Occidental Petroleum (OXY)
Q4 2010 Earnings Call
January 26, 2011 11:30 am ET
Ray Irani - Chairman, Chief Executive Officer, Chairman of Executive Committee and Member of Dividend Committee
Christopher Stavros - Vice President of Investor Relations
Edward Lowe - Vice President and President of Oxy Oil and Gas -International Production
Stephen Chazen - President, Chief Operating Officer and Director
Philip Dodge - Stanford Group Company
Jeffrey Dietert - Simmons & Company
Douglas Terreson - ISI Group Inc.
Pavel Molchanov - Raymond James & Associates
David Heikkinen - Tudor, Pickering, Holt & Co. Securities, Inc.
John Herrlin - Societe Generale Cross Asset Research
Arjun Murti - Goldman Sachs Group Inc.
Faisel Khan - Citigroup Inc
Douglas Leggate - BofA Merrill Lynch
Paul Sankey - Deutsche Bank AG
Previous Statements by OXY
» Occidental Petroleum Management Discussion Q3 2010 Results – Earnings Call Transcript.
» Occidental Petroleum Q2 2010 Earnings Call Transcript
» Occidental Petroleum Q1 2010 Earnings Call Transcript
Good morning. My name is Christie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Occidental Petroleum Fourth Quarter 2010 Earnings Conference Call. [Operator Instructions] Mr. Stavros, you may begin your conference.
Thank you, Christy, and good morning, everyone. Welcome to Occidental Petroleum's Fourth Quarter 2010 Earnings Conference Call. Joining us on the call this morning from Los Angeles are Dr. Ray Irani, Oxy's Chairman and Chief Executive Officer; Steve Chazen, our President and Chief Operating Officer; and Bill Albrecht, President of Oxy's U.S. Oil and Gas Operations. Sandy Lowe, President of our International Oil and Gas business wasn't able to join us for today's call as he is currently traveling in the Middle East.
In a moment, I will turn the call over to Dr. Irani for some opening remarks and comments regarding some of our recent transactions and new project announcements. Steve Chazen will then review our fourth quarter and full year 2010 financial and operating results. Our fourth quarter earnings press release, Investor Relations supplemental schedules and the conference call presentation slides, which refer to Steve's remarks, can be downloaded off of our website at www.oxy.com.
I'll now turn the call over to Dr. Irani. Dr. Irani, please go ahead.
Thank you, Chris, and good morning, ladies and gentlemen. In a few minutes, Steve Chazen will provide details on our financial results for the fourth quarter and full year of 2010. But first, I want to mention some key developments of the last week and of the past quarter that we believe are significant to continuing Oxy's success in 2010 and beyond.
Last week, we announced that the government of Abu Dhabi selected Oxy to participate in the development of the Shah gas fields, one of the largest natural gas fields in the Middle East. Oxy will hold a 40% participating interest in a 30-year contract with Abu Dhabi National Oil Company, ADNOC, holding the remaining 60%. We're indeed pleased that the Abu Dhabi government has chosen Oxy to participate with them in this major project. This is another important step in the implementation of our growth strategy in the Middle East and in our relationship with the Emirates of Abu Dhabi.
You will recall that in 2007, Oxy submitted a bid on the Shah project and was not selected. However, development of the field under the agreement announced last week provides an exciting opportunity to create value for the people of Abu Dhabi and of course, for Oxy stockholders. We expect it to provide similar returns to Oxy as our traditional Middle East properties.
Working in close partnership with ADNOC, we will apply our expertise in this technically challenging project to develop high sulfur content reservoirs within the Shah field. The project is anticipated to produce approximately 500 million cubic feet per day of sales gas providing net to Oxy in the range of 200 million cubic feet a day. In addition, the project is expected to produce about 50,000 barrels per day of condensate and natural gas liquids, which we expect to yield in the range of 20,000 barrels per day net to Oxy. ADNOC is already in the process of developing the field, and the majority of it have procurements and construction contracts have already been awarded. Production from the field is scheduled to begin in 2014.
Capital expenditures for the entire project were estimated to be in the range of $10 billion with Oxy's share proportional to the ownership. Another key development for Oxy and very exciting, which we announced last month, was the strategic adjustment we have made to our asset base in order to improve the company's performance and profitability. While selling our Oil and Gas operations in Argentina, which have not performed to our expectations, the subsidiary of Sinopec had expected after-tax proceeds to be about $2.5 billion.
We have made acquisitions and new producing areas for Oxy, North Dakota and South Texas, which we believe have solid potential for growth. We expect the combination of these transactions to immediately improve our earnings, return on capital employed and free cash flow. The North Dakota acquisitions has already closed, and we anticipate the Argentina and South Texas transactions to close by the end of this quarter. Two years ago, we went into North Dakota with a modest amount of acreage in the oil-rich Bakken and Three Forks Formations of the Williston Basin. Now we have expanded our position in the area to over 200,000 acres by purchasing about 180,000 net contiguous acres from a private seller for about $1.4 billion. We expect to grow our production in the Williston Basin from these properties to about 30,000 BOE per day over the next five years.