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Occidental to favor buybacks over funding direct air
capture plants
By
Sabrina Valle
May 10, 2023
FILE PHOTO: The logo for Occidental Petroleum is displayed on a screen
on the floor at the NYSE in New York
HOUSTON (Reuters) -Occidental Petroleum Corp on Wednesday said it will
distribute any excess cash from high oil prices to shareholders
instead of funding direct air capture (DAC) plants.
The U.S. oil producer has the most ambitious plan in the industry to
bring to scale a decarbonization technology that removes carbon
dioxide from the air and buries it underground. It is building its
first large scale DAC plant in Texas.
It is, however, lacking external funding to fulfill its plan to build
more than 100 DAC units, starting with the second plant.
"We intend to continue allocating excess free cash flow towards share
repurchases," CEO Vicki Hollub said in a webcast to discuss the
company's first-quarter results.
The pace of the buyback program, including payments to Warren
Buffett's Berkshire Hathaway Inc, a key stockholder, could be
accelerated if annualized oil prices stay above $75 per barrel, the
company said.
Occidental will limit capital spending in low carbon initiatives this
year to $600 million, the CEO said, and is in talks with a potential
partner to fund DAC plants.
"We are having some really good conversations with a preferred partner
that could materialize maybe sometime this year" or next year, Hollub
said. "So we do expect to get some funding".
In the first quarter, Occidental began retiring some of the $10
billion of preferred stock it sold Berkshire to help fund the
acquisition of Anadarko operations four years ago.
The move saves Occidental some of the $800 million of annual dividends
it had been paying Berkshire. Buffett's company also owns 23.7% of
Occidental's common stock. The billionaire said on Saturday that
Berkshire was not planning to seek control of Occidental.
Oxy shares fell more than 3.6% on Wednesday to $56.65, trading close
to a 52-week low, with the company anticipating that production should
reach the lowest point for the year in the second quarter due to
scheduled maintenances stoppages.
Occidental on Tuesday reported adjusted income of $1.1 billion,
missing analysts estimates amid a 20% decline in oil prices from a
year ago. Results were primarily impacted by the timing of crude oil
sales in the quarter, the company said.
(Reporting by Sabrina Valle; additional reporting by Jonathan
StempelEditing by Marguerita Choy and Lisa Shumaker)
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