Occidental forecasts 40 percent growth from Permian for 2018

By Occidental Petroleum Corp. | February 20, 2018

Occidental Petroleum Corp. of Houston reported net income of $497 million (65 cents per diluted share) for the fourth quarter of 2017, compared with $190 million (25 cents per diluted share) for the third quarter of 2017. Core income for the fourth quarter of 2017 was $313 million (41 cents per diluted share) compared with $137 million (18 cents per diluted share) for the third quarter of 2017.

“In 2017, our investments in people, technology and assets continued to pay off, putting us ahead of schedule on our breakeven plan. All of our segments generated significant free cash flow, and we achieved record-breaking well results in our Permian Resources business,” said president and CEO Vicki Hollub. “We remain committed to value-based production growth as we execute our returns-focused capital program in 2018.”

Oil and gas results

Total average daily production volumes were 621,000 barrels of oil equivalent (BOE) for the fourth quarter of 2017, compared to 600,000 BOE in the third quarter of 2017. Permian Resources average daily production volumes improved from the prior quarter by 20,000 BOE to 159,000 BOE in the fourth quarter of 2017 due to increased drilling activity and well productivity. Average daily production for Permian EOR increased by 2,000 BOE from the prior quarter to 155,000 BOE in the fourth quarter of 2017.

Oil and gas pre-tax income for the fourth quarter of 2017 was $44 million, compared to $220 million for the prior quarter. Fourth quarter income reflected non-cash charges on non-core Permian acreage of approximately $400 million, partially offset by sale gains of $64 million, while third quarter income included net gains on sales of domestic assets of $81 million. Excluding the charges and gains on sales, oil and gas income for the fourth quarter of 2017 was over $240 million higher than the third quarter, mainly due to improved crude oil and NGL prices.

For the fourth quarter of 2017, average WTI and Brent marker prices were $55.40 per barrel and $61.54 per barrel, respectively. Average worldwide realized crude oil prices were $53.67 per barrel for the fourth quarter of 2017, an increase of 16 percent compared with the third quarter of 2017. Average worldwide realized natural gas liquids (NGLs) prices were $25.08 per barrel in the fourth quarter of 2017, an improvement of 21 percent compared to the third quarter of 2017. Average domestic realized natural gas prices were $2.08 per MCF in the fourth quarter of 2017, compared to $2.15 per MCF in the third quarter of 2017.

Oil and gas preliminary reserves

At year-end 2017, Occidental’s preliminary worldwide proved reserves totaled 2.6 billion BOE, compared to 2.4 billion BOE at the end of 2016. Proved reserve additions from all sources were 412 million BOE, compared to production of 220 million BOE, and represented a reserves replacement ratio of 187 percent. Additions from improved recoveries were 201 million BOE and revisions were net positive 151 million BOE. Preliminary domestic proved reserves totaled 1.6 billion BOE at the end of 2017, compared to 1.4 billion BOE at the end of 2016. Occidental’s domestic operations had proved reserves additions from all sources of 313 million BOE, compared to production of 111 million BOE, for a reserves replacement ratio of over 280 percent. Total company finding and development costs (F&D) were $8.53 per BOE in 2017, compared to $9.65 per BOE in 2016.

As of December 31, 2017, the company's proved reserves consisted of approximately 58 percent oil, 17 percent NGL and 25 percent gas. Of the total proved reserves, approximately 60 percent is in the United States and 40 percent is in international locations. Approximately 74 percent of the proved reserves is developed and 26 percent is undeveloped.

Chemical

Chemical pre-tax income for the fourth quarter of 2017 was $222 million, compared to pre-tax income of $200 million in the third quarter of 2017. The fourth quarter included a gain on sale of $5 million. The increase in core earnings was primarily due to higher realized caustic soda pricing, partially offset by unfavorable vinyl margins. Scheduled and unscheduled plant outages occurred at various facilities in the fourth quarter, resulting in lower sales volumes across many product lines.

A new manufacturing facility in Geismar, Louisiana, was completed on budget and on time in December 2017 and is expected to achieve full capacity in 2018. The facility manufactures 4CPe, a raw material used in making next-generation, climate-friendly refrigerants with low global-warming and zero-ozone depletion potential.

Midstream and Marketing

Midstream pre-tax income for the fourth quarter of 2017 was $9 million, compared to $4 million for the third quarter of 2017. The fourth quarter results included non-cash charges of $120 million on idled facilities. Excluding the charges, the increase in fourth quarter income of $125 million, compared to the prior quarter, was due to higher marketing margins from improved crude oil price spreads and additional incremental margin earned from exporting crude oil from the Ingleside Crude Terminal and higher gas processing income due to higher NGL prices and lower plant expenses.