Occidental Petroleum - $OXY.US

What is Occidental Petroleum Future Strategy?

Occidental Petroleum Corporation explores for, develops, produces, and markets crude oil and natural gas. The Company also manufactures and markets a variety of basic chemicals, vinyls and performance chemicals. Occidental also gathers, treats, processes, transports, stores, trades and markets crude oil, natural gas, NGLs, condensate and carbon dioxide (CO2) and generates and markets power.

What Occidental Petroleum is doing in more details?

Harnessing its heritage of Western technical know-how, Occidental Petroleum engages in oil and gas exploration and production and makes basic chemicals, and vinyls

It boasts proved reserves of around 3.8 billion barrels of oil equivalent, primarily from assets in the US, the Middle East, North Africa, and Latin America. Subsidiary Occidental Chemical (OxyChem) produces caustic soda, chlorine, and chlorinated isocyanurates, and ranks in the top three producer of polyvinyl chloride (PVC) resin in the United States.

Occidental Petroleum’s midstream and marketing units purchase, gather, process, transport, store, and market crude oil, natural gas, NGLs, condensate, and CO2, and generate and market power. In 2019, it acquired Anadarko for $55 billion.

Where Occidental Petroleum is Operating?

Occidental’s principal businesses consist of three segments: Oil and Gas, Chemical, and Midstream and Marketing.

The Oil and Gas segment accounts for more than 60% 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 includes growth-oriented unconventional opportunities, and Permian EOR, which utilizes enhanced oil recovery techniques such as CO2 floods and waterfloods.

Of its around 3.8 million BOE proved reserves, around 50% is oil, about 20% is NGLs (natural gas liquids), and more than 15% is natural gas. Its most significant assets are in the Permian Basin in Texas and in the Middle East.

The chemical segment (OxyChem) accounts for around 20% 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 in Canada and Chile.

Products produced include chlorine, caustic soda, chlorinated organics, potassium chemicals, vinyl chloride monomers (VCM), and polyvinyl chloride (PVC).

The midstream and marketing segment brings in the remaining around 20% and gathers, processes, transports, stores, purchases, and markets oil, condensate, NGLs, natural gas, carbon dioxide (CO2) and power.

Where is the geographical reach of Occidental Petroleum?

Occidental’s strength is in its home US market, which accounts for over 75% 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 and most active oil basin and receives over 85% of Occidental’s annual capital expenditures. Internationally, Occidental’s strength is in the Middle East, which conducts operations in Oman, Qatar, UAE, and 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 Midstream business has gas plants in Texas, New Mexico, Colorado, Pennsylvania, Rocky Mountains, and the UAE, pipelines and gathering systems in Texas, New Mexico, and Colorado, as well as Qatar, the UAE, Oman, and United States. It also has a power generation facilities in Texas and Louisiana.

The company’s executive offices are in Houston, Texas.

What is Occidental Petroleum’s Sales and Marketing Strategy?

The oil and gas segment typically sells its oil, gas, and NGL at the lease or concession area.

Occidental’s third-party marketing activities focus on purchasing oil, NGL and gas for resale from parties whose oil and gas supply is located near its transportation and storage assets.

What is Occidental Petroleum Financial Performance?

After declining in 2016, Occidental’s revenue has been consistently rising. It has an overall growth of 63% for the last five years. In 2019, the company’s sales grew 14% to $20.4 billion.

The increase in net sales in 2019 compared to 2018 was primarily due to higher domestic volumes related to the Acquisition, which added approximately $3.5 billion in net sales as well as increased production activity in Occidental’s Permian Resources operations, partially offset by oil, NGL and natural gas prices in the oil and gas segment and lower realized caustic soda prices in the chemical segment.

The company suffered a $985 million net loss compared to the $4.1 billion profit from the previous year.

Occidental’s coffers swelled by $541 million during 2019, ending the year at $3.6 billion. The company’s operations generated $7.4 billion, while its investing activities used $29 billion and its financing activities generated $22.2 billion.

What is Occidental Petroleum Future Strategy?

Occidental is focused on delivering a unique shareholder value proposition through continual enhancements to its asset quality, organizational capability and innovative technical applications that provide competitive advantages.

Occidental’s integrated business provides conventional and unconventional opportunities through which to grow value. Occidental aims to maximize shareholder returns through a combination of: Maintaining a sustainable and sector-leading dividend; Allocating capital to high-return, short-cycle and long-cycle, cash-flow generating opportunities across its integrated business; Generating free cash flow growth to reduce debt and return cash to shareholders; Achieving production growth rates of up to 5% over the long-term; and Maintaining a strong balance sheet to secure business and enhance shareholder value.

Occidental conducts its operations with a focus on sustainability, health, safety and environmental and social responsibility. Capital is employed to operate all assets in a safe and environmentally sound manner.

Price volatility is inherent in the oil and gas business, and Occidental’s strategy is to position the business to thrive in an up- or down-cycle commodity price environment.

In 2019, Occidental closed on its acquisition of Anadarko. The Acquisition added to Occidental’s oil and gas portfolio, primarily in the Permian Basin, DJ Basin and Gulf of Mexico, as well as a significant economic interest in WES.

What are Occidental Petroleum’s Mergers and Acquisitions?

In 2019 Occidental acquired Woodlands-based, Anadarko Petroleum in a deal worth a total of $55 billion, displacing a bid from the much-larger Chevron.

Occidental and Chevron were attracted by Anadarko’s global portfolio and its Permian Basin holdings (640,000 net acres), one of the most productive oil regions in the world. The deal, when completed, 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 billion.

What is Occidental Petroleum’s History?

Founded in 1920, Occidental Petroleum struggled until 1956, when billionaire industrialist Dr. Armand Hammer sank $100,000 into the company, then worth $34,000. It drilled two wells, and both came in. Hammer eventually gained control of the company.

Occidental’s discovery of California’s second-largest gas field (1959) was followed by a concession from Libya’s King Idris (1966) and the discovery of a billion-barrel Libyan oil field. In 1968 Occidental bought Signal Oil’s European refining and marketing business as an outlet for the Libyan oil.

It also diversified, buying Island Creek Coal and Hooker Chemical.

In 1969 Occidental sold 51% of its Libyan production to the Libyan government under duress after Idris was ousted. (It suspended operations there in 1986). It soon began oil exploration in Latin America (1971) and in the North Sea (1972-73), where it discovered the lucrative Piper field.

Other projects included a 20-year fertilizer-for-ammonia deal with the USSR (1974) and a coal joint venture with China (1985).

During the 1980s Occidental sold some foreign assets and bought US natural gas pipeline firm MidCon (1986). It also bought Iowa Beef Processors (IBP) for stock worth $750 million (1981) and then spun off 49% of it in 1987 for $960 million.

In 1983 Hammer hired Ray Irani to revive Occidental’s ailing chemicals business (losses that year: $38 million).

Irani integrated operations to ensure higher margins during industry downturns and purchased Diamond Shamrock Chemicals (1986), Shell’s vinyl chloride monomer unit (1987), a DuPont chloralkali facility (1987), and Cain Chemical (1988). OxyChem’s profits reached almost $1.1 billion by 1989.

Hammer died in 1990, and Irani became CEO. In 1991, to reduce debt, Occidental exited the Chinese coal business and sold the North Sea oil properties. Occidental also spun off IBP, the largest US red-meat producer, to its shareholders.

Occidental paid Irani $95 million in 1997 to buy out his employment contract; instead, his compensation (a minimum of $1.2 million a year) was tied to the company’s fortunes. That year Occidental’s $3.65 billion bid won the US government’s auction of its 78% stake in California’s Elk Hills petroleum reserve, one of the largest in the continental US.

To help pay for Elk Hills, the company sold MidCon to K N Energy for $3.1 billion in 1998. Occidental traded its petrochemical operations to Equistar Chemicals, a partnership between Lyondell (now LyondellBasell) and Millennium Chemicals, for $425 million and a 29.5% stake.

In a venture with The Geon Company, Occidental in 1999 formed Oxy Vinyls, the #1 producer of polyvinyl chloride (PVC) resin in North America.

That year also brought a windfall: Chevron agreed to pay Occidental $775 million to settle a lawsuit stemming from the 1982 withdrawal by Gulf (later acquired by Chevron) of an offer to buy Cities Service (later acquired by Occidental).

In 2000 Occidental sold its 29% stake in Canadian Occidental back to the company for $828 million to help fund the purchase of oil and gas producer Altura Energy, a partnership of BP and Shell Oil, for $3.6 billion. Later that year the company sold some Gulf of Mexico properties to Apache for $385 million.

Occidental acquired a new exploration block in Yemen in 2001. The next year it sold its 30% of Equistar Chemicals to Lyondell in exchange for a 21% stake in Lyondell.

In 2005 it acquired a stake in a gas and oil production site located in Texas’ Permian Basin from ExxonMobil for a reported $972 million. Occidental closed the acquisition of Vintage Petroleum for a reported $3.8 billion in early 2006.

The government of Ecuador seized Occidental Petroleum’s Ecuadorian assets in 2006 as part of a nationalization drive. That year Plains Exploration and Production sold non-core oil and gas properties to Occidental for $865 million.

Also in 2006 Occidental reduced its stake in Lyondell from 12% to 8%. The following year Occidental sold its remaining Lyondell shares on the open market.

In North America in 2008 the company bought a 15% stake in the Joslyn Oil Sands project for nearly $500 million. That project is based in Alberta, Canada, and is operated by Total.

The company re-entered Libya in 2008.

Beefing up its investment vehicles, in 2009 the company purchased Citigroup’s commodities trading unit (Philbro LLC).

To raise cash to pay down debt, in 2011 the company sold its Argentina-based assets to China Petrochemical for $2.45 billion.

The deal helped cover some of the costs of Occidental’s $3.4 billion acquisition (in late 2010 and early 2011) of safer US-based assets — oil and gas properties in South Texas and North Dakota.

In the US, in 2012 Occidental paid $2.3 billion for oil and gas properties in the Permian Basin, Williston Basin, South Texas and California.

That year Occidental and Magellan Midstream Partners, L.P. formed BridgeTex Pipeline Company, LLC (BridgeTex) to build the 450-mile-long BridgeTex Pipeline to transport 300,000 barrels per day of crude oil between the Permian region and the Gulf Coast refinery markets.

In 2013 OxyChem, and Mexichem formed a 50/50 joint venture, Ingleside Ethylene LLC, to build a 1.2-billion-pound per year capacity ethylene cracker at the OxyChem plant in Ingleside, Texas, along with pipelines and storage at Markham, Texas.

As part of a long-term strategic supply relationship between the companies, essentially all of the ethylene produced from the cracker will be consumed in the manufacture of vinyl chloride monomer (VCM) utilizing existing VCM capacity.

VCM will be delivered to Mexichem to produce polyvinyl chloride (PVC) and PVC piping systems. Growing its assets, in 2013 the company and Qatar Petroleum agreed on the Phase 5 Field Development Plan of the Idd El Shargi North Dome Field, offshore Qatar.

The project will sustain oil production levels at about 100,000 barrels per day through 2019. (In 2011 Occidental also teamed up with ADNOC to develop the major Shah gas field in the UAE).

In 2013 the company paid approximately $500 million to acquire various US-based oil and gas properties.

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