Occidental Petroleum’s production mix
As seen in the chart below, in 3Q15, Occidental Petroleum Corporation’s (OXY) production mix was 63% crude oil, 25% natural gas, and 12% NGLs (natural gas liquids). This means that the company is more tilted towards liquids production, which forms almost 75% of its total production. Typically, upstream companies with more liquids production have better operating margins.
Occidental Petroleum’s strategy on production mix
Over the past five years, Occidental Petroleum’s production mix remained more or less constant, with crude oil percentage averaging around 63%. But going forward, the company is planning to focus on drilling in areas with more oil content, and its crude oil production is expected to grow at rates higher than total production.
Occidental Petroleum’s realized prices
Occidental Petroleum’s average worldwide realized crude oil price in 3Q15 was $47.78 per barrel, which was down approximately 49% from $94.26 per barrel in 3Q14.
In 3Q15, Occidental Petroleum’s average worldwide realized price for natural gas production decreased by 38% to $1.51 per thousand cubic feet compared to $2.42 per thousand cubic feet for the same period in 2014. In 3Q15, Occidental’s average worldwide realized price for natural gas liquids production decreased by approximately 62% to $14.68 per barrel compared to $38.20 for the same period in 2014.
We should note that Occidental Petroleum has experienced lower realized prices when compared with its peers like Pioneer Natural Resources (PXD). (We’ll look into why Occidental is experiencing lower realized prices in the next part.)
Oil and gas producers
Other upstream companies from S&P 500 that have similar production mix to Occidental Petroleum include Pioneer Natural Resources (PXD), EOG Resources (EOG), and Cimarex Energy (XEC). The SPDR S&P Oil and Gas Exploration & Production ETF (XOP) generally invests at least 80% of its total assets in oil and gas exploration companies.
But how has Occidental Petroleum been dealing with recent falling energy prices? Continue to the next part of this series to find out.