Occidental Petroleum Corporation Quarterly Report (Form 10-Q) for the Quarter Ended June 30, 2024
Oxy-20240630, a Delaware corporation, filed its quarterly report for the period ended June 30, 2024. The company reported net income of $1.4 billion, a significant increase from the same period last year. Revenue increased by 15% to $6.3 billion, driven by higher oil and natural gas prices and increased production. Operating cash flow was $2.1 billion, up 21% from the prior year. The company’s balance sheet remains strong, with cash and cash equivalents of $4.3 billion and total debt of $14.5 billion. Oxy-20240630 also reported a significant increase in capital expenditures, investing $1.4 billion in its operations during the quarter. Overall, the company’s financial performance was strong, driven by its focus on operational efficiency and strategic investments.
Occidental’s Consolidated Results and Segment Performance
Occidental, a diversified energy company, operates through three main segments: oil and gas, chemical, and midstream and marketing. In the second quarter of 2024, the company reported strong financial results, with net income attributable to common stockholders of $992 million, up 38% from the previous quarter.
Oil and Gas Segment The oil and gas segment was the primary driver of Occidental’s improved performance, with earnings increasing 32% to $1.639 billion compared to the first quarter. This was primarily due to higher domestic crude oil volumes and prices, as production resumed in the Eastern Gulf of Mexico after a third-party outage in the prior quarter. However, the segment’s year-to-date results were impacted by lower domestic natural gas prices and volumes.
Table: Oil and Gas Segment Performance
| Metric | Q2 2024 | Q1 2024 | Change |
|---|---|---|---|
| Earnings ($ million) | 1,639 | 1,238 | +32% |
| Domestic Oil Sales (Mbbl/d) | 553 | 487 | +13.5% |
| Domestic NGL Sales (Mbbl/d) | 249 | 242 | +2.9% |
| Domestic Natural Gas Sales (MMcf/d) | 1,371 | 1,284 | +6.8% |
| Total Sales Volumes (Mboe/d) | 1,260 | 1,175 | +7.2% |
Chemical Segment The chemical segment’s earnings increased 17% to $296 million in the second quarter, driven by higher caustic soda and PVC prices as well as improved product demand. However, year-to-date results were 39% lower compared to the same period in 2023, primarily due to lower caustic soda realized prices, partially offset by improved demand and lower ethylene and energy costs.
Midstream and Marketing Segment The midstream and marketing segment swung to earnings of $116 million in the second quarter, compared to a loss of $33 million in the prior quarter. This improvement was mainly due to higher gas marketing income from improved transportation spreads from the Permian to the Gulf Coast, as well as lower equity method investment losses in the low-carbon ventures business. Year-to-date, the segment’s earnings increased to $83 million, up from a loss of $28 million in the same period of 2023, driven by higher equity method investment income and crude sales margins.
Consolidated Financial Performance Occidental’s consolidated net income for the second quarter of 2024 was $1.170 billion, a 66% increase from the previous quarter. Excluding the impact of items affecting comparability, the improvement was primarily due to higher domestic crude oil volumes and prices in the oil and gas segment, as well as improved performance in the midstream and marketing segment.
For the first six months of 2024, Occidental’s net income attributable to common stockholders was $1.710 billion, an 8% increase compared to the same period in 2023. This was despite lower realized prices across most products in the chemical segment and lower domestic natural gas prices and crude oil volumes in the oil and gas segment, which were partially offset by higher domestic crude oil prices.
Table: Consolidated Financial Performance
| Metric | Q2 2024 | Q1 2024 | Change | YTD 2024 | YTD 2023 | Change |
|---|---|---|---|---|---|---|
| Net Income Attributable to Common Stockholders ($ million) | 992 | 718 | +38% | 1,710 | 1,588 | +8% |
| Net Income per Share - Diluted ($) | 1.03 | 0.75 | +37% | 1.78 | 1.63 | +9% |
Liquidity and Capital Resources As of June 30, 2024, Occidental had $1.8 billion in cash and cash equivalents, as well as $4.15 billion of available borrowing capacity under its revolving credit facility (RCF). The company generated $4.4 billion in cash flow from operations during the first six months of 2024, which was used to fund $3.6 billion in capital expenditures, primarily in the oil and gas segment.
Occidental’s net cash used in financing activities was $289 million for the first half of 2024, which included $698 million in dividend payments, offset by $504 million in proceeds from the exercise of common stock warrants.
The company’s long-term debt was rated Baa3 by Moody’s, BBB- by Fitch, and BB+ by S&P as of June 30, 2024. Any downgrade in credit ratings could impact Occidental’s ability to access capital markets and increase its cost of capital.
CrownRock Acquisition and Divestiture Program In December 2023, Occidental announced the $12.4 billion acquisition of CrownRock L.P., which closed on August 1, 2024. The acquisition was funded through a combination of cash, Occidental common stock, and the assumption of $1.2 billion in existing CrownRock debt.
To finance the CrownRock Acquisition, Occidental issued $4.7 billion in new term loans and $5.0 billion in senior unsecured notes in July 2024. The company plans to repay at least $4.5 billion of debt within 12 months of closing the acquisition using proceeds from a $4.5 billion to $6.0 billion divestiture program, which Occidental expects to complete within 18 months of the CrownRock closing.
In July 2024, Occidental entered into an agreement to sell certain Delaware Basin assets for approximately $818 million. As of the date of this filing, the company has closed or announced divestitures totaling $970 million in 2024.
Outlook and Priorities Occidental’s operations, financial condition, and capital expenditures are highly dependent on oil, NGL, and natural gas prices, as well as the Midland-to-Gulf-Coast oil spreads, chemical product prices, and inflationary pressures. The company expects oil prices to remain volatile due to geopolitical risks, macroeconomic factors, and actions by OPEC and non-OPEC producers.
Occidental’s key priorities for 2024 include:
- Maintaining its production base to preserve asset integrity and longevity
- Delivering a sustainable and growing dividend
- Enhancing its asset base with investments in energy, chemicals, and low-carbon businesses
- Advancing technologies and business solutions to drive a sustainable low-carbon future
- Completing the CrownRock Acquisition and the associated $4.5 billion to $6.0 billion divestiture program
- Applying divestiture proceeds to reduce debt below $15 billion
Analysis and Outlook Occidental’s strong second-quarter performance, driven by its oil and gas segment, demonstrates the company’s ability to capitalize on favorable market conditions. The recovery in domestic crude oil volumes and prices, as well as improved gas marketing income in the midstream and marketing segment, were key contributors to the improved results.
However, the company’s year-to-date performance was impacted by lower realized prices in the chemical segment and lower domestic natural gas prices and volumes in the oil and gas segment. These headwinds highlight the importance of Occidental’s diversified business model and its efforts to enhance its asset base through strategic acquisitions and divestitures.
The CrownRock Acquisition is a significant move that is expected to strengthen Occidental’s position in the Permian Basin, a key growth area. The associated divestiture program will help the company focus on its core assets and reduce debt, which should improve its financial flexibility and credit profile.
Occidental’s focus on maintaining production, delivering shareholder returns, and advancing its low-carbon initiatives aligns with the company’s long-term strategy. The successful execution of these priorities, along with prudent capital allocation and cost management, will be crucial in navigating the volatile market environment and positioning Occidental for sustainable growth.
Overall, Occidental’s consolidated results demonstrate the company’s resilience and ability to adapt to changing market conditions. The company’s diversified portfolio, strategic initiatives, and commitment to operational excellence position it well to capitalize on future opportunities and deliver value to shareholders.
