Occidental Announces 2nd Quarter 2020 Results
- All business segments exceeded guidance and continued to deliver operational excellence
- — Combined production of 1,406 Mboed from continuing operations, exceeding midpoint of guidance by 36 Mboed
- — Permian Resources exceeded high-end of guidance by 5 percent, producing 465 Mboed
- — OxyChem and Gulf of Mexico achieved all-time safety records
- Significantly lowered cost structure by fully delivering acquisition cost synergies and additional cost savings
- — Achieved 2020 annualized run rate of $1.5 billion of total overhead savings, including $900 million of synergies and $600 million of additional cost reductions
- — Achieved 2020 annualized run rate of $800 million of operating cost reductions, including realizing $200 million in synergies and $600 million of additional cost savings
- — Extensive cost management coupled with strong production resulted in second quarter domestic operating expenses to come in below guidance at $4.69 per BOE
- In July, raised $2.0 billion in senior unsecured debt and completed debt tender offer to retire $2.0 billion of 2021 debt maturities
HOUSTON – August 10, 2020 – Occidental Petroleum Corporation (NYSE:OXY) today announced a net loss attributable to common stockholders for the second quarter of 2020 of $8.4 billion, or $9.12 per diluted share, and an adjusted loss attributable to common stockholders of $1.6 billion, or $1.76 per diluted share. Second quarter after-tax items affecting comparability included impairment charges of approximately $5.2 billion on oil and gas continuing operations and $1.4 billion in discontinued operations for total impairment charges of $6.6 billion.
"We continue to make progress on our debt structure and have significantly exceeded our cost savings targets while delivering operational excellence across our business," said President and Chief Executive Officer Vicki Hollub. "These decisive financial and operational actions reflect our leadership as a low-cost operator, positioning us for success when market conditions improve."
Oil and Gas
Oil and gas pre-tax loss on continuing operations for the second quarter was $7.7 billion, compared to income of $236 million for the first quarter of 2020. The second quarter results included pre-tax impairment charges on continuing operations of approximately $4.3 billion for unproved domestic onshore acreage, $1.2 billion for proved domestic onshore and Gulf of Mexico oil and gas properties and $0.9 billion for international assets. On an after-tax basis, oil and gas impairments on continuing operations in the second quarter of 2020 were $5.2 billion. In addition, second quarter results were impacted by the steep decline in oil prices due to the continued significant drop in oil demand as governments around the world implemented measures to contain the spread of COVID-19. For the second quarter of 2020, average WTI and Brent marker prices were $27.85 per barrel and $33.26 per barrel, respectively. Average worldwide realized crude oil prices decreased by 51 percent from the prior quarter to $23.17 per barrel. Average worldwide realized NGL prices decreased by 40 percent from the prior quarter to $7.79 per BOE. Average domestic realized gas prices decreased by 24 percent from the prior quarter to $0.90 per Mcf.
Total average daily production volume of 1,406 thousands of barrels of oil equivalent per day (Mboed) for the second quarter exceeded the midpoint of guidance by 36 Mboed. Permian Resources produced 465 Mboed, exceeding the high-end of guidance by 5 percent. International average daily production volumes of 290 Mboed came within the guidance range.
Chemical pre-tax income for the second quarter of $108 million exceeded guidance by 35 percent. Compared to prior quarter income of $186 million, the decline in income resulted primarily from the negative impact of the COVID-19 pandemic on product demand. Operational spending at various facilities was lower in the second quarter offset by softening realized domestic and export PVC prices and volumes.
Midstream and Marketing
Midstream and marketing pre-tax loss for the second quarter was $7 million, compared to a loss of $1.3 billion for the first quarter of 2020. Excluding the WES goodwill charges from the first quarter of 2020, the decrease reflected mark-to-market gains in the marketing business, partially offset by higher equity investment income from WES. Excluding WES equity income, midstream and marketing pre-tax loss for the second quarter was $147 million.
Supplemental Non-GAAP Measure
This press release refers to adjusted income (loss), a supplemental measure not calculated in accordance with generally accepted accounting principles in the United States (GAAP). A definition of adjusted income (loss) and a reconciliation to net income (loss), the comparable GAAP financial measure, is included in the financial schedules of this press release. Occidental’s definition of adjusted income (loss) may differ from similarly titled measures provided by other companies in our industry and as a result may not be comparable.
Occidental is an international energy company with operations in the United States, Middle East, Africa and Latin America. We are the largest onshore oil producer in the U.S., including in the Permian Basin, and a leading offshore producer in the Gulf of Mexico. Our midstream and marketing segment provides flow assurance and maximizes the value of our oil and gas. Our chemical subsidiary OxyChem manufactures the building blocks for life-enhancing products. Our Oxy Low Carbon Ventures subsidiary is advancing leading-edge technologies and business solutions that economically grow our business while reducing emissions. We are committed to using our global leadership in carbon dioxide management to advance a lower-carbon world. Visit oxy.com for more information.
This press release contains "forward-looking statements" within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, including but not limited to statements about Occidental’s expectations, beliefs, plans or forecasts. All statements other than statements of historical fact are "forward-looking statements" for purposes of federal and state securities laws, and they include, but are not limited to: any projections of earnings, revenue or other financial items or future financial position or sources of financing; any statements of the plans, strategies and objectives of management for future operations or business strategy; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing. Words such as "estimate," "project," "predict," "will," "would," "should," "could," "may," "might," "anticipate," "plan," "intend," "believe," "expect," "aim," "goal," "target," "objective," "likely" or similar expressions that convey the prospective nature of events or outcomes are generally indicative of forward-looking statements. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Unless legally required, Occidental does not undertake any obligation to update, modify or withdraw any forward-looking statements as a result of new information, future events or otherwise.
Although Occidental believes that the expectations reflected in any of our forward-looking statements are reasonable, actual results may differ from anticipated results, sometimes materially. Factors that could cause results to differ from those projected or assumed in any forward-looking statement include, but are not limited to: the scope and duration of the COVID-19 pandemic and actions taken by governmental authorities and other third parties in response to the pandemic; Occidental’s indebtedness and other payment obligations, including the need to generate sufficient cash flows to fund operations; Occidental’s ability to successfully monetize select assets, repay or refinance debt and the impact of changes to Occidental’s credit ratings; assumptions about energy markets and fluctuations in global and local commodity and commodity-futures prices; supply and demand considerations for, and the prices of, Occidental’s products and services; actions by the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC oil producing countries; results from operations and competitive conditions; unexpected changes in costs; availability of capital resources, levels of capital expenditures and contractual obligations; the regulatory approval environment; not successfully completing, or any material delay of, field developments, expansion projects, capital expenditures, efficiency projects, acquisitions or dispositions; uncertainties and liabilities associated with acquired and divested properties and businesses; risks associated with acquisitions, mergers and joint ventures, such as difficulties integrating businesses, uncertainty associated with financial projections, projected synergies, restructuring, increased costs and adverse tax consequences; uncertainties about the estimated quantities of oil, natural gas and natural gas liquids reserves; lower-than-expected production from development projects or acquisitions; Occidental’s ability to realize the anticipated benefits from prior or future streamlining actions to reduce fixed costs, simplify or improve processes and improve Occidental’s competitiveness; exploration, drilling or other operational risks; disruptions to, capacity constraints in, or other limitations on the pipeline systems that deliver Occidental’s oil and natural gas and other processing and transportation considerations; general economic conditions, including slowdowns, domestically or internationally, and volatility in the securities, capital or credit markets; uncertainty from the expected discontinuance of LIBOR and transition to any other interest rate benchmark; adverse tax consequences; governmental actions and political conditions and events; legislative or regulatory changes; environmental risks and liability under international, provincial, federal, regional, state, tribal, local and foreign environmental laws and regulations (including remedial actions); asset and goodwill impairments; litigation; disruption or interruption of production or manufacturing or facility damage due to accidents, chemical releases, labor unrest, weather, natural disasters, cyber-attacks or insurgent activity; the creditworthiness and performance of our counterparties; failure of risk management; Occidental’s ability to retain and hire key personnel; reorganization or restructuring of Occidental’s operations; changes in tax rates; and actions by third parties that are beyond Occidental’s control. The unprecedented nature of the COVID-19 pandemic and recent market decline may make it more difficult to identify potential risks, give rise to risks that are currently unknown or amplify the impact of known risks.
Additional information concerning these and other factors can be found in Occidental’s filings with the U.S. Securities and Exchange Commission, including Occidental’s Annual Report on Form 10-K for the year ended December 31, 2019, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.