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Occidental Petroleum Fourth Quarter, Full Year 2021 Results

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Occidental Petroleum announced its fourth quarter and full year 2021 results.

Highlights:

• Announced new shareholder return framework and additional debt reduction target
• Earnings per share of $1.37 per diluted share and adjusted earnings per share of $1.48 per diluted share
• Cash flow from continuing operations of $3.2 billion and cash flow from continuing operations, before working capital of $3.9 billion
• Capital spending of $937 million, resulting in record free cash flow, excluding working capital of over $2.9 billion
• Reduced debt maturities by $2.2 billion through debt tender and 2022 maturity call provisions resulting in total year debt maturity reduction of over $6.7 billion
• OxyChem generated record quarterly pre-tax earnings of $574 million, increasing total year pre-tax earnings to over $1.5 billion
• Exceeded production guidance midpoint by 49 Mboed, with production of 1,189 Mboed from continuing operations

Oxy reported net income attributable to common stockholders for the fourth quarter of 2021 of $1.3 billion, or $1.37 per diluted share, and adjusted income attributable to common stockholders of $1.4 billion, or $1.48 per diluted share. Fourth quarter after-tax items affecting comparability of $111 million included net derivative losses of $107 million and $130 million of charges for non-core expiring domestic onshore undeveloped oil and gas leases and inventory impairments, partially offset by a positive state tax rate revaluation of $88 million and gains on sale of $68 million.

President and Chief Executive Officer Vicki Hollub said: “Occidental's focus on operational efficiencies in the fourth quarter enabled us to leverage the increases in commodity prices to further improve our balance sheet and liquidity position, and set us on a path toward continued debt reduction and the implementation of a new shareholder return framework in 2022. Our employees delivered strong operational results, setting new records and efficiency benchmarks in the Permian, Rockies, Gulf of Mexico and Oman in 2021. Additionally, OxyChem recorded its highest annual earnings in 30 years.”

Oil and Gas Results

Oil and gas pre-tax income on continuing operations for the fourth quarter was $2.1 billion, compared to pre-tax income of $1.5 billion for the third quarter of 2021. The fourth quarter results included $109 million of charges for non-core expiring domestic onshore undeveloped oil and gas leases and inventory impairments, partially offset by gains on sale of $68 million. Excluding items affecting comparability, fourth quarter oil and gas income improved over the third quarter due to higher worldwide crude oil and domestic natural gas prices and higher crude oil volumes, partially offset by higher exploration and overhead expenses. For the fourth quarter of 2021, average WTI and Brent marker prices were $77.19 per barrel and $79.76 per barrel, respectively. Average worldwide realized crude oil prices increased by approximately 10 percent from the prior quarter to $75.39 per barrel. Average worldwide realized natural gas liquids (NGL) prices increased by approximately 7 percent from the prior quarter to $36.52 per barrel. Average domestic realized gas prices increased by approximately 39 percent from the prior quarter to $4.64 per Mcf.

Total average global production from continuing operations of 1,189 thousand of barrels of oil equivalent per day (Mboed) for the fourth quarter exceeded the midpoint of guidance by 49 Mboed. Permian Resources, Rockies and Gulf of Mexico all exceeded the high end of guidance with production of 490 Mboed, 313 Mboed and 149 Mboed, respectively. International average daily production volumes came within guidance at 237 Mboed.

Oil and Gas Proved Reserves

As of December 31, 2021, Occidental's worldwide proved reserves totaled 3.5 billion barrels of oil equivalent (BOE), compared to 2.9 billion BOE for the same period in the prior year. Proved reserve additions were mainly driven by positive price and other revisions of 829 million BOE and extensions and discoveries of 145 million BOE. Revisions of proved reserves included 421 million BOE of positive price revisions and 208 million BOE of positive revisions related to additions associated with infill development projects, primarily in the Permian and DJ basins, and further positive revisions of 101 million BOE associated with updates based on reservoir performance. The remaining revisions were associated with various other cost related revisions and management changes in development plans.

OxyChem

Chemical pre-tax income of $574 million for the fourth quarter exceeded guidance by $94 million. Compared to prior quarter income of $407 million, the improvement in fourth quarter income resulted primarily from higher realized prices, volumes and margins across most product lines, partially offset by higher energy costs.

Midstream and Marketing

Midstream and marketing pre-tax loss for the fourth quarter was $15 million, compared to income of $20 million for the third quarter of 2021. The fourth quarter results included $76 million of derivative losses and $21 million of valuation adjustments to inventory. WES equity income for the fourth quarter was $131 million. Midstream and marketing's fourth quarter pre-tax loss, excluding WES equity income, exceeded guidance by over $100 million. Excluding items affecting comparability, midstream and marketing pre-tax fourth quarter results reflected higher margins from the marketing business due to timing of crude sales, optimizations in gas transportation capacities and improved gas transportation spreads, partially offset by higher operating expenses and energy costs in domestic gas processing due to increased NGL production.