occidental petroleum corporation · 5 opportunistic transactions create long-term value consistent...
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June 2017 Investor PresentationOccidental Petroleum CorporationAs of June 19, 2017
Richard A. JacksonVice President - Investor Relations
713-215-7235 | [email protected]
Anthony J. CottoneSenior Director - Investor Relations
212-603-8188 | [email protected]
3
Forward-Looking StatementsPortions of this presentation contain forward-looking statements and involve risks and uncertainties that could materially affect expected results of operations, liquidity, cash flows and business prospects. Actual results may differ from anticipated results, sometimes materially, and reported results should not be considered an indication of future performance. Factors that could cause results to differ include, but are not limited to: global commodity pricing fluctuations; supply and demand considerations for Occidental's products; higher-than-expected costs; the regulatory approval environment; reorganization or restructuring of Occidental's operations, not successfully completing, or any material delay of, field developments, expansion projects, capital expenditures, efficiency projects, acquisitions or dispositions; uncertainties about the estimated quantities of oil and natural gas reserves; lower-than-expected production from development projects or acquisitions; exploration risks; general economic slowdowns domestically or internationally; political conditions and events; liability under environmental regulations including remedial actions; litigation; disruption or interruption of production or manufacturing or facility damage due to accidents, chemical releases, labor unrest, weather, natural disasters, cyber attacks or insurgent activity; failure of risk management; changes in law or regulations; or changes in tax rates. Words such as “estimate,” “project,” “predict,” “will,” “would,” “should,” “could,” “may,” “might,” “anticipate,” “plan,” “intend,” “believe,” “expect,” “aim,” “goal,” “target,” “objective,” “likely” or similar expressions that convey the prospective nature of events or outcomes generally indicate forward-looking statements. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this presentation. The United States Securities and Exchange Commission (SEC) permits oil and gas companies, in their SEC filings, to disclose only proved, probable and possible reserves that meet the SEC’s definitions for such terms. We use certain terms in this presentation, such as “resource potential” and “total identified barrels” that the SEC’s guidelines strictly prohibit us from using in our SEC filings. These terms represent our internal estimates of volumes of oil and gas that are not proved reserves but are potentially recoverable through exploratory drilling or additional drilling or recovery techniques and are not intended to correspond to probable or possible reserves as defined by SEC regulations. By their nature these estimates are more speculative than proved, probable or possible reserves and subject to greater risk they will not be realized. Unless legally required, Occidental does not undertake any obligation to update any forward looking statements, as a result of new information, future events or otherwise. Material risks that may affect Occidental’s results of operations and financial position appear in Part I, Item 1A “Risk Factors” of the 2016 Form 10-K.
Use of non-GAAP Financial InformationThis presentation includes non-GAAP financial measures. You can find the reconciliations to comparable GAAP financial measures on the “Investors” section of our website at www.oxy.com/investors.
Cautionary Statements
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Table of Contents
• Transactions Announced June 19, 2017
• Company Overview and Value Proposition
• Driving Value in the Permian
• Journey to Digital Transformation
• Appendix
5
Opportunistic Transactions Create Long-term Value
Consistent with our pathway to breakeven at $50 WTI*, Oxy has executed multiple transactions in the Permian to accelerate our plan.
> Oxy has agreed to a number of purchase and sale transactions in Permian Resources to generate combined proceeds of $0.6 Bn.
> Oxy has also agreed to acquire additional working interests and assume operatorship in a low-decline, low capital intensity CO2 EOR unit in the Permian Basin for $0.6 Bn.
The combination of these transactions will accelerate the cash flows of the company and enhance future returns by replacing low priority development acreage with low-decline, low capital intensity EOR production with significant opportunities for value improvement.
*Breakeven at $50 WTI is after dividend and 5%-8% production growth.
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Overview of Non-Strategic Permian Resources Net Transactions
•Transactions Terms> Combined net proceeds of ~$0.6 Bn
•Properties Description> Divested of non-strategic acreage in Andrews, Martin
and Pecos Counties and added incremental acreage to enhance a future core development area in Glasscock County
> Reduced Permian Resources position by ~13,000 net acres and production by ~4,700 Boed (64% oil)
•Transaction Rationale> Acreage was not in focus development areas and had
no significant near-term development plans.> Monetizations accelerate cash flows from acreage from
the tail of our inventory and are NPV positive for Oxy.> Recent organic location additions exceed both the count
and the relative value of locations sold in transactions. Inventory to be updated on 2Q17 earnings call.
> Accelerates our pathway to breakeven at $50 WTI*
Focus Development Area:Greater Barilla Draw – 5,000+ Locations
Focus Development Area:Greater Sand Dunes – 2,000+ Locations
Permian Resources Acreage Permian EOR Acreage
NM Delaware Basin
TX Delaware Basin Central BasinPlatform
New Mexico NW ShelfMidland Basin
Map not updated for transactions.*Breakeven at $50 WTI is after dividend and 5%-8% production growth.
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NM Delaware Basin
TX Delaware Basin Central BasinPlatform
New Mexico NW Shelf
Overview of Enhanced Oil Recovery Acquisition in the Permian
•Transactions Terms> Purchase price of $0.6 Bn
•Properties Description> Seminole-San Andres Unit (34.2% interest) and
Seminole Gas Processing Plant (46.6% interest)> West Bravo Dome CO2 field in New Mexico (100%
interest) and 9.9% interest in Occidental operated Bravo Dome unit.
> Increases Permian EOR production by ~8,200 Boed (70% oil)
•Transaction Rationale> Increased ownership and gained operatorship in world
class EOR property> Synergistic opportunities for capital efficiency, cost
reductions, optimized CO2 development, and accelerated residual oil zone development. These benefits can be realized on both the acquired interests and Oxy’s existing ownership.
> Accelerates our pathway to breakeven at $50 WTI*
Seminole-San Andres Unit•WI from 53% to 87%•Seminole Gas Process Plant WI from 46% to 93%
CO2 Source Fields and Pipelines•Bravo Dome Unit WI from 77% to 87% •West Bravo Dome WI from 0% to 100%
Permian Resources Acreage Permian EOR Acreage
Midland Basin
*Breakeven at $50 WTI is after dividend and 5%-8% production growth.Map not updated for transactions.
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Upside Potential from Operatorship of Seminole-San Andres
•Value Improvement Through Scale and Operational Synergies
> Seminole-San Andres unit becomes Oxy’s largest operated CO2 flood in the Permian.
> Enhances Seminole-San Andres operations by applying Oxy’s worldwide EOR scale and expertise
> Substantial room for operating cost improvement
•Value of Synergies> Value of synergies will be magnified by impact on
both the acquired interest and Oxy’s existing ownership interest.
> Due to value of the synergies, this opportunistic acquisition delivers high returns and significant free cash flow to accelerate our pathway to cash flow breakeven at $50 WTI*.
$5
$10
$15
$20
$25
$30
Oxy EOR Permian2016 Average
Oxy Denver Unit2016 Average
Operating Costs ($/Boe)
Oxy EOR unit of analogous scale and
development type
Seminole-San Andres unit
becomes largest in Oxy’s CO2 portfolio
$0
$100
$200
$300
$400
$1/Boe $2/Boe $3/Boe $4/Boe $5/Boe
Value of Opex Synergies ($MM PV10)Acquired Interest Existing Interest
High Opex Range
Low Opex Range
*Breakeven at $50 WTI is after dividend and 5%-8% production growth.
Oxy targeting opex improvement of
greater than $5/boe
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Transactions Effectively a Swap with Net Benefits to Oxy
Transactions on a net basis*:
> Lowers our sustaining capital and overall production decline rate> Additional benefits anticipated through capital efficiency and
other operating synergies.
Remaining 2017 2019Production (Boed) 3,500 7,000Operating Cash Flow ($ MM) 35 80Free Cash Flow ($ MM) 25 55
Net benefits accelerate cash flow breakeven at $50 WTI***Assumes $50/Bbl WTI and $3.30/MCF gas and includes attainment of $5/boe operating cost synergies at Seminole-San Andres. **Breakeven at $50 WTI is after dividend and 5%-8% production growth.
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Table of Contents
• Transactions Announced June 19, 2017
• Company Overview and Value Proposition
• Driving Value in the Permian
• Journey to Digital Transformation
• Appendix
11
Oxy’s Unique Value Proposition
Upside in rising oil price environment and downside protection during falling oil price environment
Focus on value based growth
Top quartile returns
Consistent Dividend Growth• Growing dividend with strong yield
• Value protection in down cycle
• Promotes capital allocation discipline
Moderate Value-Based Growth
• 5 – 8% average production growth through oil & gas development
• Above cost-of-capital returns (ROE and ROCE)
• Return Targets*: Domestic – 15+% International – 20+%
Strong Balance Sheet
• Maintain ample cash balance and additional sources of liquidity
• Low debt-to-capital ratio
• Income-producing assets
*Return targets based on moderate commodity prices.
12
$0.50 $0.52 $0.55 $0.65 $0.80 $0.94 $1.21 $1.31 $1.47 $1.84 $2.16 $2.56 $2.88 $2.97 $3.02 $3.04$0.50 $1.02 $1.57 $2.22 $3.02
$3.96$5.16
$6.48$7.95
$9.79
$11.95
$14.51
$17.39
$20.36
$23.38
$26.42
$0.00
$4.00
$8.00
$12.00
$16.00
$20.00
$24.00
$28.00
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 1Q17Ann.
Annual Dividends PaidCumulative Dividends Paid
12Note: Dividends paid as per the Record Date
Delivering Consistent Annual Dividend Growth
($/share)2002 – 2016: Oxy dividend CAGR 13.7% vs S&P CAGR 7%
13Source: Factset, 05/26/17
0.0%0.4%
0.7% 0.7%
1.5%
2.0% 2.1% 2.1% 2.2% 2.3%
3.8%4.1%
5.0%5.2%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
PXD APC DVN EOG MRO SP500 APA HES 10 YearTreasury
COP XOM CVX OXY TOT
Integrated O&GIndependent E&P
2002 – 2016 Average Oxy Dividend Yield
Dividend yield should revert close to historical levels as we execute plan to a lower cash flow breakeven
Current Dividend Yield vs. Competitors
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1. Base/Maintenance Capital
2. Dividends
3. Growth Capital
4. Acquisitions
5. Share Repurchases
Subject to Returns and Market Conditions
Cash Flow Priorities Favor Dividends
Dividends promote capital allocation discipline
15*Competitors ROCE represents a simple average of APA, APC, COP, CVX, DVN, EOG, HES, MRO and XOM
(30%)
(20%)
(10%)
00%
10%
20%
30%
2008 2009 2010 2011 2012 2013 2014 2015 2016
Competitors ROCE*OXY ROCE
Value Growth - Annual ROCE for Oxy vs. Average of Competitors
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Value Growth
Focus on value driven growth - Top quartile returns
Positioned to return to double digit returns
(30%)
(20%)
(10%)
0%
10%
HES DVN CXO APC MRO APA EOG COP PXD OXY CVX XOM
2016 ROCE*
*Calculated based on public information and on a consistent basisCompanies listed alphabetically : APA, APC, COP, CVX, CXO, DVN, EOG, HES, MRO, PXD, XOM
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2013Actual
Cali-fornia
2013 Excl.California
OtherUS
MENA 2013Adjusted
PermianRes.
Al Hosn OtherInternational
South Texas 2016Ongoing
High-MarginProduction
Growth Goal
Cash FlowBreakeven
at $50 WTI*
Divested assets that did not generate competitive corporate returns or free cash flow
Investing in assets with higher cash margin and lower capital intensity Lower relative returns drove decision to divest of South Texas Gas propertiesProceeds to be re-deployed in Permian Resources
Prod
uctio
n (M
boed
))
South Texas Gas propertiesDecline since 2013: 17 Mboed2016 Production: 27 Mboed (11% oil production)
763 (154)
609 (62)(79)
46859
64 28 (44) 57580 655
Set to generate both returns to shareholders and value-based growth
*Cash Flow Breakeven after Dividend and Growth Capital
Value Growth - Multi-year Returns Focused Portfolio Optimization
18*Pro forma for ongoing operations (excludes operations sold or exited)
0
100
200
300
400
500
600
700
2013 2014 2015 2016
Mbo
ed
Ongoing Company Excluding Permian Resources Permian Resources
428 440528
575
Ongoing Total Company Production CAGR 10%*
Permian Resources 25% CAGR
Value Growth - Production Growth Since 2013
19*Competitor Peers include APC, CVX, CXO, DVN, EOG, HES, MRO, PXD. Excludes APA, COP, XOM due to negative F&D.
2016 F&D (Organic) $/Boe19.27
17.19
13.3711.73 11.41
9.59
6.86 6.51 6.45
0
5
10
15
20
1 2 3 4 5 6 7 8 OXY
$/B
oe
Competitor Peers*
Value Growth – Significantly Reduced Development Cost
20Source: Factset, 05/26/17
3%
18%20% 20%
24%26% 27%
35%37%
47%49%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
PXD XOM HES CVX MRO EOG OXY APC COP APA DVN
Integrated O&GIndependent E&P
2002 – 2016 Average Oxy Debt-to-Capital
Strong Balance Sheet – Debt-to-Capital
21
Company S&P Ratings
S&P Outlook
Moody’s Ratings
Moody’s Outlook
New Issue Indications(10-year)
XOM AA+ Negative Aaa Negative 2.95%CVX AA- Negative Aa2 Stable 3.05%OXY A Stable A3 Stable 3.25%EOG BBB+ Stable Baa1 Stable 3.35%COP A- Stable Baa2 Positive 3.35%PXD BBB Stable Baa2 Stable 3.55%APA BBB Stable Baa3 Stable 3.65%NBL BBB Negative Baa3 Stable 3.75%DVN BBB Stable Ba1 Stable 3.75%APC BBB Stable Ba1 Stable 4.05%MRO BBB- Stable Ba1 Stable 4.05%HES BBB- Stable Ba1 Stable 4.25%CXO BB+ Positive Ba2 Stable 4.50%CLR BB+ Stable Ba3 Positive 5.00%WPX B+ Stable B3 Stable 5.875%WLL BB- Stable B3 Positive 7.75%
Strong Balance Sheet – Oxy Credit Ratings Vs. Peers
22
SuccessfulValue Proposition
Oxy has delivered positive results on each component of our value proposition
Consistent Dividend Growth• Oxy dividend CAGR more than doubled S&P CAGR since 2002
• Highest yield vs. US peers
• Historical dividend yield of 2.85%
Moderate Value-Based Growth
• Averaged better than 5% production growth
• Upper quartile ROCE
• Portfolio optimization complete for stronger future returns
Strong Balance Sheet
• 1Q17 cash balance of $1.5 Bn
• Received tax refund of $750 million during 2Q17
• Low debt-to-capital ratio
• Historical debt-to-capital ratio of 11%
• “A” level credit rating from Moody’s, S&P and Fitch
23Source: Factset, 5/26/2017
Company Market Cap ($Bn)XOM $346RDS $226CVX $198TOT $118BP $93ENI $52
Characteristics• Low or no growth• Higher returns• Stronger Balance Sheet• Lower risk• Free cash flow• Consistent dividend growth
Company Market Cap ($Bn)COP $56EOG $53APC $29PXD $29DVN $19APA $18
Characteristics• Generally higher growth• Lower returns• Weaker Balance Sheet • Higher risk• Little or no free cash flow• Little or no dividends• Moved from gas to liquids
Oxy Uniquely
Positioned
$47 BnMarket Cap
Independent E&PsLarge Integrated Majors
Unique Investment Proposition
24
Occidental Petroleum• Value Proposition
• Quality Assets
• Differentiated Value Based Approach
25
Focused Businesses with Scale
Oil & Gas High-return, low decline, long life, moderate growth, low-cost inventory
OxyChemHigh FCF, high returns
MidstreamInfrastructure and marketing to maximize realizations and complement oil & gas business
Oil and Gas Core Areas66% Oil │ 13% NGL │ 21% Gas
United States
Latin America
• Leading position in the Permian Basin
• Permian Resources is a growth driver
• Permian EOR is stable, low-decline with free cash flow
• Highest margin operations in Colombia
• Opportunities for moderate growth with partners
Middle East• Focus areas – Oman, Qatar, and UAE
• Opportunities for growth with partner countries
• Low-decline, long term contracts, stable operations with free cash flow
26
Oman: Assisted with the discovery and started development of Safah Field in
1982. A 15 year contract extension was signed for Block 9 this year. Blocks 27
and 53 expire in 2035. Block 62 expires in 2028.
Oman: Assisted with the discovery and started development of Safah Field in 1982. A 15 year contract extension was signed for Block 9 this year. Blocks 27 and 53 expire in 2035. Block 62 expires in 2028.
Colombia: Discovered giant Cano Limon field in the early 1980’s. Several contracts that currently range from 6 years up to the economic life of field.
Long term contracts
with upside potential
Longest Legacy International Operations: Colombia and Oman
27
ISND and ISSD: Offshore development in Qatar. ISND contract for 25 years initiated in 1994. ISSD contract expires in 2022.
Dolphin: Premier transborder pipeline delivering gas from Qatar to Abu Dhabi and Oman. Agreement was initiated in 2007 for a 25 year term.
Al Hosn: 30 year joint venture with the Abu Dhabi National Oil Company, (“ADNOC”) began in 2011 to develop the giant sour gas field in Abu Dhabi. Largest ultra sour gas plant in the world. Al Hosn is a world-class mega-project.
Additional Core Middle East Assets
28*Source: Wood Mackenzie 2016 production, 3/2/17, company NWI% production rates, operators shown represent ~85% of Permian Basin daily production
-
50
100
150
200
250
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OX
YC
VX
PX
DA
PA
CX
OX
OM
XE
CE
OG
DV
NE
CA
EG
NFA
NG
CO
P PE LPI
AP
CK
MI
SH
ER
IDA
NS
HE
LLR
SPP
SIN
OC
HE
MB
HP
WP
XP
ER
M R
ES
.E
ND
EA
VO
RQ
EP
MTD
RSM NB
LLI
NN
CP
ELG
CY
EP
EA
RE
XS
SU
MY
HE
SSC
WE
IR
EN
CR
ZOPE
RM
IAN
BA
SIN
NE
T M
BO
EP
D
OP
ER
ATE
D P
RO
DU
CTI
ON
*
Liquids Gas
• 10,000 mi2 3D seismic• 130,000 mi2 2D seismic• ~10,000 gross OBO wells• 250 OBO wells since 2015
Advantages Through Scale
Largest Operator in the Permian
29
Permian ResourcesSignificant acreage& growth potential in all development areas
~650,000 net acres within the Delaware and Midland Basin boundaries
~300,000 net acres associated with 11,650 wells in unconventional development inventory
• NM Delaware Basin 290,000
• TX Delaware Basin 150,000
• Midland Basin 210,000
Total ~650,000
NetAcres*Resources Basin Development Areas
• Central Basin Platform 215,000
• New Mexico NW Shelf 150,000
• Emerging Unconventional 50,000
• Continuing Evaluation 335,000
Total ~750,000
NetAcres*
Other Resources Unconventional Areas
• Resources – Unconventional Areas 1.4• Enhanced Oil Recovery Areas 1.1
Oxy Permian Total 2.5MM
NetAcres*Business Area Acreage
Permian Resources Acreage Permian EOR Acreage
NM Delaware Basin
TX Delaware Basin
Midland Basin
Central BasinPlatform
New Mexico NW Shelf
*Includes surface and minerals. Slide not updated for transactions announced on June 19, 2017.
30
Improved Permian Resources Horizontal Inventory from 4Q2015
• Added 1,250 locations BE < $50
• Added 3,150 total locations
• Increased average length from 5,950’ to 7,100’
• Traded 10,000 net acres to enable longer lateral and consolidated facilities
• 14 years of inventory <$50 breakeven with 10 rigs0
2,000
4,000
6,000
8,000
10,000
12,000
BE <$50 BE<$60 BE <$70 AdditionalInventory
Total
~5,300
2015 Locations8,500
~11,650~11,650
~2,500
~4,100
2016 Added3,150
Texas Delaware
Basin
Midland Basin
New Mexico Delaware
Basin
Increased Total Horizontal Drilling Locations ~37%
Locations within 300,000 of 650,000 net acres in Basin Development Areas
SS Characterization +Dev. Plans + TechnologySS Characterization +Dev. Plans + Technology
*Breakeven values based on NPV10. Slide not updated for transactions announced on June 19, 2017.
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Permian EORSignificant inventory in 10-year plan
Geographically diverse
100 active CO2 + water floods covering multiple horizons
2 BBOE of identified net resource potential
870 net MMBOE at < $6.00 Future Development Cost
Proven Leader in Maximizing Recovery Across the Permian
0
500
1,000
1,500
2,000
Future Development Cost <$6Future Development Cost <$10Additional Unconventional Inventory TotalAdditional Conventional Inventory
Total Identified Barrels
Permian EOR Net Resource Potential
Permian EOR Acreage
Delaware Basin
Midland Basin
Central BasinPlatform
MM
BO
E
CO2Floods
TZ/ROZ*Water Floods +
Other Infill Drilling
Opportunities
High-gradable Inventory
<$10 <$6
*Note: TZ/ROZ – Transition Zone and Residual Oil Zone. Slide not updated for transactions announced on June 19, 2017.
Future Development Cost ($/BOE)
32
24%
14%
20%23%
15%
20%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
OxyChem Peer 1 Peer 2
1Q 2017 2015 – 2016 FY Average
EBITDA Margin
OxyChem Generates Industry Leading Chemicals Margins
33
Shipments from Ingleside export facility
2017 Impact
• Free cash flow expected to improve $150 -$200+ MM due to better marketing economics and ramp up of Ingleside oil storage and export facility
• Ample takeaway capacity and new outlet for Permian oil production
Businesses
Gas Plants: Natural gas and CO2 gathering, compression and processing systems to control upstream costs
Pipelines - Domestic: Take-away capacity via common carrier oil pipeline and storage systems, including Centurion pipeline, CO2 source fields and pipeline systems
Pipelines - Foreign: Stable free cash flow from Dolphin natural gas pipeline
Power Generation: Lower cost electricity through power and steam generating facilities
Marketing & Trading: market production at highest realizations; includes Ingleside export facility
Midstream: Improving Cash Flows and Market Access
34
Occidental Petroleum• Value Proposition
• Quality Assets
• Differentiated Value Based Approach
35
Pathway:
> Grow high margin production with low capital intensity
> Continue to invest in low decline, free cash flow businesses at low cost
> Accelerate cash flows from the tail of the portfolio to fund production growth
> Advance value-based development approach with technology
Executing a plan to fund a growing dividend and 5% – 8% growth at $50 WTI.
Our Pathway to Cashflow Breakeven: Dividend + Growth
Milestones:
> 80 Mboed of production growth
> Ample options to self-fund growth
• ~$2.2Bn = South Texas, tax refund, PAGP
• +“Win-win” Trades, Partnerships, Sales
Accelerators:
> Improving conditions in Midstream and Chemicals and commodity prices
Slide not updated for transactions announced on June 19, 2017.
36
Ope
ratin
g Ca
sh F
low
($ B
n)
$4.2
$50/bbl
Current Annualized
Chemicals
$4.4$4.7
80 MboedProduction
Current Dividend
$2.3
Sustaining and
Growth Capital$3.3
Oxy Pathway to Cash Flow Breakeven at $50 WTI
Plan Achieved at $50
$5.66.0
5.0
4.0
3.0
2.0
1.0
0.0Midstream &
Marketing
$5.6
Pathway Drivers:
• Permian Resources high-margin growth to accelerate value proposition of consistent dividend plus moderate production growth
• Enables organization to continue to drive down breakeven oil price, replenish reserves, and innovate our capabilities
Slide not updated for transactions announced on June 19, 2017.
37
Annual cash flow sensitivities (Bn) $40 $50 $60
Cash Flow Priorities:Dividend ex-
GrowthDividend +
GrowthDividend +
Growth + Options
1) Base/Maintenance Capital $2.1 $2.3 $2.5
2) Dividends (current) $2.3 $2.3 $2.3
3) Growth Capital + Options $0 $1.0 $1.0+
Cash Outflows $4.4 $5.6 $5.8+
Cash Inflows $4.4 $5.6 $6.8
Production Growth Flat 5% - 8% 5% - 8%
Upon plan execution, Oxy can fund dividend and sustain production from operating cash flows. WTI Oil Price:
Asset Quality and Capital Flexibility Provides Optionality to Cover Dividend
Slide not updated for transactions announced on June 19, 2017.
38
Differentiated Value-Based Approach
• More Oil
• Less Cost
• Better Inventory
Creating shareholder value over the long-term
• Culture of innovative technology and process– Subsurface characterization– Integrated development planning– Oxy Drilling Dynamics– Innovative facility designs – Long-term base management– Enhanced reservoir recovery
• Early adoption of external trends– Big data, analytics, and mobile workforce– Multi-lateral wells (SL2)– Crude export facility
• Innovative cost efficiency strategies– Logistic and Maintenance hubs – OBO portfolio and investments
39
SL2 Potentially Lowers Secondary Bench BE by $5:
> Lowers well cost by $0.5 - $1.0MM
> Reduces operating costs by over 50%
> Sequencing increases facilities utilization
> One artificial lift system saves $0.2MM per lateral
Project Timeline:
> Project chartered in 2015, design and lab test in 2016
> First installation completed in December 2016
> Barilla Draw - Betty Lou 1016H, WCA & 2nd BS
> 2017+ wells designed for future SL2 capability
Technology Is Key To Further Cost ReductionSL2
40
Logistic & Maintenance Hub Underway
• Secures supply availability
• $500 – $750k savings per well> Below market cost of supply will offset
potential service cost inflation
> Reduces last mile logistics costs
• Mutually beneficial partnerships
Service company yard• Maintenance• Stimulation & Cement• Service directional tools
Sand Transload and Storage• 6 Silos• 3 Unit train loops• Transload capacity
OCTG Laydown Yard• ~20 railcar spots• Dedicated truck entry/exit• Staging, returns, reclamation
OxyChem Acid Facility• Transload, storage, and
dilution of HCI for fracs• ~20 rail transload capacity
• Strategically located in New Mexico
• 244 acres
• 3 unit train loop
• 30,000 tons of sand storage
• Supports 10-12 rigs/year
• Operational in early 2018
Value Chain Partnerships Lower Costs
41
• Value Proposition: We’ve done what we said we would do and will repeat that success
• Quality Assets: Recent portfolio upgrade provides highest quality assets in the industry and they are designed to support a strong dividend with value growth:
> Low decline, low capital intensity, long life reserves
> Short cycle, high growth, high rates of return
• Strategy is consistent with value proposition
• Highly engaged workforce will execute strategy and exceed expectations
Occidental Petroleum• Value Proposition
• Quality Assets
• Differentiated Value Based Approach
42
Table of Contents
• Transactions Announced June 19, 2017
• Company Overview and Value Proposition
• Driving Value in the Permian
• Journey to Digital Transformation
• Appendix
43
• 2.5 million net acres in the Permian Basin
> 650,000 net acres within the Delaware and Midland basins
• Increased unconventional horizontal drilling locations by 37% to 11,650
> Average lateral length up 20% to ~7,100 ft
> Locations with breakeven < $50 WTI up over 100% by ~1,250 locations
• Permian Resources potential production CAGR of 30+% from Focused Development Areas
• Permian EOR opportunities include 870 MMBOE reserves (16+years R/P) with estimated future development costs <$6.00/BOE
> Operating Expense reduced 17% from 2014 to $17.18/BOE
• Opportunities to maximize net present value of cash flows
Permian Basin Key Takeaways
44
• Resources – Unconventional Areas 1.4 5,150 124 • Enhanced Oil Recovery Areas 1.1 19,310 145
Oxy Permian Total 2.5MM 24,460 269
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PX
DA
PA
CX
OX
OM
XE
CE
OG
DV
NE
CA
EG
NFA
NG
CO
P PE
LPI
AP
CK
MI
SH
ER
IDA
NS
HE
LLR
SP
PS
INO
CH
…B
HP
WP
XP
ER
M…
EN
DE
AV
…Q
EP
MTD
RS
MN
BL
LIN
NC
PE
LGC
YE
PE
AR
EX
SS
UM
YH
ES
SC
WE
IR
EN
CR
ZO
PE
RM
IAN
BA
SIN
NE
T M
BO
EP
D O
PE
RA
TED
P
RO
DU
CTI
ON
**
Liquids Gas
Oxy Permian
44
• Largest operated position in the Permian
• Exceptional subsurface characterization
• Proven value based development approach
• Improving through unique technology advancements
Net Operated 2016 NetAcres Wells* Production MboedOxy Permian Business Overview
*Gross Oxy operated wells including producers and injectors, and idle wells.**Source: Wood Mackenzie 2016 production, 3/2/17, company NWI% production rates, operators shown represent ~85% of Permian Basin daily production
Permian Basin Industry Production
45
The Permian Drives Oxy’s Value Proposition
DevelopmentCost
Opex G&A ProductionTaxes
Cash Costs
$16 - $19/BOE
Note: Estimated future project costs.
Improving top tier margins with recent operational and technical breakthroughs.
$6 - $12/BOE
DevelopmentCost
Opex G&A ProductionTaxes
Cash Costs
$6 - $10/BOE
$18 - $25/BOE
Permian EOR provides stable, free cash flow with minimal base decline.
~11,650 Undeveloped Drilling Locations ~2B Bbls Identified Undeveloped Resource
Permian Resources Permian EOR
46
Diversified Portfolio Provides High-Return and Significant Flexibility
Asset Portfolio Role Upside Potential
Southeast New Mexico
High return, low capital intensity for near-term growth and cash recycle
Acreage improvement for longer laterals and facilities optimization for multi-bench bench development
Greater Barilla Draw
High return, deep inventory of drill locations, complete infrastructure position
Continued full cycle cost improvement through operational and subsurface synergies from large acreage position
North New Mexico High confidence step-out development areas, replenishment source for high quality inventory
Acreage improvement for longer laterals and development scale. Appraise and delineate additional benches
East Midland Basin
De-risked multi-bench play with mature infrastructure for flexibleshort-cycle growth
Continued acreage improvement to create synergies of large development area
West Midland Basin
Long-term growth potential on large contiguous acreage position with significant flexibility
Technology applications and OBO intelligence to lower project breakeven price
Central BasinPlatform
Conventional low-decline development for long-term growth
Apply unconventional operationalcapabilities and EOR expertise to maximize recovery
North New Mexico
Greater Sand Dunes
East Midland Basin
Central Basin Platform
West Midland Basin
Greater Barilla Draw
2017 – 2019 Focused Resource Development Areas
Permian Resources Acreage Permian EOR Acreage
47
Maximize Value of Portfolio - Low Capital Intensity Drives Value
*Includes estimated net non-operated rigs. Slide not updated for transactions on June 19, 2017.**Calculated using estimated total year capex (drilling, completions, hookup, facilities, infrastructure, capital workovers, maintenance, seismic). Annual wedge represents the new production added in each year from the capital program (excludes base production).
0
5
10
15
20
-
50
100
150
200
250
300
2017 2018 2019
Prod
uctio
n (M
boed
)
Multi-Year Permian Resources
Rig
Cou
nt
20% CAGR
30% CAGR
Base rig count* Upside rig count*
6
8
9 9
1415 Annual Wedge
STX SaleRe-invested11 – 13 rigs
at exit
< $30MM$ per Mboed**
2015 / 2016 $54 MM
2017 $33 MM
2018 $29 MM
2019 $23 MM
+ 400 wellsTo be added
< $50 BE in 2017
Current < $50 BE = 2,500
Landing ZonesFlow Unit + StimulationMulti-flow unit modular developmentFacilities UtilizationTechnology and OBO operations
More OilLess CostBetter Inventory
Sustainable throughTop Tier Inventory
2017 Exit rig count*
All-In Capital Intensity
48
0
50
100
150
200
250
300
0 30 60 90 120 150 180
Cum
ulat
ive
Mbo
e4
,50
0
ftLa
tera
ls
Days Online
Value Based Development Increases ReturnsGreater Sand Dunes
Current* Wolfcamp XY
Old 2nd Bone Spring Design -2014
Three high-return development benches• Currently three play leading benches under development
> Modular development
> Area appraisal continues to add new benches / flow-units
• Longer laterals
• Reducing secondary bench breakeven prices by ~$10
> Facilities saves ~$800k per well
> SL2 saves >$500k per well
> OPEX reduction up to 50%
Current* 2nd Bone Spring
Moving to longer laterals to improve returns
-
2,000
4,000
6,000
8,000
2016 1H2017 2H2017 2018
Late
ral L
engt
h (F
t)
Current* 3rd Bone Spring
*Current represents wells online 3Q16 – 1Q17
49
-
25
50
75
100
125
150
0 30 60 90 120 150 180Cum
ulat
ive
Mbo
e
Days on Production
Greater Barilla Draw• Red Bull South Active and
Improving> 2 rigs currently operating
> 3 wells drilled and 3 wells online since acquisition date
> Record Peak 24hr WC B 7,500ft at 1,954 boed
> 23% lower completion costs
>Updating plan from 7,500ft to 10,000ft laterals
• Currently 3 rigs in Greater Barilla Draw> 2 additional rigs in 2Q17
Wolfcamp B Improvement = frac optimization to drive results
Efficient stimulation without sacrificing production
$11.6$9.7 $8.5
-$3
$2
$7
$12
Prior Operator Oxy Current Oxy Potential$
MM
Drilling Cost Completion
Wolfcamp B 7,500ft Well Costs
Value Based Development Increases Returns
Oxy WC B 7,500ft Fracs
Prior Operator WC B 7,500ft Fracs
50
- 25 50 75
100 125 150 175
0 30 60 90 120 150 180 210 240 270 300 330 360
Cum
ulat
ive
Oil
-Mbo
Days on Production
Old WC B Design
New WC B Design
All WC A Wells
Midland Basin - Merchant
• Currently two play leading benches under development
> Landing point optimized flow units
> Wolfcamp B performance +42%
> Oil cut from 61% to 77%+
• 2017 lateral length ~ 8,700ft
• Two benches now < $40 BE
> Pad D&C saves ~$900k per well
$11.6
$6.3$5.2 $5.1 $4.5
$- $2 $4 $6 $8
$10 $12
2014 2015 2016 2017 Best
$M
M
Drilling Completion Hookup
Wolfcamp A & B 7,500ft Well Costs
Wolfcamp B Improvement = two high return development benches
Continuous well cost improvement yielding high returns
Value Based Development Increases Returns
51
Target Formation
Recent Well Results
Well NameLateral
Length (ft)Peak 24 Hr
(boed)Peak 30 Day
(boed)Oil (%)
Brushy Canyon Federal 23 13H 4,376 899 833 90%
Avalon James 29 38H 4,730 1,132 1,115 79%
1st BSS Evaluating
2nd BSS
Cedar Canyon 22 5H 4,468 3,292 2,711 80%
Cedar Canyon 29 2H 4,584 2,782 2,370 81%
Cedar Canyon 28 8H 4,536 2,700 2,385 81%
Oxy 1Q17 Average 5,081 2,214 1,944 81%
3rd BSSCedar Canyon 22-15 31H 5,868 2,236 1,893 74%
Cedar Canyon 22-15 32H 5,868 2,231 1,852 75%
Wolfcamp XY
Patton 18 6H 4,401 2,774 2,150 71%
Cedar Canyon 16 33H 4,418 2,397 2,049 71%
Cedar Canyon 16 34H 4,235 2,287 1,967 70%
Wolfcamp A
Janie Conner 204H 4,500 1,980 1,221 78%
B Banker 226H 4,400 1,874 1,030 76%
Janie Conner 207H 4,500 1,272 1,121 72%
Wolfcamp DJanie Conner 221H 4,522 2,282 1,809 39%
Tiger 14 24S 28E 224H 4,376 1,719 1,417 47%
Note: Wells included in table include non-operated wells. Production data is from internal system for operated wells and from operator data and IHS Enerdeq for non-op wells where available.Wells in blue font were turned to production in 1Q 17.
Barilla Draw Type LogGreater Sand Dunes
Proven Economic Delineating
Brushy Canyon
Avalon
1st Bone Spring
2nd Bone Spring
3rd Bone Spring
Wolfcamp X-YWolfcamp A
Wolfcamp D
6,00
0 ft
New
New
Outstanding Results in Greater Sand Dunes Area Multi-Bench Development
52
Target Formation
Recent Well Results
Well NameLateral
Length (ft)Peak 24 Hr
(boed)Peak 30 Day
(boed)Oil (%)
Avalon Evaluating
1st Bone Spring Evaluating
2nd Bone Spring Roan State 24 #51HAardvark State 6 2H
4,5144,947
9931,254
762821
83%87%
3rd Bone Spring Big George 180 SW 3H 7,576 759 571 57%
Wolfcamp A
Buzzard State Unit #16HPeck State 258 #6H
Buzzard State Unit #15HLenox 2 #5H
Eagle State 28 #13H
7,7004,2127,5984,7214,250
2,0502,2442,0192,4251,958
1,8221,7911,7641,5061,505
74%82%73%71%69%
Wolfcamp DF
Oppenheimer 188 1HNyala Unit 9B #3H
Oppenheimer 188 2HTeller 186 1H
4,5006,5754,7764,681
2,4511,5351,5471,707
1,9071,2471,3401,263
82%83%82%81%
Wolfcamp B
Manhattan 183W 1HDaytona Unit 1B 2H
Black Bear State 11 NE #3H
Iron Mike 40 SE 2H
7,0446,9476,935
7,376
1,9541,8971,215
1,703
1,58415441,124
1,416
75%79%85%
76%
Wolfcamp C Lemur 24 1H 4,251 1,125 937 81%
Note: Wells included in table include non-operated wells. Production data is from internal system for operated wells and from operator data and IHS Enerdeq for non-op wells where available. Well highlighted in blue is most recent well put online by Oxy from newly acquired acquisition area.
Barilla Draw Type LogGreater Barilla Draw – Drilled 228 Wells Across 8 Benches
Proven Economic Delineating
Avalon
1st Bone Spring
2nd Bone Spring
3rd Bone Spring
Wolfcamp AWolfcamp DF
Wolfcamp C
4,50
0 ft
Wolfcamp BNew Red Bull South
Improving Results in Greater Barilla Draw Area Multi-Bench Development
53
Permian Resources Non-OperatedAssets
• Significant OBO position delivers ~13% of domestic production
• Leveraged to deliver high returns, knowledge, and transaction opportunities
• Well participation provides data that progresses delineation efforts across Oxy’soperated assets
2015+ Non‐Operated Activity
Delaware 4San Andres 7
Yeso 13Bone Spring 70
Spraberry 5Wolfcamp 143
Other 15
Total 257
Target 2015+ Wells
TX Delaware Basin
Central BasinPlatform
Midland Basin
New Mexico NW Shelf
NM DelawareBasin
Greater Sand Dunes
Greater Barilla Draw
Permian Basin Acreage
54
Subsurface Characterization Adds Value• Problem: Subsurface uncertainties &
unknowns to predict resource potential
> Sweet spots
> Frac barriers
> Landing zones
• Solutions: Customized subsurface characterization & expertise
> Seismic integration
> Data acquisition
> Models
• Maximize and capture resource potential
Schematic Representation of 2nd Bone Spring Sand Well Placement
2nd Bone Spring Net Sand Thickness and Middle Carbonate Outline
Seismic Interpretation of Middle Carbonate Inside 2nd Bone Spring Sand
A
A A’
Landing + Stimulation + Spacing Optimization
A A’
A’Middle Carb. Outline
55
Subsurface Characterization Adds Value• Problem: Subsurface discontinuity
differentiates stimulation impacts
> Oil left behind
> Frac interference
> Landing zones
• Solutions: Customized subsurface stimulation modeling
> Calibrated stimulation design
> Maximized stimulated rock volume
> Technical type curves
• Maximize economic recovery
Customized Stimulation Design and Landing Selection
2nd Bone Landing and Frac OptimizationA A’
Scenario A B C D
56
4
4
1
1 1
11
2 22
22
Development Units – Greater Sand DunesDevelopment Planning Adds Value• Problem: Potential destruction of
future value as a result of unknowns
> Multi-bench potential
> Frac barriers
> Productivity drivers
> External timing constraints
• Solutions: Modular field development plans to account for uncertainty and enable dynamic development
• Maximize value through reduction in capital spend waste and capture of more reserves Development Phases – Appraisal to Development
Modular blocks to manage uncertainties, select development pace and debottleneck
Aerially ‐Multiple Development Units
•Unique & likewise areas• Land ownership• Surface regulations•Maturity (e.g. common landing zones)
Vertically – Multiple Development Phases
1. Proven2. Delineating
3
3 3
3
57
Oxy Drilling Dynamics Adds Value• Problem: Inefficient use of rig
energy resulting in slow and higher cost drilling
> Downhole tool failures
> Wellbore quality
• Solutions: Oxy Drilling Dynamics
> Proprietary Oxy MSE equation
> Reduced drilling days
> Fewer tool failures
> Precision landing
• Maximize value through better time to market and precision landing
Step Changing Performance
Identify Understand Engineer Implement
Bit Vibration
Increase BHA* St i ffness
Pump Pressure
Alternative Dr i l l P ipe
Directional Control
Weight Transfer
Redesign Bi t
Re-Engineer BHA*
Weight on Bit
Rat
e of
Pen
etra
tion
(ft/
hr)
31
22
1612
30%
28%
25%
Drilling Days 7,500’ Lateral(Rig Release to Rig Release)
Real Time Monitoring from Anywhere
*BHA = bottom hole assembly
58
0
20
40
60
80
100
120
140
Jan Mar May Jul Sep Nov Jan Mar Sep Nov Jan Jul Sep Nov
2014 2015 2016
Expected 2017 range with normalized rig-to-frac ratio
Rig Release to Well Online
Day
s• Implementation resulted in 5,000
production days above the baseline plan.
Integrated Planning Adds Value• Problem: Delay in production and
cash flows due to complex operations and planning
> Multiple unaligned schedules
• Solutions: Implemented Integrated Master Schedule
> Optimized sequence of events reducing “flat time”
• Maximize Value through better time to market and securing pricing and supply of services
• 2017 additions to process
> Increased granularity of well prep, clean-out, and pre-spud activities
> Focus on efficient resources utilization
59
OXY 1 2 3 4 5 6 7 8 9 10 11 12 13
Surveillance and Base Management Adds Value
• Oxy operates 24,460 wells in the Permian Basin
• Company operated production of 235 MboepdNet (EOR and Unconventional)
• Long-term operability is critical> Well design
> Drilling quality wells
> Artificial lift optimization
> Mechanical integrity
• Oxy finds significant value upside in base optimization
• Oxy can operate large base at low opex> Offset fixed costs of high well count with operational
expertise
-
2.0
4.0
6.0
8.0
10.0
1Q 16 2Q 16 3Q 16 4Q 16
Cum
ulat
ive
Net
MB
OEP
D
2016 Permian Resources Base Optimization
Total Operated Wells
Major and Large Cap Peers
Permian Pure-Play PeersPeers (alphabetical) include: APA, COP, CPR, CVX, CXO, EOG, FANG, LPI, MPI, MTD, PE, RSP, XOM. Source : IHS Enerdeq
60
2017 Capital Outlook
CO2 Floods / Expansions - $195MM
TZ / ROZ Projects - $50MM
Gas Processing Capacity - $50MM
Water Flood and Infill Drilling - $30MM
Non-operated + Maintenance - $135MM
0
500
1,000
1,500
2,000
2,500
3,000
3,500
Gro
ss B
OPD
South Hobbs Unit Production and CO2 Flood Forecast
SOUTH HOBBS TARGETS 5 per. Mov. Avg. (SOUTH HOBBS)
Waterflood
Phase 1 CO2Flood
Reservoir Management
$0
$5
$10
$15
$20
$25
2014 2015 2016
$/B
OE
0
100
200
300
400
500
600
2016 TargetCapex
2016 ActualCapex
$M
M
Opex Reduction Capital Efficiency
Downhole Maintenance InjectantSurface, Energy and Other Facilities and Well Work Drilling
12% Reduction Y/Y17% Reduction 2014-2016
2016 Accomplishments in EOR Business
61
Table of Contents
• Transactions Announced June 19, 2017
• Company Overview and Value Proposition
• Driving Value in the Permian
• Journey to Digital Transformation
• Appendix
62
• Smart Oilfield• Edge Computing• Internet of Things• Cloud and Mobility• Big Data and Analytics• Cognitive Service and
Machine Learning• UAV• Virtual Reality
• Real time Data Historian• Predictive Analytics• Advanced Surveillance
Technical Data Management
Production Optimization
Field Automation
Consolidated ERP Systems
Next Generation Production Optimization
• Institutionalized Processes and Tools
• Single reporting repository• Focus on analysis and
decision making
• Technical Data Consolidation• Global Well Naming Convention
• Integration of operational, technical and financial data
• Global Supply Chain• Single Chart of Accounts
• Standardized End Devices• Segregation of Automation Network• Secured Remote Access to Real time
Data• Process Historian
2001
2003
2005
2008
2012
Our Journey to Digital Transformation
63
A flexible system that flows, changes form in real time, and seeks the most
natural path to its destination.
Current Innovation Pipeline Statistics and ResultsOxy’s Innovation Process
107
Capturing and Executing Innovative Ideas
64
Oxy
& In
dust
ry E
xper
tise
Data Management
Dat
a &
Ana
lytic
s D
omai
n Ex
pert
ise
• Visualization• Benchmarking• Exploitation & Exploration
Insight & Recommendations
• Bayesian Analysis• Survival Analysis• Uncertainty Analysis
• Design of Experiment• Statistical Learning (Machine Learning)• Spatial/Temporal Analysis
Statistical Methods
• Data Preparation & Tagging• Data Quality & Cleaning• Data Forensics & Profiling
Data Collection & Profiling
• Numerical and stochastic Simulation
• Signal Processing• Network Analysis
• Computational Intelligence• Natural Language
Processing• Image/Voice Processing• Data Structure & Classical
Algorithms
Opt
imiz
atio
nAr
tific
ial I
ntel
ligen
ce
Computational Methods
University Partnerships
O&G Industry Research
Outside Industry Research
Commercially Viable Algorithms
Vendors
IT
Key Levers
Data Science – Going Beyond Interesting
65
Driving Value @ the Bit
@ Bit Algorithm
• Predicts bit location using physics +machine learning
• Calculates dogleg severity, build/turn rate, motor yield
@ Target Algorithm
• Determines optimum build & turn rate, sliding and rotating lengths to reach target point
• Minimizes loss of weight on bit, tortuosity, drilling time, dogleg severity
Projection Distance
Max DLS limit = 11 degreesMax DLS limit = 14 degreesMax DLS limit = 24 degreesPlanned Trajectory
Actual Trajectory
@Bit + @Target• $325K avg. per rig savings
• Vendor performance metrics
• Increase in rate of penetration
• “Problem Well” avoidance
• Optimal path determination (staying in producing zone)
66
High Speed, Low Fidelity Reservoir Models
Historical/field data to calibrate and quantify
uncertainty
Field decisions that optimize daily total field production
Maximize NPV honoring economic, operating, and well constraints
by generating thousands of what‐if scenarios
Observation WellInjection WellVent Well
Producing Well
Temp, Press
Production
Injection
Production Well DataInjection Well Data
Optimizer
Reservoir & Operational Facilities
Target=$100MM
Driving Value @ the ReservoirSteam/Water/CO2• Leverage field data and new
data sources
• Optimize over larger areas
• Integrates w/existing workflow
• Significantly lower computational costs
67
Driving Value @ the Well
Lift System Diagnostic/Optimization
• Leverages artificial intelligence and pattern recognition
• Proprietary deviated well algorithms based on mechanical engineering+applied mathematics
Upcoming Opportunities
• Text and image analytics of unstructured data to drive efficiencies with chemical treatments, safety, failure detection, etc.
• Survival and risk analysis to identify odds of failure in advance.
• Combine maintenance cost factors and risk of failures to optimize preventative maintenance.
• Increase run life
• Earlier detection of failures
• Improve staff efficiency, quality
• Industry leading capabilities into Oxy’s proprietary lift platform (OxyLift)
Time
Risk vs Cost/Complexity
Risk of Failure Risk of Total Losses
Risk of Additional Cost
68
Driving Value@ Field Development
Multivariate Modelling
• Predictive, interactive multivariate statistical model that predicts geologic sweet spot areas and compares completion practices and cost factors
• Driven by strong collaboration with geologists, petrophysicists, geophysicists, operations, etc.
• Introducing seismic, additional well control and fluid properties
• Augments, validates and quickens existing practices
• Interactive framework that improves as data is added
69
Exploration & Appraisal
Field Development
Drilling & Completion
Trading & Distribution
Workforce Management
Production
Reservoir Characterization
Where to Drill
Lease Management Analytics
Resource Risk ManagementRate of Penetration Optimization
Production Allocation& Monitoring
Well ProfilingProduction Forecasting
Asset Maintenance
Supply Chain Optimization
Inventory Optimization
Route & Fleet Optimization
Pipeline Inspection
Contract Optimization
Risk Management Capital Optimization
Prediction of Supply Requirements
Prediction & Optimization of required Workforce
Equipment Loss & Failure
Subsurface Dysfunction Detection & Prevention Drilling Trajectory
Optimization
Minimize Environmental Risk
Optimization Cost vs Productivity
Production HES
Job Performance Monitoring
Identifying Key Players & Future Leaders
Identifying Organization Issues
Retention & Risk Management
Predictive Analysis
Drones Virtual & Augmented Reality
Internet of Things
Big Data and Analytics Edge Computing
Cognitive Services & Machine Learning
Robotics
Cloud Computing & Mobility
Digital Foundational Capabilities
The Possibilities Are Endless…
70
Table of Contents
• Transactions Announced June 19, 2017
• Company Overview and Value Proposition
• Driving Value in the Permian
• Journey to Digital Transformation
• Appendix
71
Oil & Gas Segment • FY 2017E Total Production
> 595,000 – 615,000 boed
> Permian Resources production of 140,000 – 150,000 boed
• 2Q17E Production
> Total production of 580,000 – 595,000 boed
> Permian EOR production flat
> Permian Resources production of 135,000 – 140,000 boed
> Modest impact of OPEC quota constraints and volume effects under PSC contracts due to higher oil prices.
Production Costs – FY 2017E
• Domestic Oil & Gas: ~$14.00 / boe
Exploration Expense
• ~$30 MM in 2Q17E
DD&A – FY 2017E
• Oil & Gas: ~$15.00 / boe• Chemicals and Midstream: $685 MM
Midstream
• $5 – $15 MM pre-tax income in 2Q17E
Chemical Segment
• ~$200 MM pre-tax income in 2Q17E
Corporate
• FY 2017E Domestic tax rate: 36% • FY 2017E Int'l tax rate: 55%• Interest expense of $85 MM in 2Q17E
2Q17 and FY 2017 Guidance Summary
Slide not updated for transactions announced on June 19, 2017.
72
•Improved product prices> Annualized cash flow changes ~$100 million for a ~$1.00 / barrel change in oil prices
> Annualized cash flow changes ~$45 million for a ~$0.50 / Mmbtu change in natural gas prices
•Improved chemicals performance> Annualized cash flow changes ~$30 million for a ~$10 / ton change in caustic soda prices
> Start-up of ethylene cracker
•Additional sources of liquidity in 2017 - 2018 of ~$2.2+ billion including:> Received tax refund of ~$700 million in 2Q17
> Monetized South Texas gas properties for ~$600 million in 1Q17
> Monetization of non-strategic corporate assets
> Portfolio management & optimization
Cash Flow Improvements Expected in 2017
Slide not updated for transactions announced on June 19, 2017.
73
75
110
124 129
135 - 140140 - 150
2014 2015 2016 1Q17 2Q17E 2017E
Oil NGL Gas• Total production grew 5% from Q4 16 to 129 Mboed> Oil production up 7% from Q4 16 to 78 Mbod
• Increased activity in 1Q 2017> Exited Q1 with 7 rigs> 21 wells online in 1Q17 vs. 16 in 4Q16> Added 5 top tier performing wells in Greater Sand Dunes
• 2017 program: increase in activity expected in 2Q17> 2 rigs to be added in Q2 in Greater Barilla Draw Area> Expect to drill 28 wells and put online 26 wells in 2Q17
• 2017 program: expect 120+ operated wells online> Increased activity will be focused in Greater Sand Dunes
and Greater Barilla Draw.
Permian Resources Results and Guidance
Slide not updated for transactions announced on June 19, 2017.
74
Ope
ratin
g Ca
sh F
low
($ B
n)
$4.2
$50/bbl
Current Annualized
Chemicals
$4.4$4.7
80 MboedProduction
Current Dividend
$2.3
Sustaining and
Growth Capital$3.3
Our Pathway to Cash Flow Breakeven at $50 WTI – Chemicals Drivers
$5.6
+$0.20
Chemicals Drivers:
• Full-year benefit of current basic chemicals pricing environment
• Full-year benefit of Ethylene Cracker
• Full-year benefit 4CPE Refrigerant Plant
6.0
5.0
4.0
3.0
2.0
1.0
0.0Midstream &
Marketing
$5.6
Plan Achieved at $50
Slide not updated for transactions announced on June 19, 2017.
75
Ope
ratin
g Ca
sh F
low
($ B
n)
$4.2
$50/bbl
$4.4$4.7
Current Dividend
$2.3
Sustaining and
Growth Capital$3.3
Our Pathway to Cash Flow Breakeven at $50 Oil – Midstream Drivers
$5.6
Midstream & Marketing Drivers:
• Improved Midland to Gulf Coast differentials
• Al Hosn Midstream improvement
6.0
5.0
4.0
3.0
2.0
1.0
0.0
+$0.3
$5.6
Current Annualized
Chemicals 80 MboedProduction
Midstream &Marketing
Plan Achieved at $50
Slide not updated for transactions announced on June 19, 2017.
76
Ope
ratin
g Ca
sh F
low
($ B
n)
$4.2
$50/bbl
$4.4$4.7
Current Dividend
$2.3
Sustaining and
Growth Capital$3.3
Our Pathway to Cash Flow Breakeven at $50 Oil – Oil & Gas Drivers
$5.6
Oil & Gas Drivers:• Over 2,500 locations with NPV10 breakevens
under $50 WTI • Cash margins of $30 per barrel
6.0
5.0
4.0
3.0
2.0
1.0
0.0
+$0.9
$5.6
Current Annualized
Chemicals 80 MboedProduction
Midstream &Marketing
Plan Achieved at $50
Slide not updated for transactions announced on June 19, 2017.
77
Permian Resources Growth Opex / boe
Permian Resources Legacy Opex / boe
Permian EOR Opex / boe
$2 - $4
$15 - $20
$5 - $20
2017 2018+
~$14/boe
Reducing Domestic Opex Through High Margin Growth Barrels
Total Domestic Opex / boe
Domestic Production Mix
2017 2018+
Flat
LegacyGrowth
EOR
Asset Area Opex Ranges
78
Spot Domestic Caustic Soda Price** Low end of price range as reported by IHS
• Caustic soda prices reversed their multi-yeartrend of steady decline in mid-2016
• Global caustic soda demand forecasted to outstrip capacity increases again in 2017
> European mercury technology conversion/closure deadline December 2017
• Higher energy prices will erode some of the impact of higher caustic soda prices
$200
$250
$300
$350
$400
$450
Olin35%
OxyChem24%
Westlake18%
Rest of Industry
23%
North American Chlor-Alkali Capacity Share
• Major industry consolidation iscomplete after several years of M&A activity
• Protracted poor financial performance in the industry is improving market discipline
Basic Chemical Market Dynamics Are Shifting