OCCIDENTAL PETROLEUM CORPORATION

Transcription

1 OCCIDENTAL PETROLEUM CORPORATION Vicki A. Hollub President & CEO UBS Global Oil and Gas Conference 2016 May 25, 2016 Vicki A. Hollub

2 Why own Oxy? Large Integrated Majors Independent E&Ps Company Market Cap ($B) XOM $372 RDS $197 CVX $188 TOT $120 BP $98 ENI $55 Characteristics Low or no growth Higher returns Stronger B/S; lower risk Free cash flow Consistent dividend growth Oxy Uniquely Positioned $57 billion Company Market Cap ($B) COP $54 EOG $45 PXD $27 APC $25 APA $22 DVN $18 Characteristics Generally higher growth Lower returns Weaker B/S; higher risk Little or no free cash flow Little or no dividends Moving from gassy to oily Oxy has positive elements of both groups, appealing to investors who seek a combination of moderate growth, above average returns and consistent dividend growth. Updated as of 5/24/2016 2

3 Keys to Success Balance Sheet Strength Ended 1Q16 with $3.2 Billion cash Debt of $7.6 Billion (24% debt to capitalization ratio) Talent Optimization Maintain and continue to develop staff Increase use of advanced technology and data analytics Diverse Portfolio Long life cash flow assets Significant growth potential 5% 8 % long-term Flexibility to ramp activity up or down depending on market conditions Returns-Focused Strategy Invest in projects that generate long-term value with returns above cost of capital Domestic +15% / Intern. +20% Leverage fast growth shale with low-decline EOR 3

4 Cash Flow Priorities 1. Base/Maintenance Capital 2. Dividends 3. Growth Capital 4. Share Repurchase 5. Acquisitions 4

5 History Of Returning Cash To Shareholders Period ending 2015 ($ in Billions) Cash Dividends Share Repurchases Combined 3 years $6.0 $4.0 $ years $9.6 $4.9 $ years $14.2 $9.1 $23.3 Additionally, over the 10 years ending 2015: We reinvested $54 billion of capital in the business; We made cash acquisitions of $25 billion; Our long-term debt increased by only $5.5 billion. We spun off California Resources Corp. to Oxy shareholders in 2014 valued at ~$2.3 billion. 5

6 Oxy Runs A Focused Business Oil and Gas Focus Areas United States MENA Latin America Leading position in the Permian Basin. Permian Resources is a growth driver. Al Hosn Project, Oman and Qatar. Additional opportunities for growth with partner countries. Highest margin operations in Colombia. Additional opportunities for moderate growth with partner. OxyChem High FCF, moderate growth business. Oxy Midstream Integrated pipeline and marketing business to maximize realizations. Oxy will be positioned to grow Oil production Earnings & Cash Flow per share ROCE Dividend stream 6

7 Total Spend Per Barrel Total Spend per Barrel = Capital Spending + G&A + All Operating Costs Global Oil & Gas Sales Volumes ~$40.00 Internal performance metric to focus on operational efficiency, especially in consideration of the sharp decline in commodity prices. Portion of senior management s incentive compensation is directly aligned with this performance metric Focuses on efficiency, financial returns, and free cash flow generation E Designed to help manage the reduction in overall spending while rewarding production growth. 7

8 Improved Cost Structure Ongoing Domestic Production Costs ($/boe) Overhead (SG&A) ($ millions) $13.58 $1,503 $12.28 $11.86 $1,270 ~$1, Q15 1Q Target 8

9 2016 Capital Outlook 2016 Capital Budget ($ in bln) Carefully reduce activity levels without harming the $5.6 strong progress on growth prospects $2.8 - $ E Maintenance Sustaining Growth Fund only those opportunities that exceed hurdle rates of return 2016 plan approximates expected cash from operations at around current prices 9

10 Committed Project Capital Declining Committed Project Capital ($ in millions) $1,300 Multiple long-term investments to drive cash flow and earnings growth Al Hosn Ethylene cracker JV $800 Ingleside terminal $500 $100 Gas processing Capital spending will continue to decline and cash flows and earnings expected to grow as projects start-up E 2017E Increased flexibility on capital budget in 2016 and

11 Permian Basin Is The Core Domestic Asset Oxy Acreage Oil Pipelines CO2 Pipelines EOR Business 2015 Production MBOEPD 1 million net acres 1.9 Billion BOE remaining in reserves and resources Resources (Unconventional) 2015 Production 110 BMOEPD 1.5 million net acres 8,500 identified well locations Midstream 12 processing plants 1,900 miles of pipeline CO 2 pipelines Oil infrastructure and pipelines Marketing business 11

12 Oxy is the Largest Permian Basin Producer NET MBOEPD OPERATED PRODUCTION % 50% 75% Gas Liquids Average Cumulative % of total 3.1 million BOEPD Source: Wood Mackenzie, 9/23/15, Company Net Working Interest Production Rates 12

13 2016 Permian Strategy Given the current oil price environment, we will focus on investment to achieve four core goals: Accelerate geoscience, characterization and modeling programs to enhance recovery, productivity and field economic returns Minimize base decline and set up major growth programs in both Resources and EOR segments Focus resources on game changing technologies and applications Accelerate continued improvements in execution and cost Expect to operate 4-5 rigs in the Permian over the remainder of the year 13

14 Permian Resources Summary 2016 Focus Areas 1.5 million net acre position Shorter cycle faster growth Significant improvements in capital execution efficiency and reduction in operating expenses Will run 2-4 drilling rigs in development areas Maintain momentum with efficiency improvements Continue to optimize ultimate recoveries Integrate seismic with data analytics from producing wells to further evaluate inventory 14

15 Permian Resources Drilling Inventory Continuing to lower economic hurdle points through reservoir characterization and optimization, improved productivity, reduced well costs, and faster time to market Total of ~8,500 locations in horizontal inventory Drilling Inventory Based on Q4 Costs 100% ~3,400 total locations economic at less than $60 / barrel which is an increase of approximately 700 locations from previous version Better Well Productivity and Lower Cost 40% 48% 60% ~350 locations economic below $40 / barrel 4% 14% 15

16 Permian Resources Production Total production grew 31% year-over-year to 128 MBOED. Oil production grew 35% year-over-year to 84 MBOD. Oil NGL Gas We have leveraged and extended our industry leading practices from our EOR business to drive improvements in base management to minimize decline Q15 1Q16 2Q16E Production (MBOED) 16

17 Southeast New Mexico Recent Performance Completion optimization efforts have significantly increased value Increased proppant to 1,500 lbs/ft Testing up to 2,000 lbs/ft New Design 4 Wells 78% Oil Evaluating cluster spacing and fluid design Monitoring cumulative production results of recently drilled extended laterals Preparing to transition to produced water base fluid in development areas to decrease costs Old Design 8 Wells 83% Oil 82% Oil Offsetting increased completion costs with continued drilling efficiencies Decreased drilling cost/lateral ft by greater than 20% from 2015 Current drilling, completion and hookup cost $5.9mm Expect to realize continued savings - 2H 2016 target well cost $5.5mm 17

18 Permian Resources Manufacturing Mode Delaware Wolfcamp A 4,500 HZ East Midland Wolfcamp A 7,500 HZ WELL COST $MM $10.9 $5.6 $5.3 $6.3 $3.4 Drilling Completions $5.4 $2.7 $2.9 $2.7 WELL COST $MM $9.2 $5.5 $3.7 $6.1 $3.8 Drilling Completions $5.3 $3.4 $2.3 $ Current Best 2014 Current Best DRILLING DAYS DRILLING DAYS Q15 2Q15 3Q15 4Q15 1Q16 Best Q15 2Q15 3Q15 4Q15 1Q16 Best 18

19 Permian Resources Continued Opex Reduction Permian Resources Opex/BOE $15.00 $13.02 $11.41 $10.87 $10.00 $9.74 $5.00 $8.72 Continued focus on reducing field operating costs during 2016 Downhole expense $/boe reduced 36% from Q Company operated operating expense down ~37% ($/boe) from Q $- 1Q15 2Q15 3Q15 4Q15 1Q16 Surface Downhole Supports Energy Other 19

20 Permian EOR Strategy CO 2 Supply & Processing 1.0 million net acres Shift more capital to longer-cycle EOR to take advantage of lower cost of materials and services Inventory includes projects that have F&D costs of $3-$12/BOE Incremental production will come on line in 6-18 months after the start of CO 2 injection Debottlenecking and bolt-on equipment to existing infrastructure will increase CO 2 injection capacity by 25% over the next 5 years 20

21 World Leader in CO 2 Enhanced Oil Recovery 3,500 U.S. CO 2 EOR Projects Size of bubble = CO 2 EOR Production Volume Number of Injection Wells EOR Survey 3,000 2,500 2,000 1,500 1, Kinder Morgan Exxon Hess Apache Anadarko Chevron Denbury Occidental Number of Projects Inject 1.9 billion cubic feet a day Operate 31 CO 2 EOR projects Source: Oil & Gas Journal 2012 Biennial EOR Survey 21

22 Permian EOR Cost Structure Permian EOR can operate at cash costs as low as $22 per BOE $ Permian EOR Cost Structure $55 WTI, $3.00 NYMEX $ Permian EOR Cost Structure $35 WTI, $2.00 NYMEX $30 $2.7 $30 $25 $4.0 $25 $ / BOE $20 $15 $10 $4.7 $4.7 $ / BOE $20 $15 $10 $4.0 $2.2 $3.2 $1.8 $5 $14.1 $5 $10.8 $0 Well, Surf Maint Injectant Energy Taxes SG&A $0 Well, Surf Maint Injectant Energy Taxes SG&A Sensitive to O&G Prices Partially Discretionary 22

23 Residual Oil Zone Development The ROZ development is a vertical expansion of the CO2 flooded interval. Utilize work-over rigs to drill the extra depth into additional CO2 floodable sections of the reservoir. The ROZ underlies most of our major EOR properties with current projects in South Hobbs and West Seminole and can be developed between $3 and $7 per BOE. Geologic Seal Producing Oil Water Contact Main Oil Column Residual Oil Zone Original Injector Deepened ROZ Injector Original Producer Deepened ROZ Producer New ROZ Injector Water Zone 23

24 Middle East Summary Middle East Footprint Focus Areas Al Hosn Project Qatar UAE Oman Reduced footprint in the Middle East. Strategy is to grow businesses in the core countries of UAE, Oman and Qatar. Oxy has stopped investment in Libya, Yemen, and Iraq and has agreed to exit Bahrain. The Al Hosn gas project is currently producing over 60 MBoed (net to Oxy). At full production, annualized operating cash flow is expected to be $300 to $600 million depending on commodity prices 24

25 Chemicals Ethylene Cracker Update Average annual Chemicals EBIT of almost $600 Million over last three years with earnings and cash flow growth expected from the start-up of the Ingleside Ethylene Cracker. MexiChem Ethylene Cracker JV Currently have spent ~80% of total project capital of ~$725 mm (net) for the MexiChem Ethlyene Cracker JV. MexiChem Ethylene Cracker JV Facilities to become commercially operational in early

26 Summary Key to Success / Strengths A key to long term success is to take advantage of this downturn to improve our future: Major cost structure changes Further advances in improved recovery Investment in people Portfolio expansion Diverse portfolio Data Analytics Two businesses in one of the best basins in the world Technology (new or different) Technical excellence of our people Long life, low decline, value adding, cash flow generating assets Flexibility to ramp up or down depending on market conditions 26

27 Cautionary Statement 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. Words such as "estimate," "project," "predict," "will," "would," "should," "could," "may," "might," "anticipate," "plan," "intend," "believe," "expect," "aim," "goal," "target," "objective," "likely" or similar expressions that convey the prospective nature of events or outcomes generally indicate forward-looking statements. Factors that may cause Occidental's results of operations and financial position to differ from expectations include but are not limited to: global commodity pricing fluctuations; supply and demand considerations for Occidental s products; higher-than-expected costs; the regulatory approval environment; reorganization or restructuring of Occidental's operations; not successfully completing, or any material delay of, field developments, expansion projects, capital expenditures, efficiency projects, acquisitions or dispositions; lower-than-expected production from development projects or acquisitions; exploration risks; general economic slowdowns domestically or internationally; political conditions and events; liability under environmental regulations including remedial actions; litigation; disruption or interruption of production or manufacturing or facility damage due to accidents, chemical releases, labor unrest, weather, natural disasters, cyber attacks or insurgent activity; failure of risk management; changes in law or regulations; or changes in tax rates. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this presentation. Unless legally required, Occidental does not undertake any obligation to update any forwardlooking statements, as a result of new information, future events or otherwise. Material risks that may affect Occidental s results of operations and financial position appear in Part 1, Item 1A Risk Factors of Occidental's 2015 Form 10-K. 27

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