Occidental Petroleum Corporation · NYSE:OXY
Occidental Petroleum — Q2 2015 Earnings Presentation
38 slides from Occidental Petroleum's earnings presentation, Jul 30, 2015
Slide 1: Second Quarter 2015 Earnings Conference Call
OCCIDENTAL PETROLEUM CORPORATION Second Quarter 2015 Earnings Conference Call July 30, 2015
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: 2015 Objectives
Second Quarter 2015 Earnings 2015 Objectives CASH FLOW GROWTH Permian Resources production growth Al Hosn project start-up Commodity price recovery Operating Cash Flow to cover dividend outlays and growth COST SAVINGS capital program at ~$60/bbl realized oil prices ~$450 million of captured
Slide 4: Production Growth
Second Quarter 2015 Earnings Production Growth • Oil production growth driven Total Oil Production by (MBOD) 433 – Focused development 426 program in Permian Resources 401 – Strong production in Oman and Colombia 382 372 – Resilient domestic base 369 production 1Q 2014 2Q 2014 3Q 2014 4Q 2014 1Q 201
Slide 5: Permian Resources Production Growth
Second Quarter 2015 Earnings Permian Resources Production Growth Oil NGL Gas • Total production grew 51% year- over-year to 109 MBOED. – Oil production grew 78% 117 year-over-year to 71 MBOD. 109 98 • Total production expected to grow at a ~30% annual growth 75 rate through 2015. 64 – Oil production
Slide 6: Al Hosn Update
Second Quarter 2015 Earnings Al Hosn Update • Al Hosn is a large, world-scale project and the first of its kind. We expected to undergo some growing pains as it ramped up to full production. • In 2Q15, Al Hosn produced 18,000 BOED and sold its first shipment of sulfur. • Due to mechanical challenges
Slide 7: 2015 Production Growth
Second Quarter 2015 Earnings 2015 Production Growth • U.S. oil production grew 15% year over year* • Increased Permian Resources production guidance to 117 MBOED in 2H 2015 • Al Hosn expected to average 35 MBOED in 3Q15 and 30 MBOED for FY 2015 • In the United States, we expect oil production growth
Slide 8: Ethylene Cracker Update
Second Quarter 2015 Earnings Ethylene Cracker Update • Construction on the Ingleside ethylene cracker is ahead of schedule and on budget – ~1,300 workers on site – 86% of equipment on site – 32% of total construction is complete • Expect to be at 70%+ of total project capital spent by year end 2015
Slide 9: 2015 Capital Program Evolution
Second Quarter 2015 Earnings 2015 Capital Program Evolution 2015 Capital Budget and Domestic Drilling Rigs • As we capture price savings from suppliers and improve efficiencies, we are able to do more with less spending. 100% Capital Budget • Capital spending declined by ~$250 million Domestic and w
Slide 10: Cash Flow Priorities and Share Repurchases
Second Quarter 2015 Earnings Cash Flow Priorities and Share Repurchases • We have ~64 million shares remaining under our current authorization. • At current levels, we would view the stock as attractive for repurchases. Shares Outstanding (mm) 3/31/2015 6/30/2015 Weighted Average – Basic 769.6 766.4
Slide 11: Highlights
Second Quarter 2015 Earnings Highlights Results • Domestic oil production (Bbl/d) 205,000 15% year / year growth* • Total company production (BOED) 658,000 • Core earnings** $165 million • Core diluted EPS** $0.21 • 2015 CFFO from Continuing Ops $1,377 million • 2015 CFFO before Working Capital $2,6
Slide 12: Oil & Gas Segment Pre-Tax Core Earnings
Second Quarter 2015 Earnings Oil & Gas Segment Pre-Tax Core Earnings PRE-TAX 2Q15 vs. 1Q15 Core Results ($ in millions) • 2Q15 $324 mm • 1Q15 $57 mm • 2Q14 $1.7 B 30 (8) 324 28 217 57 1Q15 Sales Price Sales Volumes Lower Operating All Others 2Q15 Expenses 12
Slide 13: Oil and Gas Total Company Production
Second Quarter 2015 Earnings Oil and Gas Total Company Production Total company oil and gas production volumes averaged 658,000 BOED, an increase of 13,000 BOE in daily production from 1Q 2015. Company-wide Oil & Gas Production (MBOED) 4 658 11 (4) 2 645 1Q15 Permian Other Domestic Colombia MENA 2Q1
Slide 14: Oil and Gas Domestic Production
Second Quarter 2015 Earnings Oil and Gas Domestic Production Exceeded our domestic oil production growth guidance with a year over year increase of 26,000 BOD or about 15% led by our Permian Resources assets. Domestic Oil & Gas Production (MBOED) 7 0 333 326 308 2Q14 1Q15 Oil Natural Gas & 2Q15 NGLs
Slide 15: Oil & Gas Realized Prices
Second Quarter 2015 Earnings Oil & Gas Realized Prices Realized Prices Benchmark Prices Worldwide Worldwide Domestic Nat. Oil ($/bbl) NGLs ($/bbl) Gas ($/mmbtu) WTI Brent NYMEX 2Q15 $54.55 $18.06 2.09 $57.94 $63.50 $2.73 WTI % 94% 31% 77%* Brent % 86% 28% 1Q15 $48.50 $17.96 $2.49 $48.63 $55.17 $3.07
Slide 16: Oil & Gas Operating Costs
Second Quarter 2015 Earnings Oil & Gas Operating Costs Production Costs ($ / BOE) 1Q14 2Q14 3Q14 4Q14 FY 2014 1Q15 2Q15 Total $12.94 $13.34 $13.45 $14.18 $13.50 $13.36 $12.10 U.S. $13.67 $14.63 $14.89 $14.94 $14.54 $14.46 $13.04 DD&A ($ / BOE) 1Q14 2Q14 3Q14 4Q14 FY 2014 1Q15 2Q15 Total $16.12 $16.6
Slide 17: Chemical Segment Core Earnings
Second Quarter 2015 Earnings Chemical Segment Core Earnings 2Q15 vs. 1Q15 PRE-TAX ($ in millions) Guidance 3Q15 expected Core Results to be ~$140 mm. • 2Q15 $136 mm • 1Q15 $139 mm • 2Q14 $133 mm 16 (20) 139 2 (1) 136 1Q15 Sales Price Sales Volume / Mix Operations / All Others 2Q15 Manufacturing * *
Slide 18: Midstream & Marketing Segment Core Earnings
Second Quarter 2015 Earnings- Midstream & Marketing Segment Core Earnings PRE-TAX 2Q15 vs. 1Q15 ($ in millions) Core Results • 2Q15 $84 mm • 1Q15 ($5) mm 59 1 84 • 2Q14 $130 mm 29 (5) 1Q15 Pipelines Marketing Gas Plants 2Q15 18
Slide 19: 1H 2015 Cash Flow
Second Quarter 2015 Earnings 1H 2015 Cash Flow 1H15 1H 2015 LT Debt / Capital 17% ($ in millions) $2,600 ($1,900) ($3,200) $7,800 ($1,100) $1,500 $5,100 ($500) ($100) Restricted Cash Restricted $4,000 Cash $2,400 Beginning CFFO Before Change in Capital Dividends Share Acquisitions Debt Issuance Endi
Slide 20: Capital Program
Second Quarter 2015 Earnings Capital Program • Total company capital expenditures for the 2015 Capital Budget 2Q15 were $1.5 billion and we expect our quarterly expenditures to continue to ramp $1.7 bn down through the year. ~$1.5 bn • Oil and Gas spent $2.7 billion during 1H15, Permian Permian Reso
Slide 21: 3Q15 Production Outlook
Second Quarter 2015 Earnings 3Q15 Production Outlook • 3Q15 US Production Outlook – Expect production from our Permian Resources operations to grow by ~5% sequentially on a BOE basis, including 5,000 barrels a day of oil growth – Growth in the Permian should be roughly offset by declines in our Mid-
Slide 22: 3Q15 & FY 2015 Guidance Summary
Second Quarter 2015 Earnings 3Q15 & FY 2015 Guidance Summary Oil & Gas Segment Price Sensitivity Pre-tax Income Impact (Quarter) • 2015 total production is expected to be Oil +/- $1/bbl = +/- $30 mm between 660,000 – 670,000 BOED. NGL +/- $1/bbl = +/- $7 mm • 2015 domestic oil production growth of a
Slide 23: Permian Resources – Production Growth
Second Quarter 2015 Earnings Permian Resources – Production Growth Oil NGL Gas • Total production grew 51% year- over-year to 109 MBOED. – Oil production grew 78% 117 year-over-year to 71 MBOD. 109 98 • Total production expected to grow at a ~30% annual growth 75 rate through 2015. 64 – Oil producti
Slide 24: Permian Resources – Activity Summary
Second Quarter 2015 Earnings Permian Resources – Activity Summary • Completed transition to horizontal development program and worked through our inventory of wells awaiting completion. • Expect to complete ~100 horizontal wells in 2H 2015 140 120 67 Hz Well Count 100 80 42 Hz 56 Hz 61 Hz 44 Hz 36 H
Slide 25: Permian Resources – Drilling Inventory
Second Quarter 2015 Earnings Permian Resources – Drilling Inventory Lowering economic hurdle points through reservoir characterization and optimization, improved productivity and faster time to market 100% Drilling Inventory (~44 yrs) • Updated hydrocarbon richness maps, Based on Q4 Costs petrophysi
Slide 26: Permian Resources – Improved Time to Market
Second Quarter 2015 Earnings Permian Resources – Improved Time to Market • Faster drilling • Less idle time • More frac stages per day • (# of Days) Integrated planning • Infrastructure investments in water handling, storage, gathering and takeaway • Step change in capital efficiency is allowing for
Slide 27: Permian Resources – Drilling Efficiency
Second Quarter 2015 Earnings Permian Resources – Drilling Efficiency 0 Delaware Basin Wolfcamp A January average = 44.3 days well drilling time reduced by 2,000 June average = 22.4 days ~50% and costs by ~40% 4,000 Improvement = 21.9 days Savings = $ 2.1 mm 6,000 Technology Days Multi-well pad, redu
Slide 28: Permian Resources – Well Cost Reductions
Second Quarter Earnings 2015 Permian Resources – Well Cost Reductions Move to Manufacturing Mode Significantly Reduced Well Cost WELL COST DRILL DAYS Delaware Wolfcamp A, 4,500’ HZ Delaware Wolfcamp A, 4,500’ HZ $12.0 50 $10.9 45 43 $10.0 40 Gross Well Cost $MM 37 $8.0 $5.6 35 $6.8 30 $6.2 $6.0 25 2
Slide 29: Permian Resources – Delaware Basin
Second Quarter 2015 Earnings Permian Resources – Delaware Basin Delaware Basin Benches • Majority of Wolfcamp locations are in our operated areas of Reeves Bell Canyon Cherry Canyon County. Brushy Canyon Avalon Delaware Basin • Current Bone Spring locations are 1st Bone Spring 2nd Bone Spring locate
Slide 30: Permian Resources – Delaware Basin
Second Quarter Earnings 2015 Permian Resources – Delaware Basin Well Performance: Texas Delaware – Wolfcamp A Boepd / 1000’ 510 70% Oil 378 514 71% Oil 319 305 222 289 225 274 210 OXY Focus Acreage • Horizontal wells completed in this area believed to be among most prolific in Permian Basin to date
Slide 31: Permian Resources – Well Cost Reductions
Second Quarter Earnings 2015 Permian Resources – Well Cost Reductions Move to Manufacturing Mode Significantly Reduced Well Cost WELL COST DRILL DAYS East Midland East Midland Wolfcamp A 7,500’ HZ Wolfcamp A 7,500’ HZ $10.0 50 $9.2 46 45 $8.0 40 Gross Well Cost $MM $6.5 35 $6.2 31 $5.5 $6.0 30 25 $4
Slide 32: Permian Resources – Midland Basin
Second Quarter 2015 Earnings Permian Resources – Midland Basin Midland Basin Benches Yates Grayburg • Majority of Wolfcamp locations Midland Basin San Andres are in our operated areas of Clear Fork Upper Spraberry Martin, Midland, Howard and Middle Spraberry Glasscock Counties. Lower Spraberry A Wol
Slide 33: Permian Resources – East Midland Basin
Second Quarter Earnings 2015 Permian Resources – East Midland Basin Well Performance: Wolfcamp A Boepd / 1000’ 244 86% Oil 167 175 143 154 127 OXY Focus Acreage • Multiple fields in East Midland with highly economic Wolfcamp potential − Merchant area continues to show encouraging results in Wolfcamp
Slide 34: Permian EOR
Second Quarter 2015 Earnings Permian EOR CO2 Supply & Processing • Stable and low-decline base production at an advantaged cost • Permian EOR business remains profitable in the current downturn • EOR business is expected to generate free cash flow this year in the current oil price environment. 34
Slide 35: Permian EOR – Operating Efficiency
Second Quarter 2015 Earnings Permian EOR – Operating Efficiency Continue to drive capital and operating cost lower by enhancing operability and productivity San Andres New Drill Downhole Maintenance Average Gross Cost, $MM Average Hours Per Job $1.70 60 58 $1.5 $1.50 $1.4 50 48 $1.30 45 $1.2 $1.10 4
Slide 36: Permian – Investment in Human Capital
Second Quarter 2015 Earnings Permian – Investment in Human Capital New Midland Training Center • Finished construction on new training center in Midland and will open in September • Given current low product prices, have deployed engineers into the field to replace contract employees – Improved dril
Slide 37: Permian Summary
Second Quarter Earnings 2015 Permian Summary • Continue to execute focused EOR Resources development strategy in Permian Resources 262 254 − Operate average of ~12 rigs in 243 2H 2015 222 211 − Expect to drill ~100 horizontal wells in 2H 2015 64 75 98 109 117 • EOR business is expected to generate f
Slide 38: Second Quarter 2015 Earnings Conference Call Q&A
SECOND QUARTER 2015 EARNINGS CONFERENCE CALL Q&A