Occidental Petroleum Looks to Permian Basin as Losses Narrow in 2016

Researched by Industrial Info Resources (Sugar Land, Texas)--Like many companies in the Oil & Gas Production field, Occidental Petroleum Corporation (NYSE:OXY) (Houston, Texas) has been cutting costs due to low energy prices that have persisted for several years. But the company just recently has been slowly ramping up production as prices have stabilized, and is now looking forward to shifting its focus to Texas' Permian Basin, one of the most hotly pursued plays, and the results from the recent startup of an ethylene cracker. Industrial Info is tracking more than $3 billion in active projects involving Occidental.

Occidental's 2016 net loss of $574 million is far below 2015's $7.83 billion loss, although the previous year involved a multibillion asset-impairment charge. Capital expenditures for 2017 are expected to be between $3 billion and $3.6 billion, depending on how commodity prices play out; the estimate is below November's estimate of $3.3 billion to $3.8 billion. The newly revised estimate still would be above 2016 capital spending, which totaled less than $3 billion.

Ingleside Ethylene LLC, a 50:50 joint venture of Occidental and Mexichem SAB de CV (Tlalnepantla, Mexico), is making its mark in the booming U.S. Gulf Coast region with the $200 million construction of ethylene storage caverns in Markham, Texas, which will support Ingleside's newly completed, $1.2 billion ethylene unit at a chlor-alkali facility in Gregory, Texas. The caverns will include a leaching plant and ethylene-gathering and -injection systems, which will store materials for the 1.2 billion-pound-per-year unit. For more information, see Industrial Info's project reports for the storage caverns and ethylene unit.

For more information on how the new unit fits squarely into the boom in ethylene unit construction, see February 2, 2017, article - Ingleside Ethylene Enters Start-Up, Leads Massive Jump in New U.S. Capacity for 2017.

The caverns and the newly completed unit will be connected via a $125 million pipeline that will run 130 miles and is set to be completed toward the end of the first quarter. Industrial Info also is tracking $75 million in surface facilities at the storage caverns, including engine-driven compressors of up to 5,000 horsepower, that are to be completed around the same time. For more information, see Industrial Info's project reports on the pipeline and the surface facilities.

Also near the Gulf Coast, Occidental is constructing a $145 million chlorinated hydrocarbons plant in Geismar, Louisiana, which is designed to produce roughly 18,000 metric tons per year, utilizing ethylene, carbon tetrachloride, iron powder, ferric chloride, chlorine and tributyl phosphate. The same facility is expected to see a planned, $4 million maintenance turnaround at a chlor-alkali unit later this quarter. For more information, see Industrial Info's project reports on the hydrocarbons plant and the turnaround.

Among the factors weighing on Occidental's 2016 results were a 19% increase in operating costs per barrel of oil equivalent in the fourth quarter, although the same costs actually fell 25% in Texas' Permian Basin, where the company is trying to refocus much of its operations.

"From 2013 to 2016, we've doubled Permian Resources production," said Vicki A. Hollub, the president and CEO of Occidental, in a quarterly earnings conference call. "We can more than double it again over the next four years in a moderate commodity price environment. We can do this because we are a more geographically focused company today." She later added: "We'll increase capital [spending] moderately in Colombia and significantly in Permian Resources. Our plan anticipates oil prices to remain approximately as reflected in the futures markets. In the Permian Basin, the increase in capital spending will be mostly directed to increased activity in southeast New Mexico and the Greater Barilla Draw area."

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.