(Edited from annual report and 10K annual report)
Occidental will remain focussed on maximising its profits and cash-flow from its core businesses, while making targeted investments to capture new opportunities for what it says is for 'profitable growth tomorrow'. In addition to positioning the oil and gas segment for sustainable growth and profitability, Occidental has taken steps to strengthen the chemical segment so that it will benefit from improving margins in a growing global economy.
Key measures to optimise its performance include:
optimising profit and free cash flow for every equivalent barrel it produces;
controlling costs;
maintaining top quartile oil and gas finding and development costs;
keeping reserve replacement high; and
generating top quartile returns on equity and capital employed.
Looking ahead
Occidental has a pipeline of short- and medium-term projects with a portfolio of high quality assets that will keep its combined oil and gas production growing at a sustainable annual rate between 5 and 7%. It expects its base production in 2010 to grow to between 700,000 and 785,000bbl/day oil.
This production outlook does not depend on new exploration success, new enhanced oil recovery (EOR) projects or new asset acquisitions. Growth is expected to come from the company’s Argentina assets that were recently acquired from Vintage Petroleum, the giant Dolphin gas project in Qatar and the United Arab Emirates, the Mukhaizna project in Oman, and Libya.
In addition, the company plans to grow its California production through a combination of primary drilling and EOR projects at its Elk Hills operation and by increasing production from former Vintage properties in southern California. The company also has a large inventory of EOR projects in the Permian Basin in Texas and New Mexico, where it expects to offset moderate decline rates.
Finally, the company is pursuing a number of new growth opportunities in its core operating areas that could increase production in 2010 to between 805,000 and 950,000 bbl/day, for a potential annual growth rate of approximately 10% over five years.
The company plans to repurchase 10m Occidental common shares in the short term. It also expects to repurchase an additional 20m shares over the intermediate term from free cash flow and the proceeds from the Vintage asset sales. If oil prices remain above $50/bbl, it will generate significant free cash flow in excess of what is required to sustain growth of 5 to 7%.
‘Our preference is to grow the business at a faster rate, but if the new projects we are currently considering encounter timing delays or don’t meet our financial criteria, we will use the excess cash to purchase additional shares. We will compare the potential for value creation of new projects with share repurchases and asset acquisitions and make decisions based on what we believe will create the greatest value over the long term’, says chairman, president and chief executive officer, Ray Irani.
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Financial highlights: Occidental, year ended 31 December
|
|
2008 |
2007 |
2006 |
2005 |
2004 |
|
Sales ($ m) |
24,217 |
18,784 |
17,175 |
14,143 |
10,400 |
|
Net Profit ($ m) |
6,857 |
5,400 |
4,191 |
5,293 |
2,574 |
|
Total Assets ($ m) |
41,537 |
36,519 |
32,431 |
26,170 |
21,440 |
|
Diluted earnings per share ($) |
8.35 |
6.44 |
4.87 |
6.47 |
3.21 |
|
Number of Employees |
10,400 |
9,700 |
9,700 |
8,017 |
7,209 |
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Occidental Chemical
Company Structure
Occidental Petroleum's (the parent company's) principal businesses constitute two industry segments: Oil & Gas and Chemicals. Occidental Chemical (OxyChem), a wholly owned subsidiary of Occidental Petroleum, is a major chemical manufacturer with interests in basic chemicals, vinyls, petrochemicals and speciality products.
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