Occidental executives outline conservative spending plans

The leaders of Occidental Petroleum Corp., Houston, are taking a cautious view on production and capital spending growth in coming quarters while they reap early productivity rewards from their Permian basin acquisition of CrownRock LP.

Occidental’s total production in the 3 months ended Sept. 30 averaged 1.412-million boe/d, a pop of 12% from Q2 and nearly 16% year over year. The former CrownRock assets, which were officially acquired on Aug. 1 (OGJ Online, Dec. 11, 2023), contributed a net 109,000 boe/d to that total, which beat management’s projections of 3 months ago by 5,000 boe/d. Total Permian production rose to 729,000 boe/d from 587,000 boe/d in the second quarter, topping expectations thanks in part to higher uptimes.

Speaking to analysts Nov. 13, president and chief executive officer Vicki Hollub and her lieutenants said they will keep development activity of the CrownRock operations at roughly their current levels for 2025. They expect that those assets will produce between 156,000 and 165,000 boe/d in fourth-quarter 2024 and that the company’s teams will be able to book more efficiency gains in coming quarters.

“We think the Permian will continue to deliver,” Hollub said on a conference call when asked about broad productivity gains this year at Occidental and its peers. “It’s a basin that will keep on giving” even if/when production from other regions first plateaus and then recedes.

Hollub’s sentiment was echoed Nov. 13 not far from Occidental's headquarters at the BofA Securities Global Energy Conference. There, EOG Resources Inc. chief operating officer Jeff Leitzell pointed attendees to his teams’ ability to keep squeezing efficiencies from their work in the Permian.

“We really feel like the Permian is in the absolute sweet spot right now and just continues to improve for us,” Leitzell said. “We’re getting better every single day operationally from an efficiency standpoint. We continue to increase well performance and get better and understand how to increase well performance.”

Most of Occidental’s production gains in the coming months will come from such efficiencies. For the fourth quarter, Hollub and her team are expecting Occidental will average 1.43-1.47 million boe/d, which would be less than 3% higher than third-quarter 2024 at the midpoint. The company's Permian output is forecast to climb to 751,000-769,000 boe/d, the midpoint of which would be an increase of 4% from the just-concluded quarter.

Looking to 2025, the Occidental team is targeting production growth in the mid-single digits. Chief financial officer Sunil Mathew told analysts that oil-and-gas work and spending will be largely in line with this year’s levels. The acquired CrownRock acreage will continue to be worked by five rigs but spending plans for many of the company’s other domestic operations are still very much in draft form and likely to be a little smaller than 2024’s levels.

“Considering the recent commodity price volatility, we are evaluating multiple 2025 activity scenarios across the rest of our US onshore portfolio,” Mathew said. “We retain considerable capital flexibility within these assets.”

Asked to elaborate on those cautious spending plans, Hollub said the volatile prices and surplus production in global oil markets is driving the conservatism. Even with some parts of the world trimming production, she said there remain too many wild cards for Occidental to get aggressive.

“But I can assure you that our teams have prepared plans and next steps for multiple price scenarios along with a plan of […] how to execute a decrease in activity,” she said. “I will say that, should prices go up—which we don’t exactly expect—we would not increase our capital beyond what we’re talking about right now.”

Occidental produced a net profit of $964 million in the third quarter, a drop from more than $1.5 billion in the same period of 2023, as total sales ticked up to $7.17 billion. Revenues from oil and gas operations rose 2% to a shade under $5.7 billion.

Shares of Occidental (Ticker: OXY) were up nearly 2% to about $51.20 on the heels of the company’s earnings report and conference call. They are, however, still down nearly 20% over the past 6 months, which has cut the company’s market capitalization to about $48 billion.