Occidental Petroleum Corporation · NYSE:OXY
Occidental Petroleum — Q2 2014 Earnings Presentation
37 slides from Occidental Petroleum's earnings presentation, Jul 31, 2014
Slide 1: Second Quarter 2014 Earnings Conference Call
Occidental Petroleum Corporation Second Quarter 2014 Earnings Conference Call July 31, 2014
Slide 2: Second Quarter 2014 Earnings – Highlights
Second Quarter 2014 Earnings – Highlights • Domestic oil production (Bbl/d) • Total company production (boe/d) • Core earnings* • Core diluted EPS* • 1H14 CFFO before WC • Cash balance @ 6/30/2014 • 1H14 Shares repurchased *See Significant Items Affecting Earnings in the Investor Relations Supplemen
Slide 3: Oil & Gas Segment Pre-Tax Earnings
$2,118 $8 ($42) $2,104 $75 1Q14 Sales Price Sales Volumes Higher Operating Costs All Others 2Q14 2Q14 vs. 1Q14 ($ in millions) Core Results • 2Q14 $2.1 B • 1Q14 2.1 B • 2Q13 2.1 B Second Quarter 2014 Earnings – Oil & Gas Segment Pre-Tax Earnings ($27) PRE-TAX
Slide 4: Earnings – Domestic versus International Operations
Second Quarter Earnings – Domestic versus International Operations • For the six months year-over-year comparison, domestic operations after-tax income was $1.4 billion an increase of ~13%. In the same six-month period, international operations core income was $1.1 billion, a decrease of ~4%. 1H13 D
Slide 5: Company-wide Oil & Gas Production
1Q14 Permian Other Domestic Colombia Outages Other MENA growth 2Q14 Second Quarter 2014 Earnings – Oil and Gas Total Company Production 736 (10) 4 4 Company-wide Oil & Gas Production (mboe/d) 727 11 Note: Excludes Hugoton production
Slide 6: Oil & Gas Realized Prices
Second Quarter 2014 Earnings – Oil & Gas Realized Prices Worldwide Oil ($/bbl) Worldwide NGLs ($/bbl) Domestic Nat. Gas ($/mmbtu) WTI NYMEX Price Sensitivity Pre-tax Income Impact (Quarter) Oil +/- $1/bbl = +/- $37 mm NGL +/- $1/bbl = +/- $7 mm U.S. Nat Gas +/- $0.50/mmbtu = +/- $25 mm Brent Realize
Slide 7: Oil & Gas Production Costs
Second Quarter 2013 Earnings – Oil & Gas Production Costs FY13 1Q14 2Q14 YTD14 $13.76 $14.33 $14.68 $14.51 Production Costs ($/boe) • 2Q14 Exploration expense was $54 million Taxes other than Income ($/boe) FY13 1Q14 2Q14 YTD14 $2.57 $2.94 $2.83 $2.88
Slide 8: Chemical Segment Core Earnings
$136 $24 ($2) ($17) ($8) $133 1Q14 Sales Price Sales Volume / Mix Operations / Manufacturing All Others 2Q14 2Q14 vs. 1Q14 ($ in millions) Guidance 3Q14 expected to be ~$150 mm. Second Quarter 2014 Earnings – Chemical Segment Core Earnings Core Results • 2Q14 $ 133 mm • 1Q14 136 mm • 2Q13 144 mm PRE
Slide 9: Midstream, Marketing & Other Segment Earnings
Second Quarter 2014 Earnings – Midstream, Marketing & Other Segment Earnings 2Q14 vs. 1Q14 $170 $43 ($9) $17 ($2) $219 1Q14 Marketing & Trading Gas Processing Pipelines All Others 2Q14 ($ in millions) Core Results • 2Q14 $219 mm • 1Q14 $170 mm • 2Q13 $48 mm PRE-TAX
Slide 10: 1H 2014 Cash Flow
Second Quarter 2014 Earnings – 1H 2014 Cash Flow $9,075 ($1,100) ($500) $1,350 Available Cash Before Working Capital Changes Working Capital Changes CapEx BridgeTex & Al Hosn Capex Dividends Share Repurchases Acquisitions & Other Hugoton Asset Sale Ending Cash Balance 6/30/14 1H 2014 ($ in millions)
Slide 11: 3Q14 & FY 2014 Guidance Summary
Second Quarter 2014 Earnings – 3Q14 & FY 2014 Guidance Summary Oil & Gas Segment * • Domestic 3Q 2014 Production* - Oil – 6,000 - 8,000 bbls/d growth. - NGLs – modest increase. – Natural gas – modest decline. – Total – 5,000 – 7,000 boe/d growth. • International 3Q 2014 Production – Both production
Slide 12: California Resources Spin-Off Update
Second Quarter 2014 Earnings – California Resources Spin-Off Update • Recently announced new executive management team for California Resources Corporation (“CRC”). – Executive Chairman – Bill Albrecht – President & CEO – Todd Stevens – CFO – Mark Smith • Filed initial Form 10 in 2Q14 and have alrea
Slide 13: California Resources Update
Second Quarter 2014 Earnings – California Resources Update • 10% oil production growth • Generated ~$1.2 billion of cash flow from operations in 1H 2014 • Expect the CRC management team to present more detailed review of the business and its growth strategy to investors during 4Q14 88 2Q13 2Q14 97 O
Slide 14: Oxy Executive Leadership Team
Second Quarter 2014 Earnings – Oxy Executive Leadership Team President and Chief Executive Officer Stephen I. Chazen Chris Stavros EVP & CFO At Oxy 9 years Prior roles: VP Investor Relations & Treasurer VP Investor Relations Cynthia Walker EVP Strategy & Development At Oxy 2 years Prior roles: EVP &
Slide 15: Oil and Gas Focus Areas
000606 Oil and Gas Focus Areas MENA Latin America Second Quarter 2014 Earnings – Remaining Occidental Business • Leading position in the Permian Basin. • Permian Resources is a growth driver. • Al Hosn Project, Dolphin, and a smaller size in rest of MENA. • Additional opportunities for growth with p
Slide 16: Permian production and margin outlook
Second Quarter 2014 Earnings – Permian . Expect improved margins through drilling efficiencies, reduced well costs and enhanced oil price realizations 207 64 120+ 2011 2012 2013 1Q14 2Q14 2015E 2016E (mboe/d) Permian EOR Permian Resources 211 Production 150 198 57 48 212 67 145 Permian Resources • 7
Slide 17: Earnings from Production Growth and Projects
Second Quarter 2014 Earnings – Earnings from Production Growth and Projects ~$4.6 ~$5.6 ~$0.1 ~$0.5 ~$1.1 2013 Core California 2013 OXY Pro Forma * Domestic Production Growth Bridge-Tex Al Hosn • Domestic production growth and start-up of the BridgeTex and Al Hosn projects are expected to offset ear
Slide 18: Strategic Initiative Update
Second Quarter 2014 Earnings – Strategic Initiative Update • We will continue to focus on raising cash from our lower growth and lower margin assets. • In the Middle East, we continue to make progress in negotiations with our partners and expect to reduce our exposure to the region. – Our goal is to
Slide 19: Capitalization
Second Quarter 2014 Earnings – Capitalization • We have repurchased more than 26 mm shares since the announcement of our strategic initiatives in 4Q13. • 20.5 million remaining shares remain available under the current repurchase program. Shares Outstanding (mm) FY2013 2Q14 Weighted Average Basic 80
Slide 20: Share Repurchases
Second Quarter 2014 Earnings – Share Repurchases ~675 mm 20.5 mm ~60 mm 25 mm 779 mm Basic Shares Outstanding as of 6/30/2014 Current Repurchase Plan California Separation PAGP Monetization Pro Forma Basic Shares Outstanding • Expect to further reduce our share count by ~60 mm through the cash divid
Slide 21: Improving ROCE
~12% ~15% 2013 2015 Exit Return on Capital Employed Second Quarter 2014 Earnings – Improving ROCE • Improved capital efficiency and operating cost structure • Long-lead-time project start-ups: – Al Hosn Sour Gas – BridgeTex Pipeline • Separation of our California business will provide a natural upli
Slide 22: Permian Resources Summary
Second Quarter 2014 Earnings – Permian Resources Summary Total Production (boe/d) 72,000 Oil Production (bbls/d) vs. 1Q-2014 vs. 1Q-2013 40,000 8% Increase 21% Increase Well Cost vs. 2013 vs. 2012 10% Reduction 31% Reduction Capital Expenditures $490MM Active Rigs 24 (17 Hz) Wells Drilled 87 (42 Hz)
Slide 23: Permian Resources Optimizing Designs to Unlock Primary Reserves
Second Quarter 2014 Earnings – Permian Resources Optimizing Designs to Unlock Primary Reserves • Deep understanding of key geologic parameters. – Porosity, Saturation, Brittleness, Fracture Distribution. – Total Organic Content, mineral model and geochemical parameters (kerogen type and quality). –
Slide 24: Permian Resources Optimizing Designs to Unlock Primary Reserves
Second Quarter 2014 Earnings – Permian Resources Optimizing Designs to Unlock Primary Reserves • 500 ft 500 ft Map View View Looking South View Looking East Ryman_Investors.jpg• Conducting extensive appraisal program across our acreage position. • Testing and optimizing various field development and
Slide 25: Permian Resources Efficiently Accelerating Development
Second Quarter 2014 Earnings – Permian Resources Efficiently Accelerating Development • Ordered long lead time equipment. • Secured favorable commercial terms by leveraging our position across our EOR and Resources businesses. . Drilling Rigs Stimulation . Casing / Tubing Cementing . Directional Art
Slide 26: Permian Resources Batch Drilling
• Phase 1: Vertical Rig . Efficient vertical drilling (0 to ~ 9000ft) . Drills first 2 hole sections – traditional design . Fast moving rigs (< 1 day) . Lower cost spread rate . Fit-for-purpose to vertical drilling needs • Phase 2: High Capacity Directional Drilling Rig . Drills complex curve and la
Slide 27: Permian Resources Infrastructure
3 Fresh Water Ponds Phase 1 Trunk Line Phase 2 Trunk Line West Merchant Water Distribution System •3 Fresh water ponds (Phase 1) .Total capacity – 1.1 MM BBLs •Water distribution trunk line .Pressurized 4 mile 16” polyethylene system with delivery rate of 90,000 BWPD •Pumps - 1 submersible pump per
Slide 28: Identified over 2,100 Horizontal Locations
Identified over 2,100 Horizontal Locations Completed 7 Wolfcamp A/B wells that achieved average peak production of 1,160 boe/d in Q2 30-Day Rate (boe/d) Peak Rate (boe/d) Eagle State 28 5H Average to Date . 15 Horizontal Wells Drilled in 2014 27 Horizontal Wells Planned for 2nd Half 2014 . . Expect
Slide 29: Identified over 2,230 Horizontal Locations
Identified over 2,230 Horizontal Locations SCR 2818 Achieved Peak Rate of 1,102 boepd . 24 Horizontal Wells Drilled . 14 Horizontal Wells Drilled in Q2 55 Horizontal Wells Planned for 2nd Half 2014 . . Decreased Drill Time to 27 Days . $7.0 Million Drill and Complete Well Cost South Curtis Ranch (SC
Slide 30: Raising 2014 growth expectation to 15% to 18%
48 57 67 72 120+ 2011 2012 2013 1Q14 2Q14 2015E 2016E 31 Production (Mboe/d) Raising 2014 growth expectation to 15% to 18% 64 •Strong 2014 performance •Increasing capital by $200MM to $1.9MM •Similar well count with higher percentage of horizontal wells •Production increase from incremental capital
Slide 31: Midstream Focus and Advantage
Second Quarter 2014 Earnings – Midstream Focus and Advantage • Oxy has a unique competitive advantage and scale in the Permian Basin to drive key strategies . Largest producer . Significant midstream/infrastructure owner and operator . Large marketing presence • Role is to maximize Realized Value fo
Slide 32: Oxy Domestic Midstream Assets
Second Quarter 2014 Earnings – Oxy Domestic Midstream Assets Crude Production . Petrochemicals . Refining . Export Markets Gas Production Downstream Upstream NGL Production 718 MMCF/d 72 MB/d 278 MB/d Total Production 470 MBoe/d Marketing Group & Plains All American Investment Power Generation • 1,8
Slide 33: Key Oxy Permian Gathering and Takeaway
Second Quarter 2014 Earnings – Key Oxy Permian Gathering and Takeaway 34 Permian Basin Plays_r2PPT_Extent_NoLabels.jpgCushing Houston Corpus Christi Central/ Midland Basins Southeast New Mexico / Delaware Basins Midland- South Colorado City Slaughter Owned 3rd Party Three key takeaway points access
Slide 34: Takeaway Capacity Impact on Price
Second Quarter 2014 Earnings – Takeaway Capacity Impact on Price Rapid production growth leading infrastructure build out Adequate Constrained Sun Longhorn Cactus Bridge Tex 60 mbpd / 2Q12 300 mbpd / 3Q14 275 mbpd / 2Q13 200 mbpd / 2Q15 35 Midland/LLS Diffs YTD2014 ($10.30) 2H2013 ($5.84)
Slide 35: Oxy Ingleside Energy Center
OxyChem Plant Second Quarter 2014 Earnings – Oxy Ingleside Energy Center Provides flexibility and avoids congested ship channel 36 • Terminaling - LPG: 60-100 MB/d (2Q 2015) - Crude/Condensate: 200-300 MB/d (1H 2016) - Storage: 2–4 MMB • Future processing options
Slide 36: Permian Crude Logistics & Marketing Value
Second Quarter 2014 Earnings – Permian Crude Logistics & Marketing Value - 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00 2012 2013 2014 (Est) 2015+ $/BBL ~$2+/BBL – Advantaged Take- away Capacity $1.50/bbl avg premium Achieved ~$1.50/bbl* premium vs. realized prices of select Permian producers. Advantaged
Slide 37: Conference Call Q&A
Second Quarter 2014 Earnings Conference Call Q&A