Oil producers in ‘dire situation,’ unable to ramp up output: Oxy CEO

As oil costs surge to the best ranges since 2008, Occidental Petroleum CEO Vicki Hollub stated U.S. producers can’t improve output immediately.

“We’re in a very dire scenario,” she stated Tuesday at CERAWeek by S&P International. “We have by no means confronted a situation the place we have to develop manufacturing, when truly provide chains not solely in our trade however each trade on this planet [are] being impacted by the pandemic.”

U.S producers have been largely anticipating to maintain manufacturing flat this yr, and within the face of surging crude costs, output cannot simply be ramped up immediately, Hollub stated. 

“Now, with provide chain challenges, it makes any sort of try to develop now — and at a speedy tempo — very, very tough,” she stated.

Manufacturing within the oil-rich Permian Basin is again round its pre-pandemic peak, in accordance with Hollub, who famous the area faces important challenges in boosting output. It is the one shale basin within the U.S. that may improve manufacturing, she stated.

A part of the problem is the necessity to offset declines from wells within the area which might be previous their peak. Different obstacles to progress are reverberating all through the financial system, together with labor shortages and points securing uncooked supplies. Whereas the trade had ready for these hurdles, it had not accounted for a situation during which it wanted to quickly crank out oil provide.

“The decision for incremental manufacturing in the USA, at this level, particularly with the availability chain challenges, cannot occur on the degree that is wanted not just for our nation however for the world. We’re in a considerably difficult situation right this moment,” she stated.

Power firms have emerged from the pandemic inside an entirely totally different trade. Whereas in earlier years, it was all about progress, now capital self-discipline is king. Within the wake of the pandemic, firms centered on paying down debt, returning money to shareholders and reining in spending.

Hollub stated traders view capital self-discipline as “primarily no progress.” Neverthless, she stated Oxy has a “large stock of high-quality investments” that it may make around the globe and particularly within the U.S. shale basin, however for now it’s centered on returning capital to shareholders. Final month, it introduced plans to lift its quarterly dividend to 13 cents per share, up from 1 cent. 

“I really feel now that we do have to return money to the shareholders within the type of dividends or buybacks, particularly through the higher cycles,” she stated, including Oxy is positioning itself in order that it is breakeven at $40 per barrel of oil.

West Texas Intermediate crude futures, the U.S. oil benchmark, traded round $126 per barrel on Tuesday.

A submitting with the Securities and Trade Fee Friday night time confirmed that Warren Buffett’s Berkshire Hathaway took a stake within the oil firm. Berkshire owns 91.2 million shares of Occidental, price $5.1 billion at Friday’s closing value of $56.15.

In the meantime, Carl Icahn has offered out of a ten% stake he had within the firm, in accordance with a report in The Wall Road Journal.