Occidental Petroleum Corporation (NYSE:OXY) Q3 2023 Earnings Call Transcript

Occidental Petroleum Corporation (NYSE:OXY) Q3 2023 Earnings Call Transcript November 8, 2023

Operator: Good afternoon, and welcome to the Occidental’s Third Quarter 2023 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Neil Backhouse, Vice President of Investor Relations. Please go ahead.

Neil Backhouse: Thank you, Anthony. Good afternoon, everyone, and thank you for participating in Occidental’s third quarter 2023 conference call. On the call with us today are Vicki Hollub, President and Chief Executive Officer; Richard Jackson, President, Operations, U.S. Onshore Resources and Carbon Management; Rob Peterson, Executive Vice President, Essential Chemistry; Ken Dillon, Senior Vice President and President International Oil and Gas Operations; and Mike Avery, President and General Manager of 1PointFive. This afternoon, we will refer to slides available on the Investors section of our website. The presentation includes a cautionary statement on Slide 2 regarding forward-looking statements that will be made on the call this afternoon.

We’ll also reference a few non-GAAP financial measures today. Reconciliations to the nearest corresponding GAAP measure can be found in the schedules to our earnings release and on our website. I’ll now turn the call over to Vicki. Vicki, please go ahead.

Vicki Hollub: Thank you, Neil, and good afternoon, everyone. The team and I would like to discuss 2 key topics today. First, how our portfolio of assets managed by excellent teams once again drove record performance this quarter, which flowed to the bottom-line. And second, as we promised, an update on 1PointFive and Direct Air Capture, which we expect to play an increasingly important role in our portfolio over time. One important note before we begin. Rob Peterson, Executive VP of Essential Chemistry, will cover our financial results and guidance today. Senior VP and Chief Financial Officer, Sunil Mathew, is unfortunately attending to a family emergency. We send our thoughts and prayers to Sunil and his family. I’ll begin by reviewing our third quarter performance.

Our teams again performed exceptionally well with our assets this quarter and delivered strongest earnings and cash flow from operations that we’ve had to date this year. This positions us to further advance our shareholder return framework and established a strong trajectory for the fourth quarter. This follows the molecules from producing oil and gas to moving and marketing it to where it is most valued, to our OxyChem team making the products that the world needs to improve lives. And finally, returning the molecules back underground as we capture emissions and sequester them forever. First, let’s review the exceptional results in oil and gas. Strong third quarter operational performance in oil and gas production exceeded the midpoint of our guidance by 34,000 BOE per day, enabling us to increase full year production guidance by 11,000 BOE per day.

Our third production guidance increased this year. Production outperformance was driven by strong new well performance in the DJ and Delaware basins as well as higher uptime due to favorable operating conditions in the Gulf of Mexico. In the Permian and Rockies, our high quality inventory, combined with our team’s subsurface expertise, continue to drive record cumulative well performance improvements. This exceptional well performance and our activity plans for the remainder of the year drove our full year production guidance increase. In the third quarter, our Delaware operations team set a record with a continuous pumping time of over 88 hours, doubling the previous, and at that time, audacious record in the second quarter. Our teams are hyper focused and diligent.

Their advancements are continuing to drive high performance. Additionally, during the third quarter in the DJ Basin, we began deploying a new and innovative natural gas hybrid frac pump with Liberty Energy. We believe that deploying this forward looking technology, which is an e-frac alternative, will reduce completion cost over time as well as emissions. Our midstream business performed better than expected due to the timing of cargo sales amidst rising commodity prices. And finally to OxyChem, which exceeded earnings guidance for the quarter, largely due to improved PVC and caustic soda export demand. I can’t say it enough. OxyChem provides so much synergy and cash flow generation to our portfolio and as you’ll hear, plays a large role in our Direct Air Capture story.

During the third quarter, we repurchased $600 million of common shares and have now completed 60% of our $3 billion share repurchase program. Share repurchases and our dividend enabled additional redemptions of the preferred equity. We have now redeemed over 15% of the deferred equity outstanding. Now I’d like to turn to the second big topic for our call, an update on the progress that our subsidiary 1PointFive is experiencing with Direct Air Capture or DAC. The DAC technology we are using leverages the skills and expertise of our chemicals business and our enhanced oil recovery business. Our team’s achievements in DAC will drive benefits to Oxy in three ways. First, it will advance DAC for commercial use. Second, it will increase Oxy’s slow resilience and generate solid returns to our shareholders over the long-term.

And third, it will broaden our pathway to carbon neutrality and help others to achieve the same. Some of the team’s recent achievements include the agreement we announced last night with BlackRock as a partner in our first DAC plant, STRATOS. This is a huge signal to the marketplace that we are attracting capital as well as customers to this exciting technology. We are very happy to have BlackRock as our partner. Our team also reached a Memorandum of Understanding with our longstanding partner, ADNOC, to explore opportunities with DAC and carbon dioxide sequestration hubs in the U.S. and the UAE. And in just 8 weeks, we announced our first initiative together, a preliminary engineering study with ADNOC for a megaton scale DAC facility in the UAE.

And shortly after the second quarter earnings call, the U.S. Department of Energy announced that it had selected 1PointFive to receive a grant for development of our South Texas DAC hub. And just this morning, Oxy Oman announced an agreement with OQ Gas Networks, the sole transporter of natural gas in Oman, to jointly study potential carbon capture, utilization and sequestration projects in the sultanate. I’ll now turn the call over to Richard, who will delve deeper into the momentum and progression of the carbon dioxide removal market and our DAC development plans.

Richard Jackson : Thank you, Vicki. Today, I’m glad to provide a business update focused on Direct Air Capture and the carbon dioxide removal credit market. I also want to reiterate Vicki’s comments on how thankful we are to welcome BlackRock as our initial investment partner for STRATOS, our first DAC facility. This is the most recent milestone in our DAC development strategy and is aligned with our execution approach, which we will discuss today. Across the Oxy, we are determined to solve challenges to both improve our business and provide essential resources for the world. Our low carbon business is an expansion of that strategy and is positioned to be a key value differentiator for Oxy in emerging markets. I will begin by highlighting several of our key DAC-related accomplishments.

As we advanced our low carbon business strategy, Direct Air Capture was recognized as both a necessary and valuable technology. Removing CO2 from the atmosphere provides a required solution for businesses across hard to abate emission sectors. Near-term, we believe our DAC technology can provide carbon dioxide removal credits, or CDRs, at a lower cost and at larger scale than other product solutions, especially for businesses in the heavy duty transportation sector that are working to hit decarbonization targets this decade. Longer term, cost effective access to atmospheric CO2 to create innovative new fuels or other products can provide a pathway to lower carbon materials and commodities for many industries. From strategy to development, our team has been forward-thinking and deliberate with a roadmap to advance technology, partnerships, and markets.

We continue to view technology to commercial product through the lens of capability, scale and systems thinking. In the case of DAC, we believe Carbon Engineering created a unique and innovative large-scale carbon removal process that has a strong fit to our OxyChem capabilities. This process uses equipment and materials that are ready to deploy at scale. Additionally, capturing large volumes of cost effective CO2 improves Oxy’s larger integrated oil and gas, CCUS, and low carbon businesses for today and tomorrow. Early teamwork with Carbon Engineering led to a more advanced innovation center at CE and the U.S. development partnership with an exclusive license for Oxy. The formation of 1PointFive followed to allow more partnerships focused on market development for CDRs. Carbon removals reached critical momentum both through early voluntary market leaders like Airbus purchasing CDRs and through new policy support measures like the U.S. Infrastructure Investment and Jobs Act set to catalyze early commercial development for technologies including DAC.

This progress was recognized worldwide and enabled new global development and CDR demand scenarios for 1PointFive to begin to take shape. Meanwhile, measurable project progress was being made with CE process innovations, the groundbreaking for STRATOS, our DAC 1 plant and with key zero emission power and emissions measurement actions to support a durable and a well-defined CDR product. Our DAC development took another step forward through the partnership with the King Ranch that enables a 30 megaton hub in South Texas both to improve future back costs and to provide a more certain supply of CDRs for an increasing demand. In 2022, the U.S. Department of Energy announced a $3.5 billion regional Direct Air Capture hubs program. In August of this year, we were notified that 1PointFive was selected by the DOE for a program grant to develop our second DAC in this South Texas hub.

This follows strong policy momentum over the last several years for CCUS through U.S. 45Q tax credit enhancements, including specific recognition for the role of carbon removals in the recent Inflation Reduction Act. Recently, we’ve seen major project momentum with ADNOC support for the UAE DAC development and especially BlackRock’s key investment in STRATOS, which bolsters our ability both to build and capitalize our plans. Further support comes from recent CDR purchase agreements with ANA, a key aviation partner; with Amazon, which purchased 250,000 metric tons of carbon removals; and with TD Bank Group with one of the largest purchases of CDRs by a financial institution. These further showcase the growing appreciation for the necessity of CDRs from leaders in core industry sectors and the need to scale them in the near-term.

Finally, the acquisition of Carbon Engineering comes at a time where the need to accelerate DAC innovation is critical. We are excited to fully support CE as they advance DAC technology while also rapidly integrating next generation of innovations into our DAC plant builds. This helps to make sure we maximize value across our partnerships and supports our ability to meet this growing CDR demand. Our DAC strategy has been visionary and deliberate, aligning investment with advancements with technology, partnerships, policy, and CDR markets. This approach has enabled Oxy to deploy capital responsibly, while establishing leadership in this critical technology and growing CDR market. Our accomplishments to date have positioned us as a DAC technology and market leader.

The next phase of our DAC strategy is focused on growth through accelerating cost reduction and expanding partnerships. With full ownership of Carbon Engineering’s technology now in-house, we expect to supplement and support the highly talented Carbon Engineering team to accelerate the innovations that ultimately reduce the cost to capture years earlier than initially anticipated. By pairing the strengths of Carbon Engineering, Oxy Major Projects and OxyChem, we will continue to reduce costs for the life of the plant. Early innovations could reduce the cost of DAC and could improvements the air contactor geometry, where we believe we can materially reduce the number of air contactors per facility. We are also designing air contactor fan motors that consume less power.

Additionally, our teams are leveraging OxyChem’s electrochemical and chlor-alkali expertise to evaluate advanced sorbents and improvements to chemical reaction rates that could increase DAC efficiency. Oxy has a proven track record of innovation, improving operational efficiencies, and large scale project development. The application of these core competencies will be key in the successful deployment of large scale DAC. Both the CDR demand and global development opportunities continue to increase. By accelerating the cost reduction of DAC, we aim to provide a low cost, large scale supply of CDRs that we believe we can provide at a cost effective solution to help businesses achieve their climate targets and improve the value proposition for DAC developers.

We believe that DAC generated CDRs will play a significant role in corporate emissions reduction strategies and specifically for several hard-to-abate sectors like aviation and marine, and markets like low carbon fuels. Future regulatory and compliance frameworks that cap emissions growth are driving companies in certain sectors to purchase measurable and durable CDR credits like DAC CDRs. As we reduce the cost of DAC, we expect companies will increase the share of DAC CDRs in their portfolio of solutions. We have included 3 market demand scenarios in our earnings presentation to illustrate how the DAC CDR market may grow rapidly through the end of this decade as the cost to capture is reduced. Reducing costs will enable us to offer CDRs to an expanding market at lower price points.

In a scenario where the cost to capture remains at $450 per tonne, we still expect the market for DAC generated CDRs to be significantly undersupplied. Demand for CDR credits from the aviation industry is expected to reach an inflection point in 2027 when the International Civil Aviation Organization begins requiring airlines to reduce or offset their annual emissions through the Carbon Offsetting and Reduction Scheme for International Aviation also known as CORSIA. Operational improvements by airlines present limited opportunities for emissions reductions. We expect that emissions reductions from sustainable aviation fuel or SAF will also be constrained as SAF demand is anticipated to exceed supply once CORSIA and other SAF mandates come into effect.

While we recognize the importance of SAF and aviation’s pathway to decarbonization, SAF remains a partial solution that is currently unable to reduce emissions to true net-zero. Already DAC CDRs can be priced lower than SAF, while also having the ability to scale, meet demand, and deliver a true net-zero solution. We expect DAC CDRs will be an essential cost effective solution for several hard-to-abate industries to achieve their targets within these compliance markets. The pace at which we will develop DAC facilities will be driven by market demand and our ability to reduce costs. If the CDR market develops slower than expected, we will have the flexibility to refocus our efforts on R&D with the goal of bringing costs down faster. If the CDR market develops in line with the medium or high cases we’ve laid out, then we intend to continue executing on our cost down plan and to be positioned to secure development partners for capital.

This capital flexibility becomes most valuable if the CDR market grows in line with our high demand forecast. A high demand for DAC CDRs would likely shift our focus towards licensing DAC technology with other developers to increase CDR supply more rapidly. The CE acquisition helps unlock this development optionality as we can integrate our learnings into a DAC technology license. Regional development partners can then support the build out with local knowledge, technical and operational resources, and capital, while Oxy can support through a technical heavy but capital-light development approach. Based on our current plan, we anticipate that the LCV program capital, excluding third-party funding, will be up to $600 million per year through 2026.

Moving on to the DAC 1 and 2 developments, we are again excited to announce BlackRock will invest $550 million in STRATOS, our first DAC facility through a fund managed by its diversified infrastructure business. BlackRock’s investment demonstrates that DAC is becoming an investable asset class for world class financial institutions. STRATOS construction is progressing well and it’s approximately 30% complete. Additionally, the ongoing work at the Carbon Engineering Innovation Center has already identified several promising opportunities to lower cost on future DAC. We expect several of these ideas can be implemented into STRATOS to help demonstrate the improvements at scale and to be ready for future DAC builds. To accommodate these process improvements, we are optimizing the construction schedule for the two process trains.

This ensures STRATOS remains on schedule to be commercially operational in mid-2025 while also ensuring we are implementing the latest technical advancements earlier than previously planned. This may face some capacity into 2026, but optimizes our development plan and future costs. Our South Texas DAC hub has commenced front end engineering design and stratigraphic well testing is in progress. We are very appreciative of our recent selection for a grant from the U.S. Department of Energy and the meaningful work we are doing through that process. Though the timing and the amount of the DOE grant are not yet known, we look forward to the final agreement and announcement of additional details. We have continued to work within our framework of DAC investment principles that will enable us to advance development while delivering returns for our shareholders and value to our customers and partners.

We are focused on accelerating reductions in the cost to capture, which is expected to increase market demand for CDRs, and in turn, attract additional development partners. These factors will drive future development pace of DAC including a final investment decision of DAC 2. We will also continue to advance collaboration with companies like BlackRock, ADNOC and Oman’s OQ Gas Networks who share our long-term vision for Direct Air Capture in our broader low carbon product ecosystem. Across it all, we appreciate these partnerships that are enabling this business for Oxy and we are focused on delivery of this solution that can supply essential lower carbon products for the world. I will now turn the call over to Rob for our financial discussion.

Rob Peterson : Thank you, Richard. We posted an adjusted profit of $1.18 per diluted share and a reported profit of $1.20 per diluted share. The difference between adjusted and reported earnings was primarily driven by gains on sales of non-core upstream assets, partially offset by derivative losses in the premium paid on preferred equity redemptions. During the third quarter, strong operational execution enabled us to generate over $1.7 billion of free cash flow before working capital, and we concluded the third quarter with over $600 million of unrestricted cash. We experienced a modest negative working capital change during the period, partially driven by the increase in commodity prices. In October, we received $341 million in cash, the environmental remediation settlement we mentioned in the last earnings call.

As Vicki highlighted, each of our domestic assets exceeded the midpoint of third quarter production guidance, including in the Gulf of Mexico where favorable weather contributed to production exceeding the high-end of guidance and a higher than expected companywide oil cut. Production outperformance coupled with a portion of Gulf of Mexico plant maintenance moving into the fourth quarter resulting in better than expected domestic operating expenses of $10.20 per BOE for the third quarter. Capital spending in the third quarter was approximately $1.6 billion representing a slight decrease from the second quarter. We further advanced our shareholder return framework during the third quarter through the repurchase of $600 million of common shares, including $175 million which settled at the start of the fourth quarter.

Additionally, we have now redeemed over 15% of deferred equity with $342 million of preferred equity redemptions triggered and redeemed during the third quarter. As of November 7th, rolling 12-month common share distributions totaled $3.12, falling below the $4 preferred equity redemption trigger. It is unlikely that cumulative distributions to common shareholders will be above the $4 per share trigger again this year, primarily due to the concentration of share repurchases in the second half of 2022. However, we remain committed to the per share earnings and cash flow accretion benefits derived from our share repurchase program and we intend to continue repurchasing shares at a pace that is largely driven by commodity prices. As Vicki mentioned, we are raising our full year production guidance due to our outperformance in the third quarter.

We are guiding to 1.226 million BOE per day in the fourth quarter, our highest quarterly production for the year, despite hailstorms in Delaware Basin that caused power interruptions early in October. Property damage from these Permian storms and Gulf of Mexico maintenance are expected to result in the fourth quarter domestic operating cost of approximately $10.50 per BOE. Fourth quarter OxyChem guidance reflects typical seasonality, as well as the impact of a planned turnaround at our Ingleside chlor-alkali and VCM plant. This turnaround was the first ever of the ethylene cracker and the first total plant outage at the Ingleside Complex in over a decade. We are beginning to see early indications that PVC and caustic soda prices may have bottomed.

However, we may not have full clarity on the fundamentals of the upcoming business cycle until early next year, as challenges remain including global macroeconomic uncertainty and demand impacts from rising interest rates. Outperformance across our domestic businesses resulted in lower than anticipated corporate adjusted effective tax rate during the third quarter, which we expect will rebound to approximately 30% in the fourth quarter as a proportion of international to domestic income increases during the period. Moving on to capital, third quarter Permian capital spending was elevated as a result of program mix and activity optimization. In certain areas, we developed higher working interest projects than originally planned as we sought to balance OBO or operated by other production.

Company-wide capital spending to date and planned spending in the fourth quarter are likely to result in full year spending at the higher end of our guidance range. Our teams are finalizing our 2024 capital plan, which we look forward to announcing on our next call following Board approval. Today, I would like to revisit several points from previous calls regarding our expected 2024 capital plan. In the upstream business, we expect similar domestic onshore activity levels to on average to 2023. We also anticipate no material change in spending for our international assets. Additionally, we expect to run two drill ships in the Gulf of Mexico next year as part of our mid cycle investment program. OxyChem commenced work on the modernization expansion of the Battleground plant this year.

As construction advances, we anticipate an incremental $100 million of capital ending starting in 2024 compared to 2023 guidance. Incremental spending in the Battleground is expected to continue through 2025. To summarize, the third quarter of 2023 represents a strong operational and financial quarter for Oxy. As we are near the conclusion of this year, we are preparing for 2024 with a continued focus on operational excellence and delivering on our shareholder return framework. We are pleased with the progress of the framework to date. In addition to retiring the debt that matures in 2024, we intend to continue prioritizing share repurchases and our use of excess cash flow. The timing of when we may exceed the $4 preferred equity redemption trigger again will be determined by the pace of our share repurchase program, which will largely be driven by the macro environment.

I look forward to next quarter’s call where we expect to report on completing another strong year for Oxy. I will now turn the call back over to Vicki.

Vicki Hollub : Thank you, Rob. As Richard explained earlier, we expect DAC to play a more important role in our premier and diverse portfolio of assets. We believe tremendous additional potential exists there. Joining us today for the Q&A session, as Neil had mentioned earlier, will be Ken Dillon, who is Senior VP and President of International Oil and Gas operations, but also manages our Major Projects part of our business, the Major Projects Group. So he can answer questions with respect to the construction of DAC. And Mike Avery, President and General Manager of 1PointFive, as was mentioned earlier. He will answer any questions about the business aspects of how we’re running, and we’ll run the DAC and some of the other projects surrounding 1PointFive. So with that, I’ll now turn the call over to the moderator for questions.

Operator: [Operator Instructions] Our first question will come from Nitin Kumar with Mizuho.

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Q&A Session

Nitin Kumar: I want to start Vicki with the topic du jour in the industry M&A. I know Oxy has a deep bench of inventory that you highlight. But obviously with some deals out there recently, there’s been a focus on consolidation. Just wanted to get your thoughts on how you see Oxy fitting into that trend going forward?

Vicki Hollub: Well, Nitin, I do want to reiterate that we were early consolidators in our industry with the Anadarko acquisition, and we did that because we saw significant synergies there, and those were obvious to us. And they were in — the acreage was in an area that made it possible for us to understand the subsurface and to gain those synergies. Now that we’ve done that, we more than doubled our production with that acquisition. We’ve more than achieved the $2 billion of synergies that we had forecast, and now it’s considerably strengthened where we are today. So the good thing is we don’t have to do acquisitions. Therefore, while our BD group keeps up with and is aware of what’s happening in our industry, we feel no need to have to do anything or be a part of it.

Nitin Kumar: Vicki, I want to go back — I know the focus is on LCV today, but last quarter you talked about the strong performance in your Permian well productivity. There’s been some talk around improving technology and really focusing on improving recovery rates in the basin. You do as much technical work as anybody else. So just curious if you have any technology that you are deploying or seeing being deployed, that could lead to a step change in recovery factors?

Vicki Hollub: I think, I really feel like we’ve already had a step change in our recovery factors. And if you go back and look as far back as 2014 and ’15, the improvements that we’ve seen have been dramatic. But most of those improvements have been around understanding the subsurface better and being able to better design frac jobs and also our wellbore configuration so that we can not only get the most out of the subsurface from a modeling perspective for the design, but also from an operating standpoint. We have an operations team that is doing a lot on the surface and with artificial lift to take advantage of AI and other things to ensure that we get the most out of the wells from an operating perspective and that we continue to access that by using artificial intelligence, lowering our bottom hole pressures and making sure that we’re the best that we can be on the subsurface with respect to efficiencies.

Now, Richard and others would chomp at the bit to be able to talk to you about all the technical work we’re doing, but I consider that to be proprietary. And I really feel like we’ve disclosed a considerable amount in the past, and that’s enabled some others to follow some of what we’re doing. So to be honest, I’d just rather keep the proprietary stuff to ourselves for now. And from a technology perspective, we have mentioned some things that we’re doing internationally to recover more out of our wells in Oman. But I’ll just leave it at that. Richard really want to do just a couple of minutes. And probably what you’re going to say is you also have to be careful with the definition of recovery, right?

Richard Jackson: Yes. That’s right. And I’ll stay clean. The thing I wanted to highlight is just obviously recovery factor is core to what we’re doing. We’re really proud of the slides that we keep in our appendix, which shows year-on-year, they’re improving performance for our wells and not over a few days. We look at it on our one year cumes. And it’s not only in the Permian, it’s in the Rockies. And as Vicki alluded to, we were talking earlier, Ken has some great advancements in the Middle East as well. The other thing I wanted to say was our appraisal success. So, highlight this quarter on the Wolfcamp B well that came through the record well. The ability to go engineer and do those technical things for these new benches is core to what we believe is important as we go forward.

And so really proud of that appraisal success. The appraisal wells that we’ve drilled this year, we’ve already replenished the planned drill wells for this year. And they’re doing it at very low breakevens in terms of adding inventory. So I just wanted to add those two things to give recognition to our team and the progress they’re making.

Vicki Hollub: I thought, I was going to have to cut him off there for a second, but he did good.

Nitin Kumar: And I was just hoping that you wouldn’t, Vicki. But great job, guys.

Operator: Our next question will come from Neil Mehta with Goldman Sachs.

Neil Mehta : Thank you so much. And this is a really helpful update around LCV. I want to take you up, Vicki, on that offer to talk about construction and how that DAC plant is building towards the mid-2025 start? What are the biggest gating items to get it to completion and how you feel about your ability to mitigate those risks?

Vicki Hollub: We’ll pass that to Ken then.

Ken Dillon: So far, I’d say construction is going very well. Worley are performing extremely well in engineering, procurement and construction phase of the project, it’s basically we’re moving through the civil phase, where we’ve got around 550 people at site into the different trades, and we’ll move up to about 1,200 people, let’s say, by the end of Q1. So far, we’ve had no issues obtaining labor on the field in terms of procurement. We’re meeting construction needs at the moment, and we’ve committed around 90% of the material value that we need, so prices are locked in at the moment. So things are going very well. I think, Worley’s engineering capabilities are such that we’ve saved quite a bit of money in construction.

And also, we designed the system so that we can replicate that, based on the engineering that we’re carrying out today. We’re building a digital twin and we’re using AI going forward. On supply chain, I’d like to highlight the visionary vendors. We talked about that early on. We’re basically working with companies who have aligned CEOs who are truly supportive, and that’s made a huge difference for us. As you know, over the last couple of years, there’s been huge pressure on electric and instrumentation equipment. I’d like to highlight Siemens Industries in the U.S. Have really helped us out. They’ve really been committed to this project and what it means. Technip Energies are also very supportive all the way to the CEO. And we’ve received many suggestions from the visionary vendors on how to reduce the cost of their packages going forward, right down to very detailed specifications.

I don’t know if I can give one example, but one vendor that we visited has two assembly lines, one for bespoke equipment and one for standard equipment. And they drew our attention to if we change one thing in our specification, we could save an awful lot of money and their experiences. You don’t gain any extra reliability for doing that. Safety performance has been exceptional, so I think we’re now through 1.2 million man hours. So overall, things are going as well, as expected. And in terms of materials that are out with the required on-site dates, we don’t really have any. So generally working well together with vendors, Worley and fabricators. We have built materials off sites. We’ve built piping racks. We did this as a pilot to reduce fabrication labor at site.

That’s worked very well. We’ll definitely do that on future decks. And that takes you into the mode of can you get the point where you build a factory where you can generate piping materials, air contactor frames without doing all the work at site. So overall, project going well and getting a lot of help from vendors.