Occidental Petroleum Corporation · NYSE:OXY
Occidental Petroleum — Scotia Howard Weil 45th Annual Energy Conference 2017
34 slides from Occidental Petroleum's conference presentation, Mar 28, 2017
Slide 1: Scotia Howard Weil 45th Annual Energy Conference
Scotia Howard Weil 45th Annual Energy Conference Occidental Petroleum Corporation March 28, 2017 Vicki A. 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
Occidental Petroleum • Value Proposition • Portfolio Optimization • Path To Value Growth • Differentiators 3
Slide 4: Value Proposition
Value Proposition Overriding Goal is to Maximize Total Shareholder Return We believe this can be achieved through a combination of: • Consistent, annual dividend growth • Value growth through oil and gas development that meets the following targets: • Above cost-of-capital returns (ROE and ROCE) > R
Slide 5: Cash Flow Priorities Favor Dividends
Cash Flow 1. Base/Maintenance Capital Priorities Favor Dividends 2. Dividends 3. Growth Capital Subject to Returns and 4. Acquisitions Market Conditions 5. Share Repurchases 5
Slide 6: Dividend Growth Far Above the S&P500's
Dividend Growth Far Above the S&P500’s OXY Annual Dividend Paid ($/Share) WTI $/Bbl 14% CAGR vs 7% 2002 - Today $160 $4.00 18% CAGR vs 6% 2004 - 2014 17% CAGR vs 9% $140 $3.50 2009 - 2014 $120 $3.00 2% 3% 13% $2.50 $100 19% $2.00 17% $80 25% $1.50 $60 12% 8% 29% $40 $1.00 18% 24% $0.50 6% 17% $20 0%
Slide 7: Occidental Petroleum
Occidental Petroleum • Value Proposition • Portfolio Optimization • Path To Value Growth • Differentiators 7
Slide 8: Portfolio Optimization
Portfolio 2013 Production 2013 Capital Optimization 5,000 500 468 400 4,000 $3,719 $ Millions Divested assets with: Mboed 300 3,000 200 2,000 • Low free cash flow 141 $1,363 100 1,000 • Limited future value 0 0 (2013 SMOG value of Continuing Ops Divested* Continuing Ops Divested* divested assets was
Slide 9: Portfolio Optimization
Portfolio Liquids Production (%) Operating Expense Optimization 100% 20 Improving cash 80% 77% 15 $13.76 73% $11.06 $/boe margin and income 10 60% 5 • Higher liquid production 40% 0 • Lower operating 2013 2016* 2013 2016* expense (20%) and DD&A (7%) DD&A F&D (All Sources) BU Comments • Lower F&D cos
Slide 10: 2016 Highlights
2016 Highlights Low-cost production growth exceeds target 7% 189% $9.65 Capital program under Production Growth Total Company Total Company All- $3 billion target Reserve Replacement Sources F&D FY 2016 Ratio Strong balance sheet and ample liquidity $9.00 13% 290% Permian basin Permian Resources acq
Slide 11: Portfolio Optimization: Focus on value
Portfolio 2016 ROCE* Optimization 10% Focus on value driven growth - Top OXY quartile returns 0% (10%) (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, APC, COP, CVX, CXO, DVN, EOG, HE
Slide 12: Portfolio Optimization
Portfolio Optimization Production (Mboed) Exited the low margin domestic & high risk international assets 763 (154) (~$1.4 Billion of capital in 2013 excluding California) 609 (62) 28 (17) 602 Invested in high margin 64 Permian Resources & low risk (79) 59 international assets 468 Approximately repl
Slide 13: Production Growth
Production Growth 5 – 8% growth driven by 2016 – 2019 Production (Mboed) Permian Resources 5-8% Expect Permian Resources CAGR to be free cash flow generating in 2018 International growth from modest investment in high return projects 602 2016 International Resources 2019 13
Slide 14: Occidental Petroleum
Occidental Petroleum Permian Resources growth • Value Proposition supported by low decline, cash • Portfolio Optimization flow generating assets • Path To Value Growth • Differentiators 14
Slide 15: Permian Resources
Permian Resources Net Business Area Acreage Acres* • Resources – Unconventional Areas 1.4 Significant acreage • Enhanced Oil Recovery Areas 1.1 & growth potential Oxy Permian Total 2.5MM in all development areas Resources Basin Development Areas Net Acres* ~650,000 net acres • NM Delaware Basin 290,
Slide 16: Increased Total Horizontal Drilling Locations ~37%
Improved Horizontal Inventory from 4Q2015 Increased Total Horizontal Drilling Locations ~37% Locations within 300,000 of 650,000 net acres in Basin Development Areas • Added 1,250 locations BE < $50 12,000 ~11,650 ~11,650 Midland • Added 3,150 total Basin 2016 locations 10,000 Added 3,150 SS Charact
Slide 17: Permian Resources 2017 Focused Development
Permian Resources 2017 Focused Development • Contiguous New Mexico NW Shelf Acreage Greater Sand Dunes – 2,000+ Midland Basin • Multi-bench NM Delaware Basin • Capable Infrastructure TX Delaware Basin Central Basin Platform • Valuable Growth Greater Barilla Draw – 5,000+ Locations Permian Resources
Slide 18: Problems Solved in the Permian – Adding It All Up
Problems Solved in the Permian Resources Development Costs Per BOE Permian – Adding It All Up Subsurface Characterization Stimulation Design Development Planning • Cost structure dramatically Infrastructure Customized Technology driven lower since 2014 Development Cost • Value Drivers: $6 - $12 > Su
Slide 19: Growth Potential of 30+% from Focused Development Areas
Growth Potential of 30+% from Focused Development Areas Multi-Year Permian Resources Growth Potential 300 18 • Top-tier well performance Production (mboed) 15 250 14 16 14 • Deep inventory for range of 30% CAGR activity Rig Count 200 12 10 150 8 • Infrastructure to support growth 8 100 9 9 6 • Core
Slide 20: Permian EOR
Permian EOR Proven Leader in Maximizing Recovery Across the Permian Significant inventory Permian EOR Net Resource Potential in 10-year plan MMBOE MMBOE 2,000 Geographically diverse High- gradable 1,500 Inventory 100 active CO2 + water floods covering Midland Basin multiple horizons 1,000 2 BBOE of
Slide 21: Focused Businesses
Focused Oil and Gas Core Areas Businesses OxyChem High FCF, United States moderate growth • Leading position in the Permian business • Permian Resources is a growth driver Midstream Integrated infrastructure Middle East Region and marketing • Focus areas – Oman, Qatar, and UAE business to • Opportun
Slide 22: Occidental Petroleum
Occidental • High quality portfolio with assets that are Petroleum designed to support a strong dividend with moderate value growth • Value Proposition • Portfolio Optimization • Permian Position (EOR and shale) • Low decline, low capital intensity, long • Path To Value Growth life reserves • Short
Slide 23: Appendix
Appendix
Slide 24: Updated 1Q17 Oil & Gas Production / Sales and Earnings Guidance
Updated 1Q17 Oil & Gas Production / Sales and Earnings Guidance • We currently estimate that our 1Q17 oil and gas production and sales volumes outside of the U.S. will be roughly 10 mboe/d below our earlier expectations. Total company production for 1Q17 is anticipated to be approximately 580 to 585
Slide 25: 1Q17 and FY 2017 Guidance Summary
1Q17 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 > 625,000 – 645,000 BOED > Permian Resources production of 140,000 – 150,000 BOED Midstream • 1Q17E Production • ($60) – ($70) mm pre-tax loss
Slide 26: Free Cash Flow Improvement
Free Cash Flow Improvement • Improved market conditions, project start-ups and lower capital should increase free cash flow generation in 2017 2017 vs 2016 FCF Improvement International O&G ~$400 MM Midstream $150 - $200 MM Chemicals ~$400 MM Total $950 - $1,000 MM 26
Slide 27: 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 f
Slide 28: Permian Resources Results and Guidance
Permian Resources Results and Guidance • Total production grew 13% year-over-year to 124 MBOED Oil NGL Gas • Increased activity in 4Q 2016 140 - 150 > 16 wells online in 4Q16 vs. 9 in 3Q16 124 127- 132 > Added 7 top tier performing wells in Greater Sand Dunes 110 • 1Q17 program: increase in activity
Slide 29: SL2 Solving Permian Problems Now
SL2 Solving Permian Problems Now • Single Location Sequenced Laterals - SL2 > Single vertical well bore producing from multiple zones > Reduce section development cost > Initial studies and development began mid-2015 with pilot currently underway > Potential cost impact per well of $0.5 - $1.0 mm •
Slide 30: Middle East Record 2016 Production
Middle East Record 2016 Production Achieved record production in 2016 in Oman and the UAE Core Countries 2017 Impact • Oman: FY16 record production of 96 • Improved production and cost reductions at Al MBOED through multiple onshore projects Hosn Gas and in Oman should increase free utilizing enhanc
Slide 31: Midstream: Improving Cash Flows and Market Access
Midstream: Improving Cash Flows and Market Access Business Segments 2017 Impact • Gas Plants: Natural gas and CO2 • Free cash flow expected to improve $150 - gathering, compression and processing $200+ MM due to better marketing economics systems to control upstream costs and ramp up of Ingleside oi
Slide 32: Chemicals Free Cash Flow to Significantly Increase
Chemicals Free Cash Flow to Significantly Increase Ingleside Ethylene Cracker – September 2016 • Ingleside Ethylene Cracker commercial operation in Q1 2017 > All systems turned over for commissioning • 50/50 JV with Mexichem in Corpus Christi, TX > $1.5 Billion for a 1.2 Billion lb/yr cracker, pipel
Slide 33: 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 •
Slide 34: Growing the Greater Barilla Draw Area
Growing the Greater Barilla Draw Area Q4 Acquisition Highlights Increased working interest from 26% to 63% • Increased acreage position to 100,000 net acres & 5,000+ horizontal locations • Capability to deploy 3 rigs in 2017 and 5+ rigs in 2018+ on acquisition acreage • Scale allows for operational
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