Occidental Petroleum Corporation · NYSE:OXY
Occidental Petroleum — Q4 2013 Earnings Presentation
61 slides from Occidental Petroleum's earnings presentation, Jan 30, 2014
Slide 1: Fourth Quarter 2013 Earnings Conference Call
Occidental Petroleum Corporation Fourth Quarter 2013 Earnings Conference Call January 30, 2014
Slide 2: 2013 Highlights
Fourth Quarter 2013 Earnings – 2013 Highlights Grew our domestic oil production last year by 11 mb/d over 2012 to 266 mb/d. Exceeded our capital efficiency goals by reducing drilling costs by ~24% from the 2012 level. Reduced our domestic operating costs by 17%. Added ~470 470 MMBOE of reser
Slide 3: 2013 Development Program Review
Fourth Quarter 2013 Earnings – 2013 Development p Program g Review Domestic Operating Costs • Improved capital efficiency by 24% over 2012 in the US, saving $900 mm of capital. – Permian – 50% of improvement $17.43 $14.43 – California – 25% of improvement ($/boe) – Other Domestic Assets – 25% of imp
Slide 4: Oil & Gas Reserves
Fourth Quarter 2013 Earnings – Oil & Gas Reserves • Very successful year in growing the Company’s reserve base, by adding substantially more reserves than we produced, over 90% of which was added through our organic development program. program • Based on a preliminary estimate of year-end 2013 rese
Slide 5: Oil & Gas Reserves
Fourth Quarter 2013 Earnings – Oil & Gas Reserves 2013 Overall Reserve (in millions of BOE) 142 ~3,500 Replacement Ratio of ~169% 32 3,296 (278) 291 FY12 Reserves 2013 Production U.S. Organic U.S. Acquisitions International Organic FY13 Reserves* Development Development * Preliminary 5
Slide 6: Oil & Gas Reserves
Fourth Quarter 2013 Earnings – Oil & Gas Reserves • Built a large portfolio of growth oriented assets in the U.S. • In 2013 2013, we spent a much larger portion of our investment dollars on the development of this portfolio. • Our organic reserve replacement for 2013 reflects the positive results of
Slide 7: U.S. Oil & Gas Reserves
Fourth Quarter 2013 Earnings – U.S. Oil & Gas Reserves 2013 U.S. Reserve (in millions of BOE) Replacement Ratio of ~190% 32 ~2,400 291 2,265 (173) FY12 Reserves 2013 Production U.S. Organic U.S. Acquisitions FY13 Reserves Development * Preliminary 7
Slide 8: Oil & Gas Reserves
Fourth Quarter 2013 Earnings – Oil & Gas Reserves • At year end 2013, ~73% of total proved reserves were liquids, increasing from 72% in 2012. – Of the total reserves, ~70% were proved developed reserves, compared to 73% in 2012. − Increase in the share of proved undeveloped reserves compared to 201
Slide 9: Oil & Gas Reserves
Fourth Quarter 2013 Earnings – Oil & Gas Reserves • Success of our organic reserve additions and the efficiencies we have achieved in our operations demonstrates the significant i ifi t progress we have h made d in i turning t i the th Company C into a competitive domestic producer. • One of our lon
Slide 10: ROCE
Fourth Quarter 2013 Earnings – ROCE • Our focus in 2013 was to enhance Return on Capital Employed * shareholder value through our results. • Heavily focused on growing domestic oil production, improving our capital efficiency and F&D costs and lowering 12.2% our operating costs. • We met or exceeded
Slide 11: Capital Spending 2013 Actual & 2014 Estimate
Fourth Quarter Earnings – Capital p Spending p g 2013 Actual & 2014 Estimate • 2014 capital program expected to be ~$10.2 billion* • Increase in capital includes ~$400 mm Capital Investment ($ bln) ll t d tto each allocated h off our CA and dP i Permian operations largely for additional drilling $10
Slide 12: Capital Spending 2013 Actual & 2014 Estimate
Fourth Quarter Earnings – Capital p Spending p g 2013 Actual & 2014 Estimate 2014E Capital - $10.2 Billion* • Midstream capital will increase ~$100 mm as a result of spending on the BridgeTex pipeline pp and two new terminals at Ingleside. g • Chemical capital will increase ~$100 mm Chemicals 6% due
Slide 13: 2014 Production Outlook
Fourth Quarter 2013 Earnings – 2014 Production Outlook Total Company* • We expect our 2014 total company 780 - 790 production volumes to grow to 763 780 - 790 mboe/d vs. 763 mboe/d in Mboe/d d 2013, with a 4Q14 exit rate of over 800 mboe/d, excluding the planned Al Hosn production. • This increase w
Slide 14: 2014 Production Outlook
Fourth Quarter 2013 Earnings – 2014 Production Outlook • While the elements of the 2014 program as discussed assume no changes to the Company structure or its mix off assets, t we dod expectt the th Company C to t look l k significantly i ifi tl different by the end of the year. • The strategic revi
Slide 15: Long-term Growth Investments
Fourth Quarter 2013 Earnings – Long-term g Growth Investments • Some of the longer lead time investments we have been making over the past couple of years will start contributing t our results to lt this thi year. Specifically: The Al Hosn Gas Project is expected to start its initial production in
Slide 16: Strategic Review
Fourth Quarter 2013 Earnings – Strategic Review • With respect to the initiatives outlined in the first phase of the Company’s strategic review announced last year: − We completed the sale of a portion of the Company’s investment in the General Partner of the Plains All-American Pipeline in October
Slide 17: Capitalization
Fourth Quarter 2013 Earnings – Capitalization • In 4Q’13, we used the Plains proceeds to retire $625 mm of debt, reducing our debt load by ~9%, and to purchase almost 10 mm shares h off th the Company’s C ’ stock t k with ith a cashh outlay tl off $880 mm. Shares Outstanding (mm) FY2013 12/31/13 Wei
Slide 18: Summary
Fourth Quarter 2013 Earnings – Summary • At the Board’s February meeting we will review the Company’s dividend policy, status of the strategic alternatives and share repurchase h authority. th it • Many of the steps we have taken in 2013, our success in improving our efficiency and the actions that
Slide 19: Permian Basin & California Oil & Gas Operations
Fourth Quarter 2013 Earnings – Permian Basin & California Oil & Gas Operations p 2014 Operational Objectives Continue the development of anchor projects, enabling the allocation of significant portions of capital to projects with solid returns, low execution risk and long-term growth. Further re
Slide 20: Permian Basin
Fourth Quarter 2013 Earnings – Permian Basin Permian Basin Capital • Two business units named as: ($ in mm) − “Permian EOR”: CO2 and waterfloods. $2,190 − “Permian Resources”: growth $1,722 oriented “unconventional”. $1,530 • The entire $450 mm increase will be spent on our Permian $1,107 Resources
Slide 21: Permian Basin Production
Fourth Quarter 2013 Earnings – Permian Basin Production • We expect the Permian EOR business ~222 211 to offset its decline in 2014 and grow 1 4% 1.4%. • The Permian Resources business is mboe/d expected to grow oil production faster by 20% 0% - 25% 5% a and d tota total p production oduct o by 13%
Slide 22: Permian Resources
Fourth Quarter 2013 Earnings – Permian Resources Shift to Horizontal Drilling • Drilled 49 horizontal wells with 47 completed and producing. D l tW Development ll Wells • Improvements in well costs, our own results and those of Horizontal ~345 neighboring operators have Vertical 335 given us the con
Slide 23: Permian Resources
Fourth Quarter 2013 Earnings – Permian Resources Acreage in Select Permian Plays (Thousands of Acres) Delaware Basin Gross Net • Believe we have one of the most p promisingg and Avalon 365 130 under-exploited unconventional portfolio in the basin. Bone Spring 1 Sand 540 210 • In 2013, added 200K net
Slide 24: Permian Resources
Fourth Quarter 2013 Earnings – Permian Resources Permian Basin Plays • We see the largest near-term growth in the Matador Arch Midland Basin, which represents ~ 2/3 of our currently y assessed resource p potential. Northwest Shelf Midland • Our Delaware Basin prospective acreage is Basin significant
Slide 25: Cost Reductions Expand Opportunity Set
Fourth Quarter 2013 Earnings – Permian Resources Cost Reductions Expand Opportunity Set • The success of our capital p and With operating cost efficiency efforts 2012 2013 Cost in 2013, has also enabled us to Benchmark Reductions significantly improve our cost Resource IRR IRR structure which has in
Slide 26: Permian Resources
Fourth Quarter 2013 Earnings– Permian Resources 2014E Capital - ~$1.6 Billion Unconventional Acreage Strategy 1. Exploration to establish the presence of a commercial resource resource. 2. Testing and data gathering to optimize well and completion design. New 3 3. Pilot programs to assess variabilit
Slide 27: Permian Resources Midland Basin
Fourth Quarter 2013 Earnings – Permian Resources Midland Basin 2014E Capital $790 mm Average Rigs 8 Texas 2014 Wells 147 Horizontal Wells 74 • Drilled 16 horizontal wells to date. • Largest g opportunity pp y is in the Wolfcamp p Shale where we have tested Wolfcamp A and B benches and, plan to test
Slide 28: Permian Resources Texas Delaware Basin
Fourth Quarter 2013 Earnings – Permian Resources Texas Delaware Basin 2014E Capital $370 mm Average Rigs 5 2014 Wells 91 New Mexico Horizontal Wells 48 • Horizontal o o ta act activity ty focused ocused o on Texas Wolfcamp where we believe the A, B and C benches will prove to be the most prospective
Slide 29: Permian Resources New Mexico Permian
Fourth Quarter 2013 Earnings – Permian Resources New Mexico Permian 2014E Capital $370 mm Average Rigs 4 2014 Wells 97 Horizontal Wells 50 • Bone Spring formation in New Mexico is the second largest opportunity in our portfolio behind the Wolfcamp Shale. • In 2013, we drilled 16 horizontal wells tes
Slide 30: Permian EOR
Fourth Quarter 2013 Earnings – Permian EOR Permian EOR SLAUGHTER (CVX) IRISH COCHRAN HOCKLEY LUBBOCK CROSBY DICKE • Business unit is a combination of IGOE SMITH LEVELLAND LUBBOCK water and CO2 floods. NM HT BOYD SLAUGHTER FRAZIER SALT C PRENTICE • $660 mm capital in 2014. Hobbs YOAKUM WILLARD OWNBY
Slide 31: Permian Basin Exploration
Fourth Quarter 2013 Earnings – Permian Basin Exploration • Over the last several years the focus of our Permian exploration program has been to identify unconventional opportunities, which are then transitioned to full field development through our evaluation process. process • Our approach has been
Slide 32: Permian Summary
Fourth Quarter 2013 Earnings – Permian Summary Permian Basin Overall Strategy for Success 1 Maximize field resource potential 1. • Targeted use of horizontal & vertical drilling, optimizing development and completion plans, infrastructure investment to pre pre-plan plan for life of field success suc
Slide 33: Permian Summary
Fourth Quarter 2013 Earnings – Permian Summary Significant Position with Key Competitive Advantages More than 2.5 billion BOE in reserves and potential resources with 15+ years of development and growth opportunities. Flexibility to shift capital among projects and between the two business units
Slide 34: Permian Summary
Fourth Quarter 2013 Earnings – Permian Summary Growth Outlook Significant cash flow from Permian EOR to fuel growth. Plan to double drilling rigs over next 3 years to accelerate development of the Permian Resources unit growth opportunities. Expect to grow Permian Resources production from 64
Slide 35: Permian Summary Growth Outlook
Fourth Quarter 2013 Earnings – Permian Summary Growth Outlook Significant cash flow from Permian EOR to fuel growth. Plan to double drilling rigs over next 3 years to accelerate growth in Permian Resources. Production Permian EOR Permian Resources 207 211 198 120+ 48 57 64 boe/d) (mb 150 150 147
Slide 36: California Overview
Fourth Quarter 2013 Earnings – California Overview • 2013 main goals were to: − deliver a predictable outcome. − advance low-risk projects that contribute to long-term growth . − reduce the cost structure. − lower the base decline. − create a more balanced portfolio. − test exploration p and develop
Slide 37: California
Fourth Quarter 2013 Earnings – California • 2013 Production of 154 mboe/d and free cash flow of ~$1.3 billion after capital. • P Progressedd development d l t off steam t floods fl d ini Kern K Front F t and d Lost L t Hills, Hill and started the redevelopment of Huntington Beach Field. • Improved o
Slide 38: California Capital Program
Fourth Quarter 2013 Earnings – California Capital p Program g • Focus on low-decline projects. California 2014 Capital - $1.9 bn • 2014 Goals – A Accelerate l t the th rate t off production d ti growth. th − Maintain the lower cost structure. Steam Floods 20% − Advance several low-risk, high-return,
Slide 39: California Operations – Water Floods
Fourth Quarter 2013 Earnings – California Operations p – Water Floods LA Basin – 2014 Capital of $500 mm Wilmington Field • Drilled 135 wells and will increase 7% to 145 wells in 2014. • Horizontal program was particularly strong strong, and horizontal wells will represent a greater % of wells in 20
Slide 40: California Operations – Steam Floods
Fourth Quarter 2013 Earnings – California Operations p – Steam Floods Heavy Oil – Key focus area in 2013 and will be again in 2014. – We plan to spend $350 mm to drill about 420 wells in 2014, compared to 324 wells in 2013, to continue the multi-year development of Kern Front and Lost Hills steam fl
Slide 41: California Operations – Elk Hills
Fourth Quarter 2013 Earnings – California Operations p – Elk Hills Elk Hills • Key objective is to lower the high decline rate; significant progress toward this goal. • 2014 capital of $600 mm to drill ~325 wells, an increase of $170 mm over 2013. • ~55% of capital will be targeting shale reservoirs
Slide 42: California Operations – Exploration
Fourth Quarter 2013 Earnings – California Operations p – Exploration p Exploration – Solid res results lts for o over er 5 years. ears – The 2014 California program will continue to explore both unconventional and conventional targets. g – The unconventional program targets several prospects similar
Slide 43: California Production Outlook
Fourth Quarter 2013 Earnings – California Production Production Outlook • Capital shift to lower decline and lower risk steam and water flood projects. • We believe we can grow production 190 from 154 mboe/d to 190 mboe/d in 2016, a ~7.5% CAGR. ~160 • Water & steam floods will contribute 80% 154 of
Slide 44: Shift in California Production Mix
Fourth Quarter 2013 Earnings – California Production Shift in California Production Mix • Over the long-term long-term, we expect our 154 148 California growth prospects to 139 138 benefit from changes in our asset 134 mix. 69 70 • Elk Hills and Long Beach, while 76 69 having the potential for years
Slide 45: Shift in California Production Mix
Fourth Quarter 2013 Earnings – California Production Shift in California Production Mix Liquids Production 110 105 • Sh Share off production d ti ffrom Elk Hill Hills 95 and Long Beach has declined from 92 92 64% in 2009 to 44% in 2013. 51 • This Thi shift hift will ill continue ti going i 48 48 for
Slide 46: 4Q13 & FY2013 Financial & Operating Data, Variances & Guidance
Fourth Quarter 2013 Earnings - Appendix 4Q13 & FY2013 FINANCIAL & OPERATING DATA,, VARIANCES & GUIDANCE 46
Slide 47: Fourth Quarter 2013 Earnings – Highlights
Fourth Quarter 2013 Earnings – Highlights Results • Domestic oil p production (Bbl/d) ( ) 270,000 , • Total production (Boe/d) 750,000 Exceeded Target • Operating p g costs 8% R Reduction d ti • Capital program Exceeded Target 24% Reduction • Core earnings $1.4 billion • Core diluted EPS $1.72 • 201
Slide 48: Highlights: 4Q13 over 3Q13 Core Income
Fourth Quarter 2013 Earnings – Highlights 4Q13-Over-3Q13 Impacts Core Income* ($ in bln) • Lower oil and gas results $1.6 $1.5 - Lower U.S. oil prices $1.4 - Lower NGLs and natural gas sales volumes + Higher MENA oil prices + Higher oil sales volumes • Lower margins L i ini marketing k ti and tradin
Slide 49: Oil & Gas Segment Earnings
Fourth Quarter 2013 Earnings – Oil & Gas Segment Earnings 4Q13 vs. 3Q13 $2,363 ($ in millions) ($168) $10 ($46) ($7) ($42) $8 $2,118 Core Results • 2Q13 $2.1 B • 3Q13 2.4 B • 4Q12 2.3 B 3Q13 Sales Price Sales Volumes Higher Higher DD&A Lower All Others 4Q13 Operating rate Exploration Costs Costs 49
Slide 50: Oil and Gas Total Production
Fourth Quarter 2013 Earnings – Oil and Gas Total Production Company-wide Oil & Gas Production (mboe/d) Severe winter weather caused significant damage to infrastructure and logistics capability that has continued co t ued to sosomewhat e at impact pact production p oduct o in January. Ja ua y We e e
Slide 51: Oil and Gas Domestic Production
Fourth Quarter 2013 Earnings – Oil and Gas Domestic Production Domestic Oil & Gas Production (mboe/d) 3 (6) 475 476 (3) 470 4Q12 3Q13 Oil NGLs Natural Gas 4Q13 51
Slide 52: Oil & Gas Realized Prices
Fourth Quarter 2013 Earnings – Oil & Gas Realized Prices Realized Prices Benchmark Prices Worldwide Worldwide Domestic Nat. Oil (($/bbl)) NGLs (($/bbl)) Gas (($/mmbtu)) WTI Brent NYMEX 4Q13 $99.27 $44.69 $3.33 $97.46 $109.35 $3.64 WTI % 102% 46% 92%* Brent % 91% 41% 3Q13 $103.95 $40.53 $3.27 $105.83
Slide 53: Oil & Gas Production Costs & Taxes
Fourth Quarter 2013 Earnings – Oil & Gas Production Costs & Taxes Production Costs ($/boe) FY12 1Q13 2Q13 3Q13 4Q13 FY13 Domestic $17.43 $14.06 $14.28 $14.65 $14.74 $14.43 Total $14 99 $13 $14.99 $13.93 93 $13 $13.40 40 $13 $13.60 60 $14 13 $14.13 $13 $13.76 76 • Taxes other than on income, which ar
Slide 54: Chemical Segment Core Earnings
Fourth Quarter 2013 Earnings – Chemical Segment Core Earnings 4Q13 vs. 3Q13 Guidance $181 ($35) ($ in millions) 1Q14 expected t be to b ~$100 $100 mm ($4) ($4) ($10) $128 Core Results • 4Q13 $ 128 mm • 3Q13 181 mm • 4Q12 180 mm 3Q13 Sales Price Sales Volume / Operations / All Others 4Q13 Mix Manufac
Slide 55: Midstream Segment Earnings
Fourth Quarter 2013 Earnings – Midstream Segment Earnings 4Q13 vs. 3Q13 Core Results ($ in millions) • 4Q13 $68 mm $212 ($84) • 3Q13 $212 mm • 4Q12 $75 mm ($30) ($39) $9 $68 3Q13 Marketing & Power Gas Processing Pipelines 4Q13 Trading Generation 55
Slide 56: FY 2013 Cash Flow
Fourth Quarter 2013 Earnings – FY 2013 Cash Flow $600 ($8,800) $13,900 FY 2013 ($ in millions) FY’13 Debt / Capital 14% Return on Equity 14% Cash Flow From Return on Capital Employed* Employed 12% Operations before $1,670 ($645) Working Capital ($2,380) changes $12,300 ($945) $3,400 Beginning Cash $
Slide 57: Capital Spending 2013 Actual & 2014 Estimate
Fourth Quarter Earnings – Capital Spending 2013 Actual & 2014 Estimate Long-term investment ~ 25% + Long-term investment ~ 20% + Americas Oil &Gas Americas Oil &Gas Exploration Exploration 5% 51% 6% 53% Chemicals & Permian Chemicals & Permian U.S. Midstream 20% U.S. Midstream 22% 12% 13% Al Hosn Al
Slide 58: 2014 Capital Estimate – Domestic Oil & Gas
Fourth Quarter 2013 Earnings – 2014 Capital Estimate – Domestic Oil & Gas • Domestic Oil & Gas development capital will be ~49% of our total 61 it l program. capital – Permian rig count to increase 60 Counts slightly as we swap horizontal 50 for vertical rigs. Average Rig C 50 – Total domestic oil a
Slide 59: 2014 Capital Estimate
Fourth Quarter 2013 Earnings – 2014 Capital Estimate International • Total Al Hosn Gas Project capital should decline ~20% from the 2013 levels and will make up ~7% of our total capital program for 2014 levels, 2014. • Qatar capital spending is expected to increase ~$200 mm for the North Dome Phase
Slide 60: 1Q14 & FY 2014 Guidance Summary
Fourth Quarter 2013 Earnings – 1Q14 & FY 2014 Guidance Summary Oil & Gas Segment* • 2014 Total Production Pre-tax Income Price Sensitivity Impact (Quarter) of 780 - 790 Mboe/d. • Domestic FY 2014 Oil +/- $1/bbl = +/- $38 mm − Oil – 280 - 295 mboe/d, NGL +/- $1/bbl = +/- $8 mm ~9% increase. U S Nat G
Slide 61: Conference Call Q&A
Fourth Quarter 2013 Earnings Conference Call Q&A