OCCIDENTAL PETROLEUM CORPORATION. Second Quarter 2015 Earnings Conference Call July 30, 2015

Transcription

1 OCCIDENTAL PETROLEUM CORPORATION Second Quarter 2015 Earnings Conference Call July 30, 2015

2 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 results, sometimes materially, and reported results should not be considered an indication of future performance. Factors that could cause results to differ 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. 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. 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 forward looking 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 I, Item 1A Risk Factors of the 2014 Form 10-K. Use of non-gaap Financial Information This presentation includes non-gaap financial measures. You can find the reconciliations to comparable GAAP financial measures on the Investors section of our website. 2

3 2015 Objectives CASH FLOW GROWTH Permian Resources production growth Al Hosn project start-up Commodity price recovery COST SAVINGS ~$450 million of captured cost savings year-to-date Operating Cash Flow to cover dividend outlays and growth capital program at ~$60/bbl realized oil prices Capital savings re-deployed into additional activity in Permian Basin ~$250 million reduction in capital spending from 1Q

4 Production Growth Oil production growth driven by Focused development program in Permian Resources Strong production in Oman and Colombia Resilient domestic base production Total Oil Production (MBOD) Q Q Q Q Q Q

5 Permian Resources Production Growth Total production grew 51% yearover-year to 109 MBOED. Oil NGL Gas Oil production grew 78% year-over-year to 71 MBOD. Total production expected to grow at a ~30% annual growth rate through Oil production is expected to continue to grow at rates higher than total production as we focus on drilling oil projects Q15 2Q15 2H15E Production (MBOED) 5

6 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 in the sulfur recovery units, the plant was limited to 50% of capacity for most of the quarter and production was curtailed for most of the month of April. A repair plan is underway to stabilize the sulfur recovery units and we expect production to continue to grow through the second half of the year. The plant is currently producing at ~50,000 BOED and we expect it to contribute ~35,000 BOED for the 3 rd quarter. 6

7 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 of at least 12%, partially offset by declines in NGLs and natural gas production Expect FY 2015 production to grow by MBOED Company-wide Oil & Gas Production (MBOED) ~ FY2013 FY2014 Permian Growth Al Hosn & Other Int'l 2015 Production Outlook * Excludes Hugoton oil production 7

8 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 Facilities to become commercially operational in early

9 2015 Capital Program Evolution 2015 Capital Budget and Domestic Drilling Rigs 100% 75% 50% 25% Capital Budget Domestic Drilling Rigs As we capture price savings from suppliers and improve efficiencies, we are able to do more with less spending. Capital spending declined by ~$250 million and will decline through the year. Given our large acreage position and deep inventory, we have the flexibility to defer drilling and appraisal activity. We expect to exit 2015 at a quarterly spending rate of $1.0 to $1.2 billion. If oil prices remain at current levels, ~$50/bbl, our 2016 capital will be less than both the 2015 full year and the fourth quarter run rate. 0% 1Q15 2Q15 3Q15E 4Q15E We expect that going forward our operating cash flow will cover capital expenditures and dividend payments, assuming $60 per barrel oil price realizations. Note: 1Q15 is the baseline index; subsequent quarters are a % of 1Q15 9

10 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 Weighted Average Diluted Basic Shares Outstanding

11 Highlights Domestic oil production (Bbl/d) Total company production (BOED) Core earnings** Core diluted EPS** 2015 CFFO from Continuing Ops 2015 CFFO before Working Capital Cash 6/30/2015 2Q15 Shares repurchased Results 205,000 15% year / year growth* 658,000 $165 million $0.21 $1,377 million $2,638 million $5.1 billion 4.8 million *Excludes California and Hugoton operations. **See Significant Items Affecting Earnings in the Earnings Release Attachments. 11

12 Oil & Gas Segment Pre-Tax Core Earnings PRE-TAX 2Q15 vs. 1Q15 ($ in millions) Core Results 2Q15 $324 mm 1Q15 $57 mm 2Q14 $1.7 B (8) Q15 Sales Price Sales Volumes Lower Operating Expenses All Others 2Q15 12

13 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 Company-wide Oil & Gas Production (MBOED) 11 (4) Q15 Permian Other Domestic Colombia MENA 2Q15 13

14 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) Q14 1Q15 Oil Natural Gas & NGLs 2Q15 Note: Excludes California and Hugoton Operations 14

15 Oil & Gas Realized Prices Worldwide Oil ($/bbl) Realized Prices Worldwide NGLs ($/bbl) Benchmark Prices Domestic Nat. Gas ($/mmbtu) WTI Brent NYMEX 2Q15 $54.55 $ $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 WTI % 100% 37% 81%* Brent % 88% 33% 2Q14 $99.30 $40.98 $4.15 $ $ $4.55 WTI % 96% 40% 91%* Brent % 90% 37% Price Sensitivity Pre-tax Income Impact (Quarter) Oil +/- $1/bbl = +/- $30 mm NGL +/- $1/bbl = +/- $7 mm U.S. Nat Gas +/- $0.10/mmbtu = +/- $3 mm * As a % of NYMEX 15

16 Oil & Gas Operating Costs Production Costs ($ / BOE) DD&A ($ / BOE) 1Q14 2Q14 3Q14 4Q14 FY Q15 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 $ Q14 2Q14 3Q14 4Q14 FY Q15 2Q15 Total $16.12 $16.64 $16.90 $18.09 $16.97 $15.35 $16.06 U.S. $17.46 $18.13 $18.63 $18.81 $18.26 $17.12 $17.82 Taxes other than on Income ($ / BOE) 1Q14 2Q14 3Q14 4Q14 FY Q15 2Q15 Total $2.83 $2.66 $2.42 $1.96 $2.45 $1.63 $1.85 2Q15 Exploration expense was $10 million Note: Excludes California 16

17 Chemical Segment Core Earnings PRE-TAX Core Results 2Q15 $136 mm 1Q15 $139 mm 2Q14 $133 mm 2Q15 vs. 1Q15 ($ in millions) Guidance 3Q15 expected to be ~$140 mm. 16 (20) (1) 136 1Q15 Sales Price Sales Volume / Mix Operations / Manufacturing * All Others 2Q15 * Impact of unscheduled plant outages at La Porte and Ingleside 17

18 - Midstream & Marketing Segment Core Earnings PRE-TAX Core Results 2Q15 $84 mm 1Q15 ($5) mm 2Q14 $130 mm 2Q15 vs. 1Q15 ($ in millions) (5) 1Q15 Pipelines Marketing Gas Plants 2Q15 18

19 1H 2015 Cash Flow 1H 2015 ($ in millions) 1H15 LT Debt / Capital 17% $2,600 ($1,900) $7,800 ($3,200) ($1,100) ($500) ($100) $1,500 $5,100 Restricted Cash $4,000 Restricted Cash $2,400 Beginning Cash Balance 12/31/14 CFFO Before Working Capital Change in Working Capital & Capital Accruals Capital Expenditures Dividends Share Repurchases Acquisitions & Other Debt Issuance Ending Cash Balance 6/30/15 * Note: Annualized and excluding the impact of non-core adjustments; See GAAP reconciliation at 19

20 Capital Program 2015 Capital Budget $1.7 bn ~$1.5 bn Total company capital expenditures for the 2Q15 were $1.5 billion and we expect our quarterly expenditures to continue to ramp down through the year. Permian Resources Remaining Oil & Gas Permian Resources Remaining Oil & Gas Oil and Gas spent $2.7 billion during 1H15, with Permian Resources expenditures comprising 47% of the total, and the remaining $500 million split between Chemicals and Midstream. Midstream & Chemicals Midstream & Chemicals 1Q15A 2Q15A 3Q15E 4Q15E Growth in operating cash flow should help us achieve our goal of being cash flow neutral after capital expenditures and dividends at ~$60 realized oil prices 20

21 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-Continent & other production. 3Q15 domestic production flat with 2Q15 3Q15 International Production Outlook Expect volumes to increase in 3Q15 by ~10,000 BOED Production rates at Al Hosn should continue to improve, increasing to ~35,000 BOED in 3Q15 Increase from Al Hosn should be partially offset by ~8,000 BOED of lower volumes in Colombia due to pipeline disruptions experienced during July FY15 Total Production Outlook Assuming no meaningful disruptions during 2H15, we are raising the lower end of our FY2015 production guidance range from 650,000 to 660,000 BOED. Our current estimate of FY2015 volumes of 660,000 to 670,000 BOED will provide year-over-year growth of 12% to 13%. 21

22 3Q15 & FY 2015 Guidance Summary Oil & Gas Segment 2015 total production is expected to be between 660, ,000 BOED domestic oil production growth of at least 12% Permian Resources 3Q15 oil growth of 5,000 BOD, offset by Midcontinent declines Domestic 3Q15 Production flat International 3Q15 Production Al Hosn Gas Project volumes expected to be ~35,000 BOED. Colombia production expected to decrease by 8,000 BOD due to pipeline disruptions. Price Sensitivity Pre-tax Income Impact (Quarter) Oil +/- $1/bbl = +/- $30 mm NGL +/- $1/bbl = +/- $7 mm U.S. Nat Gas +/- $0.10/mcf = +/- $3 mm DD&A FY 2015 Oil & Gas: ~$15.50/BOE Chemicals and Midstream: $625 mm Chemical Segment ~$140 mm pre-tax income in 3Q15. Corporate FY 2015 Domestic tax rate: 36% FY 2015 Int'l tax rate: 65% Interest expense of $50 mm in 3Q15 Exploration expense: $20 mm in 3Q15. 22

23 Permian Resources Production Growth Total production grew 51% yearover-year to 109 MBOED. Oil NGL Gas Oil production grew 78% year-over-year to 71 MBOD. Total production expected to grow at a ~30% annual growth rate through Oil production is expected to continue to grow at rates higher than total production as we focus on drilling oil projects Q15 2Q15 2H15E Production (MBOED) 23

24 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 Well Count Hz 23 Hz 56 Hz 61 Hz 44 Hz 36 Hz 47 Hz 0 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15E 4Q15E Drilled Online Hz 53 Hz 42 Hz 49 Hz 48 Hz 50 Hz 52 Hz 24

25 Permian Resources Drilling Inventory Lowering economic hurdle points through reservoir characterization and optimization, improved productivity and faster time to market Updated hydrocarbon richness maps, petrophysical and geochemical models using vast database of data from: 9,900 square miles of 3D seismic Drilling Inventory Based on Q4 Costs Better Well Productivity and Lower Cost 61% (~27 yrs) 81% (~ 36 yrs) 100% (~44 yrs) Avalon Delaware Bone Spring Production information, well logs, drill cuttings and cores from: 37% (~16 yrs) Spraberry Wolfcamp D 24,000 Oxy operated wells 4,400 outside operated wells 15% (~7 yrs) Wolfcamp C Wolfcamp B Wolfcamp A $40-$50 $50-$60 $60-$70 $70-$80 >$80 (## yrs) represents drilling inventory of years at 2015E activity levels 25

26 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 YTD TARGET Drilling Completion Hook-Up Step change in capital efficiency is allowing for increased activity with fewer drilling rigs and structural long-term cost reductions 26

27 Permian Resources Drilling Efficiency Delaware Basin Wolfcamp A well drilling time reduced by ~50% and costs by ~40% 0 2,000 4,000 January average = 44.3 days June average = 22.4 days Improvement = 21.9 days Technology Days 6,000 Savings = $ 2.1 mm Multi-well pad, reduced move time 1.8 High-resolution benchmarking 1.5 Advanced mud system to eliminate casing across salt interval 5.1 Oxy Drilling Dynamics 8.5 Curve building optimization 1.2 Vibration reduction to eliminate downhole tool failures 1.7 Rig site crew efficiency 2.1 Total Days Reduction 21.9 Depth 8,000 10,000 12,000 14,000 16,000 18, days Best Well ~50% days reduction ~40% cost reduction 22.4 days June Avg 44.3 days January Avg Days 27

28 Second Quarter Earnings 2015 Permian Resources Well Cost Reductions Move to Manufacturing Mode Significantly Reduced Well Cost WELL COST Delaware Wolfcamp A, 4,500 HZ DRILL DAYS Delaware Wolfcamp A, 4,500 HZ Gross Well Cost $MM $12.0 $10.0 $8.0 $6.0 $4.0 $2.0 $10.9 $5.6 $5.3 $6.8 $6.2 $3.6 $3.4 $3.2 $ $ Current Target Q15 2Q15 Best Drilling Completions Rig Release to Rig Release 28

29 Permian Resources Delaware Basin Delaware Basin Benches Bell Canyon Cherry Canyon Brushy Canyon Avalon 1 st Bone Spring 2 nd Bone Spring Delaware Basin Majority of Wolfcamp locations are in our operated areas of Reeves County. Current Bone Spring locations are located primarily in New Mexico. 3 rd Bone Spring A Wolfcamp B C D Development Appraisal OXY Focus Acreage Drilling Locations by Bench Gross Wells Bone Spring 1 st, 2 nd and 3 rd 2,300 Wolfcamp A / B / C 800 / 800 / 700 Other 900 Vertical 150 Total 5,700 Horizontal Development Ready 2,000 Net WI Wells 4,100 Wolfcamp A/B and 2 nd Bone Spring are in development mode Additional benches currently in appraisal mode are the 1 st and 3 rd Bone Spring, Wolfcamp C/D, and Brushy Canyon. 29

30 Second Quarter Earnings 2015 Permian Resources Delaware Basin Well Performance: Texas Delaware Wolfcamp A 70% Oil 71% Oil Boepd / OXY Focus Acreage Horizontal wells completed in this area believed to be among most prolific in Permian Basin to date 30

31 Second Quarter Earnings 2015 Permian Resources Well Cost Reductions Move to Manufacturing Mode Significantly Reduced Well Cost WELL COST East Midland Wolfcamp A 7,500 HZ $10.0 $9.2 DRILL DAYS East Midland Wolfcamp A 7,500 HZ Gross Well Cost $MM $8.0 $6.0 $4.0 $2.0 $5.5 $3.7 $6.5 $6.2 $4.2 $ $2.3 $2.2 5 $ Current Target Q15 2Q15 Best Drilling Completions Rig Release to Rig Release 31

32 Permian Resources Midland Basin Midland Basin Benches Midland Basin Yates Grayburg San Andres Clear Fork Upper Spraberry Middle Spraberry Lower Spraberry Majority of Wolfcamp locations are in our operated areas of Martin, Midland, Howard and Glasscock Counties. Wolfcamp A B C D / CLINE Barnett Shale Wolfcamp A & B and Spraberry are in development mode. Mississippian Lime OXY Focus Acreage Drilling Locations by Bench Development Appraisal Montoya Simpson Ellenburger Gross Wells Exploration Additional benches currently in appraisal mode are the Clearfork and Wolfcamp C & D. Spraberry 1,100 Wolfcamp A / B / C / D 550 / 350 / 250 / 600 Other 250 Total 3,100 Horizontal Development Ready 2,200 Net WI Wells 2,800 32

33 Second Quarter Earnings 2015 Permian Resources East Midland Basin Well Performance: Wolfcamp A Boepd / % Oil OXY Focus Acreage Multiple fields in East Midland with highly economic Wolfcamp potential Merchant area continues to show encouraging results in Wolfcamp A, B, and C Benches Recently acquired acreage, primarily in Howard County, includes several very high performers in the Wolfcamp A 33

34 Permian EOR CO 2 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

35 Permian EOR Operating Efficiency Continue to drive capital and operating cost lower by enhancing operability and productivity $1.70 $1.50 $1.30 San Andres New Drill Average Gross Cost, $MM $1.5 $1.4 $ Downhole Maintenance Average Hours Per Job $1.10 $ $0.90 $ $0.50 Q Q Q Q Q Q Q

36 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 drilling times Improved base production Valuable on the ground training and experience 36

37 Second Quarter Earnings 2015 Permian Summary Continue to execute focused development strategy in Permian Resources Operate average of ~12 rigs in 2H 2015 Expect to drill ~100 horizontal wells in 2H 2015 EOR business is expected to generate free cash flow this year even in the current oil price environment Oxy is well positioned to meet the challenges of lower prices and to grow cash flows. EOR 211 Resources Q15 2Q15 2H15E Production (MBOED) 37

38 SECOND QUARTER 2015 EARNINGS CONFERENCE CALL Q&A