Occidental Petroleum Corporation · NYSE:OXY
Occidental Petroleum — Investor Day (March 2017)
59 slides from Occidental Petroleum's investor day presentation, Mar 10, 2017
Slide 1: Oxy Permian Tour: Driving Value in the Permian
Oxy Permian Tour Driving Value in the Permian March 10, 2017
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: 2016 Performance Exceeded Expectations
2016 Performance Production Program F&D Cost* Exceeded Expectations 300 269 $14 $12 250 $12 222 • Overall Permian CAGR 10% 200 $10 $9 mboe/d $8 > Base management 150 $/boe $6 > Well productivity improvement 100 $4 50 $2 • Improved F&D 25% 0 $0 > Increasing EURs 2014 Total Permian 2016 2014 Total Per
Slide 4: Permian Basin Key Takeaways
Permian Basin Key Takeaways • 2.5 million net acres in the Permian Basin > 650,000 net acres within the Delaware and Midland basins • Increased unconventional horizontal drilling locations by 37% to 11,650 > Average lateral length up 20% to ~7,100 ft > Locations with breakeven < $50 WTI up over 100%
Slide 5: Oxy Permian Business Overview
Net Operated 2016 Net Oxy Permian Business Overview Acres Wells* Production Oxy Permian • Resources – Unconventional Areas 1.4 5,150 124 • Enhanced Oil Recovery Areas 1.1 19,310 145 Oxy Permian Total 2.5MM 24,460 269 • Largest operated position in the Permian Permian Basin Industry Production • Exce
Slide 6: The Permian Drives Oxy's Value Proposition
The Permian Drives Oxy’s Value Proposition Permian Resources Permian EOR Improving top tier margins with recent operational Permian EOR provides stable, free cash flow with and technical breakthroughs. minimal base decline. ~11,650 Undeveloped Drilling Locations ~2B Bbls Identified Undeveloped Resou
Slide 7: Full Cycle Value Shaping Competitive Advantage
Full Cycle Value Shaping Competitive Advantage • Unmatched acreage + infrastructure Enhanced Recovery • Resources – Dynamic Development • EOR – Reservoir Management Field Development Planning + Execution • Subsurface excellence • People, innovation & Subsurface Technical entrepreneurial culture Exce
Slide 8: Permian Resources
Permian Resources • Acreage and Inventory Update • Problems Solved • Problem Solving Now 8
Slide 9: Permian Resources Acreage
Net Business Area Acreage Permian Acres* Resources • Resources – Unconventional Areas • Enhanced Oil Recovery Areas 1.4 1.1 Oxy Permian Total 2.5MM Significant acreage & growth potential in all development areas Resources Basin Development Areas Net Acres* ~650,000 net acres within • NM Delaware Bas
Slide 10: Diversified Portfolio Provides High-Return and Significant Flexibility
Diversified Portfolio Provides High-Return and Significant Flexibility Asset Portfolio Role Upside Potential Southeast New High return, low capital intensity Acreage improvement for longer Mexico for near-term growth and cash laterals and facilities optimization recycle for multi-bench bench develop
Slide 11: Increased Total Horizontal Drilling Locations ~37%
Increased Total Horizontal Drilling Locations ~37% Improved Permian Resources Horizontal Locations within 300,000 of 650,000 net acres in Basin Development Areas Inventory from 4Q2015 ~11,650 ~11,650 • Added 1,250 locations 12,000 BE < $50 Midland Basin 2016 • Added 3,150 total locations 10,000 Adde
Slide 12: New Mexico Acreage is Being De-Risked by the Industry
New Mexico Acreage is Being De-Risked by the Industry 1 5 GOBBLER 5 B2PM STATE COM 1H BLUE JAY FEDERAL 1-H MEWBOURNE CONCHO BONE SPRING BONE SPRING Lateral Length: 3,986 1 Lateral Length: 4,158 30-day IP: 2,336 BOE/d (80% Oil) 4 30-day IP: 2,258 BOE/d (82% Oil) 5 2 Greater Sand Dunes 6 IRRITABLE 22
Slide 13: Permian Resources 2017 Focused Development
Permian Resources 2017 Focused Development New Mexico NW Shelf Greater Sand Dunes – 2,000+ Locations • Contiguous Midland Basin Acreage NM Delaware Basin • Multi-bench TX Delaware Basin Central Basin • Capable Platform Infrastructure • Valuable Growth Greater Barilla Draw – 5,000+ Locations Permian
Slide 14: Outstanding Results in Greater Sand Dunes Area Multi-Bench Development
Outstanding Results in Greater Sand Dunes Area Multi-Bench Development Recent Well Results Barilla GreaterDraw Type Log Sand Dunes Target Formation Lateral Peak 24 Hr Peak 30 Day Oil Well Name Length (ft) (BOEPD) (BOEPD) (%) Brushy Canyon Federal 23 13H 4,376 899 833 90% Avalon James 29 38H 4,730 1,
Slide 15: Improving Results in Greater Barilla Draw Area Multi-Bench Development
Improving Results in Greater Barilla Draw Area Multi-Bench Development Recent Well Results Barilla GreaterDraw BarillaType DrawLog – Drilled 228 Wells Across 8 Benches Target Formation Lateral Peak 24 Hr Peak 30 Day Oil Well Name Length (ft) (BOEPD) (BOEPD) (%) Avalon Evaluating 1st Bone Spring Eval
Slide 16: Growth Potential of 30+% from Focused Development Areas
Growth Potential of 30+% from Focused Development Areas Multi-Year Permian Resources Growth Potential 300 18 15 14 16 • Top-tier well performance 250 14 Production (mboed) 30% CAGR • Deep inventory for range of activity 200 12 Rig Count 10 • Infrastructure to support growth 150 8 8 9 9 • Core develo
Slide 17: Permian Resources
Permian Resources • Acreage and Inventory Update • Problems Solved • Problem Solving Now 17
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 • Cost structure dramatically driven Design Development lower since 2014 Planning Infrastructure Customized Technology • Value Drivers: Development > Subsurface Chara
Slide 19: Subsurface Characterization Adds Value
Subsurface Characterization Landing + Stimulation + Spacing Optimization Adds Value 2nd Bone Spring Net Sand Thickness and Middle Carbonate Outline Middle Carb. Outline A A’ • Problem: Subsurface uncertainties & unknowns to predict resource potential > Sweet spots > Frac barriers > Landing zones • S
Slide 20: Customized Stimulation Design and Landing Selection
Subsurface Characterization Customized Stimulation Design and Adds Value Landing Selection • Problem: Subsurface discontinuity A 2nd Bone Landing and Frac Optimization A’ differentiates stimulation impacts > Oil left behind > Frac interference > Landing zones • Solutions: Customized subsurface stimu
Slide 21: Customized Technical Excellence Adds Value
Customized Technical 2nd Bone Spring Optimization Results Excellence Adds Value 2nd Bone Spring Improvements 300 ~150% 6 month cumulative production improvement from 250 3Q 2016 old design • 150% Improved productivity Cumulative MBOE 200 4,500 ft Laterals • Best Bone Spring wells in Eddy Co, NM 150
Slide 22: Technology Staircase - Setting The Bar Higher
Customized Technical Technology Staircase - Setting The Bar Higher Excellence Adds Value Other custom solutions: • Drilling wellbore design • Facilities Play- • Flowback process Single Leading Wells Location • Artificial lift +10K Sequenced Laterals Laterals – Drilling Dynamics SL2 • Operating maint
Slide 23: Development Planning Adds Value
Development Planning Development Units – Greater Sand Dunes Adds Value • Problem: Potential destruction of future value as a result of unknowns > Multi-bench potential 4 3 > Frac barriers 3 4 > Productivity drivers > External timing constraints 3 3 1 1 • Solutions: Modular field development 1 plans
Slide 24: Oxy Drilling Dynamics Adds Value
Oxy Drilling Dynamics Step Changing Performance Adds Value Identify Understand Engineer Implement • Problem: Inefficient use of rig energy resulting in slow and Real Time Monitoring from Anywhere higher cost drilling > Downhole tool failures R e-Engineer BHA* > Wellbore quality • Solutions: Oxy Dril
Slide 25: Integrated Planning Adds Value
Integrated Planning Adds Rig Release to Well Online Value 140 • Problem: Delay in production and 120 cash flows due to complex operations 100 and planning Days 80 > Multiple unaligned schedules 60 • Solutions: Implemented Integrated 40 Expected 2017 range with Master Schedule normalized rig-to-frac
Slide 26: Surveillance and Base Management Adds Value
Surveillance and Base Management Adds Value 2016 Permian Resources Base Optimization • Oxy operates 24,460 wells in the Permian Basin 10.0 Cumulative Net MBOEPD • Company operated production of 235 Mboepd 8.0 Net (EOR and Unconventional) 6.0 • Long-term operability is critical 4.0 > Well design 2.0
Slide 27: 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 • Cost structure dramatically driven Design Development lower since 2014 Planning Infrastructure Customized Technology • Value Drivers: Development > Subsurface Chara
Slide 28: Permian Resources
Permian Resources • Acreage and Inventory Update • Problems Solved • Problem Solving Now 28
Slide 29: Lower Breakeven Cost Through Innovative Problem Solving
Lower Breakeven Cost Through Innovative Problem Solving 12,000 ~11,650 ~11,650 Innovation expected Midland Basin 2016 to offset cost inflation 10,000 Added and move more 3,150 Texas Delaware locations to lower 8,000 SS Characterization + Basin breakevens Dev. Plans + Technology New Mexico Delaware 6
Slide 30: 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 31: Appendix
Appendix
Slide 32: Key Messages
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Slide 33: Key Message and Strategy
Key Message and Strategy 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 RO
Slide 34: 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 34
Slide 35: 2016 Highlights
2016 Highlights Low-cost Production Growth Exceeds Target 7% 189% $9.65 Production Growth Total Company Total Company All- Capital Program Under FY 2016 Reserve Replacement Sources F&D $3 billion Target Ratio Strong Balance Sheet and Ample Liquidity $9.00 13% 290% Permian Resources Permian Basin Pro
Slide 36: Focused Businesses
Oil and Gas Core Areas Focused Businesses OxyChem United States High FCF, moderate • Leading position in the Permian growth business • Permian Resources is a growth driver Midstream Integrated infrastructure and marketing Middle East Region business to • Focus areas – Oman, Qatar, and UAE maximize L
Slide 37: 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
Slide 38: Operating Highlights
Operating Highlights \is
Slide 39: Production Growth Exceeded Guidance
Production Total Company Production* Permian Resources Production Growth (MBOED) (MBOED) Exceeded Guidance ~7% Growth Y/Y ~13% Growth Y/Y 124 602 565 110 2015 2016 2015 2016 * Ongoing operations; excludes Piceance, Iraq and Bahrain production volumes 39
Slide 40: 2016 Accomplishments - Total Spend per BOE Achieved Target
2016 Accomplishments - Total Spend per BOE Achieved Target Capital Spending* + G&A + All Operating Costs Total Spend per BOE = Global Oil & Gas Sales Volumes • Internal performance metric to focus on ~$62.00 operational efficiency, especially in consideration of the sharp decline in commodity prices
Slide 41: 2016 Reserve Additions Through Reservoir Performance
2016 Reserve Additions Through Reservoir Performance Total ~505 MMBOE Reserve Additions prior to price revisions Company 91 2,406 Reserve 346 Replacement 2,200 (231) 2016 ~77% Proved Developed 189% All In ~74% Liquids 150% Organic YE 2015 Production* Additions Acquisitions YE 2016 Reserves & Sales R
Slide 42: Improved Margins in Permian Resources Attracting Investment
Improved Margins in Permian Resources Attracting Investment Permian Resources Cost Structure $16 - $19 / boe • Improved productivity and lower well costs in Permian Resources drive improved profitability • Pre-tax margins > 50% at $50 / bbl oil prices Development Opex G&A Production Cash Costs Cost
Slide 43: Lower Well Costs Are Sustainable Through Design and Performance Gains
Lower Well Costs Are Sustainable Through Design and Performance Gains • Design and efficiency to secure well costs 2017 Focus Areas • Reduction of drilling non productive time through focused development • Improving well costs despite increasing stimulation designs • Improve execution of new stimula
Slide 44: Permian EOR Proven Leader in Maximizing Recovery
Permian EOR Proven Leader in Maximizing Recovery Across the Permian Significant inventory in Permian EOR Net Resource Potential 10-year plan MMBOE 2,000 Geographically diverse High-gradable 100 active CO2 + water 1,500 Inventory floods covering multiple horizons Midland Basin 2 BBOE of identified ne
Slide 45: 2016 Accomplishments in EOR Business
2016 Accomplishments in EOR Business 2017 Capital Opex Reduction Capital Efficiency Outlook $25 17% Reduction 2014-2016 12% Reduction Y/Y 600 $20 500 CO2 Floods / Expansions - $195MM $/BOE $15 400 300 $MM $10 TZ / ROZ Projects 200 $5 100 - $50MM $0 0 2014 2015 2016 2016 Target 2016 Actual Gas Proces
Slide 46: Access to Multiple Markets Through Midstream Investments
Access to Multiple Markets Through Midstream Investments Cushing • Ample takeaway capacity to reach multiple markets and to drive improved price realizations • Blending capabilities allow for optimization Mid‐Valley 240 kb/d Colorado City Midland Wink Crane McCamey Nederland Houston Ho‐Ho Pipeline H
Slide 47: Infrastructure Adds Value – Greater Sand Dunes
Infrastructure Adds Value – Greater Sand Dunes 2016 Highlights 2017 Highlights • Produced Water Re-cycling • Oil Pipeline with Facility expansion capability – 36,000 bwpd treatment – 30+ mi of pipeline Eddy County – 90+ Mbopd capacity • Frac Water Storage – 2 MMbw storage capacity • Gas Compression
Slide 48: 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 49: 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 50: 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% $200 OxyChem 24% • Caustic soda prices reversed their multi-year •
Slide 51: Oman and Qatar
Oman Oman • Improved Reservoir Surveillance 140 Oman - Mukhaizna Gross Production (Mbopd) Mukhaizna • Infill and shallow drilling 135 programs 130 Record Monthly 125 Production • 2016 Total Spend per Barrel 120 ~79% reduced by 24% 115 Proved Dec-16 Nov-16 Aug-16 Oct-16 Jun-16 Jul-16 Sep-16 Developed
Slide 52: Colombia
Colombia Colombia • Improved subsurface reservoir characterization • Focused Workover and Drilling Campaign LCI* • New Well Costs reduced by 35% Increased gross • 2016 Total Spend per barrel reduced by 25% production by 5 ~79% Proved MBOPD in 4 • Started a thermal recovery pilot of the Teca heavy oi
Slide 53: Al Hosn Gas
Al Hosn Gas Al Hosn Gas • Optimized plant to deliver more capacity • Completed operational trials Increased • Minimal capital was required Plant Capacity to 110% 2017 production expected to be >70 MBOED net 53
Slide 54: 2017 Outlook
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Slide 55: 2017 Capital Plan Will Deliver 4% to 7% Production Growth
2017 Capital Plan Will Deliver 4% to 7% Production Growth Flexible Capital Program • Domestic ($ in billions) > Increased Permian Resources drilling in SE New Mexico and Greater Barilla Draw > Short cycle development allows for flexibility to respond to oil price volatility • International > Spendin
Slide 56: 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 56
Slide 57: 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 58: 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 59: 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