Occidental Petroleum Corp. has reported $860 million in net income for the second quarter, down about 32 percent against the prior three-month period due to weaker domestic commodity prices and crude oil production.
The Texas state-based multinational had posted $1.263 billion in net earnings for the first quarter. The first six months totaled $2.123 billion, down over four times from the corresponding 2022 period, reflecting normalizing petroleum and gas prices after a record increase following Russia’s invasion of Ukraine February 2022.
Occidental’s revenue for its oil and gas segment slid to $3.959 billion for the April-June period from $4.465 billion for the January-March quarter. Combined, revenue for the segment for the first half of 2023 was down $3.129 billion compared to the first six months of 2022, when prices hit record highs amid a disruption in the oil and gas trade that followed the invasion.
Annual average prices for global crude benchmarks Brent and the West Texas Intermediate in 2022 were the highest since 2014, according to a data bulletin of the USA Energy Information Administration (EIA). The 2022 average of the Henry Hub distribution center in Louisiana state, an international standard for gas pricing, was the highest since 2009, according to the EIA database.
“Excluding the impact of items affecting comparability, oil and gas segment results for the three months ended June 30, 2023, compared to the three months ended March 31, 2023, reflected lower domestic NGL [natural gas liquids] and natural gas commodity prices and lower domestic crude oil volumes, partially offset by higher international sales volumes”, the fossil fuel and chemicals producer said in a filing with the Securities and Exchange Commission.
Occidental’s total oil and gas sales volumes rose to 1.222 million barrels of oil equivalent (Mboe) quarter on quarter. Its oil and natural gas sales dropped in the USA to 521,000 barrels and 1.32 billion cubic feet respectively but climbed overseas to 112,000 barrels and 507 million cubic feet respectively. Natural gas liquids sales increased for both markets, to 251,000 barrels locally and 35,000 abroad.
Softer price realizations in the USA had a downward impact of $375 million in Occidental’s oil and gas revenue, on top of a $131 million negative impact from lower net sales volumes.
“Operating cash flow was $5.9 billion for the six months ended June 30, 2023, compared to $8.6 billion for the six months ended June 30, 2022”, it said referring to cash generated from operations. “The decrease in operating cash flow from continuing operations was primarily due to lower commodity prices as compared to the same period in 2022.”
Occidental had $533 million in cash assets as of the end of the second quarter of 2023, with no debt maturities for the remainder of the year but owing $1.1 billion in borrowing dues in the third quarter of 2024, it said in the regulatory disclosure.
The company had declared $0.18 in dividend per common share for each of the first two quarters and announced July 26 it was carrying that level over for the third quarter. Aggregate diluted income per common unit for the January-June period stood at $1.76, according to the filing. Dividend distributions for the six months totaled $325 million, the filing shows.
Besides dividends, Occidental also paid $425 million to common stockholders in stock redemption during the first half of 2023, fulfilling nearly 40 percent of the current repurchase program worth $3 billion, it said in an earnings press release.
“Our team’s technical achievements have positioned us for a strong second half of 2023, giving us confidence to raise full-year oil and gas production guidance”, president and chief executive Vicki Hollub said in a statement.
Occidental has raised its projected output for the full year to 1.21 million barrels of oil equivalent a day, according to its performance press release.
Redemption of Buffet’s Preferred Stocks
Occidental this year started redeeming the preferred shares of billionaire Warren Buffet’s Berkshire Hathaway Inc., which aided Occidental in its takeover of Anadarko Petroleum Corp. in 2019. In the second quarter Occidental triggered the redemption of $522 million worth of stocks, “bringing year-to-date redemptions to nearly $1.2 billion or 12 percent of preferred equity”, it said in its earnings release.
Occidental holds redemption rights under a deal in which Berkshire committed $10 billion to aid Occidental’s $55 billion acquisition of Anadarko. Out of the 100,000 preferred units Occidental issued as part of the agreement, 88,312 remained as of the end of the second quarter, according to its quarterly filing.
Occidental owes $304 million in preferred stock payable as of June 30, the filing shows.
Occidental’s purchase of Anadarko has transferred the latter’s loan obligations to the new owner.
Anadarko also has a pending court case in which defeat means “Occidental would be required to repay approximately $1.4 billion in federal taxes, $28 million in state taxes and accrued interest of $493 million”, as stated in the filing.
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