And, "further improvements are expected in the next couple of quarters," Chazen said during a conference call on fourth quarter 2012 earnings.
Production costs should be under $14/barrel for 2013, compared to $14.99/b last year, he said.
Oxy has embarked on what Chazen called an "aggressive" plan to improve its operational efficiencies over all cost categories, with a goal of achieving an "appreciable" reduction in operating expenses and drilling costs to "at least" 2011 levels of $12.84/b, he said.
Chazen also said Oxy's average US rig count should be 14% lower this year than last year, for an average of 55 compared to 64 in 2012.
"We've eliminated less productive rigs to improve returns," he said.
Domestically, the company has realized other savings from its surface operations, curtailment of uneconomic downhole maintenance and workover activity, and reducing its use of outside contractors, said Chazen.
Bill Albrecht, president of Oxy's Americas oil and gas division said a fair chunk of that savings will be in the Permian Basin of West Texas, which constitutes a major operation for the company.
Albrecht said the company should average 25-27 rigs in the Permian this year, and roughly a third of that will be centered in the Wolfberry play, one of several productive geological layers in the Permian. Another third of the Permian program will be sited in the Delaware Basin, further west in Texas, while the rest will be in assorted other programs.
Chazen said Oxy's domestic oil production should grow 8-10% this year from its 2012 average of 255,000 b/d, said Chazen, and this will come from less drilling on natural gas and gas liquids properties this year. By comparison, the company's US oil production for 2011 was 230,000 b/d.
CAPITAL BUDGET DOWN 6% IN 2013
Total company capital spending this year should be $9.6 billion, down 6% from $10.2 billion in 2012, with the reduction in capital "entirely" from the oil and gas business, said Chazen.
Fully 75% of 2013 capital spending will be allotted to oil and gas sector, while 9% will be spent on midstream, 5% in Oxy's chemicals business and 11% is devoted to the Al Hosn gas venture with the Abu Dhabi National Gas Company. Oxy holds a 40% stake in the $10 billion project, where production is targeted to start next year.
The "modest" decline in rig levels will lead to an overall drop in US spending versus 2012, said Chazen. However, the efficiencies gained means the company can drill a similar number of wells this year as in 2012, he said.
Total domestic oil and gas capital will decline $900 million this year from 2012 levels. While spending in the Permian Basin should remain flat, Midcontinent US spending should be down by $400 million due to reduced activities in some higher-cost unconventional plays in the Williston and lower return gas properties in the Midcontinent and Rockies, said Chazen.
California capex will be down by $500 million from 2012 levels, a function of well cost reductions and efficiencies and what Chazen called a "modest shift towards more conventional drilling opportunities in the constraints of the current environment."
Oxy posted net income for the fourth quarter of $336 million or 42 cents/share after a one-time after-tax charge of $1.1 billion, or $1.41/share, that almost entirely relates to impairment of Midcontinent US gas assets. That compares to net income of $1.6 billion, or $2.01/share, in the Q4 2011.
