[Editor’s note: This story was updated at 1:43 p.m. CT Nov. 10.]
Occidental Petroleum Corp. on Nov. 10 laid out a target to reduce greenhouse gas emissions at its operations to net-zero by 2040, becoming the latest oil and gas company to set long-term climate goals.
Oil and gas producers, under pressure from investors who want to see the industry operate more cleanly, have announced new emissions targets this year even as they have slashed spending and production following a coronavirus-driven plunge in crude prices.
Occidental will provide detail on its net-zero target by the end of November when it releases its sustainability report, CEO Vicki Hollub said on an earnings call with analysts.
Hollub touted an August announcement that a unit of Occidental would finance development of the largest ever facility to pull CO₂ out of the atmosphere through a process known as direct air capture. CO₂ from the Permian Basin oil field will be stored underground and used to increase pressure in the oil field and speed up production.
The project will lower Occidental's oil recovery costs and allow it to partner with companies that need to lower their own carbon footprint, Hollub said.
Royal Dutch Shell Plc has laid out a strategy to reduce greenhouse gas emissions to net-zero by 2050. BP Plc plans to increase its renewable power capacity 20-fold by 2030 while reducing its oil output by 40% and diverting more funds to low-carbon investments.
Occidental's direct air capture project will not require much investment in 2021, Hollub said. The producer will not spend more than $2.9 billion on new projects next year, an amount that would keep its oil and gas output flat.
The Houston-based oil producer posted a bigger-than-expected quarterly loss on Nov. 9, as it reeled from a plunge in crude prices due to the COVID-19 crisis. Occidental has cut jobs and production this year, piling pressure on a company that had taken on significant debt to acquire Anadarko Petroleum for $38 billion last year.
Even if oil prices rise, Occidental "will go into 2021 conservatively," Hollub said on the call with analysts. The company plans capital spending of about $2.5 billion this year, and will not go higher than $2.9 billion in 2021, she said.
Occidental is targeting $2 billion to $3 billion in asset sales to be announced by the first half of 2021, which "will continue to be applied towards debt reduction," Hollub said.
The company said its total long-term net debt stood at $35.9 billion at the end of September, slightly lower than the $36.03 billion at the end of June.
"Execution on asset sales is critical to the survival of this highly leveraged company," said Jennifer Rowland, analyst with Edward Jones.
Oil prices are likely to "be much healthier in 2022" and that is when the company expects to use free cash flow to start paying down debt early, Hollub said.
Occidental is returning drilling rigs to work in the Permian Basin in the southwestern U.S. and in Colorado this quarter, and returned a drillship to the Gulf of Mexico in early October.
Shares dipped to $12.09, down 1.1% in trading on Nov. 10. On an adjusted basis, Occidental lost 84 cents per share in the third quarter, while analysts had expected a loss of 72 cents, Refinitiv data showed.
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