Vicki Hollub
President, Chief Executive Officer, and Director at Occidental Petroleum
Thank you, Jordan, and good afternoon, everyone.
2023 was a great year for us, thanks to the performance of all of our teams in Oxy. I'm going to start by discussing our financial performance, operational excellence, and our strategic advancements in 2023. Then I'll review our capital plans for 2024. These continue to position us to deliver sustainable and growing returns for our shareholders through our premier asset portfolio, advanced technology, and robust commercial runway.
First, I'll begin by reviewing our financial performance in 2023. Last year, our talented and committed teams across the Company applied advanced technical expertise, operating skills, leading edge technologies, and innovation to our exceptional portfolio, and they delivered results, $5.5 billion in free cash flow, which enabled us to pay $600 million of common dividend, repurchase $1.8 billion of common shares, and redeem $1.5 billion of preferred shares, while also investing $6.2 billion back into the business.
Next, I'll comment on our operational excellence in 2023. Last year, our production in our global oil and gas business exceeded the midpoint of our original full year production guidance by 43,000 BOE per day. This was driven by record new well productivity rates across our domestic assets in the Delaware, Midland, and DJ Basins, and internationally, by record production from Block 9 in Oman. And in addition, we safely completed the expansion of the Al Hosn plant in the UAE, which also delivered record annual production.
Despite negative price revisions, well performance across our portfolio enabled us to achieve an all-in reserves replacement ratio of 137% in 2023, and a three-year average ratio of 183%. Our track record from prior years of consistently replacing produced barrels continues, and at an F&D, the cost that is below our current DD&A rate. Oxy's year-end 2023 worldwide proved reserves increased to 4.0 billion BOE from 3.8 billion BOE in 2022.
OxyChem performed exceptionally well in 2023. It exceeded guidance and achieved $1.5 billion in pre-tax income for the third time in its history due largely to lower energy cost and an efficient planned turnaround at our Ingleside plant, even as product markets softened compared to 2022. In addition, construction on STRATOS, our first Direct Air Capture facility, is progressing on schedule to be commercially operational in mid-2025.
The fourth quarter of 2023 was an exciting way to conclude a successful year. In oil and gas, we delivered our highest quarterly production in over three years and outperformed the midpoint of our production guidance despite a third-party interruption in the Gulf of Mexico. Our Rockies business outperformed in the fourth quarter. That's consistent with its year-long trends. Innovative artificial lift technology continued to maximize base production. Well design optimization in the DJ Basin that we presented in our second quarter earnings call contributed to a 32% productivity improvement from 2022.
We also continued to deliver robust well performance in the Permian Basin where our Delaware teams drove results to the high end of the Permian's fourth quarter production guidance. Our Top Spot well, which we also discussed in our second quarter earnings call, continued its strong performance trajectory and delivered the highest six-month cumulative production of any horizontal well ever in the New Mexico Delaware Basin. In fact, Oxy has drilled eight of the top 10 horizontal wells of all-time across the entire Delaware based on this production metric, and three of those wells came online last year.
Since mid-2022, our teams outperformed the Delaware Basin industry average 12-month cumulative oil production by nearly 50%. Our team aims to extend our leadership in the New Mexico Delaware Basin this year. A significant portion of the 2024 Delaware program will develop the same horizon as the record Top Spot well. Further south in the Texas Delaware Basin, our teams continue to deliver success with a couple of notable appraisal wells in the second Bone Spring and third Bone Spring line. These wells drove incredibly early time volumes, and accordingly, secured additional capital in our 2024 Delaware program.
Our appraisal programs are positioning us for success by adding horizons in the Delaware Basin and moving tier two and tier three wells to tier one. But we're also improving our current tier one intervals, for example, with our Top Spot well. Outside the Delaware Basin, we're also making strides in some of the basins that we expect will begin to play a more consequential role.
In the Midland Basin, technical excellence, including the basin-leading Barnett wells, drove a one-year cumulative improvement in well productivity of over 30% compared to the prior year. In the Powder River Basin, Oxy set a Wyoming state initial production and early cumulative production pad record of 1.5 million barrels of oil produced in only about seven months. As we highlighted, our unconventional technical teams continue to expand and improve inventory across all of U.S. onshore basins.
While our subsurface modeling, innovative well designs, and enhanced artificial lift technology have driven improvements in well recovery, new well designs have also resulted in record drilling times for both two- and three-mile Texas Delaware Basin laterals. Similarly, in the Powder River Basin, our teams drilled an average 1,650 feet per day, and we drilled a 10,000-foot well in only 11 days, both achieving Oxy basin records.
Our successes are not limited to our onshore U.S. portfolio. In the deepwater Gulf of Mexico, we are continuing to leverage technology to drive even stronger production results. And our subsea pumping system on the K2 field achieved first lift four months ahead of schedule. This is Oxy's first deployment of this technology in deepwater. We expected to unlock future production enhancement opportunities and longer distance subsea tiebacks.
Next, I'll shift to discussing how we advanced our strategy last year. In 2023, we high-graded our oil and gas portfolio, launched the expansion of our OxyChem Battleground facility, and announced strategic commercial transactions that we expect will deliver sustainable multi-year value to our shareholders. These steps strengthened our portfolio and make it unique in our industry.
We have high-quality, short-cycle, high-return oil and gas shale development in the U.S. along with conventional, lower decline oil and gas developments in Permian EOR, the GoM, Oman, Algeria, and Abu Dhabi. These developments are complemented by our strong and stable cash flow from our chemicals business and the cash flow and carbon reduction we expect our low-carbon ventures to provide in the future.
In addition to high-grading our oil and gas portfolio through organic development and appraisal work last year, we also announced the strategic acquisition of CrownRock, which will add high-margin, low-breakeven inventory, while the increasing free cash flow per diluted share. The incremental cash flow will support our cash flow priority of delivering a sustainable and growing dividend, along with the leveraging and share repurchases after reducing the principal debt to $15 billion.
We are working constructively with the FTC in its review of the transaction and expect to receive regulatory approval and close in the second half of this year. The capital plan we will review in a moment excludes CrownRock because we'll continue to operate as two separate companies until we obtain regulatory approval and close the acquisition. In our LCV business, we completed many pivotal transactions that provided technology advancements, third-party capital, revenue certainty, and commercial optionality.
We closed the acquisition of Direct Air Capture Technology Innovator Carbon Engineering last quarter. This was a landmark achievement in our Direct Air Capture development path. We're excited also about our STRATOS joint venture with BlackRock, which we believe demonstrates the DAC is becoming an investable asset for world-class financial institutions. In addition, our teams signed on several more flagship carbon dioxide removal credit customers.
Now, I'd like to reiterate our cash flow priorities and discuss our capital plans for 2024. On our December call, we discussed how we will focus on our cash flow and shareholder return priorities in 2024 on dividend growth, debt reduction, and the capital allocation program that generates strong free cash flow throughout the commodity cycle. As we discussed regarding CrownRock, we intend to complete at least $4.5 billion in debt repayments from both pro forma cash flow and proceeds from a divestiture program. We intend to prioritize debt reduction until we achieve a principal debt balance of $15 billion or below, including repaying debt as it matures.
As a result of the acquisition, we expect to strengthen our balance sheet, improve our resilience in lower-commodity price environments, and free up cash from interest payments to support future sustainable dividend growth and share repurchases. Every year, we design our capital plan to support our strategic initiatives via projects that maximize our returns and best position Oxy to deliver long-term and resilient returns to our shareholders.
Our 2024 capital plan continues a bifurcated investment approach that balances short-cycle, high-margin investments with measured longer-cycle cash flow growth investments. In 2024, we plan to invest $5.8 billion to $6 billion in our energy and chemicals businesses, resulting in slightly less capital for our unconventional assets this year. However, we expect our unconventional assets to return more cash to the business, and we continue to expect year-over-year production growth and continued success across our premier unconventional portfolio, including some of the emerging horizons.
We intend to complement our unconventional exposure with increases to our mid-cycle investments, including lower decline conventional reservoirs, which are expected to drive longer-cycle cash flow resiliency. Our 2024 mid-cycle capital investments will position us to continue the exciting projects that we started last year. Investments in OxyChem are expected to increase this year as progress continues on the battleground expansion and the plant enhancement project.
We also added a second drillship in the Gulf of Mexico to support what we believe could become a future growth asset for Oxy. Lower decline oil production from our enhanced oil recovery, or EOR, is an important part of our long-term strategy. This year, we're investing in gas processing expansions for our Permian EOR business that support longer-term growth in many of our core CO2 fields. Our EOR business will continue to be a key part of our future oil and gas development as we believe that carbon dioxide captured by Direct Air Capture facilities is a sustainable way to develop the 2 billion barrels of potentially recoverable oil remaining in our Permian EOR operation.
In our emerging low-carbon businesses, much of Oxy's planned $600 million 2024 investment will be directed to STRATOS. We have also allocated capital to continue preparations for a second Direct Air Capture and sequestration hub in South Texas, along with subsurface and well permitting investments needed at our Gulf Coast sequestration hubs. Capital received from financial partners for our LCV businesses will add to our $600 million investment. This includes capital contributions from our joint venture partner, BlackRock, for STRATOS.
BlackRock's investment totaled $100 million in 2023, and we expect that figure will increase in 2024. We're making great progress towards advancing our net zero pathway as we develop Direct Air Capture and other exciting technologies. We see tremendous potential in LCV to increase Oxy's cash flow resilience and generate solid long-term returns for our shareholders.
I'll now turn the call over to Sunil for a review of our fourth quarter financial results and 2024 guidance.
