Occidental Petroleum reported for the second quarter on Monday a loss of $8.13 billion including impairment charges of $6.6 billion. $OXY is the biggest Permian Basin producer is living on a knife edge. ExxonMobil , Chevron and Diamondback reported a much sounder position.
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 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 Monday
($1.76) EPS Missed ($1.66) AND $2.93B Missed $3.88 Billion Forecast in Revenue
Occidental reported for the second quarter (NYSE:OXY) on Monday a loss of $8.13 billion, after reporting a profit in the same period a year earlier. OXY said it had a loss of $9.12 per share. Losses, adjusted for non-recurring costs and to account for discontinued operations, came to $1.76 per share missing Wall Street expectations of nine analysts surveyed by Zacks Investment Research was for a loss of $1.66 per share on revenue of $2.93B. analysts forecast revenue of $3.88B. Occidental also booked $1.58B from tax refunds during the quarter, which helped reduce its operating loss.
Second quarter after-tax items affecting comparability included impairment charges of approximately $5.2 billion on oil and gas continuing operations and $1.4 billion in discontinued operations for total impairment charges of $6.6 billion.
Occidental follows an earnings missed by Exxon Mobil and Chevron on July 31. Exxon reported EPS of $-0.7 on revenue of $32.61B, compared to forecasts EPS of $-0.61 on revenue of $38.16B. Chevron had missed expectations on July 31 with second quarter EPS of $-1.59 on revenue of $13.49B, compared to forecast for EPS of $-0.93 on revenue of $21.87B.
Occidental Petroleum Corporation NYSE: OXY
Market Reaction Premarket $13.94 −1.36 (-8.89%)
- All business segments exceeded guidance
- Combined production of 1,406 Mboed from continuing operations, exceeding midpoint of guidance by 36 Mboed
- Permian Resources exceeded high-end of guidance by 5 percent, producing 465 Mboed
- Combined production of 1,406 Mboed from continuing operations, exceeding
- and Gulf of Mexico achieved all-time safety records
- Significantly lowered cost structure by fully delivering acquisition cost synergies and additional cost savings
- Achieved 2020 annualized run rate of $1.5 billion of total overhead savings, including $900 million of synergies and $600 million of additional cost reductions
- Achieved 2020 annualized run rate of $800 million of operating cost reductions, including realizing $200 million in synergies and $600 million of additional cost savings
- Extensive cost management coupled with strong production resulted in second quarter domestic operating expenses to come in below guidance at $4.69 per BOE
- In July, raised $2.0 billion in senior unsecured debt and completed debt tender offer to retire $2.0 billion of 2021 debt maturities
- Occidental says its Q2 average realized domestic gas price fell 24% Q/Q to $0.90/Mcf, average realized natural gas liquids price fell 39% to $7.79/bbl, and its realized oil price plunged 51% to $23.17/bbl.
Pre-tax income for the second quarter of $108 million exceeded guidance by 35 percent. Compared to prior quarter income of $186 million, the decline in income resulted primarily from the negative impact of the COVID-19 pandemic on product demand. Operational spending at various facilities was lower in the second quarter offset by softening realized domestic and export PVC prices and volumes.
Midstream and Marketing
Midstream and marketing pre-tax loss for the second quarter was $7 million, compared to a loss of $1.3 billion for the first quarter of 2020. Excluding the WES goodwill charges from the first quarter of 2020, the decrease reflected mark-to-market gains in the marketing business, partially offset by higher equity investment income from WES. Excluding WES equity income, midstream and marketing pre-tax loss for the second quarter was $147 million.
Being The Biggest US Producer Not So Good In TImes Of Oil Price Collapse With High Debt
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.
When it rains it pours. French Total has informed OXY it will not be able to buy its business in Algeria as planned due objections from the Algerian government.
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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