Looking back on 2018, I’m pleased with the significant progress we made in strengthening Occidental’s long-term
financial and business outlook. We completed our strategic cash flow breakeven plan six months ahead of schedule and
now have the ability to cover the dividend and production sustaining capital at a $40 West Texas Intermediate (WTI) price per barrel of oil, and add meaningful production growth at $50 WTI. This achievement reflects the strength of our integrated business model, combined with our team’s focus on financial discipline and operational excellence.
Outstanding performance across our businesses fueled record free cash flow, and the return of more than $3.6 billion to shareholders through share repurchases and our sector-leading dividend. We delivered a 14 percent return on capital employed and a 27 percent
cash return on capital employed 1 — among the best in our peer group. Our solid balance sheet once again received A ratings from the major credit rating agencies.
These are significant accomplishments, but we must do more to maximize shareholder return. We remain laser-focused on financial discipline and industry-leading performance, striving to ensure every dollar we spend delivers the most value.
We are committed to disciplined capital allocation and have set the 2019 budget at $4.5 billion, 10 percent less than the previous year, with additional value-based production growth. Our goal is to invest in projects that create long-term value, targeting returns well above
the cost of capital employed. We continue to focus on delivering industry-leading returns across our integrated businesses and returning capital to shareholders through our dividend and share repurchases.
In 2018, the Board of Directors increased the dividend for the 16th consecutive year, returning $2.4 billion to our shareholders. This February, the Board affirmed an annualized dividend rate of $3.12 per share, and we expect to continue funding the dividend from cash flow generated by our base business and increased production from organic growth. We also repurchased more than $1.2 billion of shares under our $2 billion-plus share repurchase program, with the intention of completing the remainder this year. Since 2002, Occidental has returned $33 billion to shareholders through dividends and share repurchases. In the United States, we continue to hold a dominant
position in the Permian Basin, one of the most prolific oil-and-gas basins in the world. Our unique portfolio of
unconventional and conventional acreage differentiates us from competitors. Our Permian Resources business adds unconventional, short-cycle production at high rates, while our Permian Enhanced Oil Recovery (EOR) business provides reliable production and steady cash flow. Our midstream and marketing segment is complementary to and supports upstream operations, providing an integrated business from point of production to point of sale.
Permian Resources delivered 40 percent of the top 50 wells in the basin, based on 24-hour initial production rates, the
most of any operator, despite drilling less than 5 percent of total wells. As the largest user of carbon dioxide (CO2)
for EOR in the basin, Permian EOR continued to maximize recovery and deliver significant free cash flow. Permian cash operating costs were the lowest level this decade, supported by our long-term investments. One example is Aventine, our
integrated logistics-and-maintenance hub in New Mexico, which began operations in 2018.
Occidental’s principal businesses consist of three segments. The oil and gas segment explores for, develops
and produces oil and condensate, natural gas liquids (NGL) and natural gas. The chemical segment (OxyChem) mainly
manufactures and markets basic chemicals and vinyls. The midstream and marketing segment purchases, markets,
gathers, processes, transports and stores oil, condensate, NGL, natural gas, carbon dioxide (CO2) and power. It also
trades around its assets, including transportation and storage capacity. Additionally, the midstream and marketing segment invests in entities that conduct similar activities.
Occidental’s common stock is listed on the New York
Stock Exchange (NYSE). The symbol is OXY