Occidental Petroleum Corporation · NYSE:OXY
Occidental Petroleum — Credit Suisse 2009 Energy Summit
33 slides from Occidental Petroleum's conference presentation, Feb 3, 2009
Slide 1: Credit Suisse 2009 Energy Summit
February 3, 2009 Stephen I. Chazen President and Chief Financial Officer Credit Suisse 2009 Energy Summit
Slide 2: Full Year 2008 Results – Summary
2 ($ in millions, except EPS data) 2008 2007 Core Results 1 $7,348 $4,405 +70% year-over-year Net Income $6,857 $5,400 Reported EPS (diluted) $8.35 $6.44 Capital Spending $4,664 $3,360 ROE 27% 26% 1 See attached for GAAP reconciliation. Full Year 2008 Results – Summary Core EPS (diluted) $8.95 $5.25
Slide 3: Corporate Strategy/Philosophy
3 Focus on core areas – long-term production growth of 5 - 8% CAGR US - Permian Basin, California, and Mid-continent/Rockies Middle East/North Africa Latin America Maintain strong balance sheet Maintain “A” credit rating Maintain investment discipline Create value Capture EOR projects with large vol
Slide 4: Worldwide Oil & Gas Operations
4 Joslyn Piceance Hugoton California Permian Basin Colombia Bolivia Argentina Libya Qatar UAE Oman Yemen Worldwide Oil & Gas Operations
Slide 5: Worldwide Production Outlook
5 Thousand BOE/Day 466 2005 545 2006 570 2007 601 2008 660 2009E Note: Importantly this forecast is based only on existing projects and does not contemplate any new projects or future acquisitions. Worldwide Production Outlook CAGR = 8.3%
Slide 6: 2008 Reserve Replacement
6 We estimate that we replaced approximately 200% of our oil and gas production in 2008. This excludes the effect of price changes from 2007 to 2008. Including the effect of price changes, we estimate that we replaced around 150% of our 2008 production. Slightly over half of the 2008 reserve additio
Slide 7: Business Risk Factors
7 Level of Risk Acceptable to Occidental Risk Factor Low Middle High Exploratory ü Commodity ü Political ü Engineering ü Reinvestment ü Financial ü Business Risk Factors
Slide 8: Capital Allocation Philosophy
8 New projects must meet expectations for good returns Return Targets* Domestic – 15+% International – 20+% Compare new projects and asset acquisitions with share repurchases Pursue only those opportunities which meet our standards for ROCE and complement our existing assets Make decisions based on
Slide 9: Capital Spending Program
9 2008 capital program was about $4.7 billion, and we spent another $4.7 billion for acquisitions. As a result, we have accumulated a sizeable inventory of projects which can be delayed until the industry cost structure is in line with product prices. Service company cost structure is more reflectiv
Slide 10: Capital Spending Program
10 Gas drilling with less than $5 per mcf gas is unattractive. We will continue to fully fund much of our Middle East operations, successful exploration programs in California, Utah, and exploration in Argentina. Formerly "quick payout" wells in the Permian and California will be deferred until they
Slide 11: Capital Spending Program
11 We are renegotiating our supplier contracts to further reduce costs and are laying down rigs, including paying cancellation costs when that makes sense. We expect these efforts to result in a reduction in the cost of executing our capital programs, as well as, a reduction of our operating expense
Slide 12: Oil & Gas, and Midstream Capital Spending
12 ($ in millions) 2008 2009E Growth Capital 2,065 1,005 Base Capital 2,275 2,120 Total Oil & Gas, and Midstream Capital 4,340 3,125 Oil & Gas, and Midstream Capital Spending
Slide 13: US Oil & Gas Operations
13 Elk Hills & California Properties Bakersfield Los Angeles Long Beach Piceance Basin Sheep Mountain Hugoton Bravo Dome Oxy Permian Houston * See attached for GAAP reconciliation. US Oil & Gas Operations 2008 net production* 361 mboe/day 60% of worldwide total 2007 reserves* 2.15 billion boe 75% of
Slide 14: US Oil & Gas Operations
14 Thousand BOE/Day US Oil and Gas Production 331 2005 354 2006 359 2007 361 2008 383 357 2009E Key Operations/Assets: Permian Basin California/Elk Hills Field Mid-Continent/Rockies 2008 Financial Data 1 Pre-tax Income $5.8 Billion After-tax Cash $3.3 Billion Capital $1.8 Billion ROANCC** 25% **ROAN
Slide 15: Permian Basin Operations
15 Sheep Mountain Hugoton Bravo Dome To Cushing, OK Denver City Unit Lubbock Salt Creek Indian Basin Area Cogdell Hobbs Midland Sharon Ridge Seminole Large resource inventory — Oxy owns 1.7 mm acres 2008 production of 198 mboe/day Low decline rate & long-lived properties Significant cash generation
Slide 16: Permian – Century CO2 Plant Project
16 Oxy to invest $1.1 B in CO 2 plant and pipeline facilities. CO 2 to be used in Oxy’s Permian EOR projects. New CO 2 resources expected to expand Oxy’s Permian production by at least 50 mb/day within 5 years. Allows Oxy to exploit at least 3.5 tcf of CO 2 for EOR use. Enables Oxy to accelerate and
Slide 17: California Operations
17 2008 production of 128 mboe/day Oxy is the largest acreage holder in the state Continue to build inventory of drilling opportunities Planning various EOR and waterflood expansion projects. Expect to increase production by expanding our drilling program in the various shale plays and deeper pay zo
Slide 18: Middle East/North Africa Oil & Gas
18 * See attached for GAAP reconciliation. Middle East/North Africa Oil & Gas 2008 net production* 164 mboe/day 27% of worldwide total Libya Qatar UAE Oman Yemen 2007 reserves* 468 million boe 16% of worldwide total
Slide 19: Middle East/North Africa Oil & Gas
19 Thousand BOE/Day Middle East/North Africa Oil and Gas Production 103 2005 119 2006 135 2007 164 2008 194 2009E Key Operations/Assets: Dolphin Project Qatar ISND Oman/Mukhaizna Libya 2008 Financial Data 1 Pre-tax Income $4.5 Billion After-tax Cash $1.3 Billion Capital $1.1 Billion ROANCC** 41% **R
Slide 20: Oman – Mukhaizna Project
20 Continuing large scale steam flood EOR project – drilled 370+ wells thru 2008 Gross production at year-end 2008 was 6x higher vs. Sept. 2005 Expect to drill approximately 215 new wells in 2009 Met targeted 2008 production exit rate of 50 mb/d (gross) Completing all multiple water treatment facili
Slide 21: Oman – Gas Project
21 PSA signed on November 24th Newly formed contract area – “Habiba” - Block 62 20-year agreement covers 2,269 km2 Development of four gas fields Exploration potential Partners Oxy (operator) 48%, Mubadala 32%, Oman 20% Development Plan First production by 2010 Gross production approximately 27 to 2
Slide 22: Abu Dhabi – New Concessions
22 Agreement signed with ADNOC to appraise and develop of Jarn Yaphour and Ramhan fields Oxy will operate and hold a 100% interest in both fields First production at Jarn Yaphour expected in 2010 First production at Ramhan anticipated in 2011 When fully operational, we expect these two projects to p
Slide 23: Bahrain Field Development Project
23 Oxy selected by Bahrain National Oil and Gas Authority to develop oil and gas assets in the Kingdom Field discovered in 1932 12 billion BOE originally in place We are now finalizing the relevant technical and financial agreements We hope to have the completed agreement approved by the Bahrain Par
Slide 24: Latin America Oil & Gas Operations
24 Colombia Bolivia Argentina * See attached for GAAP reconciliation. Latin America Oil & Gas Operations 2008 net production* 76 mboe/day 13% of worldwide total 2007 reserves* 244 million boe 9% of worldwide total
Slide 25: Latin America Oil & Gas Operations
25 Key Operations/Assets: Colombia Argentina 2008 Financial Data 1 Pre-tax Income $0.5 Billion After-tax Cash $0.5 Billion Capital $1.0 Billion ROANCC** 14% 32 72 76 2005 2006 2007 Thousand BOE/Day Latin America Oil and Gas Production **ROANCC = Return On Average Net Capitalized Costs. 76 83 2008 20
Slide 26: Argentina Operations
26 2008 production – 36 mboe/day Drilled 162 new wells in 2008 and performed a number of recompletions Inventory of more than 700 drilling locations Near field exploration program continues to be successful and has identified new drilling opportunities Expect to increase production significantly ove
Slide 27: Other Value Enhancing Initiatives
27 Chemicals Operations Midstream Assets – Pipelines Dividend Growth Other Value Enhancing Initiatives
Slide 28: Chemicals Operations
28 ($ Millions) Period ending 12/31/08* 3-Year* 5-Year* Average Average 2007 2008 Pre-tax Earnings $755 $693 $601 $759 Free Cash Flow 1 $808 $767 $660 $830 Capital Spending $244 $210 $245 $240 1 See attached for GAAP reconciliation. Chemicals Operations
Slide 29: Midstream, Marketing and Other
29 Midstream assets reclassified out of the Oil and Gas segment The assets are comprised of the following businesses: Marketing, Gas processing plants, Pipelines, Power generation, CO 2 source fields and facilities ($ in millions) Midstream Data 2008 2007 Core Results $520 $367 Net Book Value $2,930
Slide 30: Full Year 2008 Cash Flow
$12,700 $4,700 $1,500 $950 $940 $1,800 Available Cash Capex Acquisitions Share Repurchase Dividends Other Ending Cash Balance 12/31/08 ($ in millions) Debt $4,700 $10 Cash Flow From Operations $10,700 Beginning Cash $2,000 Full Year 2008 Cash Flow
Slide 31: Creating Shareholder Value – Dividends
31 $0.52 $0.55 $0.645 $0.80 Annual Dividend Payout per share $0.50 $0.94 Establishing a track record of consistent dividend increases $1.21 Creating Shareholder Value – Dividends
Slide 32: Forward-Looking Statements
32 Statements in this presentation that contain words such as "will," "expect" or "estimate," or otherwise relate to the future, are forward-looking and involve risks and uncertainties that could significantly affect expected results. Factors that could cause results to differ materially include, bu
Slide 33: Reconciliation to Generally Accepted Accounting Principles (GAAP)
33 Occidental Petroleum Corporation Reconciliation to Generally Accepted Accounting Principles (GAAP) For the Twelve Months Ended December 31, ($ Millions) Diluted Diluted EPS EPS Reported Income $ 6,857 $ 8.35 $ 5,400 $ 6.44 Add: significant items affecting earnings Gain on sale of Russia joint ven
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