Occidental Petroleum Corporation · NYSE:OXY
Occidental Petroleum — Q4 2014 Earnings Presentation
49 slides from Occidental Petroleum's earnings presentation, Jan 29, 2015
Slide 1: Fourth Quarter 2014 Earnings Conference Call
OCCIDENTAL PETROLEUM CORPORATION Fourth Quarter 2014 Earnings Conference Call January 29, 2015
Slide 2: Fourth Quarter 2014 Earnings Highlights
Fourth Quarter 2014 Earnings Highlights Executed many of our strategic initiatives, including the Hugoton Sale spin-off of California Resources, the sale of our Hugoton 18 MBOED – 1Q14 gas properties, BridgeTex Pipeline and PAGP units $1.3 bn pre-tax proceeds At year end, our cash balance of $7.
Slide 3: Fourth Quarter 2014 Earnings Highlights
Fourth Quarter 2014 Earnings Highlights We completed the Al Hosn gas project, on budget and on time, which started production in early January. It is currently producing ~20,000 BOED (net to Oxy) and will ramp up as the 2nd train comes on-line later in 1Q15 3
Slide 4: Macro Environment
Fourth Quarter 2014 Earnings Macro Environment • The confluence of US supply growth, weaker Asian demand and extreme currency movements have led to a significant decline in product prices. • Our company is resilient and built to weather price shocks typical to this industry. • The current service co
Slide 5: Portfolio Review
Fourth Quarter 2014 Earnings Portfolio Review • We have minimized our development activities in the Williston Basin, domestic gas properties, Bahrain, and the Joslyn oil sands project, as these have sub-par returns in this current product price environment. • As a result of a thorough portfolio revi
Slide 6: 2015 Capital Outlook
Fourth Quarter 2014 Earnings 2015 Capital Outlook • Focus our capital spending on the core areas we Capital Budget ($ bn) operate, principally in the Permian Basin. • Two-thirds of the capital budget will be allocated $8.7 to maintenance capital and one-third allocated to growth capital. • Our capit
Slide 7: 2015 Production Outlook
Fourth Quarter 2014 Earnings 2015 Production Outlook • Despite a lower capital program, we expect to deliver 6% - 10% annual production growth in 2015, driven by the start-up of the Al Hosn gas project and the focused development program we will run in our Permian Resources business segment. • In th
Slide 8: Oil & Gas Reserves
Fourth Quarter 2014 Earnings Oil & Gas Reserves Organic All Sources (excl. revisions, asset sales, (ex-asset sales) acquisitions) Total Domestic Total Domestic Reserve Adds (MMBOE) 380 308 395 332 Production (MMBOE) 218 116 218 116 Reserve Replacement 174% 266% 181% 286% Costs Incurred ($ in mm) $8,
Slide 9: Oil & Gas Reserves - Total
Fourth Quarter 2014 Earnings Oil & Gas Reserves - Total • We had a successful year in growing the Company’s reserve base by adding substantially more reserves than we produced. – Company-wide, we replaced 174% of our production before asset sales. • Based on a preliminary estimate of year-end 2014 r
Slide 10: Oil & Gas Reserves - Total
Fourth Quarter 2014 Earnings Oil & Gas Reserves - Total 2014 Organic Reserve (in millions of BOE) 2,900 Replacement Ratio of ~181% 72 2,819 2,800 265 (38) 2,738 (218) 2,700 76% liquids 2,600 71% proved developed 2,500 2,400 FY13 Reserves 2014 Production U.S. Organic U.S. Acquisitions International F
Slide 11: Oil & Gas Reserves - United States
Fourth Quarter 2014 Earnings Oil & Gas Reserves - United States • Built a large portfolio of growth oriented assets in the U.S. • In 2014, we spent a much larger portion of our investment dollars on the development of this portfolio. • Our organic reserve replacement for the year reflects the positi
Slide 12: Oil & Gas Reserves - United States
Fourth Quarter 2014 Earnings Oil & Gas Reserves - United States 2014 Organic Reserve 1,900 Replacement Ratio of (in millions of BOE) ~286% 265 (38) 1,800 1,781 84% 1,700 1,670 (116) liquids 65% proved 1,600 developed 1,500 FY13 Reserves 2014 U.S. Production U.S. Organic U.S. Acquisitions FY14 Reserv
Slide 13: Capital Efficiency
Fourth Quarter 2014 Earnings Capital Efficiency Organic F&D Costs* • Through the success of our drilling ($ / BOE) U.S. Total program and capital efficiency initiatives, we lowered our F&D over recent years. $17.50 $17.71 $16.22 $16.89 $16.35 • We expect our DD&A expense to be ~$15 / BOE in 2015, a
Slide 14: Cash Flow Priorities
Fourth Quarter 2014 Earnings Cash Flow Priorities 1. Base/Maintenance Capital 2. Dividends 3. Growth Capital 4. Share Repurchase 5. Acquisitions 14
Slide 15: Cash Flow Priorities
Fourth Quarter 2014 Earnings Cash Flow Priorities • We have increased the dividend for 12 consecutive years and are committed to annual increases. • Given the uncertainty in product prices, the decision on the size of the increase will be made on the declaration of the 3rd quarter dividend. • Our re
Slide 16: Highlights
Fourth Quarter 2014 Earnings Highlights Results • Domestic oil production (Bbl/d) 189,000 11% year / year growth* • Total company production (BOED) 616,000 • Core earnings** $560 million • Core diluted EPS** $0.72 • 2014 CFFO from Continuing Ops $9.4 billion • Cash balance @ 12/31/2014 $7.8 billion
Slide 17: Significant Charges & Gains
Fourth Quarter 2014 Earnings • Under the Successful Efforts method, if an oil and gas property’s estimated future net cash flows are not sufficient to recover its carrying amount using the period end future’s curve, an impairment charge must be recorded. • As of December 31, 2014 Oxy recorded proper
Slide 18: Oil & Gas Segment Pre-Tax Core Earnings
Fourth Quarter 2014 Earnings Oil & Gas Segment Pre-Tax Core Earnings PRE-TAX 4Q14 vs. 3Q14 ($ in millions) $1,571 ($845) Core Results • 4Q14 $0.7 B • 3Q14 $1.6 B • 4Q13 $1.8 B $173 ($100) ($63) $736 3Q14 Sales Price Sales Volumes Higher Operating All Others 4Q14 Costs Note: Excludes California Opera
Slide 19: Oil and Gas Total Company Production
Fourth Quarter 2014 Earnings Oil and Gas Total Company Production Total company oil and gas production volumes averaged 616,000 BOE per day, an increase of 21,000 BOE in daily production from the third quarter. Company-wide Oil & Gas Production (MBOED) 12 616 9 (3) 3 595 3Q14 Permian Other Domestic
Slide 20: Oil and Gas Domestic Production
Fourth Quarter 2014 Earnings Oil and Gas Domestic Production Met our domestic oil production growth guidance with a year over year increase of 19,000 BOE per day or about 11% led by our Permian Resources assets. Domestic Oil & Gas Production (MBOED) 7 (1) 321 315 295 4Q13 3Q14 Oil Natural Gas & 4Q14
Slide 21: Oil & Gas Realized Prices
Fourth Quarter 2014 Earnings Oil & Gas Realized Prices Realized Prices Benchmark Prices Worldwide Worldwide Domestic Nat. Oil ($/bbl) NGLs ($/bbl) Gas ($/mmbtu) WTI Brent NYMEX 4Q14 $71.58 $27.39 $3.56 $73.15 $76.98 $3.99 WTI % 98% 37% 89%* Brent % 93% 36% 3Q14 $94.26 $38.20 $3.74 $97.17 $103.39 $4.
Slide 22: Oil & Gas Operating Costs
Fourth Quarter 2014 Earnings Oil & Gas Operating Costs Production Costs ($ / BOE) 4Q13 FY2013 1Q14 2Q14 3Q14 4Q14 FY 2014 $13.12 $12.56 $12.94 $13.34 $13.45 $14.18 $13.50 DD&A ($ / BOE) 4Q13 FY2013 1Q14 2Q14 3Q14 4Q14 FY 2014 $18.12 $16.57 $17.96 $18.44 $16.90 $18.09 $16.97 Taxes other than Income (
Slide 23: Chemical Segment Core Earnings
Fourth Quarter 2014 Earnings Chemical Segment Core Earnings PRE-TAX 4Q14 vs. 3Q14 Guidance ($ in millions) 1Q15 expected to be ~$140 mm. $56 ($10) $160 $140 ($30) $4 Core Results • 4Q14 $160 mm • 3Q14 $140 mm • 4Q13 $128 mm 3Q14 Sales Price Sales Volume / Operations / All Others 4Q14 Mix Manufacturi
Slide 24: Midstream, Marketing & Other Segment Core Earnings
Fourth Quarter 2014 Earnings - Midstream, Marketing & Other Segment Core Earnings PRE-TAX 4Q14 vs. 3Q14 ($ in millions) $27 ($26) $10 $168 $155 ($9) $11 Core Results • 4Q14 $168 mm • 3Q14 $155 mm • 4Q13 $106 mm 3Q14 Pipelines Gas Plants Power Marketing All Others 4Q14 Generation Note: Excludes Phibr
Slide 25: FY 2014 Cash Flow
Fourth Quarter 2014 Earnings FY 2014 Cash Flow FY14 FY 2014 Debt / Capital 16% ($ in millions) ROE* 9% $6,100 ($2,200) ROCE* 8% $12,800 ($7,300) ($2,500) ($1,900) CFFO $7,800 $4,200 $9,400 ($1,400) Beginning Restricted Cash Cash $3,400 $4,000 12/31/13 Available Cash CapEx BridgeTex & Al Proceeds fro
Slide 26: FY 2014 Cash Flow
Fourth Quarter 2014 Earnings FY 2014 Cash Flow • We received cash proceeds of $4.95 billion from the bond offering completed by California Resources in October. – IRS rules mandate that use of these proceeds be restricted to share repurchases, dividend payments or debt retirement. – We paid the four
Slide 27: 2015 Production Outlook
Fourth Quarter 2014 Earnings 2015 Production Outlook • Using a $55 WTI and $60 Brent price curve, we expect total company production to be between 630,000 and 650,000 BOE per day in 2015. • US Production Outlook – Oil production for FY 2015 to grow ~6% with the increase coming from the Permian Resou
Slide 28: 1Q15 & FY 2015 Guidance Summary
Fourth Quarter 2014 Earnings 1Q15 & FY 2015 Guidance Summary Oil & Gas Segment Price Sensitivity Pre-tax Income Impact (Quarter) • 2015 total production is expected to be Oil +/- $1/bbl = +/- $32 mm between 630,000 – 650,000 BOED*. NGL +/- $1/bbl = +/- $7 mm • 2015 domestic oil production growth of
Slide 29: 2015 Capital Outlook
Fourth Quarter 2014 Earnings 2015 Capital Outlook 2015 Capital Budget • Given ~50% decline in spot oil prices vs. 2014, ($ in bln) ramping down capital spending through 2015 $8.7 • All business segments will see cuts in capital spending versus 2014 levels, except for Chemicals which is in the peak y
Slide 30: 2015 Capital Breakdown
Fourth Quarter 2014 Earnings 2015 Capital Breakdown • Domestic 2015E Capital - $5.8 bln − Overall spending levels in the Permian will decline slightly and significant reductions will come from Williston and South Texas. Chemicals 10% • International Midstream − Spending levels in MENA will decline b
Slide 31: 2015 Capital Breakdown
Fourth Quarter 2014 Earnings 2015 Capital Breakdown • Chemicals 2015E Capital - $5.8 bln − Includes the Ingleside Ethylene joint venture project that we expect to complete late 2016 and be commissioned in 1Q 2017. Chemicals − We expect OxyChem to be free cash flow 10% positive through the constructi
Slide 32: Capital Cost Reductions
Fourth Quarter 2014 Earnings Capital Cost Reductions Capital Savings • 2015 plan includes pricing concessions from our suppliers of ~$250 mm for key services ($ in millions) • If the market environment remains low, we $500 mm+ expect to see ~$500 mm of total price reductions that will give us the fl
Slide 33: Operating Cost Structure
Fourth Quarter 2014 Earnings Operating Cost Structure FY 2014 Operating Costs - $15 / BOE • 2014 domestic operating costs averaged $15 / BOE Gathering & Processing • Expect operating cost Support reductions in workovers, (Labor) downhole maintenance, Workovers & Downhole injectant and energy Surface
Slide 34: Permian Resources Summary
Fourth Quarter 2014 Earnings Permian Resources Summary Achieved 9% increase in BOED and 19% BOPD versus Q3 2014 Total Production 84,000 Well Activity (BOED) 100 Oil Production (BOPD) 51,000 80 vs. 3Q-2014 19% Increase Well Count vs. 4Q-2013 42% Increase 60 Capital Expenditures $791MM 40 Active Rigs
Slide 35: Permian Resources Delaware Basin
Fourth Quarter 2014 Earnings Permian Resources Delaware Basin Active Rigs Well Activity Geologic Delaware Age Basin 20 60 Bell Canyon Cherry Canyon 15 Brushy Canyon Well Count 40 Rig Count Avalon 1st Bone Spring 10 2nd Bone Spring Permian 3rd Bone Spring 20 A 5 Wolfcamp B C 0 0 D 2Q14 3Q14 4Q14 1Q14
Slide 36: Permian Resources Delaware Basin
Fourth Quarter 2014 Earnings Permian Resources Delaware Basin Well Performance – Wolfcamp A/ B Benches BOED / 1000’ 2,432 577 PECK ST 258 #6H 1,760 418 2,018 273 BUZZARD ST 9H 1,778 241 1,503 303 Q4 Avg 1,190 225 1,377 325 Q3 Avg 1,059 251 1,228 323 Q1-Q2 Avg 875 230 0 500 1,000 1,500 2,000 2,500 Pe
Slide 37: Permian Resources Midland Basin
Fourth Quarter 2014 Earnings Permian Resources Midland Basin Geologic Midland Basin Active Rigs Well Activity Age 15 40 Yates Grayburg San Andres Clear Fork 10 Well Count Rig Count Upper Spraberry Permian Middle Spraberry Lower Spraberry 20 A Wolfcamp B 5 C D / CLINE Barnett Shale Mississippian 0 0
Slide 38: Permian Resources Midland Basin
Fourth Quarter 2014 Earnings Permian Resources Midland Basin Well Performance – Spraberry, Wolfcamp A / B Benches BOED / 1000’ 1,561 198 MERCHANT 1411 1,136 144 952 150 Q4 Avg 787 122 779 134 Q3 Avg 612 105 770 125 Q1-Q2 Avg 491 80 0 500 1,000 1,500 2,000 Peak 30 Day 10 successful Spraberry wells on
Slide 39: Permian
Fourth Quarter 2014 Earnings Permian Occidental is the largest operator and oil producer • Nearly 5 million gross acres • Permian Resources: Unconventional shale development • Permian EOR: CO2 and waterflood development • Midstream infrastructure & Marketing operations 39
Slide 40: Permian Resources 2015 Capital Program
Fourth Quarter 2014 Earnings Permian Resources 2015 Capital Program Capital Expenditures ($B) 2014 2015 Development $1.9 $1.7 Exploration $0.3 $0.0* Program Well Count Well Count By Bench 80 400 60 Well Count 300 40 Well Count 137 Disposal 200 48 Vertical 20 Horizontal 0 100 167 167 Midland Delaware
Slide 41: Permian Basin Accelerating growth and driving efficiency
Fourth Quarter 2014 Earnings – Permian Basin Accelerating growth and driving efficiency Permian Resources has a sufficient inventory of wells to continue profitable development in a low price environment. 1. Continue investment in characterization and optimization 2. Apply manufacturing principles t
Slide 42: Permian EOR
Fourth Quarter 2014 Earnings Permian EOR • 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 • Operate 2
Slide 43: World Leader in Enhanced Oil Recovery
Fourth Quarter 2014 Earnings World Leader in Enhanced Oil Recovery U.S. CO2 EOR Projects 3,500 Size of bubble = CO2 EOR 3,000 Production Volume Number of Injection Wells Oxy 2,500 2,000 All of Oxy’s CO2 operations 1,500 Kinder Morgan are in the Permian Basin Apache 1,000 Chevron Exxon 500 Denbury He
Slide 44: Permian EOR Cost Structure
Fourth Quarter 2014 Earnings Permian EOR 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 $2.7 $30 $25 $4.0 $25 $4.7 $1.8 $20 $20 $ / BOE $ / BOE $3.2 $4.7
Slide 45: Permian EOR
Fourth Quarter 2014 Earnings Permian EOR South Hobbs CO2 project added 28 MMBOE at $10.60 per BOE North SLAUGHTER IRISH Hobbs (CVX) Unit South COCHRAN IGOE SMITH HOCKLEY LEVELLAND SLAUGHTER LUBBOCK LUBBOCK CROSBY DICKE Hobbs YOAKUM WILLARD HT BOYD OWNBY PRENTICE FRAZIER TERRY LYNN GARZA SALT C KEN A
Slide 46: Permian EOR
Fourth Quarter 2014 Earnings Permian EOR ROZ Projects development cost ranges from $3 - $7 per BOE 2015 Plan: Deepen 81 wells “Stranded Oil in the Residual Oil Zone by L. Stephen Melzer, Advanced Resources International and the U.S. Department of Energy, February 2006. 46
Slide 47: Permian EOR
Fourth Quarter 2014 Earnings Permian EOR Unrisked, gross resource potential of up to 1.9 billion barrels • 2015 EOR CAPEX = $500MM Unrisked, Gross Reserves and Resources − Complete and begin CO2 injection Billion BOE at South Hobbs − Start Expansion on North Hobbs CO2 • Expected to generate free cas
Slide 48: Permian Resources Guidance
Fourth Quarter 2014 Earnings Permian Resources Guidance • In 2015, we will leverage expertise gained Permian Resources Production from a successful 2014 appraisal program to implement focused development strategy − Well positioned with high quality assets and value-oriented discipline − Continue to
Slide 49: Fourth Quarter 2014 Earnings Conference Call Q&A
FOURTH QUARTER 2014 EARNINGS CONFERENCE CALL Q&A