US ELECTIONS: Biden administration unlikely to much affect Oxy permitting: executives

A change of US presidential administration to one less favorable for new permitting on federal lands is not likely to affect Occidental Petroleum much, because while a sizable amount of its acreage is on federal lands, it has hundreds of permits either on hand or in process, the company's top executives said Nov. 10.

Even though the incoming Joe Biden administration spoke against allowing new drilling permits on federal acreage, in practice this may not be its highest priority, Oxy CEO Vicki Hollub said in a third-quarter company earnings conference call.

"I believe there are other things much more urgent for ... Biden to take on," Hollub said. "So we don't expect any near-term impact on either Gulf of Mexico permitting or onshore."

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Also, the less focus from the incoming administration, the more time Oxy has to begin working with his staff, she said.

"I know they'll want more regulation, a deeper focus on ... where the permits are, what the safety [issues are] and the impact on the environment, Hollub said. "This is an opportunity for us to be collaborative."

Oxy has 1.6 million acres on US federal land, half onshore and half in the US Gulf of Mexico, Oxy's Chief Financial Officer Rob Peterson said, adding none of the acreage Oxy bought from Anadarko Petroleum in August 2019 is on federal land.

'Good shape even with a different approach'

"In our history of working 100 years as a company with different administrations, from a pure holding standpoint we're in very good shape even with a different approach" than the current more pro-business stance of President Donald Trump, Peterson said.

"Our biggest onshore exposure is in the Powder River Basin [of Wyoming] where we have very little activity," he said. "In New Mexico we have over 200 permits in hand and a couple of hundred permits in the works, and so we have a specific inventory in New Mexico already."

Operational excellence "really helps" when seeking permits with any country, Ken Dillon, president of Oxy's international oil and gas operations, said.

Oxy has improved its safety record in the Gulf of Mexico, for example, with multiple de-crewing and re-crewing several platforms in that arena while managing the strict precautions and provisions required for operating amid the coronavirus pandemic during one of the most active Gulf storm seasons in history, Dillon said.

Process engineers improved up time on one installation by 12% which should result in $40 million in cash flows next year, he said, adding: "And we spent almost nothing to do it."

In addition, Oxy increased activity slightly in the third quarter, but plans to "meaningfully" increase it in the fourth quarter as it seeks to stabilize its production, Hollub said.

Oxy's production in Q3 totaled 1.237 million boe/d from continuing operations, exceeding the midpoint of guidance by 12,000 boe/d despite an unusually active storm season.

Permian Resources exceeds high end of guidance by 3%

Oxy's Permian Resources unconventionals unit exceeded the high end of guidance by 3% at 420,000 boe/d. That is up 8% from the same year-ago period (during which the company acquired Anadarko Petroleum) but down nearly 10% from Q2 stemming from impacts of severe budget-cutting earlier in the year to deal with lower oil prices.

Earlier this year, the company cut its 2020 capital budget by more than 50% to what is now $2.4 billion-$2.6 billion as the effects of low oil demand caused crude prices to plummet in March, April and May to the teens and $20s/b.

Oil prices rebounded to around $41/b, but that is lower on average than they were for more than 15 years except for periods in late 2015 and 1H 2016.

"We plan to increase activity ... in the fourth quarter by adding two more rigs in each of the Texas Delaware, New Mexico and DJ Basins," Hollub said. "We restarted activity with our JV partner Ecopetrol in the Midland [eastern Permian] Basin by running two rigs in the third quarter, and in the Gulf of Mexico we returned a drillship to work in early October."

But even as the company increases activity, it plans to continue maximizing operational efficiencies to sustain its production, she said.

Hollub noted that this year's capex is below sustaining capital of $2.9 billion – which is likely the maximum amount it would spend in 2021, she said.

In addition, the company has set a target to reach net zero greenhouse gas emissions associated with its operations before 2040 and a goal to achieve net-zero emissions associated with the use of its products by 2050, she added.