Occidental Petroleum Corporation · NYSE:OXY
Occidental Petroleum — Q3 2023 Earnings Presentation
46 slides from Occidental Petroleum's earnings presentation, Nov 8, 2023
Slide 1: Third Quarter Earnings Conference Call
11.08.23 Third Quarter Earnings Conference Call
Slide 2: Cautionary Statements
CAUTIONARY STATEMENTS 2 Forward-looking statements This presentation contains “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, including but not limited to statements about Occidental Petroleum Corporation’s (“Oc
Slide 3: Outline
3 OUTLINE Third Quarter Highlights DAC Development and Market Update Financials Closing Comments Marco Polo NOTE: DAC (DIRECT AIR CAPTURE)
Slide 4: Third Quarter 2023 Performance Highlights
HIGHLIGHTS 4 THIRD QUARTER 2023 PERFORMANCE $1.7 B OIL & GAS OXYCHEM Free Cash Flow 1,220 Mboed; Pre-Tax Income Generation Full Year Guidance of $373 MM Increased 11 Mboed DAC $600 MM $342 MM PARTNERSHIPS Common Shares Preferred Equity Secured STRATOS Repurchased Redemption Triggered JV Partner (~60
Slide 5: Oil & Gas Update
HIGHLIGHTS 5 OIL & GAS UPDATE MULTI-BASIN LEADING WELL PERFORMANCE TX Delaware well (Meridian State) delivered a 30-day IP of 8,250 boed and 90-day cumulative production of 553 Mboe, an industry record for the Wolfcamp B DJ Basin 2023 wells performing 36% better than record 2022 program INNOVATI
Slide 6: Outline
6 OUTLINE Third Quarter Highlights DAC Development and Market Update Financials Closing Comments Artist Rendering of DAC
Slide 7: DAC Development Drivers
DAC DEVELOPMENT AND MARKET UPDATE 7 DAC DEVELOPMENT DRIVERS • Carbon Engineering (CE) DAC technology offers revolutionary scalability Technology • CE Innovation Centre identifying improvements for DAC 1+ • Synergies across Carbon Engineering, Oxy Major Projects, and OxyChem • U.S. passed Bipartisan
Slide 8: Advancement of DAC+S Technology, Partnerships, and Market
DAC DEVELOPMENT AND MARKET UPDATE 8 ADVANCEMENT OF DAC+S TECHNOLOGY, PARTNERSHIPS, AND MARKET Identified technology Early engineering showed Scalability and cost down potential Market demand and policy supports potential promise recognized DAC development • Identified as strategic fit • Formed LCV +
Slide 9: Innovation and Partnerships Expected to Reduce Cost of Capture
DAC DEVELOPMENT AND MARKET UPDATE INNOVATION AND PARTNERSHIPS 9 EXPECTED TO REDUCE COST OF CAPTURE Cost of Capture1 Illustrative DAC Cost Reduction ($/t) Cost down innovation examples Key technology innovations, $500 manufacturing and supply • Improved air contactor geometry resulting in fewer chain
Slide 10: DAC CDR Voluntary Market Demand Scenarios
DAC DEVELOPMENT AND MARKET UPDATE 10 DAC CDR VOLUNTARY MARKET DEMAND SCENARIOS As DAC costs reduce, CDR market demand and partnership opportunities expected to increase DAC CDR demand (Mtpa) OXY OXY DAC CDR: $300/t OWNERSHIP % RETURNS • Accelerated cost reduction expected to drive CDR market 50 Mtpa
Slide 11: DAC CDRs Expected to Be Economic Alternative to SAF
DAC DEVELOPMENT AND MARKET UPDATE 11 DAC CDRs EXPECTED TO BE ECONOMIC ALTERNATIVE TO SAF CO2 abatement using SAF costs ~$750/t2 Beginning in 2027, CORSIA DAC CDRs expected to cost less than abatement using SAF requires airlines to offset their emissions1 Reduction in aviation CO2 emissions by 2050,
Slide 12: DAC 1 & 2 Development Update
DAC 1 & 2 12 DEVELOPMENT UPDATE STRATOS (DAC 1) • JV partner1 secured • Project ~30% complete • Expected commercially operational mid-2025 • Class VI well permit applications filed with U.S. EPA SOUTH TEXAS DAC HUB (DAC 2) • Selected to receive U.S. DOE grant, funding to be announced 2024 • DAC 2 FE
Slide 13: DAC Investment Principles
DAC DEVELOPMENT AND MARKET UPDATE DAC INVESTMENT PRINCIPLES 13 • Developing competitive-returns business with cash flow stability Returns Focused • DAC 2+ to meet return threshold for FID Demand-Driven • Market demand to drive development pace Development • Low-carbon program net capital expected to
Slide 14: Outline
14 OUTLINE Third Quarter Highlights DAC Development and Market Update Financials Closing Comments
Slide 15: Third Quarter 2023 Results
FINANCIALS 15 THIRD QUARTER 2023 RESULTS Reported Production versus Mboed Reported Guidance Midpoint Reconciliation Adjusted diluted EPS1 $1.18 ROCKIES Strong base and new well performance, +18 Reported diluted EPS1 $1.20 higher OBO volumes GULF OF MEXICO CFFO before working capital $3.3 B Higher up
Slide 16: Fourth Quarter 2023 Guidance
FINANCIALS 16 FOURTH QUARTER 2023 GUIDANCE OIL & GAS 4Q23 MIDSTREAM2 4Q23 Total Company Production (Mboed) 1,206 - 1,246 Pre-tax Income $(190) - $(90) MM Permian Production (Mboed) 571 - 591 Midland - MEH Spread $ / bbl. $0.10 - $0.20 Rockies & Other Production (Mboed) 263 - 269 DD&A 4Q23 Gulf of Me
Slide 17: Outline
17 OUTLINE Third Quarter Highlights Low Carbon Ventures Update Financials Closing Comments Battleground
Slide 18: Differentiated Portfolio
DIFFERENTIATED PORTFOLIO 18 Oxy’s premier diversified assets and distinguished operational capabilities create a runway for sustainable shareholder value accretion OIL & GAS OXYCHEM • Diversified portfolio with deep, improving inventory • Sector earnings leader with resilient free cash flow • Operat
Slide 19: Appendix
19 Appendix
Slide 20: Appendix: Financial Information
20 APPENDIX Financial Information Oil & Gas Update Asset Overview LCV Overview
Slide 21: Shareholder Return Framework
SHAREHOLDER RETURN FRAMEWORK 21 Sustainable & • Increased quarterly dividend to $0.18 per share in 2023 Growing Dividend • Dividend sustainable at $40 WTI • $3.0 B of share repurchases completed in 2022 Share v • Refreshed $3.0 B share repurchase authorization; ~60% complete Repurchases • Supports c
Slide 22: Preferred Equity Redemption
FINANCIAL INFORMATION 22 PREFERRED EQUITY REDEMPTION 2Q23 $0.68 Year-To-Date >$4/Share Shareholder Distributions 3Q23 1Q23 and Preferred Equity Redemption1 $0.66 $0.95 $3.121 4Q22 $1,661 MM excess distributions to common shareholders2 Distribution added to rolling 12-month calculation 4Q23 through T
Slide 23: Diluted Share Count Example
FINANCIAL INFORMATION 23 DILUTED SHARE COUNT EXAMPLE Basic Shares Outstanding + Incremental Diluted Shares = Total Diluted Outstanding Shares Incremental diluted shares include June 2020 warrants, Berkshire Hathaway warrants, and performance awards Treasury method assumes proceeds from exercised
Slide 24: Cash Flow Sensitivities
FINANCIAL INFORMATION 24 CASH FLOW SENSITIVITIES OIL & GAS MIDSTREAM & MARKETING Annualized cash flow changes ~$225 MM per $1.00 / Annualized cash flow changes ~$65 MM per $0.25 / bbl bbl change in oil prices change in Midland to MEH spread ◦ ~$205 MM per $1.00 / bbl change in WTI price ◦ ~35-da
Slide 25: Appendix: Oil & Gas Update
25 APPENDIX Financial Information Oil & Gas Update Asset Overview LCV Overview
Slide 26: Technical and Operational Excellence
TECHNICAL AND OPERATIONAL EXCELLENCE 26 CREATING VALUE THROUGH OPERATING INGENUITY WORLD-CLASS RESERVOIR INNOVATIVE WELL DESIGNS AND CHARACTERIZATION AND DATA APPLICATION TECHNOLOGY-DRIVEN EXECUTION • Oxy-developed proprietary workflows and • Long laterals, complex trajectories, and models combined
Slide 27: Domestic Onshore Assets
OIL & GAS UPDATE 27 DOMESTIC ONSHORE ASSETS PERMIAN 2023 ACTIVITY ROCKIES 2023 ACTIVITY ~$2.7 B ~24 Gross ~11 Net 380 - 410 ~$0.8 B ~3 Gross ~2 Net 100 – 110 Capex Rigs Rigs Wells Online Capex Rigs Rigs Wells Online 100% OBO OBO 100% EOR Base Maint Powder Powder Base Maint EOR EOR Powder River Basin
Slide 28: Delaware Continues to Improve
TOP-TIER WELL PERFORMANCE DELAWARE CONTINUES TO IMPROVE 28 BASIN WELL 450 PRODUCTIVITY 400 Superior-quality 350 inventory combined with subsurface expertise Cumulative Mboe 300 drives continuous improvement and value 250 200 1 Year Cumulative Improvement 150 2015 to 2022: +205% 100 2018 to 2022: +25
Slide 29: Leading Delaware Basin Well Performance
OIL & GAS UPDATE 29 LEADING DELAWARE BASIN WELL PERFORMANCE AVERAGE 6-MONTH CUMULATIVE OIL BY OPERATOR1 AVERAGE 12-MONTH CUMULATIVE OIL BY OPERATOR2 Oxy is 31% above the 6-month basin average Oxy is 21% above the 12-month basin average 180 250 Average 12-month cum. oil, Mbbl Average 6-month cum. oil
Slide 30: Well Design Driving Major DJ Basin Productivity Gains
WELL DESIGN DRIVING MAJOR DJ BASIN WELL PRODUCTIVITY GAINS 30 PRODUCTIVITY 200 180 Data-driven well design and operational expertise 160 drive continuous 140 Cumulative Mboe improvement and value 120 1 Year Cumulative 100 Improvement 80 2015-2016 to 2022: +56% 60 2017-2021 to 2022: +25% 40 2022 to 2
Slide 31: DJ Basin Well Design Changes Driving Capital Efficiency
DJ BASIN – WELL DESIGN CHANGES DRIVING CAPITAL EFFICIENCY 31 Subsurface Design Execution Performance Previous 18 WPS Driving Innovation and Efficiency Development Optimization Niobrara • Oxy’s ingenuity in well design and execution • Smaller surface impacts and accelerated time-to-market Benches ena
Slide 32: Domestic Inventory & Innovation
DOMESTIC Domestic Onshore Operated Inventory Total Gross Operated Locations 8,000 32 INVENTORY & 6,885 INNOVATION 6,000 5,592 4,000 3,812 Depth of low-breakeven inventory demonstrates quality 2,000 1,321 and quantity of Oxy’s domestic unconventional portfolio - Breakeven <$30 Breakeven <$40 Breakeve
Slide 33: Appendix: Asset Overview
33 APPENDIX Financial Information Oil & Gas Update Asset Overview LCV Overview
Slide 34: Oxy's Combined Integrated Portfolio
OXY’S COMBINED INTEGRATED PORTFOLIO 34 Oil & Gas OxyChem Oxy Midstream Focused in world class Leading manufacturer of basic Integrated infrastructure and basins with a history of chemicals and significant cash marketing provide access to global maximizing recovery generator markets 30 Rockies 1,220
Slide 35: OxyChem Market Leading Position
OXYCHEM 2,500 Pre-Tax Earnings (EBIT)1 35 MARKET LEADING POSITION 2,000 • 23 owned facilities worldwide 1,500 $ MM • Integrated assets capture benefits of favorable market conditions 1,000 • Top-tier global producer in every product 500 produced 0 ◦ Largest merchant caustic soda seller in 2010 2011
Slide 36: Midstream & Marketing Guidance Reconciliation
MIDSTREAM & MARKETING 36 GUIDANCE RECONCILIATION 3Q23 Guide 3Q23 Actuals 4Q23 Guide PHYSICAL MIDSTREAM BUSINESS $200 • 3Q23 income below guidance due to Quarterly Pre-Tax Income ($ MM) losses on equity investments; 4Q includes $150 seasonal decline in power prices $100 CRUDE EXPORTS FROM GULF COAST
Slide 37: One of the Largest U.S. Acreage Holders
ONE OF THE LARGEST U.S. ACREAGE HOLDERS 37 9.4 MM Net Total U.S. Acres ROCKIES 1.1 MM ACRES PERMIAN 2.8 MM ACRES POWDER RIVER UNCONVENTIONAL 0.3 MM POWDER RIVER 1.4 MM DJ BASIN CONVENTIONAL 0.8 MM 1.4 MM Excludes acreage outside of active DJ BASIN operating areas OTHER ONSHORE GULF OF MEXICO TOTAL A
Slide 38: U.S. Onshore Overview
U.S. ONSHORE OVERVIEW 38 3Q23 NET PRODUCTION ROCKIES Oil NGLs Gas Total 1.1 MM ACRES (Mbod) (Mbbld) (MMcfd) (Mboed) Permian 339 145 625 588 Rockies & Other Dmstc. 72 97 565 263 Total 411 242 1,190 851 OPTIMIZED ADVANCED DEPLOY STRATEGIC PERMIAN D EV ELOPMENT SUBSURFACE + POWERFUL + INFRASTRUCTURE ST
Slide 39: Gulf of Mexico Overview
GULF OF MEXICO OVERVIEW 39 ALABAMA GULF OF MEXICO MISSISSIPPI TOTAL ACREAGE 0.9 MM TEXAS LOUISIANA 3Q23 NET PRODUCTION MARLIN Oil (Mbod) 123 HORN MOUNTAIN NGLs (Mbbld) 10 HOLSTEIN NANSEN CONSTITUTION Gas (MMcfd) 77 CAESAR/TONGA BOOMVANG MARCO POLO Total (Mboed) 146 GUNNISON HEIDELBERG LUCIUS NOTE: A
Slide 40: International Overview
INTERNATIONAL OVERVIEW 40 U.A.E. 3Q23 NET PRODUCTION 2.5 MM ACRES Oil NGLs Gas Total (Mbod) (Mbbld) (MMcfd) (Mboed) Algeria & Other Intl. 25 2 15 30 Al Hosn 15 26 284 88 Dolphin 6 8 149 39 Oman 57 - 53 66 ALGERIA OMAN Total 103 36 501 223 0.5 MM ACRES 6.0 MM ACRES MENA NOTE: AS OF 09/30/2023; ACREAG
Slide 41: Appendix: LCV Overview
41 APPENDIX Financial Information Oil & Gas Update Asset Overview LCV Overview
Slide 42: DAC Commercial Development Assumptions
DAC COMMERCIAL DEVELOPMENT ASSUMPTIONS 42 DAC 1 DAC 2 Nth Voluntary and Compliance REVENUE Policy CDR PRICE1 $400 – 630/t $400 – 630/t Value Based IRA 45Q Enhancements DAC to EOR: $130/t 45Q CREDIT2 $180/t $180/t Policy/Scope Driven DAC to Sequestration: $180/t Co-Captured CO2 to Sequestration: $85/
Slide 43: Illustrative DAC Economic Modeling
DIRECT AIR CAPTURE 43 ILLUSTRATIVE DAC ECONOMIC MODELING CASH FLOW PROFILE REVENUE COSTS DAC 1 capital cost1 estimated at ~$1.3 B for first Carbon removal credit volumes DAC 1 & 2 cost of capture expected to be in the range 500k tonne per annum train, scaling capital by 1.7x Approximately 90% of
Slide 44: Cost of CO2 Reduction Using SAF
COST OF CO2 REDUCTION USING SAF 44 DAC CDRs expected to be more economic than SAF Value Units Calculation Sources / Notes Assumption: January 2022 through September 2023 SAF price premium over conventional jet fuel 2,300 $ / tonne A estimated average. (Argus Whitepaper). Calculation: Emission factor
Slide 45: Oxy to Utilize Clean Energy Generated by NET Power's First Plant
45 OXY TO UTILIZE CLEAN ENERGY GENERATED BY NET POWER’S FIRST UTILITY SCALE PLANT Oxy has ~42% equity ownership in NET Power Inc. (NYSE: NPWR) Expected to be the primary offtaker of clean energy generated by NET Power's first commercial plant using a transformational technology that inherently c
Slide 46: Oxy Zero In
VB OXY ZERO IN”