Occidental Petroleum Corporation · NYSE:OXY
Occidental Petroleum — Credit Suisse Energy Summit 2017
47 slides from Occidental Petroleum's conference presentation, Feb 14, 2017
Slide 1: Occidental Petroleum Corporation
Occidental Petroleum Corporation Vicki A. Hollub Credit Suisse Energy Summit February 14, 2017
Slide 2: Cautionary Statements
Cautionary Statements Forward-Looking Statements 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. Actual results may differ from anticipated
Slide 3: Key Message and Strategy
Key Message and Strategy Overriding Goal is to Maximize Total Shareholder Return We believe this can be achieved through a combination of: • Consistent, annual dividend growth • Value growth through oil and gas development that meets the following targets: • Above cost-of-capital returns (ROE and RO
Slide 4: Focused Businesses
Oil and Gas Core Areas Focused Businesses OxyChem United States High FCF, moderate • Leading position in the Permian growth business • Permian Resources is a growth driver Midstream Integrated infrastructure and marketing Middle East Region business to • Focus areas – Oman, Qatar, and UAE maximize L
Slide 5: Middle East Record 2016 Production
Middle East Record 2016 Production Achieved record production in 2016 in Oman and the UAE Core Countries 2017 Impact • Oman: FY16 record production of 96 • Improved production and cost reductions at Al Hosn Gas and MBOED through multiple onshore projects in Oman should increase free cash flow by ~$3
Slide 6: Oman and Qatar
Oman Oman • Improved Reservoir Surveillance 140 Oman - Mukhaizna Gross Production (Mbopd) Mukhaizna • Infill and shallow drilling 135 130 Record Monthly programs 125 Production • 2016 Total Spend per Barrel 120 ~79% reduced by 24% 115 Proved Dec-16 Nov-16 Aug-16 Oct-16 Jun-16 Jul-16 Sep-16 Developed
Slide 7: Al Hosn Gas
Al Hosn Gas Al Hosn Gas • Optimized plant to deliver more capacity Increased • Completed operational trials Plant Capacity • Minimal capital was required to 110% 2017 production expected to be >70 MBOED 7
Slide 8: Colombia
Colombia Colombia • Improved subsurface reservoir characterization LCI* • Focused Workover and Drilling Campaign • New Well Costs reduced by 35% Increased gross • 2016 Total Spend per barrel reduced by 25% production by 5 ~79% Proved MBOPD in 4 • Thermal recovery pilot of the Teca heavy oil, encoura
Slide 9: Basic Chemical Market Dynamics Are Shifting
Basic Chemical Market Dynamics Are Shifting Spot Domestic Caustic Soda Price* North American Chlor-Alkali Capacity Share * Low end of price range as reported by IHS $450 $400 Rest of $350 Industry Olin 23% 35% $300 $250 Westlake 18% $200 OxyChem 24% • Caustic soda prices reversed their multi-year •
Slide 10: Chemicals Free Cash Flow to Significantly Increase
Chemicals Free Cash Flow to Significantly Increase Ingleside Ethylene Cracker – September 2016 • Ingleside Ethylene Cracker expected to commence production and start-up in 1Q17 > Gradual ramp up of production volumes over 1H17 • 50/50 JV with Mexichem in Corpus Christi, TX > $1.5 Billion for a 1.2 B
Slide 11: Midstream: Improving Cash Flows and Market Access
Midstream: Improving Cash Flows and Market Access Business Segments 2017 Impact • Gas Plants: Natural gas and CO2 gathering, • Free cash flow expected to improve $150 - $200+ MM compression and processing systems to control due to better marketing economics and ramp up of upstream costs Ingleside oi
Slide 12: Free Cash Flow Improvement
Free Cash Flow Improvement • Improved market conditions, project start-ups and lower capital should increase free cash flow generation in 2017 2017 vs 2016 FCF Improvement International O&G ~$400 MM Midstream $150 - $200 MM Chemicals ~$400 MM Total $950 - $1,000 MM 12
Slide 13: Permian Basin
Permian Basin • Permian Resources • Permian EOR 13
Slide 14: Permian Resources
Business Area Acreage Net Acres* Permian • Resources – Unconventional Areas • Enhanced Oil Recovery Areas 1.4 1.1 Resources Occidental Permian Total 2.5MM Significant Acreage & Growth Potential Net Resources Basin Development Areas In All Development Areas Acres* • NM Delaware Basin 290,000 ~650,000
Slide 15: Increased Total Horizontal Drilling Locations
Increased Total Horizontal Drilling Locations ~37% Improved Permian Locations within 300,000 net acres Resources Horizontal Inventory from 4Q2015 12,000 ~11,650 ~11,650 • Added 1,250 locations Midland 2016 BE < $50 10,000 Added • Added 3,150 total 3,150 Texas locations Delaware 8,000 • Increased ave
Slide 16: Lower Well Costs Are Sustainable Through Design and Performance Gains
Lower Well Costs Are Sustainable Through Design and Performance Gains • Design and efficiency to secure well costs 2017 Focus Areas • Reduction of drilling non productive time through focused development • Improving well costs despite increasing stimulation designs • Improve execution of new stimula
Slide 17: Improved Margins in Permian Resources Attracting Investment
Improved Margins in Permian Resources Attracting Investment Permian Resources Cost Structure $16 - $19 / boe • Improved productivity and lower well costs in Permian Resources drive improved profitability • Pre-tax margins > 50% at $50 / bbl oil prices Development Opex G&A Production Cash Costs Cost
Slide 18: Growth Potential of 30+% from Focused Development Areas
Growth Potential of 30+% from Focused Development Areas Multi-Year Permian Resources Growth Potential 300 18 15 16 • Top-tier well performance 250 14 14 • Deep inventory for range of Production (mboed) 30% CAGR 200 12 activity Rig Count 10 150 8 8 • Infrastructure to support growth 9 9 100 6 20% CAG
Slide 19: Permian EOR Proven Leader in Maximizing Recovery
Permian EOR Proven Leader in Maximizing Recovery Across the Permian Significant inventory in Permian EOR Net Resource Potential 10-year plan MMBOE 2,000 Geographically diverse High-gradable 100 active CO2 + water 1,500 Inventory floods covering multiple horizons Midland Basin 2 BBOE of identified ne
Slide 20: 2016 Accomplishments in EOR Business
2016 Accomplishments in EOR Business 2017 Capital Opex Reduction Capital Efficiency Outlook $25 17% Reduction 2014-2016 12% Reduction Y/Y 600 $20 500 CO2 Floods / Expansions - $195MM $/BOE $15 400 300 $MM $10 TZ / ROZ Projects 200 $5 100 - $50MM $0 0 2014 2015 2016 2016 Target 2016 Actual Gas Proces
Slide 21: 2016 Reserve Additions Through Reservoir Performance
2016 Reserve Additions Through Reservoir Performance Total ~505 MMBOE Reserve Additions prior to price revisions Company 91 2,406 Reserve 346 Replacement 2,200 (231) 2016 ~77% Proved Developed 189% All In ~74% Liquids 150% Organic YE 2015 Production* Additions Acquisitions YE 2016 Reserves & Sales R
Slide 22: 2016 Highlights
2016 Highlights Strong Balance Sheet and Ample Liquidity EOY cash = $2.2 B 7% 189% $9.65 Low-cost Production Production Growth Total Company Total Company All- FY 2016 Reserve Replacement Sources F&D Growth Exceeds Target Ratio Capital Program Under $3 billion Target $9.00 13% 290% Permian Resources
Slide 23: Differentiated Permian Position
Differentiated Permian Position Primary + EOR Reservoir Management Full Cycle Value • Subsurface characterization • Integrated Capital and Operating cost effectiveness • Enhanced oil recovery through capability and technology Infrastructure to support capital efficient growth and recovery 23
Slide 24: 1Q17 and FY 2017 Guidance Summary
1Q17 and FY 2017 Guidance Summary Oil & Gas Segment DD&A – FY 2017E • FY 2017E Total Production • Oil & Gas: ~$15.00 / BOE > 625,000 – 645,000 BOED • Chemicals and Midstream: $685 mm > Permian Resources production of 140,000 – 150,000 BOED Midstream • 1Q17E Production • ($60) – ($70) mm pre-tax loss
Slide 25: Cash Flow Priorities Favor Dividends
Cash Flow 1. Base/Maintenance Capital Priorities Favor Dividends 2. Dividends 3. Growth Capital Subject to Returns and 4. Acquisitions Market Conditions 5. Share Repurchases 25
Slide 26: Appendix
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Slide 27: 2017 Production Outlook
2017 Production Outlook • Total production from core assets to grow 4% - 7% over 2016, with long-term production growth target of 5 - 8% > Improved Al Hosn Gas performance > Increase in Permian Resources > Modest impact from turnarounds, PSCs and quota compliance in 2017 Company-wide Oil & Gas Produ
Slide 28: Successful Drilling Program Leading to Lower F&D Costs
Successful Drilling Program Leading to Lower F&D Costs F&D Costs (All Sources)* $25.41 $22.02 $9.65 • Improved productivity and lower well costs in Permian Resources 5 Year 3 Year 2016 • Improved performance and $26.22 expanded capacity in Al Hosn F&D Costs (Organic)* $21.73 Gas • Permian acquisitio
Slide 29: Committed Project Capital Shifts to Permian Resources
Committed Project Capital Shifts to Permian Resources Committed Project Capital • Multiple long-term investments to drive cash ($ in millions) flow and earnings growth have started up > Al Hosn Gas $1,300 > Ethylene cracker JV > Ingleside terminal $800 > Gas processing • Capital spending will contin
Slide 30: Occidental Petroleum
Occidental Petroleum • Key Messages and Strategy • 2016 Highlights • 2017 Outlook • Permian Basin 30
Slide 31: Production Growth Exceeded Guidance
Production Total Company Production* Permian Resources Production Growth (MBOED) (MBOED) Exceeded Guidance ~7% Growth Y/Y ~13% Growth Y/Y 602 124 565 110 2015 2016 2015 2016 * Ongoing operations; excludes Piceance, Iraq and Bahrain production volumes 31
Slide 32: 2016 Accomplishments - Total Spend per BOE Achieved Target
2016 Accomplishments - Total Spend per BOE Achieved Target Capital Spending* + G&A + All Operating Costs Total Spend per BOE = Global Oil & Gas Sales Volumes • Internal performance metric to focus on ~$62.00 operational efficiency, especially in consideration of the sharp decline in commodity prices
Slide 33: Occidental Petroleum
Occidental Petroleum • Key Messages and Strategy • 2016 Highlights • 2017 Outlook • Permian Basin 33
Slide 34: Permian Resources 2017 Focused Development
Permian Resources 2017 Focused Development New Mexico NW Shelf • 2017 Resources Greater Sand Dunes – 2,000+ Locations Capital $1.0 – $1.4 Bn Midland Basin NM Delaware > ~80% D&C, Non- Basin Operated, Capital Workovers TX Delaware Basin Central Basin > ~20% Facilities and Platform infrastructure, Mai
Slide 35: Greater Sand Dunes Improved Productivity by ~150%
Greater Sand Dunes Improved Productivity by ~150% ~150% 6 month cumulative production • Subsurface characterization enabling leading performance Oxy’s 2nd Bone Spring Improvements improvement from old design > 178 Miles2 3D Seismic + 186 Miles2 additional in 2017 300 4,500 ft Laterals 3Q 2016 > 3 Be
Slide 36: Capital Flexibility to Pursue Profitable Growth
Capital Capital Outlook Flexibility to ($ in bln) Pursue $3.0 - $3.6 Profitable ~$2.9 Growth Total Capital Outlook – $3.0 to $3.6 Bn 2016 2017E Maintenance Sustaining Growth 36
Slide 37: 2017 Capital Plan Will Deliver 4% to 7% Production Growth
2017 Capital Plan Will Deliver 4% to 7% Production Growth Flexible Capital Program • Domestic ($ in billions) > Increased Permian Resources drilling in SE New Mexico and Greater Barilla Draw > Short cycle development allows for flexibility to respond to oil price volatility • International > Spendin
Slide 38: Permian Resources Results and Guidance
Permian Resources Results and Guidance • Total production grew 13% year-over-year to 124 MBOED Oil NGL Gas • Increased activity in 4Q 2016 140 - 150 > 16 wells online in 4Q16 vs. 9 in 3Q16 124 127- 132 > Added 7 top tier performing wells in Greater Sand Dunes 110 • 1Q17 program: increase in activity
Slide 39: Permian Basin Key Takeaways
Permian Basin Key Takeaways • 2.5 million net acres in the Permian Basin > 650,000 net acres within the Delaware and Midland basins • Increased unconventional horizontal drilling locations to 11,650 > Average lateral length up 20% to ~7,100 ft > Locations with breakeven < $50 WTI up over 100% by ~1,
Slide 40: 2016 Performance Exceeded Expectations
2016 Performance Production Program F&D Cost* Exceeded Expectations 300 269 $14 $12 250 $12 222 • Permian CAGR 10% 200 $10 $9 mboe/d > Base management $8 150 $/boe > Well productivity improvement $6 100 $4 • Improved F&D 25% 50 $2 > Increasing EURs 0 $0 > Focused development synergies 2014 Total Per
Slide 41: Greater Sand Dunes Area Multi-Bench Development Provides Up to 50+% ROR
Greater Sand Dunes Area Multi-Bench Development Provides Up to 50+% ROR Recent Well Results Barilla GreaterDraw Type Log Sand Dunes Target Formation Lateral Peak 24 Hr Peak 30 Day Oil Well Name Length (ft) (BOEPD) (BOEPD) (%) Brushy Canyon Federal 23 13H 4,376 899 833 90% Avalon James 29 38H 4,730 1
Slide 42: Growing the Greater Barilla Draw Area
Growing the Greater Barilla Draw Area Q4 Acquisition Highlights Increased working interest from 26% to 63% • Increased acreage position to 100,000 net acres & 5,000+ horizontal locations • Capability to deploy 3 rigs in 2017 and 5+ rigs in 2018+ on acquisition acreage • Scale allows for operational
Slide 43: Cash Flow Improvements Expected in 2017
Cash Flow Improvements Expected in 2017 • Improved product prices > Annualized cash flow changes ~$100 million for a ~$1.00 / barrel change in oil prices > Annualized cash flow changes ~$45 million for a ~$0.50 / Mmbtu change in natural gas prices • Improved chemicals performance > Annualized cash f
Slide 44: 2016 Total Company Reserve Replacement
2016 Total Company Reserve Replacement MMBOE 2015 YE Proved Reserves 2,200 Production* (231) Revisions of Previous Estimates 159 Improved Recovery 185 Extensions & Discoveries 2 Total Organic 346 Purchases & Sales 91 2016 YE Proved Reserves 2,406 Total Additions (All In) 437 Reserve Replacement (All
Slide 45: Improved Recovery and Acquisition Leads to Strong U.S. Reserve Replacement
Improved Recovery and Acquisition Leads to Strong U.S. Reserve Replacement Reserve 210 (18) Replacement 1,353 1,271 (110) 2016 175% All In 66% Organic YE 2015 Production Additions Sales YE 2016 Reserves Reserves All reserves are in Mmboe. 45
Slide 46: 2016 U.S. Reserve Replacement
2016 U.S. Reserve Replacement MMBOE 2015 YE Proved Reserves 1,271 Production (110) Revisions of Previous Estimates (92) Improved Recovery 165 Extensions & Discoveries 0 Total Organic 73 Purchase & Sales 119 2016 YE Proved Reserves 1,353 Total Additions (All In) 192 Reserve Replacement (All in) 175%
Slide 47: Occidental Petroleum
Occidental Petroleum • Key Messages and Strategy • 2016 Highlights • 2017 Outlook • Permian Basin 47
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