Occidental Petroleum to Implement Strategic Production Adjustments

Occidental Petroleum (NYSE:OXY) experienced a modest 0.2% surge in post-market trading on Wednesday following the release of robust Q4 adjusted earnings and revenues. The company announced a reduction in spending for U.S. shale operations, signaling a strategic focus on enhancing cash flow to facilitate debt repayment.

In Q4, production exhibited a marginal increase of approximately 7,000 barrels of oil equivalent per day (~7K boe/day) compared to the corresponding period the previous year, reaching 1.234 million barrels of oil equivalent per day (boe/day). This figure exceeded the midpoint of company guidance by 8,000 boe/day. However, the average realized price for oil experienced a year-on-year decline of around 2%, amounting to $78.85 per barrel. Additionally, Q4 production from the Permian Basin recorded a 4.1% year-on-year upturn, reaching 588,000 boe/day.

Occidental (OXY) has declared its intent to curtail capital spending in shale and exploration by approximately $320 million in the current year. In this endeavor, the company plans to idle two rigs in the Permian Basin, attributing this decision to “efficiency and moderating activity.” Concurrently, Occidental will elevate capital expenditure in the Gulf of Mexico, chemicals, and the enhanced oil recovery business.

The company has outlined its projection for FY 2024 production, targeting 1.25 million boe/day, reflecting a 1.3% increase over the output in Q4 2023. Moreover, Occidental plans to limit its capital spending to roughly $6.5 billion, falling short of the $7 billion estimate put forth by analysts. It is worth noting that this projection does not encompass the anticipated output of approximately 170,000 boe/day resulting from the pending regulatory approvals for the acquisition of shale producer CrownRock. The increase in cash flow resulting from this strategic slowdown is earmarked for debt repayment linked to the $10.8 billion CrownRock acquisition.