Dear Shareholders,
Through exceptional execution across our world-class asset base, Oxy delivered on our commitment to return capital to shareholders in 2022 with the triple benefit of a growing and sustainable common dividend, a strengthened financial position and completion of our $3 billion share repurchase program.
Oxy’s high-return assets are the engine of our success, generating efficient production and a robust drilling inventory. Our proved reserves growth far outpaced our production, and we exited 2022 with proved reserves of over 3.8 billion barrels of oil equivalent (Boe), an increase of more than 300 million Boe from 2021. In the Gulf of Mexico, we completed new tie-backs to our existing platforms, contributing to several production milestones. We set numerous records in onshore operations in 2022, including record well productivity in the Delaware Basin. We also achieved record lateral lengths in the Delaware Basin, DJ Basin, Oman, and most notably in the Midland Basin, where our well Lulu 3641DP exceeded 18,000 feet to become our longest lateral on record. Remarkably, this well was drilled in slightly over 12 days. Milestones like these showcase our teams’ focus on safely and efficiently expanding the boundaries of drilling technology. Our teams in Algeria, Oman and the UAE are also creating tremendous value with our government partners. The Al Hosn project, for example, is already achieving production milestones from its ongoing gas plant expansion, which will be completed in 2023.
OxyChem’s workforce had another banner year in 2022, with record pre-tax earnings. In May, the U.S. Department of Energy selected OxyChem as a Better Practice Award winner for innovations in energy efficiency. In August, we announced the planned modernization and expansion of OxyChem’s Battleground chlor-alkali plant in Houston, with completion expected in 2026.
These projects are not only integral to efficient development and production; they help us advance Oxy’s HSE and Sustainability Principles and further integrate our worldwide framework for safe, reliable and sustainable operations. In 2020, Oxy was the first U.S. oil and gas company to endorse the World Bank’s Zero Routine Flaring by 2030 initiative, and I’m pleased that our U.S. oil and gas operations achieved this milestone in 2022, eight years ahead of the World Bank’s target, with our international operations on track to end routine flaring before 2030. We are implementing additional measures to rapidly detect, repair and prevent methane emissions as a member of the UN-sponsored Oil and Gas Methane Partnership 2.0, the Methane Guiding Principles and the Oil and Gas Climate Initiative’s Aiming for Zero Methane Emissions pledge. To further electrify our operations, we reached an agreement in November for NET Power, LLC to build its first utility-scale natural gas power plant with near-zero emissions in the Permian Basin, targeted to be online by 2026.
We also made significant progress in our low-carbon ventures that leverage our carbon management and major projects expertise, infrastructure, key partnerships and innovative technologies to advance our pathway to net-zero emissions and help others do the same. In September 2022, our subsidiary 1PointFive began construction on our first Direct Air Capture (DAC) plant in Ector County, Texas. With a planned capacity of 500,000 metric tons, this DAC plant will be the world’s largest of its kind and is expected to begin commercial operations in 2025. 1PointFive has executed agreements to sell carbon dioxide (CO2) removal credits from our DAC plant to prospective purchasers in diverse industry sectors. As of March 2023, 1PointFive has also secured substantial pore space and land in multiple locations along the U.S. Gulf Coast and in the Permian Basin for carbon sequestration hubs to store captured CO2 from DAC and industrial facilities.
Oxy generated record net income attributable to common shareholders of $12.5 billion and record free cash flow before working capital of $13.6 billion, driven by our operational records and strong commodity prices. These results enabled us to retire more than $10.5 billion of debt, surpassing our 2022 target and strengthening our balance sheet, with estimated savings of more than $400 million per year in interest and financing costs. In March 2023, Moody’s Investors Service upgraded Oxy’s senior unsecured credit rating to investment grade. As an outgrowth of our strong shareholder returns, we expect redemptions of our preferred equity beginning in 2023 will further rebalance our enterprise value in favor of common shareholders.
We were honored to be recognized by Fortune once again as one of the World’s Most Admired Companies in 2023, ranking No. 1 in the Mining, Crude-Oil Production category. Oxy has made Fortune’s list in this category every reported year since 2008, including the No. 1 ranking 12 times. To help our employees sustain their exceptional performance from 2022, we are continuing to build on our Diversity, Inclusion and Belonging, Workforce Development, and Strategic Technical Excellence programs.
In closing, I want to thank our Board of Directors for their strategic oversight and our employees for their dedication to maximize value for our shareholders in 2023 and over the long term, as we deliver the energy, products and solutions needed by our customers, communities and society at large.
Sincerely,
Vicki Hollub
President and Chief Executive Officer
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