Implementing an aggressive spending program in 2017, with an ongoing focus on the acquisition and development of assets in the Permian Basin, U.S. producer Occidental Petroleum Corp. plans to complete its $50.00 per barrel break-even plan ahead of schedule by the third quarter of this year.
"Continued improvements in well productivity and development optimization have put us ahead on our break-even plan milestone," Joseph Elliot, Occidental president of domestic oil and gas, said Feb. 14 during the company's fourth-quarter 2017 earnings call.
At the end of the fourth quarter of 2017, Occidental's operating cash flow from continuing operations was more than $1.4 billion.
"At $50 [bbl] WTI, the cash required to attain our breakeven plan is more than covered by our cash balance, and at current prices, we would not need a current cash flow deficit. We would not run a cash flow deficit during 2018," CFO Cedric Burgher said on the call.
For the full year 2017, the company reported cash flow from continuing operations was nearly $5.00 billion, almost double the prior year's $2.52 billion, as global oil prices rose.
With West Texas Intermediate and Brent crude oil prices averaging $55.40/bbl and $61.54/bbl, respectively, during the fourth quarter of 2017, Occidental anticipates it will increase total production from 8% to 12% this year to a range of 640,000 barrels of oil equivalent per day to 665,000 boe/d.
During the fourth quarter of 2017, Occidental's total production rose 7% on the year to 621,000 boe/d, which was below company and analysts' expectations, as downtime and the weather impacted volumes. In the fourth quarter of 2017, increased drilling activity and well productivity worked to lift its output in the Permian Basin by 20,000 boe/d on the three-month period to 159,000 boe/d.
The company intends to accelerate its growth in the Permian Basin this year, boosting production from the region by 40% to a level between 195,000 boe/d and 209,000 boe/d. For the first quarter, its Permian production should range between 169,000 boe/d and 173,000 boe/d.
Occidental, like many of its peers, has already made extensive, strategic investments in the prolific Permian Basin. The company will spend a total of $1.9 billion in the region this year.
For the entire year, Occidental's capital expenditures are pegged at $3.9 billion, up from $3.6 billion for the full year 2017.
"As we look beyond our cash flow break-even plan, we will consider several key factors for disciplined reinvestment that support dividend and production growth long term. Our investment decisions are focused on maximizing return on capital employed. We will not invest in projects unless they deliver a minimum return of 15% for domestic and 20% for international," Occidental CEO Vicki Hollub said during the call.
After market close Feb. 13, Occidental posted 2017 core net income of $313 million, or 41 cents per diluted share, within most analysts' prerelease estimates, and climbing from a loss of $97 million, or 13 cents per share, in the prior-year period.
Occidental's net income for the final quarter of 2017 surged to $497 million, or 65 cents per diluted share, compared with a net loss of $272 million, or 36 cents per diluted share, in the same period of 2016.
At 3:05 p.m. ET on Feb. 14, Occidental's stock price on the New York Stock Exchange was valued at $69.57 per share, down 15 cents.