Occidental Petroleum Corporation · NYSE:OXY
Occidental Petroleum — Q2 2013 Earnings Presentation
40 slides from Occidental Petroleum's earnings presentation, Jul 30, 2013
Slide 1: Second Quarter 2013 Earnings Conference Call
Occidental Petroleum Corporation Second Quarter 2013 Earnings Conference Call July 30, 2013
Slide 2: Second Quarter 2013 Earnings – Highlights
Second Quarter 2013 Earnings – Highlights Results • Total Production (Boe/d) 772,000 • Operating costs On track • Capital program On track • Core earnings $1 3 billion $1.3 • Core diluted EPS $1.58 • YTD CFFO before WC $6.4 billion • Cash balance @ 6/30/2013 $3.1 billion See Significant Items Affect
Slide 3: Quarter-over-Quarter Impacts to Core Income
Second Quarter 2013 Earnings – Highlights Quarter-over-Quarter Impacts Core Income ($ in bln) • Improved oil and gas results results. $1.359 $1.332 + Increased oil volumes, primarily in $1.276 MENA. + Increased domestic realized oil and gas prices. – Lower international realized oil prices. • Lower
Slide 4: Oil & Gas Segment Earnings
Second Quarter 2013 Earnings – Oil & Gas Segment Earnings 2Q13 vs. 1Q13 ($ in millions) $246 ($28) ($32) ($122) $2,100 $116 $1,920 Core Results C R lt • 2Q13 $2.1 B • 1Q13 1.9 B • 2Q12 20B 2.0 1Q13 Domestic D ti Sales S l Int'l I t'l Sales S l Price Pi Sales S l Volumes V l Exploration E l ti All Ot
Slide 5: Oil and Gas Total Production
Second Quarter 2013 Earnings – Oil and Gas Total Production Company-wide Oil & Gas Production (Mboe/d) 19 2 (7) (3) (2) 772 766 763 2Q13 IImpacts t (Mb (Mboe/d) /d) • Permian weather & 3 gas plant turnarounds • Colombia activity 4 2Q12 1Q13 Qatar & California Permian Mid-Cont Other 2Q13 Dolphin Int'
Slide 6: Oil and Gas Domestic Production
Second Quarter 2013 Earnings – Oil and Gas Domestic Production Domestic Oil & Gas Production (Mboe/d) 478 (2) (1) (5) 470 462 2Q13 Impacts (Mboe/d) • Permian weather - 2 oil impact • Plant turnaround - 1 gas impact 2Q12 1Q13 Oil NGLs Natural Gas 2Q13 6
Slide 7: Oil & Gas Realized Prices
Second Quarter 2013 Earnings – Oil & Gas Realized Prices Realized Prices Benchmark Prices Worldwide Worldwide Domestic Nat. Oil ($/bbl) NGLs ($/bbl) Gas ($/mmbtu) WTI Brent NYMEX 2Q13 $97.91 $38.78 $3.82 $94.22 $103.35 $4.00 Benchmark % 104% * 41% * 95% 1Q13 $98.07 $40.27 $3.08 $94.37 $112.64 $3.37
Slide 8: Oil & Gas Production Costs
Second Quarter 2013 Earnings – Oil & Gas Production Costs Production Costs ($/boe) FY12 1Q13 2Q13 YTD13 Domestic $17.43 $14.06 $14.28 $14.17 Total $14 99 $13 $14.99 $13.93 93 $13 $13.40 40 $13 $13.66 66 • ~$500 million annualized domestic cost savings versus f ll year full ear 2012 2012. 8
Slide 9: Chemical Segment Core Earnings
Second Quarter 2013 Earnings – Chemical Segment Core Earnings 2Q13 vs. 1Q13 Guidance ($ in millions) 3Q13 expected t be to b ~$170 $170 mm $6 ($12) $159 ($5) ($4) $144 Core Results • 2Q13 $144 mm • 1Q13 159 mm • 2Q12 194 mm 1Q13 Sales Price Sales Volume / Operations / All Others 2Q13 Mix Manufacturi
Slide 10: Midstream Segment Earnings
Second Quarter 2013 Earnings – Midstream Segment Earnings 2Q13 vs. 1Q13 ($ in millions) $215 ($172) Core Results • 2Q13 $48 mm • 1Q13 215 mm • 2Q12 77 mm ($16) $5 $ $48 $16 1Q13 Marketing & Gas Processing Pipelines All Others 2Q13 Trading 10
Slide 11: YTD 2013 Cash Flow
Second Quarter 2013 Earnings – YTD 2013 Cash Flow YE2012 vs. YTD2013 ($ in millions) $380 $150 YTD’13 $7,600 $4,200 Debt / Capital 15% Return on Equity 13% Return on Capital Employed* Employed 11% Cash Flow From Operations before Working Capital changes $225 $270 $575 $6,000 $3,100 Beginning Cash $1
Slide 12: Key Performance Metrics – Domestic Production
Second Quarter 2013 Earnings – Key Performance Metrics – Domestic Production • Occidental’s domestic oil and gas segment continued to execute on our liquids production growth strategy. − 2Q13 domestic production of 470 mboe/d, consisting of 338 mboe/d of liquids and 792 mmcf/d of gas. − Planned plan
Slide 13: Capital Efficiency & Operating Cost Reduction Program
Second Quarter 2013 Earnings – Capital Efficiency & Operating p g Cost Reduction Program g • Focused drilling program in our core areas − Reduced our domestic well costs by 21% and operating costs by ~19% relative to 2012, ahead of previously stated targets of 15% well cost improvement and total oil
Slide 14: Oil & Gas – California
Second Quarter 2013 Earnings – California Oil & Gas 14
Slide 15: California Operations – Highlights
Second Quarter 2013 Earnings – California Operations p Highlights g g • Largest producer of natural gas and oil and gas on a gross operated BOE basis. • Largest oil & gas mineral acreage holder, with more than 2.1 mm net acres. acres • Diverse geologic characteristics and numerous reservoir targets,
Slide 16: California Operations – 2013 Strategic Objectives
Second Quarter 2013 Earnings – California Operations p – 2013 Strategic g Objectives j 2013 Objectives • Deliver p predictable outcome given g constraints of working g in California. • Advance projects with solid returns, low execution risk and long term growth. • Reducing drilling and completion co
Slide 17: California Operations – New Organizational Structure
Second Quarter 2013 Earnings – California Operations p – New Organizational g Structure • Restructured business units to create teams organized around the unique characteristics of each asset group, resulting in a 5th b business i unit it d dedicated di t d tot managing i heavy h oil il properties.
Slide 18: California Operations – Operating Efficiency
Second Quarter 2013 Earnings – California Operations p – Operating p g Efficiency y • Significantly reduced operating costs as well as drilling costs in California, exceeding our targets. – Expect to save at least $175 million this year in operating costs. Opex/boe Opex Reductions $23.20 Other 15% $
Slide 19: California Operations – Capital Efficiency
Second Quarter 2013 Earnings – California Operations p – Capital p Efficiency y • Improved capital efficiency by ~15% compared to 2012 – Locked in drilling programs – Revised well designs – Optimized drilling equipment and fluids to reduce drill time – Improved contracting strategies 19
Slide 20: California Operations – Capital Program
Second Quarter 2013 Earnings – California Operations p – Capital p Program g • Adjusted strategy at start of year California 2013 Capital - $1.5 bn – 2013 Capital Program allocates a higher % of the budget to lower decline projects such as water floods Steam Floods and steam floods. 25% Unconvention
Slide 21: California Operations – Water Floods
Second Quarter 2013 Earnings – California Operations p – Water Floods Los Angeles Basin • Water floods are a core competency of Oxy. San Vicente Salt Lake Los Angeles Beverly Hills Sawtelle Montebello • Several new projects in Cheviot Hills Las Cienegas L.A. Basin Whittier progress p g and a number
Slide 22: Wilmington Field Water Flood
Second Quarter 2013 Earnings – California Operations p – Water Floods Wilmington Field Water Flood • Most water flood capital directed to optimize our most developed project, project the giant Wilmington Field. – 135 new wells including 35 horizontal wells. – Horizontal wells can have average IP rat
Slide 23: Water Floods – Huntington Beach and Buena Vista
Second Quarter 2013 Earnings – California Operations p – Water Floods • Huntington Beach Field Redevelopment – Adding g two new fit-for-purpose p p rigs, g one designed g for drilling g in urban areas. – Expect to begin drilling towards year end 2013. – 128 well locations identified, providing 4-5 y
Slide 24: California Operations – Steam Floods
Second Quarter 2013 Earnings – California Operations p – Steam Floods • Steam flood activities have been a focus in 2013 – Highly profitable, taking advantage of the gas versus oil price spread where cheap gas is used to generate steam, which is then injected to produce oil. • These projects can del
Slide 25: Steam Floods – Kern Front and Lost Hills
Second Quarter 2013 Earnings – California Operations p – Steam Floods • Kern Front and Lost Hills Lost Hills − 2 largest steam floods Kern Front − > 1 billi billion barrels b l off original i i l oil il in i place; ~ 870 million barrels oil remaining in place Bakersfield − Added 2 rigs g and expect
Slide 26: Steam Floods – Spending and Outlook
Second Quarter 2013 Earnings – California Operations p – Steam Floods • Total steam flood spending will constitute ~25% of total California capital in 2013. – Expect to drill >1,500 steam flood wells over the next 5 years. • With shift of capital to water and steam flood opportunities, we expect a l
Slide 27: California Operations – Unconventional
Second Quarter 2013 Earnings – California Operations p – Unconventional • In addition to shale plays, our “unconventional” opportunities include reservoirs that have low permeability, which require special recovery processes to flow. Sacramento • ~1/3rd of our California production San is from uncon
Slide 28: Unconventional – Elk Hills Area
Second Quarter 2013 Earnings – California Operations p – Unconventional Rose Rose • Drilled ~1,300 unconventional wells in California since 1998. North Shafter • >1,000 of these are in and around Elk Hills, including the Monterey Monument Monument Junction Junction and other key shale plays. Bakersf
Slide 29: Unconventional – Rose Field
Second Quarter 2013 Earnings – California Operations p – Unconventional Rose • Pursuit of Unconventional Opportunities outside Elk Hills includes the Rose Field Field. North North Shafter • Acquired in late 2009, drilled 1 Monument Junction appraisal well in 2011, 8 development wells e s in 2012 0 a
Slide 30: California Operations – Elk Hills
Second Quarter 2013 Earnings – California Operations p – Elk Hills • Have almost doubled proved Elk Hills Field reserves since acquisition in 1998. • Goal is to reduce the underlying 25% base decline rate by as much as half. − EOR projects (steam, water, polymer, CO2 floods) could be implemented ove
Slide 31: California Operations – Exploration
Second Quarter 2013 Earnings – California Operations p – Exploration p • >100 exploration wells drilled over past 5 years. • Two thirds have found hydrocarbons and a large portion of these resulted in commercial production production. • 3D seismic has been acquired over a significant portion of our
Slide 32: California Operations – Conventional Gas Properties
Second Quarter 2013 Earnings – California Operations p – Conventional Gas Properties p Sacramento Basin • Established sizeable conventional natural gas position in the S Sacramentot BBasin. i – >318,000 net acres. – ~66 MMcf/d of dry gas production. – L Largest t operator t ini region i (80%+). (80%
Slide 33: California Operations – Summary
Second Quarter 2013 Earnings – California Operations p – Summaryy • Large inventory of diverse projects. – Water floods – Steam floods – Additional EOR (CO2, polymer pol mer floods floods, etc.) etc ) – Unconventional • Si Similar il mix i off projects j t ini near-term t with ith larger l portion t
Slide 34: California Operations – Summary: Progress toward 2013 Goals
Second Quarter 2013 Earnings – California Operations p – Summaryy Progress toward 2013 Goals: • $1.5 $1 5 billion capital program and expect to generate free cash flow of over $1 billion. – With continued improvements in permitting, should be able to grow capital budget to $2.0 $2 0 billion in 2014,
Slide 35: 2013 Production Outlook
Second Quarter 2013 Earnings – 2013 Production Outlook • Domestically, we continue to expect solid growth in our oil production for the year. − Based the nature and timing of our drilling program, such as steam flood drilling in California, and the timing of gas plant maintenance turnarounds in the
Slide 36: 2013 Production Outlook – International
Second Quarter 2013 Earnings – 2013 Production Outlook • Internationally, we expect more cost pool depletions in our contracts in Qatar and Yemen, which will result in less cost recovery barrels from those locations. • However However, we expect total international production to be about flat in 2H1
Slide 37: 2013 Capital Outlook
Second Quarter 2013 Earnings – 2013 Capital Outlook • The first six months' capital spending was $4.2 billion, with $2.2 billion spent in the second quarter. • We expect the second half of the year spending rate to be higher. Our annual spending level is expected to be generally in line with the $9.
Slide 38: Strategic Business Review and Plains All American
Second Quarter 2013 Earnings • With regard to our strategic business review, we presented various options to our Board of Directors. • Our review of these options is not yet complete, so the Board will continue to evaluate the alternatives. We expect to have additional information regarding our plan
Slide 39: 2H13 Guidance Summary
Second Quarter 2013 Earnings – 2H13 Guidance Summary Oil & Gas Segment • Domestic Production – Oil – 6,000 6 000 to 8 8,000 000 bopd growth – NGLs – modest decline – Natural gas – modest decline • International – Production volumes – similar to 2Q13 – Sales volumes – increase in 2H13 to recoup over
Slide 40: Conference Call Q&A
Second Quarter 2013 Earnings Conference Call Q&A