Good afternoon, and welcome to Occidental's Third Quarter 2024 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Jordan Tanner, Vice President of Investor Relations. Please go ahead.

Thank you, Drew. Good afternoon, everyone, and thank you for participating in Occidental's Third Quarter 2024 Earnings Conference Call. On the call with us today are Vicki Hollub, President and Chief Executive Officer; Sunil Mathew, Senior Vice President and Chief Financial Officer; Richard Jackson, President, Operations, U.S. Onshore Resources and Carbon Management; and Ken Dillon, Senior Vice President and President, International Oil and Gas Operations. This afternoon, we will refer to slides available on the Investors section of our website. The presentation includes a cautionary statement on Slide 2 regarding forward-looking statements that will be made on the call this afternoon. We'll also reference a few non-GAAP financial measures today. Reconciliations to the nearest corresponding GAAP measure can be found in the schedules to our earnings release and on our website. I'll now turn the call over to Vicki.

Thank you, Jordan, and good afternoon, everyone. Our teams delivered another quarter of exceptional performance across all of our business segments. Despite weather disruptions and commodity price volatility, resilient operational execution from our teams helped to deliver the highest operating cash flow so far this year. Our strong financial results are a testament to the dedication and capabilities of our teams as well as the premium quality of our assets. I'll begin today by reviewing our third quarter performance and providing highlights from our Oil & Gas business, including the ongoing integration of CrownRock. I'll also give an update on our direct air capture projects and then share the progress on our near-term debt reduction program. Sunil will cover our financial results and fourth quarter outlook, including the increases and full year guidance for each of our segments, and we'll provide insight on how we're looking at our 2025 capital plans. In the third quarter, our team's commitment and delivery across each of our business units enabled us to generate $1.5 billion of free cash flow before working capital, exceeding guidance in all three segments. Our Oil & Gas segment exceeded the high-end of our production guidance and set a new company record for the highest quarterly U.S. production in our history. This was an outstanding achievement maybe even more impressive considering there were three hurricanes that impacted our operations across the Gulf of Mexico. This production outperformance was primarily driven by strong new well performance and higher uptime throughout the Permian Basin. Our Midland Basin teams excelled, surpassing production guidance in our recently acquired CrownRock assets and delivering the highest quarterly production in over five years across our legacy Midland Basin assets. Optimum geologic targeting drove drilled well performance supplemented by non-recurring OBO benefits. The Delaware Basin continues to…

Thank you, Vicki. In the third quarter, we generated an adjusted profit of $1 per diluted share and a reported profit of $0.98 per diluted share. The difference between adjusted and reported profit was primarily driven by a loss from the sale of [indiscernible] down operated U.S. onshore acreage, largely offset by a gain on the sale of common units, representing limited partner interest in Western Midstream Partners. As a result of strong operational performance across all business segments, in the third quarter, we generated $1.5 billion of free cash flow before working capital, and we finished the quarter with $1.8 billion of unrestricted cash. The strong free cash flow this quarter reflects our team's ability to translate high-quality assets into impressive financial results despite adverse weather conditions and commodity price volatility. As Vicki mentioned, the success in the third quarter can largely be attributed to new well and base production outperformance, the Permian Basin inclusive of our newly acquired CrownRock assets. While the majority of the outperformance was associated with company's traded activities, the Permian saw a 6,000 BOE per day uplift associated with non-recurring outside operated volumes due to prior period adjustment. In the Gulf of Mexico, production came in below our third quarter guidance range, largely due to unplanned downtime from hurricane related activity and well go forwards. Despite these impacts, our domestic lease operating expenses at $8.68 on a per barrel basis, notably outperformed third quarter guidance and are the lowest since the first quarter of 2022. This demonstrates our operational strength and focus on delivering higher margin barrels over time as illustrated on Slide 8. In the Midstream & Marketing segment, we continue to capture value through optimizing our cash marketing positions out of the Permian Basin. This was a significant catalyst in the segment…

Thank you, Sunil. Before moving to the Q&A, I'd like to close by recognizing the exceptional performance of our team, delivering value through operational excellence, world-class execution and through driving down costs in a safe and reliable manner. We continue to demonstrate industry-leading performance across our U.S. onshore assets, setting new records for our operations and well performance. Now with the integration of the CrownRock assets, bolstering our Permian footprint, our combined teams are enthusiastically unlocking operational efficiencies to enhance our margins. Our diversified portfolio across oil and gas, midstream and chemicals continues to deliver strong returns. And I'm proud of the achievements we've made across our low-carbon businesses. I see a demonstrated leadership and proven capability in carbon management through our EOR operations and we are making great progress delivering our strategy project pioneering DAC at scale. With that, we'll now open the call for questions. And as Jordan mentioned Richard Jackson and Ken Dillon are with us today for the Q&A session.

[Operator Instructions] The first question comes from Doug Leggate with Wolfe Research.

Thank you. Vicki, I hope you can hear me okay. The line is a little choppy today, but hopefully, you can understand my question. The operational performance is quite extraordinary and I think you never really laid out synergies with CrownRock. Obviously, they seem to be showing up. But I guess my question is, there seems to be a nervousness certainly in the market around the commodity outlook and you guys, I guess, have some big decisions as Sunil laid out whether you accept the growth or whether you slow down the program, which obviously has got capital implications. So I'm wondering, first of all, if you could, I know you don't want to give us numbers today, but just give us your thoughts on the macro in a world that clearly does not need any more oil. That's my first question. My follow-up, if I may, is on disposals. You obviously have a lot of options and you also have laid out this $1.35 billion of chemicals and low-carbon spend next year. So I guess my question is, we're trying to understand what the deleveraging capacity of the portfolio is you own NET Power, 48%, you obviously own WES and you've got the roll off, I assume, of that capital after 2025. So just give us your thoughts on what the pace of deleveraging could look like and what the options are to achieve that, as we go into perhaps a softer commodity backdrop?

Thank you, Doug. I'll begin with the macro. We, meaning our leadership team, we review the macro on a weekly basis. We look at all the fundamentals like the activity levels, supply and demand numbers, inventory, external factors anything that could impact prices and impact our operations we look at. And so, we too see the downside of risk to prices in 2025. And it's hard to predict prices though. I would say that, over the past few years very few people have accurately predicted prices in this incredibly volatile situation that we have today, where there's more volatility in oil prices than I think I've ever seen. But we do believe that '26 will be better than ‘25. It's because much of the surplus in the market today has come from growth in the U.S., Guyana, Brazil and Canada. But there's declining growth rates we believe between the U.S. and Brazil. And if you take that along with a couple of other non-OPEC countries that are helping to mitigate the current excess the decline in production then at least just the wildcards right now are Iran and Russia. With that being said, we believe, it's very prudent for us to be prepared for that situation to be very much leaning forward and not caught on flat footed or on our heels like what's happened to us in past decades. So what we've done is, our current thought is to recommend to our Board the plan that Sunil described in which we feel is conservative. What that is doing is keeping activity levels in the CrownRock area as they are today. And then lowering slightly the capital in some of the other oil and gas areas. So we wouldn't be growing the rest of the oil and gas portfolio. CrownRock…

Doug, this is Richard. Yes, I'd be glad to talk through some of the most recent updates on our CrownRock integration. I know that we've gotten several questions on that, so I appreciate you bringing that up. Obviously, going really well from the start of close and really that's a means a lot from the team that's been operating it over the last year. So they really brought in some strong operational performance that led to the beat in the Q3 and the Q4. So very appreciative of that. But really been able to, as Vicki said, the teams dive into some of the potential synergies. And a few just to highlight, as you know, we always start with our sub-surface and we -- as we look into next year, we think we have a very strong program for those five rigs, focused on some of the horizons that we well understand, but we are moving to some de-spacing. And so, I think we'll be able to talk about that more as we get to the next call, but looking to de-space and improve our recovery per dollar spent. Supply chain is another area we've been very focused because they've helped bring a lot to the table. But looking with this more balanced operational portfolio between the Delaware and the Midland Basin, we're seeing some opportunities. And so one of the examples that they've highlighted is really our frac ore utilization as we're able to take advantage of what we call white space, the time between sort of being complete with the well ready for frac until mobilizing that unit to frac the well. They're targeting quite a bit of improvement next year, north of 20% improvement in that white space. So what that does is, you're carrying a normal sort of DUC level due to operations that may go from something like 22 DUCs at any one-time down to 15 and that adds barrels on the year for really no cost. So, pleased with that. The water example that Vicki talked about, that's a South Curtis Ranch development that we're able to use the nearby Nail Ranch facility that CrownRock had for water. And so, that's $10 million that they're able to deliver there. And then, the final thing I would say is, we're just now really getting into these, what we call, best of the best workshops. And so, it's not just what Oxy brings, it's certainly valuing what the Oxy Rock team brings now to our overall operations. So the Midland Basin team as they look at next year, they're out looking better than 10% cost improvement across the Midland Basin operations due to these kind of best of the best synergies between the teams. So we think that's pretty meaningful and outpacing certainly what we'd be able to do alone.

The next question comes from Roger Read with Wells Fargo.

Yes. Thank you. Good morning. One thing we noticed in the results last night, it was a discussion on the sell side call, was the oil mix in the Permian here. And I know there has been a lot of moving parts, right? CrownRock comes in, some things go out. But, as you think about the go forward drilling program, what is the right way for us to think about that? Q3 a bit of a kind of a blip to the downside and then back up where you were or are we seeing a, I don't know if the right term is structural change, but maybe a change in the resource base that you have there?

Hi, Roger. You cut out over the last couple of sentences. Sorry about that. Would you mind repeating it?

Yes. Sorry about that. I just said last night with the results and then on the sell side call, there were discussions and questions about the percentage of oil produced out of the Permian. And I was just trying to understand, we had a lot of moving parts this quarter with the addition of CrownRock and then some assets sold as well. And as you look at the go forward, how should we think about that oil mix? It was kind of 58%, 59% this quarter 55%. Just, it's not a huge difference, but we're all watching those small changes and trying to figure out what they mean.

Can you take that, Richard?

Yes. Hey, Roger, I'll try to help that a little bit. I think, to start the question, I think moving forward, we're going to try to do what we can to help guide to that and help you understand what that means. A couple of things I would point to, one is increased secondary benches, especially in the Delaware. We moved year-on-year 2023 to '24, I think we went from about 20% secondary benches to 40%. But like Vicki mentioned in our script and we highlighted in the slides, that's adding a lot of value for us, even though there are a little more NGLs associated with that, the value being able to take those 2 existing facilities is quite accretive on a return basis. And so we're doing more of that blend between our primary and secondary benches, taking advantage of that existing infrastructure. So from a go forward, one, we'll try to help. But two, I think what you're seeing in the second half sort of leveling off, and you can see it in the third quarter and fourth quarter implied percentage on that. So hopefully, that helps, and we'll do what we can to show that. Probably the one other point I want to mention on that, we did, from a pure volume basis on oil, I just wanted to reiterate the strong performance of the team that was a beat on oil. So that's a plus 5% from the Permian on overall oil volume. So I understand the percentages but also want to give kudos to the team in terms of the delivery on that.

Yes. And I didn't mean to imply a bad total production. It was more just trying to understand the moving components in there. The other question I have, and I think this kind of has been addressed. But in terms of the goals on debt reduction now -- and let's leave aside what the oil price is going to be because obviously, that will change what CapEx and all that is. But if we just sort of took the forward curve, and we think where you're going to be in 12 to 18 months, how do you see the balance sheet? Like what would be defined as success from your standpoint?

We think we've already had some significant success over the $4 billion, but we do believe that even in a lower price environment, we're going to have some cash flow. We're still going to have some [degustitures]. We'll still make progress in 2025 regardless of where prices will be. And that's our target. Our target is to continue our debt reduction through the year, regardless of what it takes to do that.

The next question comes from Neil Mehta with Goldman Sachs.

Yes. Vicki, I had a macro question for you. I just -- I think you've talked a lot about how over the next couple of years, you expect shale to get more mature and while maybe not decline, but resource kind of tapers out and we're going to need to then pull on exploration. But one of the things that's emerged from this earnings season is very consistent beats productivity and oil volumes, not just from you guys but from the industry broadly and I just love your perspective, has that evolved the way that you're thinking about the macro, the continued resiliency of supply in the face of a declining U.S. rig count, our macro perspective would be great?

I do believe that we're going to continue to increase efficiency in the Permian Basin. And I think the Permian is a basin that will continue to deliver where we'll see volumes declining and ultimately achieving a plateau for the Permian with -- for the U.S. within the next 3 to 5 years will be because of declines from the other basins. These secondary benches that we have second and third and fourth benches that we can develop in the Permian in the Delaware and the Midland Basin. Those will continue to contribute to growth for the Permian since the growth from the Permian, that's going to offset the decline from the other basis in the near-term and ultimately help us to achieve, I think, a larger, higher peak than where we are today, that's when we'll start to plateau in the peak. So that would be, in our view, three to five years out because as you said, we're still continuing to get more out of those reservoirs. And there's a lot of productivity still remaining, a lot of wells still to be completed. And as long as we're seeing that increase, I think that, it's going to continue. I expect though in the near-term with weaker prices that what we used to think as a peak in say in three years, moves further out because with weaker prices I think there's going to be less growth in the Permian, in 2026 than what we saw or in 2025 than what we've seen in 2026. So it's going to push that peak a little further out. But still productivity in the Permian, as you have mentioned and indicated. It's certainly going to continue to increase. It's the basements that we'll keep on giving for sure.

Thanks, Vicki. That's great color. And then, just going back to the DAC, and as you think about bringing on Unit 1 by the middle of next year, what are the sort of the gating items, the critical path items to get it into service? And what are you really focused on around the start-up from an engineering standpoint? And then in light of the election, has anything changed about the way you think about the economics of this business, or is your view on this independent of the subsidy environment?

I'm going to take that first one first, and then Ken is going to go through the milestones and what he's looking at seeing with respect to construction. But I will say that, in weaker prices and in the scenario we see today, I think that DAC is going to be one of those businesses for us that kind of fits in the same category as our chemicals business and our gas business in the Middle East. I think DAC is going to be a value creator and a cash flow generator for us for a long time. We have work to do in the near-term. But in the long-term, what we what's happening with respect to support for DAC is pretty amazing and taking advantage of that. But because of what we're able to do here apply innovation, even as we're building the first stack, it's very encouraging from a commercial standpoint. So we're already working down on the cost curve. We're already looking at opportunities for improvements in DAC too. So we do believe that the commerciality is still there for these units and the market is getting stronger all the time. So we're still excited and encouraged about where we are with respect to commerciality. Ken?

Good afternoon. The DAC project is doing very well. First phase is nearly 90% completion now and this includes the first two capture trains, which should be mechanically complete by the end of the year as well as the central processing areas. So all the major equipment’s there, loop checks have been done ongoing at the moment. Central processing size for 500,000 tons, which will support the additional two capture trains when they come online between mid-'25 and mid-'26. So overall, if you take both together, the project is about 70% fleet worth of capacity. Since the CE purchase, our engineers have been working closer than ever. There are many cost out ideas that we continue to work with Richard asked if we could see what the project team could easily incorporate into STRATOS. On the slide, you've seen physical changes that Vicki mentioned earlier resulting in pure [LR] reactors and also smaller area contractors with a 30% reduction. What you can see, which goes to your point, is all the savings in the piping, the number of valves, the instruments that have all been eliminated. This also makes it much simpler to build. And there's also a massive improvement in the air contractor construction method going-forward by using modules, which will have the build time for the air contactors. Future [indiscernible] we plan to see 10% to 15% savings from these modifications and could see additional improvements to take it past 20%, also with reduced OpEx maintenance, improved safety. The team at Worley has been key to being able to adapt on the fly in engineering and procurement. In fact, Chris Ashton, the Worley CEO was at the site to meet with his team recently and show support for the project. Overall, the teams are working incredibly well together as the project is on schedule.

And then I'll just follow-up with your question about the election results and the impact that will have. I think the election is -- up to become our next President is going to be very positive for our industry, especially, for this, our direct air capture. The reality is that I believe, he understands better than anybody our need for energy independence here in the United States. He understands the industry. He understands how it plays in geopolitical politics. He knows, what we're trying to accomplish and what we're doing. And he also understands the part that our direct air capture will play in, in helping with that energy independence and security. So I believe, that the funding from the Infrastructure Investment and Jobs Act that the DoE has already awarded will be dispersed as per the agreement such as for our DAC 2, because we built on the King Ranch. We do expect to get the $500 million with the potential for $650 million. We also believe that 45Q will continue to have bipartisan support because the deal benefit of, first of all, helping companies to decarbonize the carbon reduction of credit score from us, but also the recovery of additional reserves from our domestic reservoir. President Trump clearly supports that as well. And he, again understands that that's something that's necessary. Getting oil on reservoirs you already have is the best possible way to provide affordable gas, gasoline to our country. And it's impossible to be a superpower without ample supply of liquid fuels. The use of CO2 for ancillary recovery as I mentioned is a big part of what makes that so important for the country. And some people don't understand that process. I won't take the time to go into how it works. But just, helping…

The next question comes from Paul Cheng with Scotiabank.

Hi, good morning. I think the first one is for Sunil. Sunil, you probably already addressed it, but trying to make sure I understand, this year, based on the fourth quarter CapEx, so your full year CapEx is about, say, $7.1 billion or that about $200 million higher than your previous midpoint guidance. And is that all in the CrownRock because you are doing or that all in Permian because you are doing better? If I'm looking at next year, is CrownRock capital still looking for $900 million? So I think [PMIC] is assuming that this is a $500 million incremental. So now that I mean, how much is the incremental CapEx from CrownRock for next year? This is the first question. And second question, if we look at the -- I just want to go back into the gas oil ratio. If we look at the third quarter versus the second quarter, it dropped by about 2% in Permian. Is that something one off has triggered yet or is it all driven by CrownRock? And it does look like fourth quarter that the gas oil ratio is relatively close to the third quarter. So I suppose that maybe that this is all driven by CrownRock, but just want to clarify and make sure that we understand correctly.

Okay. Paul, if I understand correctly your question -- your first question was what was the driver for the increase in the full year guidance for 2024? Is that correct, or is it --

That's correct. And also correspondingly that from '24 to '25 CrownRock, what is the incremental CapEx that we should assume?

Okay. With respect to your first question, yes, all the incremental CapEx for the full year of 2024 is related to CrownRock. So what we have disclosed in the last earnings call was this will be around $400 million and that is for the five months that we're operating from. So with respect to what the capital would be for next year, like, I mentioned in my prepared remarks, we are planning a five day program for next year, and we are still working the details around what the capital would be, but we expect it somewhere in the $900 million to $950 million range. And so, with respect to your second question, that was on the GOR for Permian, correct?

Yes. Is there anything one-off in the third quarter that related to that, because it's a drop of 2% that is a pretty substantial drop comparing to the second quarter oil cut in the Permian.

Yes, I can start and Sunil can help on any other macro. Yes, it really is, I mean, one, Permian growing unconventional. So we had growth in the Rockies and Permian. And so that significant jump in production with a lower oil cut mix was one piece of it. Two, a bigger part of that is our secondary that I mentioned earlier. In our first year, oil cut is significantly less for our secondary benches, but the value is better. And so, we want to continue to reinforce that. So I think to your point, the growth in CrownRock is a part of that growth in unconventional, that is really driving that oil percent. But we see that percentage in the back half of this year sort of extending into next year. And as we develop different areas that may drive that change over a period of time, we're going to help -- we'll try to help guide to that so that you can understand and follow that. Hopefully, that helps.

The next question comes from Scott Gruber with Citi.

Yes, good afternoon. A couple of questions here. Just back on the Permian, you mentioned raising the percentage of secondary zone development in the Delaware from 20% to 40%, if I heard correctly. Where does that figure go in '25? And then as you look at the Midland side of the basin with the CrownRock assets, could you step-up the percentage? Where is that percentage currently? And can you step it up in '25 as well?

Yes. Thank you. So I think a similar percentage on the overall Permian in terms of primary and secondary benches, I think we did sort of a level set utilizing these existing infrastructure facilities for that. So I don't expect that to largely change at least with activity levels, as we're currently operating. Obviously, we adjust down or up depending on what our final program is. That could change a bit, but I think that will be very similar. From a CrownRock perspective, our base plan for those five rigs next year is really what we call 85% primary benches. And so, while we see some opportunities in secondary benches, the program that's been put together is very de-risked, and we did that really to be able to perform operationally. So we've tried to get out in front of sort of those operational plans. So the Spraberry kind of dean, Wolfcamp A and B, those are the primary zones that we're looking at next year. If we see opportunity to improve on that, we obviously would change, but that's the going in plan for next year.

The next question comes from Arun Jayaram with JPMorgan Securities.

Good morning. I wanted to see if you could discuss your thoughts on what you view as more normalized CapEx in Chems? You mentioned that you'll spend about $900 million next year given some projects. And what you think about more normalized CapEx? And what does the growth CapEx you're spending next year, what does that do to the earnings power of that segment?

In OxyChem, pretty the special projects we were running about $300 million. And so that's what we expect to be able to get back down to those battleground and the couple of pipeline projects we just had.

With respect to the earnings power like as Vicki mentioned in her prepared remarks and later, we expect around $325 million uplift once we complete the project, and the project is expected to be completed in mid-2026. And that is finally driven by the expansion in capacity of around 80%. And this assumes around mid-cycle of 40%.

All right. That's helpful. Just one question on the Rockies. It looks like from your disclosure that you have sold some properties in the Rockies. Looks like the Powder River Basin, just give us a sense of future thoughts on the Powder and what exactly you've divested there?

So in the Powder River, we bought the whole thing obviously as part of the Anadarko acquisition. But, we saw early on that there was -- there's a southern part of Powder River Basin that was by far the most contiguous and the cars that we felt like we could get the most value out of. So that's why we sold and we wanted to always be focused and always have continuous acreage where possible and always looking at sub-surface where we think we can optimize and create value. So we sold the park that's north of that local part of the southern part of the basin. We sold that to Anschutz because it's in a better area for them to be able to develop. And so, for -- we -- I think we did a win-win situation there and now have the focus on the area that we think is going to create a lot of value for us in the future.

In the interest of time, this concludes our question-and-answer session. I would like to turn the conference back over to Vicki Hollub for any closing remarks.

I want to thank you all for your questions and for joining our call today. Have a great rest of your day. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.