Occidental Petroleum Corporation · NYSE:OXY
Occidental Petroleum — Q1 2019 Earnings Presentation
45 slides from Occidental Petroleum's earnings presentation, May 2019
Slide 1: May 2019 Investor Presentation
May 2019 Investor Presentation Occidental Petroleum Corporation
Slide 2: Cautionary Statements
Cautionary Statements Forward-Looking Statements Any statements in this presentation about Occidental Petroleum Corporation’s (“Occidental”) expectations, beliefs, plans or forecasts, including statements regarding the proposed transaction between Occidental and Anadarko Petroleum Corporation (“Anad
Slide 3: Occidental Petroleum
Occidental Petroleum Investor Information • OXY & APC: Positioned for Success • Sustainable Value Creation • Delivering Through Superior Execution • Transaction Overview • Anticipated Timeline: Closing 2H19 • Pathway to Integration • Disciplined Financial Position Earnings Highlights • First Quarter
Slide 4: Oxy's Existing Integrated Portfolio
Oxy’s Existing Integrated Portfolio Oil & Gas OxyChem Midstream Focused in world class Leading manufacturer of Integrated infrastructure and basins with a history of basic chemicals and marketing provides access to maximizing recovery significant cash generator global markets Permian Conventional •
Slide 5: 2018 Highlights – Delivering on Our Value Proposition
2018 Highlights – Delivering on Our Value Proposition Focused on Returns Cash Flow Generation Operational Excellence Integrated Business Sector leading returns, CFFO before working cap. Permian achieved lowest 164% all-in reserve achieved 14% ROCE and exceeded capex and operating costs per b
Slide 6: Anadarko Combined Company
World Class Global Asset Portfolio With Focus Q4 2018A Production (Mboed) 7 Oman 8 Qatar 9 UAE 10 Colombia 30 year production 2nd Largest Oil Producer 30 Year Joint Venture Llanos Norte Basin and history in Oman in Offshore Qatar with ADNOC Magdalena Basin 41% Status Oxy 700 58% Quo 4 5 1% 3 2 1 6 1
Slide 7: 2018 Return On Capital and Return Of Capital
2018 Return On Capital and Return Of Capital 20% Returned $3.6 B to shareholders in 2018, including $1.3 B of share repurchases 15% OXY Since 2002, returned $34 B of Total Capital through 1Q19 Sector leading returns, achieved 14% ROCE 10% and 27% CROCE in 20182 ROCE (%) 5% 0% -5% 0% 2% 4% 6% 8
Slide 8: Occidental Petroleum
Occidental Petroleum Investor Information • OXY & APC: Positioned for Success • Sustainable Value Creation • Delivering Through Superior Execution • Transaction Overview • Anticipated Timeline: Closing 2H19 • Pathway to Integration • Disciplined Financial Position Earnings Highlights • First Quarter
Slide 9: Transaction Merits
Transaction Merits • Highly accretive to CFPS and Free CFPS after dividends • $3.5 B free cash flow improvements through synergies and capital reduction • $10 - 15 B of planned portfolio optimization and free cash flow support rapid deleveraging; $8.8 B already announced • Oxy’s shale, Enhanced Oil
Slide 10: Oxy & Anadarko: Creating A High Return Cash Generating Energy Company
Substantial Scale Industry-Leading Returns Disciplined Growth Oxy & Anadarko: >$100 B 20%+ 2021 PF $3.12/share Growing Dividend and CROCE Enterprise Value 1 Creating A High Attractive mix of U.S. unconventional, global Strong mix of stable free cash 5% flow, world-class growth, Full-cycle production
Slide 11: Premier, Complementary Global Asset Portfolio
Premier, Complementary Global Asset Portfolio #1 Producer in the Permian Largest Private Surface and Mineral Acreage Owner in Wyoming #1 in CO2 EOR Projects Top 3 Producer of PVC, Chlorine, and #1 Producer in the DJ Basin Caustic Soda #1 Producer in the Uinta Basin Leading
Slide 12: Significant Identified Synergies with Potential Upside
Significant Identified Synergies with Potential Upside Expected Pre-Tax Annual Synergies and Capital Reduction ($ B) $1.5 $3.5 Capital Synergies: $0.9 B $0.9 Opex/G&A Synergies: $1.1 B $0.6 Capital Reduction: $1.5 B $0.5 Permian Capital and Opex Savings Procurement & Supply Chain General Overhead &
Slide 13: Delivering Value
Delivering Value Pro Forma Per Common Share Accretion1 • Continued commitment 2020 +40% 2021 +30% to return of capital through growing the dividend and share repurchases over time >10X >4X • Debt reduction via portfolio optimization CFPS 2 Capex2 Dividend Preferred Free CFPS CFPS 2 Capex 2 Dividend
Slide 14: Occidental Petroleum
Occidental Petroleum Investor Information • OXY & APC: Positioned for Success • Sustainable Value Creation • Delivering Through Superior Execution • Transaction Overview • Anticipated Timeline: Closing 2H19 • Pathway to Integration • Disciplined Financial Position Earnings Highlights • First Quarter
Slide 15: Continuous Improvement in Permian Resources Well Performance
Continuous Improvement in Permian Resources Hz Unconventional Well Performance Permian Resources 250 Well Performance 147% Improvement since 2015 25% Improvement from 2017 to 2018 • Subsurface 200 2018 Characterization Cumulative Mboe 2017 150 • Data Analytics 2016 • Innovative Well 100 Designs
Slide 16: Oxy's Play Leading Delaware Basin Performance
Oxy’s Play Leading Delaware Basin Performance Average 6 Month Cumulative Oil by Operator Oxy’s Subsurface Knowledge, Data 160 Analytics and Execution Drive Basin 140 Leading Results 120 Top Delaware Basin Operator 100 • 74% better 6 month production than APC Cumulative Mbo 80 • Oxy pumps less pr
Slide 17: Delaware Basin – Synergistic Assets
Delaware Basin – Synergistic Assets Oxy is competitively advantaged with experience in Delaware Basin geology and regional supply logistics Oxy Aventine - Maintenance and Logistics Hub • APC’s acreage is located in the middle of Oxy’s core development areas and on trend with Delaware Greater Sand Du
Slide 18: Basin Leading Wells with Less Proppant
Top 100 Permian Basin Wells 6 Month Cumulative Oil Top 100 Wells Basin Leading Wells with Less Proppant Oxy has 23% of the Best Wells, While Only Competitors use 27% more Proppant: >$500 M Drilling 4% of Total Permian Wells Incurring Incremental Cost per Well and 25 3,500 Increased Parent/Child Risk
Slide 19: Occidental Petroleum
Occidental Petroleum Investor Information • OXY & APC: Positioned for Success • Sustainable Value Creation • Delivering Through Superior Execution • Transaction Overview • Anticipated Timeline: Closing 2H19 • Pathway to Integration • Disciplined Financial Position Earnings Highlights • First Quarter
Slide 20: Transaction Details
Transaction Details Oxy formally enters agreement to acquire Anadarko on May 9, 2019 –$59.00 cash and 0.2934 Oxy shares per Anadarko share –Equity purchase price of $38 B Structure –Total transaction value of $57 B (including Western Midstream debt and non-controlling interest) Formal agreement
Slide 21: Occidental Petroleum
Occidental Petroleum Investor Information • OXY & APC: Positioned for Success • Sustainable Value Creation • Delivering Through Superior Execution • Transaction Overview • Anticipated Timeline: Closing 2H19 • Pathway to Integration • Disciplined Financial Position Earnings Highlights • First Quarter
Slide 22: Anticipated Timeline
Anticipated Timeline May 9, 2019: Oxy formally Distribute 2H 2019 enters Receive SEC proxy Acquisition is agreement to comments statement/ complete acquire prospectus Anadarko Prepare and Prepare and Proxy file HSR, Form file solicitation S-4 and proxy amendments period of statement/ to Form S-4 30
Slide 23: Occidental Petroleum
Occidental Petroleum Investor Information • OXY & APC: Positioned for Success • Sustainable Value Creation • Delivering Through Superior Execution • Transaction Overview • Anticipated Timeline: Closing 2H19 • Pathway to Integration • Disciplined Financial Position Earnings Highlights • First Quarter
Slide 24: Oxy and Anadarko Integration
Oxy and Anadarko Integration Integration Approach Progress Develop comprehensive Designed integration understanding of current architecture Today operating models and plan integration Deployed top talent to lead integration teams, supported by external experts Integrate, stabilize, and Deal Clos
Slide 25: Integration Objectives
Integration Objectives Deliver Execute a Build a World Class Value Flawless Day-1 Occidental + • Leverage opportunities broadly • Focus on continuing operations • Create a combined operating across functions, geography, and protecting the base model to support our global and business business strate
Slide 26: Occidental Petroleum
Occidental Petroleum Investor Information • OXY & APC: Positioned for Success • Sustainable Value Creation • Delivering Through Superior Execution • Transaction Overview • Anticipated Timeline: Closing 2H19 • Pathway to Integration • Disciplined Financial Position Earnings Highlights • First Quarter
Slide 27: Cash Flow Priorities for Combined Company
Cash Flow • Maintain low cost production Maintenance Capital Priorities for base Combined • Maintain and grow current Company Sustainable Dividend dividend per share at a sustainable level • Reduce combined capital spend Growth Capital to support annual production growth of 5% • Deleverage to align
Slide 28: Portfolio Optimization
Portfolio Optimization •$10 – 15 B Planned divestitures of non-core assets $10 – 15 B •Within 12 – 24 months • Expected to fast-track synergy achievement, integration, and deleveraging •Total to purchase Africa assets: Algeria, Ghana, Mozambique and South Africa • Binding agreement $8 B •$8.8 B Gros
Slide 29: Occidental Petroleum
Occidental Petroleum Investor Information • OXY & APC: Positioned for Success • Sustainable Value Creation • Delivering Through Superior Execution • Transaction Overview • Anticipated Timeline: Closing 2H19 • Pathway to Integration • Disciplined Financial Position Earnings Highlights • First Quarter
Slide 30: 1Q19 Highlights
1Q19 Highlights Focused on Returns & Cash Flow Generation Returned $800 MM (45% of CFFO before working capital) to shareholders through dividends and share repurchases Continued to deliver sector leading returns; CROCE1 of 21% and ROCE1 of 9% Operational Excellence Oxy delivered 23 of the top
Slide 31: 1Q19 Permian Highlights
1Q19 Permian Highlights Permian Execution Excellence Permian Resources Subsurface Technical Basin-leading > Well productivity outperforming peer average by over 45% across the Delaware Basin Excellence Wells > Implementing new facility design resulting in 60% fewer tanks, Operational D&C emissions r
Slide 32: Occidental Petroleum
Occidental Petroleum Investor Information • OXY & APC: Positioned for Success • Sustainable Value Creation • Delivering Through Superior Execution • Transaction Overview • Anticipated Timeline: Closing 2H19 • Pathway to Integration • Disciplined Financial Position Earnings Highlights • First Quarter
Slide 33: 1Q19 Results
1Q19 Results Reported diluted EPS $0.84 Core diluted EPS $0.84 1Q19 Actual versus Guidance Boed Midpoint Reconciliation 1Q19 CFFO before working capital $1.8 B • Permian Resources execution +2,500 and well productivity 1Q19 capital expenditures $1.3 B • Permian EOR production +3,000 Dividend payment
Slide 34: 2019 Guidance
2019 Guidance Oil & Gas Segment Exploration Expense • FY 2019E Production • ~$30 MM in 2Q19E > Total production of 715 - 730 Mboed • ~$130 MM in FY 2019E > Permian Resources production of 278 - 288 Mboed DD&A – FY 2019E > International production of 278 - 283 Mboed • Oil & Gas: ~$13.50 / boe • OxyCh
Slide 35: Appendix Contents
Appendix Contents • Financial Information • Executive Compensation • Oil and Gas Updates • Additional Information 35
Slide 36: Cash Flow Sensitivities in 2Q19
Cash Flow Sensitivities in 2Q19 Oil & Gas • Annualized cash flow changes ~$130 MM per ~$1.00 / bbl change in oil prices > ~$100 MM per ~$1.00 / bbl change in WTI prices > ~$30 MM per ~$1.00 / bbl change in Brent prices • Annualized cash flow changes ~$35 MM per ~$0.50 / Mmbtu change in natural gas p
Slide 37: 2019 Cash Flow and Cash Balance Reconciliation
2019 Cash Flow and Cash Balance Reconciliation $B $1.8 ($0.6) ($0.2) ($1.3) $3.0 ($0.9) $1.8 Beginning Cash CFFO Before Dividends Share Repurchases Capital Expenditures Working Capital / Ending Cash Balance 01/01/19 Working Capital Other Balance 03/31/19 37
Slide 38: Appendix Contents
Appendix Contents • Financial Information • Executive Compensation • Oil and Gas Updates • Additional Information 38
Slide 39: Executive Compensation Program Objectives
Executive Compensation Program Objectives • Align with shareholder interests • Preserve performance accountability • Build long-term share ownership • Provide consistent retention incentive • Straightforward and transparent 1 • Match or exceed governance standards 2019 Changes to Annual Cash Incenti
Slide 40: Appendix Contents
Appendix Contents • Financial Information • Executive Compensation • Oil and Gas Updates • Additional Information 40
Slide 41: Core Development Areas – Greater Sand Dunes
Core Development Areas Delivering Impressive Results – Greater Sand Dunes Cumulative Production (Mboe) Subsurface Characterization is Driving Basin Greater Sand Dunes Bone Spring - 10K wells Leading Results 2018 52 Wells ~9,950’ • Subsurface characterization mitigating parent-child effect and 2019 p
Slide 42: Core Development Areas – Barilla Draw
Core Development Areas Delivering Impressive Results – Barilla Draw Cumulative Production (Mboe) Scalable Performance Improvements Increasing Barilla Draw Wolfcamp A & Hoban - 10K wells Asset Value 2018 21 Wells ~10,100’ • New well design and subsurface characterization improving well results 2019 >
Slide 43: Appendix Contents
Appendix Contents • Financial Information • Executive Compensation • Oil and Gas Updates • Additional Information 43
Slide 44: Berkshire Hathaway Financing Commitment
Berkshire Hathaway Financing Commitment Flexible, balance sheet friendly acquisition financing Financial support from, and affiliation with, the world’s most renowned Rationale investor Enhances competitive ability to pursue attractive acquisition Capital available at closing $10 B, 8% Cum
Slide 45: Investor Relations Contacts
Investor Relations Contacts Jeff Alvarez Vice President - Investor Relations 713.215.7864 | jeff_alvarez@oxy.com Neil Backhouse Director - Investor Relations 713.366.5604 | neil_backhouse@oxy.com