Occidental holds to production forecast amid Midland, Delaware deals

Occidental Petroleum Corp., Houston, reiterated 2024 guidance after a second quarter in which the operator posted its highest production number in 4 years. The steady production outlook incorporates the expected output from the recently acquired Midland basin operations of CrownRock LP, which will offset the pending loss of barrels from a planned Delaware basin divestiture.

Occidental averaged nearly 1,258,000 boe/d of total production in 3 months ended June 30, up from 1,172,000 boe/d in the first quarter and slightly above the midpoint of the guidance chief executive officer Vicki Hollub and her team had provided the market in the spring. US oil production came in at 553,000 b/d, an increase of 13% from this year's first quarter (when a Gulf of Mexico pipeline outage limited production) and up 6% year over year.

As with a hatful of other US exploration and development companies, efficiency gains have driven Occidental’s numbers. Hollub told analysts and investors on an Aug. 8 conference call that the company has booked unconventional well cost savings of about 10% so far in 2024.

“These savings have been achieved through lower nonproductive time, increased frac utilization, operational efficiency gains and facilities optimization,” Hollub said. “We anticipate further acceleration in time to market in the second half of the year.”

Net profits for Occidental totaled $992 million in the second quarter versus $605 million in the same period of 2023. The company’s oil and gas assets produced segment income of nearly $1.2 billion and midstream and marketing business reversed a prior-year loss but profits from chemical operations fell to $227 million from $337 million mainly because of economic weakness in China.

Looking to the third quarter, executives are forecasting total production of 1,370,000-1,410,000 boe/d, a range that will still include the Barilla Draw assets in the Delaware basin that are set to be sold to Permian Resources (OGJ Online, July 29, 2024). Occidental’s forecast for the full year remains 1,290,000-1,340,000 boe/d.

The Permian Resources sale won’t be Occidental's last in the near future: When announcing the CrownRock transaction last year, Hollub committed to divesting $4.5-6 billion worth of assets by mid-2026. Recent closed and announced deals will bring in $970 million but Hollub the team is in no rush to divest.

“We’ve said previously that we get a lot of incoming offers. But it’s clear that some think this is a fire sale and it is not,” Hollub said. “We have high confidence we're going to be able to achieve our debt reduction targets.”

Shares of Occidental (Ticker: OXY) rose on the heels of the Aug. 8 earnings report and closed Aug. 9 at $58.41, roughly 1% higher than the previous Friday. Shares are essentially flat over the past 6 months, leaving the company’s market capitalization about $53.5 billion.