Occidental Petroleum 2006 Annual Report Download - page 16

oil recovery with nitrogen injection. As a result of these activities and acquisitions, Occidental was able to maintain production at 2005 levels.
Since its acquisition, total Elk Hills oil and gas production has been approximately 301 million BOE. At the end of 2006, the property had an
estimated 484 million BOE of proved reserves, compared to the 425 million BOE that were recorded at the time of the acquisition.
Permian Basin
The Permian Basin extends throughout southwest Texas and southeast New Mexico and is one of the largest and most active oil basins in the
United States, with the entire basin accounting for approximately 18 percent of the total United States oil production. Occidental is the largest
producer in the Permian Basin with an approximate 16-percent net share of the total Permian Basin oil production. Occidental also produces and
processes natural gas and natural gas liquids (NGL) in the Permian Basin.
Most of Occidental's Permian Basin interests were obtained through the acquisition of Altura in 2000 for approximately $3.6 billion. In 2005
and 2006, Occidental made several additional acquisitions of oil and gas producing property interests for approximately $1.7 billion and $290
million (including approximately $175 million related to the acquisition of Vintage and the property acquisitions from Plains), respectively.
Occidental's total share of Permian Basin oil, gas and NGL production averaged 199,000 BOE per day in 2006 compared to 189,000 BOE per
day in 2005. At the end of 2006, Occidental's Permian Basin properties had 1.2 billion BOE in proved reserves. Occidental's Permian Basin
production is diversified across a large number of producing areas. The largest producing areas in 2006 included Wasson San Andres, Slaughter,
Levelland, North Cowden, Wasson Clearfork and Salt Creek, which contributed 20 percent, 9 percent, 5 percent, 4 percent, 4 percent and 4
percent, respectively, to Occidental’s 2006 Permian BOE production.
Occidental’s interests in the Permian Basin offer additional development and exploitation potential. During 2006, Occidental drilled
approximately 260 wells on its operated properties and participated in wells drilled on outside operated interests. Occidental conducted significant
development activity on eight carbon dioxide (CO 2) projects during 2006, including implementation of new floods and expansion of existing CO 2
floods. Occidental also focused on improving the performance of existing wells. Occidental had an average of 122 well service units working in the
Permian area during 2006 performing well maintenance and workovers.
Approximately 60 percent of Occidental’s Permian Basin oil production is from fields that actively employ the application of CO 2 flood
technology, an enhanced oil recovery (EOR) technique. This involves injecting CO 2 into oil reservoirs where it acts as a solvent, causing the oil to
flow more freely into producing wells. These CO 2 flood operations make Occidental a world leader in the application of this technology.
Vintage California
In 2006, Occidental combined its California properties acquired from Vintage and Plains with existing California properties (excluding the Elk
Hills, THUMS and Tidelands Oil Production Company (Tidelands) properties). The combined properties produce oil and gas from more than 50
fields, spread over 500 miles mainly in the Ventura, San Joaquin and Sacramento basins. Oil and gas average production in 2006 was
approximately 17,000 BOE per day. At the end of 2006, the combined properties had an estimated 128 million BOE of proved reserves.
THUMS
Occidental purchased THUMS, the field contractor for an oil production unit offshore Long Beach, California, in 2000. Since then, Occidental
has implemented a successful development plan. Occidental's share of production from THUMS is subject to contractual arrangements similar to a
production sharing contract (PSC), whereby Occidental’s share of production varies inversely with oil prices. For 2006, production from THUMS
averaged 19,000 BOE per day.
Gulf of Mexico
Occidental has a one-third interest in the deep-water Horn Mountain oil field, which is Occidental's only property in the Gulf of Mexico. BP
p.l.c. (BP) is the operator. For 2006, Occidental's production at Horn Mountain averaged 13,000 BOE per day.
Hugoton and Other
Occidental owns a large concentration of gas reserves, production interests and royalty interests in the Hugoton area of Kansas and
Oklahoma.
Also, Occidental has over 28,000 net acres in the Piceance Basin in western Colorado. During 2006, Occidental drilled 43 development wells
and started operation of a newly constructed gas processing facility.
Occidental acquired Tidelands in 2006. Tidelands is the field contractor for an onshore oil production unit in Long Beach, California.
Occidental’s share of production from Tidelands is subject to contractual arrangements similar to a PSC, whereby Occidental’s share of production
varies inversely with oil prices. Tidelands also is subject to cost-plus contracts.
Occidental’s Hugoton and other operations produced 26,000 BOE per day.
Middle East/North Africa
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Occidental's investment in the Dolphin Project, which was acquired in 2002, consists of two separate economic interests held through two
separate legal entities. One entity, OXY Dolphin E&P, LLC, owns a 24.5-percent undivided interest in the assets and liabilities associated with a
Development and Production Sharing Agreement (DPSA) with the Government of Qatar to develop and produce natural gas and condensate in
Qatar’s North Field for 25 years from the start of production, with a provision to request a 5-year extension. The purchase price of the undivided
working interest in the DPSA was approximately $60 million and was recorded in property, plant & equipment (PP&E). This undivided interest is
proportionately consolidated in Occidental's financial statements.
A second entity, OXY Dolphin Pipeline, LLC, owns 24.5 percent of the stock of Dolphin Energy Limited (Dolphin Energy). The purchase price
of Dolphin Energy stock totaled approximately $250 million and was recorded as an equity investment.
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