Occidental Petroleum's Focus on Gulf of Mexico Growth
2023-08-04
Occidental Petroleum recently held a call meeting to discuss their second quarter 2023 earnings. The meeting featured presentations from company executives, who emphasized the company's diverse portfolio and focus on generating cash flow and driving shareholder returns.
During the meeting, the company's shareholder returns and progress in advancing their shareholder return framework were highlighted as the most important topics. The executives discussed the potential growth opportunities in the Gulf of Mexico, indicating a shift in strategy. Initially, the plan was to maintain production levels in the region and invest cash flow in other areas. However, the President and CEO, Vicki Hollub, now believes that advancements in artificial intelligence and data analytics, combined with their team's technical excellence, could be a game changer for the Gulf of Mexico. This suggests a focus on maximizing growth potential in the region rather than solely generating cash.
The market outlook for Occidental Petroleum is mixed. Production is expected to decrease in the Rockies and the Gulf of Mexico in the third quarter due to various factors. However, international production is expected to increase in the second half of the year. Despite the expected decrease in production, the company remains confident in its overall volume trajectory and expects strong production in the fourth quarter and entering 2024. In terms of the chemicals business, there has been weakening in PVC and caustic soda pricing, but the company's full-year guidance for pre-tax income remains intact.
Key drivers of the business discussed during the meeting include the company's track record of building major projects, their strategic partnership with ADNOC, their focus on cost reduction and technology adoption, and their capital allocation strategy. Occidental Petroleum plans to optimize efficiency, consider pricing strategies, evaluate capital expenditure, collaborate with ADNOC on various projects, and focus on shareholder returns.
The meeting also highlighted several key performance indicators (KPIs) that demonstrated the company's strong operational performance. Occidental Petroleum exceeded its production guidance for the second quarter, with the Rockies team achieving a company record for drilling speed. The Permian production delivered better-than-expected new well performance, and the Delaware completions team achieved a new record for continuous frac pumping time. These KPIs reflect the company's success in increasing production, reducing costs, and improving operational efficiency.
Looking ahead, Occidental Petroleum's outlook for the quarter and year appears positive. The company has experienced strong reserve growth and consistently replaced annual production by a significant margin. Their plan to convert lower-tier benches to top tier is expected to further enhance production capabilities. Occidental Petroleum has also generated significant free cash flow, repurchased common shares, and redeemed a substantial amount of preferred equity. These factors, along with their differentiated portfolio and strong results, support their shareholder return framework.
In terms of capital spending plans, Occidental Petroleum intends to maintain a moderate level of spending, focusing on projects with the best returns. They also consider share repurchases as part of their capital allocation strategy, with potential plans to repurchase common shares and redeem preferred shares in the future.
Participants in the Occidental Petroleum Q2 2023 earnings conference call included Vicki Hollub (President and CEO), Rob Peterson (SVP and CFO), and Richard Jackson (President, Operations, U.S. Onshore Resources and Carbon Management).
In conclusion, Occidental Petroleum's CEO, Vicki Hollub, highlighted the company's high-quality and complementary asset portfolio, praised the operational metrics achieved, and discussed strategic and operational improvements to enhance shareholder returns. With a diverse portfolio of assets and a commitment to technological expertise and environmental sustainability, Occidental Petroleum remains a significant player in the global energy industry.