Will the real Oxy please stand up?
On one hand we have an Occidental Petroleum Corp. that cried so hard about declining Kern County reserves and bottomed-out natural gas prices that it scored a $31 million refund in property taxes this year.
On the other, we have a very different Oxy gushing in its second quarter earnings report to analysts and stockholders that its California oil fortunes, particularly those in Kern, couldn't be rosier.
The company even boasted that 900 million barrels of oil equivalent (BOE) are just waiting to be sucked out of its Elk Hills field alone.
That is super interesting considering Oxy's own financials from 2011 show the company reported it had only 727 million barrels of oil equivalent in all of its California fields combined.
So, what is going on?
"I don't know," said Tony Ansolabehere, Assistant Kern County Assessor-Recorder. "This is awfully different than everything they've said before. I'm surprised. You can quote me as definitely saying I'm surprised."
The second quarter earnings report discussion was led by Vicki Hollub, head of the company's California division.
Far from moaning about declining reserves, particularly in Elk Hills, Hollub, according to the official transcript of the discussion, says that the company is looking at ways to increase reserves at Elk Hills and reduce the rate of decline by possibly as much as 50 percent.
That seems to depend somewhat on whether Oxy can get its hands on Co2 gas from the controversial proposed HECA plant. In a complicated series of operations, HECA would make fertilizer using energy made by gasifying coal. It would then trap the attendant Co2 gases and Oxy would inject the gas into Elk Hills making it easier to extract oil. But the HECA project is far from being approved.
Even without that resource, Hollub asserts that Elk Hills "still has more than 900 million BOE of remaining reserves" that can be recovered through existing methods.
"That just doesn't add up," Ansolabehere said.
After Oxy informed the Assessor's office here that its Elk Hills reserves had declined and its natural gas just wasn't worth as much these days, the Assessor revalued the field from $9.3 billion in 2011 down to $6.8 billion in 2012.
That resulted in a $31 million tax refund paid by Kern County, several schools and a number of special districts this year.
It was a painful loss, which the Assessor's office expected would only get worse in coming years.
That's because Elk Hills' value had dropped even more in January, 2013, based on Oxy's information at that time. The supposed value of the field sank to $4.8 billion.
Ansolabehere said he will be bringing this second quater earnings report to the table when the Assessor and Oxy meet in January to start the process of evaluating the company's Kern properties for the following tax year.
Oxy spokeswoman Susie Geiger sent me an email saying the 2011 reduced valuation of Elk Hills was because of poor natural gas prices and an underperforming old oil reservoir.
Yup, got that.
As for the upbeat outlook in the earnings report, Geiger said the report included "forward-looking statements" and much of the new production has been gas, which is less valuable than oil.
OK, but the earnings report also notes Oxy is using its cheap natural gas to increase its steam flooding operations at a variety of Kern County fields, which means its increasing oil production, not gas production.
In fact, the earnings report says increased steam flooding is expected to increase the Kern Front and Lost Hills field production of heavy oil by around 3,000 barrels of oil equivalent per day by the end of this year.
That sounds to me like Oxy is increasing its oil production, and potential oil reserves.
The other fascinating tidbit in Oxy's second quarter earnings report, released July 30, is contained in a discussion about the company's oil exploration efforts in California.
Hollub extols the company's success in exploiting both conventional and "unconventional plays," meaning areas not typically considered oil rich.
"Last year for instance, we made a significant unconventional discovery in the San Joaquin basin," Hollub states.
This year, testing "...established reserves and resources of approximately 50 million BOE."
More testing planned for later 2013 and 2014 could double that amount, she states.
Of course, Hollub doesn't give any more detailed information about this new discovery such as, where it is or in what type of formation it's contained.
All of which is extremely reminiscent of 2009, Ansolabehere noted.
That's when Oxy came out with news of its Gunslinger field, near Tupman.
Ansolabehere recalled how Oxy chairman Ray Irani made huge predictions back then of 150 million to 250 million barrels of oil equivalent lurking beneath Gunslinger.
"Now, you don't hear anything about the Gunslinger field," Ansolabehere said.
Perhaps this second quarter earnings report is skipping down the same hopeful, rose strewn path. Only time will tell.
Oil analyst Brian Youngberg, with Edwards Jones & Co. in St. Louis, wasn't too excited by the reserve picture outlined in Oxy's earnings report. Reserves are best viewed through a long lens, he said, not year over year.
And while Oxy's tone was much more upbeat about its California assets, Youngberg said, California has been mostly disappointing to investors. Expected growth has gone unrealized over the past few years as natural gas prices tanked and the regulatory atmosphere in California crimped Oxy's plans.
"Now, there's a lot of expectation that Oxy plans to spin off California into its own company," Youngberg said.
The company's top brass has already announced a planned reorganization and the great deal of time and emphasis given to California operations in this recent earnings report give credence to the spin off idea, he said.
What that would mean for Kern County is unclear.
Assessor-Recorder Jim Fitch said the whole thing is a bit curious.
"We're really wondering about the statements they've made and what's actually happening," he said. "But we're always rooting for them to do well."
Sure, as long as we get our cut.
Opinions expressed in this column are those of Lois Henry, not The Bakersfield Californian. Her column appears Wednesdays and Sundays. Comment at http://www.bakersfield.com, call her at 395-7373 or e-mail firstname.lastname@example.org
Editor's note: This paragraph was updated to say the value sank to $4.8 billion. That's because Elk Hills' value had dropped even more in January, 2013, based on Oxy's information at that time. The supposed value of the field sank to $4.8 billion.