Occidental Petroleum Corporation · NYSE:OXY
Occidental Petroleum — Bernstein 33rd Annual Strategic Decision Conference 2017
44 slides from Occidental Petroleum's conference presentation, Jun 1, 2017
Slide 1: Bernstein 33rd Annual Strategic Decision Conference
Bernstein 33rd Annual Strategic Decision Conference Occidental Petroleum Corporation June 1, 2017 Vicki Hollub Chief Executive Officer
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: Occidental Petroleum: Value Proposition
Occidental Petroleum • Value Proposition • Quality Assets • Differentiated Value- Based Approach 3
Slide 4: Oxy's Value Proposition
Oxy’s Value 2016 ROCE* Dividend Growth Consistent Proposition • Growing dividend with strong yield • Value protection in down cycle Upside in rising oil • Promotes capital allocation discipline price environment and downside Moderate Value-Based Growth protection during falling oil price • 5 – 8% av
Slide 5: Delivering Consistent Dividend Growth
Delivering Consistent Dividend Growth 2002 – 2016: Oxy dividend CAGR 14% vs S&P CAGR 7% ($/share) $28.00 Annual Dividends Paid $26.42 $24.00 Cumulative Dividends Paid $23.38 $20.36 $20.00 $17.39 $16.00 $14.51 $11.95 $12.00 $9.79 $7.95 $8.00 $6.48 $5.17 $3.96 $4.00 $2.22 $3.02 $2.56 $2.88 $2.97 $3.02
Slide 6: Current Dividend Yield vs. Competitors
Current Dividend Yield vs. Competitors 6.0% Dividend yield should revert close to historical levels as we 5.2% execute plan to a lower cash flow breakeven 5.0% 5.0% 4.1% 4.0% 3.8% 3.0% 2002 – 2016 Average Oxy Dividend Yield 2.2% 2.3% 2.0% 2.1% 2.1% 2.0% 1.5% 1.0% 0.7% 0.7% 0.4% 0.0% 0.0% PXD APC DVN
Slide 7: Cash Flow Priorities Favor Dividends
Cash Flow Priorities 1. Base/Maintenance Capital Favor Dividends 2. Dividends Dividends promote 3. Growth Capital capital allocation Subject to Returns and discipline 4. Acquisitions Market Conditions 5. Share Repurchases 7
Slide 8: Value Growth - Annual ROCE for Oxy vs. Average of Competitors
Value Growth - Annual ROCE for Oxy vs. Average of Competitors 30% 20% 10% 00% (10%) (20%) (30%) 2008 2009 2010 2011 2012 2013 2014 2015 2016 OXY ROCE Competitors ROCE* *Competitors ROCE based on public information represents a simple average of APA, APC, COP, CVX, DVN, EOG, HES, MRO and XOM 8
Slide 9: Value Growth - Multi-year Returns Focused Portfolio Optimization
Value Growth - 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 assets with higher cash margin and corporate returns or free cash flow lower capital intensity Lower rel
Slide 10: Value Growth: 2016 ROCE
Value Growth 2016 ROCE* 10% Focus on value driven growth - Top quartile returns 0% Positioned to return to double digit (10%) returns (20%) (30%) HES DVN CXO APC MRO APA EOG COP PXD OXY CVX XOM *Calculated based on public information and on a consistent basis Companies listed alphabetically : APA, A
Slide 11: Value Growth: Significantly Reduced Development Cost
Value Growth: Significantly Reduced Development Cost 2016 F&D (Organic) $/Boe* 20 19.27 17.19 15 13.37 11.73 11.41 $/Boe 10 9.59 6.86 6.51 6.45 5 0 1 2 3 4 5 6 7 8 OXY Competitor Peers* *Competitor Peers listed alphabetically: APC, CVX, CXO, DVN, EOG, HES, MRO, PXD. F&D calculated on a consistent ba
Slide 12: Value Growth - Production Growth Since 2013
Value Growth - Production Growth Since 2013 Ongoing Total Company Production CAGR 10%* 700 600 575 Permian 529 Resources 500 427 441 25% CAGR 400 Mboed 300 200 100 0 2013 2014 2015 2016 Ongoing Company Excluding Permian Resources Permian Resources 12 *Pro forma for ongoing operations (excludes opera
Slide 13: Strong Balance Sheet – Net Debt-to-Capital
Strong Balance Sheet – Net Debt-to-Capital 60.0% 49% 50.0% 47% 40.0% 37% 35% 30.0% 26% 27% 24% 20% 20% 20.0% 18% 2002 – 2016 Average Oxy Net Debt-to-Capital 10.0% 3% 0.0% PXD XOM HES CVX MRO EOG OXY APC COP APA DVN Independent E&P Integrated O&G Source: Net Debt-to-Capital for 03/31/2017, Factset, 0
Slide 14: Strong Balance Sheet - Oxy Credit Ratings Vs. Peers
Strong Balance Sheet - Oxy Credit Ratings Vs. Peers Company S&P S&P Moody’s Moody’s New Issue Ratings Outlook Ratings Outlook Indications (10-year) XOM AA+ Negative Aaa Negative 2.95% CVX AA- Negative Aa2 Stable 3.05% OXY A Stable A3 Stable 3.25% EOG BBB+ Stable Baa1 Stable 3.35% COP A- Stable Baa2
Slide 15: Successful Value Proposition
Successful Consistent 2016 ROCE* Dividend Growth Value • Oxy dividend CAGR doubled S&P CAGR since 2002 Proposition • Highest yield vs. US peers • Historical dividend yield of 2.85% Oxy has delivered Moderate Value-Based Growth positive results on • Averaged better than 5% production growth each comp
Slide 16: Unique Investment Proposition
Unique Investment Proposition Large Integrated Majors Independent E&Ps Company Market Cap ($Bn) Company Market Cap ($Bn) Oxy XOM $346 COP $56 Uniquely RDS $226 EOG $53 Positioned CVX $198 APC $29 TOT $118 PXD $29 BP $93 DVN $19 ENI $52 APA $18 Characteristics Characteristics • Low or no growth • Gen
Slide 17: Occidental Petroleum: Quality Assets
Occidental Petroleum • Value Proposition • Quality Assets • Differentiated Value- Based Approach 17
Slide 18: Focused Businesses with Scale
Focused Oil and Gas Core Areas Businesses with 66% Oil │ 13% NGL │ 21% Gas Scale United States Oil & Gas • Leading position in the Permian Basin High-return, low decline, • Permian Resources is a growth driver long life, moderate growth, • Permian EOR is stable, low-decline low-cost inventory with f
Slide 19: Longest Legacy International Operations: Colombia and Oman
Longest Legacy International Operations: Colombia and Oman Colombia: Discovered giant Cano Limon field in the early 1980’s. Several contracts that currently range from 6 years up to the economic life of field. Long term contracts with upside potential Oman: Assisted with the discovery and started Om
Slide 20: Additional Core Middle East Assets
Additional Core Middle East Assets ISND and ISSD: Offshore development in Qatar. ISND contract for 25 years initiated in 1994. ISSD contract expires in 2022. Dolphin: Premier transborder pipeline delivering gas from Qatar to Abu Dhabi and Oman. Agreement was initiated in 2007 for a 25 year term. Al
Slide 21: Largest Operator in the Permian
Largest Operator in the Permian 400 Liquids Gas 350 PERMIAN BASIN NET MBOEPD 300 Advantages Through Scale OPERATED PRODUCTION* 250 • 10,000 mi2 3D seismic 200 • 130,000 mi2 2D seismic 150 • ~10,000 gross OBO wells • 250 OBO wells since 2015 100 50 - MTDR CRZO PXD ENDEAVOR CPE APA EOG DVN CXO OXY CVX
Slide 22: Permian Resources
Permian Net Resources Business Area Acreage Acres* • Resources – Unconventional Areas 1.4 • Enhanced Oil Recovery Areas 1.1 Significant acreage Oxy Permian Total 2.5MM & growth potential in all development Net areas Resources Basin Development Areas Acres* • NM Delaware Basin 290,000 ~650,000 net ac
Slide 23: Increased Total Horizontal Drilling Locations ~37%
Improved Permian Resources Horizontal Increased Total Horizontal Drilling Locations ~37% Inventory from 4Q2015 Locations within 300,000 of 650,000 net acres in Basin Development Areas • Added 1,250 12,000 ~11,650 ~11,650 locations BE < $50 Midland Basin 2016 • Added 3,150 total 10,000 Added 3,150 lo
Slide 24: Permian EOR: Proven Leader in Maximizing Recovery
Permian EOR Proven Leader in Maximizing Recovery Across the Permian Significant inventory in 10-year plan Permian EOR Net Resource Potential MMBOE Geographically diverse 2,000 100 active CO2 + water floods High-gradable covering multiple horizons Inventory 1,500 2 BBOE of identified net Midland Basi
Slide 25: OxyChem Generates Industry Leading Chemicals Margins
OxyChem Generates Industry Leading Chemicals Margins EBITDA Margin 30.0% 25.0% 24% 23% 20% 20% 20.0% 15% 15.0% 14% 10.0% 5.0% 0.0% OxyChem Peer 1 Peer 2 1Q 2017 2015 – 2016 FY Average Peers: WLK and OLN 25
Slide 26: Midstream: Improving Cash Flows and Market Access
Midstream: Improving Cash Flows and Market Access Businesses 2017 Impact Gas Plants: Natural gas and CO2 gathering, • Free cash flow expected to improve $150 - compression and processing systems to $200+ MM due to better marketing economics control upstream costs and ramp up of Ingleside oil storage
Slide 27: Occidental Petroleum: Differentiated Value-Based Approach
Occidental Petroleum • Value Proposition • Quality Assets • Differentiated Value- Based Approach 27
Slide 28: Our Pathway to Cashflow Breakeven: Dividend + Growth
Our Pathway to Cashflow Breakeven: Dividend + Growth 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 lo
Slide 29: Our Pathway to Cash Flow Breakeven at $50 WTI
Our Pathway to Cash Flow Breakeven at $50 WTI 6.0 $5.6 $5.6 Operating Cash Flow ($ Bn) 5.0 $4.7 Sustaining $4.4 $4.2 and 4.0 Growth Pathway Drivers: Capital $3.3 3.0 • Permian Resources high-margin growth to $50/bbl accelerate value proposition of consistent dividend plus moderate production growth
Slide 30: Asset Quality and Capital Flexibility Provides Optionality to Cover Dividend
Asset Quality and Capital Flexibility Provides Optionality to Cover Dividend Upon plan execution, Oxy can fund dividend and sustain production from operating cash flows. WTI Oil Price: Annual cash flow sensitivities (Bn) $40 $50 $60 Dividend ex- Dividend + Dividend + Cash Flow Priorities: Growth Gro
Slide 31: 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 32: SL2 Technology Is Key To Further Cost Reduction
SL2 Technology Is Key To Further Cost Reduction 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: > Project c
Slide 33: 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 34: Occidental Petroleum: Summary
• Value Proposition: We’ve done what we said we Occidental would do and will repeat that success Petroleum • Quality Assets: Recent portfolio upgrade provides • Value Proposition highest quality assets in the industry and they are designed to support a strong dividend with • Quality Assets value gro
Slide 35: Appendix
YELL GOONS BEL ITIES —— ts a Se + ee eed : 5 See (ee Bt iststmnta—} |
Slide 36: 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 37: Cash Flow Improvements Expected in 2017
Cash Flow Improvements Expected in 2017 •Improved product prices > Annualized cash flow changes ~$100 million for a ~$1.00 / barrel change in oil prices > Annualized cash flow changes ~$45 million for a ~$0.50 / Mmbtu change in natural gas prices •Improved chemicals performance > Annualized cash flo
Slide 38: Permian Resources Results and Guidance
Permian Resources Results and Guidance Total production grew 5% from Q4 16 to 129 Mboed > Oil production up 7% from Q4 16 to 78 Mbod Oil NGL Gas 140 - 150 135 - 140 Increased activity in 1Q 2017 129 124 > Exited Q1 with 7 rigs 110 > 21 wells online in 1Q17 vs. 16 in 4Q16 > Added 5 top tier performin
Slide 39: Pathway to Cash Flow Breakeven at $50 WTI – Chemicals
Our Pathway to Cash Flow Breakeven at $50 WTI – Chemicals 6.0 $5.6 $5.6 Operating Cash Flow ($ Bn) 5.0 $4.7 Sustaining $4.4 $4.2 +$0.20 and 4.0 Growth Chemicals Drivers: Capital $3.3 3.0 • Full-year benefit of current basic chemicals $50/bbl pricing environment 2.0 • Full-year benefit of Ethylene Cr
Slide 40: Pathway to Cash Flow Breakeven at $50 WTI – Midstream
Our Pathway to Cash Flow Breakeven at $50 WTI – Midstream 6.0 $5.6 $5.6 Operating Cash Flow ($ Bn) 5.0 $4.7 Sustaining $4.4 +$0.3 $4.2 and 4.0 Growth Midstream & Marketing Drivers: Capital $3.3 3.0 • Improved Midland to Gulf Coast differentials $50/bbl • Full-year benefit of Ingleside Export Facilit
Slide 41: Pathway to Cash Flow Breakeven at $50 WTI – Oil & Gas
Our Pathway to Cash Flow Breakeven at $50 WTI – Oil & Gas 6.0 $5.6 $5.6 +$0.9 Operating Cash Flow ($ Bn) 5.0 $4.7 Sustaining $4.4 $4.2 and 4.0 Growth Oil & Gas Drivers: Capital $3.3 3.0 • Over 2,500 locations with NPV10 breakevens under $50 WTI $50/bbl • Cash margins of $30 per barrel 2.0 Current Di
Slide 42: Reducing Domestic Opex Through High Margin Growth Barrels
Reducing Domestic Opex Through High Margin Growth Barrels Asset Area Opex Ranges Domestic Production Mix Permian Resources $2 - $4 Growth Opex / boe Growth Legacy Flat EOR Permian Resources $5 - $20 Legacy Opex / boe 2017 2018+ Total Domestic Opex / boe ~$14/boe Permian EOR $15 - $20 Opex / boe 2017
Slide 43: Current Dividend Yield Well-Above Historical Measures
Current Dividend Yield Well-Above Historical Measures Dividend Yield Average 6.0% Dividend yield should revert close to historical levels as we 5.0% execute plan to a lower cash flow breakeven 4.0% 3.0% 2.0% 1.0% 0.0% Source: Factset 43
Slide 44: Basic Chemical Market Dynamics Are Shifting
Basic Chemical Market Dynamics Are Shifting Spot Domestic Caustic Soda Price* North American Chlor-Alkali Capacity Share * Low end of price range as reported by IHS $450 $400 Rest of $350 Industry Olin 23% 35% $300 $250 Westlake 18% $200 OxyChem 24% • Caustic soda prices reversed their multi-year •
Occidental Petroleum — Bernstein 33rd Annual Strategic Decision Conference 2017 on 6ix