Occidental's Hollub Plans Buying Spree in Largest U.S. Oil Field

Updated on
  • Crude bonanza expands beyond known Permian borders: new CEO
  • Hollub says No. 1 independent oil explorer to continue M&A

Occidental Petroleum Corp. is on the hunt to expand its holdings in the biggest U.S. oil field where it’s already the top producer, said Chief Executive Officer Vicki Hollub.

The world’s largest independent oil explorer by market value is not just pursuing acquisitions in the Permian Basin but also evaluating adjacent areas immediately outside the region’s known borders that appear to be rich in crude, Hollub said in an interview on April 29, the day she was promoted to CEO.

An expansion of the Permian’s boundaries would open a new frontier of oil exploration in a region that has been a cornerstone of the U.S. crude production since the 1920s and for decades gave Texas a sway over global energy markets unmatched until the rise of OPEC in the 1970s. Permian wells, spread across an area of Texas and New Mexico that’s seven times the size of Massachusetts, pumped one in every five barrels of domestic American crude last year.

“We feel there are still opportunities in the surrounding basins,” Hollub said in the interview in Midland, Texas, the unofficial capital city of the Permian region. “You have a region around that which given the right situation could be oil-bearing as well.”

Hollub, a University of Alabama-trained mineral engineer, succeeded mentor Stephen Chazen as CEO last week upon his retirement. Chazen, 69, will remain a member of Occidental’s board of directors and provide strategic advice to top executives. Hollub inherited a slimmed-down Occidental that under Chazen’s five-year reign as CEO relocated to Houston from Los Angeles and shed assets from California to the Middle East amid the most-severe oil-market collapse in at least 35 years.

Chazen’s Vision

“We’re going to continue” buying up Permian assets, Hollub said during the interview. “This was Steve’s vision. We feel like there’s still potential remaining, but now it’s no longer a question of whether there could be hydrocarbons in some of these zones but how do you get those hydrocarbons out.”

Occidental controls drilling rights across almost 2 million acres in the Permian, up 14 percent in the past three years, according to data compiled by Bloomberg Intelligence. Occidental is scheduled to report first-quarter results on May 5.

The company’s costs to drill wells in the region plunged as much as 42 percent last year, helping sustain the Permian’s status as one of Occidental’s biggest profit drivers. Pumping crude from the Permian’s stacked layers of oil-bearing rock formations dropped 26 percent in 2015 to less than $10 a barrel for Occidental, according to company figures.

Even as the company prepares to expand the known boundaries of the Permian region, Hollub said that wildcatting remains anathema to her, as it was under Chazen. Wildcatting is oil-industry jargon for the riskiest type of exploratory drilling, involving probing totally unknown geologic formations where unpredictable pressures and heat can lead to huge financial failures -- or disastrous blowouts.

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