Vintage Petroleum — Merrill Lynch 2005 Global Energy Conference
53 slides from Vintage Petroleum's conference presentation, Nov 2, 2005
Slide 1: Merrill Lynch 2005 Global Energy Conference
Occidental Petroleum Corporation November 2, 2005 STEVE CHAZEN Senior Executive Vice President & Chief Financial Officer Merrill Lynch 2005 Global Energy Conference
Slide 2: Additional Information and Where to Find It
Occidental Petroleum Corporation Filed pursuant to Rule 425 and deemed filed pursuant to Rule 14a-12 Filing Person: Occidental Petroleum Corporation Subject Company: Vintage Petroleum, Inc. File Number: 1-10578 Additional Information and Where to Find It Oxy will file a Form S-4, Vintage will file a
Slide 3: 2004 Proven Reserves and Results
Occidental Petroleum Corporation 2004 Proven Reserves of 2.5 billion barrels oil equivalent 2004 Results: WTI = $41.40 per bbl Net Income $2.6 billion Cash From Operations $3.9 billion Return on Equity 27.8% Return on Capital Employed 20.2% Total Shareholder Return 41.1%
Slide 4: Nine Month 2005 Results
Nine Month 2005 Results Equity Market Capitalization $30 billion as of 10/26/05 4 th largest U.S. oil & gas company Net Income – Reported/Core $4.129/$2.806 Billion Earnings per Share – Reported/Core $10.26/$6.97 Cash from Operations$ 3.7 Billion Stockholders’ Equity $13.9 Billion *ROCE (%) 36 *ROE
Slide 5: Financial Performance Criteria
Financial Performance Criteria Return on Capital Employed Measures Efficient Use of Capital Return on Equity Total Return to Stockholders Stock Price Change Plus Dividend
Slide 6: Return On Capital Employed
20 Return On Capital Employed Percent 15 15 11 15 12 11 9 2004 2002 - 2004 2000 - 2004 1995 - 2004 S&P 500 Oil & Gas Index Oxy Data Source: Bloomberg See Appendix B for GAAP Reconciliation
Slide 7: Return On Common Equity
Return On Common Equity Percent 28 22 22 15 25 17 17 12 2004 2002 - 2004 2000 - 2004 1995 - 2004 S&P 500 Oil & Gas Index Oxy Data Source: Bloomberg
Slide 8: Oxy Strategy
What’s Been Oxy Strategy: Focused Operations Value Creation Disciplined Financial Philosophy
Slide 9: Worldwide Operations
Worldwide Operations Long Beach Permian Basin Horn Mountain Hugoton Elk Hills Colombia Ecuador Libya Russia Pakistan Oman U.A.E . Yemen Qatar Argentina . . .
Slide 10: Worldwide Production
Thousand BOE/Day 515 476 566 547 461 425 438 395 Worldwide Production
Slide 11: Production & Reserve Additions
Production & Reserve Additions 173 244 188 263 200 368 207 268 Million BOE 2004 2003 2002 2001 Production Additions See Appendix B for GAAP reconciliation.
Slide 12: Sources of Worldwide Reserve Additions
Million BOE Sources of Worldwide Reserve Additions 1,170 244 263 368 268 969 See Appendix B for GAAP reconciliation.
Slide 13: Finding & Development Costs
Finding & Development Costs BP OXY XOM CVX KMG BR UCL APA APC COP DVN AHC 5.42 5.71 6.77 6.95 7.00 8.20 8.58 15.99 9.72 9.35 17.18 6.05 3-Year Average 2002-2004 ($/BOE) MRO Data Source: Merrill Lynch Equity Research 5.00
Slide 14: 2002-2004 Free Cash Flow
2002-2004 Free Cash Flow* $/BOE * Combined (consolidated and other interests) exploration & production income after taxes and before interest, plus DD&A and exploration expense, less capital (excluding acquisitions and ARO costs) – divided by BOE sales. See Appendix B for GAAP reconciliation OXY: 20
Slide 15: Focused Value Creation Strategy
Focused Value Creation Strategy Maintain Strong Balance Sheet Disciplined Capital Expenditure Program Selective Acquisitions Moderate Predictable Reserve/Production Growth Chemicals Provides Excess Cash Flow Review Non-Core Investments Review Dividend Policy Annually
Slide 16: Balance Sheet
Balance Sheet 6,354 4,890 2000 2001 2002 4,759 4,774 5,634 6,318 Total Debt - $ Millions Total Equity - $Millions 2000 2001 2002 4,570 2003 2003 7,929 2004 3,905 2004 10,550 57 46 43 37 27 Debt/Cap - Percentage 3,017 3Q 2005 3Q 2005 13,906 18
Slide 17: 2005 Capital Expenditures
2005 Capital Expenditures ($MM) Oil & Gas US $ 850 Middle East / North Africa 560 Latin America 160 Other International 10 Exploration 280 Chemicals 170 2,030 Dolphin 360 $ 2,390 Net Acquisition Capital $2,100
Slide 18: Selective Acquisitions
Selective Acquisitions Natural Consolidator Permian Basin California Vulcan Chlor-Alkali Plants Vintage Petroleum
Slide 19: Permian Basin Acquisitions
Permian Basin Acquisitions Spent $1.4 Billion on Asset Acquisitions (Net of Asset Sales) Projected Production Impact Estimated Year-End 2005 Exit Rate of 30,000 BOE/Day First Nine Months 2005
Slide 20: Chemical Highlights
Chemical Highlights Generate Cash Flow In Excess of Capital Expenditures Through the Business Cycle Primary Mission of Oxy’s Chemicals Business Generated Nearly $3 Billion of Cash Flow After Capital During the Last 10 Years Generated Approximately $700 Million of Cash Flow After Capital Through Nine
Slide 21: Vintage Transaction Summary
Vintage Transaction Summary Consideration 0.42 Oxy shares per Vintage share (~28.7 Mm Oxy shares) $20.00 cash per Vintage share (~$1,366 Mm) Strategic Overlap Financially Accretive Annual Synergies - $40-60 Mm cost savings and exploration capital savings of ~$100 Mm Growth Opportunities Argentina an
Slide 22: Transaction Summary
Transaction Summary Consideration $Mm 0.42 x 68.3 Mm shares x $74.98/share $2,151 $20/share x 68.3 Mm shares 1,366 Debt assumed 550 Estimated Cash at closing (225) Total consideration $3,842 Proved Reserves – 437 Mmboe (12/31/04) Probable and Possible Reserves – 421 Mmboe (12/31/04) 2nd Qtr 2005 Pro
Slide 23: VPI Pro- OxY
VPI Pro- OxY Forma VPI fc?) Cost Savings _ Exploration Capital Savings @ Hedging @ Free Cash Flow
Slide 24: Strategic Overlap Argentina
Strategic Overlap Argentina Significantly enhances Latin America core area 22 concessions, mostly in the San Jorge Basin As of 12/31/04, ~217 Mmboe of proved reserves, ~500 drilling locations (97% historical drilling success rate) Strong current production and expected 10-15% production growth over
Slide 25: Vintage Growth Opportunities Argentina
Vintage Growth Opportunities Argentina
Slide 26: Argentina Historical and Forecast Production Growth
Strategic Overlap Argentina – Historical and Forecast Production Growth
Slide 27: Strategic Overlap California
Strategic Overlap California Good strategic fit with existing Oxy operations ~70 Mmboe of proved reserves as of 12/31/04 Oxy sees significant opportunity to increase recovery on existing properties (~20% over the next few years) ~11,000+ Boepd of production Key fields are high quality crude oil Bake
Slide 28: Vintage Other Properties
Vintage – Other Properties Bolivia – Intriguing potential, needs long term market development Yemen Candidates for portfolio rationalization East Texas, Gulf Coast, Mid-Continent Unconventional North American gas ~71 Mmboe of proved reserves as of 12/31/04 ~19,000 Boepd of production Divestitures ex
Slide 29: Transaction Value
Transaction Value Note: This slide is taken from VPI’s analyst presentation at the UBS conference in Las Vegas in May 2005. $4,642 $3,849 Total $64.10 $52.91 Net Asset Value Per Share 67.7 67.7 Fully Diluted Shares $4,339 $3,582 Net Asset Value (378) (342) Other balance sheet items 45 45 Gathering/M
Slide 30: Pro-Forma Reserves by Country
Pro-Forma Reserves by Country Million BOE 1,982 348 58 63 49 47 24 US Qatar Yemen Russia Pakistan Oman Colombia 104 Ecuador Proved reserves as of 12/31/04 217 Argentina Bolivia 77 OXY Vintage Reserve Life of 12.7; Total proved reserves of 2,969 Mmboe
Slide 31: Dividends
Dividends 2002-2004 Dividend Payments Totaled Nearly $1.2 Billion Annual Payout Rates Per Common Share 2002 = $1.00 2003 = $1.04 2004 = $1.10 2005 = $1.29 2006 = $1.44 Dividend Policy Evaluated Annually Cash Dividends Paid Continuously Since 1975
Slide 32: What's Ahead?
What’s ahead? Success Riding on Two Factors Add New Projects in Core Areas to Provide Growth Maintain Strong Asset Base to Generate Cash to Support Growth Stay Focused on the Fundamentals Maintain Financial Discipline and Focus Execute Our Strategy Create Long-Term Value
Slide 33: Production Growth Projects
Production Growth Projects Qatar: ISND / ISSD Dolphin Oman: Mukhaizna Oil Field Libya Argentina Permian Basin / California Exploration Current Plans to Drill 30-40 Wells in 2005 Awarded 9 Exploration Blocks in Libya in January
Slide 34: Dolphin Gas Project
Dolphin Gas Project Projected Start – late 2006 Invest Gross Capital of $4 Billion (2004-2006) Oxy’s Share is 24.5% Estimated Net Reserves: 300 Million BOE (assumes 2 BCF/Day Gas Production)
Slide 35: Oman - Mukhaizna Oil Field
Oman - Mukhaizna Oil Field Oxy Active in Oman Since 1979 Oxy’s Nine Months 2005 Production 26,500 BOE/Day Oxy Signs 30-Year PSC for Oman’s Mukhaizna Oil Field Increase Production from 10,000BPD to 150,000BPD (Gross) CAPEX = $2 Billion Ultimate Recovery 1 Billion BBLS
Slide 36: Return to Libya
Return to Libya We Have Returned to our Historical Assets 3Q 2005 production 9,000 b/d Production will contribute approximately 22,000 b/d to Oxy's year-end 2005 exit rate. Oxy’s net working interest in Libya covers approximately 130,000 square kilometers Exploration Work program proceeding on nine
Slide 37: Return to Libya
Return to Libya EPSA II NC143 EPSA II NC145 EPSA II NC144 EPSA 85 NC150 EPSA I NC74 EPSA I NC29 Concessions 102, 103 B C A B F Concession Blocks EPSA I (Zueitina) EPSA II Exploration (Oxy) EPSA 85 Exploration (Oxy) EPSA IV #1 Exploration (Oxy) Libya Tunisia Algeria Niger Chad Egypt Tripoli Benghazi
Slide 38: Conclusion
Conclusion Strong, Flexible Balance Sheet Continued Oil & Gas Production Growth Long-Lived Domestic Oil & Gas Reserve Base New, High Potential Exploration Opportunities Solid Base for Future Growth And Profitability
Slide 39: Forward-looking statements
Occidental Petroleum Corporation The matters set forth in this presentation, including statements as to the expected benefits of the Vintage acquisition such as efficiencies, cost savings, financial strength, and the competitive ability and position of the combined company, and other statements iden
Slide 40: Slide 40
Slide 41: Appendix A – Vintage Acquisition
Appendix A – Vintage Acquisition
Slide 42: Strategic Overlap Argentina – Strong Cash Margin
Strategic Overlap Argentina – Strong Cash Margin (16.99) (13.74) (9.51) Export tax impact (7.75) (7.75) (6.40) Contract Differential $25.56 (0.73) (6.05) 32.31 5.70 35.26 $60.00 $15.50 (0.70) (6.05) 22.25 5.70 24.09 $40.00 $19.48 Margin (0.70) G&A (6.05) LOE 26.23 Weighted Avg. Sales Price 5.70 Gas
Slide 43: Contribution Analysis
Contribution Analysis VPI OXY % of Enterprise Value 9% 91% % of Market Value 5% 95% LTM EBITDA 7% 93% LTM Cash from Operations 6% 94% Production (per Day) Oil 11% 89% Gas 16% 84% Boe 12% 88% Proved Reserves (Mmboe) 15% 85% PDP Reserves (Mmboe) 13% 87% Note: VPI numbers have been adjusted to take out
Slide 44: Occidental Pro-Forma Financials
Occidental Pro-Forma Financials 2005 14.51 14.86 Cash Flow Per Share $9.76 $9.79 Earnings per Share Occidental Stand-alone Pro-Forma Pro-forma: Consensus First Call Oxy 2005 estimate, including 9 Mm share buyback
Slide 45: Worldwide Production
Worldwide Production Note: Occidental + Vintage - No effects of rationalization Occidental Pro-Forma
Slide 46: Appendix B – GAAP Reconciliation
Appendix B – GAAP Reconciliation
Slide 47: Worldwide Proven Reserves
US International Worldwide 2004 OIL GAS BOE OIL GAS BOE OIL GAS BOE Consolidated Subsidiaries 1,494 2,101 1,844 499 874 645 1,993 2,975 2,489 Other Interests - - - 43 - 43 43 - 43 Worldwide 1,494 2,101 1,844 542 874 688 2,036 2,975 2,532 2003 Consolidated Subsidiaries 1,500 1,826 1,804 490 759 617 1
Slide 48: 2004 Proven Reserves by Country
Consolidated Subsidiaries Other Interests Worldwide OIL GAS BOE OIL GAS BOE OIL GAS BOE United States 1,494 2,101 1,844 - - - 1,494 2,101 1,844 Qatar 237 668 348 - - - 237 668 348 Ecuador 104 - 104 - - - 104 - 104 Oman 46 100 63 - - - 46 100 63 Colombia 67 - 67 (9) - (9 ) 58 - 58 Russia - - - - 49 -
Slide 49: Worldwide Production and Proved Reserve Additions
(Million BOE) Consolidated Subsidiaries Other Interests Worldwide OIL GAS BOE OIL GAS BOE OIL GAS BOE PRODUCTION 2000 117 259 160 8 - 8 125 259 168 2001 124 241 164 9 - 9 133 241 173 2002 142 229 180 8 - 8 150 229 188 2003 153 221 190 10 - 10 163 221 200 2004 159 233 198 9 - 9 168 233 207 Proved Res
Slide 50: Reserve Additions by Source
(Million BOE ) Consolidated Subsidiaries Other Interests Worldwide OIL GAS BOE OIL GAS BOE OIL GAS BOE 2004 Revisions 5 241 45 5 (9) 3 10 232 48 Improved Recovery 88 185 120 1 - 1 89 185 121 Extensions and Discoveries 30 191 61 2 - 2 32 191 63 Purchases 39 7 40 (4) - (4 ) 35 7 36 162 624 266 4 (9 )
Slide 51: 2004 Oil & Gas Cash Flow
2004 Occidental Petroleum Consolidated Statement of Cash Flows Cash flow from operating activities $ 3,878 Cash flow from investing activities (2,288 ) Cash flow from financing activities (824 ) Change in cash $ 766 2004 Consolidated Other Subsidiaries Interests Worldwide FAS 69 GAAP Oil & Gas resul
Slide 52: Annual Average 2002-2004 Oil & Gas Cash Flow
Annual Average 2002 - 2004 Occidental Petroleum Consolidated Statement of Cash Flows Cash flow from operating activities $ 3,017 Cash flow from investing activities (2,002 ) Cash flow from financing activities (599 ) Change in cash $ 416 Annual Average 2002 - 2004 Consolidated Other Subsidiaries Int
Slide 53: Return on Capital Employed
December 31 September 30 2005 2004 2005 Annualized GAAP measure – earnings applicable $ 2,568 $ 4,129 to common shareholders Interest expense 239 178 Tax effect of interest expense (84) (62) Earnings before tax-effected interest expense $ 2,723 4,245 GAAP stockholders’ equity $ 10,550 $ 13,909 Debt
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