Occidental Petroleum Corporation. Third Quarter 2014 Earnings Conference Call October 23, 2014

Transcription

1 Occidental Petroleum Corporation Third Quarter 2014 Earnings Conference Call October 23, 2014

2 Highlights Results Domestic oil production (Bbl/d) Total company production (boe/d) Core earnings* Core diluted EPS* YTD CFFO before WC Cash 9/30/2014 3Q14 Shares repurchased YTD Shares repurchased 282,000 8% year / year growth 755,000 $1.2 billion $1.58 $8.6 billion $2.9 billion 4.7 million 21.2 million *See Significant Items Affecting Earnings in the Investor Relations Supplemental Schedules. 2

3 Oil & Gas Segment Pre-Tax Earnings PRE-TAX 3Q14 vs. 2Q14 ($ in millions) $2,118 ($259) $70 ($37) $10 $1,902 Core Results 3Q14 $1.9 B 2Q14 $2.1 B 3Q13 $2.4 B 2Q14 Sales Price Sales Volumes Higher Operating All Others 3Q14 Costs 3

4 Oil and Gas Total Company Production Total company oil and gas production volume, averaged 755,000 BOE per day, an increase of 19,000 BOE in daily production from the second quarter. Company-wide Oil & Gas Production (mboe/d) 10 (2) Q14 Permian Other Domestic Colombia MENA Decline 3Q14 Note: Excludes Hugoton production 4

5 Oil and Gas Domestic Production Met our domestic oil production growth guidance with a year over year increase of 20,000 BOE per day or about 8 percent, led by our Permian and California assets. Domestic Oil & Gas Production (mboe/d) Q13 2Q14 Oil Natural Gas & NGLs 3Q14 Note: Excludes Hugoton production 5

6 Oil and Gas Domestic Production Domestic Oil & Gas Production Excluding California (mboe/d) Q13 2Q14 Oil Natural Gas & NGLs 3Q14 Note: Excludes California and Hugoton production 6

7 Oil & Gas Realized Prices Realized Prices Benchmark Prices Worldwide Worldwide Domestic Nat. Oil ($/bbl) NGLs ($/bbl) Gas ($/mmbtu) WTI Brent NYMEX 3Q14 $94.68 $40.26 $3.91 $97.17 $ $4.17 WTI % 97% 41% 94%* Brent % 92% 39% 2Q14 $ $42.82 $4.28 $ $ $4.55 WTI % 97% 42% 94%* Brent % 91% 39% 3Q13 $ $40.53 $3.27 $ $ $3.62 WTI % 98% 38% 90%* Brent % 95% 37% Price Sensitivity Pre-tax Income Impact (Quarter) Oil +/- $1/bbl = +/- $35 mm NGL +/- $1/bbl = +/- $7 mm U.S. Nat Gas +/- $0.50/mmbtu = +/- $25 mm Price Sensitivity Ex. California Pre-tax Income Impact (Quarter) Oil +/- $1/bbl = +/- $29 mm NGL +/- $1/bbl = +/- $6 mm U.S. Nat Gas +/- $0.50/mmbtu = +/- $15 mm * As a % of NYMEX 7

8 Oil & Gas Production Costs Production Costs ($/boe) FY13 1Q14 2Q14 3Q14 YTD14 $13.76 $14.33 $14.68 $14.89 $14.64 DD&A ($/boe) FY13 1Q14 2Q14 3Q14 YTD14 $17.10 $16.86 $17.25 $17.45 $17.19 Taxes other than Income ($/boe) FY13 1Q14 2Q14 3Q14 YTD14 $2.57 $2.94 $2.83 $2.64 $2.80 3Q14 Exploration expense was $53 million 8

9 Chemical Segment Core Earnings PRE-TAX 3Q14 vs. 2Q14 ($ in millions) Guidance 4Q14 expected to be ~$115 mm. $133 $9 ($6) ($1) $5 $140 Core Results 3Q14 $140 mm 2Q14 $133 mm 3Q13 $181 mm 2Q14 Sales Price Sales Volume / Mix Operations / Manufacturing All Others 3Q14 9

10 Midstream, Marketing & Other Segment Earnings PRE-TAX $219 ($115) 3Q14 vs. 2Q14 ($ in millions) $11 $10 $125 3Q14 Core Results $125 mm 2Q14 $219 mm 3Q13 $212 mm 2Q14 Trading Power Generation All Others 3Q14 10

11 YTD 2014 Cash Flow The first nine months of 2014 included tax payments of $570 million related to the gain on the sale of the PAGP units and our Hugoton assets $12,000 YTD 2014 CFFO before Working Capital changes $8,600 ($400) ($6,600) ($700) ($ in millions) ($1,650) 3Q14 Debt / Capital 16% Return on Equity* 12% Return on Capital Employed* 11% Beginning Cash $3,400 12/31/13 ($2,100) ($650) $1,400 $1,600 $2,900 Available Cash Before Working Capital Changes Working CapEx BridgeTex & Dividends Share Acquisitions Proceeds Commerical Ending Cash Capital Al Hosn Repurchases & Other from Paper Balance Changes Capex Asset Sales 9/30/14 / * Note: Annualized; See attached GAAP reconciliation. 11

12 California Resources We received cash proceeds of approximately $5 billion from the bond offering completed by California Resources. IRS rules mandate that use of these proceeds be restricted to share repurchases, dividend payments or debt retirement. We will be receiving an additional $1.2 billion of cash from California Resources concurrent with the spin-off in late November. The use of those proceeds will be unrestricted. When Oxy completes the spin-off of California Resources at the end of November, we will reclassify their financial and operational results to discontinued operations for our core results disclosure. As such, our fourth quarter core income will exclude all of California results, and income on a reported basis will include 2 months of California results. Total year results on a reported basis will include eleven months contribution from our California operations classified as discontinued. Included in the Investor Relations supplemental schedules is a pro forma table segregating Oxy s sold and spun-off domestic production from our on-going operations for the historical quarterly 2013 and 2014 periods. 12

13 US Oil & Gas Pro Forma Data Production (Mboe/d) 3Q14 2Q14 1Q14 4Q13 3Q13 2Q13 1Q13 Permian Resources Permian EOR Midcontinent and Other Ongoing Operations Hugoton California Total Ongoing Domestic Operating Costs ($ / boe) 3Q14 2Q14 1Q14 4Q13 3Q13 2Q13 1Q13 Cash operating costs $14.89 $14.66 $14.18 $13.55 $13.24 $12.59 $12.41 Taxes other than on Income $4.37 $4.92 $4.95 $4.55 $4.94 $4.54 $4.20 DD&A expense $18.54 $18.44 $17.96 $16.77 $16.56 $16.55 $16.58 Exploration expense ($mm) $6 $14 $10 $14 $10 $23 $20 13

14 4Q14 & FY 2014 Guidance Summary Oil & Gas Segment * Domestic 4Q 2014 Production* Oil: continued Permian production growth. NGLs: modest decline Natural gas: modest decline International 4Q 2014 Production Volumes expected to increase with Al Hosn Gas project coming on-line. Positive impact from production sharing contracts sensitive to price. Exploration expense: $60 mm in 4Q14. Price Sensitivity (excludes California) Pre-tax Income Impact (Quarter) Oil +/- $1/bbl = +/- $29 mm NGL +/- $1/bbl = +/- $6 mm U.S. Nat Gas +/- $0.10/mmbtu = +/- $3 mm Chemical Segment ~$115 mm pre-tax income in 4Q14. Midstream Segment Positive impact from start up of BridgeTex pipeline. Corporate 4Q14 Income tax rate: 40% * EXCLUDES California volumes 14

15 Permian Permian Resources 24% production growth (year / year) in 3Q14 80,000+ boe/d exit rate in 2014E 100,000+ boe/d exit rate in 2015E Production (mboe/ /d) Permian EOR Permian Resources Q14 2Q14 3Q E 2015E 2016E 15

16 California Resources Spin-Off Update Major Producing Basins Sacramento Basin San Joaquin Basin CRC Fee / Lease Acreage Ventura Basin Los Angeles Basin Oxy Land Position Board of Directors authorized California Resources spin-off Distribution expected to occur on November 30 Record date is November 17 Oxy shareholders will receive 0.4 shares of CRC for each share of Oxy Oxy will distribute ~310 million shares of CRC and retain ~75 million shares of CRC After the spin-off and within 18 months, Oxy intends to conduct an exchange offer for the remaining CRC shares, further reducing Oxy shares outstanding. California Resources completed its debt financing and distributed ~$5.0 billion to Occidental as a tax-free dividend on October 9. Dividend of ~$1.2 billion from a term loan / credit facility will happen concurrent with the spin-off California operations will be classified as discontinued operations in 4Q14 Given significant historical investments in California, we expect lower unit rates for cash operating costs, DD&A and F&D costs, and improved reserve replacement ratios on a historical and ongoing basis for Oxy. 16

17 Strategic Initiative Update In the Williston and Piceance basins, given the current product price environment we plan to operate these assets with less capital in order to generate free cash and shift our investment toward our higher growth and higher return operations in the Permian Basin. In the Middle East, we continue to make progress in negotiations with our partners towards a partial monetization. Our goal is to improve the businesses ability to grow profitably from a somewhat smaller base. Over time, we expect to achieve a similar balance in our asset mix, with at least 60% of our oil and gas production coming from the United States. Over time, we expect to monetize our remaining interest in the General Partner of Plains All American Pipeline which is valued at more than $4 billion, in addition to some other midstream assets when market conditions warrant. Strategic Initiatives Hugoton Sale 18 Mboe/d 1Q14 $1.3 bn pre-tax proceeds PAGP IPO $1.4 bn pre-tax proceeds 25% remaining interest California Spin-Off 160 Mboe/d 3Q14 $6.2 bn after-tax distribution 17

18 Use of Proceeds Expect to generate a large amount of cash proceeds from the strategic initiatives The bulk of these proceeds will be used for to share repurchases, we also hope to reinvest in the business through h attractive ti bolt-on property acquisitions iti in our core area of the Permian Basin. Opportunities may exist for accretive property acquisitions that have current production, o growth prospects and complement e our existing acreage. We have no intention of acquiring public companies. We have repurchased approximately 31 mm of the company's shares for nearly $3 billion since the end of 3Q million shares remain authorized under the current repurchase program. Shares Outstanding (mm) FY2013 3Q14 Weighted Average - Basic Weighted Average - Diluted Basic Shares Outstanding

19 Capital Outlook Significant amount of long-term investment, including capital for the BridgeTex pipeline and the Al Hosn Gas project, is nearing completion. Expect our overall capital program to decline in 2015 given the absence of California and the completion of multiple long-term projects. Capital Breakdown Excluding California Expect a significant decline in our spending in the Middle East as we begin to reap the benefits of some of our earlier long-term investments. Vast majority of capital budgeted for next year will be allocated to our domestic oil and gas drilling opportunities where we will maintain flexibility in our budget. Some of the reduction in the program on long-term projects will be allocated to profitable growth opportunities in Permian Resources, Midstream and Chemicals. If lower crude oil prices persist or fall further, we will adjust our capital program to manage within our cash flow. Other Domestic Midstream, Chemicals, Exploration and Other MENA Permian 19

20 Production Outlook Expect Permian Resources to deliver production growth of at least 20% in 2015, primarily from oil. Expect the Resources business to exit 2014 at over 80,000 BOE per day and to exit 2015 at over 100,000 BOE per day. Total domestic production should grow 5% - 8%, reflecting a modest decline in natural gas and NGLs. In the Middle East, first production from the Al Hosn Gas project is anticipated later this quarter. Oxy s net share of production is expected to ramp toward 60,000 BOE per day during the first half of next year. Company-wide Oil & Gas Production Excluding California (mboe/d) 8 10% Production Growth in Q14 2Q14 3Q14 Permian Growth Al Hosn Start Up 2015 Production Outlook Note: Excludes California and Hugoton production 20

21 Outlook We expect our cash balance to exceed our total debt at year end. Oxy is built to thrive in this environment with our core properties in the Permian EOR business and production sharing contracts in the Middle East which provide relatively stable cash flow. Following the execution of the California spin-off, Oxy s philosophy of disciplined capital allocation will continue. Our core businesses will continue to focus on delivering moderate volume growth, generating g higher earnings and cash flow per share, as well as improved financial returns. Our Permian Resources business will represent the key area of oil growth within our domestic operations. 21

22 Permian Resources Summary Growing production and increasing operational efficiency Total Production (boe/d) 77,000 Active Rigs Oil Production (bbls/d) vs. 2Q-2014 vs. 3Q Q14 43,000 8% Increase 3Q14 26% Increase Well Cost vs % Reduction vs % Reduction Capital Expenditures $472MM Active Rigs 24 2Q Horizontal Vertical Well Activity Wells Drilled Wells Online 75 / 44 Hz 71 / 36 Hz 1Q14 2Q14 3Q14 Drill Online 22

23 Permian Resources Core Areas Delaware Basin Midland Basin Bench Gross Wells Bone Spring 1,500 Wolfcamp A 800 Wolfcamp B 650 Wolfcamp C 700 Other 600 Vertical 350 Total 4,600 HZ Development Ready 1,450 Net WI Wells 3,500 Central Basin Platform Midland Basin Bench Gross Wells Spraberry 450 Wolfcamp A 250 Wolfcamp B 350 Wolfcamp C 550 Wolfcamp D/Cline 700 Vertical 200 Total 2,500 HZ Development Ready 1,050 Net WI Wells 2,300 Delaware Basin Legend Development Appraisal Marathon Thrust Belt Val Verde Basin 23

24 Permian Resources Delaware Benches Geologic Age Delaware Basin Active Rigs Bell Canyon Cherry Canyon Brushy Canyon Avalon Delaware Basin 4Q14 3Q st Bone Spring Permian 2 nd Bone Spring 3 rd Bone Spring Marathon Thrust Belt Val Verde Basin 2Q Legend Wolfc camp A B C D Well llactivity it Horizontal 40 Vertical Development Appraisal Exploration 1Q14 2Q14 3Q14 Drill Online 24

25 Permian Resources Delaware Well Performance Texas Delaware Wolfcamp A/B BOEPD / 1000 Ryman 14 #5H 1, , Q3 Avg Q2 YTD Avg 834 1,355 1,067 1, Barilla Draw 1,000 2,000 Peak 24 Hr 30 Day Completed zipper frac on Anna Katherine #5H and #6H Reduced d completion cost by $700M Avg. Peak Rate = 1,600 BOEPD; Avg. 30 Day Rate = 1,225 BOEPD Totsy 206H in Wolfcamp C with Avg. Peak Rate = 1,356 BOEPD and Avg. 30 Day Rate = 912 BOEPD Increasing sand volumes by 35% Increasing lateral length to 5,500 feet 25

26 Permian Resources Midland Basin Benches Geologic Age Midland Basin Active Rigs Yates Grayburg San Andres Clear Fork Upper Spraberry Midland Basin 4Q14 3Q Permian Mississippian Ordovician Middle Spraberry Lower Spraberry Wolfcamp A B C D/CLINE Barnett Shale Mississippian Lime Montoya Simpson Ellenburger Marathon Thrust Belt Well Activity Val Verde Basin 38 2Q Horizontal Vertical Legend Development Appraisal Exploration 1Q14 2Q14 3Q14 Drill Online 26

27 Permian Resources Midland Basin Well Performance Spraberry, Wolfcamp A / B BOEPD / 1000 St. Andrews SCR 3526H DR 4027H Q3 Avg Q2 YTD Avg , Dora Roberts Mabee Ranch South Curtis Ranch (SCR) Merchant Guitar Powell Ranch 0 Peak Day 2000 Successful Spraberry wells (SCR 3526H, 2 wells flowing back) Completed 10,000 Lateral in DR4027H Continue aggressive testing program in Wolfcamp A/B Well Spacing, cluster spacing and count Fluid System, Proppant Type and Concentration, Surfactants Increased lateral length and sand concentrations 27

28 Permian Resources Guidance Strong 2014 performance Rapidly translating the knowledge gained in our appraisal efforts to value Production (Mboe/d) 120+ Positioned required resources to execute accelerated development in 2015 Maintain flexibility to optimize activity levels Expect to meet 2014 growth rate of 15% to 18% On track to meet 2016 production target t of 120+MBOED Q14 2Q14 3Q E E 28

29 OXY Permian Gathering / Takeaway Cushing SENM/ DE Basins Central/ Midland Basins Slaughter Centurion Basin Colorado City Seaway ay WTG Midland- South BridgeTex (50%) LongHorn Owned 3 rd Party Cactus 2Q15 Houston Corpus Christi BridgeTex Started t Up in Late Sept

30 Takeaway Capacity Impact on Prices Midland WTI to LLS Differential ($/Bbl) $10 $5 $0 ($5) ($10) YTD Avg. -(~$16)/Bbl 2014 YTD Avg. - (~$12)/Bbl ($15) ($20) ($25) Sun Longhorn ($30) Start-up Start-up ($35) (80MBPD) (225MBPD) Longhorn Expansion (50MBPD) BridgeTex Start-up (300MBPD) ($40) Balanced Takeaway Constrained Takeaway 30

31 Permian Infrastructure Value Drivers $/Bbl $20 $18 $16 $14 $12 $10 $8 $6 $4 $2 $0 ~ $0-10+/Bbl ~$1-3/Bbl ~ $1-3/Bbl Tariff Revenue R Shipper Producer/Shipper d (Advantaged Pipeline Tariff) (Higher Prices/Mkt Opportunities) Takeaway Capacity Commitments are Key to Capturing Value * Illustrative Purposes Only 31

32 Third Quarter 2014 Earnings Conference Call Q&A