Occidental Petroleum reported better than expected fourth quarter earnings on Thursday from a year-ago loss on higher-than-forecast U.S. production and crude prices. $OXY is the biggest Permian Basin producer. ExxonMobil, Chevron and Diamondback reported earlier.
Beyond The Survival Mode In The Oil Patch
Guidance on exploration and production spending is key since oil prices collapsed and natural gas prices have continued to soar. Now with the change in shift in US politics and the COVID affect with the recent Russian attack of The Ukraine has created a demanding if not interesting dynamic for energy producers. Oil service giants Haliburton, Schlumberger $SLB, Baker Hughes, a GE Co $BHGE reported rising activity metrics after the Permian bottleneck a year ago. The Covid-19 economic collapse threw more fuel on the fire.
Earnings
Occidental reported for the fourth quarter (NYSE: OXY) on Thursday with adjusted earnings of $1.48 per share beat analysts’ consensus forecast for $1.10 per share, according to Refinitiv IBES. Revenue was up $4.66 billion from the same period last year.
- Cash flow from continuing operations of $3.2 billion and cash flow from continuing operations, before working capital of $3.9 billion
- Capital spending of $937 million, resulting in record free cash flow, excluding working capital of over $2.9 billion
- Reduced debt maturities by $2.2 billion through debt tender and 2022 maturity call provisions
resulting in total year debt maturity reduction of over $6.7 billion - OXY sold its oil last quarter for an average price of $75.39 per barrel, up about 85% from a year earlier.
Production
U.S. output from the Permian Basin, the Rocky Mountains and the Gulf of Mexico production areas each exceeded the high end of the company’s earlier guidance.
OXY exceeded production guidance midpoint by 49 Mboed, with production of 1,189 Mboed from continuing operations
The company increased its quarterly common dividend to 13 cents per share.
“Occidental’s focus on operational efficiencies in the fourth quarter enabled us to leverage the increases in commodity prices to further improve our balance sheet and liquidity position and set us on a path toward continued debt reduction and the implementation of a new shareholder return framework in 2022 … As we continue to reduce our net debt and strengthen our balance sheet, our focus has expanded to returning additional capital to shareholders,” said Chief Executive Vicki Hollub.
Midstream and Marketing
Midstream and marketing pre-tax loss for the fourth quarter was $15 million, compared to income of $20 million for the third quarter of 2021. The fourth quarter results included $76 million of derivative losses and $21 million of valuation adjustments to inventory.
OxyChem
Chemical pre-tax income of $574 million for the fourth quarter exceeded guidance by $94 million. Compared to prior quarter income of $407 million, the improvement in fourth quarter income resulted primarily from higher realized prices, volumes and margins across most product lines, partially offset by higher energy costs.
Oil and Gas Proved Reserves
As of December 31, 2021, Occidental’s worldwide proved reserves totaled 3.5 billion barrels of oil equivalent (BOE), compared to 2.9 billion BOE for the same period in the prior year. Proved reserve additions were mainly driven by positive price and other revisions of 829 million BOE and extensions and discoveries of 145 million BOE.
Revisions of proved reserves included 421 million BOE of positive price revisions and 208 million BOE of positive revisions related to additions associated with infill development projects, primarily in the Permian and DJ basins, and further positive revisions of 101 million BOE associated with updates based on reservoir performance. The remaining revisions were associated with various other cost related revisions and management changes in development plans.
OXY Recovering after it all went wrong, (or got worse) with the Andarko Acquisition
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 the market to be doing that efficiently. The company has hired investment bank Moelis & Co. to advise it.
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.
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.
About Occidental
Occidental is an international energy company with assets primarily in the United States, the Middle East and North Africa. We are one of the largest oil producers in the U.S., including a leading producer in the Permian and DJ basins, and offshore Gulf of Mexico. Our midstream and marketing segment provides flow assurance and maximizes the value of our oil and gas. Our chemical subsidiary OxyChem manufactures the building blocks for life-enhancing products. Our Oxy Low Carbon Ventures subsidiary (OLCV) is advancing leading-edge technologies and business solutions that economically grow our business while reducing emissions. We are committed to using our global leadership in carbon management to advance a lower-carbon world. Visit oxy.com for more information. via website
Source: Occidental Petroleum
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