Focusing on sweet spots in the Permian Basin and its deep experience in the enhanced oil recovery (EOR) market, Houston-based Occidental Petroleum Corp. (Oxy) remains on course to thrive even if commodity prices remain depressed, senior executives said last week.
During a conference call to discuss second quarter results, CEO Vicki Hollub emphasized that Oxy's break-even point for growing Permian investments requires production reaching 80,000 boe/d, a mark the company expects to reach by early 2019.
Oxy's approach has already resulted in "400 additional Permian resources locations year-to-date with breakevens under $50/bbl," Hollub said.
"Our pathway to break-even begins with the best portfolio of assets that Oxy has had in its nearly 100-year history," she said. It’s not enough only have great assets. "We must also ensure we continue to increase margins through cost reductions." To accomplish this, Oxy has established a "value-based development approach" operating and technology innovations. "As a result, we're seeing exciting progress across all of our assets.
During 2Q2017, Oxy added 9,000 boe/d in the Permian, moving closer to the company's production targets in the quarter. Oxy ended second quarter with 11 rigs working the Permian, four more than in the first quarter, said Jody Elliott, president for U.S. operations.
"The increase in second quarter activity was late in the quarter which will primarily benefit production in the fourth quarter of 2017 and the first quarter of 2018," Elliott said.
During the second half of this year, Oxy expects to run five rigs in the greater Sand Dunes area, four rigs in the Greater Barilla Draw area and two rigs in the Midland sub-basin.
Elliott stressed that the bulk of Oxy's Permian activity in the next few years would be concentrated in the Delaware sub-basin "where we're positioned, we have good rock positions."
For its EOR business, Oxy is holding up to 100 million bbl of production potential at future development costs under $6.00/bbl, Elliott said.
In January, the U.S. Environmental Protection Agency (EPA) approved a second monitoring, reporting and verification plan for injecting and storing carbon dioxide (CO2) safely in the Permian Basin as part of Oxy's EOR operations. Oxy was among the first to receive EPA authorization for EOR with CO2 sequestration in 2015. The latest EPA approval is "an important milestone in the development and commercialization of carbon capture, utilization and storage technology as an approach for long-term management of greenhouse gas emissions,” Elliott said.
Oxy reported net income of $507 million (66 cents/share) in 2Q2017, compared with a year-ago loss of $136 million (minus 18 cents).