Occidental Petroleum's 2011 Capital Budget

By Eric Fox | February 01, 2011 AAA

Occidental Petroleum (NYSE:OXY) plans to increase capital spending in 2011, as the company moves to develop its recently acquired domestic properties and invest in other parts of its large portfolio of assets. This is part of a $27.5 billion five-year capital program that the company hopes will boost production by as much as 8% annually through 2014.
IN PICTURES: 5 "New" Rules For Safe Investing

2011 Capital Budget
Occidental Petroleum announced a $6.1 billion capital spending program for 2011, a large jump from the $3.9 billion spent in 2010. The increase is not as large as it appears because the company deferred some of its 2010 capital spending into 2011. The company's original 2010 capital budget, highlighted at an analyst meeting held in May 2010, called for $4.5 billion in spending for 2010.

Shah Gas Field
The 2011 total doesn't include any spending on a large project in the Middle East that was recently signed by the company. Occidental Petroleum is partnering with the Abu Dhabi National Oil Company (ADNOC) to develop the Shah Gas field. Occidental Petroleum will hold a 40% share of the project and will pay a proportionate share of the $10 billion cost estimate over the next few years.

This is a large project for Occidental Petroleum and once production begins in 2014, the company will see net production of 200 million cubic feet per day of natural gas, along with 20,000 barrels per day of condensate and natural gas liquids. Conoco Phillips (NYSE:COP) was the original participant in the project but withdrew in April 2010.

Onshore United States
Occidental Petroleum will spend approximately 8% of its total capital budget, or approximately $490 million to develop newly acquired properties in the United States onshore area. This includes the Bakken formation in the Williston Basin and properties in south Texas.

Occidental Petroleum spent $1.8 billion to purchase properties in Texas from Royal Dutch Shell (NYSE:RDS). The properties have current production of 200 million cubic feet per day of natural gas equivalents. In North Dakota, Occidental Petroleum spent $1.4 billion to buy 180,000 net acres from a private seller. The company will use the capital to increase production here from 5,500 barrels of oil equivalent (BOE) per day to 30,000 BOE per day over a five year period.

Occidental Petroleum funded the purchases in part with the sale of its Argentina assets to China Petrochemical Corporation (NYSE:SNP). The company received net proceeds of $2.5 billion for these properties, which have been unprofitable for the last four years.

Occidental Petroleum has allocated 20% of its capital budget for 2011 to explore and develop its acreage in California. The company has hundreds of drilling locations in both conventional and unconventional formations.

Bottom Line
Occidental Petroleum has loaded up on new onshore properties in the United States and will spend tens of billions through 2014 to develop these and other assets in its global portfolio. The company hopes this level of spending will boost production by 8% annually over that time frame. (For related reading, also take a look at our Oil And Gas Industry Primer.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

comments powered by Disqus
Related Analysis
  1. 3 Undervalued Stocks In An Overvalued Market
    Investing

    3 Undervalued Stocks In An Overvalued Market

  2. Unconventional Drilling Still Has Room To Boom
    Stock Analysis

    Unconventional Drilling Still Has Room To Boom

  3. Finding An Alternative With Currency ETFs
    Stock Analysis

    Finding An Alternative With Currency ETFs

  4. Commodities: Has Their Time Come Again?
    Stock Analysis

    Commodities: Has Their Time Come Again?

  5. Why 'Bricks And Mortar' Retail Remains A Solid Bet
    Stock Analysis

    Why 'Bricks And Mortar' Retail Remains A Solid Bet

Trading Center