Occidental profits quadruple, execs to prioritize shareholder returns in 2023

Occidental Petroleum Corp., Houston, quadrupled its third-quarter profits versus 2021 to more than $2.5 billion and produced cash flow from continuing operations of $4.3 billion versus $2.9 billion in the prior-year quarter. The company slightly topped the midpoint of its production guidance for the quarter, wrapping the quarter with daily production of 1.18 million b/d.

During third-quarter 2022, the US operations of Occidental produced 944,000 b/d, an increase of nearly 3% both from second-quarter 2022 and from third-quarter 2021. Permian basin output rose to 523,000 b/d from 499,000 a year ago and Gulf of Mexico production increased nearly 20% to 151,000 b/d. The company’s Rockies operations and those elsewhere across the country slipped about 7% to 270,000 b/d.

For fourth-quarter 2022, chief executive officer Vicki Hollub said the operator expects production of 1.20-1.26 million b/d, with the Permian basin accounting for nearly all of that growth and climbing to 556,000-590,000 b/d. For 2023, Hollub said that number won’t change much because Occidental will “significantly” shift its use of cash toward shareholder returns and because its oil operations will prioritize developing higher-quality wells over sheer numbers.

“If growth is an outcome, it’ll be somewhere in the neighborhood of 1% or less,” she said on a conference call with analysts, echoing several oil and gas industry peers this earnings season. “It’s not our desire to grow it 3-5%. Growth is not our target.”

Case in point: The 46 wells the company drilled in the Delaware basin during the quarter produced about 3,600 b/d on average during their first 30 days. Executives called out a program in Loving County, Texas, where 30-day production averaged about 5,700 b/d across eight wells.

Other points from Oxy’s third-quarter presentation and conference call included:

• Passage of the Inflation Reduction Act has increased the revenue potential of Occidental’s investments in direct and point-source air capture projects. In March, Hollub projected direct air capture (DAC) revenues of $250-450/tonne; they are now looking at a range of $400-630/tonne. For point-source capture plants, potential revenue is now expected to be $85/tonne for the next few years, up from $50/tonne this past spring.
• Expected costs are climbing: Early this year, Occidental forecast construction of its first DAC plant in Ector County, Texas, would cost between $800 million and $1 billion. That figure has increased to $1.1 billion but Hollub said the company is working with suppliers to manage costs as work progresses on the project and others in Oxy’s pipeline.

Shares of Occidental (Ticker: OXY) were down more than 8% to about $68.70 in afternoon trading Nov. 9. They’re still up nearly 20% over the past 6 months, a move that has grown the company’s market capitalization to about $64 billion.