Riding the continuing wave of high oil prices, Occidental Petroleum Corp. (Oxy) expects its shale well count to keep growing, drilling 150-175 wells this year in California, said CEO Stephen Chazen during an earnings conference call with financial analysts Tuesday.
"It is clear that the bulk of our growth, the overwhelming majority, will come out of California," said Chazen, but he refused to provide an analyst with precise region-by-region growth projections. "There will be some [small] growth in the Williston [Bakken play] and some in the Permian Basin, but if you look at the third quarter, the bulk will come out of California, and as you go into the fourth quarter because of the ramp-up in the Permian, you will see a little more growth there."
Noting that Oxy's rig counts should continue to climb next year, Chazen and Bill Albrecht, president of Oxy Oil & Gas USA, painted a bullish outlook for domestic growth while some of the company's foreign plays, such as in the Middle East are more problematic. "Our exit rate going into next year ought to be fairly attractive with a pretty high backlog of production," Chazen said. "I think we're on a good track now." A total rig count of 74 is expected by year-end, with most of them being in vertical, oil plays.
"For shale, right now we're looking at drilling somewhere between 150 and 175 shale wells this year in California," Albrecht said. "We completed 26 wells in the first quarter and another 55 in the second quarter. They are not necessarily hooked up but just the number completed."
The Oxy senior executives were asked by several analysts about the ongoing permitting problems that it and other oil/gas producers are having getting injection well permits from California. Chazen decline to give many details on the Los Angeles-based energy company's discussions with the state, noting that he thinks "eventually the state will come around; it just takes longer, that's all."
In California, Oxy currently is producing about 45,000 boe/d, Albrecht said.
In response to questions about asset growth and/or splitting Oxy into separate domestic and international companies, Chazen said the company is always looking for growth opportunities in places around the world that it "understands," but he didn't think there would be value created by splitting the company between its U.S. and foreign operations.
"We always look for opportunities internationally, but in places we understand, so I don't think we will be drilling much in Antarctica," Chazen said. "We're looking for places where we can make substantial returns; we don't want to go international just to produce empty barrels." In terms of the idea of a split, he said, "You have to come to the conclusion that it actually creates value, rather than as something that just entertains investment bankers. Right now there is a lot of synergy between the two businesses."
Oxy reported second quarter net income of $1.8 billion ($2.23/share) compared with $1.1 billion ($1.31/share) for the same period last year.