Occidental Petroleum Corp Q1 2023 Earnings Call Summary

The following is excerpted from the question-and-answer section of the transcript.

Question: John Macalister Royall - JPMorgan Chase & Co, Research Division - Analyst : So my first question is on chemicals. You were in line in 1Q, but you raised your full year guide. So you're seeing something that's giving you more confidence in the remainder of the year, but it does feel like there should still be some challenges to the housing market. So just looking for some color on the guidance raised in chems so early in the year and what appears to be an uncertain environment?

Question: John Macalister Royall - JPMorgan Chase & Co, Research Division - Analyst : Great. And then my next question is on the paydown of the preferred. You gave some color on the downside case and if you end up going below $4 a share LTM. Is there a commodity price where you think you might expect to pull back on the buyback and go below that $4 a share? And just assuming we stay above it, is that $700 million-ish run rate, including the premium a good go-forward clip to think about?

Question: Paul Cheng - Scotiabank Global Banking and Markets, Research Division - Analyst : Just want to go back into the budget. What's the underlying inflation that you included in your original budget? And have you -- I suppose that you didn't really build in into any deflationary in the second half? And how much is your service and raw material for this year will be subject to the spot prices if we do see deflationary? That's the first question. And second question is that, I think, in the prepared remarks, talk about on the DJ Basin that for the remaining of the year. The well come on stream will be pretty ratable each quarter. How about in the Permian? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 10, 2023 / 5:00PM, OXY.N - Q1 2023 Occidental Petroleum Corp Earnings Call Richard A. Jackson - Occidental Petroleum Corporation - Senior VP and President of Operations - U.S. Onshore Resources & Carbon Management Paul, let me -- I'll try to start on both of those. In terms of really inflation, when we look year-on-year, we are around 15%. This is domestic in the U.S. Of course, internationally, we didn't see near that. But in the U.S., looking at around 15%. We had plans that were embedded in our budget to offset about five of that through operational efficiencies. So we're generally on target for both. Let me deconstruct kind of the second half and then a few of the bigger components. So the second half of the year, we are seeing some things soften. When you think about OCTG, obviously power costs and fuel, some of the labor components, those are types of things that we see as potential. We also have quite a few of our rigs and frac cores that are up, and so we'll be exposed a little bit either way there, though, like we talk about, we have longer-term relationships and we're able to balance kind of that long-term with short-term pricing with our service partners on that front. So the big areas we're looking for is continuing to kind of watch the OCTG market. We'll see what rigs and fracs do this year. Obviously, we're steady, but we'll see what the rest of the market has to do. And then probably the other point that we would watch or that would impact us is sand. We're using more regional sand even in the Rockies. There's some different sand choices, but our primary supplier there continues to be in front in the Permian, and so we're seeing some opportunity on that. So at this point, we're not looking to change our outlook or kind of change the way we're thinking about the budget, but we did want to note those are the key variables that we're watching that will impact us. And then in terms of the Permian, similar sort of well count type change, not quite as drastic as what we're seeing in the DJ. But we had 56 wells online in the first quarter. We'll see that kind of hit more steady state of around 100, 110. And really, what happened, just to give a little bit more color, as Rob kind of said in his prepared remarks, a lot around development sequencing. So if you think about the ramp-up and then going into the fourth quarter, where you're exposed to weather, we had pads with smaller well count. And so we did that to really de-risk kind of the production in the fourth quarter, and really it was production in the first quarter. As we started in the first quarter, many of our well pads, Midland Basin, Delaware Basin, they've gone north of 10 kind of wells per pad. So you have a lot more SIMOPS that's better from a value standpoint, but it does change kind of that sequencing of production online. But we do see -- while the well count was low and the kind of residual DUC count grew for us in the first quarter, we expect to hit steady state really on both of those as we go into the second quarter and definitely in the second half of the year. So hopefully, that helps a little bit there.