More oil production would hurt shareholders, Occidental CEO says

Occidental Petroleum’s logo is displayed on a floor screen at the New York Stock Exchange (NYSE) in New York, U.S., April 30, 2019. REUTERS/Brendan McDermid

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HOUSTON, May 11 (Reuters) – Oil companies around the world are trying to boost production but are struggling to balance increases without jeopardizing shareholder returns, Vicki Hollub, chief executive of Occidental Petroleum (OXY .NOT).

Energy companies are under pressure to increase production and stem the tide of inflation and fuel shortages. Leaders have been criticized for not responding quickly to calls for more. Oil prices hit a 14-year high in March and helped push US inflation to double-digit levels.

“It’s almost value destruction if you try to accelerate anything now,” Hollub said on a conference call to discuss the company’s first quarter results.

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Occidental’s production fell in the last quarter, but it expects a slight increase for the year.

The U.S. oil producer, which plans to resume share buybacks this quarter to reward investors, could boost production by as much as 5% next year if yields remain high. But rising costs for services and materials have limited what companies can do to respond quickly to oil supplies.

“There are a lot of headwinds to increasing production around the world,” Hollub said. “Some of the longer-term projects just can’t get started because of the costs involved.”

The company increased capital spending by $250 million, mostly to cover inflation costs, she said. It also forfeited a cross-rig program for its Colorado operations after regulators limited its drilling permits to one unit for the rest of 2022, she said.

Occidental will resume its share buyback program this quarter after hitting its net debt target of $20 billion, Chief Financial Officer Robert Peterson said on the call.

The producer previously announced plans to use $3 billion for buyouts.

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Reporting by Sabrina Valle; Editing by Chris Reese and Marguerita Choy

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