Occidental Petroleum Corp. (Oxy), which soon will spin off its California assets into a new company, currently has more of a sales mindset, but if oil prices continue to decline it could quickly switch to a buying mode regarding U.S. domestic assets, particularly in the Permian Basin, CEO Stephen Chazen said Thursday on a 3Q2014 earnings conference call.
Although they are not for sale now, Chazen left no doubt that in time the company’s Bakken and Piceance assets eventually will be on the sales block, just as surely as Oxy will go after more assets in the Permian and other parts of the Midcontinent. Since 2012, Oxy has been cutting back gas drilling and production in the Piceance (see Shale Daily, Oct. 21, 2013).
During a question-and-answer session, Chazen said Oxy would be cash-rich by the end of this year and would continue to look for growth opportunities in the Permian through new investments. "We'll use our balance sheet to do those [deals]," he said.
"If there was a sharp reduction in oil prices, and more buying opportunities, we wouldn't hesitate to increase our leverage to grow the business. From our perspective this [oil price decrease] is sort of good times, and I know exactly what to do at $75/bbl oil, but I have no idea what to do at $120/bbl.
"This is really good times for us because as a fundamental business matter, these cyclical downturns are where you use the balance sheet to build the business," he said, adding that he would not attempt to predict exactly what oil prices will do. "This is a volatile time, but a little lower oil prices gives us an opportunity to add to our business."
Regarding questions about specific plans to limit capital spending in the Bakken and longer term plans there for its 335,000-acre holdings, Chazen said Oxy's properties in North Dakota can't compete with the returns its substantial acreage in the Permian provides.
"It's not that they are bad assets but more that they are not competitive within our portfolio," he said.
In regard to the natural gas-rich Piceance, Chazen has reiterated in several recent conferences that he is not bullish about U.S. gas prices. "Gas has a tough time competing in this environment," he said.
An analyst asked Chazen if his response implies the eventual sale of the Bakken assets, and Chazen indicated he agreed with that assessment, but currently "is probably not the time to be doing that."
Earlier this month, Oxy's spokesperson deflected questions about a rumored sales effort for the Bakken acreage (see Shale Daily, Oct. 10). A year ago, Oxy’s boardauthorized management to pursue alternatives pertaining to the Midcontinent and Middle East/North Africa assets, as well as selling an interest in the general partnership of Plains All-American Pipeline LP.