Occidental Petroleum Corporation · NYSE:OXY
Occidental Petroleum — Q4 2015 Earnings Presentation
43 slides from Occidental Petroleum's earnings presentation, Feb 4, 2016
Slide 1: Fourth Quarter 2015 Earnings Conference Call
OCCIDENTAL PETROLEUM CORPORATION Fourth Quarter 2015 Earnings Conference Call February 4, 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: Execution Of Our Growth Strategy
Fourth Quarter 2015 Execution Of Our Growth Strategy Permian Resources growth exceeded our expectations as we reached our 2016 growth target of 120,000 BOED a year early. We increased production by 35,000 BOED, a 47% year over year growth rate. The Al Hosn gas project reached full production cap
Slide 4: Production Growth
Fourth Quarter 2015 Production Growth Total Oil Production* Total Company Production* (MBOD) (MBOED) 416 652 362 571 2014 2015 2014 2015 * Ongoing operations; excludes Williston & Hugoton production volumes 4
Slide 5: Execution Of Our Strategic Initiatives
Fourth Quarter 2015 Execution Of Our Strategic Initiatives Closed the sale of Williston Basin Williston Sale properties 16 MBOED – FY15 $0.6 bn pre-tax Progressed our efforts to exit from non- proceeds core operations in Middle East Reached understanding on terms of payment with the Republic o
Slide 6: Strategy
Fourth Quarter 2015 Strategy Overall strategy is to invest in projects that generate long-term value, achieving returns well above our cost of capital while maintaining a conservative balance sheet • Our assets in Permian EOR, Colombia, ISND in Qatar, Dolphin, Al Hosn and OxyChem provide significant
Slide 7: Cash Flow Priorities
Fourth Quarter 2015 Cash Flow Priorities 1. Base/Maintenance Capital 2. Dividends 3. Growth Capital 4. Share Repurchase 5. Acquisitions 7
Slide 8: Improved Cost Structure
Fourth Quarter 2015 Improved Cost Structure Production Costs Overhead (SG&A) ($/boe) ($ millions) • Expect continued improvement in cost $13.50 $1,503 structure – Strategic Initiatives $1,270 $11.57 – Lower workovers – Lower downhole maintenance – Lower energy costs 2014 2015 2014 2015 8
Slide 9: 2016 Capital Outlook
Fourth Quarter 2015 2016 Capital Outlook 2016 Capital Budget • Carefully reduce activity levels without ($ in bln) harming the strong progress on growth prospects $5.6 • Fund only those opportunities that exceed hurdle rates of return • 2016 plan approximates expected cash from operations at around
Slide 10: Committed Project Capital Declining
Fourth Quarter 2015 Committed Project Capital Declining Committed Project Capital • Multiple long-term investments to ($ in millions) drive cash flow and earnings $1,300 growth – Al Hosn – Ethylene cracker JV $800 – Ingleside terminal – Gas processing $500 • Capital spending will continue to decline
Slide 11: 2016 Capital Outlook
Fourth Quarter 2015 2016 Capital Outlook Oil & Gas Capital Budget Chemicals and Midstream Capital Budget ($ in bln) ($ in bln) $4.4 $1.2 ~$1.0 ~$2.0 2015 2016E 2015 2016E Maintenance Sustaining Growth Maintenance Sustaining Growth 11
Slide 12: 2016 Production Outlook
Fourth Quarter 2015 2016 Production Outlook • Expect total production from core assets to grow 2% - 4% over 2015 levels – Core assets exclude Bahrain, Libya, Iraq, Yemen, Williston and Piceance Basins – Full year contribution from Al Hosn and start-up of Block 62 in Oman should add ~35,000 BOED of p
Slide 13: Reserves
Fourth Quarter 2015 Reserves • Continue to build on our strategy to focus on our existing strong Permian position – In total Permian business, replaced 115% of production through our drilling program – In Permian Resources segment, replaced 214% of production through the drilling program, excluding
Slide 14: Capital Program
Fourth Quarter 2015 Capital Program Capital Program $8.7 bn • Total company capital expenditures 2015 were $5.6 billion, a 36% Permian reduction from 2014 Resources $5.6 bn • Oil and Gas spent $4.4 billion, with Permian Permian Resources expenditures Remaining Resources Oil & Gas comprising 50% of t
Slide 15: 2016 Capital Breakdown – Oil & Gas
Fourth Quarter 2015 2016 Capital Breakdown – Oil & Gas 2016 Capital Budget $2.8 - $3.0 billion • Domestic − Overall spending levels in the Permian will decline Chemicals 18% Permian Resources 21% • International Midstream − Spending levels in MENA will 16% decline by ~56% mostly from the Al Permian
Slide 16: 2016 Capital Breakdown – Chemicals & Midstream
Fourth Quarter 2015 2016 Capital Breakdown – Chemicals & Midstream 2016 Capital Budget • Includes $500 million of committed capital $2.8 - $3.0 billion for projects to be completed by YE 2016 • Chemicals − Includes the Ingleside Ethylene joint Chemicals Permian PermianResources Resources venture pro
Slide 17: Core Results
Fourth Quarter 2015 Core Results Results • Domestic oil production (Bbl/d) 190,000 11% year / year growth* • Total company production (BOED) 671,000 • Core results** ($129) million • Core diluted EPS** ($0.17) • 4Q15 CFFO before Working Capital $0.94 billion • 4Q15 Capital Expenditures $1.17 billion
Slide 18: 2015 Production from Core Assets
Fourth Quarter 2015 2015 Production from Core Assets Core Assets - Oil & Gas Production (MBOED) 668 36 72 ~560 FY2015 Reported Domestic Asset Sales Non-Core MENA 2015 Core Assets Production 18
Slide 19: Oil and Gas Total Company Production
Fourth Quarter 2015 Oil and Gas Total Company Production • In 4Q15, total company oil and gas production volumes averaged 671,000 BOED, a decrease of 1,000 BOE in daily production from 3Q 2015. Company-wide Oil & Gas Production (MBOED) 9 (19) 12 672 1 (4) 671 3Q15 Permian Other Colombia MENA ex. Ira
Slide 20: Oil and Gas Domestic Production
Fourth Quarter 2015 Oil and Gas Domestic Production • Exceeded our domestic oil production growth guidance with a year over year increase of 19,000 BOD or about 11% led by our Permian Resources assets. Domestic Oil & Gas Production (MBOED) 2 (2) 315 (3) 312 301 4Q14 3Q15 Oil NGLs Natural Gas 4Q15 No
Slide 21: Oil & Gas Realized Prices
Fourth Quarter 2015 Oil & Gas Realized Prices Realized Prices Benchmark Prices Worldwide Worldwide Domestic Nat. Oil ($/bbl) NGLs ($/bbl) Gas ($/mmbtu) WTI Brent NYMEX 4Q15 $38.68 $14.02 $1.75 $42.18 $44.71 $2.44 WTI % 92% 33% 72%* Brent % 87% 31% 3Q15 $47.78 $14.68 $2.24 $46.43 $51.17 $2.78 WTI % 1
Slide 22: YTD 2015 Cash Flow
Fourth Quarter 2015 YTD 2015 Cash Flow FY 2015 ($ in millions) $4,800 ($2,100) 4Q15 ($5,600) LT Debt / Capital 22% $7,800 ($2,300) $900 $4,400 $1,500 ($600) Beginning CFFO Before Change in Capital Dividends Share Debt Issuance Sale Proceeds Ending Cash Cash Balance Working Working Expenditures Repur
Slide 23: 2016E Sources & Uses of Cash
Fourth Quarter 2015 2016E Sources & Uses of Cash 2016 Illustrative Sources & Uses of Cash • S&P Rating affirmed at single A with stable outlook Ecuador Payments ~$1.2 bn & Asset Sales • Financial flexibility to invest through the cycle and return 4Q15 cash to shareholders Annualized Cash Flow ~$3.6
Slide 24: FY 2016 Production Outlook – Core Assets
Fourth Quarter 2015 FY 2016 Production Outlook – Core Assets • FY 2016 Total Production Outlook – Core Assets (Excludes Iraq, Libya, Bahrain, Yemen, Williston & Piceance) – Total volumes of 570,000 – 585,000 BOED • FY 2016 US Production Outlook – Core Assets (Excludes Williston & Piceance) – Total v
Slide 25: 1Q16 Production Outlook
Fourth Quarter 2015 1Q16 Production Outlook • 1Q16 Total Production Outlook – Total production of 620,000 – 630,000 BOED – Permian Resources of ~121,000 BOED – Middle East volumes impacted by ~15,000 BOED due to scheduled maintenance turnarounds at Al Hosn and Dolphin 25
Slide 26: Targeted SG&A Reductions
Fourth Quarter 2015 Targeted SG&A Reductions • The realignment of our business helped us make strong progress in lowering our SG&A costs in 2015 by more than $200 million. • In the current environment, we expect to reduce these costs by at least another $100 million into 2016. • Actions completed −
Slide 27: 1Q16 & FY 2016 Guidance Summary
Fourth Quarter 2015 1Q16 & FY 2016 Guidance Summary Oil & Gas Segment DD&A – FY 2016E • FY 2016E Total Production – Core Assets • Oil & Gas: ~$15.00 / BOE – 570,000 – 585,000 BOED • Chemicals and Midstream: $675 mm • FY 2016E Domestic Production – Core Assets Production Costs – 270,000 – 285,000 BOE
Slide 28: Permian Resources Production
Fourth Quarter 2015 Permian Resources Production Oil NGL Gas • Total production grew 40% year- over-year to 118 MBOED. – Oil production grew 49% year-over-year to 76 MBOD. 116 118 ~123 110 109 – Oil production is expected 98 to continue to grow at rates higher than total 75 production. • Reached goa
Slide 29: Delaware Basin Recent Performance
Fourth Quarter 2015 Delaware Basin Recent Performance Well Performance: Texas Delaware – Wolfcamp A • Peck State 258 6H - 12 month cumulative production: 384 Mboe – 84% oil • Buzzard State 9H - 12 month cumulative production: 318 Mboe – 75% oil • Moore Hooper 3H - 6 month cumulative production: 205
Slide 30: Southeast New Mexico Recent Performance
Fourth Quarter 2015 Southeast New Mexico Recent Performance Well Performance: New Mexico 2nd Bone Spring • Cedar Canyon 27 State 4H - 12 month cumulative production: 252 Mboe – 79% oil • Misty 35 Fed Com 4H – 9 month cumulative production: 263 Mboe – 83% oil Boepd / 1000’ Peak 24 Hour 30 Day CEDAR C
Slide 31: Permian Resources - Manufacturing Mode
Fourth Quarter 2015 Permian Resources - Manufacturing Mode Move to Manufacturing Mode Significantly Reduced Well Cost WELL COST DRILL DAYS Delaware Wolfcamp A 4,500’ HZ Delaware Wolfcamp A 4,500’ HZ 50 $12.0 $10.9 43 45 $10.0 40 37 35 GROSS WELL COST $MM $8.0 $5.6 30 $6.2 $6.0 $5.5 25 20 19 $3.2 20
Slide 32: East Midland Basin Recent Performance
Fourth Quarter 2015 East Midland Basin Recent Performance Well Performance: East Midland - Wolfcamp A • Adams 4231 #1WA - 3 month cumulative production: 117 Mboe – 92% oil • Adams 4201WA - 6 month cumulative production: 180 Mboe – 91% oil • Merchant 1401A - 6 month cumulative production: 142 Mboe –
Slide 33: Permian Resources - Manufacturing Mode
Fourth Quarter 2015 Permian Resources - Manufacturing Mode 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 31 30 $5.5 $6.0 $6.0 $5.3 25 20 20 1
Slide 34: Permian Resources Cost Reduction
Fourth Quarter 2015 Permian Resources Cost Reduction Permian Resources Operating Costs / BOE $15.00 $13.20 $13.03 $11.39 • Focus on reducing field operating $10.87 costs during 2015 $10.00 $9.73 • Downhole expense ($/boe) reduced 34% from 4Q14 • Company operated operating expense $5.00 down ~30% ($/
Slide 35: Permian EOR
Fourth Quarter 2015 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 is expected to generate free cash flow this year in the current oil price environment. • South Hobbs
Slide 36: World Leader in Enhanced Oil Recovery
Fourth Quarter 2015 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 37: Permian EOR Cost Structure
Fourth Quarter 2015 Permian EOR Cost Structure Permian EOR can operate at cash costs as low as $22 per BOE 2015 Permian EOR Cost Structure 2015 Permian EOR Cost Structure $55 WTI, $3.00 NYMEX $35 WTI, $2.00 NYMEX $35 $35 $30 $2.7 $30 $25 $4.0 $25 $4.7 $1.8 $20 $20 $ / BOE $ / BOE $3.2 $4.7 $2.2 $15
Slide 38: Permian EOR
Fourth Quarter 2015 Permian EOR Cash Operating Expense ($/BOE) $25.00 • Cash Operating Expense reduced $20.82 $20.03 by $4.36 / BOE in 4Q14 to 4Q15 $20.00 $18.16 $18.36 $16.46 • Savings were driven by $15.00 productivity gains and supplier cost reductions $/BOE $10.00 • Well maintenance job producti
Slide 39: South Hobbs: CO2 Flood and Expansion Areas
Fourth Quarter 2015 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 40: 2016 Permian Strategy
Fourth Quarter 2015 2016 Permian Strategy Given the current oil price environment, we will focus on investment to achieve four core goals: Accelerate geoscience, characterization and modeling programs to enhance recovery, productivity and field economic returns Minimize base decline and set up m
Slide 41: Permian Resources – Drilling Inventory
Fourth Quarter 2015 Permian Resources – Drilling Inventory Continuing to lower economic hurdle points through reservoir characterization and optimization, improved productivity, reduced well costs, and faster time to market 100% Drilling Inventory • Total of ~8,500 locations in Based on Q4 Costs hor
Slide 42: Permian Summary
Fourth Quarter 2015 Permian Summary EOR Resources • 2016 activity focused on core locations with minimal infrastructure investments 260 261 ~266 255 254 • Analyze appraisal data to support 243 future development and initiate 222 seed projects for long term growth 116 118 ~123 110 98 109 in EOR 75 •
Slide 43: Fourth Quarter 2015 Earnings Conference Call Q&A
FOURTH QUARTER 2015 EARNINGS CONFERENCE CALL Q&A