The paragraph is the introduction to Occidental's Third Quarter 2024 Earnings Conference Call. The call is hosted by Jordan Tanner, Vice President of Investor Relations, and features several key executives, including CEO Vicki Hollub. The focus is on the company's strong performance across its business segments despite challenges like weather disruptions and commodity price volatility. Vicki Hollub highlights the company's highest operating cash flow for the year, driven by strong operational execution and quality assets. She outlines the agenda for the call, which includes reviewing the third quarter performance, updates on the Oil & Gas business and CrownRock integration, developments in direct air capture projects, and progress on their debt reduction program.

In the second paragraph, Sunil discusses the company's financial performance, highlighting the third quarter's $1.5 billion free cash flow, which exceeded expectations across all segments, particularly in Oil & Gas with record U.S. production. This achievement was notable despite challenges like hurricanes in the Gulf of Mexico, with strong performances in the Permian Basin and legacy Midland Basin assets, aided by successful new wells and non-recurring OBO benefits. The Delaware Basin, especially New Mexico, also contributed significantly, with a notable 1.2 million barrels produced from a six-well project. Prominent achievements include having top-performing industry wells in both the Delaware and DJ Basins, attributed to their innovative and dedicated teams.

The paragraph discusses the company's success in onshore development, highlighting efficiency improvements and enhanced well productivity. In their New Mexico program, they have leveraged existing infrastructure to boost returns and achieved a 10% improvement in drilling cycle times in the Permian. Cost reductions include a 20% decrease in third-quarter well expenses compared to the previous year, enabling faster production and enhanced cash margins. The company continues to reduce lease operating expenses and projects a greater than 20% reduction in quarterly BOE by the fourth quarter, aided by increased uptime, improved CO2 utilization, and efficient integration of CrownRock barrels. Overall, their operational and technical advancements are expanding margins and reducing costs, leading to industry-leading well construction.

Occidental had a strong third quarter, exceeding expectations despite Gulf weather disruptions. Their midstream segment performed well, leveraging natural gas pricing between Baha and the Gulf Coast. The recent acquisition of CrownRock has been successfully integrated, with a focus on safety, organizational integration, and talent retention. There have been no major safety incidents since the acquisition. The combined teams are sharing best practices and identifying operational improvements. They plan to maintain investment in their Permian asset and are looking to reduce costs and accelerate market time by using Oxy's supply chain expertise and resources.

The paragraph discusses the company's recent identification of $10 million in expected savings for a 2025 development plan through water integration, highlighting enhanced base production and well performance. This led to higher third-quarter production volumes, prompting a 9,000 BOE per day increase in fourth-quarter projections for CrownRock assets. The company is in early integration stages but optimistic about future opportunities. Additionally, the company updates on its low-carbon initiatives, particularly the progress of STRATOS, the largest direct air capture facility, mentioning efficient construction and accelerated innovation driven by the Carbon Engineering team.

The paragraph describes Oxy's collaboration with its technical teams and the CE Innovation Center, resulting in technological advancements in engineering design for the STRATOS project. The new design will have fewer air contactors and pellet reactors to reduce costs and improve liability, with an initial 250,000 tons per annum capacity expected by mid-2025, followed by an additional 256,000 tons the next year. This strategy adds value and mitigates risks for future Direct Air Capture (DAC) projects. The South Texas DAC project received a significant boost with up to $500 million from the U.S. Department of Energy, potentially increasing by $150 million for an expanded regional carbon network. This support emphasizes the commercialization of DAC technology. The company's progress is driven by innovative teams, learned project efficiencies, and external funding, reinforcing its position in emerging markets and boosting demand in carbon credit markets.

The paragraph discusses the development and impact of STRATOS, a project aimed at showcasing DAC (Direct Air Capture) and geological storage as effective tools for tackling climate change, particularly for industries like aviation and maritime to achieve net-zero goals. It highlights the dual benefit of DAC in enabling net-zero oil production for energy security and meeting demands of expanding data centers and AI-driven industries with low-cost, low-emission power solutions. Additionally, the paragraph outlines the company's significant debt reduction efforts, noting the substantial progress made since the CrownRock acquisition, with $4 billion repaid in three months, nearing their commitment to repay $4.5 billion within a year and aiming for a medium-term debt target of $15 billion.

In the third quarter, the company reported an adjusted profit of $1 per diluted share and a reported profit of $0.98, with the difference mainly due to asset sales. The company generated $1.5 billion in free cash flow and ended with $1.8 billion in unrestricted cash, demonstrating strong financial performance despite challenges like adverse weather and commodity price volatility. This success is credited to new well performance in the Permian Basin, including recently acquired CrownRock assets, and strong trading activities, although Gulf of Mexico production was below expectations due to hurricane disruptions. Domestic lease operating expenses were notably low, underscoring operational efficiency and a focus on higher-margin production.

The paragraph discusses the company's strong performance in the Midstream & Marketing segment, largely due to optimizing cash marketing out of the Permian Basin, which led to earnings exceeding guidance. The company is raising its full-year guidance for all business segments due to third-quarter outperformance and positive fourth-quarter expectations. It is increasing fourth-quarter production guidance, particularly in the Permian Basin, and expects these trends to counteract production impacts from Gulf of Mexico disruptions. OxyChem also surpassed third-quarter guidance despite weather challenges and anticipates higher full-year guidance for caustic soda pricing. Overall, the company is raising its full-year guidance for the Midstream & Marketing segment following strong third-quarter results.

The paragraph provides an update on the company's financial and capital guidance for future projects. It notes a slight decrease in natural gas optimization benefits and accounts for changes due to the sale of a stake in WES. The capital expenditure for 2025 is highlighted, showing a reduction in the low-carbon ventures' budget to $450 million and an increase in the OxyChem budget to $900 million due to project activity. Construction of major projects, including the STRATOS DAC business and OxyChem tile expansion, is underway, with completion expected around mid-2026. The Oil & Gas segment plans to maintain stable activity levels, focusing on optimized well spacing and improved production delivery.

The paragraph discusses the company's expectations for mid-single-digit production growth from its assets and highlights its capital flexibility due to short-cycle U.S. onshore activities. The company is planning multiple 2025 activity scenarios due to recent commodity price volatility. They emphasize their commitment to debt reduction, reporting no 2024 debt maturities and sufficient cash to cover 2025 maturities. Their focus for 2025 will be on deleveraging and strengthening their financial position. Vicki Hollub praises the team's performance in driving value through efficient and cost-effective operations. With the integration of CrownRock assets, they aim to enhance operational efficiencies and margins. Their diversified portfolio in oil, gas, midstream, and chemicals continues to yield strong returns, including achievements in their low-carbon ventures.

The paragraph presents a discussion during a Q&A session following a conference call, where Doug Leggate from Wolfe Research asks Vicki Hollub about the company's operational performance, synergies with CrownRock, and plans amid market concerns regarding the commodity outlook. Doug inquires about the company's strategy in the face of a potential oversupply of oil and capital implications of either accepting growth or slowing down the program. He also asks about the company's plans for deleveraging its portfolio, considering their significant investments and ownership stakes in various entities, amid a possibly softer commodity market. Vicki Hollub responds by stating that the leadership team regularly reviews the macroeconomic environment.

The paragraph discusses a cautious approach to managing oil price volatility, with a focus on maintaining steady activity levels in the CrownRock area while slightly reducing capital in other oil and gas areas. The company's strategy includes preparing for price fluctuations by developing adaptable plans to efficiently adjust production levels as needed, in anticipation of potential changes in global oil supply, particularly due to dynamics in countries like the U.S., Brazil, and non-OPEC nations, with attention to Iran and Russia. The emphasis is on readiness and strategic planning to avoid being unprepared as in past experiences.

The paragraph discusses the company's cautious approach to capital expenditure, indicating that they won't increase it unless prices drop significantly. They emphasize the current strategic allocation of capital into their projects, like CrownRock, which is expected to generate significant cash flow by 2026. The paragraph also highlights the stability and value of their OxyChem and Middle East gas projects amidst oil price volatility. The company is prepared to adapt their cost structure if necessary and is experiencing strong synergies at CrownRock. They also mention their significant portfolio in the Permian Basin and the numerous opportunities they have, including marketing certain assets, as part of their strategy to manage leverage.

Richard Jackson discusses the successful integration of CrownRock, highlighting strong operational performance and synergies achieved since the close. The focus for next year involves a detailed subsurface program with five rigs and exploring de-spacing to enhance recovery per dollar spent. Additionally, the supply chain has contributed to creating a balanced operational portfolio in the Delaware and Midland Basin. A key initiative includes improving frac ore utilization, aiming for over a 20% improvement in "white space," reducing the number of drilled but uncompleted wells (DUCs) and increasing annual production without added costs.

In the paragraph, it's discussed that the integration of South Curtis Ranch and Nail Ranch facilities, as managed by CrownRock, is expected to deliver $10 million in benefits. The Oxy team is conducting "best of the best" workshops to leverage synergies, particularly in the Midland Basin operations, aiming for over 10% cost improvements. Roger Read from Wells Fargo asks about the oil production mix in the Permian following recent changes, including the addition of CrownRock and asset sales. He seeks clarity on whether these changes indicate a structural shift in the resource base or are temporary fluctuations. Vicki Hollub requests Roger to repeat the latter part of his question due to an audio cutout.

The paragraph discusses slight changes in percentages related to production, with Richard Jackson explaining steps being taken to guide understanding of these changes. He highlights the increased use of secondary benches in the Delaware, boosting value despite more NGLs, by utilizing existing infrastructure. He assures that these adaptations aim for leveling off in the second half of the year, as implied in upcoming quarter predictions, and praises the team for a 5% increase in oil volume from the Permian. Roger Read acknowledges the positive production and seeks clarification on the production components.

In the paragraph, Vicki Hollub discusses the company's strategy for debt reduction, emphasizing their commitment to continue reducing debt through 2025, regardless of oil price changes. She highlights that they have already achieved significant success and anticipate maintaining cash flow and making progress through divestitures. The operator introduces Neil Mehta from Goldman Sachs, who asks a macro-level question about the future of shale production, noting recent industry productivity and oil volume successes despite a declining U.S. rig count. Vicki responds by expressing confidence in the continued efficiency of the Permian Basin and predicts it will sustain production, while other U.S. basins will see declines, leading to a plateau in U.S. oil volumes in the next 3 to 5 years.

The paragraph discusses the potential growth and productivity in the Permian Basin, emphasizing the development of secondary benches in the Delaware and Midland Basin. It suggests that this growth could offset declines from other areas and lead to a higher production peak in the future, potentially within three to five years. However, weaker oil prices might delay this peak. In response to a question from Neil Mehta, Vicki Hollub shifts focus to the Direct Air Capture (DAC) initiative, discussing the necessary steps and considerations for bringing Unit 1 into service by the middle of next year. She indicates that Ken will address specific milestones and construction aspects. The paragraph also touches on the potential impact of the election and subsidy environment on the economics of the business.

The paragraph discusses the Direct Air Capture (DAC) project's progress and its potential as a value creator and cash flow generator for the company. Despite current challenges with weaker prices, there's optimism about innovation and commercial viability in the long term. Currently, the DAC project is nearly 90% complete for its first phase, including two capture trains and central processing areas. The project aims to support additional trains by mid-2025 to mid-2026, achieving about 70% capacity. The company is also exploring cost-reduction strategies with close collaboration among engineers since acquiring CE. Efforts include refining reactors and streamlining contractors to enhance efficiency.

The paragraph discusses cost-saving innovations in construction, specifically the reduction of components like piping and valves through modular design, leading to a simpler, faster build process and improved safety. The collaboration with Worley, highlighted by CEO Chris Ashton's visit, has been crucial in adapting strategies efficiently. The project is on schedule, and Vicki Hollub comments on the positive outlook for the direct air capture industry under the upcoming presidency, emphasizing energy independence. She mentions anticipated funding from the Infrastructure Investment and Jobs Act for their DAC 2 project, expecting to receive between $500 million to $650 million.

The paragraph discusses the bipartisan support for 45Q tax credits, highlighting their benefits in helping companies decarbonize and recovering additional oil reserves from domestic reservoirs. This process involves using CO2 for enhanced oil recovery, which is crucial for maintaining an ample supply of liquid fuels. The text notes the challenge of acquiring enough CO2 for this purpose and mentions the use of Direct Air Capture (DAC) and NET Power technologies. NET Power generates emission-free electricity, capturing CO2, which can then be utilized for oil recovery or product manufacturing. These technologies aim to aid companies in decarbonization while extending the country's energy resources.

In the paragraph, Paul Cheng from Scotiabank questions Sunil Mathew about an increase in full-year capital expenditures (CapEx) compared to previous guidance, specifically inquiring if the increase is due to CrownRock's operations in the Permian. Sunil confirms that the entire CapEx increase for 2024 is related to CrownRock, reporting an additional $400 million for the five months they're operating. Paul also asks about expected incremental CapEx for CrownRock from 2024 to 2025, seeking clarification on the gas-oil ratio changes observed between the second and third quarters, and whether these changes were influenced by CrownRock.

The paragraph discusses the company's plans for the next year's capital, estimated to be between $900 million and $950 million. It addresses a 2% decrease in the oil cut in the Permian basin from the second to the third quarter and attributes it to growth in unconventional production in the Rockies and Permian, and the development of secondary zones, which have a lower initial oil cut but better value. Richard Jackson mentions that growth in CrownRock contributes to this change and that these trends are expected to continue into the next year. Scott Gruber from Citi asks about increasing the percentage of secondary zone development in the Delaware basin from 20% to 40% and inquires about future plans for this percentage, as well as opportunities on the Midland side with the CrownRock assets.

The paragraph discusses future plans and expectations for operations in the Permian region. Richard Jackson mentions that they intend to maintain a focus on primary benches like Spraberry, Wolfcamp A, and B, using existing infrastructure and a de-risked operational plan to optimize performance. He suggests adjusting activity levels as necessary based on their final program. The conversation shifts to CapEx in the chemicals sector, with Arun Jayaram asking about normalized CapEx expectations after planned projects, to which Vicki Hollub responds that they anticipate returning to around $300 million in CapEx after completing specific projects next year.

In the discussion, Richard Jackson noted that the company expects a $325 million increase in earnings from a project set to be completed by mid-2026, driven by an 80% expansion in capacity. Arun Jayaram inquired about property sales in the Rockies, specifically in the Powder River Basin. Vicki Hollub explained that the company sold the northern part of the Powder River Basin to Anschutz, as it was more suitable for their development, allowing her company to focus on contiguous acreage in the southern part of the basin for future value creation. The conference then concluded with closing remarks from Vicki Hollub.

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