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Occidental Petroleum reported a lower loss than expected Q1 loss Tuesday, However $OXY. as the biggest Permian Basin producer after the $38 billion Anadarko aquisition is living on a knife edge with the oil price collapse. ExxonMobil , Chevron and Diamondback reported a much sounder position.


Oil Gas Sunset

Survival Mode In The Oil Patch

Occidental has now cut 2020 capital expenditures three times. On Tuesday OXYsaid it expects to spend $2.4 to $2.6 billion, which is 53% below original guidance and another $300 million below its last estimate from March.

Occidental identified $1.2 billion in operating and overhead cost reductions to be realized in 2020 in addition to achieving $1.1 billion overhead and operating expense synergy target one year ahead of schedule

Guidance on exploration and production spending is key since oil prices collapsed and natural gas prices have continued to fall, with U.S. drilling and production still at high levels despite the collapse in rig numbers Oil service giants Schlumberger $SLB, Baker Hughes, a GE Co $BHGE having reported slowing activity metrics while Haliburton warned about the Permian bottleneck last year.. The Covid-19 economic collapse threw more fuel on the fire.

Occidental Petroleum Corporation NYSE: OXY Reported After Close Tuesday

($0.53) EPS Beat ($0.61) AND $6.4B Beat $5.2 Billion Forecast in Revenue

Earnings

Occidental reported for the first quarter and announced a net loss of $2.2 billion for the first quarter of the year before adjustments, attributing most of it to goodwill impairment charges of $1.4 billion and equity investment losses from Western Midstream Partners which it acquired as part of its $55 billion deal for Anadarko Petroleum. .

The adjusted loss owas still $467 million, EPS showed a quarterly loss of $0.52 per share versus the consensus estimate  -$0.61. Revenue of $6.4 billion was also ahead of expectations for $5.2 billion..This compares to earnings of $0.84 per share a year ago. These figures are adjusted for non-recurring items. On a positive note, the company did book a $1 billion gain on its oil hedges, which helped offset some of those writedowns.

Occidental Petroleum Corporation NYSE: OXY

Market Reaction 13.94 −1.36 (8.89%)

Highlights

  • Oil and gas operations delivered $179 million of pre-tax income, boosted by its oil hedges. Those contracts enabled Occidental to capture an average price of $46.17 per barrel in the U.S. and $50.95 per barrel internationally.
  • Total production averaged 1.416 million barrels of oil equivalent per day (BOE/D) during the quarter, which came in about 31,000 BOE/d above the midpoint of its guidance range. T
  •  OxyChem business was one of the few bright spots. It generated $186 million of pre-tax income during the quarter, which exceeded the company's guidance by $36 million
  • The midstream and marketing business, meanwhile, delivered a pre-tax loss of $1.3 billion. That was entirely due to the $1.4 billion writedown of the company's stake in Western Midstream.
  • It's marketing business helped offset some of this by recording gains on the value of some of its crude oil contracts.

Being The Biggest US Producer Not So Good In TImes Of Oil Price Collapse With High Debt

OXY US Acerage

OXY Combined portfolio

Hedges

OXY OIl hedges Q1 2020

 

Where it all went wrong, (or got worse). The Andarko Aquistion

In May 2019, Occidental topped Chevron's (CVX) offer to acquire Andarko Petroleum (APC)to gain access to Anadarko's Permian Basin acreage. The deal is expected to close in the second half of this year. Once that buyout is finalized, Occidental will become the biggest Permian Basin producer. Anadarko shareholders will vote Aug. 8 on the $38 billion sale

Following the acquisition, Oxy was saddled with a total debt load of around $40 billion. The Wall Street Journal reports the company is looking to reduce, but clearly this is not tmarket to be doing that efficiently.. The company has hired investment bank Moelis & Co. to advise it.v

Occidental is strung out.with about $11 billion in debt maturing by 2022. OXY issued $257 million worth of new shares in mid-April to pay a dividend to Warren Buffett’s Berkshire Hathaway, which lent the oil company $10 billion to buy Anadarko. Buffett no doubt a little nervous about that debt risk.

OXY Debt q1 2020

When it rains it poors. French Total has informed OXY it will not be able to buy its business in Algeria as planned due objections from the Algeriangovernment.

The deal led to some more merger activity in the area. Callon Petroleum (CPE) announced that it would buy Carrizo Oil & Gas (CRZO) in an all-stock deal to expand its Permian Basin acreage. Occidental was also battling activist investor Carl Icahn blasted the Anadarko deal for what he says are overly favorable terms for Warren Buffett. Berkshire Hathaway (BRKB) agreed to provide $10 billion in equity financing to aid Occidental's bid.

Source: Occidental Petroleum

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