Occidental Petroleum Corporation · NYSE:OXY
Occidental Petroleum — Bernstein Strategic Decisions Conference 2015
38 slides from Occidental Petroleum's conference presentation, May 28, 2015
Slide 1: Occidental Petroleum Corporation – Bernstein Strategic Decisions Conference 2015
OCCIDENTAL PETROLEUM CORPORATION Stephen I. Chazen President & CEO Bernstein Strategic Decisions Conference 2015 May 28, 2015
Slide 2: Key Messages & Strategy
Key Messages & Strategy Overriding Goal is to Maximize Total Shareholder Return • We believe this can be achieved through a combination of: • Oil and gas production growth of 5% to 8% per year over the long-term; − Executing on our capital program with a focus on growing our U.S. oil production • Al
Slide 3: Why own Oxy?
Why own Oxy? Large Integrated Majors Independent E&Ps Company Market Cap ($B) Company Market Cap ($B) XOM $361 COP $80 CVX $197 Oxy EOG $49 RDS $195 Uniquely APC $44 BP $131 Positioned APA $23 TOT $125 PXD $23 ENI $66 MRO $19 Characteristics Characteristics • Low or no growth • Generally higher grow
Slide 4: Medium-Term Objectives
Medium-Term Objectives CASH FLOW GROWTH Permian Resources production growth Al Hosn project start-up Gradual Commodity price recovery Cash Flow Neutral after capital spending and COST SAVINGS dividend outlays by 4Q 2015 at around $60/bbl oil ~$400 million of captured cost savings year-to-dat
Slide 5: Succession Plan Announced
Succession Plan Announced • Oxy’s board of directors has approved a CEO succession plan and promoted Vicki A. Hollub to Senior Executive Vice President of Occidental and President – Oxy Oil and Gas, responsible for operations in the United States, Middle East region and Latin America. • The board pl
Slide 6: Cash Flow Priorities
Cash Flow Priorities 1. Base/Maintenance Capital 2. Dividends 3. Growth Capital 4. Share Repurchase 5. Acquisitions 6
Slide 7: History Of Returning Cash To Shareholders
History Of Returning Cash To Shareholders ($ in Billions) Share Period ending 2014 Cash Dividends Repurchases Combined 3 – years $5.9 $4.0 $9.9 5 – years $8.5 $4.4 $12.9 10 – years $12.4 $8.5 $20.9 1Q – 2015 $0.5 $0.2 $0.7 – Additionally, over the 10 years ending 2014: • We reinvested $45 billion of
Slide 8: Confidence In Cash Flow = Dividend Increase
Confidence In Cash Flow = Dividend Increase • Raised the dividend by 4+%, the 13th year of consecutive increases. • Expect to be able to continue to grow our dividend for many years into the future. – The new ethylene cracker which comes on in 2017 will provide a substantial boost in our distributab
Slide 9: Delivering Consistent Dividend Growth
Delivering Consistent Dividend Growth ($/share) $22.00 $20.39 $20.00 $18.00 $17.39 $16.00 $14.51 $14.00 $11.95 $12.00 $9.79 $10.00 $7.95 $8.00 $6.48 $6.00 $5.16 $3.96 $4.00 $3.02 $2.88 $3.00 $2.22 $2.56 $1.84 $2.16 $2.00 $1.57 $1.47 $1.02 $1.21 $1.31 $0.50 $0.65 $0.80 $0.94 $0.50 $0.52 $0.55 $0.00 2
Slide 10: Active Share Repurchase Program
Active Share Repurchase Program • Over the last 5 quarters we have repurchased 28.4 million shares of our stock and have ~69 million shares remaining under our current program authorization. • We will continue to repurchase shares subject to the stock price and market conditions and expect to ultima
Slide 11: Oxy Runs A Focused Business
Oxy Runs A Focused Business Oil and Gas Focus Areas United States • Leading position OxyChem in the Permian Basin. High FCF, moderate • Permian Resources growth business. is a growth driver. Oxy Midstream • Al Hosn Project, Integrated pipeline and MENA Oman and Qatar. marketing business to • Additio
Slide 12: Oxy is Primarily an Oil Producer
Oxy is Primarily an Oil Producer Oil & Gas Production First Quarter 2015 (Million barrels of oil equivalent) By Geography By Commodity 5.6 10% 29.3 14.1 38.3 28.7 50% 24% 66% 50% U.S. International Oil NGLs Gas 12
Slide 13: Delivering on Production Growth
Delivering on Production Growth • U.S. oil production grew 14% in 1Q15 on a year-over-year basis.* • Increased Permian Resources production guidance to 105 - 108 MBOED. • Al Hosn expected to average 25 MBOED in 2Q15 and 35 MBOED for FY 2015. • In the U.S., we expect oil production growth of 8% this
Slide 14: 2015E Capital Budget Down Sharply vs. 2014
2015E Capital Budget Down Sharply vs. 2014 33% decline in 2015 capital budget Domestic O&G Domestic O&G Chemicals 42% Chemicals 43% U.S. 6% 10% Midstream Permian 9% Resources U.S. Permian Exploration 22% Midstream Resources 6% 10% 30% Exploration 4% Other International Domestic International 37% 20%
Slide 15: Capital Efficiency Continues to Improve
Capital Efficiency Continues to Improve Organic F&D Costs* • Through the success of our drilling ($ / BOE) U.S. Total program and capital efficiency initiatives, we lowered our F&D costs over recent $21.90 $20.48 $20.24 years. $18.66 $16.89 • We expect our DD&A expense to be ~$15 / BOE in 2015, a de
Slide 16: Capital Spending Ramps Down Through Year
Capital Spending Ramps Down Through Year • Total company capital expenditures for 2015 Capital Budget the 1Q15 were $1.7 bn and we expect our quarterly expenditures to continue to ramp $1.7 bn down through the year. • Based on our lower pace of spending in Permian 1Q15 and continued cost efficiency
Slide 17: Capital Program 2015 Evolution
Capital Program 2015 Evolution 2015 Capital Budget and Domestic Drilling Rigs • As we capture price savings from suppliers and improve efficiencies, 100% Capital we are able to do more with less Budget spending. Domestic • Given our large acreage position and 75% Drilling Rigs deep inventory, we hav
Slide 18: Permian Basin Is The Core Domestic Asset
Permian Basin Is The Core Domestic Asset • Largest oil producer and operator in Permian Basin. • Significant investments in infrastructure to support the upstream provide low operating costs, advantaged realized prices and competitive advantages. • ~60% of Oxy’s Permian oil production is from CO2 re
Slide 19: Oxy is the Largest Permian Basin Producer
Oxy is the Largest Permian Basin Producer Cumulative Total Operated Production, Thousand BOEPD % of total 2.3 million BOEPD Source: IHS Energy Feb and Mar 2014, 6 MCF/BOE excluding estimated CO2 production. 19
Slide 20: Permian Resources Drilling Inventory
Permian Resources Drilling Inventory Lowering economic hurdle point by improving well productivity, time to market and costs 100% Drilling Inventory (~44 yrs) 1. Investing in characterization Based on Q4 Costs and optimization to improve 81% well productivity. (~ 36 yrs) Avalon Better Well Productiv
Slide 21: Permian Resources Summary
Permian Resources Summary Increased 2015 production guidance from 100 MBOED to 105 - 108 MBOED Production (MBOED) Average Rig Count Horizontal Vertical 4 5 4 7 25 21 17 19 13 2Q14 3Q14 4Q14 1Q15 Remainder 2015 Wells Drilled / Online 120 107 Drilled Online 98 150 84 126 75 57 64 48 87 85 86 75 71 70
Slide 22: Permian Resources Summary – Well Count
Permian Resources Summary Achieved 17% increase in BOED and 22% increase in BOPD vs. Q414 1Q 2015 WELL ACTIVITY 126 Wells Online Total Production 1Q 2015 (BOED) 98,000 120 Oil Production (BOPD) 62,000 vs. 4Q-2014 22% Increase 100 vs. 1Q-2014 68% Increase Well Count 80 Capital Expenditures $728MM 60
Slide 23: Step Change in Efficiency – Total Time To Market Is Down 50%
Step Change in Efficiency – Our Total Time To Market Is Down 50% • Faster drilling • Less idle time • More frac stages per day • Integrated planning (# of Days) • Infrastructure investments in water handling, storage, gathering and takeaway • Step change in capital efficiency should allow for increa
Slide 24: Domestic Drilling Rig Evolution For 2015
Domestic Drilling Rig Evolution For 2015 • Some of the captured cost savings have been re-deployed into higher activity levels than planned for the remainder of 2015. 2015E Domestic Drilling Rigs 35 31 31 30 25 20 15 14 13 13 11 10 10 9 5 0 1Q15 2Q15E 3Q15E 4Q15E January Plan Current Outlook 24
Slide 25: Move to Manufacturing Mode Has Significantly Reduced Well Costs
Move to Manufacturing Mode Has Significantly Reduced Well Costs Manufacturing Mode Drilling / Completions WELL COST DRILL DAYS Delaware WC-A 4,500‘ HZ Delaware WC-A 4,500’ $12.0 $10.9 50 45 43 $10.0 $8.3 40 GROSS WELL COST $MM $8.0 $5.6 35 31 $6.5 30 26 $6.0 $4.7 25 $3.0 20 $4.0 16 14 15 $5.3 $2.0 $
Slide 26: Move to Manufacturing Mode Has Significantly Reduced Well Costs
Move to Manufacturing Mode Has Significantly Reduced Well Costs Manufacturing Mode Drilling / Completions WELL COST WELL COST SCR Spraberry 10,000‘ HZ New Mexico Bone Spring HZ $10.0 $9.7 $8.0 $7.9 $7.0 $6.6 $8.0 $7.2 GROSS WELL COST $MM $6.0 $5.7 GROSS WELL COST $MM $5.7 $5.5 $6.0 $5.0 $2.9 $4.6 $4
Slide 27: Permian – Delaware Basin Opportunities
Permian – Delaware Basin Opportunities Delaware Basin OXY Acreage Benches • Majority of Wolfcamp locations are Bell Canyon Cherry Canyon in our operated areas of Reeves Brushy Canyon County. Avalon 1st Bone Spring 2nd Bone Spring • Current Bone Spring locations are 3rd Bone Spring located primarily
Slide 28: Permian – Midland Basin Opportunities
Permian – Midland Basin Opportunities OXY Acreage Midland Basin Benches Yates Grayburg • Majority of Wolfcamp locations San Andres are in our operated areas of Clear Fork Upper Spraberry Martin, Midland and Andrews Middle Spraberry Counties. Lower Spraberry A Wolfcamp B C • Wolfcamp A & B and Sprabe
Slide 29: Permian Resources Production Guidance
Permian Resources Production Guidance • Continue to execute focused development strategy PRODUCTION (MBOED) • For the remainder of 2015: − Operate average of 13 rigs (higher than planned) − Expect to drill 150 wells − Continue to pursue step changes in well productivity and cost structure 120 107 −
Slide 30: Permian EOR – Consistent Generator of Cash
Permian EOR – Consistent Generator of Cash • ~150,000 BOEPD of low cost CO2 Supply and Processing production. • Most active and largest EOR operator in the Permian Basin with 30 active floods. • Over 40 years of successful CO2 flooding experience. • High working interest in over 350 properties. • Op
Slide 31: Permian EOR Has A Low Cost Structure
Permian EOR Has A Low Cost Structure Permian EOR can operate at cash costs as low as $22 per BOE 2015 Permian EOR Cost Structure 2015 Permian EOR Cost Structure $55 WTI, $3.00 NYMEX $35 WTI, $2.00 NYMEX $35 $35 $30 $30 $2.7 $25 $4.0 $25 $4.7 $1.8 $20 $20 $ / BOE $ / BOE $3.2 $4.7 $15 $2.2 $15 $4.0 $
Slide 32: Oxy Permian Gathering / Takeaway
Oxy Permian Gathering / Takeaway Cushing Centurion Central/ SENM/ Midland Basins DE Basins Basin Slaughter Colorado City Seaway WTG Midland- BridgeTex South LongHorn Houston Cactus 2Q15 Owned 3rd Party Corpus Christi BridgeTex Started Up in Late Sept 2014 32
Slide 33: Long-term Growth Investments
Long-term Growth Investments • Some of the longer lead time investments we have been making over the past couple of years will start contributing to our results this year. – Continued preferential access and commitment to the BridgeTex pipeline which started in late September will improve our Permia
Slide 34: Al Hosn Gas Project Continues To Ramp Up
Al Hosn Gas Project Continues To Ramp Up • We completed the Al Hosn gas project, on budget and on time. • It is currently producing ~25,000 BOED (net to Oxy) and will ramp up through the year. • FY 2015 volumes from Al Hosn should average ~35,000 BOED (net to Oxy) with more than 40% of production co
Slide 35: Future Growth – Chemicals
Future Growth – Chemicals OxyChem Ingleside Ethylene Cracker • We have formed a 50/50 JV with Mexichem to build a world scale ethylene cracker at the OxyChem plant in Ingleside, TX. • Construction on the Ingleside cracker project began mid-2014 with the facilities to become commercially operational
Slide 36: Future Growth – Ingleside Energy Center
Future Growth – Ingleside Energy Center OxyChem Plant • Terminaling - LPG: 60-100 MB/d (2Q 2015) - Crude/Condensate: 200-300 MB/d (1H 2016) - Storage: 2 - 4 MM BBLS • Future processing options Provides flexibility and avoids congested ship channel 36
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. Words such as "estimate," "project," "predict," "will," "would," "shoul
Slide 38: Occidental Petroleum Corporation
D> Oxy Ww’ Occidental Petroleum Corporation
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