Occidental Petroleum's CEO Discusses Q3 2011 Results - Earnings Call Transcript

Occidental Petroleum (OXY)

Q3 2011 Earnings Call

October 27, 2011 11:30 am ET

Executives

Stephen I. Chazen - Chief Executive Officer, President and Director

Edward Arthur Lowe - Vice President and President of Oxy Oil and Gas -International Production

James M. Lienert - Chief Financial Officer and Executive Vice President

Christopher G. Stavros - Vice President of Investor Relations

Analysts

Arjun N. Murti - Goldman Sachs Group Inc., Research Division

John P. Herrlin - Societe Generale Cross Asset Research

Edward Westlake - Crédit Suisse AG, Research Division

Jeffrey A. Dietert - Simmons & Company International, Research Division

Pavel Molchanov - Raymond James & Associates, Inc., Research Division

Doug Terreson - ISI Group Inc., Research Division

Paul Sankey - Deutsche Bank AG, Research Division

Ann L. Kohler - CRT Capital Group LLC, Research Division

Jessica Chipman - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division

Douglas George Blyth Leggate - BofA Merrill Lynch, Research Division

Jason Gammel - Macquarie Research

Presentation

Operator

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 Third Quarter 2011 Earnings Release Conference Call. [Operator Instructions] Thank you. I would now like to turn the call over to Christopher Stavros. Please go ahead, sir.

Christopher G. Stavros

Thank you, Christie. Good morning, everyone. Welcome to Occidental Petroleum's Third Quarter 2011 Earnings Conference Call. Joining us on the call this morning from Los Angeles are Steve Chazen, Oxy's President, Chief Executive Officer; Jim Lienert, Oxy's Chief Financial Officer; Bill Albrecht, President of our Domestic Oil and Gas operations; and Sandy Lowe, President of our International Oil and Gas business.

In just a moment, I'll turn the call over to Jim, our CFO, who will review our financial and operating results for the third quarter and first 9 months of 2011. Chazen will then follow with some comments on Oxy's strategy and outlook for the fourth quarter, and we'll conclude with a brief Q&A session.

Our third quarter earnings press release, Investor Relations' supplemental schedules and the conference call presentation slides, which refer to both Jim and Steve's remarks, can be downloaded off of our website at www.oxy.com.

I'll now turn the call over to Jim Lienert. Jim, please go ahead.

James M. Lienert

Thank you, Chris. Core income was $1.8 billion, or $2.18 per diluted share, in the third quarter this year compared to $1.2 billion, or $1.48 per diluted share, in the third quarter of last year. Net income was $1.8 billion, or $2.17 per diluted share, in the third quarter of 2011 compared to $1.2 billion, or $1.46 per diluted share, in the third quarter of 2010. The small difference between net and core income is due to discontinued operations.

Here's a segment breakdown for the third quarter. Oil and Gas segment earnings for the third quarter of 2011 were $2.6 billion, the same as the second quarter of 2011 and compared to $1.8 billion in the third quarter of 2010. Higher volumes this quarter compared to the second quarter of 2011 resulted in flat quarter-to-quarter income despite lower prices. The improvement in 2011 over the same period in 2010 was driven by higher production in liquids prices. The third quarter 2011 realized prices increased on a year-over-year basis by 34% for crude oil, 41% for NGLs and remained about flat for domestic natural gas.

Sales volumes, which are different from production volumes due to timing of liftings. We're 743,000 BOE per day compared to 713,000 BOE per day in the third quarter of 2010. Our production was 739,000 BOE per day compared to 706,000 in the third quarter of 2010, which included production from Libya. This represents a greater than 4.5% increase year-over-year, reflecting our continued focus on production growth.

The third quarter production was also more than 3% higher than the second quarter 2011 volumes of 715,000 BOE per day. Domestically, our production was 436,000 BOE per day, representing the highest ever domestic production volumes for the company compared to our guidance of 430,000 to 432,000 BOE per day.

Our production in California rose by 6,000 BOE per day compared to the second quarter and contributed a large portion of the sequential increase in our overall domestic production volumes. Latin America volumes were 30,000 BOE per day. Columbia volumes decreased from the second quarter due to pipeline interruptions caused by insurgent activity.

In the Middle East region, we recorded no production in Libya. In Iraq, we produced 4,000 BOE per day. Yemen daily production was 28,000 BOE, slightly ahead of our guidance. In Oman, the third quarter production was 79,000 BOE per day, an increase of 3,000 BOE per day over the second quarter volumes.

In Qatar, the third quarter production was 73,000 BOE per day, an increase of 5,000 BOE per day over the second quarter volumes. The increase reflected the results of the development program, as well as maintenance issues that affected the second quarter volumes. in Dolphin and Bahrain combined, production increased 3,000 BOE per day from the second quarter volumes.

Our third quarter sales volumes were 743,000 BOE per day compared to our guidance of 725,000 BOE per day. The improvement resulted mainly from the higher domestic production and the timing of liftings. Third quarter 2011 realized prices declined for all of our products from the second quarter of the year.

Our worldwide crude oil realized price was $97.24 per barrel, a decrease of 6%. Worldwide NGLs were $56.06 per barrel, a decline of 3%, and domestic natural gas prices were about flat at $4.23 per MCF.

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