The Occidental Petroleum Corp.’s $12-billion acquisition of the Midland-based CrownRock Corp. was a major factor in Oxy’s second quarter performance, which featured its highest production in four years for the total company and its American onshore operations.
“We further strengthened our portfolio through the addition of CrownRock’s assets in the Midland Basin,” said President-CEO Vicki A. Hollub from Houston. “We are also pleased to announce that our strategic divestiture program is progressing and we have a clear line of sight to meeting the debt reduction targets we set out when we announced the CrownRock deal last December.
“We closed the acquisition on Aug. 1 and we continue to be impressed with CrownRock’s efficient operations and employee talent. As we have discussed previously this acquisition complements and enhances our premier Permian Basin portfolio with the addition of high-margin production and low-breakeven undeveloped inventory.”
Hollub said Oxy generated $1.3 billion in free cash flow before working capital during the quarter.
“This was driven by exceptional execution across our business segments with notably strong Permian new well performance and higher production uptime along with outperformance in the Gulf of Mexico,” she said.
“This year to date we’ve seen approximately 10-percent improvement in our unconventional well costs compared to the first half of last year, putting us ahead of our planned well cost savings. These savings have been achieved through lower non-productive time, increased frack utilization, operational efficiency gains and facilities optimization as part of our focused program to lower wells’ cost, decrease time to market and increase free cash flow.”
Hollub said Occidental’s optimization initiatives for the second half of the year include its enhanced oil recovery business in the Permian Basin where engineers are finding ways to utilize carbon dioxide more efficiently in its reservoirs.
“We’re also optimizing our artificial lift, which has led to reduced failure rates and associated downhole maintenance costs,” she said. “In the Delaware Basin we’ve decreased water disposal costs by doubling the volume of water recycled relative to the first half of last year.
“Water stewardship remains a key priority and I’m pleased to highlight a recent milestone in which we recycled a cumulative 50 million barrels in our Midland South Curtis Ranch treatment facility. In addition we have now recycled over 150 million barrels in our New Mexico operations since 2019.”
Looking to the second half of 2024, Hollub said construction is progressing on STRATOS, Oxy’s first direct air capture facility west of Odessa, and its Low Carbon Ventures team continues to demonstrate that the demand for carbon dioxide removal credits is growing.
“In July we announced an agreement with Microsoft for the sale of 500,000 metric tons of carbon dioxide removal credits over six years from STRATOS,” she said. “The agreement is the largest single purchase of direct air capture CDR credits to date and it highlights the increasing recognition of carbon engineering technology as a solution to help organizations achieve their net-zero goals.”
Senior Vice President-Chief Financial Officer Sunil Mathew reported that Oxy issued $5 billion of senior unsecured notes in late July to fund the cash consideration of the CrownRock acquisition.
“Overall we were highly pleased with the investor demand for the bond offering,” Mathew said. “Our efforts to strengthen our balance sheet remain a top priority and we are achieving early success in debt reduction.
“In July we retired $400 million of debt at maturity and our strong organic free cash flow is enabling further de-leveraging progress in the coming weeks. By the end of August between additional Oxy maturities and the early redemption of CrownRock’s notes we will have repaid an additional $1.9 billion of debt, bringing the total to $2.3 billion.”
Mathew said the company generated over $1.3 billion of free cash flow before working capital, driven by sustained success across its diversified business segments.
“More specifically the second quarter was marked by strong production performance in the Permian Basin and the Gulf of Mexico, driving high oil volumes,” he said. “In the midstream segment substantial value capture was realized, particularly in gas marketing evident through the greater than $180-million adjusted pre-tax income outperformance when compared to the midpoint of guidance.”
Including CrownRock, Mathew said, the midpoint of Occidental’s total company production and guidance has increased from 1.25 million to approximately 1.32 million barrels of oil equivalent per day.
“While the legacy Oxy capital will decrease in the second half as a result of tapered domestic activity, maintaining CrownRock’s 5-rig program will reshape the investment profile as we increase the full-year total company net capital range to $6.8 billion to $7 billion,” he said.
