OXY 2023 Share buybacks & dividend boost

Neil Mehta

And that’s the follow-up, Vicki, which is just around the authorization. You guys did a great job in the third quarter and knocking off a decent part of that share buyback authorization. Do you need to come back into the market? And how should we think about timing and sizing there?

Vicki Hollub

Well, we’ll finish the $3 billion for this year and then any cash that’s left available this year will go to further debt reduction. Starting next year is when we’ll be significant – have significantly more capital available to buy back shares. So essentially, any free cash flow that’s available next year will be allocated mostly to share buybacks. And we really want people to understand that this is not something that we’re doing on a temporary basis. We do believe that share buybacks where we are today and where our capital needs are and our cash flow potential, share buybacks is a part of our value proposition as is a growing dividend. And the two worked so well together as a combined value proposition. So that’s what we’re essentially trying to do.

And they also talked about the redemption of Berkshire preferreds. Redemption is mandatory if shareholder returns exceeds $4/ share in a rolling 12 month period.


Q3 Earnings Slide Deck

Slide 7: They are drilling some very good wells in Texas and Colorado, including the best horizontal well ever completed in the lower 48. Management commented in call they expect similar well performance over large portions of their Delaware Basin acreage.

Slides 23: Delaware Basin horizontal (HZ) well performance continues to improve over time

Slide 24: Best (HZ) well performance in the Delaware Basin when compared to peers. Peers include XOM, CVX and EOG.

Slide 25: Over 6,000 US drilling locations with a positive PV10 at $50 oil.

A lot to like on the Oil and Gas side. A $BIG$ wait and see on the Carbon Capture investments. Hopefully, they won’t be lighting that money on fire.

Vicki firmly believes that captured CO2 can and will be used unlock significant portions of the existing 2 Billion Barrel conventional EOR resource base, as well as increasing ultimate recovery from recent and future unconventional horizontal wells.


"Getting to a net-zero barrel of oil, as Hollub calls it, involves literally rerouting the route carbon dioxide takes through the world. For companies like Occidental, CO2 isn’t just a planet-destroying waste product. It’s a critical input to the process of oil production. Engineers can use CO2 to essentially juice aging oil wells by pumping it underground to displace hydrocarbons. The process is called enhanced oil recovery, or EOR. Occidental is the industry leader, producing the equivalent of 130,000 barrels per day of EOR oil and gas as of 2020. And that oil can, in theory, be less impactful on the climate. “We have it documented that it takes more CO2 injected into the reservoir than what the incremental barrels from that CO2 that are produced will emit when they’re used,” she said.

The trick is where that injected CO2 comes from. The Permian is crisscrossed with thousands of miles of pipelines that bring CO2 to oil fields from as far away as Colorado. At the moment, the vast majority comes from naturally occurring reservoirs or as a byproduct of the production of methane. One of the strangest ironies of modern oil production is that companies like Occidental don’t actually have enough CO2. “There’s two billion barrels of resources remaining to be developed in our conventional reservoirs using CO2,” Hollub said.

So she and her team went out looking for more. Eventually they hit on the idea that’s encapsulated in the IRA. Instead of pulling CO2 out of the ground only to put it back, Occidental could divert some of the CO2 that’s being produced by so-called industrial sources, companies that would otherwise be dumping it into the atmosphere because, of course, there’s no business reason not to.

…companies can choose whether they want the CO2 Occidental is capturing to be buried, full stop, or used for more oil production. But it’s clear Hollub thinks EOR is a big part of the future for Occidental. She has often said that the last barrel of oil should come from EOR. “I think there could be a world where we do stop drilling new wells,” she said. “To increase recovery from the remaining conventional reservoirs is something that’s kind of like a best kept secret for the United States. Nobody very much realizes that, but that is there. And that gives us that longevity beyond what some people are forecasting,” Hollub said. "