Oxy cuts capital budget by a third

In the midst of falling oil prices, Occidental Petroleum Corp., Houston, expects to reduce its total capital spending for 2015 to $5.8 billion from $8.7 billion in 2014.

Oil and gas capital spending is expected to total $4.5 billion. Following a portfolio review, the company reduced the carrying values of assets in areas where it’s minimizing development activity, resulting in an aftertax charge of $5.1 billion.

“Although we have a large inventory of opportunities as well as the financial capacity to spend more capital, we think it is imprudent to accelerate some of these opportunities in the current low product price environment,” explained Stephen I. Chazen, Oxy president and chief executive officer.

“We are focused on reducing our costs, which includes renegotiating our supplier contracts that are not reflective of weaker oil prices,” he said. “These efforts should result in a reduction in the cost of executing our capital program, as well as reducing our operating expenses.

Oxy’s capital program will focus on core assets in the Permian basin and parts of the Middle East. The company has minimized development activities in the Williston basin, domestic gas properties, Bahrain, and the Joslyn oil sands project due to “subpar returns in this current product price environment,” Chazen said.

Oxy expects to reach production growth of 6-10% for full-year 2015, with the Al Hosn Gas Project expected to average 50,000 boe/d.

US production is expected to be relatively flat on a barrels of oil equivalent basis, with gas production expected to decline and oil production to increase 6%.

4Q, yearend results

Oxy reported its fourth-quarter 2014 core income totaled $560 million, compared with $1.2 billion for fourth-quarter 2013. Fourth-quarter 2014 had a reported loss of $3.4 billion, compared with income of $1.6 billion for fourth-quarter 2013.

The spinoff of California Resources Corp. was completed on Nov. 30, and its financial and operational results have been classified as discontinued operations (OGJ Online, July 10, 2014).

US oil production increased 19,000 b/d from fourth-quarter 2013 supported by 42% growth in oil production from Permian Resources business.

Oil and gas daily production volumes for the full year, excluding Hugoton, were flat at 591,000 boe. Average US daily production increased 10,000 boe to 312,000 boe. During this same time period, US oil production increased 6% to 181,000 b/d, mainly attributable to Permian Resources operations.

International average production volumes decreased to 279,000 boe/d for 2014 from 289,000 boe/d in 2013, primarily due to lower cost recovery barrels in Iraq and insurgent activities in Colombia, Libya, and Yemen.

Core income for 2014 was $3.8 billion, compared with $4.6 billion in 2013. Net income for 2014 was $616 million, compared with $5.9 billion in 2013. Full-year 2013 and 11 months of 2014 California Resources results are included in the reported net income and cash flows and have been classified as discontinued operations.

Operating cash flow from continuing operations, excluding capital accruals, was $9.4 billion and the company spent $8.7 billion for capital expenditures, net of partner contributions.

US core aftertax earnings for oil and gas were $1.2 billion for 2014, compared with $1.6 billion for 2013. The decrease in domestic core earnings reflected lower crude oil and NGL prices, higher operating costs from increased workover and maintenance activities, and higher DD&A expenses, partially offset by higher crude oil production volumes and improved realized prices for gas.

International core aftertax earnings were $2.1 billion for 2014, compared with $2.5 billion in 2013. International core earnings reflected lower realized crude oil prices and sales volumes, partially offset by lower operating expenses and DD&A.

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