The operator introduces the Occidental's Third Quarter 2023 Earnings Conference Call, with Vice President of Investor Relations Neil Backhouse leading the call. The call will feature President and CEO Vicki Hollub, along with other executives, who will discuss the company's record performance and provide an update on 1PointFive and Direct Air Capture. The call will also cover non-GAAP financial measures and include a cautionary statement regarding forward-looking statements. Executive VP of Essential Chemistry, Rob Peterson, will cover financial results and guidance, as CFO Sunil Mathew is unable to attend due to a family emergency.

The company had a strong third quarter performance, with exceptional results in their oil and gas production. Production exceeded their guidance and they were able to increase their full year production guidance. The team's expertise and high quality inventory drove record well performance improvements. The Delaware operations team set a new record for continuous pumping time and the company is also utilizing new and innovative technology in their operations.

The company believes that implementing new technology and utilizing their subsidiary 1PointFive's Direct Air Capture (DAC) technology will result in cost reduction and emission reduction. Their midstream and OxyChem businesses performed well in the third quarter, and the company has been able to repurchase shares and redeem preferred equity. The company's progress with DAC, including a partnership with BlackRock and a Memorandum of Understanding with ADNOC, will not only benefit Oxy, but also contribute to carbon neutrality and attract capital and customers.

In just 8 weeks, 1PointFive has announced its first initiative with ADNOC for a megaton scale DAC facility in the UAE and has received a grant from the U.S. Department of Energy for a South Texas DAC hub. Oxy Oman has also announced a joint study with OQ Gas Networks to explore potential carbon capture projects. Richard Jackson will provide a business update on Direct Air Capture and the carbon dioxide removal credit market, highlighting the importance of DAC in solving challenges and providing essential resources for the world.

The company believes that their DAC technology can provide cost-effective carbon dioxide removal credits for businesses in the transportation sector. They have a strategic roadmap to advance technology, partnerships, and markets. The partnership with Carbon Engineering has led to the formation of 1PointFive, which focuses on market development for CDRs. The recent policy support and demand for CDRs have allowed for global development and increased demand for 1PointFive's technology.

The company has made significant progress in their CE process innovations, groundbreaking for a new plant, and key zero emission and emissions measurement actions. They have also partnered with King Ranch to establish a 30 megaton hub in South Texas and have been selected by the DOE for a program grant to develop a second DAC in this hub. There has been strong policy momentum for CCUS, with support from ADNOC and BlackRock's investment in STRATOS. The company has also secured CDR purchase agreements with key industry leaders, showcasing the growing appreciation for CDRs. The acquisition of Carbon Engineering will help accelerate DAC innovation and meet the growing demand for CDRs.

Oxy's DAC strategy has been successful in positioning them as a leader in the technology and market. They plan to continue growing by reducing costs and expanding partnerships. With full ownership of Carbon Engineering's technology, they aim to accelerate innovations and reduce costs. Oxy's teams are also leveraging their expertise in electrochemical and chlor-alkali to improve efficiency. They have a proven track record of innovation and large scale project development, which will be crucial in deploying large scale DAC. The demand for CDRs is increasing, and Oxy aims to provide a low-cost solution to help businesses achieve their climate targets and improve the value proposition for DAC developers.

DAC generated CDRs are expected to play a significant role in reducing corporate emissions, especially for hard-to-abate sectors like aviation and marine. As the cost of DAC decreases, demand for CDRs is expected to increase, and they may become a more popular solution for companies looking to reduce their carbon footprint. The demand for CDR credits from the aviation industry is expected to grow as regulations require airlines to offset their emissions. While sustainable aviation fuel (SAF) is also being pursued as a solution, it is currently limited in its ability to achieve true net-zero emissions. DAC CDRs are seen as a more scalable and cost-effective solution compared to SAF.

The company expects DAC CDRs to be a cost-effective solution for hard-to-abate industries and will focus on reducing costs and developing partnerships to meet market demand. The recent acquisition of CE will help with this goal. The company also announces a $550 million investment in their first DAC facility and ongoing work to lower costs in future DAC developments.

The company is planning to implement several process improvements into STRATOS, which will help demonstrate the improvements at scale and be ready for future DAC builds. This may cause some capacity issues in 2026, but it optimizes their development plan and future costs. The company has received a grant from the U.S. Department of Energy and is continuing to work within their investment principles. They are focused on reducing the cost to capture and attracting more development partners. They also have partnerships with companies like BlackRock, ADNOC, and Oman's OQ Gas Networks. The company is grateful for these partnerships and is focused on delivering a solution that can supply lower carbon products. The discussion will now be turned over to Rob for the financial aspect.

The company posted a profit of $1.18 per diluted share and $1.20 per diluted share, with the difference being due to gains on sales of non-core assets and derivative losses. They generated over $1.7 billion of free cash flow and had over $600 million in unrestricted cash. Production exceeded guidance and operating expenses were better than expected. Capital spending decreased slightly from the previous quarter. The company repurchased $600 million of common shares and redeemed over 15% of deferred equity. As of November 7th, common share distributions fell below the $4 preferred equity redemption trigger.

The company does not expect to reach the $4 per share trigger for cumulative distributions to common shareholders this year due to concentrated share repurchases in the second half of 2022. They plan to continue repurchasing shares at a pace based on commodity prices. Production guidance for the fourth quarter has been raised, despite hailstorms in the Delaware Basin. Domestic operating costs are expected to be around $10.50 per BOE due to property damage and maintenance. OxyChem guidance reflects typical seasonality and a planned turnaround at their Ingleside plant. The company is seeing early indications that PVC and caustic soda prices may have bottomed, but there is still uncertainty in the market. The corporate adjusted effective tax rate is expected to rebound in the fourth quarter. Third quarter Permian capital spending was higher due to program mix and optimization.

In the third quarter of 2023, Oxy had a strong financial and operational performance. They are preparing for 2024 with a focus on operational excellence and delivering shareholder returns. They plan to continue prioritizing share repurchases and using excess cash flow to retire debt and potentially exceed the preferred equity redemption trigger. Their 2024 capital plan is expected to have similar activity levels in domestic onshore and international assets, as well as continued investment in the Gulf of Mexico and the Battleground plant.

Vicki Hollub discusses the potential for DAC to play a larger role in their portfolio and introduces Ken Dillon and Mike Avery to answer questions about the construction and business aspects of the project. The moderator then asks a question about Oxy's potential involvement in industry consolidation, to which Hollub responds that they have already made a significant acquisition with Anadarko and do not currently have plans for further acquisitions.

Vicki Hollub, a member of the BD group, states that while they are aware of industry developments, they do not feel the need to participate in them. Nitin Kumar asks about technology being used to improve recovery rates in the Permian basin, but Hollub believes they have already made significant improvements through understanding the subsurface and optimizing well design and operations. She declines to share specific proprietary information about their technology.

The speaker mentions that they are proud of the slides that show improving performance for their wells, especially in the Permian and Rockies regions. They also mention success in appraisal wells and low breakevens for adding inventory. The next question asks for an update on the construction of the DAC plant for a mid-2025 start.

Ken Dillon discusses the progress of construction for the project, stating that Worley is performing well in the engineering and procurement phases. He also mentions that labor and supply chain have not been an issue, with 90% of materials already committed. He credits Worley's engineering capabilities and the support of visionary vendors, such as Siemens Industries and Technip Energies, for the project's success thus far. These vendors have provided suggestions on how to reduce costs, including having separate assembly lines for bespoke and standard equipment.

The project is going well and vendors have been very helpful in finding ways to save money without sacrificing reliability. The safety performance has been exceptional and materials are on track. The project team has been working well with vendors, fabricators, and Worley. The team has even built materials off-site as a pilot to reduce labor at the site. The visionary vendors have been committed to making the project work and are motivated by the goal of reducing CO2 emissions from transportation. It is estimated that thousands of Direct Air Capture facilities will need to be built to achieve this goal.

The speaker discusses the importance of Direct Air Capture technology in reducing CO2 emissions and achieving global climate goals. They clarify that this technology is not a replacement for wind or solar power. In response to a question about capital considerations, the speaker mentions that their upstream oil and gas activity will remain the same next year, with additional investments in Battleground and drill ships. They expect to provide more guidance on this in the future. The next question asks about inflation in construction, which is directed to Richard.

The speaker discusses the impact of higher interest rates on their business model and growth plan. They mention optimizing resources, such as rigs and frac, to see better returns. They also mention seeing some areas of improvement in terms of softening in areas like oil country tubular goods, sand, and fuel. The speaker is also asked about the impact of inflation on their low carbon business and the terms of their deal with financial institutes for buying CDR.

Richard Jackson, Ken Dillon, and Mike Avery discuss the impact of inflation on the STRATOS project and the progress made in the sales process. Ken states that there has been a moderate increase in costs due to general industry inflation and learnings from the CEIC. Mike shares that there is growing momentum in the market for Direct Air Capture (DAC) and a strong pipeline of potential buyers. He attributes this to the market's recognition of DAC's importance and affordability compared to other alternatives. He also mentions a trend towards higher integrity solutions in the carbon market.

The company has announced deals with various companies and has sold out about 65-70% of their net capacity to 2030. They have a strong pipeline of negotiations and expect to sell out about 85% of their capacity by 2030. The next question is about the business plan and strategy for DAC, and the CEO expresses confidence in the technology and its fit with their strategy. They plan to benefit from the sale of carbon reduction credits and providing CO2 as a product for customers to convert to sustainable aviation fluids.

The author explains that using CO2 extracted from the air in enhanced oil recovery reservoirs is the most efficient way to produce emission-free oil for use in sustainable aviation and maritime fuels. This method not only reduces emissions, but also has a lower impact on the supply chain and is more cost-effective. The author believes that this is crucial in order to cap global warming and generate revenue for their business.

The speaker emphasizes the importance of having partners in order to advance their technology and eventually license it to others. They plan to build hundreds and eventually thousands of these technologies, but it is not sustainable without a business model in place. The speaker also mentions the potential for outsourcing capital and generating revenue through licensing. They clarify that they will continue to invest in oil and gas, but strive for carbon neutrality or negativity in the future.

The speaker discusses plans for the last barrel of oil to be produced from an enhanced oil recovery reservoir using CO2 from the atmosphere. They also mention licensing out this technology to partners around the world. In response to a question about their Permian plan, they mention their focus on secondary benches and increasing completion intensity, which has led to increased cash flow. They plan to continue developing these secondary benches in a methodical manner in the future.

The company has been successful in optimizing their development plans based on positive surprises and improvements in appraisal activity. They will continue to focus on the subsurface and make sure their recovery is outstanding. There was a recent earthquake in the Permian, but the company's disposal process remains focused on responsible use of water, including water recycling.

Oxy is investing in responsible use of industrial water and plans to recycle more water in all areas of operations. They are also excited about their projects in the Gulf of Mexico, including drilling and completing 5 wells and testing 2 exploration opportunities. They see potential for growth in the asset in the second half of the decade through primary production, secondary recovery, and partnering with other companies.

The company has not focused much on water flooding in the past, but they see potential for significant upside in this method for their reservoirs. They have also built a new portfolio in partnership with Kosmos, which could be quickly tied back to Lucius. The company sees this as a way to move capital between different areas and believes there is great potential for secondary recovery. The conference call has now ended.

This summary was generated with AI and may contain some inaccuracies.