OCCIDENTAL PETROLEUM CORPORATION. BAML Global Energy Conference November 17, 2016

Transcription

1 OCCIDENTAL PETROLEUM CORPORATION BAML Global Energy Conference November 17, 2016

2 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. 2

3 Key Messages & Strategy Overriding Goal is to Maximize Total Shareholder Return We believe this can be achieved through a combination of: Oil and gas production growth of 5% to 8% per year over the long-term; Executing on our capital program with a focus on growing our U.S. oil production Allocating and deploying capital with a focus on achieving well above cost-of-capital returns (ROE and ROCE); Return Targets* Domestic 15+% International 20+% Continued improvement in our capital and drilling efficiency Start-up of long-term projects Providing consistent, annual dividend growth; Maintaining a strong balance sheet. *Assumes moderate product prices 3

4 Cash Flow Priorities Favor Dividends 1. Base/Maintenance Capital 2. Dividends 3. Growth Capital 4. Acquisitions 5. Share Repurchases Subject to Returns and Market Conditions 4

5 Key Messages & Takeaways High quality oil and gas assets & other low capital intensity operations Improving free cash flow in other segments provides continued dividend support Significant exposure to a recovery in oil prices provides optionality for dividend growth and/or acceleration of production growth Operational excellence On track to exceed high end of 4% - 6% production growth guidance for FY 2016 On track for 2016 capital budget of ~$3 billion Recent WI acquisitions in existing areas strengthen Permian position Operatorship provides opportunity to control pace and cost of drilling Significant value capture through operating & development cost synergies, well productivity, application of D&C knowledge, and leveraging existing infrastructure Significant optionality and value through future upside and development flexibility Superior balance sheet and ample liquidity 5

6 Unique Investment Proposition Large Integrated Majors Company Market Cap ($B) XOM $358 RDS $211 CVX $203 TOT $120 BP $105 ENI $51 Characteristics Low or no growth Higher returns Stronger B/S; lower risk Free cash flow Consistent dividend growth Oxy Uniquely Positioned $51 billion Independent E&Ps Company Market Cap ($B) COP $57 EOG $54 APC $34 PXD $30 DVN $23 APA $22 Characteristics Generally higher growth Lower returns Weaker B/S; higher risk Little or no free cash flow Little or no dividends Moved 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 11/10/2016 6

7 A Focused Business with High Quality Assets 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 potential 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 ops & marketing designed to maximize realizations. Quality assets position Oxy to grow Oil production Earnings & Cash Flow per share ROCE Dividend stream 7

8 Production Growth Exceeding Expectations Expect to exceed the higher end of 2016 production guidance of 4% - 6% growth Record high production at Al Hosn and Oman Permian Resources ~13% FY 2016 growth Anticipate production growth of 5% - 8% in 2017 Company-wide Oil & Gas Production from Core Assets (MBOED) >6% Core Assets Production Growth in % Production Growth 2015 Core Production Other Domestic Decline Permian Resources Growth Al Hosn & Oman Block E Core Production Outlook 2017E Core Production Outlook Note: Core assets exclude Bahrain, Iraq, Yemen, Williston and Piceance Basins 8

9 Total Spend per BOE Has Declined Total Spend per BOE = Capital Spending* + G&A + All Operating Costs Global Oil & Gas Sales Volumes ~$62.00 ~$40.00 $28.50 ~$27.50 Internal performance metric to focus on operational efficiency, especially in consideration of the sharp decline in commodity prices Portion of management and employees incentive compensation is directly aligned with this performance metric Focuses on efficiency, improved margins, and free cash flow generation Target 2016 YTD Designed to help manage reduction in overall spending while rewarding production growth * Excludes cost of acquisitions 9

10 Recent Debt Offering & Sources of Liquidity Cash balance of $3.2 billion at 9/30/2016 Recently issued $1.5 billion in bonds with 10-year coupon at 3.00% and 30-year coupon at 4.10% Single A credit ratings re-affirmed with stable outlook Additional sources of liquidity in of ~$2 billion including: Anticipated tax refund in 2017 Monetization of non-strategic corporate assets Portfolio management & optimization 10

11 Capital Flexibility to Pursue Growth Preliminary Capital Outlook ($ in bln) <$3.0 $3.3 - $3.8 Total sustaining and maintenance capital of ~$2.2 billion* Focused on return based capital for growth projects in Permian Resources Shorter cycle capital investments allow for flexibility to respond to any changing price environment 2016E 2017E Maintenance Sustaining Growth If oil prices show downside volatility, can quickly adjust capital program below current outlook * Estimated capital budget required to keep production stable 11

12 Middle East Update Achieved record production YTD 2016 in Oman, Qatar and the UAE Core Countries Oman: YTD record production of 95 MBOED through multiple onshore projects utilizing enhanced oil recovery, including steamfloods. Qatar: YTD production of 110 MBOED through multiple shallow-water EOR projects, Dolphin and ISSD record production UAE: YTD production of 61 MBOED from the Al Hosn gas project, exceeding performance expectations, including planned turnarounds Al Hosn 2017 production to increase to MBOED 2017 Impact Improved production and cost reductions at Al Hosn and in Oman should increase free cash flow by ~$300+ MM Al Hosn Gas development Al Hosn Gas Project 12

13 Midstream Update Business Segments Gas Plants: Natural gas and CO 2 gathering, compression and processing systems to control upstream costs Pipelines - Domestic: Take-away capacity via common carrier oil pipeline and storage systems, including Centurion pipeline, CO 2 source fields and pipeline systems 2017 Impact Free cash flow expected to improve $150 - $200+ MM due to better marketing economics and ramp up of Ingleside oil storage and export facility Ample takeaway capacity and new outlet for Permian oil production Pipelines - Foreign: Stable free cash flow from Dolphin natural gas pipeline Power Generation: Lower cost electricity through power and steam generating facilities Marketing & Trading: market production at highest realizations; includes Ingleside export facility Shipments from Ingleside export facility 13

14 Chemicals Update Integrated Value Chain Chlorine: 60% Internal Use for VCM, EDC, and Other Derivatives / 40% External Merchant Sales Vinyls: Demand driven by construction growth: PVC sell 75% domestically and 25% exported; VCM 50% internal use for PVC and 40% exported and 10% sold domestically; 2017 Impact Expect free cash flow to increase by ~$400 MM with lower capital expenditures, start up of ethylene cracker & product margin increases $10/ton of Caustic Netback = $30 MM cash flow US infrastructure backlog a significant upside Ingleside ethylene cracker near completion Caustic Soda: Leveraged to exports, manufacturing activity and chemicals demand: 95% sold externally; 40% exported; market prices now rising Natural Gas Inputs: Partial hedge of Oxy s domestic natural gas production 14

15 Free Cash Flow Improvement Improved market conditions, project start-ups and lower capital should increase free cash flow generation in 2017 MENA Midstream Chemicals Total 2017 vs 2016 FCF Improvement ~$300 MM $150 - $200 MM ~$400 MM $850 - $900 MM 15

16 Permian Basin Is The Core Domestic Asset Oxy Acreage Oil Pipelines CO2 Pipelines EOR Business YTD 16 Production MBOEPD 1 million net acres 1.9 Billion BOE remaining in reserves and resources Resources (Unconventional) YTD 16 Production 125 MBOEPD 1.4 million net acres 8,500 identified well locations* Midstream 12 processing plants ~2,900 miles of pipeline CO 2 pipelines Oil infrastructure and pipelines Marketing business Infrastructure difficult to duplicate * Based on 4Q15 metrics 16

17 Growing the Greater Barilla Draw Area Unique opportunity to increase working interests and operatorship in Red Bull properties BEFORE ~26% Working Interest Recent acquisition enhances Occidental s strong position in the Southern Delaware Basin Part of a multi-year investment plan started in 2012 Area now encompasses ~100,000 net acres & 3,800+ hz locations Scale of contiguous position allows for synergies Vast delineated area of subsurface characterization Expanded best-in-class operating capabilities Integrated infrastructure and supply chain leverage Market access for rapid production growth Unconstrained high value growth potential AFTER ~26% Working Interest ~63% Working Interest ~100% Working Interest 17

18 Multi-Bench Development Potential Recent Wells Barilla Draw Type Log Target Formation Well #* Effective Lateral Length (Feet) IP-30 (Boepd) Avalon Potential 1 st Bone Spring Evaluating 2 nd Bone Spring Well #1 Well #2 4,514 4, rd Bone Spring Well #1 7, Wolfcamp A Well #1 Well #2 Well #3 Well #4 Well #5 4,396 7,700 4,407 4,300 7,553 1,564 2,210 1,304 1,892 1,240 Wolfcamp Debris Flow Well #1 Well #2 Well #3 Well #4 4,500 6,575 4,776 4,681 1,907 1,247 1,340 1,263 Wolfcamp B Well #1 Well #2 Well #3 Well #4 7,377 6,947 6,935 7,376 1,171 1,513 1,124 1,416 Debris Flow Wolfcamp C Well #1 4, Proven Economic Evaluating Potential * Wells include Oxy and acquisition acreage 18

19 Greater Barilla Draw Advantages Well Productivity Well Cost* Infrastructure Cost 6 Month Cumulative MBOE Prior Operator 7,500 ft Lateral Oxy Current Oxy Potential Total Well Cost ($MM) $12 $10 $8 $6 $4 $2 $ Prior Operator 7,500 ft Lateral $7.8 - $8.5 Oxy Current Oxy Potential Facilities % of Development Capex 30% 25% 20% 15% 10% 5% 0% Prior Operator Oxy Current Oxy Potential Subsurface Expertise Vertical Delineation History 3D Seismic + Core Expansive sub-basin characterization area Integrated Stimulation Designs Unique designs to fit geo-science and reservoir characteristics Optimal Full Section Spacing for value 5+ Rig Development Potential Oxy Drilling Dynamics Faster Drilling + Reduced Downtime More Lateral Footage / Rig Completion Efficiencies Maximizing Stages per Day Optimized Flow Back Shared infrastructure 150,000+ BOPD Oil Pipeline takeaway 300+ MMCFD Gas Pipeline capacity 290,000+ BWPD Pipeline SWD Capacity 90 MW of Power from 5 Electrical Substations 52 consolidated CTB s Integrated Artificial Lift systems *Well cost includes drilling, completion, hook-up, initial flow-back, capitalized *overhead, and artificial lift 19

20 Acquisition Influence on Greater Barilla Draw Net Production - BOEPD 38,000 Oxy s development capability adds significant value to the acquired assets Previously owned a 26% WI in the acquisition area Oxy operating adds over $600MM of Future NPV10* to the Greater Barilla Draw area Net Acres Drilling Pace Capability *Future NPV10 calculation assumes a modest 3 rig pace with $500K / well cost improvement, $0.50 / boe opex improvement and 10% well productivity improvement from the prior operator. 20

21 Greater Barilla Draw Development Area Timeline Enter Appraise Improve Optimize Innovate Grow Systematic acquisition criteria Leverage nonoperated learning early Add large contiguous operated acreage Bolt-on s to create value Surface acreage for full cycle cost advantage Subsurface characterization progression Testing of key subsurface concepts Delineation of multiple benches Vertical to Hz well transition Drilling & Completion technology advancement Pad Drilling Slim Hole well design Unique Drilling Fluid implementation Well-ordered stimulations Total Time-to- Market reduction Total activity integrated planning Water Infrastructure Extended lateral inventory build Well Spacing studies Orientation tests Stimulation advancements Full section development design Consolidated CTB s Oil & Gas Gathering Infrastructure Gas processing and assurance Acreage improvements Supply Chain and logistics transformation Co-bench development technology Infrastructure and facilities enhancements Enhanced Reservoir Recovery Unconstrained Growth Potential Expansive multibench subsurface characterization Low cost multi-bench co-development capability Oil + Water + Gas infrastructure and assurance Operating cost synergies 21

22 Greater Barilla Draw Timeline Collie Lockridge Barilla Draw Red Bull North (~63%) Existing Oxy 3D Seismic Surveys Proposed D Seismic Acquisition Outside Operated Oxy Operated Red Bull - South Motorcycle (~25%) Enter Appraise Improve Optimize Innovate 1 st WC A Hz well at Lockridge Barilla Draw acquisition 1 st WC B Hz well appraisal Operated and nonoperated acquisitions 1 st WC C and 3 rd BS Hz appraisal wells Acquired core: WC A, WC B, 2 nd and 3 rd BS 5,000 lateral <15 drilling days 1 st 10,000 Hz lateral Oxy/Enterprise JV gas plant Acreage swap & JVs for extended laterals 35,000 net acres acquisition 22

23 Permian Resources Drives Oxy Production Growth Total Permian Resources production growth expected to be ~13% in 2016 Increased activity expected in 4Q16 in preparation for 2017 growth Oil NGL Gas MBOED ~ rigs drilling a mix of development and appraisal wells 75 Production will start increasing again before year-end E 2017E 23

24 Overall Permian Continues to Grow Expect to increase to 8 rigs in 4Q16 Successfully enhancing completion methods across Permian Resources acreage position Achieving better than expected results in both Permian businesses which will allow us to invest the savings into additional wells in each respective business Expect production growth in 2017 with added rigs in Permian Resources and continued investment in Permian EOR 222 Oil NGL Gas MBOED ~ E 2017E 24

25 Access to Multiple Markets Through Midstream Investments Ample Cushing takeaway capacity to reach multiple markets and hubs to drive improved price realizations Wink Crane Midland Colorado City Mid Valley 240 kb/d Blending capabilities allow for optimization McCamey Nederland Houston HOFTCO Terminal Ho Ho Pipeline Oxy owned Oxy is a major shipper Corpus Christi Ingleside Terminal 25

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