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OXY(OXY) - 2024 Q1 - Earnings Call Transcript
OXYOXY(OXY)2024-05-08 19:52
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Financial Data and Key Metrics Changes - In Q1 2024, the company generated an adjusted profit of 0.63perdilutedshareandareportedprofitof0.63 per diluted share and a reported profit of 0.75 per diluted share, with the difference primarily due to a litigation settlement gain and gains on sales included in equity income [44] - The company generated over 2.4billioninoperatingcashflowbeforeworkingcapital,withfreecashflowexceeding2.4 billion in operating cash flow before working capital, with free cash flow exceeding 700 million despite third-party outage impacts [22][29] - The company exited Q1 with nearly 1.3billionofunrestrictedcashandanticipatesapproximately1.3 billion of unrestricted cash and anticipates approximately 180 million of annualized incremental cash flow from interest savings through debt repayment [28][27] Business Line Data and Key Metrics Changes - The oil and gas business delivered robust production results, offsetting an extended third-party outage, with production guidance for Q2 expected to increase to 1.23 million to 1.27 million BOE per day [20][30] - The midstream business significantly outperformed guidance, driven by gas marketing optimization and capturing value from regional pricing disparities [25][38] - OxyChem benefited from improved demand for marketed products, including PVC and vinyl, contributing to cash flow diversification [39] Market Data and Key Metrics Changes - The company noted that lower gas prices negatively impacted some areas, but OxyChem benefited from reduced energy costs, positioning the midstream teams to capitalize on gas marketing opportunities [32] - The company anticipates modest price improvements in the chemicals business during Q2, following a strong start in Q1 [32] Company Strategy and Development Direction - The company plans to continue deleveraging through a 4.5billionto4.5 billion to 6 billion divestiture program, with proceeds aimed at reducing principal debt to 15billionorbelow[45][46]−TheCrownRockacquisitionisexpectedtocloseinQ32024,enhancingthecompany′sproductioncapabilitiesandcashflow[36][126]−Thecompanyisfocusedonoperationalexcellenceandcapitalefficiency,withplanstooptimizewelldesignandreducecosts[24][70]Management′sCommentsonOperatingEnvironmentandFutureOutlook−Managementexpressedconfidenceinachievingproductiontargetsdespitechallenges,highlightingimprovementsinoperationalefficienciesandcapitalintensity[67][71]−ThemanagementteamnotedthatthecurrentinflationaryenvironmentandweakdemandfromChinaareimpactingpricing,buttheyexpectrecoveryindemandandpricesbeyond2024[77][79]−Thecompanyisoptimisticaboutthefuture,withafocusonexpandingresilientcashflowandenhancingshareholdervalue[42][43]OtherImportantInformation−Thecompanyisadvancingitsfirstdirectaircaptureplant,STRATOS,andhassecuredmultiplecarbondioxideremovalcreditagreements[42]−Thecompanyiscommittedtoachievingcashflowimprovementsindependentofcommoditycycles,withexpectationsofover15 billion or below [45][46] - The CrownRock acquisition is expected to close in Q3 2024, enhancing the company's production capabilities and cash flow [36][126] - The company is focused on operational excellence and capital efficiency, with plans to optimize well design and reduce costs [24][70] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving production targets despite challenges, highlighting improvements in operational efficiencies and capital intensity [67][71] - The management team noted that the current inflationary environment and weak demand from China are impacting pricing, but they expect recovery in demand and prices beyond 2024 [77][79] - The company is optimistic about the future, with a focus on expanding resilient cash flow and enhancing shareholder value [42][43] Other Important Information - The company is advancing its first direct air capture plant, STRATOS, and has secured multiple carbon dioxide removal credit agreements [42] - The company is committed to achieving cash flow improvements independent of commodity cycles, with expectations of over 1 billion in cash flow enhancements [41] Q&A Session Summary Question: What is the company's perspective on the market for non-core asset sales? - Management indicated high interest in the divestiture program and is committed to achieving the 4.5billionto4.5 billion to 6 billion target within 18 months of closing [62][88] Question: How does the company view the performance of the midstream business? - Management noted that the midstream business is well-positioned to capture opportunities and has been performing well due to effective gas marketing strategies [72][74] Question: Can you provide insights on the performance of the Delaware and DJ Basins? - Management highlighted strong performance in both basins, with unique approaches to subsurface aspects and stimulation design contributing to improved well performance [58][60] Question: What are the expectations for the CrownRock acquisition? - Management confirmed that the acquisition is on track to close in Q3 2024 and will enhance production capabilities [126] Question: How does the company view the impact of the new production fee in Colorado? - Management believes the fee is manageable and will not overly burden operations, viewing it as a positive step for both the state and the industry [127][128]