Occidental profits quadruple, execs to prioritize shareholder returns in 2023

Nov. 9, 2022
CEO Vicki Hollub said if there is any production growth next year, it will be ‘in the neighborhood of 1% or less.’

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.