The operator of Occidental's Fourth Quarter 2023 Earnings Conference Call welcomes participants and introduces the company's executives. The presentation includes a cautionary statement and references to non-GAAP financial measures. CEO Vicki Hollub discusses the company's financial performance, operational excellence, and strategic advancements in 2023, followed by an overview of their capital plans for 2024.

In 2023, the company had a successful year, with $5.5 billion in free cash flow, which allowed for dividends, share repurchases, and investments. Production exceeded expectations, driven by record new well productivity rates and expansions in the UAE. The company also maintained a strong reserves replacement ratio and saw an increase in worldwide proved reserves. OxyChem performed well, achieving $1.5 billion in pre-tax income and making progress on their Direct Air Capture facility. The year ended on a positive note.

In the oil and gas sector, the company had its highest quarterly production in over three years, despite a third-party interruption in the Gulf of Mexico. The Rockies business also outperformed and innovative technology and optimization techniques helped improve productivity. The company's teams in the Permian Basin delivered strong results, with one well achieving the highest six-month cumulative production ever in the New Mexico, Delaware Basin. The company aims to continue its success in the Delaware Basin and has secured additional capital for appraisal wells in the second and third Bone Spring lines. These efforts are positioning the company for success by adding new horizons and improving existing ones.

Oxy is making progress in various basins, including the Midland and Powder River basins, where they have seen significant improvements in well productivity and record drilling times. They are also utilizing technology in the deepwater Gulf of Mexico to drive production and have made strategic moves to strengthen their portfolio and create value for shareholders.

The company has a diverse portfolio of oil and gas developments, including high-quality shale and conventional projects. They have also made strategic acquisitions, such as CrownRock, to increase their cash flow and support their cash flow priorities of dividends, deleveraging, and share repurchases. They have also made significant advancements in their low-carbon ventures, including the acquisition of Carbon Engineering and the STRATOS joint venture with BlackRock. The company's cash flow priorities and capital plans for 2024 will support their growth and sustainability.

In 2024, the company plans to focus on cash flow and shareholder return priorities, including debt reduction and dividend growth. They intend to repay at least $4.5 billion in debt and prioritize debt reduction until their principal debt balance is $15 billion or below. The acquisition is expected to strengthen their balance sheet and free up cash for future sustainable dividend growth. The company will continue to invest in short-cycle, high-margin projects, while also increasing investments in longer-cycle cash flow growth. They expect their unconventional assets to generate more cash and continue to see production growth. They also plan to invest in lower decline conventional reservoirs to drive longer-term cash flow resiliency.

OxyChem is expected to increase investments this year for the Battleground expansion and plant enhancement project. A second drillship was added in the Gulf of Mexico for future growth. Investments are also being made in gas processing expansions for Permian EOR business and for a second Direct Air Capture and sequestration hub in South Texas. Capital contributions from financial partners, including BlackRock, will add to the $600 million investment in low-carbon businesses. Progress is being made towards Oxy's net-zero pathway. Sunil will now review the fourth quarter financial results and 2024 guidance.

The company announced a profit of $0.74 per diluted share and a reported profit of $1.08 per diluted share, with the difference primarily due to the acquisition of Carbon Engineering. Despite production losses caused by an unplanned outage in the eastern Gulf of Mexico, the company exceeded its guidance and had a positive working capital change. The closing of the acquisition is expected to be delayed due to a request for additional information from the FTC, and production is expected to grow in 2024.

The paragraph discusses the production outlook for Oxy's operations in the Rockies, Permian Basin, and internationally. It also mentions the expected decrease in production in the first quarter due to various factors such as lower activity levels and maintenance. The chemicals segment is expected to generate a pre-tax income close to its fourth best year despite potential market challenges. The first quarter results for OxyChem are expected to be flat due to PVC price erosion, seasonal demand, and export pricing pressure.

The company expects to see financial improvements in the coming years due to reduced transportation rates and projects in their midstream and chemicals businesses. They also plan to invest in their conventional assets to generate cash flow and meet their deleveraging targets. The company's focus on operational excellence and shareholder returns is recognized by the CEO.

The company's efforts have led to successful achievements and progress towards a successful 2024. The call is opened for questions, with Richard Jackson and Ken Dillon also participating. The first question is about deleveraging and the path to reducing debt after the CrownRock acquisition. The CEO mentions that there is a lot of interest in the Permian and they plan to divest non-core properties after the acquisition is closed. The Gulf of Mexico production is expected to be lower in Q1 due to a pipeline outage, but should increase in the following quarters.

The speaker is asking questions about the company's recent disposal and acquisition decisions. They mention that the company had previously planned to sell 25 different assets to reduce debt, but ended up not needing to do so after acquiring Anadarko.

The speaker is discussing the potential cash flow associated with divesting assets worth $4.5 billion to $6 billion. They cannot provide a specific estimate at this time due to changing factors, but they are trying to minimize the amount of cash flow lost. The speaker also addresses questions about sustaining capital and explains that the growth rate of 2% correlates with spending of about $1.5 billion, with some of that money going towards mid-cycle projects that will generate oil production in the future.

The paragraph discusses the potential delay in mid-cycle investments in the Gulf of Mexico and how it will impact production. The expected 2.2% increase will be based on a spending of $4.9 billion, which is less than the mid-cycle price of $4.8 billion. The company's oil and gas operations will still see growth due to increased productivity and development. The question from John Royall is about the full year midstream guide and the moving pieces from 2023 to 2024, as well as the potential for the midstream business to generate $300-$400 million in savings under mid-cycle conditions. Sunil Mathew mentions that the lower guidance for this year is due to assumptions about the spread for gas transportation contracts.

The company was able to capture gas transportation optimization opportunities last year, such as during a cold weather event in the West Coast. They have assumed a lower sulfur pricing for 2024, but expect prices to improve in the second half of this year. The company expects an uplift in their midstream income in the next few years. They also added $700 million BOE to their reserves, mostly from their Permian Resources business.

The company experienced revisions in productivity improvements, with the majority coming from Permian EOR. The focus on primary and secondary benches has led to outperformance in production, particularly in the Delaware basin. EOR projects and investments in gas processing facilities have also contributed to increased base production and reserve growth. Additionally, significant reserves were added in Algeria due to the team's efforts in merging contracts.

The paragraph discusses the significant increase in reserves made by the Algeria team, with the bulk coming from the Permian and Algeria. It also mentions the increase in reserves in all business units except for Al Hosn, where there was already a significant amount booked. The question from David Deckelbaum is about the plans for EOR production and the expected growth rate over the next five to ten years. Vicki Hollub responds by stating that EOR will be a significant part of their portfolio development and that they have 2 billion barrels of resources remaining to be developed. She also mentions their plans to build Direct Air Capture facilities to extract CO2 from the atmosphere, making their barrels the most sustainable in the world. EOR is seen as crucial for maintaining energy independence in the United States.

The company believes that EOR is crucial for the success of the climate transition and will provide affordable net zero carbon barrels of oil. They have a strategy in place to make this a significant part of their operations, which will benefit shareholders and the U.S. Additionally, the company is investing in new wells and expanding their gas plant to increase production and bring on CO2 for future use. These projects have a low decline and are expected to be very competitive in the company's portfolio.

Richard Jackson, COO of Occidental Petroleum, discusses the company's plans for growth in the coming years. He mentions that the Seminole project will add 15,000 to 20,000 barrels per day with minimal capital investment. This fits within the budget for EOR spending this year, and there is potential for further growth as more CO2 is brought on. Jackson also mentions that discussions with the DoE for the second DAC facility in Kleberg are going well, and there is a timeline for the start of construction. The company is also working on building out subsurface capabilities for CO2 and has submitted eight Class VI and expects to submit another 10 this year. Carbon Engineering is also making progress in R&D and project work with Ken.

During a conference call, Vicki Hollub, CEO of Occidental Petroleum, and David Deckelbaum, CFO of Occidental Petroleum, addressed questions from analysts regarding the company's pending acquisition of CrownRock. Hollub stated that the company is working diligently with the FTC to provide all necessary information and hopes to close the deal in the second half of the year. Analyst Roger Read asked about the company's capital allocation strategy, specifically why they are investing more in the Rockies and EOR projects rather than the Permian, which is known for its high returns. Hollub did not provide a specific answer but mentioned that the company is focused on building mid-cycle businesses and lower declined businesses in these areas.

Vicki Hollub discusses how the company is balancing their investments to maintain a sustainable growing dividend. Richard Jackson adds that the CrownRock acquisition provides growth opportunities and the Rockies region has low capital intensity and high margins. They are pulling back on activity in the Rockies to achieve a more sustainable level.

Sunil Mathew discusses how the company is balancing capital allocation in the oil and gas segment by considering margin, base decline, and capital flexibility. He mentions the high margin and returns of U.S. unconventional assets, the high cash margin of Gulf of Mexico assets, and the mitigating effect of international assets on commodity price risk. He also explains how the company is managing base decline by investing in both short-cycle and mid-cycle conventional projects, with Permian EOR having the lowest base decline. Finally, he highlights the flexibility of the company's capital allocation, with a majority of upstream CapEx being in the U.S. Onshore where activity can be adjusted based on macro conditions.

Vicki Hollub, CEO of Occidental Petroleum, discusses the company's oil and gas capital allocation strategy, highlighting their diverse portfolio of conventional and unconventional assets. She also mentions their ability to quickly and efficiently wrap up operations in response to macroeconomic conditions. Richard Jackson, head of the DJ Basin, adds that they have a good number of permits for their DJ D&C plan and have been successful in addressing community and state concerns around emissions and safety.

The company has made positive progress in consolidating facilities and improving transportation to make things easier. They are currently in a stable and sustainable position with permit outflow. The preferred redemptions will not occur until late 2025, and the CrownRock acquisition will help offset any mitigated payments. The company plans to use cash flow to pay down debt, including the term loan and upcoming maturities.

Vicki Hollub discusses the delay of the Battleground project to 2026 due to supply chain issues and inflation. However, the other plant enhancement projects are still on track and will provide a $350 million EBITDA uplift. The cash flow from these projects will begin before 2026, but the full impact won't be seen until the second half of 2026. Additionally, OxyChem projects and a reduction in mid-cycle contract prices will provide a total of $1.7 billion in incremental cash in 2026.

The company has made significant improvements in cash flow through projects and cost reduction, and is looking forward to further growth. They are planning on two drillships in the Gulf of Mexico this year, but are also exploring other potential investments, such as water injection, to increase recovery and reduce declines.

The company has seen success in the Gulf of Mexico with low-cost developments and is a world leader in technology. OBN seismic activity has helped with target identification and well planning. The company sees the Gulf of Mexico as a portfolio with potential for growth using existing infrastructure and technology skills. The CrownRock acquisition was not influenced by EOR plans in the Midland Basin, but the company does plan to expand EOR in both the Midland and Delaware Basins. The Q&A session has ended.

Vicki Hollub thanks the participants for joining the conference and concludes by saying goodbye. The operator then officially ends the call.

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