Release Date: May 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Occidental Petroleum Corp (OXY, Financial) reported a strong start to 2024 with over $2.4 billion in operating cash flow before working capital, highlighting effective operational execution.
- The company's oil and gas business delivered robust production results, essentially offsetting the impact of a third-party outage in the Eastern Gulf of Mexico.
- Occidental Petroleum Corp (OXY) achieved record gross daily production in Oman North, driven by new well performance and production uptime.
- The Midstream business of Occidental Petroleum Corp (OXY) significantly outperformed the high end of first quarter guidance, driven by gas marketing optimization and capturing value in regional pricing disparities.
- Occidental Petroleum Corp (OXY) is advancing construction of its first direct air capture plant, STRATOS, on schedule, enhancing its low carbon ventures businesses and cash flow resiliency.
Negative Points
- Occidental Petroleum Corp (OXY) faced challenges due to a third-party outage in the Eastern Gulf of Mexico, impacting early 2024 operations.
- Despite strong performance, the company revised full year Gulf of Mexico production guidance downwards due to the extended outage.
- Occidental Petroleum Corp (OXY) is experiencing lower gas prices, which are unfavorable and impact parts of the portfolio despite benefits to OxyChem from reduced energy costs.
- The company noted a negative working capital change, typical for the first quarter, largely due to semiannual interest payments on debt and annual property tax payments.
- Occidental Petroleum Corp (OXY) is undergoing a divestiture program to deleverage, aiming to reduce principal debt to $15 billion or below, indicating current financial pressure.
Q & A Highlights
Q: Could you provide more details on the Permian outlook, including the Rockies, in terms of CapEx and full-year production forecasts?
A: (Richard A. Jackson - Occidental Petroleum Corporation - Senior VP and President of Operations - U.S. Onshore Resources & Carbon Management) Yes, we are pleased with our first quarter results in both the Rockies and the Permian. For the Permian, we're seeing an implied production increase of about 18,000 barrels a day from the first to the second half of the year while reducing rigs. This is achieved through better operational efficiencies and well design improvements, which also contribute to cost reductions. We're cautious with our full-year guidance as we want to observe how production ramps up in the coming quarters.
Q: Regarding the midstream performance, how should we think about its contribution over the next 1.5 to 2 years, especially considering potential constraints on oil and gas movement out of the basin?
A: (Vicki A. Hollub - Occidental Petroleum Corporation - President, CEO & Director) We don't anticipate issues with moving oil or gas out of the Permian Basin. Our midstream performance benefits from our ability to move and trade gas efficiently across different markets. We have overcapacity for oil transportation, which allows us to capitalize on third-party barrel opportunities. This setup helps us manage volatility and capture opportunities in the midstream business.
Q: Can you discuss the impact of secondary benches in the Permian, particularly in terms of well performance and overall operation?
A: (Richard A. Jackson - Occidental Petroleum Corporation - Senior VP and President of Operations - U.S. Onshore Resources & Carbon Management) Our focus on subsurface workflows has been applied to secondary benches, leading to impressive performance. This approach is consistent across different areas, whether in the Midland or Delaware basins. In the Rockies, operational improvements have also contributed significantly to performance, with better early and long-term production management.
Q: What is the current market perspective on noncore asset sales, and how confident are you in achieving up to $6 billion from these sales?
A: (Vicki A. Hollub - Occidental Petroleum Corporation - President, CEO & Director) There is high interest in our noncore assets since announcing our divestiture plans. We expect this interest to translate into substantial offers. Our decision will be based on valuation, ensuring we make the best value decisions for our portfolio.
Q: Could you provide an update on the CrownRock acquisition and its current production trends?
A: (Vicki A. Hollub - Occidental Petroleum Corporation - President, CEO & Director) We do not have an update on CrownRock's production or other metrics at this time. We will provide more details in our next quarterly update, likely around the time the transaction is expected to close in the third quarter.
Q: What are your thoughts on the new production fee initiative in Colorado, and how might it impact Oxy?
A: (Vicki A. Hollub - Occidental Petroleum Corporation - President, CEO & Director) The agreement reached in Colorado is seen as a win-win, providing a manageable framework for both the industry and the state's environmental goals. The fee, combined with regulatory stability, allows for continued investment and environmental initiatives without being overly burdensome.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
