Analyst Note| Dave Meats, CFA |
Occidental delivered production of 1,237 mboe/d in the third quarter, which was 12% lower sequentially and about 25% lower year over year on a divestiture-adjusted basis. This compares with the previously guided range of 1,200–1,250 mboe/d. The declines reflect a drastic dip in capital spending in response to the COVID-19 pandemic. The 2020 budget was unchanged at $2.4–$2.6 billion, less than half of the original spending plan. However, the brunt of the decline may have passed--after a few months at skeleton activity levels, management is cautiously adding rigs again in Texas, New Mexico, and Colorado. But we do not expect a dramatic rebound in production while the firm is still prioritizing the balance sheet. In fact, on the conference call, management noted that the high case next year would be keeping production flat, which it could do with a sustaining budget of $2.9 billion.