Occidental forecasts 4% drop in 2023 global production from fourth quarter

Occidental Petroleum Corp., Houston, is projecting that its global oil and gas production will take a small step back this year from 2022 as it focuses on “promoting additional capital efficiency” in its Permian basin operations while continuing to pay down its debts and return capital to investors.

The leaders of Occidental on Feb. 28 told analysts and investors that they expect the company to produce an average of 1.18 MMboe/d this year, which is down nearly 4% from fourth-quarter 2022. In the Permian, production of 560,000-590,000 boe/d is expected, which is in line with the 565,000 boe/d rate of late 2022. The company’s operations in the Rockies and other parts of the US are expected to produce about 240,000 boe/d this year, down from 272,000 in fourth-quarter 2022, while Gulf of Mexico output will be down slightly from its late-2022 average of 150,000 boe/d. International production, meanwhile, is forecast to slide 8% to 240,000 boe/d.

President and chief executive officer Vicki Hollub said Occidental last year set operational records in a number of business units, which helped the company buy back $3 billion in shares and lower its debt level. Part of the 2023 strategy to continue to improve operations, Hollub said, are investments in enhanced oil recovery (EOR) work and the company’s OxyChem division, which she said have lower decline rates.

“That’s what we most like about our portfolio: this diversity of having the lower-decline assets combined with the higher-decline but higher cash-flow-generating assets–at least initially. It’s very complementary,” Hollub said.

For the year, Occidental is targeting a capex budget (excluding work on net-zero projects) of $5.2-5.6 billion. That’s up from $4.5 billion in 2022 ($3.8 billion for oil and gas projects) and $2.9 billion in 2021 and, Hollub said, includes an assumption that inflation will lift domestic oil and gas expenses by 15% from last year. Hollub and her lieutenants said they plan to focus primarily on managing production and improving efficiency at many of the company's operations but do expect production to increase steadily as the year progresses. 

Occidental executives also said they have pushed back the expected completion and launch of their first direct air capture (DAC) plant by several months (OGJ Online, Aug. 5, 2022). That project, in Texas’ Ector County, had been expected to start commercial operations in late 2024 but will now complete its commissioning around then and launch full operations by mid-2025.

In the 3 months ended Dec. 31, Occidental posted a net profit of more than $1.7 billion, an increase of 29% from the same period of 2021. Revenues for the quarter more than doubled to $8.3 billion but higher operating costs, inflationary pressures on capital spending, and the impact of Winter Storm Elliott helped keep a lid on bottom-line growth. The company’s OxyChem unit produced record earnings for the quarter.

Shares of Occidental (Ticker: OXY) slipped slightly Feb. 28 to $58.56 and have lost about 15% of their value over the past 6 months. Along with its fourth-quarter 2022 results, the company said its board has voted to boost the quarterly dividend by nearly 40% to 18 cents, which will lift the stock’s dividend yield to about 1.2%.