Occidental Petroleum Corporation · NYSE:OXY
Occidental Petroleum — Howard Weil 40th Annual Energy Conference (March 2012)
42 slides from Occidental Petroleum's conference presentation, Mar 26, 2012
Slide 1: Occidental Petroleum Corporation
EXHIBIT 99.1 Occidental Petroleum Corporation Howard Weil 40th Annual Energy Conference Stephen I. Chazen President and Chief Executive Officer March 27, 2012 1
Slide 2: Full Year 2011 Results - Summary
Full Year 2011 Results - Summary ($ in millions, except EPS data) FY 2011 FY 2010 • Core Results $6,828 $4,664 • Core EPS (diluted) $8.39 $5.72 • Net Income $6,771 $4,530 • Reported EPS (diluted) $8.32 $5.56 • Oil and Gas production volumes 733 706 (mboe/d) +4% • Capital Spending $7,518 $3,940 • Cas
Slide 3: What Is Our Philosophy & Strategy?
What Is Our Philosophy & Strategy? Overriding Goal is to Maximize Total Shareholder Return • We believe this can be achieved through a combination of: • Growing our oil and gas production by 5 to 8% per year on average over the long term; • Allocating and deploying capital with a focus on achieving
Slide 4: Oxy's Three Main Performance Criteria - Production Growth, Returns & Dividend Growth
Oxy’s Three Main Performance Criteria - Production Growth, Returns & Dividend Growth • We finished a strong year in terms of the three main performance criteria outlined last quarter. • Our domestic oil and gas production grew by about 12% for 2011 to 428 mboe/d. – 4Q11 domestic production of 449 mb
Slide 5: Return on Assets
Return on Assets (2007 - 2011) Net Income Return on Assets 5 Year Average U.S. 14% International 37% Total E&P 20% Cash Flow* Return on Assets 5 Year Average U.S. 21% International 54% Total E&P 29% * Net Income + DD&A See attached for GAAP reconciliation 5 5
Slide 6: Consistent Dividend Growth
Consistent Dividend Growth • Our ability to pay dividends is indicated by our free cash flow generation. • Free cash flow after interest, taxes and capital spending, but before dividends, acquisitions and debt activity for 2011 was about $4.8 billion. • Last month the Board of Directors increased th
Slide 7: Consistent Dividend Growth
Consistent Dividend Growth ($/share) Note: Dividends paid as per the Record Date 7 7
Slide 8: Worldwide Oil & Gas Producing Areas
Worldwide Oil & Gas Producing Areas United States Libya Iraq California Qatar Permian UAE Basin Bahrain Oman Yemen Colombia Bolivia Focus Areas 8 8
Slide 9: Oil & Gas Production - 1Q12 Outlook
Oil & Gas Production - 1Q12 Outlook • During our 4Q11 earnings conference call held in late January, we indicated: – “At current prices, total 1Q12 sales volumes to be comparable to 4Q11 volumes of 749 mboe/d, depending on the scheduling of liftings. – Our 4Q11 Colombia production was 28 mb/d, up sl
Slide 10: Oxy Is Primarily An Oil Company
Oxy Is Primarily An Oil Company Oil & Gas Production * Full Year 2011 (Million barrels of oil equivalent) 74 111 28% 193 42% 156 72% 58% *Excludes Argentina 10 10
Slide 11: Realized Oil Prices & Differentials
Realized Oil Prices & Differentials • About 60% of Oxy’s oil production tracks world oil prices and 40% is indexed to WTI. For example: – In California our realized price was 109% of WTI and 94% of Brent in 2011. – In Oman our average price was 104% of WTI and 89% of Brent. • Our overall differentia
Slide 12: Capital Spending - 2012 Outlook
Capital Spending - 2012 Outlook • We have ample legitimate opportunities in our domestic oil and gas business where we could deploy capital. • We try to manage the program to a level that is realistic at current price levels, and as a result, have deferred some projects that otherwise would have met
Slide 13: Capital Spending - 2012E vs. 2011 Actual
Capital Spending - 2012E vs. 2011 Actual • We increased our capital program approximately 10% in 2012 to $8.3 billion from the $7.5 billion spent in 2011. • About $500 million of this increase will be in the US, mainly in the Permian basin, and the rest in international projects including the Al Hos
Slide 14: Oil & Gas Volume Growth Drivers
Oil & Gas Volume Growth Drivers • Base 5 - 8% Compounded Average Annual Growth – Current California risked prospects – Non-CO2 & CO2 in the Permian – Williston Basin – Oman – Iraq • Upside from Existing Holdings – New California conventional and unconventional prospects – Permian exploration – Rocki
Slide 15: US Oil & Gas Production - 1H12 Outlook
US Oil & Gas Production - 1H12 Outlook • US oil and gas production - – In 1H12, we expect our domestic production to grow 3 to 4 mboe/d each month from the current quarterly average of 449 mboe/d, which would correspond to a 6 to 8 mboe/d increase per quarter. – 4Q11 was relatively free of significa
Slide 16: US Oil & Gas Capital and Production
US Oil & Gas Capital and Production $1,100 463 456 449 $884 436 424 $704 $640 403 389 $403 $310 $259 Capital (3 quarters Production earlier) Note: 1Q12E and 2Q12E production based on midpoint of guidance range of 6 to 8 mboe/d of production growth. 16 16
Slide 17: US Oil & Gas Capital and Production
US Oil & Gas Capital and Production 475 463 456 449 8.0% 450 436 424 6.0% 425 403 4.0% 4.0% 3.3% 400 389 3.0% 2.8% 1.7% 2.1% 2.0% 1.4% 375 0.0% 350 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12E 2Q12E CapEx as % of US Capital Employed (3 quarters Production earlier) Note: 1Q12E and 2Q12E production based on midpoin
Slide 18: Oxy's US Operated Rig Activity
Oxy’s US Operated Rig Activity 72 70 38 Oxy’s US operated rigs represent approximately 6% of the total Liquids directed rigs operating in the Lower 48. 18
Slide 19: California Overview
California Overview • Largest acreage holder in CA with ~1.7 mm acres, majority of which are net mineral interests. • 2011 production of 138 mboe/d. • 78% interest in the Elk Hills Field — the largest producer of gas and NGLs in CA. • Currently operating ~30 drilling rigs in the state. • Drilled ~67
Slide 20: California Capital Program
California Capital Program • We currently expect the rig count to • In CA, we expect to spend about remain at ~30 in 1H12, roughly the same 21% of our total capital program. as what we were running at YE-2011; • We are seeing improvement with respect to permitting issues in the state; • We have rece
Slide 21: California Conventional Exploration
California Conventional Exploration Major Producing • World Class Province Basins – 35+ Billion BOE discovered – 5 of top 12 U.S. oil fields 2 Billion BOE • Significant Remaining Potential – Large undiscovered resources Sacramento – Multiple play and trap types San 20 Billion Francisco BOE • Underex
Slide 22: California Field Sizes
California Field Sizes Discovery Play <0.1 0.1 1 10 100 1 10 Billion Billion Field Size (MMBOE) Oxy Play Type and Prospect Exposure Sources: California Division of Oil, Gas & Geothermal Resources Occidental Estimates 22 22
Slide 23: California Unconventional "Shale" Program
California Unconventional “Shale” Program • Multi-year inventory of drill sites in CA, many of which are both outside of Elk Hills proper & the Kern County Discovery Area • Expect to drill 80+ shale wells outside Elk Hills proper, and ~140 total shale wells including Elk Hills in 1H12 • 30-day initi
Slide 24: Permian Basin Overview
Permian Basin Overview • 2011 production of 198,000 boe/d • Largest oil producer in Permian (~15% net share of total) • Largest operator in Permian (of 1,500+ operators) • Drilled ~409 wells on operated properties in 2011 • ~64% of Oxy’s Permian oil production is from CO2 related EOR projects • Have
Slide 25: Permian Basin Capital Program
Permian Basin Capital Program • In the Permian operations, we • Our rig count at year-end 2011 expect to spend about 20% of was 23; our total capital. • We expect our rig count to ramp up during the year to around 27 rigs by year end; • Our CO2 flood capital should remain comparable to the 2011 leve
Slide 26: Permian EOR Opportunities
Permian EOR Opportunities 7.8 BBO Net Remaining 3P Reserves • 4.1 BBO have been produced, 0.8 BBO • leaving 7.8 BBO net EOR Likely remaining 1.4 BBO 4.6 BBO 1.0 BBO Residual EOR Potential 26 26
Slide 27: Midcontinent and Other Capital Program
Midcontinent and Other Capital Program • In the Midcontinent and Other operations, we plan to spend about 14% of our total capital program. 2012E Total Capital - $8.3 Billion *Includes both oil & gas development and midstream capital. 27 27
Slide 28: International Development and Exploration Capital Program
International Development and, Exploration Capital Program • Total international development capital will be about 30% of the total company capital program. 2012E Total Capital - $8.3 Billion *Includes both oil & gas development and midstream capital. 28 28
Slide 29: Abu Dhabi - Al Hosn Gas Project (Shah Field)
Abu Dhabi - Al Hosn Gas Project (Shah Field) • Shah Gas Field one of the largest in the Middle East; • Oxy holds a 40% participating interest under a 30-year contract; • The project involves development of high-sulfur content reservoirs within the Shah field, located onshore ~180 km so. west of Abu
Slide 30: Oxy Oman - Mukhaizna Project
Oxy Oman - Mukhaizna Project • World Class Steam flood project; • 2 B bo ROIP; • Discovered in 1975 in South Central Oman; • Oxy assumed operation ! September 1, 2005 at 8,500 b/d; • Steam flood commenced May 2007, and had drilled 1,400+ new wells through 2011; • Gross Production: ~124,000 b/d at ye
Slide 31: Oxy Oman Gross Production Growth
Oxy Oman Gross Production Growth 31 31
Slide 32: Cash Flow Priorities
Cash Flow Priorities 1. Base/Maintenance Capital 2. Dividends 3. Growth Capital 4. Acquisitions 5. Share Repurchase 32 32
Slide 33: Summary - 2011 Cash Flow
Summary - 2011 Cash Flow – Free cash flow from continuing operations after capex and dividends, but before acquisition and debt activity, was about $3.4 billion. ($ in millions) Cash Flow From Operations Shah - $500 $12,300 Beginning Cash $2,600 12/31/10 Note: See attached GAAP reconciliation. 33
Slide 34: Acquisition Strategy
Acquisition Strategy • Company’s core business is acquiring assets that can provide future growth through improved recovery. – Foreign contracts – Domestic add-ons – Small incremental additions to production in short term • Generate returns of at least 15% in the US and 20% overseas. • Overall avera
Slide 35: Oxy - Investment Attributes
Oxy - Investment Attributes • 5 - 8% base annual production growth over the long term • Opportunity for additional volume growth • Returns on invested capital significantly in excess of Company’s cost of capital • Consistent, annual increases in dividends • Significant financial flexibility for oppo
Slide 36: Creating Shareholder Value
Creating Shareholder Value Oxy’s Shareholder Equity versus Equity Market Value A History of Generating Shareholder Value Change in Equity Market Value Market Value per $ of Equity Retained ($ in millions) Change in Shareholder Equity $27,385 3 - Year 2.7 $10,303 $34,978 5 - Year $18,092 1.9 $66,066
Slide 37: Cautionary Statement
Cautionary Statement Portions of this presentation contain forward-looking statements and involve risks and uncertainties that could materially affect expected results of operations, liquidity, cash flows and business prospects. Factors that could cause results to differ materially include, but are
Slide 38: Occidental Petroleum Corporation
Occidental Petroleum Corporation 38 38
Slide 39: Reconciliation to GAAP - Twelve Months Ended December 31
Occidental Petroleum Corporation Reconciliation to Generally Accepted Accounting Principles (GAAP) For the Twelve Months Ended December 31, ($ Millions) 2011 2010 Diluted Diluted EPS EPS Reported Income $ 6,771 $ 5.56 $ 4,530 $ 5.56 Add: significant items affecting earnings Asset impairments - 275 L
Slide 40: Return on Capital Employed (ROCE) Reconciliation to GAAP
Occidental Petroleum Corporation Return on Capital Employed (ROCE) Reconciliation to Generally Accepted Accounting Principles (GAAP) 2010 2011 RETURN ON CAPITAL EMPLOYED (%) 13.2 17.2 GAAP measure - net income attributable 4,530 6,771 to common stock Interest expense 93 284 Tax effect of interest ex
Slide 41: Oil & Gas Return on Assets Reconciliation to GAAP
Occidental Petroleum Corporation Oil & Gas Return on Assets Reconciliation to Generally Accepted Accounting Principles (GAAP) ($ Millions) 5-Year 2007 2008 2009 2010 2011 Average Revenues 12,583 17,378 10,984 14,245 18,419 14,722 Production costs 2,011 2,428 2,214 2,622 3,428 2,541 Other operating e
Slide 42: Free Cash Flow Reconciliation to GAAP
Occidental Petroleum Corporation Free Cash Flow Reconciliation to Generally Accepted Accounting Principles (GAAP) ($ Millions) Twelve Months 2011 Consolidated Statement of Cash Flows Cash flow from operating activities 12,281 Cash flow from investing activities (9,903) Cash flow from financing activ
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