Occidental increases production guidance after first-quarter efficiency gains

Occidental Petroleum Corp., Houston, topped its production guidance in first-quarter 2023 and increased its guidance for the rest of the year due to greater well efficiency and strong performance from new locations.

In this year's first quarter, Occidental’s production averaged 1.22 MMboe/d, 0.3% more than the midpoint of guidance noted earlier this year. All of the company’s geographic regions topped expectations: The Permian basin averaged 579,000 boe/d versus a February midpoint forecast of 565,000 boe/d, while operations in the Rockies and other US onshore regions totaled 264,000 boe/d (up from guidance of 257,000 boe/d), the Gulf of Mexico produced 171,000 boe/d (up from guidance of 156,000 boe/d), and international projects averaged 206,000 boe/d (up from guidance of 203,000 boe/d).

“Our teams continue to deliver outstanding operational performance, which drives our financial success,” president and chief executive officer Vicki Hollub said in a statement. “We are well positioned to build on the successful first quarter.”

Occidental produced a net profit (before paying out its preferred stock dividend) of almost $1.3 billion on revenues of nearly $7.3 billion. The profit was down from $4.9 billion in early 2022 mainly because the company’s oil price realization was about $74 versus nearly $92 a year prior.

The operator has increased the full-year total production forecast by a little more than 1% to 1.195 MMboe/d. That number is 3.1% higher than Occidental’s full-year 2022 production but nearly 3% below its fourth-quarter number.

A prominent factor in raising that forecast has been the greater efficiency of Occidental’s Permian basin and Rockies operations as well as the highest production in nearly a decade from the Gulf of Mexico, the company said. On a conference call with analysts, Hollub emphasized that Occidental’s wells are not losing performance and pointed to, among other things, the company breaking its lateral length record with a 25,499-ft well in the Denver-Julesburg basin and a Delaware basin team improving the company’s record for continuous pumping time by about 6 hours to about 28 hours.

As executives outlined nearly 3 months ago, Occidental also will ramp up its development activity this quarter. In first-quarter 2023, the company completed 53 wells in the Permian basin, but that number is expected to be 100-110 in the remaining quarters of 2023.

Despite increasing its production outlook, Occidental executives also said they remain focused on returning capital to shareholders, including via share repurchases. Should commodity prices drop sharply enough, Hollub said, the Occidental team would slow its production and emphasize buybacks even more.

Shares of Occidental (Ticker: OXY) were down more than 3% to about $56.90 heading into the last hour of regular trading May 10. Over the past 5 months, shares have fallen about 20%, cutting the company’s market capitalization to about $51 billion.