Vicki Hollub
President and Chief Executive Officer at Occidental Petroleum
Thank you, Jordan, and good afternoon, everyone. Our teams delivered another quarter of exceptional performance across all of our business segments. Despite weather disruptions and commodity price volatility, resilient operational execution from our teams helped to deliver the highest operating cash flow so far this year. Our strong financial results are a testament to the dedication and capabilities of our teams as well as the premium quality of our assets.
I'll begin today by reviewing our third quarter performance, providing highlights from our oil and gas business, including the ongoing integration of CrownRock. I'll also give an update on our Direct Air Capture project, and then share the progress on our near-term debt reduction program. Sunil will cover our financial results and fourth quarter outlook, including increases in full year guidance for each of our segments and then we'll provide insight of how we're looking at our 2025 capital plans.
In the third quarter, our team's commitment and delivery across each of our business units enabled us to generate $1.5 billion of free cash flow before working capital, exceeding guidance in all three segments. Our Oil and Gas segment exceeded the high-end of our production guidance and set a new company record for the highest quarterly US production in our history. This was an outstanding achievement made even more impressive considering there were three hurricanes that impacted our operations across the Gulf of Mexico. This production outperformance was primarily driven by strong new well performance and higher uptime throughout the Permian Basin.
Our Midland Basin teams excelled, surpassing production guidance in our recently acquired CrownRock assets and delivering the highest quarterly production in over five years across our legacy Midland Basin assets. Optimum geologic targeting drove new well performance supplemented by non-recurring OBO benefits.
The Delaware Basin continues to perform at an industry-leading level with our New Mexico performance being instrumental in our third quarter results. Most notably, a six well Wolfcamp development project in our tanks field in New Mexico produced an impressive 1.2 million barrels of oil in the first 90 days. In previous earnings calls, we highlighted that Oxy had eight of the top 10 industry wells in the entire Delaware Basin from a six-month cumulative production standpoint.
Today, I'm proud to announce that our Rockies team now claims eight of the top 10 DJ Basin wells drilled since 2019, several of which came online in 2024. Such remarkable industry achievements are only possible because our teams relentlessly pursue innovation and excellence. Not only is our onshore development exceeding expectations on well productivity, we're also executing in a more efficient manner. For example, every new well drilled in the third quarter New Mexico development program is utilizing existing infrastructure. As discussed in the past, this significantly enhances project returns and in many cases enables secondary bench developments to deliver stronger returns than our primary benches.
We continue to advance our drilling efficiency as evidenced by 10% improvement in Permian unconventional drilling cycle times relative to last year. In the DJ Basin, we successfully drilled two-mile lateral in only 80 hours and our teams reduced third quarter well costs by 20% compared to the first half of last year. More than just reducing well costs, these improvements also accelerate time-to-market, allowing us to turn capital dollars into production faster. Our teams continue to make well, design, and execution improvements with exceptional results. We expect to carry this momentum into 2025.
Another factor in our success along with continued well performance leadership and capital efficiency progression is our team's persistent focus on driving down lease operating expenses across our assets, which ultimately enhances our cash margins. Over the last year, we have meaningfully reduced our domestic operating expenses on a per well basis. Looking to the fourth quarter, we anticipate continued progress will result in greater than 20% year-over-year reduction in quarterly LOE per barrel. These steady improvements are driven by several factors, including increased uptime, improved CO2 utilization and more recently, the integration of low cost, high margin CrownRock barrels into our portfolio. Our teams continue to deliver operational and technical strengths to drive margin expansion for both sides, reducing costs while constructing industry leading wells.
Turning to our Chemicals and Midstream businesses, OxyChem outperformed in the third quarter, modestly exceeding guidance while overcoming disruptive Gulf weather. And our Midstream segment also had another impressive quarter with our marketing teams once again leveraging natural gas price locations between Baja and the North Coast to deliver value to the company. Our demonstrated leadership and midstream expertise allowed us to optimize transport strategies, effectively bringing both our products and third-party volumes to market even in adverse conditions.
I'd like to now share more on the successful addition of CrownRock to our Oxy portfolio, since the acquisition closed in early August. We are entirely pleased with the integration of assets and more importantly, people. We've been highly impressed with the legacy CrownRock culture as well as the stewardship exhibited in running day-to-day operations in a safe, profitable manner. Our focus these first months has been centered on safety, organizational integration and retention of talent that began very well. There have been no significant safety incidents dating as far back as the December deal announcement and that's a testament to the CrownRock's team's for efficiency and professionalism. The combined teams are now sharing best practices and identifying opportunities to enhance build operations through our combined middle basin position as well as constructing our 2025 development plans. As Sunil will cover later, we envision a consistent level of investment in this premier Permian asset next year.
I want to highlight a few areas where our teams are identifying opportunities for operational improvements and cost efficiencies. The first one I'll mention is leveraging Oxy's supply-chain expertise to reduce cost of materials construction. We're also evaluating opportunities to leverage our broader Permian frac and overall resources to accelerate time-to-market and increase utilization rates. We've spoken in past about the ample water capacity and network associated with these new assets and how well they fit with our existing water assets and how they can benefit our legacy business. Recently, we've identified nearly $10 million in expected savings for our singular development plan in the first quarter of 2025, made possible by water integration across assets.
We think this opportunity is just the first of many as we leverage shared infrastructure across our combined position. We also see opportunities to enhance the base production through improved operability and artificial [Indecipherable]. Already, we are seeing incremental base production improvements into CrownRock assets. Because of this and stronger-than-anticipated new well performance, our third quarter production volumes exceeded the expectations that we laid out in August. We are projecting a 9,000 BOE per day increase to our fourth quarter exit-rate for these assets. We're still in the early stages of integration, but are very excited about the opportunities ahead. By bringing our teams together, we expect to unlock new value and achieve even greater success.
Turning now to our low carbon businesses. I'd like to provide an update on our Direct Air Capture projects. Construction of STRATOS, which will be the largest Direct Air Capture facility in the world, is progressing smoothly and to plan. As we have previously shared, we have faced the construction sequence of STRATOS to help integrate the latest advancements, research and development efforts. We have been thoroughly impressed with the infusion of talent, passion and performance coming from the Carbon Engineering team over last year, driving an innovation cycle that's moving even faster than we anticipated.
Collaboration within our technical teams across our Oxy paired with insight the CE Innovation Center has given rise to incredible technological breakthroughs and engineering design innovation, which we will integrate into the continued build-out of STRATOS. The new design will features of fewer air contactors and fewer solid reactors, which should reduce operating expenses and increased reliability. We expect to bring the initial 250,000 tons per annum of capacity online in mid 2025 with the additional 250,000 tons to phase-in during the next year, incorporating those improvements. This disciplined approach not only generates value for STRATOS, but will benefit and derisk future DAC builds.
We're also advancing our South Texas DAC project and recently achieved a significant milestone with the US Department of Energy awarding the project up to $500 million from the initial DAC facility on the site. This grant could potentially increase by $150 million from the development of an expanded regional carbon network in South Texas. The award is momentous in furthering commercial-scale DAC in the United States and validates our ability to accelerate the vital supply technology.
A combination of factors will drive our continued progress in this market and technology, and you're seeing them work together now in time. First, our innovative technical teams and continued investment in R&D are enhancing real world projects. Second, we are leveraging project and operational margins from STRATOS and applying them to enhance future designs. Third, government support and third-party capital are serving as catalyst to accelerating investment in developing DAC technology at climate-relevant scale, while also solidifying our leading position in emerging markets.
We're excited about the progress made to date in constructing STRATOS, improving the DAC technology, driving demand in the voluntary and compliance carbon credit markets. Through the development of STRATOS, Oxy is taking a leading role to demonstrate to the developing compliance markets that DAC plus geologic storage is a large-scale, highly durable and economic tool for growth approach climate change. We believe we can help our two major industries like aviation and maritime meet their net zero goals with DAC, which can also serve as complementary solutions with -- along with sustainable aviation and fuels. Equally, it's important, CO2 from our DAC can also enable us to produce net zero oil from our [Indecipherable] operations, providing resources the US need for energy security and energy the world will continue to need for decades to come.
We also recognize that we are in a pivotal moment for our power and utilities in our country, especially with the proliferation of data centers and AI, increasing the need for a reliable, low-cost [Indecipherable] emissions. Over the coming decades, we believe Oxy will be equally positioned to contribute to its growing sectors of our equity investment NET power and our ability to provide DAC solutions at scale to meet the increased demand for our carbon dioxide renewable credits for large-scale data centers and power generation.
Finally, I want to share with you some of the recent progress we've made in debt reduction. In December, we made a commitment to repay over $4.5 billion of debt in the 12 months of closing the CrownRock acquisition. Progress in our divestiture program, including the closing of [Indecipherable] the sale of a portion of our West Holdings in the third quarter, combined with our continuing strong organic cash-flow has put us well-ahead of schedule. In fact, during the third quarter, we repaid $4 billion, which is nearly 90% of our near-term commitment, and that's within just two months of the CrownRock closing. We remain fully committed to achieving our medium-term principal debt target of $15 billion.
I'll now hand the call over to Sunil to provide more details about our third quarter financial results, guidance and capital plan.
