Q3 2024 Occidental Petroleum Corp Earnings Call
Speaker Change: Good afternoon and welcome to Occidentals third quarter 2024 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.
Speaker Change: After today's presentation, there will be an opportunity to ask questions.
Speaker Change: To ask a question, you may press star then 1 on your touchtone phone. To withdraw your question, please press star then 2. Please note this event is being recorded. I would now like to turn the conference over to Jordan Tanner, Vice President of Investor Relations. Please go ahead.
Jordan Tanner: Thank you, Drew. Good afternoon, everyone, and thank you for participating in Occidental's third quarter 2024 earnings conference call. On the call with us today are Vicki Hollub, President and Chief Executive Officer.
Senior Vice President and Chief Financial Officer.
Jordan Tanner: Richard Jackson, President Operations, U.S. Onshore Resources and Carbon Management, and Ken Dillon, Senior Vice President and President, International Oil and Gas Operations.
Speaker Change: This afternoon, we will refer to slides available on the Investor section of our website.
Speaker Change: The presentation includes a cautionary statement on slide 2 regarding forward-looking statements that will be made on the call this afternoon. We'll also reference a few non-GAAP financial measures today.
Speaker Change: Reconciliations to the nearest corresponding gap measure can be found in the schedules to our earnings release and on our website. I'll now turn the call over to Vicki.
Thank you, Jordan, and have a good afternoon, everyone.
Thanks for watching!
Speaker Change: Our teams delivered another quarter of exceptional performance across all of our business sectors.
Speaker Change: Despite weather disruptions and commodity price volatility, resilient operational execution from our team helps us deliver the highest operating cash flow so far this year.
Speaker Change: Our strong financial results are a testament to the dedication and capabilities of our team, as well as the premium quality of our assets.
Speaker Change: I'll begin today by reviewing our third quarter performance and providing highlights from our oil and gas business, including the ongoing integration of Crown Rock.
Speaker Change: I'll also give an update on our direct air capture projects and then share the progress on our near-term depth reduction program.
Speaker Change: Sunil will cover our financial results and fourth quarter outlook including increases and full year guidance for each of our segments and will provide insight of how we're looking at our 2025 capital plans.
Thanks for watching!
Speaker Change: In the third quarter, our team's commitment and delivery across each of our business units enabled us to generate $1.5 billion in free cash flow before working capital, exceeding guidance in all three segments.
Speaker Change: Our oil and gas segment exceeded the high end of our production guidance and set a new company record for the highest quarterly U.S. production in our history.
Speaker Change: This was an outstanding achievement, maybe even more impressive considering there were three hurricanes that impacted operations across North America.
Speaker Change: This production house performance was primarily driven by strong meat well performance and higher uptime throughout the Permian Basin.
Speaker Change: Our Midland Basin teams excelled, surpassing production guidance in our recently acquired Crown Rock assets and delivering the highest quarterly production in over five years across our legacy Midland Basin assets.
Speaker Change: Optimum geologic targeting drove UL performance, supplemented by non-recurring OBO benefits.
Speaker Change: The Delaware Basin continues to perform at an industry-leading level, with our New Mexico performance being instrumental in our third quarter results. Most notably, a six-wheel Wolf Camp development project in our tank field in New Mexico produced an impressive 1.2 million barrels of oil in the first 90 days.
Speaker Change: In previous earnings calls, we highlighted that Oxy had eight of the top ten industry wells in the entire Delaware Basin from a six-month cumulative production standpoint.
Speaker Change: Today I'm proud to announce that our Rockies team now claims eight of the top ten CJ Basin Wells drilled since 2019.
several of which came out online in 2012.
on D2R.
Speaker Change: Such remarkable industry achievements are only possible because our teams relentlessly pursue innovation and excellence.
Not only is our onshore development exceeding expected...
Speaker Change: expectations on well productivity, we're also executing in a more efficient manner.
Speaker Change: For example, every new weld milled in the third quarter of the New Mexico Development Program.
is utilizing existing infrastructure.
Speaker Change: As discussed in the past, this significantly enhances project returns and in many cases enables secondary bench developments to deliver stronger returns than our primary benches.
Speaker Change: We continue to advance our drilling efficiency as evidenced by 10% improvement in Fermion unconventional drilling cyclotrons.
both in the last year.
Speaker Change: In the D.J. Basin, we successfully drilled a 2-mile lateral in only 80 hours.
Speaker Change: And our teams reduced third quarter well costs by 20% compared to the first half of last year.
Speaker Change: More than just reducing well costs, these improvements also accelerate time to market, allowing us to turn capital dollars into production factors.
Speaker Change: Our teams continue to make well-designed and execution improvements with exceptional results. We expect to carry this momentum into 2025.
Speaker Change: Another factor in our success, along with continued well-performance leadership and capital efficiency and progression, is our team's persistent focus on driving down lease operating expenses.
Martin, and Katie Reeves.
Speaker Change: Over the last year, we have meaningfully reduced our domestic operating expenses on a per wealth basis.
Speaker Change: Looking to the fourth quarter, we anticipate continued progress will result in a greater than 20% year-over-year reduction in quarterly yellow fee per barrel.
Speaker Change: These steady improvements are driven by several factors, including increased uptime, improved CO2 utilization, and more recently, the integration of low-cost, high-margin ground-rock barrels into our portfolio.
Our teams continue to deliver their operational and technical strength.
Speaker Change: to drive margin expansion for both sides, reducing costs while constructing industry-leading wells.
Speaker Change: Turning to our chemicals and vitrine businesses, OxyChem outperformed in the third quarter, honestly exceeding guidance while overcoming disruptive Gulf weather.
Speaker Change: And our midstream segment also had another impressive quarter, with our marketing teams once again leveraging natural gas price dislocations.
Speaker Change: Baha, and the Gulf Coast to deliver value to the company.
Speaker Change: Our demonstrative leadership and midstream expertise allowed us to optimize transport strategies, effectively bringing both our products and third-party volumes to market, even in adverse conditions.
Speaker Change: I'd like to now share more on the successful addition of Crown Rocktivore OxyPortfolio since the acquisition closed in early August.
Speaker Change: We're eternally pleased with the integration of assets and, more importantly, people. We've been highly impressed with the legacy Crown Rock culture, as well as the stewardship exhibited in running day-to-day operations in a safe, profitable manner.
Our focus these first months is to
Speaker Change: have been centered on safety, organizational integration, and retention of talent, and it's gone very well. There have been no significant safety incidents dating as far back as the December deal announcement, and that's a testament to the Crown Rocks team's proficiency and professionalism.
Speaker Change: The combined teams are now sharing best practices and identifying opportunities to advance field operations.
as well as constructing our 2025
Speaker Change: At Sunil we'll cover later, we envision a consistent level of investment in this premier Permian asset next year.
Speaker Change: I want to highlight a few areas where our teams are identifying opportunities for operational improvements and cost efficiency.
Speaker Change: The first one I'll mention is leveraging OPSI's supply chain expertise to reduce cost of materials and construction.
Speaker Change: We're also evaluating opportunities to leverage our broader Permian frat forest and overall resources to accelerate time-to-market and increase utilization rates.
Thanks for watching!
Speaker Change: We've spoken in the past about the ample water capacity and network associated with these new assets, and how well they fit with our existing water assets, and how they can benefit our legacy business.
Speaker Change: Recently we've identified nearly 10 million dollars in expected savings for a singular development plan in the first quarter of 2025, made possible by water integration process.
Speaker Change: We think this opportunity is just the first of many as we leverage shared infrastructure across our combined positions.
Speaker Change: We also see opportunities to enhance the base production through improved operability and artificial lint design.
Speaker Change: Already we are seeing incremental base production improvements in cryo-hoc assets.
Speaker Change: Because of this, and stronger than anticipated U-Haul performance, our third quarter production volumes exceeded the expectations that we laid out in August.
Speaker Change: We're now projecting a 9,000 BPOE per day increase to our fourth quarter exit rate for these assets.
We're still in the early stages of integration.
Speaker Change: but are very excited about the opportunities ahead. Bringing our teams together, we expect to unlock new values and achieve even greater success.
Yeah.
Turning now to our low-carbon businesses.
Speaker Change: I'd like to provide an update on our direct air capture project.
Speaker Change: Construction of Stratos, which will be the largest direct air capture facility in the world, is progressing smoothly and to plan.
Speaker Change: As we have previously shared, we have phased the construction sequence of Stratus to help integrate the latest advancements.
for research and development efforts.
Speaker Change: We've been thoroughly impressed with the infusion of talent, passion, and performance coming from the Carbon Engineering team over the last year, driving an innovation cycle that's moving even faster than we anticipated.
Thank you so much. Bye.
Speaker Change: Collaboration within our technical teams across Oxy paired with insight from the CE Innovation Center has given rise to incredible technological breakthroughs in engineering design innovation.
which we will integrate into the continued build-out of Stratus.
The new design will feature
Speaker Change: Fewer air contactors and fewer pellet reactors should reduce operating expenses and increase reliability.
Speaker Change: We expect to bring the initial 250,000 tons per animal capacity online in mid-2025, with the additional 250,000 tons to phase in during the next year.
incorporating those improvements.
Speaker Change: This disciplined approach not only generates value for Stratos, but will benefit and de-risk future DAC bills.
Speaker Change: We're also advancing our South Texas DAC project, and recently achieved a significant milestone with the U.S. Department of Energy awarding the project up to $500 million for the additional DAC facility at the site.
Speaker Change: This grant could potentially increase by $150 million for the development of an expanded regional carbon network in South Texas.
Thanks for watching!
Speaker Change: The award is momentous in furthering commercial scale of DAC in the United States and validates our ability to accelerate the body of technology.
Speaker Change: A combination of factors will drive our continued progress in the market and technology, and you're seeing them work together now in time. First, our innovative technical teams and continuous investment in R&D or intensive real-world projects.
Speaker Change: Second, we are leveraging project and operational architecture strata and applying them to enhance future designs.
Speaker Change: Third, government support and third-party capital are serving as catalysts to accelerating investment in developing DAC technology at climate-relevant scale, while also solidifying our leading position in the emerging markets.
Thanks for watching!
Speaker Change: We're excited about the progress made to date in constructing straddles, improving the DAC technology, driving demand in the voluntary and compliance carbon credit markets.
Speaker Change: Through the development of strategies, OPSI is taking a leading role to demonstrate to the developing compliance markets that DAC-plus geologic storage is a large-scale, highly durable, and economic tool for its approach to climate change.
Speaker Change: We believe we can help our two main industries, like aviation and maritime, meet their net zero goals, which can also serve as complementary solutions.
along with Sustainable Aviation, and the PTOs.
Speaker Change: Equally as important, CO2 from our gas can also enable us to produce net zero oil for our EOR automations.
Speaker Change: providing resources the U.S. needs for energy security and energy the world will continue to need for decades to come.
Speaker Change: We also recognize that we are in a pivotal moment for our power and utilities.
our country.
Speaker Change: Especially with the proliferation of data centers and AI increasing the need for reliable, low-cost, low-emissions power.
Speaker Change: Over the coming decades, we believe Oxy will be uniquely deficient in contributing to the growing sectors of our equity investments and net power, and our ability to provide tax solutions at scale to meet the increased demand for carbon dioxide renewable credits.
for Large-Scale Data Centers and Power Journal.
Speaker Change: Finally, I want to share with you some of the recent progress we've made in debt reduction. In December, we made a commitment to repay over $4.5 billion of debt within 12 months of closing the Crown Rock acquisition.
Speaker Change: Progress in our divestiture program, including the closing of rural draw-ups,
Speaker Change: The sale of a portion of our West holdings in the third quarter, combined with our continuing strong organic cash flow has put us well ahead of schedule.
Speaker Change: In fact, during the third quarter, we repaid $4 billion, which is nearly 90% of our year-term commitment. And that's within just two months of the Crown Rock closing.
Speaker Change: We remain fully committed to achieving our medium-term principal debt target of $15,000,000.
Speaker Change: I'll now hand the call over to Sunil to provide more details about our third quarter financial results, guidance, and capital plan.
Sunil: Thank you, Vicki. In the third quarter, we generated an adjusted profit of $1 per diluted share.
and a reported profit of 98 cents per diluted shill.
Sunil: The difference between adjusted and reported profit was primarily driven by a loss on the sale of non-owned, non-operated U.S. onshore aircraft.
Sunil: largely offset by a gain on the sale of common units representing limited partner interest in western midstream parts.
Sunil: As a result of strong operational performance across all business segments.
Sunil: In the third quarter, we generated $1.5 billion of free cash flow to the working capital.
Sunil: and we finished the quarter with 1.8 billion dollars of unrestricted cash.
Sunil: The strong pre-capital of this quarter reflects our team's ability to translate high-quality assets into impressive financial results despite adverse weather conditions.
and Commodity Price Volatility.
Speaker Change: As Vicki mentioned, the success in the third quarter can largely be attributed to new wealth and base production outperformance, the Permian Basin, inclusive of our newly acquired Comprom assets.
Speaker Change: While the majority of the outperformance was associated with company-related activities, the firm then saw a 6,000 DOE per day uplift associated with non-recurring off-site operator volumes due to prior period access.
Speaker Change: In the south of Mexico, production came in below our third quarter guidance rates.
largely due to unplanned downtime from hurricane-related activity and overpause.
Speaker Change: Despite these impacts, our domestic yeast is operating expensive at $8.68 on a per barrel basis.
Speaker Change: Notably, I'll perform third quarter guidance and are the lowest since the first quarter of 2022.
Speaker Change: This demonstrates our operational strength and focus on delivering higher margin barrels over time as illustrated on slide 8.
Speaker Change: This was a significant catalyst in the segment generating positive learning on an adjusted basis.
approximately 145 million dollars about the midpoint of time.
as Vicki highlighted.
Speaker Change: We are raising our four-year guidance for each of our business segments as a result of third quarter outperformance and improved expectations in the fourth quarter.
Speaker Change: In oil and gas, we are raising our 4th quarter total company production guidance from last quarter's implied guidance to a midpoint of 1.45 million POE per day.
Speaker Change: driven by sustained well-performance and operational momentum coupled with an improved outlook in the Burmese market.
Speaker Change: Supporting this, we have increased our four-year production guidance for the Birmingham based on our performance from both our legacy unconventional business and the Cromwell assets.
Speaker Change: This rate includes an additional 12,000 DOE per day in the fourth quarter, 9,000 of which are coming from our ground rock assets.
Speaker Change: We are excited to build on the year-to-date success across our domestic portfolio and expect these positive production trends in the Permian should more than offset the poor-water production impact.
Speaker Change: related to the Gulf of Mexico's ongoing well world wars and disruption from Hurricane Rafael.
Speaker Change: Full water guidance reflects an expected uptick in caustic soda prices due to European supply disruptions and represents an increase to full year guidance for the segment, despite seasonal declines in volumes for both PVC and caustic soda.
Speaker Change: We are also raising four-year guidance for our ministry and marketing staff as a result of the strong third quarter performance.
Speaker Change: Our guidance is used that our marketing teams will capture some natural gas transportation optimization centers in the fourth quarter, though to a lesser extent than the prior two quarters.
as Bogey and Gaff take a week off spring.
Speaker Change: Additionally, our guidance has been adjusted to account for OPSI's current ownership in West after update of a portion of our LP units during the third quarter.
Capital spent net of non-controlling interest.
Speaker Change: In third quarter of approximately 1.6 million dollars was in line with the expectations and we remained within our previously guided range for 2024 capital.
Speaker Change: In closing, I want to share an update on how we are approaching our capital program for next year.
Speaker Change: 2025 will be a pivotal year for our low-carbon ventures and Oxygen businesses.
as we advance construction of two major projects.
Speaker Change: that are expected to generate cash flow growth and enhance long-term shareholder value.
Speaker Change: As Vicki shared, we are well underway with the construction of Sparkless, a first-of-its-kind dark display. As Vicki said, we are well underway with the construction of Sparkless, a first-of-its-kind
We expect a 3D25 low-carbon venture capital budget.
Speaker Change: Net of Non-Controlling Interest Contributions to be approximately 450 million dollars.
Speaker Change: This represents a $150 million decrease from a 2024 guidance of $600 million.
Speaker Change: Our OCCAM fibrogram expansion and modernization is also progressing well and is expected to reach peak construction activity next year.
Speaker Change: We anticipate our chemicals capital budget to be approximately $900 million in 2025, an increase of $200 million from this year due to the increase in project activity.
The expansion remains on track for completion in mid-2026.
Speaker Change: In our oil and gas business, we anticipate activity levels to be broadly similar to Thursday.
Speaker Change: Across our Crown Rock acreage, we plan to maintain a five-day program as the assets have benefited from stable activity levels in the last few years.
Speaker Change: Next year's development program will feature targeted adjustments to well spacing along with accelerated production delivery through time-to-market improvements.
Speaker Change: Overall, we expect annual production growth in the mid-single basis from these assets.
Considering the recent commodity price volatility.
We are evaluating multiple 2025 activity scenarios.
across the rest of our U.S. onshore portfolio.
Speaker Change: As a result of our high proportion of short-cycled U.S. onshore activity, we retain considerable capital flexibility within these areas.
Speaker Change: We look forward to sharing that BTA plan next quarterly this fall.
Thanks for watching!
Speaker Change: As Vicki emphasized in her update on our debt reduction progress, we remain dedicated to our core financial priorities.
Speaker Change: We believe the early success of our deleveraging program keeps us in a great position heading into 2025.
We have no remaining 2024 death maturities.
Speaker Change: and our current unrestricted cash balance is sufficient to cover the remaining $1.5 billion of 2025 debt maturities.
Speaker Change: The majority of which are not due until the second half of the year.
Speaker Change: We are comfortable with our debt maturity profile and capital investments we persecute in 2025 will be strategically guided by a commitment to further deleveraging and strengthening our financial position.
I will now turn the call back over to you.
Speaker Change: Thank you, Sunil. Before we move to the Q&A, I'd like to close by recognizing the exceptional performance of our team, delivering value through operational excellence, world-class execution,
Speaker Change: and through driving down costs in a safe and reliable manner.
Speaker Change: We continue to demonstrate industry-leading performance across our U.S. onshore assets.
setting new records for our operations and well performance.
Speaker Change: and Kevin Cole, continue to deliver strong returns. I'm proud of the achievements made across our low-carbon business.
Speaker Change: Octavio has demonstrated leadership and proven capability in cost management through our EOR operations and we are making great progress delivering our Stratos project binary DAC at scale.
Speaker Change: With that, we'll now open the call for questions. And as George mentioned, Richard Jackson and Tim Diller are with us today for the Q&A session.
Speaker Change: We will now begin the question and answer session. To ask a question, you may press star then 1 on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2.
Speaker Change: Please limit questions to one primary question and one follow-up. If you have further questions, you may re-enter the question queue. At this time, we will pause momentarily to assemble our roster.
Speaker Change: The first question comes from Doug Legate with Wolf Research. Please go ahead.
Doug Legate: Thank you. Vicki, I hope you can hear me okay. The line is a little choppy today, but hopefully you can understand my question.
Doug Legate: The operational performance is quite extraordinary and I think you never really laid out synergies with Crown Rock, obviously they seem to be showing up. But I guess my question is,
Doug Legate: There seems to be a nervousness certainly in the market around the commodity outlook and you guys I guess have some big decisions as Sunil laid out whether you accept the growth
Doug Legate: or whether you slow down the program, which obviously has got capital implications. So I'm wondering, first of all, if you could...
Doug Legate: I know you don't want to give us numbers today, but just give us your thoughts on the macro in a world that clearly does not need any more oil. That's my first question. My follow-up, if I may, is on disposals.
Doug Legate: You obviously have a lot of options and you also have laid out this 1.35 billion of
Doug Legate: chemicals and low carbon spend next year so I guess my question is we're trying to understand
Doug Legate: What the deleveraging capacity of the portfolio is. You own net power.
Doug Legate: 48% you obviously own Wes and you've got the roll-off I assume of that capital after 2025 so just give us give us your thoughts on what the pace of deleveraging could look like and what the options are to achieve that as we go into perhaps a softer commodity backdrop
Speaker Change: Thank you Doug. I'll begin with the macro. We, meaning our leadership team, we review the macro on a weekly basis.
Speaker Change: We look at all the fundamentals like the activity levels, supply and demand numbers, inventory, external factors, anything that could impact prices and impact our operations to look at. And so we too see the downside risks to prices.
of Canada.
Speaker Change: It's hard to predict prices though, I would say that over the past few years, very few people have accurately predicted prices in this incredibly volatile situation that we have today where there's more volatility in oil prices than I think I've ever seen.
Speaker Change: But we do believe that 26 will be better than 25, and it's because much of the surplus in the market today has come from growth in the U.S., Guyana, Brazil, and Canada.
Speaker Change: But there's declining growth rates, we believe, from the U.S. and Brazil, and if you take that along with a couple of other non-OPEC countries that are helping to mitigate the current excess with declining production.
Speaker Change: With that being said, we believe it's very prudent for us to be prepared for that situation, to be very much leaning forward and not caught on flat-footed or on our heels like has happened to us in past decades.
Speaker Change: So what we've done is our current thought is to recommend to our board the plan that Sunil described, which we feel is conservative. What that is doing is keeping activity levels in the Crown Rock area as they are today.
Speaker Change: and then lowering slightly the capital in some of the other oil and gas areas.
Speaker Change: So we wouldn't be growing the rest of the oil and gas portfolio, rather we'll grow as a result of just maintaining that rig activity and trying to maintain those efficiencies.
Speaker Change: because it's always easier to wrap down than it is to wrap up.
Speaker Change: But I can assure you that our teams have prepared plans and next steps for multiple crime scenarios.
Speaker Change: along with the plan on when to pull the trigger, how to pull the trigger, how to execute a decrease in activity to be needed. 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.
Speaker Change: We would only trigger some reaction if prices look like they're going down and that trend is...
Speaker Change: is struggling downwards. So with that, they have the opportunities, we have the opportunities to make changes. And as you saw what we did during the pandemic, we reacted quickly and strongly to that situation. So we have the same capabilities to do that now.
Speaker Change: But I would say there's no better time to allocate capital to our people than now.
Speaker Change: as we're doing it out of ground, that project finishes in 2026 and will provide $325 million in additional cash flow.
Speaker Change: This high volatility in oil prices that our oxygen and our gas projects have released along with our...
production chairing contract.
Speaker Change: Those, I guess, are not as appreciated in other times as they are now, looking through having that steady cash flow through the cycles.
Speaker Change: So that's where we are with the macro, that's where we are with what we're thinking we have, Castle Span.
And again, we have the capability to write down and...
So we've got details on gallery.
Speaker Change: With respect to the synergies in Crown Rock, those synergies have been
Speaker Change: pretty strong that we're starting to see now. So we will, I'll let Richard take a stab at that, but before he does, I just want to get to your deleveraging questions. As you mentioned, we have lots of opportunities.
Speaker Change: We have one of the largest portfolios in the Permian as any company.
Speaker Change: We also have the other things that you mentioned. We have some things that we are marketing now.
Speaker Change: And as we go into the future, we have lots of letters to pull. And we always have everything on the table. We look at everything.
Speaker Change: And depending on what the macro is, I can assure you that we have a plan for any kind of scenario and the opportunity to execute on disaveraging as the city.
Thanks for watching!
Speaker Change: Hey, Doug. This is Richard. Yeah, I'd be glad to talk through some of the most recent updates on our Crown Rock integration. I know that we've gotten several questions on that, so I appreciate you bringing that up. Obviously going really well from the start of close, and really that's a...
Speaker Change: It means a lot from the team that's been operating it over the last year.
Speaker Change: So they really brought in some strong operational performance that led to the beat in the third quarter and the fourth quarter, so very appreciative of that, but really been able to, as Vicki said, the teams dive into some of the potential synergies and a few just to highlight.
As you know, we always start with our subsurface.
Speaker Change: As we look into next year, we think we have a very strong program for those five rigs focused on some of the horizons.
Speaker Change: that we well understand, but we are moving to some de-spacing.
Speaker Change: And so I think we'll be able to talk about that more as we get to the next call, but looking to DSpace and...
Speaker Change: Supply chains, another area we've been very focused because they've helped bring a lot to the table, but looking with this more balanced operational portfolio between the Delaware and the Midland Basin, we're seeing some opportunities. And so one of the examples that they've highlighted is really our frat core utilization.
Speaker Change: As we're able to take advantage of what we call white space, a time between being complete with the well ready for frack until mobilizing that unit to frack the well.
Speaker Change: They're targeting quite a bit of improvement next year, north of 20% improvement in that white space, so what that does
you know, as you're carrying a normal sort of...
Speaker Change: level, due to operations, that may go from something like 22 ducks at any one time down to 15, and that adds barrels on the year for really no cost. So pleased with that. The water example that Vicki talked about, that's a South Curtis Ranch development, that we're able to use the nearby Nail Ranch facility that Crown Rock had for water. And so that's...
Speaker Change: And then, you know, the final thing I would say is we're just now really getting into these what we call best of the best workshops. And so it's not just what, you know, Oxy brings, it's certainly valuing what Cramrock or the OxyRot team brings now to our overall operations.
Speaker Change: So, the Midland Basin team, as I look at next year, you know, they're out looking better than 10% cost improvement across the Midland Basin operations due to these kind of best of the best synergies between them.
Speaker Change: So we think that's pretty meaningful and outpacing certainly what we'd be able to do alone.
The next question comes from Roger Reed with Wells Fargo.
Please go ahead
Speaker Change: Yeah, thank you. Good morning. One thing we noticed in the results last night, it was a discussion on the cell side call, was the oil mix in the Permian here.
Speaker Change: And I know there's been a lot of moving parts, right? Crown Rock comes in, some things go out. But as you think about the Go Forward drilling program, what is the right way for us to think about that?
Speaker Change: Q3 a bit of a kind of a blip to the downside and then back up where you were or are we seeing a I don't know if the right term is structural change, but you know maybe a change in the resource base that you have there
Speaker Change: Hey, Roger, you cut out on the last couple of sentences.
I'll see you next time.
Sorry about that. Would you find repeating it?
Thanks for watching!
Speaker Change: I just said last night with the results and then on the sell-side call there were discussions and questions about the percentage of oil produced out of the Permian and I was just trying to understand you know we had a lot of moving parts this quarter with the addition of Crown Rock and then some assets sold as well and as you look at the go-forward how should we think about that oil mix?
Speaker Change: You know, it's kind of 58, 59 percent, this quarter, 55 percent, just it's not a huge difference, but we're all watching those small changes and trying to figure out what they mean.
Speaker Change: Yeah, hey Roger, I'll try to help that a little bit I think you know
To start the question, I think, you know, moving forward,
Speaker Change: We're going to try to do what we can to help guide to that and help you understand what that means. A couple of things I would point to, one is...
Speaker Change: increased secondary benches, especially in the Delaware. We moved, you know, year on year, 23 to 24, I think we went from about 20% secondary benches to 40%, but like Vicki mentioned in our script and we highlighted in the slides, that's adding a lot of value for us. Even though there are a little more NGLs associated with that, you know, the value being able to take those two existing facilities is
Squad of Creative on a return basis.
Speaker Change: And so we're doing more of that blend between our primary and secondary benches, taking advantage of that existing infrastructure. So from a go forward, one, we'll try to help, but two, I think what you're seeing in the second half is sort of leveling off, and you can see it in the third quarter and fourth quarter implied percentage on that. So hopefully that helps, and we'll do what we can to show that. And probably the one other point I wanted to mention on that, we did...
Speaker Change: You know, from a pure volume basis on oil, just wanted to reiterate the strong performance of the team. That was a beat on oil, so, you know, that's a plus five from the Permian on overall oil volume. So, understand the percentages, but also want to, you know, give kudos to the team in terms of the delivery on that.
Speaker Change: Yeah, and I didn't mean to imply a bad total production. It was more just trying to understand the moving components in there.
Speaker Change: of the legislature. So we'll still take the program in 2025, regardless of where Friday will be. And that's our target. Our target is to continue our production through the year.
regardless of what it takes to do that.
Thanks for watching!
Okay and apologies for my bad connection but thank you.
Thank you, Roger.
Speaker Change: Yeah, thanks Vicki and team. Vicki, I had a macro question for you. I just, I think you've talked a lot about how over the next couple of years you expect Shale to get more mature and
Thank you.
Speaker Change: Williams declining and ultimately achieving a plateau for the U.S., within the next three to five years, will be due to because of the decline in terms of the other base.
Speaker Change: These secondary benches that we have, second and third and fourth benches that we can develop in the Permian and in the Delaware and the Middle Basin, those will continue to contribute to growth for the Permian.
Speaker Change: So it's the growth from the Permian that's going to offset the decline from the other basins in the near term and ultimately help us to achieve, I think, a larger, a higher
Pete's been where we are today.
That's when we'll start to plateau.
Speaker Change: So that would be, in our view, three to five years out because, as you said, we're still continuing to get more out of those reservoirs.
Speaker Change: And there's a lot of productivity still remaining, a lot of wealth still to be completed.
Speaker Change: And as always, we're seeing that increase. I think that it's going to continue. I expect, though, in the near term, with weaker prices, that what we used to think is a...
Thank you. Bye.
say in three years.
Speaker Change: I think there's going to be less growth for Permian in 2026.
Speaker Change: and then what we saw or in 2025 and what was seen in 2025.
Speaker Change: So it's going to push that peak a little further out, but still productivity in the Permian as you have mentioned and indicated, it's certainly going to continue to increase. It's the basements that will keep on giving for sure.
Speaker Change: Thanks, thank you. That's great, Claire. And then, just going back to DAC, you know, as you think about bringing on
Speaker Change: Unit one by the middle of next year. What are the sort of the gating items the critical path items to get it into service and
Speaker Change: What are you really focused on around the startup from an engineering standpoint? And then, in light of the election, has anything changed about the way you think about the economics of this business, or is your view on...
and in the subsidy environment.
Speaker Change: I'm going to take that first one first and then Ken's going to go through the
Speaker Change: the milestones and what he's looking at seeing with respect to construction.
Speaker Change: But I will say that in weaker prices and in the scenario we see today, I think that DOC is going to be one of those businesses for us that kind of fits in the same categories or chemical decisions in our business.
Speaker Change: Gas Business in the Middle East. I think that is going to be
a value creator and a cash flow generator for us.
Speaker Change: and John K. We have worked to do in the near term but in the long term what's happening with respect to support for DAC is pretty amazing and taking advantage of that. But because of what we're able to do here, apply innovation, even as we're building the first DAC, it's very easy.
That's very, you know, encouraging from a commercial standpoint.
Speaker Change: So we're already working down on the cost curve. We're already looking at opportunities for improvements in DAC-2. So we do believe that the commerciality is still there for these units and the market is getting stronger all the time.
Speaker Change: So we're still excited and encouraged about where we are with respect to commerciality.
Thank you very much.
Good afternoon. The DAC project is doing very well.
Speaker Change: The first phase is nearly at 90% completion now, and this includes the first two capture drains, which should be mechanically complete by the end of the year, as well as the central processing area. So all the major equipment's there, loop checks have been done, ongoing at the moment.
Speaker Change: Central processing size for 500,000 tons which will support the additional two capture trains when they come on line between 10.25 and 10.26.
Speaker Change: So overall, if you take both together, the project is about 70% complete worth of gold plastic.
Speaker Change: Since the CE purchase, our engineers have been working closer than ever. There are many cost-down ideas that we continue to work, but Richard asked if we could see what the project team could reasonably incorporate into Stratos.
Speaker Change: From the slide, you've seen physical changes that Vicki mentioned earlier resulting in fewer pellet reactors and also smaller air contact with a 30% reduction.
Speaker Change: What you can see, which goes to your point, is all the savings in the piping, the number of valves, the instruments that have all been eliminated. This also makes it much simpler to build.
Speaker Change: And there's also a massive improvement in the air contactor construction method going forward by using modules which will halve the build time for the air contactors.
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Speaker Change: Future vaccine plans will see 10-15% savings from these modifications and can see additional improvements to take it past 20%, also with reduced op-eds, maintenance, and
and Bruce Swayze.
Speaker Change: The team at Worley have been key to being able to adapt on the fly in engineering and procurement and in fact Chris Ashton, the Worley CEO, was at the site to meet with his team recently to show support for the project. So overall the teams are working incredibly well together.
and the project is on schedule.
Speaker Change: And then I'll just follow up with your question about the election results and the impact that will have. I think the election...
Speaker Change: to become our next president is going to be very positive for our industry.
and especially for this, our director of captions.
The reality is that, I believe,
Speaker Change: He understands better than anybody our need for energy independence here in the United States. He understands the industry. He understands how it plays into geopolitical politics.
Speaker Change: He knows what we're trying to accomplish and what we're doing, and he also understands the part that our director, Cassie, will play in helping with that energy independence and security.
Speaker Change: So, I believe that the funding from the Infrastructure Investment and Jobs Act that the DOE has already awarded will be disbursed as per the agreement, such as for our DAC-2, which is going to be built on the Keene Ranch. We do expect to get the $500 million.
Mitchell, 6-7-5-U.
Nguyen.
& Lois in the kitchen.
Yes, definitely to our country.
Speaker Change: It's impossible to be a superpower without ample supply of living fuels.
Speaker Change: The use of CO2 for cancer recoveries, as I mentioned, is a big part of what makes that so important for the country.
and some people don't understand that process.
Speaker Change: I'm going to take the time to go into how it works, but just helping people to understand, and again, Professor Trout knows this, that the CO2, it takes more of the CO2 injected into a reservoir than the incremental oil that it generates will end up being used.
and the reservoirs here, we don't have enough organic sealants.
Speaker Change: So, DAC is necessary to achieve the incremental CO2 that we need. And then going from DAC to net power...
and Lauren
Speaker Change: Marshall and Nick talking about the co-op work engagement of temporary gave-and-take resources.
Speaker Change: So, we're developing what I believe are two of the technologies that the world really needs to address not only the companies that want to decarbonize to help them, but to get
and Rameen.
Speaker Change: So that's where we stand on this. We're pretty confident about where we are and how that's going to play out with this election.
Thank you for watching!
Speaker Change: The next question comes from Paul Chang with Scotiabank. Please go ahead.
Thank you.
Hi, good morning.
Speaker Change: I think the first one is for Sunil. Sunil, you probably already addressed it, but trying to make sure I understand, this year based on the fourth quarter CAPEX, so your full year CAPEX is about say $7.1 billion or that about $200 million higher than your previous midpoint guidance.
Speaker Change: And is that all in the Crown law because you are doing or that all in permit because you are doing better?
Speaker Change: If I'm looking at next year, yes, Crown Rock CapEx is still looking for $900 million. So I think previously it's assuming that this is a $500 million incremental. So now that, I mean, how much is the incremental CapEx from Crown Rock for next year? This is the first question.
And the second question,
Speaker Change: If we look at the third quarter versus the second quarter, it dropped by about 2 percent in permit.
Speaker Change: Is there something one-off has triggered yet or is it all driven by Kwang Rok?
Thank you.
Thank you for watching!
Speaker Change: Okay, so if I understand correctly, your first question was, what was the driver for the increase in the full year guidance for 2024? Is that correct? That's correct, and also correspondingly that from 2024 to 2025, what is the incremental capex that we should assume?
Thanks for watching!
Speaker Change: Okay, so with respect to your first question, yes, all the incremental gap backs for the full year of 2024 is to come down. So what we have disclosed in the last earnings call was it's going to be around 400 million and that is for the five months that we are operating from.
Speaker Change: So with respect to your second question, that was on the GOR for permeate, correct?
The
Speaker Change: that is there anything is one off in the third quarter that related that because there's a drop of 2% that is a pretty substantial drop comparing to the second quarter oil cut in the Permian.
Speaker Change: Yeah, I could start and Sunil could help on any other macro. Yeah, it really is, I mean one, I mean growing unconventionally.
Speaker Change: So we had growth in the Rockies and Permian, and so that significant jump in production with a lower oil cut mix was one piece of it. Two, a bigger part of that is our secondary benefits.
Speaker Change: I mentioned earlier. The first year oil cut is significantly less for our secondary benches but the value is better.
Speaker Change: And so we want to continue to reinforce that. So I think, you know, to your point, you know, the growth in Crown Rock is a part of that growth and unconventional.
Speaker Change: That is really driving that oil percent, but we see that percentage in the back half of this year sort of extending into next year, and as we develop different areas that may drive that.
Speaker Change: You know Change over a period of time we're going to help and we'll try to help guide to that so that you you can understand and Follow that hopefully that helps
Speaker Change: The next question comes from Scott Gruber with Citi. Please go ahead.
Yes, good afternoon. A couple of questions here.
Speaker Change: And then as you look at the Midland side of the basin with the ground rock assets, could you step up the percentage? Where is that percentage currently? And can you step it up in 2025 as well?
Speaker Change: Yeah, thank you. So I think a similar percentage on the overall Permian in terms of primary and secondary benches I think we did.
sort of a level set utilizing these
Speaker Change: existing infrastructure facilities for that. So I don't expect that to largely change, at least with activity levels as we're currently operating. Obviously, we adjust.
Speaker Change: down or up, depending on what our final program is, that could change a bit, but I think that that'll be very similar. From a Crown Rock perspective, our base plan for those five rigs next year is really what we call 85% primary benches.
And so while we see some opportunities in secondary benches.
The program that's been put together is very de-risked.
Speaker Change: And we did that really to be able to perform operationally.
Speaker Change: So we try to get out in front of sort of those operational plans. So you know, the Sprayberry kind of Dean, Wolf Camp A and B, those are the primary zones that we're looking at next year. If we see opportunity to improve on that, we obviously would change, but that's the going in plan for next year.
Speaker Change: The next question comes from Arun Jayaram with J.P. Morgan Securities.
Please go ahead
Speaker Change: Good morning. I wanted to see if you could discuss your thoughts on what you view as more normalized CapEx. In CHEMS you mentioned that you'll spend about $900 million next year given some projects. What you think about more normalized CapEx and what does the growth CapEx you're spending next year, what does that do to the earnings power of that segment?
Speaker Change: So in OxyChem, three of these special projects, we were running about 300 million.
Speaker Change: and so that's what we expect to be able to get back down to post battleground and the couple of hotline projects we just had.
Thanks for watching!
and with respect to the audience part, like, as...
Speaker Change: mentioned and later. We expect around 325 million uplift once we complete the project and the project is expected to be completed in mid-2026.
Speaker Change: and that is primarily driven by the expansion in capacity of around 80%.
and this assumes around mid-cycle 40.
Speaker Change: Alright, that's helpful. Just one question on the Rockies. It looks like from your disclosure that you have sold some properties in the Rockies, looks like the Powder River Basin. Just give us a sense of, you know, future thoughts on the powder and what exactly you've divested there.
So, in the Delaware River,
Speaker Change: We bought the whole thing obviously as a part of the Anadarko acquisition, but
Speaker Change: We saw early on that the southern part of the Powder River Basin was by far the most
Speaker Change: So that's why we sold, and we wanted to always be focused and always have continuous acreage where possible.
and always looking at subsurface where we think we can...
Speaker Change: So we sold the park that's north of that local part of the southern part of the basin. We sold that to Henshoots because it's in a better area for them to be able to develop. And so I think we did a win-win situation there.
Speaker Change: and now have the focus on the area that I think is going to create a lot of value for us in the future.
Thanks for watching!
Speaker Change: In the interest of time, this concludes our question and answer session. I would like to turn the conference back over to Vicki Hollub for any closing remarks.
Vicki Hollub: I want to thank you all for your questions and for joining our call today. Have a great rest of your day. Thank you.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
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