Occidental delays CrownRock output goals, turns to debt reduction

Occidental Petroleum said on Thursday that it would focus on reducing debt and catching-up with production goals promised before a much anticipated expansion of the cash distribution program.

The U.S. Oil Producer posted better than expected second quarter results on Tuesday, thanks to strong production in Colorado and lower operating costs. This, combined with a one-time high midstream earning, sent the shares up by 1.54% during afternoon trading.

The company has not been able to produce the 170,000 barrels equivalent per day (boepd), as expected, from newly acquired assets. The $12 billion purchase of CrownRock, a producer, pushed Occidental's debt levels higher and forced it to suspend its plans to increase cash distribution.

In a conference call with analysts, Chief Executive Vicki Holub stated that the strategy had sent share prices "much below (levels) than we believed they should be". She said that the company was ahead of schedule in repaying the debt and increasing returns to investors.

Occidental must now deliver on its debt reduction and asset sales goals in order to catch up with peers' capital returns, UBS oil analysts Josh Silverstein wrote in a recent note.

The company plans to reduce debt by about 70%, or $3.1 billion, by the third quarter.

Richard Jackson, Occidental’s President for U.S. Onshore Resources, told analysts that the production goals of CrownRock assets would take longer than anticipated due to weather and operational downtime. This resulted in a rate of production 14,000 barrels below target.

Occidental was unaware of CrownRock's plans for production and has now adjusted its plans. He said that the company would focus on cutting production costs rather than expanding beyond its target.

Production is expected to rise by approximately 140,000 boepd, to 1,39 million boepd. (Reporting and editing by Chris Reese, Jonathan Oatis, and Jonathan Oatis; Additional reporting by Seher)

(source: Reuters)