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EMBA Econ Project 2005

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  • pg 1
									-1-
 Occidental Petroleum Corporation

Presented by the Red Baron’s
     Juanice Christian
        Randy Cobb
        John Lampl
      Ernesto Miranda
          Eric Yost




                         -2-
Program
   World Oil Consumption
   World Oil Production
   Hubbert’s Peak
   Occidental Petroleum Corporation
    – Business Model

    – Competitors

    – Production

    – Financials

    – Threats

   Red Baron’s Forecast


                          -3-
The Changing Perception of the Oil Industry’s Dynamics




          Spring 1999                                Fall 2003




  Source: The Economist    Summer 2004        Summer 2004
 Source: The Economist
                                -4-
                                1                PETRIE PARKMAN & Co.
Accordingly, in practical terms, the U. S. issue is
                already resolved.
           The remaining question is:




     World
Is the U.S. Running Out of Oil?
World Oil Trading to Meet Demand




 Source: BP
                 -6-
World Per Capita Annual Oil Consumption
            30

            25

            20
   (Bbls)




            15

            10
                                                                   ∆ Demand ?

            5

            0




                                                                    a
                                                         na
                        a


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                                                               In
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                   Ko




                                                    Br
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                                                    C
                                         R
                              er
                 h




                            G
               ut
             So




                                     -7-
   US Oil Demand




Source: http://www.eia.doe.gov
                                 -8-
US Import Supply




Source: http://www.eia.doe.gov
                                 -9-
-10-
-11-
          World Oil Production – “Hubbert’s Peak”
                                                                                         Predicted production curve


                              30
                                                                                                    ?
    Million Barrels per day




                              25
                                       Results match Hubbert’s prediction
                              20

                              15
                              10

                               5
                               0
                                  9    4    9    4    9    4    9    4    9    4    9    E    E    E    E    E
                              19 4 19 5 19 5 19 6 19 6 19 7 19 7 19 8 19 8 19 9 19 9 0 04 0 09 0 14 0 19 0 24
                                                                                     2    2    2    2    2

                                         United States             Britain and Norway   Persian Gulf Nations

Source: Deffeyes, K.S. (2001), Hubbert’s Peak
                                                                             5
                                                                            -12-              PETRIE PARKMAN & Co.
Source: http://www.eia.doe.gov




                                 -13-
                     FIVE HIGHEST STATES'S # OIL WELLS


Thousands
        200
        180
        160
        140
        120
        100
          80
          60
          40
          20
            0
                2002      1999    1996   1993   1990   1987   1984   1981 1978   1975   1972   1969   1966   1963   1960
                                                                       Year                                          Oklahoma
                                                                                                                     Louisiana
                                                                                                                     Arkansas
                                                                                                                     Texas
                                                                                                                     California
 Source: http://www.eia.doe.gov

                                                                      -14-
                             Five Highest State's Oil Production
Millions
      1400


       1200


       1000


          800
                                                                                                                                                                                      Oklahoma
                                                                                                                                                                                      Louisiana
          600
                                                                                                                                                                                      Arkansas
                                                                                                                                                                                      Texas
           400                                                                                                                                                                        California


           200


                0
                    2002
                           2000
                                  1998
                                         1996
                                                1994
                                                       1992

                                                              1990

                                                                     1988

                                                                            1986

                                                                                   1984

                                                                                          1982

                                                                                                 1980

                                                                                                         1978

                                                                                                                1976

                                                                                                                       1974

                                                                                                                              1972

                                                                                                                                     1970

                                                                                                                                            1968

                                                                                                                                                   1966

                                                                                                                                                          1964

                                                                                                                                                                 1962
                                                                            Year


                                                                                                                                                                        1960

                                                                                                                                                                               1958
Source: http://www.eia.doe.gov
                                                                                                        -15-
A Popular Topic, but No Clear Public Consensus


“We’re draining our               “Enough oil to last for
reserves dry.”                    500 years.”
     Houston Chronicle                  Houston Chronicle
     May 30, 2004                       May 30, 2004
     Llewellyn King                     H. Sterling Burnett
     Chairman & CEO                     Senior Fellow
     King Publishing Co.                National Center for
     Publisher for:                     Policy Analysis
     White House Weekly
     & Energy Daily



                           -16-
Red Baron’s View is that both statements
are correct, with slight editing….

    Cheap                           , if the price is
      Red Baron’s Edit               high enough.
                                                    Red Baron’s Edit




“We’re draining our               “Enough oil to last for
reserves dry.”      ^             500 years .”
                                            ^
     Houston Chronicle                  Houston Chronicle
     May 30, 2004                       May 30, 2004
     Llewellyn King                     H. Sterling Burnett
     Chairman & CEO                     Senior Fellow
     King Publishing Co.                National Center for
     Publisher for:                     Policy Analysis
     White House Weekly
     & Energy Daily
                           -17-
March 5, 2005


    -18-
-19-
-20-
OCCIDENTAL PETROLEUM CORP (NYSE: OXY)
Financial Information (millions of dollars)           Q303      Q304     % Change
Corporate
Revenue (24)c                                        178,584   231,026     29.4
Net Income (24)                                      10,515    16,356      55.5
Worldwide Lines of Business Net Income
Petroleum (26) d                                      13,98    19,934      42.5
Oil and Natural Gas Production (20)e                 10,821    14,552      34.5
Refining/Marketing (13)e                              3,168     5,382      69.9
Downstream Natural Gas and Power (9)                  773        998       29.2
Chemicals (9)                                         392       1,527     289.8
Domestic Net Income by Function
Oil and Natural Gas Production (13)                   5,376     6,399      19.0
Refining/Marketing (13)                               2,552     3,830      50.1
Foreign Net Income by Function
Oil and Natural Gas Production (6)                    3,309     4,989      50.8
Refining/Marketing (4)                        -21-    865       1,552      79.3
-22-
Major Oil Companies




          -23-
 Industry Consolidation

                           Number of Independent Companies with
                      80
                                   Mkt Cap > $150 MM
                      70


                      60
Number Of Companies




                      50


                      40


                      30


                      20


                      10


                      0




                         20 D
                         20 E
                              E
                            79
                            80
                            81
                            82
                            83
                            84
                            85
                            86
                            87
                            88
                            89
                            90
                            91
                            92
                            93
                            94
                            95
                            96
                            97
                            98
                            99
                            00
                            01
                            02

                        04 3
                      20 200


                           05
                           06
                            T
                          19
                          19
                          19
                          19
                          19
                          19
                          19
                          19
                          19
                          19
                          19
                          19
                          19
                          19
                          19
                          19
                          19
                          19
                          19
                          19
                          19
                          20
                          20
                          20


                          Y
   Source: http://www.eia.doe.gov

                                            14
                                            -24-      PETRIE PARKMAN & Co.
-25-
-26-
-27-
-28-
-29-
Refining/Downstream




               -30-
Hurricane Ivan




                 -31-
Other Forces / Considerations
                                              US Dollar
                     $1.40                                        70.00
                     $1.30                                        80.00
                     $1.20                                        90.00
                     $1.10                                        100.00
                     $1.00                                        110.00
                     $0.90                                        120.00
                     $0.80                                        130.00
                     $0.70                                        140.00




                      06 /99
                      12 /99
                      05 /99
                      11 /00
                      04 /00
                      10 /01
                      03 /01
                      09 /02
                      02 /02
                      08 5/03
                      01 /03
                      07 /04
                             /04
                        / 04
                        / 21
                        / 06
                        / 22
                        / 06
                        / 23
                        / 08
                        / 25
                        / 09

                        / 12
                        / 27
                        / 13
                        /2
                      01
$1 = 0.757863EUR                US $ per Euro      Yen per $ US
      2/27/05




                   $1 = 105.21 JPY
                                    2/27/05



                             -32-
-33-
        7%
        6%
        5%
        4%
        3%
        2%
        1%
        0%




Inflation    CPI          Core CPI




                   -34-
Changes in the Federal Fund Rate




                         SOURCE: The Washington Post | GRAPHIC: washingtonpost.com
                  -35-
-36-
Economic Jaws of Inventory & Price –
Leading Indicator or Symptomatic Result?

                    U.S. Crude Oil Inventory VS Oil Price
                    (The Last 13+ years)

           370                                                            $60.00
           350                                                            $50.00
           330                                                            $40.00
   mmbls




                                                                                   $/bo
           310                                                            $30.00
           290                                                            $20.00
           270                                                            $10.00
           250                                                            $0.00
           Ja -95




           Ja -98




           Ja -01




                   4
           O -93
           Ju 93



           O 96
           Ju -96



           O 99
           Ju -99



           O 02
           Ju 02
           A l-94




           A -97




           A -00




           A l-03
                -0
                -



             n-




             n-




             n-
                -
            pr




            pr




            pr




            pr
             ct




             ct




             ct




             ct
             n




              l




              l
           Ja




                                           Inventory          Oil Price

Source: Bloomberg
                                                       -37-
Free Markets At Work:
                  Sample Factors
Impact of Rising Prices             Impact of Low Prices
•Conservation & Demand              •Unrestrained use &
destruction                         Demand stimulation
•Fuel switching                     •Fuel switching
•Reserve & production               •Reserve & production
expansion                           contraction
•Increase in service costs          •Pressure on service costs
•Innovation & technology            •Low cost operators are
are rewarded ($$$)                  rewarded ($$$) &
                                    technology advances
                             -38-
                      Ja




                                 $10.00
                                 $15.00
                                 $20.00
                                 $25.00
                                 $30.00
                                 $35.00
                                 $40.00
                                 $45.00
                                 $50.00
                        n-
                            95
                       Ju
                          l-9
                      Ja 5




  Source: Bloomberg
                        n-
                            96
                       Ju
                          l-9
                      Ja 6
                        n-
                            97
                                                          Actual Price



                       Ju
                          l-9
                      Ja 7
                                          Forward Curve



                        n-
                            98
                       Ju
                          l-9
                      Ja 8
                        n-
                            99
                       Ju
                          l-9
                      Ja 9
                        n-
                            00
                       Ju




-39-
                          l-0
                      Ja 0
                        n-
                            01
                       Ju
                          l-0
                      Ja 1
                        n-
                            02
                       Ju
                          l-0
                      Ja 2
                        n-
                            03
                       Ju
                          l-0
                      Ja 3
                        n-
                            04
                       Ju
                          l-0
                      Ja 4
                                                                         Accuracy of the Market’s Vision on Prices




                        n-
                            05
                       Ju
                          l-0
                      Ja 5
                        n-
                            06
Conclusion
   World Oil Consumption - Increasing
   World Oil Production – Increasing to Meet Demand
   Hubbert’s Peak – Will Not Last Forever
   Occidental Petroleum Corporation
    – Business Model

    – Competitors

    – Production

    – Financials

    – Threats

   Red Baron’s Forecast

                         Anything Is Possible
                          -40-
        You
       Decide
       Thank You

  From the Red Barons
   Juanice Christian
      Randy Cobb
      John Lampl
    Ernesto Miranda
       Eric Yost
-41-

								
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