About Occidental Petroleum Corporation
Harnessing its heritage of Western technical know-how, Occidental Petroleum engages in oil and gas exploration and production and makes basic chemicals, plastics, and petrochemicals. It boasts proved reserves of 2.8 billion barrels of oil equivalent, primarily from assets in the US, the Middle East, North Africa, and Latin America. Subsidiary Occidental Chemical (OxyChem) produces acids, chlorine, and specialty products, and owns Oxy Vinyls, the #1 maker of polyvinyl chloride (PVC) resin in North America. Occidental Petroleum's midstream and marketing units gather, treat, process, transport, store, trade, and market crude oil, natural gas, NGLs, condensate, and CO2, and generate and market power. In 2019 it agreed a major deal to acquire Anadarko for $38 billion.
Occidental's principal businesses consist of three segments: Oil and Gas, Chemical, and Midstream and Marketing.
The Oil and Gas segment accounts for some 55% of total sales and explores for, develops, and produces oil and condensate, natural gas liquids (NGLs) and natural gas. It operates through two units: Permian Resources, which exploits unconventional resources, and Permian EOR, which uses techniques such as CO2 floods and waterfloods. Of its 2.8 million boe proved reserves, around 55% is oil, 25% is natural gas, and over 15% is NGLs (natural gas liquids). Its most significant assets are in the Permian Basin in Texas and in the Middle East.
The chemical segment (OxyChem) accounts for around 25% of sales and makes and markets basic chemicals and vinyls. It owns and operates manufacturing plants at more than 20 domestic and two international sites. Products produced include chlorine, caustic soda, chlorinated organics, potassium chemicals, vinyl chloride monomers, and PVC.
The midstream and marketing segment brings in the remaining 20% and gathers, processes, transports, stores, purchases, and markets oil, condensate, NGLs, natural gas, carbon dioxide (CO2) and power.
Occidental's strength is in its home US market, which accounts for over 70% of company sales, but it also has a significant international presence.
The company's US presence is focused on Texas and New Mexico, particularly the Permian Basin, which is the US' largest onshore oil field and receives more than half of Occidental's annual capital expenditures. Internationally, Occidental's strength is in the Middle East, particularly Oman and Qatar, which both account for 10% of revenue, and the UAE, which brings in 5%. Occidental also makes 5% of total sales in Colombia.
OxyChem owns and operates more than 20 manufacturing plants in Alabama, Georgia, Illinois, Kansas, Louisiana, Michigan, New Jersey, New York, Ohio, Tennessee, and Texas, and at two international sites in Canada and Chile.
The Mid-steam business has gas plants in Texas, New Mexico, and the UAE, pipelines in Texas, New Mexico, and Colorado, as well as Qatar, the UAE, and Canada. It also has a crude terminal in Texas and power and steam generation facilities in Texas and Louisiana.
The company's executive offices are in Houston, Texas.
Occidental's revenue rises and falls with the oil price, and while the company has hedging practices to stabilize its bottom line, that too is vulnerable to weakness in the oil price.
As such, Occidental's revenue over the last five years is characterized by a steep fall from 2014 to 2016, following by an almost as steep rise in the two subsequent years.
In fiscal 2018 the company's sales grew 43% to $17.8 billion, close to levels seen before the oil price crashed in 2015 and 2016. The Brent price was $16.71 (30%) higher per barrel on average during 2018, while the WTI oil price was $13.82 (27%) higher. Occidental also increased production from 602,000 BOE/day to 658,000 BOE, reflecting higher production in the Permian Basin. The Midsteam and marketing segment experienced revenue uplift due to improved Midland-to-Gulf-Coast spreads, but the Chemicals segment grew more modestly.
Occidental is strongly profitable once more following losses in 2015 and 2016 and a mild recovery in 2017. Net income of $4.1 billion was 215% higher than the previous year, driven by a powerful increase in profitability in the Midstream and marketing segment, in addition to strong growth in the Oil and Gas and (to a lesser extent) Chemicals segments. The Midstream and marketing segment was boosted by much-improved marketing margins and higher gas plant income.
Occidental's coffers swelled by $1.4 billion during 2018, ending the year at $3.0 billion. The company's operations generated $7.7 billion, while its investing activities used $3.2 billion and its financing activities used $3.1 billion. The company's main cash uses were capital investments in its oil fields and dividends.
Occidental's attention is turned toward the Permian Basin, the major oil and gas producing region that spans west Texas and New Mexico. Permian Resources, Occidental's division active in the region, will receive 56% of Occidental's annual capital budget in 2019, while the Permian EOR (enhanced oil recovery) division will receive a further 12% of total capex to expand current facilities and increase CO2 production and injection capacity.
Occidental's investment focus is on unconventional assets (oil fields mined using techniques including CO2, water, and steam floods), which have a very short (two-year) investment payback cycle, providing some of the best margins found anywhere in the industry. Additionally, synergies between Permian Resources and Permian EOR reduce the break-even point further.
Besides operational investment, Occidental also increased its presence in the Permian Basin in a big way in 2019 when it acquired Anadarko in a step-change $38 billion deal, out-bidding larger rival Chevron in the process. The acquisition will make Occidental the Permian's largest operator, adding Anadarko's 600,00 acres to Occidental's already considerable holdings. The Anadarko deal will have major implications for Occidental's debt and it remains to be seen whether the undoubted boost to revenue and profits will prove worthwhile in the long-term. The deal also increases Occidental's exposure to external threats, such as fluctuations in the oil price and the shift toward renewables.
Mergers and Acquisitions
In 2019 Occidental agreed to buy Anadarko Petroleum for $38 million, displacing the much-larger Chevron's $33 million bid. Occidental and Chevron were attracted by Anadarko’s global portfolio and its Permian Basin holdings (640,000 net acres), one of the most economical oil regions in the world. The deal, when consummated, would make Occidental the biggest player in the Permian. Occidental had wooed Anadarko for a stock-and-cash deal, before Chevron stepped in and offered more cash. Occidental regrouped and raised more cash (including $10 billion from Warren Buffett) to sweeten its bid. It also arranged the sale of Anadarko assets in Africa to total, raising a further $9 million. The acquisition is expected to close in the second half of 2019.
5 GREENWAY PLZ STE 110
Houston, TX 77046-0521
Phone: 1 (713) 215-7000
Employer Type: Publicly Owned
Stock Symbol: OXY
Stock Exchange: , NYSE
Chairman: Eugene L. Batchelder
VP and CIO: Ioannis A. Charalambous
President, CEO, and Director: Vicki A. Hollub
Employees (This Location): 1,000
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