow Priorities
Second Quarter 2016 Earnings Cash Flow Priorities 1. Base/Maintenance Capital 2. Dividends 3. Growth Capital 4. Share Repurchase 5. Acquisitions 19
Slide 20: Board of Directors Election
Second Quarter 2016 Board of Directors Election • Jack B. Moore, former Chairman of Cameron International Corporation, has been elected to Oxy’s Board of Directors. • Mr. Moore, 62, served as Chairman of the Board for Cameron International Corporation from 2011 until it was acquired by Schlumberger
Slide 21: Core Results
Second Quarter 2016 Core Results Results • Total ongoing oil production (Bbl/d)* 386,000 ~flat YoY* • Total ongoing production (BOED) 609,000 • Core results** ($136) million • Core diluted EPS** ($0.18) • 2Q16 CFFO before Working Capital & Other $935 million • 2Q16 Capital Expenditures $657 million
Slide 22: Oil and Gas Total Company Production – Ongoing Operations
Second Quarter 2016 Oil and Gas Total Company Production – Ongoing Operations • In 2Q 2016, total company oil and gas production volumes averaged 609,000 BOED, an increase of 19,000 BOE in daily production from 1Q 2016. Company-wide Oil & Gas Core Production* (MBOED) 24 609 590 (3) (2) 1Q16 Permian
Slide 23: Oil and Gas Domestic Production
Second Quarter 2016 Oil and Gas Domestic Production Domestic Oil & Gas Production* (MBOED) 307 (7) 2 302 - 298 2Q15 1Q16 Oil NGLs Natural Gas 2Q16 *Core production excludes Williston and Piceance production volumes 23
Slide 24: Oil and Gas International Production
Second Quarter 2016 Oil and Gas International Production • International production was up 24,000 BOED in 2Q 2016 with Al Hosn running at full capacity and Block 62 in Oman increasing. International Oil & Gas Production* (MBOED) 20 307 283 (4) 8 254 2Q15 1Q16 Oil NGLs Natural Gas 2Q16 *Core producti
Slide 25: Oil & Gas Realized Prices
Second Quarter 2016 Oil & Gas Realized Prices Realized Prices Benchmark Prices Worldwide Worldwide Domestic Nat. Oil ($/bbl) NGLs ($/bbl) Gas ($/mmbtu) WTI Brent NYMEX 2Q16 $39.66 $14.59 $1.46 $45.59 $46.97 $1.97 WTI % 87% 32% 74%* Brent % 84% 31% 1Q16 $29.42 $10.86 $1.50 $33.45 $35.08 $2.07 WTI % 8
Slide 26: YTD 2016 Cash Flow
Second Quarter 2016 YTD 2016 Cash Flow 1H 2016 ($ in millions) $1,750 ($810) 2Q16 ($1,350) Debt / Capital 27% ($1,150) $900 $10 $4,400 $3,750 Beginning Cash CFFO Before Change in Capital Dividends Debt Asset Sale Ending Cash Balance Working Capital Working Capital Expenditures Retire/Proceeds Procee
Slide 27: Debt Maturity Schedule
Second Quarter 2016 Debt Maturity Schedule • New issuances extended the dollar-weighted average maturity of debt by over 5 years. Rating Outlook S&P A Stable Fitch A Stable $ million Retired / Called maturities Moody’s A3 Stable 1,450 1,500 New Issuances 1,250 1,000 500 0 2016 2017 2018 2019 2020 20
Slide 28: FY and 3Q 2016 Production Outlook
Second Quarter 2016 FY and 3Q 2016 Production Outlook • FY 2016 Total Production Outlook – Core Assets (Excludes Iraq, Bahrain & Piceance) – Total volumes of 590,000 – 600,000 BOED • 3Q16 Total Production Outlook – Core Assets (In 3Q16, Reported Production = Core Production) – Total production of 60
Slide 29: 3Q16 & FY 2016 Guidance Summary
Second Quarter 2016 3Q16 & FY 2016 Guidance Summary Oil & Gas Segment DD&A – FY 2016E • FY 2016E Total Production – Core Assets • Oil & Gas: ~$15.00 / BOE – 590,000 – 600,000 BOED • Chemicals and Midstream: $655 mm • 3Q16E Production – Core Assets Exploration Expense (In 3Q16, Reported Production =
Slide 30: Permian Resources Production
Second Quarter 2016 Earnings Permian Resources Production • Total production grew 16% year-over- Oil NGL Gas year to 126 MBOED MBOED – Oil production grew 10% year-over- year to 79 MBOD 128 126 116 ~121 • 2Q 2016 activity was down compared to 110 1Q 2016 – 14 wells online in 2Q vs 37 in 1Q 75 – Impr
Slide 31: Permian Resources Manufacturing Mode: Drilling / Completions
Second Quarter Earnings 2016 – Permian Resources Manufacturing Mode: Drilling / Completions Move to Manufacturing Mode Significantly Reduced Well Cost Permian Resources Permian Resources Cost ($MM) / 1,000' of Perforated Lateral 1,000' of Lateral Per Rig Per Quarter 2.0 40 36.3 1.8 1.72 35 1.6 0.8 1
Slide 32: TX Delaware Basin Recent Performance
Second Quarter Earnings 2016 – TX Delaware Basin Recent Performance Well Performance: Texas Delaware – Wolfcamp A • Buzzard State 21 11H three month cumulative production of 110 MBOE – 75% oil • HB Morrison B 12H three month cumulative production of 101 MBOE – 84% oil BOED / Peak 24 Hour 30 Day 1000
Slide 33: TX Delaware Basin Manufacturing Mode: Drilling / Completions
Second Quarter Earnings 2016– TX Delaware Basin Manufacturing Mode: Drilling / Completions Move to Manufacturing Mode Significantly Reduced Well Cost WELL COST DRILL DAYS Delaware Wolfcamp A 4,500‘ HZ Delaware Wolfcamp A 4,500’ HZ $12.0 50 $10.9 45 43 $10.0 40 GROSS WELL COST $MM $8.0 $5.6 $7.7 35 $
Slide 34: Southeast New Mexico Recent Performance
Second Quarter Earnings 2016 – Southeast New Mexico Recent Performance Optimization efforts have significantly increased value • Increased proppant to 1,500 lbs/ft creating increased reservoir stimulation and complexity New Design – 4 Wells 73% Oil • Target development well cost of $5.5mm • Choke ma
Slide 35: East Midland Basin Recent Performance
Second Quarter Earnings 2016 – East Midland Basin Recent Performance Cost Efficiency Efforts: Wolfcamp A • Optimize completion designs with geology throughout the field – Decreased cluster spacing and increased proppant per lateral foot – Increased stimulated rock volume and frac complexity – Reduce
Slide 36: West Midland Performance
Second Quarter Earnings 2016 – West Midland Performance Completion optimization efforts have significantly increased value • 56% improvement in cumulative BOE production South Curtis Ranch Lower Spraberry 10,000' 180 Best performer – SCR 433SH • Increased proppant concentration to 1,500 lbs/ft 150 –
Slide 37: East Midland Basin Manufacturing Mode: Drilling / Completions
Second Quarter Earnings 2016 – East Midland Basin Manufacturing Mode: Drilling / Completions Move to Manufacturing Mode Significantly Reduced Well Cost WELL COST DRILL DAYS East Midland East Midland Wolfcamp A 7,500' Hz Wolfcamp A 7,500’ Hz $12.0 50 46 45 $10.0 $9.2 40 GROSS WELL COST $MM 35 $8.0 $7
Slide 38: Permian Resources Continued Opex Reduction
Second Quarter Earnings 2016 – Permian Resources Continued Opex Reduction Permian Resources Opex / BOE • Continued focus on reducing field $15.00 operating costs during 2016 – Surface expense $/boe reduced 43% $11.41 from Q2 2015 $10.87 – Downhole expense $/boe reduced $10.00 $9.74 22% from Q2 2015
Slide 39: Permian Resources Production Optimization
Second Quarter Earnings 2016 – Permian Resources Production Optimization Permian Resources Production • Focused on maximizing 6 Optimization (MBOEPD) production from existing wells 5.4 4.7 – High return, quick payback 5 projects with low development 3.9 cost 4 – Developing additional Net MBOEPD Cumu
Slide 40: Permian EOR
Second 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 41: World Leader in Enhanced Oil Recovery
Second 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 Anadar
Slide 42: South Hobbs: CO2 Flood and Expansion Areas
Second 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 •
Slide 43: Residual Oil Zone Development
Second 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 74 well
Slide 44: Permian Appraisal Activity
Second Quarter 2016 Permian Appraisal Activity Drilled a 2nd Bone Spring appraisal well in the Texas Delaware region with encouraging results, which we believe will add additional bench potential to the long term development plan in this area Drilled and completed two horizontal Wichita Albany w
Slide 45: Permian Summary
Second Quarter 2016 Permian Summary • Expect to increase to 7 – 8 rigs in Oil NGL Gas 2H16 MBOED • Successfully enhancing completion 273 270 260 ~265 methods across Permian Resources 255 acreage position 222 • Achieving better than expected results in both Permian businesses which will allow us to i
Slide 46: Second Quarter 2016 Earnings Conference Call Q&A
SECOND QUARTER 2016 EARNINGS CONFERENCE CALL Q&A