Occidental Petroleum Corporation

Good afternoon, and welcome to Occidental's third quarter 2022 earnings conference call. All participants will be in 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 touch-tone phone. To withdraw your question, please press star then two. Please note, today's event is being recorded. I would now like to turn the conference over to Jeff Alvarez, Vice President of Investment Relations. Please go ahead, sir.

Thank you, Rocco. Good afternoon, everyone, and thank you for participating in Occidental's third quarter 2022 conference call. On the call with us today are Vicki Hollow, President and Chief Executive Officer, Rob Peterson, Senior Vice President and Chief Financial Officer, and Richard Jackson, President Operations, U.S. Onshore Resources, and carbon management. 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. We'll also reference a few non-GAAP financial measures today. Reconciliations to the nearest corresponding GAAP measure can be found in the schedules to our earnings release and on our website. I'll now turn the call over to Vicki. Vicki, please go ahead.

Thank you, Jeff, and good afternoon, everyone. We delivered another strong quarter operationally and financially, enabling us to further advance our shareholder return framework as we made meaningful progress toward completing our $3 billion share and purchase program. We achieved our goal of reducing the face value of our debt to the high teens and plan to continue repaying debt through the remainder of this year. before allocating a higher percentage of cash flow to shareholder returns next year. The excellent operational performance of our businesses was a key driver of our strong financial results, including generating the cash flow required to advance our shareholder return framework and further strengthen our balance sheet. OxyCAN delivered strong earnings following a record second quarter, while our Gulf of Mexico, International, Rockies, and Permian teams set new operational records. This afternoon, I will cover our third quarter operational performance and the exciting progress our low-carbon business has made since our investor update in March. Rob will cover our financial results as well as our updated guidance, which includes an increase in full-year guidance for all three of our business segments. Our businesses all performed well in the third quarter, enabling us to generate $3.6 billion of free cash flow before working capital, with total company-wide capital spend of approximately $1.1 billion. Our oil and gas business delivered production of nearly 1.2 million BOE per day, exceeding the midpoint of guidance by approximately 25,000 BOE per day. Outperformance from the Rockies and Gulf of Mexico were key drivers of our production exceeding third quarter guidance. The Rockies' success was driven by better-than-expected base production and higher NGL recoveries. In the Gulf of Mexico, we benefited from unseasonably calm weather during most of the third quarter and better than expected performance from Horn Mountain West. Our ability to generate substantial free cash flow, even as oil prices declined compared to the previous quarter, positioned us to complete approximately $2.6 billion of our $3 billion share repurchase program through November 7th. Over the last 12 months, we have returned approximately $3.21 per share to common shareholders, moving us closer to potentially being able to begin redeeming the preferred equity in 2023. We also repaid approximately $1.5 billion of debt in the third quarter and in the period ending November 7th. Providing commodity prices remain supportive, we intend to reduce the face value of our debt approximately $18 billion by the end of this year. meaning that we will have repaid over $10 billion of debt in 2022. As we enter 2023, we expect that our free cash flow allocation will shift significantly toward shareholder returns. We intend to reward shareholders with a sustainable dividend supported by an active repurchase program, continued rebalancing of our enterprise value in favor of common shareholders, And a reduction in our cost of capital as the preferred equity is partially redeemed. Turning to OxyChem and Midstream, both businesses benefited from supportive market conditions during the third quarter. OxyChem exceeded its guidance as chloralkali prices continued to strengthen, and the expected softening in the PVC markets did not materialize to the extent that we had forecast. We continue to be highly encouraged by well performance across our portfolio. In the Delaware Basin, we delivered our best quarter to date for early well performance with the 46 wells online averaging peak 30-day rates of over 3,600 BOE per day, demonstrating the superior quality of our inventory and subsurface expertise. And in the Texas Delaware, we recently brought on online a new silvertip well with the highest initial oil production of any horizontal well previously drilled in the lower 48. The Python 13H well posted a three-stream IP of almost 20,000 BOE per day and averaged over 11,000 BOE per day over its first 30 days online, which we believe to be the strongest performance ever for a Permian well. Overall, the Python development has outperformed expectations, and we're looking forward to developing the offsetting areas over the next few months. We're beginning to see additional progress in Colorado's new permit approval process. In August, we received approval from the Colorado Oil and Gas Conservation Commission for the state's first comprehensive area plan under the recently implemented regulations. This plan has paved the way for us to complete more than 200 new wells in Wells County over the next few years. Also, several drilling permit applications that had been pending for a period of time were recently approved. allowing us to add back a rig in the DJ Basin after reallocating one earlier this year. With the permits we have in hand and our expectations for future approvals, we have enhanced our flexibility as we formulate our activity for next year. Last quarter, we celebrated first oil from our new discovery field in the Gulf of Mexico, Horn Mountain West. While it's exciting to realize production from new discoveries, Our existing fields have abundant potential that we continue to unlock with innovative technical solutions like subsea expansions. For example, our Cesar Tonga field recently reached a production milestone of 150 barrels of cumulative oil production since its startup 10 years ago. Cesar Tonga is a subsea tieback to the Constitution Spar and is one of the largest fields in the Outer Continental Shelf. This impressive achievement is the result of the collaboration and hard work across Oxy's Gulf of Mexico business unit, including the asset development teams and offshore personnel who focus on delivering safe and efficient barrels every day. In the years ahead, we plan to continue maximizing production capacity through projects like this one. The Cesar Tonga subsea expansion, which is scheduled for start-up in the first quarter of next year, will address facility bottlenecks and maximize production capacity from the field while signaling a transition into the next phase of field development. In the second quarter, I highlighted new production records at Alhosen in the UAE and Block 9 in Oman. I'd like to congratulate our Alhosen and Oman teams again this quarter for breaking those recently set records. We're beginning to benefit from incremental production from Alhosen and are pleased the expansion project is on track for completion in the middle of 2023. Turning to our low-carbon business, I'm pleased to share that we broke ground on the world's largest direct air capture plant in Hector County, Texas. The first stage of construction, which includes site preparation and road work, began in September. Plant startup is expected in late 2024. During our March LCV investor update, we provided an overview of the expected revenues and costs for both direct air capture and point source capture projects. Since then, we've experienced progress on legislative and commercial fronts. Congress passed the Inflation Reduction Act, which contains several enhancements to the 45Q tax credits that will incentivize the development of carbon capture projects. Additionally, strong interest from potential customers has provided us with a clearer picture of the market for carbon dioxide removal credits, or CDRs, and net zero oil, in addition to other products. We believe our low carbon strategy combined with the ability to leverage direct air capture or DAC for the benefit of ourselves and others uniquely positions us to lead the market in supplying CDRs to the thousands of businesses that have established net zero ambitions. We are encouraged by the passage of the IRA and previously highlighted the potential for the 45Q enhancements to accelerate our low carbon strategy. We expect the 45Q enhancements to jumpstart the voluntary market for CDRs, which gives us confidence to increase the number of DACs in our current development scenario from 70 online by 2035 to approximately 100. Equally as important, we expect the accelerated development of direct air capture will enable us to reduce plant capital and operating costs at a faster pace. In March, we provided a capital cost for the first stack plant of $800 million to $1 billion. Given the inflationary pressures felt across the economy, especially for construction materials and labor, we now expect the first plant to cost approximately $1.1 billion. The current inflationary environment will not last forever, and we will leverage our supply chain and major projects expertise wherever possible to lower the cost of our first direct air capture as well as the ones to follow. The U.S. has taken a leadership role in moving towards net zero, making it more accessible for companies to meet their net zero commitments through the utilization of CDRs. Our long-term view on the potential of direct air capture has not changed, but to reach the net zero development scenario of 135 DACs described in our March update, the rest of the world will need to rise to the challenge in the form of global policy support. We're already seeing evidence of this, such as the PACE program recently announced in the UAE, which will catalyze $100 billion in financing and investment. The Permian location of our first direct air capture will provide us multiple options to maximize the value of captured CO2. We have the ability to inject the CO2 into a saline reservoir producing CDRs, or to utilize the captured CO2 to produce net zero oil from our enhanced oil recovery assets. Our conversations with many corporate partners and potential clients have highlighted the significant demand for CDRs generated through CO2 sequestration. To meet this demand and advance our own net zero ambitions, we plan to develop several hubs along the U.S. Gulf Coast where we will have the option to develop direct air capture, provide point source capture and sequestration for industrial emissions, or offer both solutions. To advance our ability to provide sequestration services and generate CDRs, we have filed applications for two Class VI sequestration permits and plan to file applications in the near future. We recently secured two new locations for the large-scale development of sequestration hubs. The first location covers 65,000 acres in southeast Texas. with up to 1.3 billion tons of CO2 sequestration capacity that could support up to 20 DAGs. We also reached a lease agreement with King Ranch, the largest privately held ranch in the US, to build up to 30 DAGs and develop point source capture infrastructure. Our agreement covers approximately 106,000 acres, which is about 166 square miles, with the capability to safely and permanently sequester approximately 3 billion tons of CO2. We expect to develop our second DAC at King Ranch and plan to start the pre-peed before year end. These two new locations are in addition to the three hubs focused on point source capture that we're also developing. We have secured almost 100,000 acres in Southeast Texas and Louisiana capable of safely and permanently sequestering approximately 1.9 billion tons of CO2. In total, we have secured over 260,000 acres capable of sequestering almost 6 billion tons of CO2 compared to the target we communicated in March of securing approximately 100,000 acres by the end of the year. FedPower recently announced a plan to develop and build the world's first utility-scale natural gas-fired power plant with near-zero atmospheric emissions. The plant will be located close to Oxy's operations in the Permian and will supply our operations with clean, low-cost, on-demand power. CO2 generated by the power plant will be captured and permanently sequestered underground using our existing CO2 infrastructure. This plant will accelerate Oxy's plans to reduce carbon emissions to help us achieve our net zero ambition. This first utility scale plant will enable both Oxy and NetPower to develop best practices that use NetPower's technology to provide emission-free power for our Permian operations and future direct air capture sites. I'll now turn the call over to Rob, who will walk you through our third quarter results and guidance.