Occidental Petroleum Corporation projects annual production growth of at least 5 to 8 percent through 2014, Chairman and Chief Executive Officer Dr. Ray R. Irani announced at a meeting with financial analysts in New York. Dr. Irani and members of Oxy’s executive management team presented details of the company’s operational and financial strategy for achieving sustained growth and profitability over the next five years, highlighting the importance of the Middle East to its plans.
Dr. Irani stated that “the growth projections are based entirely on performance expectations for existing properties at which we are currently engaged — not from future asset acquisitions or new projects.” He noted that “Oxy could achieve average annual production growth of between 6 and 9 percent over the next five years and could grow in excess of 9 percent, depending on success in our exploration and asset development programs.”
“Our goal for Oxy has been, and continues to be, delivering top-quartile returns,” Dr. Irani said.
Irani said that “pursuing additional growth opportunities in the Middle East,” was a key compenent in achieving his growth and sustainability targets.
The chairman and CEO also highlighted a focus on returns, targeting returns on investment of a minimum of 15 percent after tax for U.S. assets and 20 percent, after tax, for international assets, and continuing dividend growth.
Report Highlights:
For the 10 years ended December 31, 2009, for every dollar in earnings the company retained, Oxy generated a $2.57 increase in equity market value while its peers’ results ranged from $2.53 to a loss of $.24. Oxy has one of the lowest F&D (finding and development) costs in the industry per barrel. With a 10-year average F&D cost of $9.82, using actual prices, Oxy’s F&D cost was 19 percent of the average West Texas Intermediate (WTI) price over the same period.
Oxy expects to spend a total of $27.5 billion on its capital program between 2010 and 2014, with 55 percent planned for U.S. projects and 45 percent for international. Capital expenditure for 2010 is targeted at $4.5 billion.
“We will also continue to emphasize our health, environment and safety programs,” said Dr. Irani. “Oxy is one of the top safety performers in the oil and gas and chemical industries and consistently ranks among the safest companies in the U.S.”
Middle East Focus:
Outside of the US, Oxy operates internationally in the Middle East and Latin America regions. Total net international production is expected to grow from an estimated 365,000 BOEPD in 2010 to a net production of between 453,000 and 486,000 BOEPD in 2014.
Oxy outlined to analysts its strong performance and growth prospects in the Middle East region. Estimated regional net production for 2010 is anticipated to be 286,000 BOEPD, growing to an estimated range of 358,000 to 381,000 BOEPD in 2014.
In Iraq, Oxy and its consortium partners have begun work on a development program of the giant Zubair oilfield that is expected to bring Oxy net production of 65,000 to 75,000 BOEPD by 2014 and reserve additions. The contract allows for Oxy’s rapid cost recovery, which, at current oil prices, could be achieved in less than five years. The consortium currently has 40 personnel in Zubair, and is expected to increase to 150 personnel by year-end.
“We believe that, over the next several years, Iraq will evolve – building its infrastructure, achieving greater political stability and strengthening security. As that occurs, there will be increased opportunity for those companies that have performed successfully in the region,” Dr. Irani said. “We believe that Oxy will be both a key contributor and beneficiary as Iraq reclaims its important place in world energy production.”
In Bahrain, a major redevelopment project is under way at the Bahrain field as a joint venture of Oxy, the Mubadala Development Company of Abu Dhabi and the National Oil and Gas Authority of Bahrain. Gross field oil production is expected to more than double to 75,000 BOPD by 2014 with a peak level of more than 100,000 BOPD. Gross gas production during the five-year period is expected to grow more than 45 percent from a current level of 1.1 BCF (billion cubic feet per day) per day to 1.6 BCF.
The company’s total gross production in Oman, where it is the No. 2 oil producer, has skyrocketed from 1,000 BOEPD in 1984 when Oxy began operating the Safah field to an estimated 190,000 BOEPD in 2010. Production at the Mukhaizna field, where Oxy has a major steam flood project for enhanced oil recovery, has increased more than 11-fold to 100,000 BOPD since Oxy assumed operations in 2005 and is projected to be producing 150,000 BOEPD in 2014. Oxy’s expected gross production in Oman from existing projects is expected to grow to between 220,000 and 240,000 BOEPD by 2014 with additional potential from existing exploration projects.
In Qatar, Oxy operates three oil projects – Idd El Shargi North Dome, Idd El Shargi South Dome and Al Rayyan. Gross production for these projects is anticipated to be over 118 MBOPD in 2014 with additional activity anticipated late in the upcoming five-year period. In addition, Oxy is a partner in the giant Dolphin natural gas project that delivers Qatari gas to markets in the U.A.E. and Oman. Oxy reported that the Dolphin Project has delivered exceptional returns in performance. The project was executed with minimal variance in budget and construction schedule even during a period of rapidly increasing costs. Dolphin’s gross production currently exceeds 500,000 BOEPD and is expected to be sustained.
Latin America Focus:
Latin America net production is anticipated to grow from an estimated 79,000 BOEPD in 2010 to between 95,000 and 105,000 BOEPD in five years.
In Argentina, where a contract extension is expected to extend the term of Oxy’s Santa Cruz concessions to 2025, the company anticipates a country-wide net production growth of 9 percent per year with Oxy’s 2014 net production anticipated to be in the range of 65,000 to 75,000 BOEPD. In Colombia, Oxy’s net production at Oxy’s Llanos Basin and La Cira-Infantas operations is expected to be above 25,000 BOEPD in 2014.
