Q1 2024 Earnings Summary
- Occidental expects to achieve $400 million of incremental cash flow from midstream contract roll-offs, with high confidence in this target due to better terms and some improvements already being realized.
- The company is deleveraging through noncore asset sales, with significant interest in their high-quality assets, which is expected to enhance the balance sheet and potentially resume share repurchases, providing greater value per common share.
- Occidental is achieving production growth while reducing rigs, improving capital efficiency, and decreasing base decline rates by 4% to 5%, resulting in more production with less capital expenditure.
- There is uncertainty regarding Oxy's ability to achieve the projected $400 million in cash flow improvements from midstream contract roll-offs, as better terms are not yet fully locked in and may be subject to renegotiation challenges.
- An extended shutdown in the Gulf of Mexico has led to a reduction in oil production, contributing to a lowered oil cut guidance for the year. ,
- OxyChem is experiencing weak demand and depressed prices for key products like PVC and caustic soda due to overbuilding in China and inflation in the United States, with no clear timeline for market recovery.
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Noncore Asset Sales
Q: What's the status of planned noncore asset sales?
A: The company is receiving high interest in its noncore assets and remains committed to divesting $4.5 billion to $6 billion within 18 months of closing. They are confident in achieving this target based on the strong incoming interest but will ensure valuations are appropriate before proceeding. -
Midstream Contract Roll-offs
Q: How confident are you in the $400 million midstream benefit?
A: Management has high confidence in realizing the $400 million incremental cash flow from midstream contract roll-offs, with some benefits already being seen today. -
Permian Production and Capital Efficiency
Q: Why not increase total volume outlook despite higher CapEx?
A: The Permian production is set to increase by 18,000 barrels per day from the first half to the second half of the year while reducing rigs, demonstrating more with less. Capital intensity has improved over last year, focusing on spending dollars per production added. -
Deleveraging Plans
Q: Will deleveraging be more organic given asset cash flows?
A: The company is fully committed to achieving the targeted debt reduction to $15 billion through a combination of asset sales and organic cash flow, ensuring the best value decisions are made. -
OxyChem Market Outlook
Q: What's the outlook for chlorine and caustic soda markets?
A: After achieving record earnings in previous years, prices are at a bottom due to inflation and weak demand from an overbuilt China. Management expects demand and prices to improve beyond this year as the housing market recovers and inflation stabilizes. -
Secondary Benches in Bone Spring
Q: How do secondary benches impact inventory and returns?
A: Success in secondary benches like the Bone Spring adds low-cost inventory, improving capital intensity. Approximately 450 wells with less than $50 breakeven are being added, extending low-cost capital intensity over the next few years. -
DJ Basin Performance
Q: Why is DJ Basin outperforming, and is guidance conservative?
A: The DJ Basin's strong performance is due to subsurface improvements and operational efficiencies, leading to over 20% year-on-year improvement. While gains have been significant, management aims to provide accurate outlooks but acknowledges the teams are expected to continue outperforming. -
CrownRock Acquisition Update
Q: Any updates on CrownRock acquisition production estimates?
A: There are no updates on CrownRock's production estimates at this time. The company expects to provide more information upon closing, which is anticipated in the third quarter. -
Gulf of Mexico Production Impact
Q: Does the Gulf outage affect oil mix and guidance?
A: The Gulf of Mexico shutdown is almost entirely responsible for the 100 basis point reduction in oil cut for the year. There's no other significant impact trending differently in the portfolio. -
Colorado Production Fee
Q: What's your view on Colorado's new production fee?
A: Management views the agreement as a win-win, believing that the fee is manageable and that it will lead to positive environmental initiatives without overly burdening operations.