Q4 2024 Occidental Petroleum Corp Earnings Call
Speaker Change: Good afternoon, everyone, and welcome to Occidental's fourth quarter 2024 earnings conference call.
Speaker Change: All participants will be in a 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. To ask a question, you may press star and then one using a touch-tone telephone. To withdraw your questions, you may press star and two.
Please also note, today's event is being recorded.
Speaker Change: At this time I'd like to turn the floor over to Jordan Tanner, Vice President of Investor Relations. Please go ahead.
Speaker Change: Thank you, Jamie. Good afternoon, everyone, and thank you for participating in Occidental's 4th Quarter 2024 Earnings Conference Call.
Speaker Change: On the call with us today are Vicki Hollub, President and Chief Executive Officer.
Ken Dillon: and Ken Dillon, Senior Vice President and President, International Oil and Gas Operations.
Ken Dillon: We will also reference a few non-GAAP financial measures today reckon.
Ken Dillon: Reconciliations to the nearest corresponding GAAP measure can be found in the schedules to our earnings release and on our website I will now now I'll turn the call over to Vicki.
Ken Dillon: Okay.
Jordan Tanner: Jordan and good afternoon, everyone.
Speaker Change: 24, it was a year of strategic execution for ROTC, we position the portfolio to maximize value by increasing our exposure in short cycle high return assets. While also advancing major projects aimed at delivering sustainable returns through the cycle.
Speaker Change: Our team's relentless focus on performance and commitment to safe and reliable operations enabled us to progress our cash flow priorities delivering on our near term deleveraging targets, while growing value for our shareholders.
Speaker Change: I'll begin today by covering our 'twenty 'twenty, four financial and operational achievements as well as our strategic advancements that will position us for success in the years ahead.
Speaker Change: Then I'll discuss our priorities and capital plans for 2020 five.
Speaker Change: So Neal will follow with a review of our fourth quarter performance and will provide guidance for the first quarter and the full year ahead.
Speaker Change: Yeah.
Speaker Change: Let's see outperformed across all three segments in 2024, we generated $4 $9 billion of free cash flow, enabling us to pay approximately 800 million of common dividends and to increase the quarterly dividend by more than 22%.
Speaker Change: As we announced yesterday, we also made significant progress on our cash flow and shareholder return priorities.
Speaker Change: A combination of asset sales and organic cash flow, we achieved our near term debt repayment target of $4 $5 billion seven months ahead of schedule.
Speaker Change: Our steadfast commitment to improving our balance sheet is coupled with our drive to invest in our future and generate long term shareholder value.
Speaker Change: Capital improvements and operational efficiencies driven by our teams resulted in a capital spend of $6 $8 billion, which was the low end of our guidance.
Speaker Change: Our midstream team also successfully revised key domestic crude transportation contracts to further enhance future cash flows.
Speaker Change: Now moving to operational excellence, the combination or the execution efficiencies, along with strong new well deliverability and enhanced based production.
Speaker Change: Well done to achieve the highest annual U S oil production as well as record total company production at 1.33 million dead weight per day proxy in 2024.
Speaker Change: This exceeded the upper end of full year guidance.
Speaker Change: The U S record production was driven by continued well performance leadership across our operated U S onshore positions in the Delaware D J, Midland and powder River basins, and they'll Hudson contributed to the overall company record.
Speaker Change: In 2020 for our teams to reduce domestic lease operating expenses per barrel by approximately 9% and lowered well costs by roughly 12% across all unconventional basins.
Speaker Change: A key differentiator for oxy is our ability to replace reserves to fortify the long term sustainability of our business.
Speaker Change: And 'twenty 'twenty four we increased our year end proved reserve balance to $4 6 billion daily which is the highest synopsys history.
Speaker Change: This represents an all in reserves replacement ratio of 230% for 2020 four.
Speaker Change: And organic reserves replacement ratio of 112%.
Speaker Change: Pending our over 20 year track record of replacing reserves year after year with the exceptions of the downturn in 2015 and the pandemic in 2020.
Speaker Change: It's also notable that we had been replacing higher cost production with a higher volume of lower cost new reserves.
Speaker Change: Really our capital spend for oil and gas development is less than our annual DD&A cost. This is driving increased earnings per barrel and increased earnings per share.
Speaker Change: In addition, our U S onshore inventory continues to get better which is a testament to the portfolio is incredibly rich resources and our team's dedication to continuous improvement.
Speaker Change: Even after accounting for wells drilled and divestitures, we increased our operated inventory in the U S unconventional well locations with sub 60 breakeven.
At the same time, we improved our average well breakeven by 6%.
Speaker Change: Okay.
Speaker Change: Our obstacle business also outperformed exceeding the original guidance midpoint to achieve over $1.1 billion in pre tax income in 2024.
Speaker Change: In our midstream segment also performed exceptionally well with our gas marketing optimization efforts offsetting lower in basin gas realizations in the Permian and contributing to meaningful outperformance against our original guidance.
Speaker Change: Looking back the 'twenty 'twenty four we advanced our strategy across all of our businesses.
I'll now highlight a few of them we closed on the Crown acquisition, adding Midland basin scale and high margin inventory as well as increasing our access to high quality unconventional oil assets in the U S.
Speaker Change: This is an asset that continues to demonstrate value with both our financial and production results exceeding expectations.
Speaker Change: That's construction at West, Texas moved forward on Stratas, our teams in Squamish, British Columbia focused on enhancing that technology. Some of their innovations are being implemented as Travis.
Speaker Change: We believe that will deliver long term value as well as help achieve U S energy security by developing the carbon neutral fuels in the world needs.
Speaker Change: You had the flexibility to use that C. O two for both E O War and sequestration and some customers are focused on securing carbon renewable credits.
Speaker Change: City ours are important to help us prove out the technology and get the cost down to advance those objectives, we signed several foundational C D. Our agreements last year.
Speaker Change: We accelerated the pace of DAC R&D through the integration of our carbon engineering and Oxy, James which has resulted in an open exchange of ideas. It has expanded our culture of innovation.
Speaker Change: We're looking forward to bringing these learnings to the development of debt facilities at the South, Texas, DAC hub, which was awarded funding from the U S Department of energy.
Now I'd like to share a few highlights from our fourth quarter, which demonstrated continued strength in our financial and operational performance to close out a successful year.
All three of our business segments also outperformed in the fourth quarter, delivering robust financial returns and generating a $1.4 billion and free cash flow.
Speaker Change: Obviously, Ken business generated $280 million and adjusted income benefiting from better realized prices and volumes in both domestic and international markets.
Speaker Change: Our midstream business outperformed through continued gas marketing transportation optimization during the fourth quarter and from higher sulfur pricing for al Hudson production.
Speaker Change: And our oil and gas segment level production during the fourth quarter was 1.46 million Boe's per day outperforming the midpoint of guidance guidance by 13000, Boe's per day, and setting a record for oxy highest ever U S quarterly production.
Speaker Change: Our teams ended 2024 with strong performance and momentum going into 2020 fives.
Speaker Change: Looking to 2025, our strategic priorities reflect an extension of 'twenty 'twenty four.
Speaker Change: We remain committed to delivering value to our shareholders and believe strengthening the balance sheet is paramount to achieving this.
Speaker Change: Our first priority is to continue our deleveraging progress from last year and deliver sustainable dividend growth.
Speaker Change: Our now $1.2 billion of divestiture proceeds will be used for debt reduction.
The savings from the reduced interest payments will be allocated to the dividend does is this week our board of directors authorized a 9% increase in our common dividend.
Speaker Change: We recognize the need to balance reducing debt and financial risks today, while preserving tomorrows development opportunities and associated cash flow to accomplish this our second priority is to advance our major projects safely.
Speaker Change: Safely and reliably bringing stride is online this year and keeping the battleground modernization and expansion project on track for completion next year.
Speaker Change: Stratus is progressing on schedule to be commercially operational this year.
Speaker Change: We completed construction of trains one and two in December and had been thoroughly impressed by the work of our teams in our construction partner more poorly.
Speaker Change: Construction on the central processing facilities is expected to be completed in the second quarter with commissioning on trains one and two in parallel we expect start up operations to continue in the third quarter with a wrap up of the initial capacity through year end.
Speaker Change: Our battleground project is also advancing with completion expected in mid 2026 and commercial operations to begin later that year.
Speaker Change: The project is expected to increase cash flow through improved margins and higher product volumes generating a strong return, while improving obviously, kansas market position for key ingredients used in producing clean drinking water medicine and soaps.
Speaker Change: Okay.
Speaker Change: Our third priority is to maintain our culture of innovation and commitment to operational excellence, our team's relentless drive for improvement and focus on continuous learning.
Every great results to date, enabling us to outperform targets and deliver more with less.
Speaker Change: This is most recently demonstrated across a crown Roc acreage were in just a few months since the close we've identified numerous opportunities to deliver more production lower well cost and accelerate returns.
Speaker Change: This year, we expect a 10% improvement in time to market compared to last year, and we expect a 7% decrease in well cost, which represents a 15% improvement relative to 'twenty to 'twenty three.
Speaker Change: The teams are continuing to share best practices and innovate through best and best workshops, which we expect will drive continued efficiency and performance improvements throughout the year.
Speaker Change: In addition, we see meaningful opportunities to leverage our competitive position expanded scale and enhanced capabilities across our full Midland basin operations.
Speaker Change: Through the integration, we have identified scale efficiencies and design improvements with the potential to lower well cost across our remaining Midland basin program on more than $1 million per well through drilling and completion savings.
Speaker Change: These reverse synergies were a key driver behind the extension of our Midland Basin, J D with Echo patrol, which will enable additional development in the basin.
Speaker Change: The agreement further highlights the vital role investment in U S oil and most notably the Permian plays in the global market.
Speaker Change: Our teams are also leveraging innovative ideas to unlock greater resources achieve cost savings and improved recoveries.
Speaker Change: But then our Permian operations, we are pushing the technical limits of well deliverability deepening reservoir characterization and simulation efforts and conducting field trials to further advance enhanced oil recovery in unconventional reservoirs.
Speaker Change: In our Gulf of America, and our international portfolio.
Speaker Change: We are utilizing advanced seismic to uncover new opportunities and provide a rich dataset for AI application.
In Algeria.
Speaker Change: Recently completed the country's largest seismic data acquisition, which was also the largest ever onshore acquisition for oxy.
Speaker Change: This will play a key role as we look to enhance value through future development opportunities.
Speaker Change: We also have an ambitious set of artificial intelligence initiatives ongoing to maximize value and improve margins. Our Gulf of America operations are utilizing AI to improve supply chain management asset integrity and resin reservoir characterization. Additionally, we created an AI center of excellence.
Speaker Change: To align all intercompany AI initiatives and accelerate business value.
Speaker Change: Well then our LCD portfolio. We're also at the forefront of direct lithium extraction technology working with our JV partner, we are progressing from a pilot to demonstration plant to explore the commerciality of our subsidiary Terra lithium patented DLT technology.
Speaker Change: Turning now to our 2025 capital plan, we aimed to maximize cash flow by investing primarily in short cycle high return assets, while making measured investments to advance our mid cycle projects to provide future cash flow resilience.
Speaker Change: This year, we plan to invest between $7 billion and $7 $2 billion in our energy and chemicals business.
Speaker Change: The oil and gas capital program, it's roughly equivalent to 2024, when adjusting for a full year of crown rock in our portfolio.
Speaker Change: We expect full year production to average approximately 142 million Boe per day.
This represents relatively stable production from 'twenty to 'twenty four when accounting for a full year of Crown rock.
Speaker Change: So with modest oil growth.
Speaker Change: Similar to years past, we anticipate production in the first quarter to reflect the low point for the year with a significant uplift expected from <unk> from the second half.
Speaker Change: So Neil will provide more detail on this and our 2025 guidance.
Speaker Change: Investments and Oxy Kim are expected to increase to 900 million. This year was 2025, representing the peak year for construction that battleground.
Speaker Change: Battleground spend is expected to decrease substantially as the project nears completion in 2026 without seeking capital reverting to maintenance levels. The following year.
Speaker Change: The increase in battleground spend is largely offset by a decrease in our LCD spend in 2025, which will be set at approximately $450 million.
Speaker Change: The majority of this capital will be for the continued build out of stratas with the remainder directed towards our South, Texas backup and Gulf Coast sequestration projects.
Speaker Change: We built our 2025 capital plan to focus on projects that we believe best position at sea for long term success.
Speaker Change: As in past years, we retain a high degree of flexibility with more than 75% of our oil and gas capital allocated to our U S onshore portfolio.
Speaker Change: This allows us to adapt to commodity price fluctuations and officially respond to market conditions. In addition, our focus on short cycle high return unconventional development will help to facilitate our near term debt reduction supporting our cash flow priorities and commitment to enhanced shareholder returns.
Aneel: Now I will turn the call over to Aneel.
Aneel: Thank you Ricky I will begin today by reviewing our fourth quarter results, we announced an adjusted profit of 80 cents per diluted share and a reported loss of 32 cents per diluted share.
Aneel: The difference was primarily due to an increase in long term environmental remediation liability based on a recent unfavorable federal court ruling.
Aneel: We have appealed the ruling and will seek cost recovery from all potentially responsible parties.
Aneel: And well remediation and potential cash outlays are not expected to materially increase over the next several years and I expect it to extend over multiple decades.
Aneel: Our fourth quarter financial and operational outperformance delivered a strong close to the year with all three business segments exceeding guidance.
Aneel: We generated approximately $1 $4 billion of free cash flow benefiting from higher global production volumes, despite lower realized oil prices.
Aneel: As Vicki mentioned, our U S portfolio achieved record quarterly production, driven largely by operable and improved well performance across the Delaware and Midland basins.
Speaker Change: New well performance in our operated Rockies assets also exceeded expectations.
Speaker Change: Together these more than offset lower production volumes from our domestic offshore and international assets due to respect to weather evens and PSU related impacts.
Speaker Change: Notably our 'twenty 'twenty pulp production was achieved with less capital coming in at the low end of guidance.
Speaker Change: We had a positive working capital change in the quarter, primarily due to timing of interest payments impacts from lower oil prices and fewer barrels on the water at year end.
Speaker Change: This together with our strong operational performance and disciplined capital program enabled us to exit the quarter with over $2.1 billion of unrestricted cash after repaying $500 million.
So all of that.
Now turning to our business plan and guidance.
Speaker Change: Total capital for the year is expected to be between seven four and $7 $6 billion with enrichment front weighted to the first half of the year.
Speaker Change: Our capital plan represents a strategic mix of investments balancing short cycle high return assets with investments at no decline non oil and gas projects to provide diversification and cash flow stability.
Speaker Change: Our capital weighting towards a higher proportion of short cycle U S. Onshore assets will enable significant cash flow velocity that can be applied to debt reduction.
Speaker Change: It will also allow us to retain significant flexibility to respond to changing market conditions.
Speaker Change: In 2025, we expect full year production to average approximately 1.42 million Boe per day.
Speaker Change: Representing mid single digit growth from 2024.
Speaker Change: After adjusting for a full year of ground wrong total production volumes are expected to remain relatively flat.
Speaker Change: Though with a nearly 3% increase in oil volumes.
Speaker Change: As was the case in 2024, our first quarter production is expected to decrease from the prior quarter due to reduced fourth quarter activity levels, and a lower working interest and recently drilled Permian wells.
Speaker Change: Severe winter weather in January also impacted bromine production in.
Speaker Change: In addition volumes would be impacted by plant maintenance and platform life extension at Horn mountain as well as turnarounds at our loosen and dolphin.
Speaker Change: Yeah.
Speaker Change: While we expect lower volumes during the first half of the year production is expected to ramp up in the second half.
Speaker Change: Much of this increase is coming from the Permian, which is expected to grow by more than 15% in 2025.
Speaker Change: Due to a full year of crown Brooke and modest growth across our legacy positions.
Vicki Hollub: As Vicki mentioned.
Speaker Change: Chromebook assets continued to outperform and I expected to average over 170000 Boe per day, representing more than 5% growth.
Speaker Change: Our guidance for Rockies volumes is lower for 2025, driven by the decision to adjust our gas processing ethane rejection in the DJ basin.
Speaker Change: This is expected to increase revenues and improve margins delivering greater value from our Rockies assets.
Speaker Change: Additionally, our announced divestiture of non operated Rockies interest with lower full year production from the region.
Speaker Change: When accounting for these items and reduced outside operated activity. Our 2025 Rockies production is expected to be essentially flat from last year.
Speaker Change: Despite AVR maintenance during the first quarter full year production in our U S. Offshore portfolio is expected to increase related to 2024.
Speaker Change: This coupled with our growth out of the Permian is expected to increase our total company oil cut to 52% in 2025.
Speaker Change: Yeah.
Speaker Change: Looking to the chemicals business Oxy Chem ended 2024 with a strong operational performance generated $280 million and I just took pretax income in the fourth quarter and exceeding guidance by $50 million.
Speaker Change: This was driven by better than expected pricing in both the domestic and international markets as global supply disruptions kept prices higher and demand are strong through most of the fourth quarter.
Speaker Change: Yeah.
Speaker Change: Oxy camps first quarter income is expected to be lower than the prior quarter, primarily due to three short term events.
Speaker Change: Our operations were affected by the winter storms in January which temporarily impacted production and restricted access to market.
Speaker Change: We also had an unplanned outage at our Ingleside Russell that lasted approximately two weeks.
And we are seeing an increase in raw material costs following higher than expected ethylene plant outages during the first quarter.
Speaker Change: These temporary cost pressures should ease early in the second quarter once the ethylene suppliers are back online.
Speaker Change: For the full year, we expect a slight decrease in oxi against earnings and are guiding to a midpoint of $1 billion of pretax income.
Speaker Change: This was driven in part by the events of the first quarter forecasted natural gas prices and expectations for a slightly oversupplied market for the first half of the year. Following late 'twenty 'twenty four domestic domestic capacity additions.
Speaker Change: Rationalizations I expected to occur in the second half, which should help to rebalance the market and improved pricing.
Speaker Change: Our midstream segment at a strong end to the year with adjusted pre tax income outperforming guidance by $104 million.
Speaker Change: The bulk of this was due to gas marketing optimization in the Permian with our teams once again expertly managing market volatility to maximize margins.
Speaker Change: Higher sulfur prices for Allison also contributed to these earnings.
Speaker Change: Our midstream segment demonstrated exceptional performance throughout the year with adjusted pretax income, surpassing the midpoint of our or general full year guidance by approximately $600 million.
Speaker Change: We expect slightly lower midstream earnings in 2025 as to opportunities for gas truck transportation optimization model with increased takeaway capacity now online.
Speaker Change: While we may see fewer pricing dislocations and opportunities to capitalize on market spreads, we expect upstream business to benefit from improved realized prices in the Permian.
Speaker Change: Reduced opportunities to optimize gas marketing will be partially offset by improvements in our crude marketing out of the Permian.
Speaker Change: As we mentioned previously we expect to benefit from the revision of two grew transportation contracts at lower rates this year.
Speaker Change: One of these will be realized at the end of the first quarter with the second coming into effect at the end of the third quarter.
Speaker Change: Given the timing, we expect to see an approximate $200 million benefit this year and expect approximately $400 million in annual savings in 2026.
Speaker Change: Turning to our LCD business, we are extremely excited about stratos progress to date.
Speaker Change: The expected startup of operations this year.
Speaker Change: Due to the timing and ramp up period associated with bringing the first space online.
Speaker Change: Assuming a minimal contribution from Stratos and our midstream guidance.
Speaker Change: We expect a negative working capital change during the first quarter, which is typical for this time of year is driven by interest payments property tax and compensation payments.
Speaker Change: Additionally, there are two upcoming 2020 for tax payments as part of the federal disaster relief program following hurricane bedroom, which will further impact working capital in the first and second quarters of the year.
Speaker Change: I would like to close today by reiterating our commitment to strengthening our balance sheet, which will position us to generate greater shareholder returns.
As we shared at the start we are pleased to announce that we successfully achieved our near term debt reduction target by repaying $4 $5 billion in 2024.
Speaker Change: We are continuing this momentum into 2025 and announced $1.2 billion in divestitures in the first quarter.
Speaker Change: Proceeds from these sales will be applied to our 2025 maturities and excess cash flow after common dividends will be available to further reduce our 2026 and beyond debt maturities.
Speaker Change: By reducing the amount of cash committed to interest payments Judy we will please oxy in a stronger position to deliver an expanded return of capital program in the future I will now turn the call back over to Vicki.
Vicki Hollub: Thank you Sunil.
Vicki Hollub: As I shared at the start 2024 was a pivotal year for oxy, we strengthened our portfolio delivered on our near term deleveraging commitments and advanced our major growth projects, while we delivered exceptional financial and operational results. What excites me. The most is the way our teams propelled our business forward.
Vicki Hollub: With passion industry leadership, and a continued focus on innovation and learning and most importantly, our focus on safety underpinned at all in 2020 for our employees achieved tier of safety performance ever in our history, that's across oil and gas midstream and <unk>.
Vicki Hollub: Oxy Kim.
Vicki Hollub: The commitment of our people to safe and sustainable operations is embedded and oxy core values and helps enable our long term success.
Vicki Hollub: This will be an exciting year for us our technical capabilities and portfolio of assets never been better and the combination of our three business segments, you uniquely positions us to capitalize on shared learnings and operational synergies, bringing stratus online will be a testament to this and demonstrating the differentiated strategy and compelling value.
Vicki Hollub: Compensation that oxy brings to the table.
Vicki Hollub: With that we'll now open the call for questions and as Jordan mentioned, Richard Jackson, and Ken Dillon are here with us today for the Q&A.
Vicki Hollub: Ladies and gentlemen, we will now begin the question and answer session.
Vicki Hollub: To ask a question you May press Star and then one using a touchtone telephone if you are using a speaker phone would you asked me. Please pick up your handset prior to pressing the keys.
Vicki Hollub: Withdraw your question you May press Star two.
Speaker Change: We do also ask that you please limit yourselves to a primary question and one follow up.
Speaker Change: If you do have further questions you may re enter the question to you and once again that is by pressing star and one.
Speaker Change: At this time, we will pause momentarily to assemble the roster.
Speaker Change: Our first question today comes from.
Speaker Change: Rune GRM from J P. Morgan. Please go ahead with your question.
Speaker Change: Yeah good afternoon.
Speaker Change: I wanted to see if you could shed some light on the Gulf of Mexico outlook.
Speaker Change: For 2025 that you have.
Speaker Change: Perhaps some maintenance and one cube and maybe help us think about how the quarterly trajectory could be in the Gulf and maybe some of the projects that are contributing to a little bit of a year over year growth and 25 versus 24.
Ken you want to share our Gulf of America.
Speaker Change: Information.
Speaker Change: Thanks, Erin, Yes Gulf of Mexico Gulf of America has a busy year ahead.
Speaker Change: As you know, we really want to carry out the fabric maintenance life extension and painting activities and good weather and away from Hurricane season. So this quarter, we have two platforms going to total of Rins when they come back on the land around 16000 barrels a day.
Speaker Change: Our drilling activities. This year involves six wells.
Speaker Change: This wedge showed up between 18 to 22000 barrels a day for the year.
Speaker Change: Our production engineering activities, including stimulation the lull with Obi you should add another four to 7000.
Speaker Change: <unk> per day, and we will carry out.
Speaker Change: Barb turnaround in Q4.
Speaker Change: So racking these up including some decline gets us to a range of 141 to 150000 barrels a day for the year upwards.
Speaker Change: Opportunistic work may move some things around that but.
Speaker Change: But I hope this gives you a real fear feel for the year.
Speaker Change: Also our equipment uptime is top tier so record levels.
Speaker Change: And then in addition to these activities. We are also commencing our Gulf of America to plain old projects, which will add material quantities of low F&D calls barrels.
Speaker Change: A lot of the capital laterally. This year is focused in Horn mountain 2.0, and that includes the start of our water floods, there artificial lift projects, which include the ESP and gas lift.
Speaker Change: So yes, a busy year ahead, but we've got great assets and we've got a really great team there.
Speaker Change: Great. That's helpful. Thanks for the detailed.
Speaker Change: You mentioned that you've announced.
And I also think in early February and extension to the Echo patrol JV in the Midland Basin.
Speaker Change: Can you just give us those are just some of the basic terms of the agreement and just confirm that this is fully baked into 2025 guide.
Speaker Change: Yeah. The terms are similar to what we had before and this is this will be a project that it's not huge but it is an extension into next year.
Speaker Change: And we'll drill about 23 wells or so and.
Speaker Change: I'm looking forward to working continuing to work with Echo patrol to get that done.
Speaker Change: Great. Thanks, a lot.
Speaker Change: Thank you.
Speaker Change: And our next question comes from Betty Jang from Barclays. Please go ahead with your question.
Betty Jang: Great. Thank you for taking my question.
Speaker Change: You asked about start with the Rockies program.
Speaker Change: In 2025, but also how you see that evolving over the next few years, we didn't notice based on the presentation that.
Speaker Change: The activity level is much lower that's brought up gross and net basis year on year and Capex is flattish style.
Speaker Change: Yes are there any nonproductive capital in there does that impact 2026, and beyond and how it how should we just be thinking about that program going forward. Thanks.
Richard Jackson: Yeah, great. Thank you for the question. This is Richard I'll walk through a few pieces of that.
Richard Jackson: As you noted part of it is walking through some of the adjustments, especially if you're thinking about our production as we stepped.
Richard Jackson: Step down with the ethane rejection in the first quarter.
Richard Jackson: And then working through our.
Richard Jackson: Divestitures from an activity standpoint.
Richard Jackson: The Rockies is.
Richard Jackson: <unk> got some embedded deficiency I'd say it was the first place to start we are across all of our assets. We put it into highlights the improved not only drilling cost for drilling efficiency and that's true for the Rockies as well so they're close to a 100 million down looking at just really just more efficiency.
Richard Jackson: Across our drilling and completion activities that is all set.
Richard Jackson: By infrastructure and that infrastructure for US is an important development in the D. J basin. This is moving to a larger more contiguous development area that we've talked about it in the past called Bronco and for US that gives us about 140 locations at less than $50 breakeven.
Richard Jackson: That will be able to prosecute over the next three years and so while we're trading a bit to that efficiency for the investment in infrastructure and the story plays out a bit in the Permian as well, we think thats, a really value added spin for us this year.
Richard Jackson: From an activity standpoint, the Rockies the only other thing I'll note our powder River basin.
Richard Jackson: Had some really strong well results I think we highlighted those over the last couple of quarters in terms of the productivity of those wells were continuing to monitor those in the first quarter and then will be set to resume our activity in the powder River basin in the second half of this year.
Richard Jackson: And to what we believe will be a very competitive program opportunity for us next year as we contemplate capital.
Richard Jackson: No. That's it that's helpful. Thank you.
Speaker Change: My follow up is on that.
Speaker Change: That that reduction you guys have a really strong half weighed on did that reduction in 'twenty 'twenty four and our latest one key with the noncore asset sale.
Speaker Change: That there's about $15 billion net debt target still out there or do you still feel good about reaching that level by late 'twenty early 'twenty 'twenty seven.
Speaker Change: Obviously commodity price is a factor, but just wanted to get your sense on that trajectory to that number.
Speaker Change: We do still feel comfortable with that I would say that probably it's going to be more like the the first part of 'twenty 'twenty seven, but we felt comfortable with where we are and still have opportunities to supplement our cash flow from operations.
Speaker Change: To help accomplish that.
Speaker Change: And our next question comes from Neal Dingmann from tourists Securities. Please go ahead with your question.
Neal Dingmann: Thanks for the time first.
Neal Dingmann: My first question is just maybe around your 2025 guide specifically.
Neal Dingmann: Thank you were talking about about 1 million four Boe per day production in around what the $7 5 million Capex I'm just wondering on the around.
Neal Dingmann: Around those two what type of service cost are you all assuming in there and you know how much operational efficiencies because you certainly have continued to see that.
Neal Dingmann: Both in your DJ and Permian and I'm, just wondering if you're expecting more.
Speaker Change: Well, we will pass this to Richard since he gets 75% of the capital.
Neal Dingmann: Sounds good at all.
Neal Dingmann: It might be share the answer with getting a little bit as we talk about service call. So let me start with the performance you know I had noted some of the Rockies improvements, but but overall last year was a very strong year from our drilling and completion teams, we've delivered about a 12% improvement.
Neal Dingmann: Against 2023, and our drilling and completion costs that was about half.
Neal Dingmann: What we call scope and performance. So that's really operational efficiencies well designs are continuing to improve on those that with some of the benefit, especially in the minimum Midland basin that we saw with Crown rock as we came together as one team the other roughly half of that was a market or sort of the default.
Neal Dingmann: Scenario factors across our our services for.
Neal Dingmann: For 2025, we're looking at around a 7% drawing completion cost improvement, obviously uncertainty a bit in terms of service costs and can help address some of that but we're really focused on continuing to deliver the performance component of about 7%.
Neal Dingmann: So.
Neal Dingmann: Can you give more detail we get into it but really just efficiency across you.
Neal Dingmann: Both our drilling and completion activities lower M. P. T. A R nonproductive time across those activities a bit more improved pad design is leading to some better outcomes in terms of our.
Neal Dingmann: Production for lower cost and so those two things again trying to roll into our 7% for the year on D&C cost.
Neal Dingmann: Great details with you and then just a second quick one just on M&A, specifically speaking I'd love to hear your thoughts. If you think most of the higher quality domestic assets have now transacted and if so you know what.
Neal Dingmann: Would that would you now consider you know maybe boosting the international M&A or what your thoughts around that.
Neal Dingmann: Yeah.
Neal Dingmann: I think we like the international assets that we have today and we intentionally chose these assets.
Neal Dingmann: Jerry has incredible reservoirs and we still have opportunities for not only expansion of the operations that we have today, but but exploration as well. So we Algeria is definitely in our future for our growth.
Neal Dingmann: Also in Oman due we we have opportunities for the continued development of oil, but we also have some gas opportunities in Oman that could turn out to be a really good thing for us we're doing a little bit of exploration in Abu Dhabi just to see how that will turn out those reservoirs. There are very similar to what we've developed.
Neal Dingmann: Oman. So it was a we were the right fit to take those blocks three and five theyre in Oman, and and that's going well. So far. So so we will start with not only growth in our international projects over the next probably.
Neal Dingmann: Probably three to five years, but also in the Gulf of America, where.
AI is not only are going to do things that I described in my script, but also are we believe that we're gonna be able to unlock some of the complexities.
Neal Dingmann: In the golf and that that will turn into not just having better success with exploration that better field development too and could also help with some of the water flooding are projects that Ken has has planned so we like where we have and we're just going to work on growing the positions that were already in.
Neal Dingmann: Internationally.
Speaker Change: Our next question comes from Paul Cheng from Scotiabank. Please go ahead with your question.
Paul Cheng: Thank you good morning.
Neal Dingmann: Did I get it.
Paul Cheng: Right that in one no.
Paul Cheng: Yes, you also may be used to new.
Paul Cheng:
Paul Cheng: Prepared remarks that you expect that the Permian oil cut is going to be higher in 2024 or 2025.
Paul Cheng: That is correct.
Paul Cheng: What will drive up the the only cut me off with the that's the first question.
Richard Jackson: Hi, Paul This is Richard I'll take that one just a couple of things.
Richard Jackson: Things to think about when we talk about oil cut in the Permian and then I'll get into a bit of the numbers.
Richard Jackson: First of all correlate very well with our unconventional grow so whether it's year on year or quarter on quarter, you can see that oil cut will track that the other thing that's happened over the last year is really crown rock coming in and so Midland Basin, obviously has a bit different oil cut.
Richard Jackson: Than than the Delaware and so that mix participates.
Richard Jackson: Other.
Richard Jackson: Factor like to talk about in the Permian is just our secondary benches and that's been more prevalent in our Delaware position, where we've seen an increase with our secondary benches as a mix of our overall program, which as we've talked about delivers better value.
Richard Jackson: Even with a lower cost so.
Richard Jackson: As you watch us sort of quarter on quarter year on year. Those are generally the variables that drive it now.
Richard Jackson: Address your question.
Richard Jackson: Yes, we are seeing a better oil cut.
Richard Jackson: Even as we go forth quarter window in the first quarter, and then total year 'twenty five or improvement almost a percent as we look at full year versus the 25, So again that's growth.
Richard Jackson: But it's really tracking our production in our unconventional business and the.
Richard Jackson: Our U S Permian development.
Richard Jackson: And once.
Okay.
Mike: So just to clarify what I'd mentioned in my prepared remarks was the growth from Permian, which could show just alkali along with the growth in our Gulf of America, which Ken went through the details. So we said the total company oil cut is going to increase to 52% in 2025, just wanted to clarify on that Mike.
Richard Jackson: Yes, Thank you Sidney rich.
Speaker Change: Which what percent of your 2025 program in the Permian is on the secondary benches with since the 2024 and do you think that the.
Speaker Change: The parent the secondary benches is better so can you give a sense of what is the oil cut in those secondary benches. Thank you.
Speaker Change: Yes, perfect for this year.
Speaker Change: Total one thing to think about total Permian unconventional development, we talk about primary benches are actually up year on year, and that's because of our crown rock development in a very de risked and provide a lot of primary benches in the Delaware. This year, we're up about 30 per.
Speaker Change: In terms of secondary benches as a percentage of our total program versus last year was around 25% and what are you know one of the Ah.
Speaker Change: Details we provided.
Speaker Change: In prior calls or talked about is when we say better those those secondary benches are flowing into existing facilities and so from a total cost per barrel for the year. You are coming out are much more advantage you can double or even triple your return.
When youre looking at a development program with that sort of benefit coming from facility. So.
Speaker Change: This year as we make these investments into these new areas and I've talked about you know the 140 wells in the Rockies that we're adding with that infrastructure investment we will see that same play out on total returns for the life of the program.
Speaker Change: Okay.
Speaker Change: Our next question comes from Roger read from Wells Fargo. Please go ahead with your question.
Roger Read: Yeah. Thanks, good morning, or good afternoon, what am I talking about here.
Speaker Change: Maybe just to quickly come back to.
Speaker Change: Question on drilling and completion efficiencies on a slide.
Speaker Change: Slide 13.
Speaker Change: You spelled out the well cost declines this year, 7% and then there is expect to save 1 million per well across remaining program. What is the I'm, assuming the million strung out over a longer period of time, but I just wanted to get a little clarity on.
Speaker Change: Maybe two different lines of banking.
Roger Read: Yeah, Hi, Roger good afternoon.
Speaker Change: That $1 million was specific to our Midland basin.
Speaker Change: Activity and that was exciting to us because that was really a benefit coming out of it.
Speaker Change: Joint Crown Rock rock now Oxy rock team with our legacy Midland Basin team and so that $1 million was really.
Speaker Change: Yeah.
Speaker Change: Delivered in the fourth quarter. So when we look at our fourth quarter drilling completion cost it was $1 million better than our total year 'twenty four we expect that to continue now into 'twenty 'twenty five and so quite a few really strong.
Speaker Change: Things that were identified from well design into.
Speaker Change: Into operational sequencing that came out of that exercise. So we talk about the benefits.
Speaker Change: No cash flow delivery from our oxy rock assets and team, but it's also helping our overall Midland team as well.
Okay.
Speaker Change: Just sort of built their different things, we've seen and we'll see but not a not a separate goal going forward.
Speaker Change: No the disability okay.
Speaker Change: And then two to change pace, just a little bit here with the strategy startup given.
Speaker Change: This is a very I'll say brand new technology, but it's a brand new at scale.
Speaker Change: Commercial system.
Speaker Change: The main.
Speaker Change: Don't know if you want to call them hurdles are.
Speaker Change: Milestones or whatever we should be watching as you turn this thing on ramp it up commission. It this year I understand not to build any real profitability in but what are you looking at as key challenges that will make you feel more comfortable as you go through the commissioning process.
Speaker Change: Uh huh.
Ken Dillon: Hi, there as Ken.
Speaker Change: Just to go through where we are and then talk through the links that so really excited here.
Speaker Change: Stratos phase one is 94% complete overall and 98% complete on construction.
Vicki Hollub: Last piping spills or being hydro tested instrumentation and electrical equipment checks are ongoing so so getting very close and as Vicki said worthy have done incredibly well in the project.
Speaker Change: In terms of so once we've got the mechanical completion.
Speaker Change: For the process area and the Calciner, We're then moving into the startup phase.
Speaker Change: In terms of startup the oxy Chem teams, who have been handling these chemicals for for decades are preparing to sub systems and the process systems and essentially the sequences as follows will start pumping water in the system and start running the funds, we've already had a son running which was.
Speaker Change: A really good day at site.
Speaker Change: Sam will start injecting.
Speaker Change: Water into one bay.
Speaker Change: And then mixing potassium hydroxide the line and then we'll start making pellets.
Speaker Change: Once we start making the pellets, we filter those pellets, we drive them and then we start moving them through the mechanical handling system to the Calciner.
Speaker Change: Startup the Calciner in Landstar, capturing C O two which is a really big day at site. It will be very small volumes, but it's a really big day. Once we built one be losing them leased our other base and then we start compression and start injection.
Speaker Change: So those are really the sequences oxy Kim are very experienced in handling. These materials. So we have milestones associated with each of these.
Roger Read: And Roger maybe I'll, just add a couple of kind.
Speaker Change: Kind of as we think about the business outcome as Sunil mentioned, we've been conservative this year as we think about the the startup and timing of ramp up to full capacity and Thats really as.
Speaker Change: As we expect to learn a lot through this commissioning and start up like we do all of our projects. We're looking for opportunities to reduce operating expense, we're looking for opportunities to increase capacity and so we want to be really thoughtful over the next six months to try to learn as much as we can cause the goal is really you know.
Speaker Change: Maximizing both of those outcomes over the next several years so.
Speaker Change: Just wanted to make that that tight when you think about the.
Speaker Change: The rest of the year for us.
Speaker Change: I appreciate that would be exciting to watch.
Speaker Change: Our next question comes from Neil Mehta from Goldman Sachs. Please go ahead with your question.
Neil Mehta: Yeah. Thanks for all the great information just a couple of midstream questions.
Neil Mehta: Just would love your perspective on the key drivers of that business looking at the guide here for 25, Q1 looks a little bit weaker and then I guess it it builds through the year is closer to breakeven. So just your perspective on the variables that are going into that.
Neil Mehta: I have a follow up on midstream.
Neil Mehta: Yeah Neal so if you look at our guidance for 2025 compared to 24 multi.
Speaker Change: Multiple moving pieces, so firstly on the crude marketing side.
Speaker Change: You know, we're going to get a lower transportation costs like I've mentioned in my prepared remarks, there are two transportation contracts that are expiring this year.
Speaker Change: Between dose one as in Q1.
Speaker Change: And the other one is in Q3.
So this year, we're going to get a benefit of about $200 million next year, it's going to be $400 million, but some of that is partially offset by the anvil <expletive> escalation of around 3%. So that's what the crude marketing side and on the gas marketing side.
Speaker Change: With the additional takeaway capacity now coming online from Permian, we are assuming lower differentials between Permian and Gulf Coast.
Speaker Change: Then on the wholesale side, we are seeing a higher sulfur price, which again should be a improvement compared to last year.
Speaker Change: And then on Wes.
Speaker Change: We sold 19.5 million units last year, so that is going to impact our income.
Speaker Change: You have lower distribution on lower income compared to last year and the last thing on LCB.
Speaker Change: Just talked about to start up and the ramp up in Stratos, So which will also have a small negative impact on the income compared to last year, but what I would say is our midstream team as you know overall very well positioned to capture value when the market does present itself and again last year that demonstrated by beating the original guide.
Speaker Change: <unk> $600 million.
Speaker Change: Yes, it really good numbers Neil. Thank you that is the follow up is just the framework around west monetization recognizing there are a lot of moving pieces, but how are you thinking about the pluses and minuses of that.
Speaker Change: As we think about the deleveraging targets.
Speaker Change: Should we think about the tax component that goes into that equation as well.
Speaker Change: Well it is for us we continually.
Speaker Change: Look at opportunities and evaluate the opportunities and it all comes down to the value proposition and so you're right that the tax impact would.
Speaker Change: It would be a part of that value proposition when we're looking at them selling and divesting things that provide significant cash flow as west us. So.
Speaker Change: That would be a half have to be a part of what we consider.
Speaker Change: Our next question comes from Doug will get from Wolfe Research. Please go ahead with your question.
Speaker Change: Hi, This is John Abbott on for Doug Leggate. Thank you for taking our question. Our first question is on the call for Matt.
Speaker Change: America.
Speaker Change: I mean, you spoke about 2025, but can you talk about visibility beyond 2025.
Speaker Change: And how you see sustainable production.
Sure it's Ken here.
Speaker Change: I think we intend to have a goal of staying long term if.
Speaker Change: If you looked at the projects.
Speaker Change: We're working on at the moment, yes, we have the primary.
Speaker Change: No.
Speaker Change: Development drilling programs, we also begs flourish and so this year.
Speaker Change: <unk> been two exploration wells, one basically underneath one of our facilities, which has two targets.
Speaker Change: ISC, none the Wilcox target.
Speaker Change: And then the next wave is the EUR.
Speaker Change: Gulf of Blanks Gulf of America 2.0 projects.
Speaker Change: Project switch.
Speaker Change: The water floods carried very low F&D very little decline very long term. So again each of these projects is accretive to lower costs long term developments and theyre not really pops on water floods, there basically pressure maintenance project.
Speaker Change: So it's not huge drilling overheads on these existing facilities we have.
Speaker Change: Unconventional opportunities we are fracking opportunities. So so the scale of the opportunity and gone as you know hundreds of millions of barrels we see potentially there and have mapped out all of these Gulf of America to point projects.
Speaker Change: We're just working our way through them.
Speaker Change: So hopefully about couple of years here.
Speaker Change: Question.
Speaker Change: I have to say that I'm sure Kim enthusiasm about the Gulf.
Speaker Change: Of America, its really going to be for us in the out years three to five years, it's going to be an important part of our growth story.
Speaker Change: Yeah.
Speaker Change: I appreciate it and then the next question that we had was on your <unk> business is no longer break out your production and your financials.
Speaker Change: Could you provide an update where production Stan and.
Speaker Change: Is it still around 140000 barrels per day, which was your run rate a couple of years ago.
Speaker Change: Yeah.
Speaker Change: Yes, thanks for the question for Darren.
Speaker Change: Our enhanced oil recovery, we remain excited about that business too as we look into the future.
Speaker Change: From a production level.
Speaker Change: It's similar we've had some slight decline over the last really three years I think you can see from our.
Speaker Change: Capital investment and it's been a bit lower the last several years, but what that business is delivered is really great.
Speaker Change: Efficiency on cost so when we talk about a lot of our operating expense.
Speaker Change: Reductions they have led the way their leverage more to opex and they are capital and so they can really help deliver.
Speaker Change: Good cash margin to our business are improving cash margin to our business with those.
Speaker Change: <unk> in the future you know this is this is part of our our strategy with Sidoti.
Speaker Change: C O two in carbon capture and so as we get the ability to have lower cost C. O. Two we're excited about what that business can become very low similar to what Kevin talked about in the Gulf of America, very low F&D cost barrels at very low decline and so when we bring that production on.
Speaker Change: It's going to provide nice cash flow attributes to complement the rest of our business.
Speaker Change: And our next question comes from Leo Mariani from Roth. Please go ahead with your question.
Speaker Change: I wanted to ask just a general question around the low carbon ventures business year, obviously, we've had a significant change in the administration.
Speaker Change: Here in the U S. Just wanted to kind of get a sense. If you all are thinking about that business differently over the next four years as you kind of proceed to prosecute things here.
Speaker Change: Not really I mean, we were aware of the situation and certainly there's more uncertainty around.
Speaker Change: They are a in the infrastructure bill, but the way. We view. This is that C. O. Two is it's going to be much needed for the U.
Speaker Change: The U S for our extended energy independence.
Speaker Change: The reality is that.
Speaker Change: The shale Revolution was an amazing thing that happened here in the United States. We believe the next round of technology, that's going to add significant barrel 50 to 70 billion barrels of reserves will be production that comes from the use of C. O. Two in enhanced oil recovery, So 45 Q.
Speaker Change: It's important for the development of the technology to get to C. O. Two theres not enough organic C O two in the country to be able to.
Speaker Change: I applaud all of the things that we're going to need to flood to get that $50 70 billion barrels and that 50 to 70 billion barrels would extend our energy independence by more than 10 years. It's it's critically important and so taking C. O. Two out of the atmosphere is the technology that needs to work for the United States and press.
Speaker Change: Chuck knows this the business case for this I've had several conversations with them.
People around him understand the need for at least some initial subsidies to help advance. This technology just as you know there hasn't been really many transformational technologies that have been developed that didn't have some sort of assistance at the beginning of it and so we know that we have the case.
The ability to get the cost down on these direct air capture facilities. We've been so impressed with the combination of the oxy and carbon engineering team. The innovation that they are developing so quickly is very very helpful, but to get to where we need to to be we really need to have 45 key and so we have been.
Speaker Change: With members of Congress and Senators and.
Speaker Change: We've met with many of the new cabinet members.
Speaker Change: We're getting the story out that.
Speaker Change: The next technology that must work and it is very much needed is direct air capture to get the C. O. Two for these reservoirs. So we were optimistic that everyone. Once we get around to everybody will understand that the business case for this.
Speaker Change: But even if the business case is not completely what we expect from the government I do believe that we have the capability to get this down faster than we originally thought we would and so that that's where we're headed but it hasn't changed our strategy in terms of what we're doing well.
Speaker Change: We're just trying to understand the and the King ranch adapt facility.
Speaker Change: And ladies and gentlemen in the interest of time. This will conclude today's question and answer session I would now like to turn the conference call back over to.
Vicki Hollub: Vicky for any closing remarks.
Speaker Change: I'd just like to say thank you all for your questions and for joining our call and hope you have a great rest of your day.
Vicki Hollub: Yeah.
Vicki Hollub: The conference has now concluded we do thank you for attending today's presentation. You may now disconnect your lines.
Vicki Hollub: [music].
Vicki Hollub: Okay.
Uh huh.
Vicki Hollub: Okay.
Vicki Hollub: Yeah.