MOSCOW (MRC) -- Occidental Petroleum expects oil and gas output to dip in the second half of the year and will not boost production until it “significantly” reduces debt, reported Reuters with reference to Chief Executive Vicki Hollub's statement.
The company has been struggling with debt taken on during its USD38 billion acquisition of Anadarko Petroleum last year, an ill-timed bet on oil prices rising.
The Anadarko purchase was intended to increase efficiency and profits by boosting oil and gas production. But Occidental’s output will dip in the third and fourth quarters and it will end the year pumping about 1.2 million barrels of oil and gas per day, roughly 200,000 barrels per day less than the year prior.
The production outlook “does not inspire confidence in capital efficiency” or in the ability to “meet sustaining capital requirements next year,” Mizuho Securities USA analyst Vincent Lovaglio said, adding that Occidental needs to finalize a major asset sale.
Occidental did not release 2021 spending plans, but said it would have to spend about USD2.9 billion to keep production flat, based on oil prices at USD40 per barrel.
It has about USD4.5 billion in notes due next year and reported long-term debt of USD36 billion on June 30. Warren Buffett’s Berkshire Hathaway holds about USD9.7 billion in Occidental preferred shares that pay a dividend of about 8%.
Occidental is restarting some activity in the Permian Basin and Gulf of Mexico, but its focus is to “ensure that we have the liquidity to go forward so we have the ability to meet our maturities,” Hollub said on a call with analysts.
It no longer plans to sell Algerian assets it had once hoped to sell to France’s Total to pay down debt, Hollub said, calling Algeria a “core asset.” Algerian authorities had moved to block Total’s acquisition.
Occidental is still marketing assets in Ghana and expects to sell a land and minerals package in Wyoming this year.
In H1 August, it posted an USD8.35 billion second-quarter loss amid lower energy prices and writedowns.
As MRC wrote before, OxyChem, the chemical segment of Occidental Petroleum (Oxy; Houston, Texas) reports second-quarter pre-tax income of USD108 million, down 48% year-over-year (YOY) from USD208 million and 35% ahead of the company’s guidance. Sales totaled USD846 million, down 15% YOY from USD998 million.
We remind that OxyChem conducted a seven-day turnaround at its PVC plant in Pasadena, Texas, USA, in April, 2020. This plant's production capacity is 1 million mt/year.
According to MRC's ScanPlast report, Russia's overall PVC production reached 557,000 tonnes in the first seven months of 2020, up by 1% year on year. Only three Russian producers managed to increase their output.
Occidental Petroleum Corporation (OxyChem) is a California-based oil and gas exploration and production company with operations in the United States, the Middle East, North Africa, and South America. Oxychem is Oxy"s Texas-based subsidiary which manufacture polyvinyl chloride (PVC) resins, chlorine and caustic soda used in plastics, pharmaceuticals and water treatment chemicals.