OXY
#It is a lot more around the uncertainty of the price environment and it has a lot less to do with our capability to do it.
What we want to do is ensure that we are conservative with our capital programs.
We have the potential and the opportunities to certainly not only meet the upper end, but exceed it, but we're really trying to be careful about what we forecast and what programs we set up for next year.
I can tell you that what we will do is that we will put the program together ---+ we always do that at the end of this year ---+ and we will firm it up by first of next year.
But what our teams have done during this downturn is this slower period is they've enabled us to have a lot more flexibility next year to be able to ramp up should we need to or should we have the opportunity to do so.
And the ramp up could be not just in Permian Resources.
As I mentioned earlier, the ramp up could be in Colombia as well.
And in addition to that, we expect that because of the situation with Al Hosn, overall Al Hosn will have a higher production rate in 2017 because it will have a full year of production versus the warranty turnaround that we had in Q1 of this year.
In addition to that we will have Block 62 gas on for the full year and that will be helpful.
So you take those things, combine it with the flexibility that we have in both Permian Resources and Colombia, we will start the year probably conservatively until we see fundamentals start to support prices.
But we will have the ability to ramp up in multiple areas.
If prices and the fundamentals are such that we feel comfortable, we will have the flexibility to actually increase our programs throughout the year if we see that that makes sense.
<UNK>, this is <UNK>.
Good morning.
It is more than a sweet spot.
I think we are encouraged with Southeast New Mexico across the board.
Multiple bench development, these examples are over in our Cedar Canyon area but further east of that area there is acreage with even more benches that are prospective.
So very encouraged with Southeast New Mexico and the rig adds that we're talking about will likely be in the Delaware and in New Mexico.
Yes, for the chemicals cash flow we expect that capital this year is around $500 million.
Next year it should drop to less than $400 million.
The following year it would be back down to basically its maintenance levels of around $250 million.
So we will have around $300 million cash flow from chemicals this year and expect that by 2018 that would be up to around $900 million, potentially a little bit more than that depending on product prices in the chemical business.
That is correct.
We had about ---+ total, including the chemicals and the midstream business, we had this year $500 million of committed capital and almost $400 million of that is coming off for 2017.
That will be redeployed into ---+ most of that into the Permian Resources business.
Most of the rationalization in terms of oil and gas, and certainly Middle East operations, is largely behind us.
We have done that over the last year or so.
From a corporate asset perspective, we still have, as you point out, the Plains units.
There is about 80 million units of that and they've just gone through their simplification process, so we will let that sort of close out here formally in the latter part of the year, fourth quarter with their plan.
This is not a strategic investment on our part, so I would tell you that we don't look to hold on to that longer term.
So that is sort of an option in terms of liquidity that we have got.
Market value is sort of $800 million, thereabouts.
That is pretty close to right.
We do expect it to be $50 or above in 2017, but we are not ---+ certainly we are not as bullish as some people.
We are taking, as I said, a conservative view, but it would be fundamentally above $50.
Right.
Well, the way we view it is the Permian, as you know, it is a huge place.
There is lots of opportunities.
We are looking at this as a goal and objective in terms of our total expansion and there are multiple ways to get there.
We could get there with several different options.
What we have done is prioritized our options and we are working pretty much a lot of things to try to ensure that we reach our goals.
But we're happy to (multiple speakers).
The goals are to try to match what our growth profile could be in EOR with resources.
And we haven't really put what that means in terms of the exact production volumes or anything like that out there, because it is kind of hard to do at this point with respect to the EOR business.
But we are really ---+ we are in a position, because of where our operations are with respect to EOR in the Permian, we have got the ability in multiple areas to play sort of a Pac-Man approach where we can acquire a lot of smaller assets that could total up to make a material difference to us as a cumulative acquisition.
So we are not opposed to looking at a variety of smaller deals.
Again, because of our position we would have the capability to do that and make it still fit within our goals to try to make sure that these are synergistic with our current operations.
That is actually what I'm talking about.
We are going to do the same thing in both resources and CO2, because we have the ability around the areas that we currently operate to add additional properties.
That's correct.
Yes, the scale of growth is much easier in the resources business.
In the EOR business the issue that we have today is that we are constrained by some of our infrastructure.
So we feel like some of the expanding to our footprint would enable us to also expand our infrastructure to support some growth, accelerated growth, with not only what we have but what we could potentially pick up.
Currently we don't see an issue with the CO2 that we would need to accelerate growth.
We are trying to look at options for where we get the CO2, but I don't see that being a bottleneck for us.
I see the current bottleneck being just the fact that it doesn't make sense to accelerate some of our floods where our plants are sized more appropriately for a full field development.
So that is really some of the bottleneck, is the infrastructure around the existing plants.
<UNK>, this is <UNK>.
I appreciate the question.
With regard to the decline, it is really a function of the activity set from this last quarter.
As one of the things I discussed, we have moved a rig and drilled a couple of Wichita Albany wells; we drilled a couple of CO2 source wells.
So the activity set in this quarter was fairly low for Resources, which is indicative in the forecast for the third quarter.
But in the back half of the year those rigs are backend resources; we are going to add rigs.
And so we will flatten that decline toward the end of the year and then set us up with the right trajectory for production growth into 2017.
We expect that would probably be in the $1.3 billion to $1.4 billion range, but with the way the teams are still improving the efficiencies and the well productivities are getting better, we are not prepared to commit to that completely at this point.
Every time we set a target for those guys they meet or exceed it, so we are not sure that that is the exact number.
We will know better about that by the end of the year as we prepare our final plans and we get a little more information from our Southeast New Mexico developments.
<UNK>, this is <UNK> <UNK>.
Good question.
As we do with other large facilities like this, we tend to ---+ when everything is stable, we tend to test individual components and processes within the plant.
We have been doing that during the summer, which is the toughest time, the most relevant proving because of the relatively high heat in the area.
And we have been able to show our guidance for 60,000 barrels a day equivalent for Oxy share.
We have been up in the high 60,000s with the promise to get into the 70,000s just by pushing individual processes pretty hard.
The main reason for this is to assess what the expansion would look like and which components would need either total addition or enhancement or some that might just be able to take higher load.
So we think out of this will come, if you like, a new baseline which could be 110%, 112%, or even a bit higher, and from there we would design an expansion to get up to a good number, kind of the sweet spot for the investment profile and the production profile.
Of course, working with our bigger partner, the Abu Dhabi National Oil Company.
So that is kind of where we are with it.
I think it will be ---+ the fact that we did this during the summer is probably pretty good for you around enhanced production.
<UNK>, most of our acreage is HBP.
We have some drilling clocks, 180 drilling clocks, but the activity set is driven by the value proposition and the returns from these investments.
We have very few remaining lease obligation drilling wells, if any at all.
I think that is manageable as long as the ramp up, from an industry perspective, is fairly moderate.
What encourages me, at least for us at Oxy, is that we continue to have new ideas coming forward for cost efficiency.
We mentioned before last year we had this cost stand down day.
In Resources alone that generated over 1,400 ideas.
We have put in place about half of those and so we are still vetting the other half for opportunities.
Again, that crosses OpEx, capital, SG&A.
We have some other technology things we are working on the drilling side that we think can provide efficiency gains.
We know at some point that the price cycle will turn around on services, but I think we are getting well-prepared to offset that with efficiency.
Not just for us, but for the supplier as well in areas of integrated planning and logistics, crew utilization, equipment utilization, bundling of services.
There is just a number of things that we think can help offset the potential for either efficiency or cost pressure as we move forward.
So I think we can hold those kind of rates of return.
It is fairly quick.
It is really more a function as a single well or is it a multi-well pad where you want to drill all the wells and then complete all the wells.
So your time to market for that package is a little bit longer.
But, again, we are drilling in areas mostly where we have got infrastructure and so adding wells is fairly quick.
There is not a long delay.
I would add to that the way they are doing the developments now is they are doing pad drilling, so as <UNK> mentioned, the pad drilling will result in lumpy production.
That is why we are not expecting production impact from the increased activity levels this year, but we do expect it to show up in early Q1.
And that is why we set the program up that way.
It was really a part of our plan to start getting ready for 2017 production, so that is when we will see the incremental from the increased activity.
I will start with Colombia first and then we will let <UNK> take the Permian question.
In Colombia what we have done, we entered into ---+ we currently have a water flood going there now that is successful.
We got some additional intervals within that same area to develop two other zones and we have been studying and putting the water flood pilot plans together, so we will be starting the pilot first.
And then ---+ so that is why we are adding the $20 million there to Colombia is to do the pilot so that we can get some information from that before we start into full field development.
The full field development of those water floods will come after we complete the pilot.
<UNK>, with regard to the Permian acreage swaps, that is probably our most active area right now with our land business.
And so most operators are wanting to drill longer laterals, 7,500, 10,000 foot, and so acreage swaps, especially where you have got more neighboring acreage ---+ trying to swap Midland for Delaware is a little tougher.
But in a general geographic area we are seeing quite a bit of activity and we have taken advantage of that so that we can drill longer laterals.
I think we would expect that from the time that we start water injection that it would be within the six months to a year.
