Occidental Petroleum Announces 4th Quarter and Full Year 2018 Results

Source Press Release
Company Occidental Petroleum Corporation 
Tags Strategy - Chemicals, Refining & Marketing Activities, LNG & Gas Storage/Processing, Tight Gas & Liquids, Unconventional Resources, Production/Development, Upstream Activities, Capital Spending, Guidance, Financial & Operating Data
Date February 12, 2019

Occidental Petroleum reports 2018 net income of $4.1 billion with ROCE of 14%, the highest since 2014 portfolio optimization; returns more than $3.6 billion to shareholders

  • Q4 cash flow from operations before working capital of $1.9 billion funded capital expenditures and dividends
  • Reserve replacement of 164% worldwide with Permian Resources replacement of 300%
  • Q4 Permian Resources production of 250,000 BOE per day, up 57% year-over-year
  • 2019 estimated production growth of 9 to 11%, with 30+% annual growth in Permian Resources
  • 2018 year-end cash balance of $3.0 billion
  • 2019 capital budget 10% lower at $4.5 billion

Occidental Petroleum Corporation (NYSE:OXY) today announced net income for the fourth quarter of 2018 of $706 million, or $0.93 per diluted share, which included impairment charges of $220 million. Core income for the fourth quarter of 2018was $922 million, or $1.22 per diluted share.

“In 2018, outstanding performance across our businesses generated the highest level of operating cash flow and return on capital employed since our portfolio optimization, and we returned more than $3.6 billion to shareholders through share repurchases and our sustainable dividend,” said President and Chief Executive Officer Vicki Hollub. “These achievements reflect the strength of our integrated business model and the high quality of our assets. As we execute our returns-focused capital program in 2019, we will strive to ensure that every dollar we spend maximizes value for our shareholders.”

QUARTERLY RESULTS

Oil and Gas

Oil and gas pre-tax income for the fourth quarter of 2018 was $145 million, compared to $767 million for the prior quarter. Occidental recorded impairment charges on its Qatar assets of $220 million and $196 million in the fourth and third quarters of 2018, respectively. Excluding these impairment charges, oil and gas pre-tax income was $365 million for the fourth quarter of 2018, compared to $963 million for the third quarter of 2018. The decline in fourth quarter core income, compared to the prior quarter, reflected lower oil and natural gas liquids (NGL) prices, a negative non-cash mark-to-market adjustment on carbon dioxide (CO2) purchase contracts, and higher depreciation, depletion and amortization and operating expenses in Qatar, primarily as a result of the Idd El-Shargi North Dome offshore field contract expiration in October 2019.

Total average daily production volumes were 700,000 barrels of oil equivalent (BOE) for the fourth quarter of 2018, compared to 681,000 BOE in the third quarter of 2018. Permian Resources average daily production volumes for the fourth quarter of 2018 were 250,000 BOE, at the high end of guidance and an increase of 11 percent from the prior quarter due to improved well performance and development activity. Compared to the fourth quarter of 2017, PermianResources production increased by more than 57 percent. International average daily volumes decreased by 7,000 BOE in the fourth quarter of 2018, compared to the prior quarter, primarily due to the impact of price on production sharing contracts in Oman and weather delays in Qatar.

For the fourth quarter of 2018, average WTI and Brent marker prices were $58.81 per barrel and $68.08 per barrel, respectively. Average worldwide realized crude oil prices decreased by 10 percent from the prior quarter to $56.11 per barrel. Average worldwide realized NGL prices decreased by 23 percent from the prior quarter to $22.88 per BOE.

Oil and Gas Preliminary Reserves

At year-end 2018, Occidental’s preliminary worldwide proved reserves totaled 2.8 billion BOE, compared to 2.6 billion BOE at the end of 2017. Proved reserve additions from all sources were 394 million BOE, compared to production of 240 million BOE, and represented a reserves replacement ratio all-in of 164 percent. Additions from improved recoveries were 294 million BOE and revisions were net positive 56 million BOE. Preliminary domestic proved reserves totaled 1.7 billion BOE at the end of 2018, compared to 1.6 billion BOE at the end of 2017. Occidental’s domestic operations had proved reserves additions from all sources of 292 million BOE, compared to production of 136 million BOE, for a reserves replacement ratio of 215 percent, with PermianResources reserves replacement of 300 percent.

As of December 31, 2018, the company's proved reserves consisted of approximately 57 percent oil, 18 percent NGL and 25 percent gas. Of the total proved reserves, approximately 62 percent is in the United States and 38 percent is international. Approximately 73 percent of the proved reserves is developed and 27 percent is undeveloped.

Chemical

Chemical pre-tax income for the fourth quarter of 2018 was $223 million, compared to $321 million for the prior quarter. The decline was primarily due to lower realized caustic soda pricing and unfavorable natural gas and ethylene costs. In addition, scheduled plant outages combined with typical seasonality resulted in lower production volumes across many product lines.

Midstream and Marketing

Midstream and marketing pre-tax income for the fourth quarter of 2018 was $675 million, compared to $1.7 billion for the prior quarter. Third quarter earnings included a pre-tax net gain on sale of approximately $900 million for the Centurion common carrier oil pipeline and storage system, the Southeast New Mexico oil gathering system and the Ingleside Crude Terminal. Excluding the gain on sale, midstream pre-tax income from the third quarter of 2018 was $796 million. The decrease in fourth quarter income reflected lower Midland-to-Gulf-Coast spreads in the marketing business, lower pipeline income due to the sale of the Centurion pipeline in the third quarter and lower Dolphin Pipeline equity income.

Source: EvaluateEnergy® ©2019 EvaluateEnergy Ltd