Occidental Petroleum Corporation · NYSE:OXY
Occidental Petroleum — 2014 UBS Global Oil & Gas Conference
43 slides from Occidental Petroleum's conference presentation, May 21, 2014
Slide 1: Occidental Petroleum Corporation – 2014 UBS Global Oil & Gas Conference
Occidental Petroleum Corporation 2014 UBS Global Oil & Gas Conference May 21, 2014 Stephen I. Chazen President and Chief Executive Officer
Slide 2: Key Messages
Key Messages Generate shareholder value by employing our current strategy: Stronger financial returns • Continued improvement in our capital and drilling efficiency with the goal of generating higher earnings from our oil and gas production growth. • Start-up of long-term projects with these lar
Slide 3: Why own Oxy?
Why own Oxy? Large Integrated Majors Independent E&Ps Company Market Cap ($B) Company Market Cap ($B) XOM $444 COP $94 RDS $251 Oxy EOG $54 CVX $240 Uniquely APC $51 TOT $161 Positioned APA $34 BP $156 PXD $28 ENI $93 MRO $25 Characteristics Characteristics • Low or no growth • Generally higher grow
Slide 4: What Is Our Philosophy & Strategy?
What Is Our Philosophy & Strategy? Overriding Goal is to Maximize Total Shareholder Return • We believe this can be achieved through a combination of: • Growing our oil and gas production by 5% to 8% per year on average over the long term; • Allocating and deploying capital with a focus on achieving
Slide 5: Cash Flow Priorities
Cash Flow Priorities 1. Base/Maintenance Capital 2. Dividends 3. Growth Capital 4. Share Repurchase 5. Acquisitions 5
Slide 6: Delivering Consistent Dividend Growth
Delivering Consistent Dividend Growth ($/share) $17.39 $18.00 $16.00 $14.51 $14.00 $11.95 $12.00 $9.79 $10.00 $7.95 $8.00 $6.48 $6.00 $5.16 $3.96 $4.00 $3.02 $2.56 $2.88 $2.16 $2.22 $1.84 $1.57 $1.47 $2.00 $1.21 $1.31 $1.02 $0.80 $0.94 $0.50$0.50$0.52 $0.55 $0.65 $0.00 2002 2003 2004 2005 2006 2007
Slide 7: Oxy Is Primarily A Domestic Oil Producer
Oxy Is Primarily A Domestic Oil Producer Oil & Gas Production First Quarter 2014 (Million barrels of oil equivalent) 17 26% 26 39% 42 41 7 63% 61% 11% Oil NGLs Gas Domestic International 7
Slide 8: Improvement in Capital Efficiency & Operating Costs
Improvement in Capital Efficiency & Operating Costs Domestic Operating Costs • Improved capital efficiency in the U.S. by 24% last year vs. 2012, saving $900 mm of capital. $17.43 – Permian – 50% of improvement $14.43 ($/boe) – California – 25% of improvement – Other Domestic Assets – 25% of improve
Slide 9: Strong 2013 Oil & Gas Reserves Replacement
Strong 2013 Oil & Gas Reserves Replacement 2013 Overall Reserve (in millions of BOE) 142 3,483 Replacement Ratio of ~169% 32 3,296 (278) 291 Over 90% of reserves added through our organic development program. FY12 Reserves 2013 Production U.S. Organic U.S. Acquisitions International Organic FY13 Res
Slide 10: Capital Spending Program
Capital Spending Program • 2014 Capital Program expected to be ~$10.2 billion* • Capital increase includes ~$400 mm Capital Investment ($ bn) allocated to each of our CA and Permian operations largely for additional drilling $10.2 to accelerate their development plans and production growth. $8.8 • A
Slide 11: Capital Spending Program
Capital Spending Program Long-term investment ~ 25% + Long-term investment ~ 20% + Exploration Exploration 5% 6% Chemicals & Permian Chemicals & Permian U.S. Midstream 20% U.S. Midstream 22% 12% 13% Americas Oil &Gas Americas Oil &Gas Al Hosn 51% Al Hosn 7% 53% 11% California California 17% 19% Othe
Slide 12: Permian Basin Overview
Permian Basin Overview • Permian Resources is the cornerstone growth operation of the domestic business. • Substantial acreage position with significant resource development potential. • We have used our knowledge and experience to gradually shift our program toward horizontal drilling in an efficie
Slide 13: Permian Basin – Capital Spending
Permian Basin – Capital Spending Permian Basin Capital • Two business units: ($ in mm) − “Permian EOR”: CO2 and water $2,190 floods. − “Permian Resources”: growth $1,722 oriented “unconventional”. $1,530 • The entire $450 mm increase in $1,107 capital will be spent on our Permian Resources assets, r
Slide 14: Permian Basin – Production and Expenses
Permian Basin – Production and Expenses Production • We expect the Permian EOR business 212 ~222 to offset its decline in 2014 and grow 1.4%. • The Permian Resources business is expected to grow oil production faster, mboe/d by 20% - 25% and total production by 13% - 16%. • On a combined basis in 20
Slide 15: Permian Resources
Permian Resources Permian Basin Plays • We see the largest near-term growth in the Midland Basin, which represents ~2/3 of Matador Arch our currently assessed resource potential. Northwest Shelf • Our Delaware Basin prospective acreage is Midland Basin significantly larger, and the potential there W
Slide 16: Permian Resources
Permian Resources Acreage in Select Permian Plays (Thousands of Acres) • Believe we have one of the most promising and Delaware Basin Gross Net under-exploited unconventional portfolio in the Avalon 365 130 basin. Bone Spring 1 Sand 540 210 Bone Spring 2 Sand 510 185 • In 2013, added 200K net prospe
Slide 17: Permian Resources – Shift to Horizontal Drilling
Permian Resources Shift to Horizontal Drilling • Drilled 49 horizontal wells in 2013. • Improvements in our well costs, Development Wells our own results as well as those of neighboring operators have Horizontal ~345 given us the confidence to Vertical 335 dramatically shift our program 49 to more h
Slide 18: Permian Resources – 1Q14 Results and Goals
Permian Resources 1Q14 Results – Permian Resources Permian Resources Goals • 5% production growth Q / Q Continue evaluating potential • ~$328 million CapEx across acreage position. • Averaged 22 rigs (15 horizontal) Pilot development strategies • Drilled 67 wells (25 horizontal) to optimize retu
Slide 19: Permian Resources – Midland Basin
Permian Resources – Midland Basin Focus Areas – S. Curtis Ranch & Dora Roberts • ~800 drilling locations in S. Curtis & DR. • 12 horizontal wells on production during 1Q14, focused on Wolfcamp B; production 91% liquids. • Avg. drilling time of 27 days and total SCR 2318H SCR 2316H D&C costs of ~$6.5
Slide 20: Permian Resources – Texas Delaware Basin
Permian Resources – Texas Delaware Basin Focus Area - Barilla Draw 5 Wolfcamp Horizontals 1A, 2B, 2C A & B benches averaged: IP 1,150 boepd 30 Day Rate 760 boepd 88% Liquids • 5 Wolfcamp wells brought on production in A, B and C intervals. NM • Drilling & completion costs averaging $8.5 mm due to gr
Slide 21: Permian Resources – SE New Mexico
Permian Resources – SE New Mexico New Mexico Permian 26 Hz wells drilled (since end of 2012) 17 Bone Spring IP 700 boepd 30 Day Rate of 400 boepd 90% Liquids 9 Brushy Canyon IP 1,100 boepd with ESP (3 wells) • Average drilling time of 30 days. • Total drilling & completion costs of New Mexico ~$5.6
Slide 22: Transition to Horizontal Drilling Should Accelerate Permian Resources Production Growth in 2H14
Transition to Horizontal Drilling Should Accelerate Permian Resources Production Growth in 2H14 Permian Resources Q4E 2014 Production 76 - 82 mboed 13%- 16% Growth Q3E Q2E 72 - 76 mboed 57 Q1A 68 - 72 mboed 50 Texas Delaware 67 mboed 13 43 Hz Wells 40 13 New Mexico 12 45 Hz Wells 12 13 Total Permian
Slide 23: Permian Resources – Summary
Permian Resources – Summary • Expect to average 26 rigs during 2Q14. • Identified several key ways to improve well performance and completion techniques. − Transition from gel to slick water fracs. − Reviewing cluster spacing. − Evaluating optimal lateral lengths. • For FY 2014, remain on track to s
Slide 24: Oxy's Permian EOR Operations
Oxy’s Permian EOR Operations Current EOR operations • ~68% of Oxy’s Permian production • ~$2 billion per year of free cash flow Vertically integrated infrastructure • CO2 source fields with development potential • Long term CO2 purchase agreements • Pipelines with 2.4 bcfd capacity • High WI% in ove
Slide 25: Permian Summary
Permian Summary Significant Position with Key Competitive Advantages Large and diverse portfolio creates a variety of growth options. More than 2.5 billion BOE in reserves and potential resources with 15+ years of development and growth opportunities. Flexibility to shift capital among project
Slide 26: California Resources Corporation
California Resources Corporation • California Resources Corporation will be a growth oriented business with a large resource base and self-sufficient cash flow. • Pure play California resources company able to spend virtually all of its cash flow to grow production, reserves and earnings. – Capital
Slide 27: California Production
California Production Production Outlook • We expect production to grow from 154 mboe/d to 190 mboe/d in 2016, a ~7.5% CAGR. 190 • Water & steam floods will contribute 80% of production growth. ~160 154 138 148 • 90% of growth from projects already online. (mboe/d) • We think this positions Californ
Slide 28: Middle East / North Africa Overview
Middle East / North Africa Overview Oman, Qatar & United Arab Emirates • 70% of MENA Production • 85% of Income from Operations • 65% of Capital • Nearly all free cash flow 28
Slide 29: Middle East / North Africa Overview
Middle East / North Africa Overview • Over $20 bn free cash flow in last 15 years. • Expect to generate over $2.0 bn annual free cash flow after Al Hosn Gas Project start-up. • Invested $9 bn of capital since 2010, 75% in Oman, Abu Dhabi and Qatar. • Drilled 2,500+ wells since 2010. • Active in the
Slide 30: Long-term Growth Investments
Long-term Growth Investments • Some of the longer lead time investments we have been making over the past couple of years will start contributing to our results this year. Specifically: The Al Hosn Gas Project is expected to start its initial production in 4Q’14 and start contributing to our cash
Slide 31: Future Growth – Al Hosn Gas Project
Future Growth – Al Hosn Gas Project Al Hosn Gas Project • Plant will be able to process ~1 Bcfd of field gas and separate it into sales gas, condensate, NGLs and sulfur. • Oxy’s net production expected to be 200+ MMSCFD of sales gas and 20+ MBOEPD of NGLs and condensate. • 2014 Oxy share of capital
Slide 32: Future Growth – The BridgeTex Pipeline Project
Future Growth – The BridgeTex Pipeline Project • Goal is to maximize our oil price • Oxy spending ~$400 mm to develop the BridgeTex pipeline as a JV with realizations, particularly for the oil Magellan Midstream Partners; produced in our Permian operations. • The ~450 mile pipeline will have a capac
Slide 33: Future Growth – Chemicals
Future Growth – Chemicals OxyChem Ingleside Ethylene Cracker • We have formed a 50/50 JV with Mexichem to build a world scale ethylene cracker at the OxyChem plant in Ingleside, TX. • Construction on the Ingleside cracker project is expected to begin in mid-2014 with the facilities becoming commerci
Slide 34: Remaining Occidental Business
Remaining Occidental Business Q: What does Oxy look like after the separation of California Resources Corporation into an independent and separately traded company? A: Very similar to the current Oxy, although somewhat smaller. Higher financial returns (ROCE). Moderate volume growth, off of
Slide 35: Remaining Occidental Business
Remaining Occidental Business Oil and Gas Focus Areas OxyChem United States • Leading position High FCF, moderate in the Permian Basin. growth business. • Permian Resources is a growth driver. Oxy Midstream Integrated pipeline and MENA • Al Hosn Project, marketing business to Dolphin, and a smaller
Slide 36: Improving ROCE
Improving ROCE Return on Capital Employed • Improved capital efficiency and operating cost structure. ~15% • Long-lead-time project start-ups: – Al Hosn Sour Gas, BridgeTex Pipeline and the New Johnsonville Plant. ~12% • Separation of our California business will provide a natural uplift to ROCE. ~1
Slide 37: Free Cash Flow from New Projects Offsets California Separation
Free Cash Flow from New Projects Offsets California Separation • We expect that new operating cash flow from long lead-time projects combined with significant reductions in spending will more than offset the cash flow generated by the California assets. ~$700 ~$1.1 bn Al Hosn, BridgeTex & Chlor-alka
Slide 38: Share Repurchases
Share Repurchases • We expect that we will be able to reduce our share count by 40 - 50 mm through the dividends from the California separation and by ~25 mm shares from the monetization of our remaining interest in PAGP. • Coupled with the buyback of the 26.5 million shares in our current repurchas
Slide 39: Illustrative 2015 Capital Program
Illustrative 2015 Capital Program • Separation of California and the start-up of Al Hosn and BridgeTex should reduce 2015 Capital by ~$3 billion, partly offset by capital for growth projects. $10,200 $2,100 $750 $900 - $1,400 $8,000 - $8,500 $250 ($ in millions) 2014E Capital California Al Hosn Brid
Slide 40: Earnings from Production Growth and Projects
Earnings from Production Growth and Projects • Domestic production growth and start-up of the BridgeTex and Al Hosn projects are expected to offset earnings from the California separation. After-tax earnings ($ in bln) ~$5.6 ~$1.1* ~$0.5 ~$0.1 ~$0.4 ~$4.6 Domestic Production Growth and $6.95 / share
Slide 41: Illustrative EPS Improvement from Production Growth, New Projects & Share Repurchases
Illustrative EPS Improvement from Production Growth, New Projects & Share Repurchases • EPS improvement driven by Domestic production growth, start-up of BridgeTex and Al Hosn projects and, share repurchases. After-tax earnings ($ in bln) ~$0.5 ~$5.6 ~$0.1 ~$0.4 ~$4.6 Domestic Production Growth and
Slide 42: Cautionary Statement
Cautionary Statement Portions of this report 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 results, sometimes materially, and
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