(Adds conference call details, updates shares)
Aug 9 (Reuters) - Occidental Petroleum Corp, the largest oil and gas producer in the Permian basin, on Thursday said it was raising its capital spending sharply but it maintained a tepid production forecast for the year, causing investors to send its shares down as much 6.3 percent.
Producers are under pressure from investors to increase production while reining in expenses. In March, investors punished the world's largest publicly traded oil producer, Exxon Mobil, after it outlined plans to double annual earnings by 2025 through heavier investments here
Houston-based Occidental, which was the biggest drag Thursday on the S&P Energy Index and earlier the second biggest on the broader S&P 500 index, boosted its spending target to $5 billion from $3.9 billion, a 28 percent increase that surprised some analysts.
On an earnings call on Thursday, Chief Executive Vicki Hollub said the company’s outlays might go higher next year, to between $5 billion to $5.3 billion if oil prices, now about $67 a barrel, held above $60.
“We were a bit under capital versus our peers,” Hollub said in response to a question about the magnitude of the budget increase.
Occidental lowered the top end of its production guidance while boosting the lower end. Occidental now expects annual output of 650,000 barrels of oil equivalent per day to 664,000 boe/d, compared with its earlier guidance of 645,000 boe/d to 665,000 boe/d.
The company also said on its conference call that it raised annual guidance for production in the Permian by 3 percent, where it plans to spend most of the increased capex.
“The disproportionate raise of 2018 capex relative to production guidance are going to be a hurdle for the stock near term,” Jefferies analyst Jason Gammel said.
Chief Financial Officer Cedric Burgher said the company expects increased Permian production due to improved well productivity and an increase in well count.
The production gains and a sale of pipeline and oil-export assets will add about $5 billion to the company’s 2018 cash flow, he said, helping finance share repurchases and strengthening its balance sheet.
Occidental had said in March that it expected its Permian shale division to break even - or generate as much cash as it spends - by the third quarter..
Shares of the company were down about 4 percent at $77.83 in Thursday afternoon. (Reporting by Laharee Chatterjee and Anirban Paul in Bengaluru)