Occidental Petroleum plans to step back from troubled regional markets by the end of the year as it seeks to cut costs and focus its portfolio on three key markets in the Middle East, according to the company’s new chief executive.
Vicki Hollub, who will take over as chief executive of Occidental in April, said that the Houston-based firm would focus on three areas in the Middle East, including Abu Dhabi, Oman and Qatar, as well as Colombia and the Permian Basin in Texas.
“Getting the portfolio the way that we want means that we can work on lowering our cost structure that will help optimise what we are doing,” she said.
But to do this, a few assets need to be disposed of, which include interests in Iraq, Libya and Yemen. “We have plans to exit out of those and we expect by the end of this year, we should have most of that done,” she said.
Movement has already been made on Occidental stake in the Zubair oilfield in southern Iraq, with the country’s state-owned South Oil Company expected to take over. In Yemen, Ms Hollub said that some contracts were expiring while the company is hoping to sell another asset to firms that are “interested and have previous experience in Yemen”.
Exiting various fields in Libya’s Sirte Basin and other onshore exploration blocks is another ball game. “We haven’t really defined or disclosed what our exit strategy is right now, so that’s one of the options that will probably take longer,” Ms Hollub said.
Streamlining the company's activities is vital in the current oil market as the price of Brent crude, the global benchmark, has dipped below US$30 per barrel. While the oil market is cyclical, the incoming company head said that the problem is with higher oil prices the industry becomes more inefficient.
“We actually lose margins sometimes because it gets so crazy with costs, so now what we’re trying to do is significantly lower our cost structures so that we can weather more price swings and lower price in the future.”
Occidental has, in some areas, lowered drilling costs by as much as 45 per cent with completion costs down about 30 per cent. “We reduced our costs around $750 million [last year] and part of that was unit cost reduction from vendors, but the majority of the costs were from efficiency improvements,” she said.
This year’s budget is still in progress, but Ms Hollub said that it would be at least 30 per cent lower than last year. “The good thing about our portfolio is that we have a variety of types of projects so if we could just lower that cost, then we should be able to manoeuvre in whatever the new normal of prices is going to be.”
The firm is working on a technical evaluation for Adnoc's Hail and Ghasha fields that includes 3D seismic and drilling appraisal wells. "We hope to provide Adnoc information to decide to develop those wells and if those are developed, we'd certainly like to be a part of the companies considered," she said. "When people ask about us selling down in the Middle East, that's not going to happen to those three core areas because we need the cash flows."
lgraves@thenational.ae
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