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OXY(OXY) - 2025 Q1 - Earnings Call Transcript
OXYOXY(OXY)2025-05-08 18:00

Financial Data and Key Metrics Changes - In Q1 2025, the company generated an adjusted profit of 0.87perdilutedshareandareportedprofitof0.87 per diluted share and a reported profit of 0.77 per diluted share, with a significant difference attributed to the mark-to-market impact of derivatives [20] - The company generated approximately 1,200,000,000offreecashflowbeforeworkingcapitalandexitedthequarterwith1,200,000,000 of free cash flow before working capital and exited the quarter with 2,600,000,000 of unrestricted cash [20] - Year-to-date, the company has retired 2,300,000,000indebt,contributingtoareductioninannualinterestexpenseby2,300,000,000 in debt, contributing to a reduction in annual interest expense by 370,000,000 [14][25] Business Line Data and Key Metrics Changes - The oil and gas business produced just over 1,390,000 BOE per day, meeting production guidance [4] - OxyChem delivered 215,000,000onanadjustedbasis,overcomingoperationalchallengesrelatedtowinterweather[10]−Themidstreamandmarketingbusinesssignificantlyoutperformedexpectations,drivenbystronggasmarketingoptimization[11]MarketDataandKeyMetricsChanges−ThecompanyexpectstotalcompanyproductiontomodestlyincreaseinQ22025,drivenbyvariousactivitiesincludingPermianactivitylevelsandthereturnofGulfofAmericaproduction[21]−Thecompanyreviseditsfull−yearoperatingcostguidancefrom215,000,000 on an adjusted basis, overcoming operational challenges related to winter weather [10] - The midstream and marketing business significantly outperformed expectations, driven by strong gas marketing optimization [11] Market Data and Key Metrics Changes - The company expects total company production to modestly increase in Q2 2025, driven by various activities including Permian activity levels and the return of Gulf of America production [21] - The company revised its full-year operating cost guidance from 9 to 8.65perBOE,reflectingacommitmenttooperationalefficiency[23]CompanyStrategyandDevelopmentDirection−Thecompanyisfocusedonstrengtheningitsbalancesheet,increasingreturnstoshareholders,andcontributingtoU.S.energyleadershipthroughdisciplinedcapitalallocationandoperationalexcellence[29]−ThecompanyisinadvancednegotiationstoextendtheBlock53contractinOmanbyfifteenyears,whichisexpectedtounlocksignificantadditionalresources[7][9]−Thecompanyiscommittedtodebtreductionandhasmadesignificantprogress,withall2025maturitiesretired[14][26]Management′sCommentsonOperatingEnvironmentandFutureOutlook−Managementhighlighteduncertaintyarounddemand,policy,andsupplyasheadwindsforthesector,leadingtoincreasedcommoditypricevolatility[14]−Thecompanyispreparedtoscalebackactivityandmanagecostsprudentlyifcommoditypricesweakensignificantly[16]−Managementexpressedconfidenceintheoperationalmomentumandfinancialposition,expectingtodeliverconsistentresultsandpreservevaluethroughcommoditycycles[28]OtherImportantInformation−Thecompanysignedalandmark25−yearcarbonofftakeagreementforalowcarbonammoniafacility,supportingthetransportationandgeologicstorageofapproximately2,300,000metrictonsofCO2annually[12]−Thecompanyanticipatesapproximately8.65 per BOE, reflecting a commitment to operational efficiency [23] Company Strategy and Development Direction - The company is focused on strengthening its balance sheet, increasing returns to shareholders, and contributing to U.S. energy leadership through disciplined capital allocation and operational excellence [29] - The company is in advanced negotiations to extend the Block 53 contract in Oman by fifteen years, which is expected to unlock significant additional resources [7][9] - The company is committed to debt reduction and has made significant progress, with all 2025 maturities retired [14][26] Management's Comments on Operating Environment and Future Outlook - Management highlighted uncertainty around demand, policy, and supply as headwinds for the sector, leading to increased commodity price volatility [14] - The company is prepared to scale back activity and manage costs prudently if commodity prices weaken significantly [16] - Management expressed confidence in the operational momentum and financial position, expecting to deliver consistent results and preserve value through commodity cycles [28] Other Important Information - The company signed a landmark 25-year carbon offtake agreement for a low carbon ammonia facility, supporting the transportation and geologic storage of approximately 2,300,000 metric tons of CO2 annually [12] - The company anticipates approximately 1,000,000,000 in incremental pretax free cash flow from non-oil and gas sources in 2026, with further expansion in 2027 [28] Q&A Session Summary Question: Can you elaborate on CapEx and OpEx reductions for this year? - Management indicated that the reductions are a mix of efficiency gains and timeline adjustments, with no immediate impact on production expected [32][34] Question: How much of the free cash flow inflection is from operating cash flow versus capital spending reductions? - Management provided a breakdown of expected cash flow improvements from various segments, including chemicals and midstream [39][45] Question: What are the thoughts on divestitures at this point in the cycle? - Management stated that divestiture decisions are value-based, with options available for both short and long cycle assets [58] Question: Can you unpack the opportunities in Oman? - Management expressed excitement about the Block 53 extension and recent discoveries, indicating potential cash flow improvements [60][63] Question: What are the thoughts on the Low Carbon Ventures business? - Management highlighted the strong voluntary compliance market for carbon reduction credits and the potential for enhanced oil recovery using CO2 [70][72] Question: What are the expectations for U.S. oil supply in the near and long term? - Management noted that U.S. shale basins are plateauing or declining, with the Permian potentially plateauing sooner than expected due to reduced activity levels [77][78]