Occidental Petroleum Corporation

Good afternoon and welcome to the Occidental's second quarter 2021 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Jeff Alvarez, Vice President of Investor Relations. Please go ahead.

Thank you, Chad. Good afternoon, everyone, and thank you for participating in Occidental's second quarter 2021 conference call. On the call with us today are Vicki Holub, President and Chief Executive Officer, and Rob Peterson, Senior Vice President and Chief Financial Officer. This afternoon, we will refer to slides available on the investor section of our website. The presentation includes a cautionary statement on slide two regarding forward-looking statements that will be made on the call this afternoon. I'll now turn the call over to Vicki. Vicki, please go ahead.

Thank you, Jeff, and good afternoon, everyone. Our strong operational performance in the second quarter continued to drive robust financial performance as we marked our second consecutive quarter of generating the highest level of free cash flow in over a decade. As was the case last quarter, our cost structure and capital intensity leadership were catalysts for our strong results and continue to provide a solid foundation for free cash flow generation in the future. We're especially pleased to have been in a position at the end of the second quarter to launch a tender process to retire over $3 billion of debt using excess cash generated from operations, as well as proceeds from divestitures. While we made incremental progress in reducing debt throughout 2020 and the first half of 2021, the completion of this tender represents a sizable step forward in our deleveraging efforts. This morning, I'll cover our second quarter operational performance and divestiture progress, and Rob will cover our financial results and balance sheet improvement, as well as our updated guidance, which includes an improvement to our DD&A rate and an increase in guidance for our full-year production and for Midstream and OxyChem's 2021 earnings. In the second quarter, all of our businesses outperformed. Our capital discipline and efficiency, combined with a supportive and improving commodity price environment, positioned us to generate the highest level of free cash flow before and after working capital since the third quarter of 2008, when WTI hit $145 a barrel. We are proud of our teams for this accomplishment, and we appreciate that they are continuing to improve our capital execution and operating efficiencies to further expand our margins. We exited the quarter with approximately $4.6 billion of unrestricted cash, which does not include cash received in July from the recently closed investiture or the cash used for the debt tender, which closed in July. Rob will touch on the tender in a little more detail, but I'd like to reiterate how pleased we are to be, once again, making notable progress in reducing debt and strengthening our balance sheet. Turning to our operational results, Our oil and gas business delivered second quarter production from continuing operations of over 1.2 million BOE per day. The total company-wide capital spending of almost 698 million. Our domestic oil and gas operating costs of $6 per BOE came in substantially below our full-year guidance as our teams continue to demonstrate their innovative operations expertise by finding new ways to safely reduce costs in our field operations. In the second quarter, OxyChem continued to benefit from robust PVC demand and pricing, as well as gradual strengthening in the cost of soda market. We believe the fundamentals for these markets will remain supportive through the second half of 2021, and we are confident in increasing our full-year guidance to a midpoint of $1.25 billion, representing an almost 60% increase over our original guidance for the year. The ability of our oil and gas business to overcome challenges while increasing efficiencies has been transformational. Looking back over the first six months of this year, we overcame the impacts of a major weather event and divested a producing asset. We were able to make up the lost and divested production and have increased our full year production guidance for continuing operations to 1.15 million VOE per day. We continue to be highly encouraged by well performance across our portfolio. For example, in the Texas-Delaware, we recently brought online a new silvertip development that is producing approximately 20% more oil compared to a prior development in this area. Additionally, in an area roughly 10 miles southeast of Silvertip, we brought online a five-well development with average 30-day peak rates of almost 5,000 DOE per day. As I mentioned, operationally, our teams continue to set new efficiency records while constantly pursuing opportunities to improve. We set new quarterly records across our portfolio on feet drilled and hours pumped in a single day. In the Midland Basin, we set a new drilling record with over 9,500 feet drilled in 24 hours, contributing to a new oxypermian spud-to-rig release record, drilling a 10,000-foot horizontal well in only eight days. In the DJ Basin, we set a new company-wide frac record of pumping over 23 hours in a single day. Utilizing oxydrilling dynamics in the Gulf of Mexico, we have significantly lowered drilling costs and duration as the wells drilled in 2021 have cost 15% less than the average for 2019. As I mentioned on last quarter's call, we've had excellent results leveraging remote operations. Our innovative mindset and ability to leverage technological breakthroughs have allowed us to continue pushing the performance envelope giving me confidence that our best-in-class capital efficiency will continue. Our divestiture plan advanced in the second quarter with a recent closing of a non-core Permian acreage sale for approximately $510 million. Given our industry-leading inventory depth, we welcome the opportunity to monetize these assets at an attractive price, as it is unlikely that we would have developed this acreage in the near future. We expect to close at least $2 billion of divestitures post-Columbia And as we've said previously, we'll always prioritize obtaining value for our shareholders over meeting a deadline. I want to take a few minutes to talk about our chemical business and how we plan to leverage its leadership and expertise into our low-carbon ventures business. OxyChem's success is demonstrated by its financial performance and track record of consistent free cash flow generation. OxyChem has been a consistent generator of free cash flow during past downturns. And with the macro environment improving, OxyChem is on track to deliver record earnings this year, even surpassing 2018's results. The business may also continue to strengthen in future years as caustic soda, one of the key profit drivers for the business, has experienced only a moderate price recovery to date. Last quarter, I spoke about how OxyChem's integration across multiple chlorine derivatives provides us with the ability to optimize our caustic soda production while opportunistically adjusting our production mix to maximize margins. There are many opportunities for us to apply this same approach to integration as we develop opportunities between OxyChem and our low-carbon ventures business. As a major producer of PVC and caustic potash, OxyChem has the engineering, R&D, and process technology expertise, as well as the production capability necessary to build our low-carbon business. OxyChem is a world leader in the customization, handling, and usage of PVC, which will be a major component in the construction and ongoing operation of the direct air capture facility. We're also one of the world's largest leading producers of caustic potash, the key chemical utilized in the direct air capture process to separate carbon dioxide for sequestration or carbon neutral enhanced oil recovery. Our vast knowledge of equipment design and our experience with operating and handling of caustic potash will be key to helping us quickly optimize our direct air capture facilities. In addition to being a market leader and consistent free cash flow generator, OxyChem is integral to our business of today and of tomorrow. It's also worth noting that OxyChem is a market leader in health, safety, and environmental performance. OxyChem recently earned a remarkable 31 responsible care awards. These are from the American Chemistry Council and are the U.S. chemical manufacturing industry's leading performance awards. The awards recognized OxyChem's achievements in safety, waste reduction, and improving energy efficiency. Several of the award-winning initiatives focused on waste minimization, reuse, recycling, and energy efficiency, which will all contribute to our 2025 sustainability goals. I'll now hand the call over to Rob, who will walk you through our financial results for the second quarter and guidance for the remainder of the year.