Occidental Petroleum Corporation · NYSE:OXY
Occidental Petroleum — Q3 2012 Earnings Presentation
37 slides from Occidental Petroleum's earnings presentation, Oct 25, 2012
Slide 1: Third Quarter 2012 Earnings Conference Call
Occidental Petroleum Corporation p Third Quarter 2012 Earnings Conference Call October 25, 2012
Slide 2: Third Quarter 2012 Earnings – Highlights
Third Quarter 2012 Earnings – Highlights • Income from continuing operations — $1.4 Billion in 3Q12 vs. vs $1.8 $1 8 Billion in 3Q11 or $1 $1.3 3 Billion in 2Q12 2Q12. – EPS $1.70 (diluted) vs. $2.18 (diluted) in 3Q11 or $1.64 (diluted) in 2Q12. • 3Q12 income from continuing operations improved $0 0
Slide 3: Oil & Gas Segment Variance Analysis – 3Q12 vs. 2Q12
Third Quarter 2012 Earnings – Oil & Gas Segment Variance Analysis – 3Q12 vs. 2Q12 • Core Results for 3Q12 of $2.0 B vs. $2.0 B in 2Q12 $2,043 $94 $23 $59 $28 $44 $13 $2,026 ($ in i millions) illi ) 2Q12 Sales Price Sales Volume G&A Higher Lower All Others 3Q12 Costs Operating Exploration Costs Costs
Slide 4: Oil & Gas Production
Third Quarter 2012 Earnings – Oil & Gas Production 3Q12 3Q11 Oil and Gas Production Volumes (mboe/d) 766 739 • 3Q12 production of 766 mboe/d increased 4% from 3Q11; • Domestic production was 469 mboe/d, an increase of 7 mboe/d from 2Q12 and the eighth consecutive quarterly domestic volume record for
Slide 5: Oil & Gas Production
Third Quarter 2012 Earnings – Oil & Gas Production • Latin America volumes were 32 mboe/d; • In the Middle East region, volumes were 265 mboe/d: – Dolphin’s production was 13 mboe/d lower than 2Q12 resulting from the full cost recovery of pre-startup capital, as we noted last quarter; – Qatar’s prod
Slide 6: Oil & Gas Segment Realized Prices
Third Quarter 2012 Earnings – Oil & Gas Segment Realized Prices • 3Q12 realized prices were mixed for our products compared to 2Q12. − Our worldwide crude oil realized price was $96.62 $96 62 per bbl, bbl a decrease of about 3%; − worldwide NGLs were $40.65 per barrel, also a decrease of about 3%; −
Slide 7: Oil & Gas Segment Realized Prices
Third Quarter 2012 Earnings – Oil & Gas Segment Realized Prices • Realized oil prices for the quarter represented 105% of the average WTI and 88% of the average Brent price. • Realized NGL prices were 44% of the average WTI and realized domestic gas prices were 90% of the average NYMEX price. • Pric
Slide 8: Oil & Gas Segment
Third Quarter 2012 Earnings – Oil & Gas Segment 3Q12 3Q11 Reported Segment Earnings ($mm) $2,026 $2,612 WTI Oil Price ($/bbl) $92.22 $89.76 Brent Oil Price ($/bbl) $109.48 $112.22 NYMEX Gas Price ($/mcf) $2.76 $4.28 Oxy’s y Realized Prices Worldwide Oil ($/bbl) $96.62 $97.24 - 1% year-over-year Worl
Slide 9: Oil & Gas Segment – Production Costs and Taxes
Third Quarter 2012 Earnings – Oil & Gas Segment – Production Costs and Taxes • Oil and gas cash production costs were $15.00 per boe for the first nine months of 2012, compared with $12.84 per boe for the full year 2011. – The cost increase reflects higher well maintenance activity, in part reflecti
Slide 10: Chemical Segment Variance Analysis – 3Q12 vs. 2Q12
Third Quarter 2012 Earnings – Chemical Segment Variance Analysis – 3Q12 vs. 2Q12 • Core Results for 3Q12 were $162 mm vs. $194 mm in 2Q12 – The sequential quarterly and year-over-year decline were due to lower Asian market demand that drove export prices lower, partially offset by lower ethylene cos
Slide 11: Midstream Segment Variance Analysis – 3Q12 vs. 2Q12
Third Quarter 2012 Earnings – Midstream Segment Variance Analysis – 3Q12 vs. 2Q12 • Core Results for 3Q12 were $156 mm vs. $77 mm in 2Q12 – Increase in earnings was in the marketing and trading businesses and power generation, partially offset by lower margins in the gas plants, reflecting lower NGL
Slide 12: Taxes
Third Quarter 2012 Earnings – Taxes • The worldwide effective tax rate was 38% for 3Q12 3Q12. The lower rate compared to our guidance was attributable to a shift in the mix of income toward domestic. • Our 3Q12 US and foreign tax rates are included in the Investor Relations Supplemental pp Schedules
Slide 13: 2012 YTD Cash Flow
Third Quarter 2012 Earnings – 2012 YTD Cash Flow – Working capital reduced our nine-month cash flow from operations of $9.2 billion by ~$660 mm to $8.5 billion. ~$510 mm of working capital use occurred in 3Q12. Capex was $7.7 billion for the first nine months, of which $2.6 billion was spent in 3Q12
Slide 14: Shares Outstanding & Debt/Capital
Third Quarter 2012 Earnings – Shares Outstanding & Debt/Capital Shares Outstanding (mm) YTD12 9/30/12 Weighted Average Basic 810.1 810 1 Weighted Average Diluted 810.8 Basic Shares Outstanding 809.3 Diluted Shares Outstanding 810.1 9/30/12 12/31/11 Debt/Capital 16% 13% 14
Slide 15: Key Performance Metrics
Third Quarter 2012 Earnings – Key Performance Metrics • Occidental’s domestic oil and gas segment produced record volumes for the eighth consecutive quarter and continued to execute on our liquids production growth strategy. • 3Q12 domestic production of 469 mboe/d, consisting of 334 mboe/d of liqui
Slide 16: Key Performance Metrics
Third Quarter 2012 Earnings – Key Performance Metrics • Compared to 3Q11, our domestic production grew by 8%, or 33 mboe/d, of which 30 mb/d was oil production growth. 500 462 469 449 455 436 72 73 74 70 oe per day 400 73 300 +30 mb/d oil Thousand bo 240 244 249 260 230 production growth 200 T 100 1
Slide 17: Oxy's Strategy
Third Quarter 2012 Earnings – Oxy’s Strategy • Three Th main i objectives: bj ti − Generate rates of return on invested capital significantly in excess of our cost of capital; − Achieve moderate growth of the business; − Deliver continued dividend growth. • With regard to returns, returns we don't b
Slide 18: Oxy's Strategy
Third Quarter 2012 Earnings – Oxy’s Strategy • This year, we expect to spend • These expenditures include ~25% of our total capital capital for: expenditures on future growth projects that will contribute to • the Al Hosn Shah gas project our operations over the next which is expected to start sever
Slide 19: Permian
Third Quarter 2012 Earnings – Permian • Domestically and internationally, we have a mix of both higher return assets and higher growth assets. • Importantly, Importantly many of our higher growth assets are relatively early in their development, although we have already experienced meaningful succes
Slide 20: Permian
Third Quarter 2012 Earnings – Permian Oxy Acreage in Select Permian Basin Plays (Thousands of Acres) Delaware Basin Gross Oxy Share • As a result of the significant g Avalon 340 120 activity by us and our partners, Bone Spring 1 Sand 560 220 our Permian acreage where we Bone Spring 2 Sand 530 210 be
Slide 21: California
Third Quarter 2012 Earnings – California • In CA, we have a very large acreage position with diverse geologic characteristics and numerous reservoir targets targets. • Development opportunities range from conventional to steam floods, water floods and shales. • The drilling costs and expected ultima
Slide 22: California Liquids Production Volumes
Third Quarter 2012 Earnings – California Liquids Production Volumes • In mid-2010, we shifted our development program to conventional and unconventional opportunities outside of the traditional and more mature Elk Hills areas. Liquids Production Volumes 106 101 102 96 99 100 93 90 91 35 37 35 35 80
Slide 23: California Gas Production Volumes
Third Quarter 2012 Earnings – California Gas Production Volumes • Recently, we further modified our programs to emphasize oil production in light of depressed gas and associated liquids prices. As a result, gas production in all of CA declined in 3Q12. Gas Production Volumes 50 45 46 45 43 45 42 42
Slide 24: California
Third Quarter 2012 Earnings – California • Total CA production growth on a BOE basis is slower than we thought g it would be,, in part p due to the Elk Hills decline, permitting issues and more recently low gas prices. • On a positive note, overall performance of the new resources has been consisten
Slide 25: California – Elk Hills Cryogenic Gas Processing Plant
Third Quarter 2012 Earnings – California Elk Hills Cryogenic Gas Processing Plant • Over the last several years we have spent $370 mm on the new Elk Hills gas plant. • The plant went into operation in early July and, notwithstanding i iti l startup initial t t issues, i is i positively affecting our
Slide 26: California
Third Quarter 2012 Earnings – California • We will continue our focus on higher return, low cost opportunities in CA, and this is a very diverse opportunity set. • For example, Lost Hills – a major steam flood project – We expect p to achieve significant g production p growth g to about 15 mb/d in s
Slide 27: Williston / Mid-Continent
Third Quarter 2012 Earnings – Williston / Mid-Continent • In the Williston basin in North Dakota, we currently have over 310,000 net acres with significant resource potential, which we estimate to be about 250 million net barrels. • O production Our d ti in i the th basin b i has h tripled t i l d s
Slide 28: International
Third Quarter 2012 Earnings – International • Internationally, our most significant businesses are in the Middle East region where our operations are characterized by limited duration contracts with high rates of return on invested capital during the contract term. • Our primary O i focus f in i the
Slide 29: International – Al Hosn Gas Project
Third Quarter 2012 Earnings – International Al Hosn Gas Project • The Al Hosn gas project is approximately 61% complete and is progressing as planned. • This project made up ~11% of our total capital program for the first nine months of 2012. • While capital spending is running higher for 2012 than
Slide 30: International
Third Quarter 2012 Earnings – International • Currently, the Al Hosn project is consuming sizeable amounts of capital during its development phase. • p We expect to see a significant g shift in late 2014 when this project p j changes from being a cash consumer to a cash generator. • Once the project
Slide 31: Operating Costs & Capital
Third Quarter 2012 Earnings – Operating Costs & Capital • We are focused on improving returns through a comprehensive effort to reduce operating expenses and improve capital efficiency. • Our operating costs have been increasing for some time for a variety of reasons including: – industry inflation;
Slide 32: Operating Costs & Capital
Third Quarter 2012 Earnings – Operating Costs & Capital • We are embarking on an aggressive plan to improve our operational efficiency across all cost categories, including capital, it l with ith a view i tto achieve hi an appreciable i bl reduction d ti in i our operating expenses and drilling cost
Slide 33: 4Q12 Outlook – Capital Program
Third Quarter 2012 Earnings – 4Q12 Outlook Capital Program • Our 4Q12 capital spending will slow from the 3Q12 level to a run rate that we believe will be in line with next year's total capital it l program. – Our intention was to reduce capital meaningfully starting in 3Q12. – However,, this would
Slide 34: 4Q12 Outlook – Oil and Gas Production
Third Quarter 2012 Earnings – 4Q12 Outlook Oil and Gas Production • Over the past year, we have achieved our goal of increasing domestic production by 6 to 8 mboe/d quarter-over-quarter. – We expect our 4Q12 oil production to grow by about this much. – However, Ho e er the expected e pected decline
Slide 35: 4Q12 Outlook – Chemicals & Taxes
Third Quarter 2012 Earnings – 4Q12 Outlook Chemicals & Taxes • The fourth quarter is typically the chemical segment’s weakest quarter. quarter • We estimate 4Q12 earnings will be about $140 mm, or slightly lower than 3Q12. – Along with seasonal factors, weak global demand from the European and Asian
Slide 36: Summary
Third Quarter 2012 Earnings – Summary • We believe we have a deep portfolio of development opportunities that will allow us to continue to deliver returns that are 5 to 6 percentage points above our cost of capital. • Total return to our shareholders is the combination of appreciation in stock price
Slide 37: Q&A
Third Quarter 2012 Earnings – Q&A 37