Occidental Petroleum Corporation

Good afternoon and welcome to Occidental's second quarter 2023 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 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 Neil Backhouse, Vice President of Investor Relations. Please go ahead.

Thank you, Drew. Good afternoon, everyone, and thank you for participating in Occidental's second quarter 2023 conference call. On the call with us today are Vicki Holla, 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, Neil, and good afternoon, everyone. There are three things I'd like to drive home today. First, our portfolio of assets continue to set the table for record results. Second, our teams outperformed last quarter's and last year's excellent operational metrics. And I want to make sure our investors see how that flows to the bottom line. Third, our strategic and operational improvements continue to support our ability to take actions to drive even better shareholder returns. I'll begin with the portfolio. We have the highest quality and most complimentary assets that Oxy's ever had. They are a unique blend of short cycle, high return shale assets in the Permian and the Rockies, along with lower decline, solid return conventional reservoirs in the Permian, GOM, and our international assets. 60% of our oil and gas production is from shale reservoirs and 40% from conventional. More than 80% of our production is in the United States. The international oil and gas assets that we operate are in only three countries, Oman, Abu Dhabi, and Algeria. Our worldwide full-year 2023 production mix is expected to be approximately 53% oil, 22% NGLs, and 25% gas, and 70% of the gas is in the United States. Our conventional oil and gas assets, along with OxyChem, provide support during low-price cycles, while the Shell assets provide the opportunity for growth during moderate and high-price cycles and the flexibility to adjust activity levels quickly if needed. This combination of assets has generated record cash flows for Oxy over the last couple of years versus the cash flow generated by the portfolio that we previously had in a similar price environment from 2011 to 2014. The midstream business provides flow assurance and has done so with exceptional performance during catastrophes and emergencies. The low-carbon ventures business will help Oxy and others decarbonize at scale in a way that provides incremental value to our shareholders. To summarize, we have a deep and diverse portfolio, providing the cash flow resilience and sustainability necessary to support our shareholder return framework throughout the commodity cycles. Let's shift now to operational excellence. Strong second quarter operational performance exceeded the midpoint of our production guidance by 42,000 BOE per day, enabling us to again raise full year production guidance. In the Rockies, outperformance was driven by approved base production and UL performance, along with higher than expected non-operated volumes and a receipt of accumulated royalties. Our Rockies teams drilled 32% faster on a foot-per-day basis than they did in the first quarter. The team's diligent work set several new Oxy records, including company-wide record of drilling over 10,400 feet of lateral in only 24 hours. Just 10 years ago, it took the industry an average of 15 days to drill 10,400 feet. Our premium production delivered higher operability and better-than-expected new well performance particularly in our two new drilling space units in New Mexico, Top Spot and Precious. Our Delaware completions team shattered Oxy's previous record for continuous frac pumping time by nearly 12 hours to a total of 40 hours and 49 minutes. Four years ago, the same job would have taken about 84 hours. Forty hours back then was unthinkable, but our teams have made this a reality. We expect that the efficiencies generated by advancements in drilling and completions pumping will result in lower cost and reduced time to market. Offshore in the Gulf of Mexico, we safely completed seasonal maintenance activities focused on asset integrity and longevity. Excluding the impacts of this planned maintenance, we delivered higher base production and benefited from improved uptime performance across multiple platforms. Internationally, our teams continue to deliver strong results. The Alhosen expansion came online two months earlier than planned as a result of great teamwork with our partner AdNoc. This means that together we have now successfully expanded the plan in stages from 1 BCF a day to 1.45 BCF a day for a very small incremental capital investment. In Oman Block 65, we drilled a near-field exploration well, which delivered 6,000 BOE per day and a 24-hour initial production test, and it is now on production to sales in less than a month from completion. This was our highest Oman initial production test in a decade, and we continue to show the benefits of our subsurface characterization techniques worldwide. We were awarded the block in 2019, and in collaboration with the Ministry of Energy, we are positive about opportunities in the country where we are the largest independent producer. OxyChem also outperformed during the second quarter due to greater than expected resilience in the price of caustic soda and reductions in feedstock prices. OxyChem is one of our valuable differentiators. It provides rich diversification to our high-quality asset portfolio, by consistently generating quarterly free cash flow, which provides a balance to our oil and gas business throughout the commodity cycle. Now I'd like to talk about how our focus on operational excellence is enhancing our portfolio and extending our sustainability to maximize near and long-term shareholder returns. Oxy's wells are getting stronger and are supported by our deep inventory, which continues to get better. In the Permian, we have improved well productivity in seven of the last eight years, and with the application of our proprietary subsurface modeling, we're starting to see the same results in the DJ Basin, where improved well designs have delivered reserves at roughly 20% less cost. The improved well design has resulted in about 25% improvement in single-well, 12-month cumulative volumes over the last five years. We are on pace to significantly exceed that rate in 2023. In addition, our teams are continuing to advance our modeling expertise, which has led to upgrades of secondary benches to top-tier performers. This was a key for our 212% U.S. organic reserves replacement ratio last year. Let me try to make that point again. Last year, Because of these upgrades to our secondary benches to our top tier benches, we were actually able to replace our production by 212% with reserve ads. Secondary bench upgrades are progressing in 2023. Overall, in 10 of the last 12 years, we have replaced 150 to 230% of our annual production. The only exceptions being in 2015 with a price downturn in 2020 with the pandemic. Converting lower tier benches to top tier will further extend our ability to achieve high production replacement ratios. Not only are we adding more reserves than we are producing each year, we are adding the reserves at a funding and development cost that is lower than our current DD&A rate, which will drive DD&A down and earnings up. Our differentiated portfolio and the strong results delivered by our teams provided support for execution of our 2023 shareholder return framework. During the second quarter, we generated significant free cash flow, repurchased 425 million of common shares, and have now completed approximately 40% of our $3 billion share repurchase program. Common share repurchases, along with our dividend, enabled additional redemptions of the preferred equity. we've redeemed approximately $1.2 billion of preferred equity. I'll now turn the call over to Rob.