Energy companies are going to keep consolidating as they chase the resources needed to sustain production, Occidental Petroleum Corp. CEO Vicki Hollub said Nov. 21 at Hart Energy’s Executive Oil Conference & Expo in Midland, Texas.

“Without a doubt, there’s going to be consolidation, not just in the Permian, not just in the U.S., but around the world,” Hollub said.

Countries and national oil companies control most of the 2 Tbbl of oil available in the world, leaving independents scrambling for the remainder.

“Large companies are going to have a very hard time replacing what they produce,” she said. “That’s created a lot of need for the largest oil companies to do M&A—or they become a declining business.”

Hollub’s advice is straight out of Oxy’s playbook. The company’s $55 billion purchase of Anadarko Petroleum Corp., completed in 2019, was “transformational” for Oxy, which famously beat out Chevron Corp. to make the deal, Hollub said.

“When I took over in 2016, we didn’t have the cash flow to cover our dividends and our capital programs,” she said. “We wanted to further improve not only our cash flow, we also wanted to increase our portfolio and we wanted to become more focused on U.S. development. The Anadarko acquisition did all three of those in one swoop.”

Then CrownRock LP showed up in September 2023 just as Anadarko was almost paid off.

“Initially we didn’t want to go after it,” she said, but “it was one of those that comes along very rarely where you can find the assets and the people that were so superior and the future development that we felt like we needed. It makes the Permian Basin really the foundation of Oxy.”

Investors haven’t warmed to the combination yet. Oxy shares are trading at about $51, near the 52-week low of $48.42. The 52-week high is $71.19.

“With all the volatility around the world, people would like us to further strengthen our balance sheet,” Hollub said. She said the company is working to reduce its net debt to $15 billion over the next few years.

On top of consolidation targets for acreage, Oxy and other Permian operators also have to focus on reducing emissions and managing water, Hollub said.

Oxy grew its direct air capture program with this in mind.

Oxy’s CCUS subsidiary 1PointFive captures CO2 to recover more oil and support its chemicals business.

“The synergies are broad there, and it was a perfect fit for us,” she said.

Comments