Vicki Hollub
President and Chief Executive Officer at Occidental Petroleum
Thank you, Jordan, and good afternoon, everyone.
2024 was a year of strategic execution for Oxy. We positioned the portfolio to maximize value by increasing our exposure to short-cycle high-return assets, while also advancing major projects aimed at delivering sustainable returns through-the-cycle. Our team's relentless focus on performance and commitment to safe and reliable operations enabled us to progress our cash-flow priorities, delivering on our near-term deleveraging targets while growing value for our shareholders.
I'll begin today by covering our 2024 financial and operational achievements as well as our strategic advancements that will position us for success in the years ahead. Then I'll discuss our priorities and capital plans for 2025. Sunil will follow with a review of our 4th-quarter performance and we'll provide guidance for the first-quarter and the full-year ahead. Oxy outperformed across all three segments in 2024. We generated $4.9 billion of free-cash flow, enabling us to pay approximately $800 million of common dividends and to increase the quarterly dividend by more than 22%.
As we announced yesterday, we also made significant progress on our cash-flow and shareholder return priorities. Through a combination of asset sales and organic cash-flow, we achieved our near-term debt repayment target of $4.5 billion, seven months ahead of schedule. Our steadfast commitment to improving our balance sheet is coupled with our drive-to invest in our future and generate long-term shareholder value.
Capital improvements and operational efficiencies driven by our teams resulted in a capital spend of $6.8 billion, which was the low-end of our guidance. Our midstream team also successfully revised key domestic crude transportation contracts to further enhance future cash flows.
Now moving to operational excellence. The combination of execution efficiencies along with strong new well deliverability and enhanced base production enabled us to achieve the highest annual US oil production as well as record total company production at 1.33 million BOE per day per oxy in 2024. This exceeded the upper-end of full-year guidance. The US record production was driven by continued well performance leadership across our operated US onshore positions in the Delaware, DJ, Midland and Powder River basins, and contributed to their overall company record. In 2024, our teams reduced domestic lease operating expenses per barrel by approximately 9% and lowered well costs by roughly 12% across all unconventional basins.
A key differentiator for Oxy is our ability to replace reserves to fortify the long-term sustainability of our business. In 2024, we increased our year-end proved reserve balance to 4.6 billion BOE, which is the highest in Oxy's history. This represents an all-in reserves replacement ratio of 230% for 2024 and an organic reserves replacement ratio of 112%, extending our over 20-year track-record of replacing reserves year-after year with the exceptions of the downturn in 2015 and the pandemic in 2020. It's also notable that we have been replacing higher-cost production with a higher-volume of lower-cost new reserves.
Annually, our capital spend for oil and gas development is less than our annual DD&A cost. This is driving increased earnings per barrel and increased earnings per share. In addition, our US onshore inventory continues to get better, which is a testament to the portfolio's incredibly rich resources and our team's dedication to continuous improvement. Even after accounting for wells drilled and divestitures, we increased our operated inventory of US unconventional well locations with sub-60 breakevens.
At the same time, we improved our average well breakeven by 6%. Our OxyChem business also outperformed, exceeding the original guidance midpoint to achieve over $1.1 billion in pretax income in 2024. In our Midstream segment also performed exceptionally well with our gas marketing optimization efforts offsetting lower in-basin gas realizations in the Permian and contributing to meaningful outperformance against our original guidance. Looking back to 2024, we advanced our strategy across all of our businesses, and I want to highlight a few of them.
We closed on the CrownRock acquisition, adding Midland Basin scale and high-margin inventory as well as increasing our access to high-quality unconventional oil assets in the US. This is an asset that continues to demonstrate value with both our financial and production results exceeding expectations. As construction in West Texas moved forward on Stratos, our teams in Squamish, British Columbia, focused on enhancing DAC technology. Some of their innovations are being implemented in Stratos.
We believe DAC will deliver long-term value as well as help achieve US energy security by developing the carbon-neutral fuels the world needs. We have the flexibility to use DAC CO2 for both EOR and sequestration, and some customers are focused on securing carbon removal credits. CDRs are important to help us prove up the technology and get the cost-down. To advance those objectives, we signed several foundational CDR agreements last year. We accelerated the pace of DAC R&D through the integration of our carbon engineering and Oxy teams, which has resulted in an open exchange of ideas that has expanded our culture of innovation. We are looking-forward to bringing these learnings to the development of DAC facilities at the South Texas DAC Hub, which was awarded funding from the US Department of Energy.
Now I'd like to share a few highlights from our 4th-quarter, which demonstrated continued strength in our financial and operational performance to close-out a successful year. All three of our business segments also outperformed in the 4th-quarter, delivering robust financial returns and generating a $1.4 billion in free-cash flow. Our business generated $280 million in adjusted income, benefiting from better realized prices and volumes in both the domestic and international markets. And our midstream business outperformed through continued gas marketing transportation optimization during the 4th-quarter and from higher sulfur pricing for alhose in-production. In our oil and gas segment, global production during the 4th-quarter was 1.46 million BOE per day, outperforming the midpoint of guidance by 13,000 BOE per day and setting a record for Oxy's highest-ever US quarterly production. Our teams ended 2024 with strong performance and momentum going into 2025.
Looking to 2025, our strategic priorities reflect an extension of 2024. We remain committed to delivering value to our shareholders and believe strengthening the balance sheet is paramount to achieving this. Our first priority is to continue our deleveraging progress from last year and deliver sustainable dividend growth. Our announced $1.2 billion of divestiture proceeds will be used for debt reduction. The savings from the reduced interest payments will be allocated to the dividend as this week, our Board of Directors authorized a 9% increase in our common dividend. We recognize the need to balance reducing debt and financial risk today while preserving tomorrow's development opportunities and associated cash-flow.
To accomplish this, our second priority is to advance our major projects safely and reliably, bringing Stratus online this year and keeping the battleground modernization and expansion project on-track for completion next year. Stratos is progressing on-schedule to be commercially operational this year. We completed construction of trains one and two in December and have been thoroughly impressed by the work of our teams and our construction partner Worley. Construction on the central processing facilities is expected to be completed in the second-quarter with commissioning on trains one and two in parallel.
We expect start-up operations to continue in the 3rd-quarter with a ramp-up of the initial capacity through year-end. Our battleground project is also advancing with completion expected in mid-2026 and commercial operations to begin later that year. The project is expected to increase cash-flow through improved margins and higher product volumes, generating a strong return while improving Oxychem's market position for key ingredients used in producing clean drinking water, medicine and soaps.
Our third priority is to maintain our culture of innovation and commitment to operational excellence. Our team's relentless drive for improvement and focus on continuing learning have delivered great results to date, enabling us to outperform targets and deliver more with less. This is most recently demonstrated across our Crown Rock Acreage where in just a few months since close, we've identified numerous opportunities to deliver more production, lower well costs and accelerate returns. This year, we expect a 10% improvement in time-to-market compared to last year and we expect a 7% decrease in well costs, which represents a 15% improvement relative to 2023.
The teams are continuing to share best practices and innovate through best and best workshops, which we expect will drive continued efficiency and performance improvements throughout the year. In addition, we see meaningful opportunities to leverage our competitive position, expanded scale and enhanced capabilities across our full Midland Basin operations. Through the integration, we have identified scale efficiencies and design improvements with the potential to lower well cost across our remaining Midland Basin program by more than $1 million per well through drilling and completion savings.
These reverse synergies were a key driver behind the extension of our Midland Basin JV with Echo Patrol, which will enable additional development of the basin. The agreement further highlights the vital role investment in US oil and most notably the Permian plays in the global market. Our teams are also leveraging innovative ideas to unlock greater resources, achieve cost-savings and improve recoveries. Within our Permian operations, we are pushing the technical limits of well deliverability, deepening reservoir characterization and simulation efforts and conducting field trials to further advance enhanced oil recovery and unconventional reservoirs.
In our Gulf of America and international portfolio, where we are utilizing advanced seismic to uncover new opportunities and provide a rich dataset for AI application. In Algeria, we recently-completed the country's largest seismic data acquisition, which was also the largest-ever onshore acquisition for Oxy. This will play a key role as we look to enhance value through future development opportunities. First, we also have an ambitious set of artificial intelligence initiatives ongoing to maximize value and improve margins. Our Gulf of America operations are utilizing AI to improve supply-chain management, asset integrity and reservoir characterization.
Additionally, we created an AI center of excellence to align all intercompany AI initiatives and accelerate business value. Within our LCD portfolio, we are also at the forefront of direct lithium extraction technology. Working with our JV partner, we are progressing from a pilot to demonstration plant to explore the commerciality of our subsidiary, TerraLithium's patented DLD technology.
Turning now to our 2025 capital plan. We aim to maximize cash-flow by investing primarily in short-cycle high-return assets while making measured investments to advance our mid-cycle projects to provide future cash-flow resilience. This year, we plan to invest between $7 billion and $7.2 billion in our Energy and Chemicals business. The oil and gas capital program is roughly equivalent to 2024 when adjusting for a full-year of CrownRock in our portfolio. We expect full-year production to average approximately 1.42 million BOE per day. This represents relatively stable production from 2024 when accounting for a full-year of CrownRock, though with modest oil growth.
Similar to years past, we anticipate production in the first-quarter to reflect a low-point for the year with a significant uplift expected from the second-half. Sunil will provide more detail on this in our 2025 guidance. Investments in OxyChem are expected to increase to $900 million this year with 2025 representing the peak year for construction at background. Battleground spend is expected to decrease substantially as the project nears completion in 2026 with Oxychem's capital reverting to maintenance levels the following year. The increase in battleground spend is largely offset by a decrease in our LCD spend in 2025, which will be set at approximately $450 million.
The majority of this capital will be for the continued build-out of Stratos with the remainder directed towards our South Texas and Gulf Coast sequestration projects. We built our 2025 capital plan to focus on projects that we believe best position Oxy for long-term success. As in past years, we retain a high degree of flexibility with more than 75% of our oil and gas capital allocated to our US onshore portfolio. This allows us to adapt to commodity price fluctuations and efficiently respond to-market conditions. In addition, our focus on short-cycle high-return unconventional development will help to facilitate our near-term debt reduction, supporting our cash-flow priorities and commitment to enhanced shareholder returns.
Now, I'll turn the call over to Sunil.
