Occidental Petroleum Corp posted solid fourth-quarter results and delivered on many of its stated objectives for 2013.
The integrated oil company last year increased its US oil output by 4.3 percent, or 11,000 barrels per day, while reducing its drilling costs by 24 percent and its domestic operating costs by 17 percent.
Occidental Petroleum also replaced 169 percent of its reserves in 2013 at an ultra-low finding and development cost of about $17.00 per barrel of oil equivalent.
This impressive progress should continue into 2014, with management outlining credible plans to grow the company’s US oil volumes by 9 percent and its overall hydrocarbon output by 2.2 percent to 3.5 percent.
Much of this upside will come from plans to accelerate drilling activity in the Permian Basin.
Although oil and gas companies have drilled in the Permian Basin for more than a century, advances in horizontal drilling and hydraulic fracturing–the production techniques that have fueled the shale revolution–have enabled operators to identify and exploit formerly overlooked or inaccessible oil formations in the region.
Occidental Petroleum plans to grow its capital expenditures in the Permian Basin by $450 million, with the entirety of this incremental spending increase going toward shale oil and gas development.
Whereas many independent oil and gas companies borrow heavily to finance their drilling programs, Occidental Petroleum will fund this development from the steady cash flow generated by its extensive enhanced-oil recovery efforts in the region.
These operations, which involve pumping volumes of water or carbon dioxide into mature reservoirs, deliver a base of steady, long-lived production at a reasonable cost.
Occidental Petroleum expects to grow its oil output from the Permian Basin by 15 percent in 2014. CEO Steve Chazen also introduced intermediate-term guidance that calls for the company to double its output from the region’s shale plays by the end of 2016. Overall, management aims to grow the company’s production in the Permian Basin at an average annual rate of 10 percent over this period.