Occidental Petroleum Earnings Call Nuggets: Expense Opportunities and Shareholder Initiatives

Occidental Petroleum Corporation (NYSE:OXY) recently reported its fourth quarter earnings and discussed the following topics in its earnings conference call.

Expense Opportunities

Doug Terreson – ISI Group: Steve it sounds like the team have been very successful in identifying some of these expense opportunities and had a pretty surprising pay. So, my question is whether or not the early success indicates there may be about greater potential than you guys had originally envisioned. And you talked about several calls categories in your commentary. And the second question is were you surprised by the opportunities in particular areas over the savings fairly broad based and spread out?

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Stephen I. Chazen – President and CEO: Bill will answer in more detail, but on the overview both Bill and I have been stunned by how the people especially in the field operations responded to this. Lot of great ideas, some of them maybe a little often field, but a lot of great ideas and so we have been very pleased with this. And I think Bill can give and it’s really spread over a lot of categories, there is no one thing we can point out and say it was caused by this or that. And I think we have maybe like Bill talk about it or hear from him, as Bill has been out talking to the people in the field.

William E. Albrecht – VP, President, Americas, Oxy Oil & Gas: Like Steve, these savings have been generated both on the capital side as well as the operating cost side. And on the capital side as Steve mentioned in his remarks, we are well in our way to achieving our targets, we are about half way home on the capital side. And on the operating expense side which is where our field people really do come into play. And it is very important that those folks that are closest to the wellhead embrace this, they really have. I mean we are actually more than 50% toward our goal on the operating expense side, more like two-thirds of the way there, and it’s across a lot of different categories, just top to bottom, not just one specific thing.

Stephen I. Chazen – President and CEO: I’d like to go back Doug. I mean the goal here is not just cutting the cost, but making more margin.

Doug Terreson – ISI Group: Sure.

Stephen I. Chazen – President and CEO: So, it is just about we cut the cost by closing down a facility or something, but the goal is creating more margin. So, far we haven’t seen any reduction in our production as a result of this.

Shareholder Initiatives

Drew Venker – Morgan Stanley: Hi, it’s actually Drew Venker. Just wanted to ask you guys there’s been a number of shareholder initiatives in the past few months targeted mainly at (option) companies, revolving around separating business lines to boost valuation. So, one could argue that your Chemicals and Midstream business could receive a similar valuation uplift. What are your thoughts around separating those segments from the upstream?

Stephen I. Chazen – President and CEO: We are open to any ideas that will generate real value. The Midstream segment is I’d hate to use the bad word, but integrated with our mostly Permian operations. And we believe that our oil company gets better prices for the product, the oil, and putting it in a form where some third-party shared in that, may not be the best thing to do. Chemical companies such as chlorine and caustic business, chemical companies as a (NASDAQ:FULL) group don’t generate huge multiples. So I mean there’s other things people could talk about doing and we look at all this stuff regularly to see whether there’s real value that could be created. So both Ray and I are large shareholders in the business. We’re not here to collect salaries. And so from our perspective, most of our net worth, or at least I’ll say it for me, is tied up in this. And so from our perspective we’re perfectly aligned with the shareholders in this and our goal is to make the stock go up and increase our net worth that way rather than through 5% increase in our salary or something. So I think that we’re perfectly aligned – a lot of people I know in the business don’t have a lot of stock, but we’re perfectly aligned on this and we continue to look at things that make sense that will increase value, but those two segments are small compared to the total. But I’d be very cautious about the Midstream because it’s so heavily integrated into our margins in the Permian because one of the advantage we have in the Permian is we control our own infrastructure and the biggest fiduciary – and while you still could control it, being a fiduciary is not necessarily what you want to be. We can get Willie Chiang who runs that business can maybe talk about it a little bit.

WCW (Willie) Chiang – EVP, Operations: Yeah, I may make a comment on just what we’re seeing in the fourth quarter and first quarter, the differentials you can see how they’ve been significantly depressed fourth quarter because of turnarounds in pipeline maintenance out of the Permian where we’ve seen significant discounts. And I think a good example of what Steve talked about is our project that we are working with Magellan on BridgeTex to get access to the Gulf Coast through Colorado City which is essentially Midland. And as you all well know when you have constrained supply that’s not a good thing so price signals work, infrastructure gets built and we are able to match supply with demand and get access to other markets. And I think to do that without control midstream companies little more difficult but we see it as a real advantage that we have.