Occidental Petroleum Corporation · NYSE:OXY
Occidental Petroleum — Credit Suisse Energy Summit 2016
36 slides from Occidental Petroleum's conference presentation, Feb 23, 2016
Slide 1: Credit Suisse Energy Summit
OCCIDENTAL PETROLEUM CORPORATION Vicki A. Hollub President & Chief Operating Officer Credit Suisse Energy Summit February 23, 2016
Slide 2: Cautionary Statement
Cautionary Statement 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. Words such as "estimate," "project," "predict," "will," "would," "shoul
Slide 3: Why own Oxy?
Why own Oxy? Large Integrated Majors Independent E&Ps Company Market Cap ($B) Company Market Cap ($B) XOM $328 COP $41 CVX $156 Oxy EOG $37 RDS $142 Uniquely APC $21 TOT $100 Positioned PXD $20 BP $94 APA $15 ENI $51 MRO $6 Characteristics Characteristics • Low or no growth • Generally higher growth
Slide 4: Why own Oxy?
Why own Oxy? Balance sheet Portfolio of Assets • Ended 2015 with $4.4 Billion • Long life cash flow assets cash • Significant growth potential • Debt of $8.3 Billion (25% • Flexibility to ramp activity debt to capitalization ratio) up or down depending on market conditions People Strategy • Maintain
Slide 5: Key Messages & Strategy
Key Messages & Strategy Overriding Goal is to Maximize Total Shareholder Return • We believe this can be achieved through a combination of: • Oil and gas production growth of 5% to 8% per year over the long-term; − Executing on our capital program with a focus on growing our U.S. oil production • Al
Slide 6: Cash Flow Priorities
Cash Flow Priorities 1. Base/Maintenance Capital 2. Dividends 3. Growth Capital 4. Share Repurchase 5. Acquisitions 6
Slide 7: Execution Of Our Strategic Initiatives
Execution Of Our Strategic Initiatives Closed the sale of Williston Basin properties Williston Sale 16 MBOED – FY15 Progressed our efforts to exit from non-core operations in Middle East $0.6 bn pre-tax proceeds Reached understanding on terms of payment with the Republic of Ecuador for ~$1 bil
Slide 8: Oxy Runs A Focused Business
Oxy Runs A Focused Business Oil and Gas Focus Areas United States • Leading position OxyChem in the Permian Basin High FCF, moderate • Permian Resources growth business. is a growth driver Oxy Midstream MENA • Al Hosn Project, Integrated pipeline and Oman and Qatar marketing business to • Additional
Slide 9: Permian Basin Is The Core Domestic Asset
Permian Basin Is The Core Domestic Asset • Largest oil producer and operator in Permian Basin. • Significant investments in infrastructure to support the upstream provide low operating costs, advantaged realized prices and competitive advantages. • ~60% of Oxy’s Permian oil production is from CO2 re
Slide 10: Oxy is the Largest Permian Basin Producer
Oxy is the Largest Permian Basin Producer Cumulative Total Operated Production, Thousand BOEPD % of total 2.3 million BOEPD Source: IHS Energy Feb and Mar 2014, 6 MCF/BOE excluding estimated CO2 production. 10
Slide 11: 2016 Permian Strategy
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 major growth programs
Slide 12: Permian Resources – Drilling Inventory
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% • Total of ~8,500 locations in Drilling Inventory Based on Q4 Costs horizontal inventory Be
Slide 13: Permian Resources Production Growth
Permian Resources Production Growth 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 goal of 120 MBOE
Slide 14: Permian Resources Cost Reduction
Permian Resources Cost Reduction Permian Resources Operating Costs / BOE $15.00 $13.20 $13.03 • Focus on reducing field $11.39 $10.87 operating costs during 2015 $10.00 $9.73 • Downhole expense ($/boe) reduced 34% from 4Q14 • Company operated operating $5.00 expense down ~30% ($/boe) from 4Q14 $- 4Q
Slide 15: Permian Resources – Manufacturing Mode
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 17 $4.0 $2.8 15 14 $5
Slide 16: Permian Resources – Manufacturing Mode
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 18 17 $4.0 $3.7 $3.4
Slide 17: Permian EOR
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 • Infrastructure would be hard to
Slide 18: World Leader in CO2 Enhanced Oil Recovery
World Leader in CO2 Enhanced Oil Recovery U.S. CO2 EOR Projects Size of bubble = CO2 EOR Production Volume 3,500 Number of Injection Wells 3,000 Occidental 2,500 2,000 • Inject 1.9 billion cubic feet a day 1,500 Kinder Morgan • Operate 31 CO2 EOR projects Apache 1,000 Chevron Exxon 500 Denbury Hess
Slide 19: Permian EOR Cost Structure
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 $15 $4.0 $10 $10 $14
Slide 20: Permian EOR Cash Costs
Permian EOR Cash Costs Cash Operating Expense ($/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 productivity impr
Slide 21: Denver EOR Unit: Battery Development
Denver EOR Unit: Battery 5 Development Waterflood Primary CO2 Battery 5 Redevelopment Project: • Develops both Main Oil Column & Residual Oil Zone • Requires deepening 150 wells • Develops 21 MMBOE net at a $4.80 per BOE 21
Slide 22: Hobbs: CO2 Flood and Expansion Areas
Hobbs: CO2 Flood and Expansion Areas North Hobbs: South Hobbs: • Phase 1 added 35 MMBOE (Injection started • Started CO2 injection into Phase 1 in in 2003) September (ahead of schedule) • Phase 2A Project will develop 13.7 MMBOE • Phase 1 & 2 will develop 28 MMBOE at at $13.82 per BOE (Injection Sta
Slide 23: Permian EOR
Permian EOR ROZ Projects development cost South Hobbs ranges from $3 - $7 per BOE Residual Oil Zone (“ROZ”) Potential: • Four pattern to begin in 2016. • Full ROZ expansion: – ~50 patterns; 80 MMBOE “Stranded Oil in the Residual Oil Zone by L. Stephen Melzer, Advanced Resources International and the
Slide 24: Permian EOR is a Large, Highly Economic Resource
Permian EOR is a Large, Highly Economic Resource Unrisked, gross resource potential of up to 1.9 billion barrels • 2015 EOR CAPEX = $500MM Unrisked, Gross Reserves and − Complete and begin CO2 injection at Resources South Hobbs − Start Expansion on North Hobbs CO2 • Expected to generate free cash fl
Slide 25: Permian Summary
Permian Summary EOR Resources • 2016 activity focused on core locations with minimal infrastructure investments 260 261 ~266 255 254 • Analyze appraisal data to support 243 future development and initiate 222 seed projects for long term growth 116 118 ~123 110 98 109 in EOR 75 • Reduce rig count in
Slide 26: 2016 Capital Outlook
2016 Capital Outlook 2016 Capital Budget • Carefully reduce activity levels without ($ 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 current prices $2.8
Slide 27: Committed Project Capital Declining
Committed Project Capital Declining Committed Project Capital • Multiple long-term investments to ($ in millions) drive cash flow and earnings growth $1,300 – Al Hosn – Ethylene cracker JV $800 – Ingleside terminal – Gas processing $500 • Capital spending will continue to decline and cash flows and
Slide 28: 2016 Capital Breakdown – Oil & Gas
2016 Capital Breakdown – Oil & Gas 2016 Capital Budget $2.8 - $3.0 billion Chemicals 18% Permian Resources 21% Midstream 16% Permian EOR 17% Exploration & Other 4% International 24% 28
Slide 29: Oxy Production Growth
Oxy Production Growth Total Oil Production* Total Company Production* (MBOD) (MBOED) 416 652 362 571 2014 2015 2014 2015 * Ongoing operations; excludes Williston & Hugoton production volumes 29
Slide 30: 2016 Production Outlook
2016 Production Outlook • Expect total production from core assets to grow 2% - 4% over 2015 levels – Core assets exclude Bahrain, Libya, Iraq, Yemen, Williston and Piceance Basins – Full year contribution from Al Hosn and start-up of Block 62 in Oman should add ~35,000 BOED of production – Modest i
Slide 31: Improved Cost Structure
Improved Cost Structure Production Costs Overhead (SG&A) ($/boe) ($ millions) • Expect continued improvement in cost structure $13.50 $1,503 – Strategic Initiatives $1,270 $11.57 – Lower workovers – Lower downhole maintenance – Lower energy costs 2014 2015 2014 2015 31
Slide 32: 2016E Sources & Uses of Cash
2016E Sources & Uses of Cash • S&P Rating affirmed at 2016 Illustrative Sources & Uses of Cash 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 bn @ $42 / barrel De
Slide 33: Cash Flow Priorities
Cash Flow Priorities 1. Base/Maintenance Capital 2. Dividends 3. Growth Capital 4. Share Repurchase 5. Acquisitions 33
Slide 34: History Of Returning Cash To Shareholders
History Of Returning Cash To Shareholders ($ in Billions) Share Period ending 2015 Cash Dividends Repurchases Combined 3 – years $6.0 $4.3 $10.4 5 – years $9.6 $4.4 $14.6 10 – years $14.0 $9.2 $23.3 – Additionally, over the 10 years ending 2014: • We reinvested $45 billion of capital in the business
Slide 35: Summary – Key to Success / Strengths
Summary – Key to Success / Strengths • A key to long term success is to take advantage of this downturn to improve our future: – Major cost structure changes Data Analytics – Further advances in improved recovery Technology (new or different) – Investment in people Technical excellence of our – Port
Slide 36: Oxy
D> Oxy Ww’ Occidental Petroleum Corporation
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