================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) JULY 19, 2001
OCCIDENTAL PETROLEUM CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 1-9210 95-4035997
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
10889 WILSHIRE BOULEVARD
LOS ANGELES, CALIFORNIA 90024
(Address of principal executive offices) (ZIP code)
Registrant's telephone number, including area code:
(310) 208-8800
================================================================================
Item 5. Other Events and Regulation FD Disclosure
------ -----------------------------------------
On July 19, 2001, Occidental Petroleum Corporation announced earnings
before special items for the second quarter 2001 of $466 million ($1.25 per
share), up 34-percent from $343 million ($0.93 per share) for the same period a
year ago.
In announcing the results, Dr. Ray R. Irani, chairman and chief executive
officer, said, "Strong energy prices, particularly in California's natural gas
market, resulted in outstanding earnings and cash flow for the second quarter
and the first half of this year. The chemical segment returned to profitability
in the second quarter after experiencing losses for the previous two quarters.
During the first half of the year, Occidental's earnings before special items of
$976 million, or $2.63 on a per share basis, were the highest in the history of
the company for any six-month period. We have used our free cash flow to reduce
debt by approximately $480 million during the first six months, raising the debt
reduction total to nearly $3.3 billion from our pro-forma peak debt of $9.2
billion in April 2000. Our debt to capitalization ratio at the end of June was
51-percent. Over the past week we announced the sale of our interest in the
Tangguh LNG project in Indonesia and the sale of the entity that leased a
pipeline in Texas to our former MidCon subsidiary. These two transactions will
provide an additional $750 million in after-tax net proceeds for debt reduction,
which would increase our total debt reduction so far this year to $1.23 billion.
We expect to have additional and significant debt reduction during the balance
of this year, and debt reduction will remain a high priority next year."
Net income was $473 million ($1.27 per share), compared with $564 million
($1.53 per share) for the same period last year. The second quarter 2001
included a $7 million gain, net of tax, related to the sale of additional
interests in the Gulf of Mexico. The second quarter 2000 included an after-tax
gain of $300 million related to the sale of an investment in Canadian Occidental
Petroleum Ltd. and an after-tax charge of approximately $79 million for the
write-down of chemical intermediates businesses. Sales increased 19-percent to
$3.8 billion in the second quarter of 2001, from $3.2 billion for the same
period a year ago.
Debt Reduction
--------------
During the quarter, total debt was reduced by $244 million, lowering total
debt at the end of the quarter to $5.9 billion and reducing the debt to
capitalization ratio to 51-percent. Interest expense (including distributions on
trust preferred securities but excluding interest income received on notes
receivable from Occidental Permian partners) was $113 million for the second
quarter of 2001, compared with $150 million for the second quarter of 2000. The
decline is primarily a result of the significant debt reduction over the last
twelve months.
If the Tangguh LNG and pipeline entity sales had occurred in the second
quarter, total debt on a pro-forma basis would have been reduced to $5.1
billion, with an implied debt to capitalization ratio of 48-percent.
Oil and Gas
-----------
The oil and gas segment earnings before special items were $799 million for
the second quarter 2001, compared with $557 million for the second quarter 2000.
The improvement in earnings is primarily the result of higher domestic natural
gas prices, partially offset by lower worldwide crude oil prices and lower crude
oil volumes primarily in Colombia. The California gas market price
1
premium remained strong in the second quarter 2001, resulting in an average
domestic gas price of $8.55 per thousand cubic feet.
Oil and gas segment earnings for the second quarter 2001 were $806 million
and included the $7 million gain, net of tax, discussed above.
Chemicals
---------
The chemicals segment earnings before special items were $58 million for
the second quarter 2001, compared with $154 million for the second quarter 2000.
The decline in earnings before special items reflects lower sales prices for
PVC, EDC and chlorine, lower earnings from equity affiliates and higher energy
costs, partially offset by higher prices for caustic soda. The earnings in the
second quarter 2001, compared with losses in the previous two quarters, reflect
lower energy and feedstock costs and the results of aggressive overhead
reduction efforts.
Chemical segment earnings also were $58 million for the second quarter 2001
compared to $34 million for the second quarter 2000 that included a $120 million
pre-tax charge for the write-down of chemical intermediates businesses.
Six Months Results
------------------
For the first six months of 2001, Occidental's earnings before special
items were $976 million ($2.63 per share), compared with $607 million ($1.65 per
share) for the same period of 2000. Net income was $957 million ($2.58 per
share) for the first six months of 2001, compared with $835 million ($2.27 per
share) for the same period of 2000. Sales increased by approximately 43-percent
to $8.3 billion for the first six months of 2001, from $5.8 billion for the same
period of 2000.
Forward-looking statements and estimates regarding exploration and production
activities, oil, gas and commodity chemical prices and their related earnings
effects, and cost reductions, as well as pro-forma estimates in this release are
based on assumptions concerning market, competitive, regulatory, environmental,
operational and other conditions. Actual results could differ materially as a
result of factors discussed in Occidental's Annual Report on Form 10-K.
2
SUMMARY OF SEGMENT NET SALES AND EARNINGS
(Millions, except per-share amounts)
Second Quarter Six Months
---------------- ----------------
Periods Ended June 30 2001 2000 2001 2000
================================= ======= ======= ======= =======
SEGMENT NET SALES
Oil and gas $ 2,964 $ 2,128 $ 6,576 $ 3,662
Chemical 881 1,067 1,744 2,107
------- ------- ------- -------
Net sales $ 3,845 $ 3,195 $ 8,320 $ 5,769
================================= ======= ======= ======= =======
SEGMENT EARNINGS (LOSS)
Oil and gas $ 806 $ 557 $ 1,752 $ 951
Chemical 58 34 (21) 177
------- ------- ------- -------
864 591 1,731 1,128
UNALLOCATED CORPORATE ITEMS
Interest expense, net (a) (71) (104) (147) (203)
Income taxes (b) (249) (349) (424) (499)
Trust preferred distributions
& other (14) (16) (30) (33)
Other (c) (57) 442 (146) 442
------- ------- ------- -------
INCOME BEFORE EXTRAORDINARY ITEMS
AND EFFECT OF CHANGES IN
ACCOUNTING PRINCIPLES 473 564 984 835
Extraordinary loss, net -- -- (3) --
Cumulative effect of changes
in accounting principles, net -- -- (24) --
------- ------- ------- -------
NET INCOME 473 564 957 835
Effect of repurchase of Trust
Preferred Securities -- -- - 1
------- ------- ------- -------
EARNINGS APPLICABLE TO COMMON
STOCK $ 473 $ 564 $ 957 $ 836
======= ======= ======= =======
BASIC EARNINGS PER COMMON SHARE
Income before extraordinary
items and effect of changes
in accounting principles $ 1.27 $ 1.53 $ 2.65 $ 2.27
Extraordinary loss, net -- -- (.01) --
Cumulative effect of changes
in accounting principles, net -- -- (.06) --
------- ------- ------- -------
$ 1.27 $ 1.53 $ 2.58 $ 2.27
======= ======= ======= =======
DILUTED EARNINGS PER COMMON SHARE
Income before extraordinary
items and effect of changes
in accounting principles $ 1.26 $ 1.53 $ 2.64 $ 2.27
Extraordinary loss, net -- -- (.01) --
Cumulative effect of changes
in accounting principles, net -- -- (.06) --
------- ------- ------- -------
$ 1.26 $ 1.53 $ 2.57 $ 2.27
======= ======= ======= =======
AVERAGE BASIC COMMON SHARES
OUTSTANDING 372.0 368.8 371.1 368.5
--------------------------------- ------- ------- ------- -------
See footnotes on following page.
3
(a) The second quarter and six months year-to-date 2001 include $28 million and
$61 million, respectively, interest income on notes receivable from
Occidental Permian partners. Comparable amounts for 2000 were $30 million
for both the second quarter and six months year-to-date.
(b) Includes an offset for (charges)/credits in lieu of U.S. federal income
taxes allocated to the divisions. Divisional earnings have been impacted by
a ($3) million charge at Oil and Gas and an $18 million credit at Chemicals
in the second quarter of 2001. The second quarter of 2000 had credits
allocated to the divisions of $2 million and $4 million at Oil and Gas and
Chemicals, respectively. The 2001 results include a ($4) million charge at
Oil and Gas related to an asset sale and a $14 million credit at Chemicals
related to asset sales. Additionally, the 2000 results include the tax
related to the gain on the sale of Canadian Occidental Petroleum Ltd. in
April 2000. The gain is reflected in Unallocated Corporate Items - Other.
(c) Includes preferred distributions to the Occidental Permian partners. The
second quarter and six months year-to-date 2001 include $28 million and $62
million, respectively. The second quarter and six months year-to-date 2000
include $30 million. These amounts are essentially offset by the interest
income discussed in (a) above. Additionally, the 2000 results include the
pre-tax gain of $493 million related to the sale of the investment in
Canadian Occidental Petroleum Ltd.
4
SUMMARY OF OPERATING STATISTICS
Second Quarter Six Months
---------------- ----------------
Periods Ended June 30 2001 2000 2001 2000
================================= ======= ======= ======= =======
NET OIL, GAS AND LIQUIDS
PRODUCTION PER DAY
United States
Crude oil and liquids (MBBL)
California 72 76 72 63
Permian 137 114 136 64
US Other -- 2 -- 4
------- ------- ------- -------
Total 209 192 208 131
Natural Gas (MMCF)
California 298 298 307 301
Hugoton 163 164 165 165
Permian 146 105 147 78
US Other -- 113 -- 108
------- ------- ------- -------
Total 607 680 619 652
Latin America
Crude oil and condensate (MBBL)
Colombia -- 44 10 40
Ecuador 14 18 13 17
------- ------- ------- -------
Total 14 62 23 57
Eastern Hemisphere
Crude oil and condensate (MBBL)
Oman 10 10 10 10
Pakistan 8 5 7 5
Qatar 41 61 42 51
Russia 27 26 28 26
Yemen 32 28 34 32
------- ------- ------- -------
Total 118 130 121 124
Natural Gas (MMCF)
Pakistan 49 51 50 51
Barrels of Oil Equivalent (MBOE) 450 506 463 429
CAPITAL EXPENDITURES (millions) $ 309 $ 211 $ 547 $ 333
======= ======= ======= =======
DEPRECIATION, DEPLETION AND
AMORTIZATION OF ASSETS (millions) $ 237 $ 234 $ 482 $ 419
================================= ======= ======= ======= =======
5
Item 9. Regulation FD Disclosure
------ ------------------------
Text of Speech by Stephen I. Chazen, Chief Financial Officer and
----------------------------------------------------------------
Executive Vice President - Corporate Development
------------------------------------------------
Occidental Petroleum Corporation
STEPHEN CHAZEN
Chief Financial Officer and
Executive Vice President - Corporate Development
- Conference Call -
Second Quarter 2001 Earnings Announcement
July 19, 2001
Los Angeles, California
Good morning, and thanks for joining us.
Most, if not all, of you have already received a copy of the press release
announcing our second quarter earnings along with the Investor Relations
Supplemental Schedules. If you haven't received them, you can find them on our
website, oxy.com, or on the SEC's EDGAR site.
Earnings before special items were $466 million, or $1.25 per share, That's
a 34-percent increase above the $343 million, or 93 cents per share, we earned
in the second quarter last year.
For the first half of this year, earnings before special items were $976
million, or $2.63 per share, compared to $607 million, or $1.65 per share last
year. These are the highest earnings for any six-month period in the company's
history.
On a segment basis, oil and gas second quarter earnings before special
items were $799 million, compared to $557 million during the same period a year
ago. This improvement is due primarily to higher natural gas prices.
Our average domestic natural gas price realizations were approximately
three times higher this year at $8.55 per thousand cubic feet compared to $2.81
in the same quarter last year. The primary driver behind higher gas prices was
the premium of approximately $8.00 per million BTUs above the average NYMEX
price we received for our California gas production. Looking ahead, we are
experiencing a softening of California natural gas prices and a narrowing of the
differential to about $2.50 per thousand cubic feet. We expect our average third
quarter California gas price realization to remain well above the NYMEX for the
same period. We produce about 300 million cubic feet per day in California and a
differential of one-dollar equates to $27 million in quarterly oil and gas
earnings.
Increased natural gas prices more than offset the decline in oil price
realizations during the second quarter. Oil prices for the quarter averaged
$23.02 per barrel compared to $24.69 during the same period last year. A $1.00
per million BTUs swing in NYMEX gas prices has a
6
$62 million impact on our quarterly oil and gas earnings. Likewise, a $1.00 per
barrel change in oil prices will impact quarterly earnings by $28 million.
A number of factors accounted for the decline in production compared to the
same period a year ago, with the primary factor being the shut-in of Colombian
production for the entire quarter due to a pipeline outage. Our Colombian
operation produced an average of 44,000 barrels of oil per day during the second
quarter last year. We also sold properties in the Gulf of Mexico that
contributed 113 million cubic feet per day of gas production in the second
quarter last year.
The impact of these events was partially offset by the addition of
production from the former Altura properties we purchased in late April last
year.
Turning to Qatar. What appears on the surface to be a 20,000-barrel per day
decline in our Qatar production is due primarily to a timing issue surrounding
cargo shipments. Last year, we had an extra cargo in the second quarter while
this year we had one less than normal.
Exploration expense was $18 million in the quarter compared to $15 million
in last year's second quarter and $21 million in this year's first quarter. Our
spending rate remains well below trend, but in the current quarter we expect to
have the results from the drilling of two major wells, for a total estimated
investment of $70 million.
Chemical earnings before special items were $58 million compared to $154
million in last year's second quarter. The year-to-year decline reflects lower
prices for most of our products, lower earnings from our equity interest in
Equistar and higher energy costs, partially offset by higher caustic soda
prices. During the first quarter this year, we reported a loss of $53 million.
The sequential quarterly improvement is due to reduced energy and feedstock
costs and lower overhead. Last quarter we took a severance charge as part of our
ongoing efforts to cut costs and the benefits of those actions are beginning to
flow through.
The fundamental weakness in chemicals demand we discussed last quarter is
continuing, but it's encouraging that the inventory liquidations we saw over the
last several quarters appears to be over. However, a meaningful recovery
continues to depend on a strengthening of the economy.
Cash flow from operations during the first half of the year was
approximately $1.3 billion. During the second quarter we increased shareholder
equity by $453 million. At the same time, we reduced total debt by $244 million
to under $5.9 billion, compared to just under $6.4 billion at the end of last
year. We expect to continue using our free cash flow to pay down debt. I want to
remind everyone that our calculation of total debt includes preferred
securities, the Altura non-recourse debt, Oxy's corporate debt and other
obligations.
At the end of the quarter our debt to total capitalization ratio was down
to 51-percent, compared to 57-percent at the end of last year. Interest expense,
including distributions on trust preferred securities, of $113 million during
the second quarter this year is $37 million less than last year's second
quarter. Through the first six months of this year, total interest expense of
$238 million is $28 million below the same period a year ago.
7
Yesterday, we announced the sale of our residual interest in Occidental
Texas Pipeline Company to Kinder Morgan Inc. for $360 million. We had retained
this interest as part of the sale of MidCon in 1998. In the current interest
rate environment, we had an opportunity to monetize our interest in this
non-core asset. This transaction follows last week's announcement of the sale to
Mitsubishi of our interests in the Tangguh LNG project in Indonesia for $480
million. The combined after-tax proceeds from these two transactions provide a
total of $750 million for additional debt reduction which is equivalent to about
one year's free cash flow in a typical year. Thus the proceeds from these sales
have allowed us to accelerate our debt reduction program by about one year.
The two transactions will generate a combined after-tax gain of $125
million in the third quarter. The Tangguh sale has closed while the pipeline
sale will close later in the year.
If these transactions had occurred in the second quarter, our total debt on
a pro-forma basis would have been $5.1 billion, with an implied debt to
capitalization ratio of 48-percent. Debt reduction remains a high priority for
the remainder of this year and in 2002.
Last week, Standard & Poor's and Moody's both announced that they were
reviewing our credit rating for possible upgrades.
Capital spending for the quarter was $309 million and $547 for the first
half. We expect total spending for the year of $1.3 billion, including $100
million for chemicals.
Now I'd like to turn the conference call over to Dr. Ray Irani, Chairman
and CEO.
Text of Speech by Dr. Ray R. Irani, Chairman and Chief Executive Officer
------------------------------------------------------------------------
Occidental Petroleum Corporation
DR. RAY R. IRANI
Chairman and Chief Executive Officer
- Conference Call -
Second Quarter 2001 Earnings Announcement
July 19, 2001
Los Angeles, California
Thank you, Steve.
As Steve reported, we had another outstanding quarter thanks to continued
strong performance by our oil and gas operations and encouraging signs of
recovery in our chemical business. Our earnings for the first half of the year
are the highest of any six-month period in the company's history. The
acceleration of our debt reduction program by selling two non-core assets at
very attractive prices has produced our strongest balance sheet in more than two
decades. Our balance sheet will grow even stronger as we continue to pay down
debt in the second half of the year.
8
Since 1997, we've concentrated on growing our oil and gas business by
narrowing our geographic scope to three core areas, divesting non-core and
under-performing assets and focusing on large, long-lived "legacy" assets. We've
targeted the Middle East as the premier growth area among our core areas that
also include the U.S. and Latin America. We believe we have the strongest
position in the Middle East of any company our size.
Occidental has been an important player in the region ever since we
discovered the billion-barrel Augila field in Libya in 1966. In the meantime,
we've established strong positions in Oman, Qatar and Yemen. We're the largest
private oil producer in Oman where we've enjoyed considerable exploration
success. We're the operator of the largest, most successful enhanced oil
recovery project in Qatar. And, we're currently the largest holder of
exploration acreage in Yemen where we hope to add to our existing oil production
base in Masila and East Shabwa.
By now I'm sure you're all aware that Occidental was one of eight western
oil companies, including five U.S. firms, to win a stake in the Saudi Arabia
Natural Gas Initiative. This Initiative marks the first time the Kingdom has
opened its doors to foreign investment in the energy sector since the 1970s. On
June 3, I joined the CEOs of the other companies in Jeddah, Saudi Arabia to sign
preliminary agreements covering the three huge projects that make up this
Initiative. The Saudi leadership has made it clear that they expect the
partnership to be a rewarding experience for all participants that will open the
door to other investment opportunities.
Occidental is a member of the Core Venture 2 consortium, which will be
investing in the Red Sea area. Occidental and Marathon each will have a
20-percent interest in this multi- billion dollar project, while ExxonMobil is
the lead partner with a 60-percent interest. The Red Sea venture involves
development of discovered gas from the Midyan and Barqan fields located in the
northwest part of the Kingdom, and construction of related gas processing and
pipeline facilities. The consortium expects to build at least one power plant
and a water desalination unit, as well as evaluate the potential for a
petrochemical plant. The project also calls for onshore and offshore exploration
in Blocks 40 to 49 located along the Red Sea. Exploration success in these
blocks will lay the foundation for additional investment opportunities in power
generation, water desalination and petrochemicals in the western part of the
Kingdom. The Kingdom has emphasized that the companies were selected as
long-term, strategic partners and each company in Core Venture 2 will
participate in all segments of the venture.
The project's potential is enormous given the geology of the region and the
rapidly growing local market. Saudi Arabia is the world's biggest hydrocarbon
province with the world's largest oil reserves and fourth largest natural gas
reserves. The Kingdom currently consumes about 4 billion cubic feet of natural
gas per day and expects that number to rise to 7 billion cubic feet per day in
2003. Current estimates indicate the Kingdom will need from 12 to 14 billion
cubic feet per day to meet its consumption projections by 2025.
Saudi Aramco opened data rooms earlier this month to allow the consortium's
technical experts to gather additional data for use in their evaluation of the
project. A new negotiating team has been formed that is comprised of members of
the Ministries and Government agencies directly involved in the Initiative, as
well as a number of specialized sub-committees to deal with various aspects of
the project. A ministerial committee headed by Foreign Minister Prince Saud
9
al-Faisal will continue to oversee the entire process until definitive
agreements are reached at the end of this year or early next year.
Saudi leaders see these projects as the beginning of the next phase of the
Kingdom's industrial development. This phase will focus on further development
of the Kingdom's natural gas reserves to diversify and expand industrial
development and to create thousands of new jobs for Saudi citizens.
For Occidental, participation in the Red Sea project means an attractive
return on investment and an even stronger presence in one of our core areas.
Recent news reports have noted that the expected integrated rate of return for
the Kingdom's core venture projects, each of which includes upstream, midstream,
and downstream components, will make them very competitive with rates of return
for other energy projects around the world. The Saudi leaders recognize this
important consideration and want their partners to be successful so that the
companies will be encouraged to continue to invest in the Kingdom for many years
to come.
Given the reasonable level of risk involved, and the expectation of quite
attractive rates of return, Occidental is very excited about the opportunity to
participate in the Kingdom's historic Natural Gas Initiative.
Thank you - and we're now ready to answer questions.
--------------------------------------------------------------------------------
Portions of this presentation are forward-looking and involve risks
and uncertainties that could significantly affect expected results.
Factors that could cause results to differ materially include, but are
not limited to: global commodity pricing fluctuations for oil, natural
gas and chemicals; competitive pricing pressures; higher than expected
costs including feedstock; the supply/demand considerations for
Occidental's products; any general economic recession domestically or
internationally; and not successfully completing any expansion,
capital expenditure or acquisition. The United States Securities and
Exchange Commission (SEC) permits oil and natural gas companies, in
their filings with the SEC, to disclose only proved reserves
demonstrated by actual production or conclusive formation tests to be
economically producible under existing economic and operating
conditions. We use certain terms in this presentation, such as
probable, possible and recoverable reserves, that the SEC's guidelines
strictly prohibit us from using in filings with the SEC. U.S.
investors are urged to consider carefully the disclosure in our form
10-K, available through the following toll-free telephone number,
1-888-OXYPETE (1-888-699-7383) or on the Internet at
http://www.oxy.com. You also can obtain a copy from the SEC by calling
1-800-SEC-0330.
--------------------------------------------------------------------------------
10
Supplemental Investor Information
---------------------------------
Investor Relations Supplemental Schedules
[OXY LOGO]
OCCIDENTAL PETROLEUM
2001 SECOND QUARTER
NET INCOME (LOSS) ($ MILLIONS)
EARNINGS
REPORTED BEFORE
INCOME ADJUSTMENTS SPECIAL ITEMS
-------- ----------- -------------
Oil & Gas $ 806 $ (7) Asset sale $ 799
Chemical 58 58
Corporate
Interest - Permian Non-recourse debt (23) (23)
Interest - all others (76) (76)
Taxes (249) (249)
Trust Pfd Distributions & Other (14) (14)
Other (29) (29)
-------- -------- --------
NET INCOME $ 473 $ (7) $ 466
======== ======== ========
BASIC EARNINGS PER SHARE $ 1.27 $ 1.25
======== ========
11
Investor Relations Supplemental Schedules
[OXY LOGO]
OCCIDENTAL PETROLEUM
2000 SECOND QUARTER
NET INCOME (LOSS) ($ MILLIONS)
EARNINGS
REPORTED BEFORE
INCOME ADJUSTMENTS SPECIAL ITEMS
-------- ----------- -------------
Oil & Gas $ 557 $ -- $ 557
Chemical 34 120 Specialty write-down 154
Corporate
Interest - Permian Non-recourse debt (36) (36)
Interest (98) (98)
Taxes (349) 152 Tax effect of adjustments (197)
Trust Pfd Distributions & Other (16) (16)
Other 472 (493) CanOxy gain (21)
-------- -------- --------
NET INCOME $ 564 $ (221) $ 343
======== ======== ========
BASIC EARNINGS PER SHARE $ 1.53 $ 0.93
======== ========
12
Investor Relations Supplemental Schedules
[OXY LOGO]
OCCIDENTAL PETROLEUM
2001 FIRST SIX MONTHS
NET INCOME (LOSS) ($ MILLIONS)
EARNINGS
REPORTED BEFORE
INCOME ADJUSTMENTS SPECIAL ITEMS
-------- ----------- -------------
Oil & Gas $ 1,752 $ (7) Asset sale $ 1,745
Chemical (21) 26 Severance and plant shut down cost 5
Corporate
Interest - Permian Non-recourse debt (56) (56)
Interest - all others (152) (152)
Taxes (424) (70) State tax reserve reversal (494)
Trust Pfd Distributions & Other (30) (30)
Other (85) 49 Environmental remediation (42)
(6) OIL insurance dividend
-------- -------- --------
Income before extraordinary loss 984 (8) 976
and cumulative effect of changes in
accounting principles
Extraordinary loss, net (3) 3 Early debt defeasance --
Cumulative effect of changes in (24) 24 Derivative & hedge accounting --
accounting principles
-------- -------- --------
NET INCOME $ 957 $ 19 $ 976
======== ======== ========
BASIC EARNINGS PER SHARE $ 2.63
Income before extraordinary loss $ 2.65
and cumulative effect of changes in
accounting principles
Extraordinary loss, net (0.01) --
Cumulative effect of changes in (0.06) --
accounting principles
-------- --------
NET INCOME $ 2.58 $ 2.63
======== ========
13
Investor Relations Supplemental Schedules
[OXY LOGO]
OCCIDENTAL PETROLEUM
2000 FIRST SIX MONTHS
NET INCOME (LOSS) ($ MILLIONS)
EARNINGS
REPORTED BEFORE
INCOME ADJUSTMENTS SPECIAL ITEMS
-------- ----------- -------------
Oil & Gas $ 951 $ -- $ 951
Chemical 177 120 Specialty write-down 297
Corporate
Interest - Permian Non-recourse debt (36) (36)
Interest (197) (197)
Taxes (499) 156 Tax effect of adjustments (343)
Trust Pfd Distributions & Other (33) (33)
Other 472 (11) OIL insurance dividend (32)
(493) CanOxy gain
-------- -------- --------
NET INCOME $ 835 $ (228) $ 607
======== ======== ========
BASIC EARNINGS PER SHARE $ 2.27 $ 1.65
======== ========
14
Investor Relations Supplemental Schedules
[OXY LOGO]
OCCIDENTAL PETROLEUM
2001 SECOND QUARTER NET INCOME (LOSS)
REPORTED INCOME COMPARISON
SECOND FIRST
QUARTER QUARTER
2001 2001 B/(W)
-------- -------- --------
OIL & GAS $ 806 $ 946 ($ 140)
CHEMICAL 58 (79) 137
CORPORATE
INTEREST-PERMIAN NON-RECOURSE DEBT (23) (33) 10
INTEREST - ALL OTHERS (76) (76) 0
TAXES (249) (175) (74)
TRUST PFD DISTRIBUTIONS & OTHER (14) (16) 2
OTHER (29) (56) 27
-------- -------- --------
INCOME BEFORE EXTRAORDINARY ITEMS 473 511 (38)
AND CUMULATIVE EFFECT OF CHANGES
IN ACCOUNTING PRINCIPLES
EXTRAORDINARY ITEMS -- (3) 3
CUMULATIVE EFFECT OF CHANGES IN
ACCOUNTING PRINCIPLES -- (24) 24
-------- -------- --------
NET INCOME $ 473 $ 484 ($ 11)
======== ======== ========
BASIC EARNINGS PER SHARE $ 1.27 $ 1.31 ($ 0.04)
======== ======== ========
EFFECTIVE TAX RATE 33% 25% -8%
======== ======== ========
================================================================================
OCCIDENTAL PETROLEUM
2001 SECOND QUARTER NET INCOME (LOSS)
INCOME BEFORE SPECIAL ITEMS COMPARISON
SECOND FIRST
QUARTER QUARTER
2001 2001 B/(W)
-------- -------- --------
OIL & GAS $ 799 $ 946 ($ 147)
CHEMICAL 58 (53) 111
CORPORATE
INTEREST-PERMIAN NON-RECOURSE DEBT (23) (33) 10
INTEREST - ALL OTHERS (76) (76) 0
TAXES (249) (245) (4)
TRUST PFD DISTRIBUTIONS & OTHER (14) (16) 2
OTHER (29) (13) (16)
-------- -------- --------
NET INCOME $ 466 $ 510 ($ 44)
======== ======== ========
BASIC EARNINGS PER SHARE $ 1.25 $ 1.38 ($ 0.13)
======== ======== ========
EFFECTIVE TAX RATE 34% 32% -2%
======== ======== ========
15
Investor Relations Supplemental Schedules
[OXY LOGO]
OCCIDENTAL PETROLEUM
OIL & GAS
SEGMENT EARNINGS BEFORE SPECIAL ITEMS VARIANCE ANALYSIS
($ MILLIONS)
2001 2nd Quarter $ 799
2001 1st Quarter 946
--------
$ (147)
========
Price Variance $ (77)
Volume Variance (47)
Exploration Expense Variance 3
All other (26)
--------
TOTAL VARIANCE $ (147)
========
--------------------------------------------------------------------------------
OCCIDENTAL PETROLEUM
CHEMICAL
SEGMENT EARNINGS BEFORE SPECIAL ITEMS VARIANCE ANALYSIS
($ MILLIONS)
2001 2nd Quarter $ 58
2001 1st Quarter (53)
--------
$ 111
========
Sales Price $ 9
Sales Volume/Mix 12
Operations/Manufacturing 64 *
All Other 26
--------
TOTAL VARIANCE $ 111
========
* Lower energy and feedstock costs.
16
Investor Relations Supplemental Schedules
[OXY LOGO]
OCCIDENTAL PETROLEUM
2001 SECOND QUARTER NET INCOME (LOSS)
REPORTED INCOME COMPARISON
SECOND SECOND
QUARTER QUARTER
2001 2000 B/(W)
-------- -------- --------
OIL & GAS $ 806 $ 557 $ 249
CHEMICAL 58 34 24
CORPORATE
INTEREST-PERMIAN NON-RECOURSE DEBT (23) (36) 13
INTEREST - ALL OTHERS (76) (98) 22
TAXES (249) (349) 100
TRUST PFD DISTRIBUTIONS & OTHER (14) (16) 2
OTHER (29) 472 (501)
-------- -------- --------
NET INCOME $ 473 $ 564 $ (91)
======== ======== ========
BASIC EARNINGS PER SHARE $ 1.27 $ 1.53 ($ 0.26)
======== ======== ========
EFFECTIVE TAX RATE 33% 38% 5%
======== ======== ========
================================================================================
OCCIDENTAL PETROLEUM
2001 SECOND QUARTER NET INCOME (LOSS)
INCOME BEFORE SPECIAL ITEMS COMPARISON
SECOND SECOND
QUARTER QUARTER
2001 2000 B/(W)
-------- -------- --------
OIL & GAS $ 799 $ 557 $ 242
CHEMICAL 58 154 (96)
CORPORATE
INTEREST-PERMIAN NON-RECOURSE DEBT (23) (36) 13
INTEREST - ALL OTHERS (76) (98) 22
TAXES (249) (197) (52)
TRUST PFD DISTRIBUTIONS & OTHER (14) (16) 2
OTHER (29) (21) (8)
-------- -------- --------
NET INCOME $ 466 $ 343 $ 123
======== ======== ========
BASIC EARNINGS PER SHARE $ 1.25 $ 0.93 $ 0.32
======== ======== ========
EFFECTIVE TAX RATE 34% 36% 2%
======== ======== ========
17
Investor Relations Supplemental Schedules
[OXY LOGO]
OCCIDENTAL PETROLEUM
OIL & GAS
SEGMENT EARNINGS BEFORE SPECIAL ITEMS VARIANCE ANALYSIS
($ MILLIONS)
2001 2nd Quarter $ 799
2000 2nd Quarter 557
--------
$ 242
========
Price Variance $ 363
Volume Variance (68)
Exploration Expense Variance (3)
All Other (50)
--------
TOTAL VARIANCE $ 242
========
--------------------------------------------------------------------------------
OCCIDENTAL PETROLEUM
CHEMICAL
SEGMENT EARNINGS BEFORE SPECIAL ITEMS VARIANCE ANALYSIS
($ MILLIONS)
2001 2nd Quarter $ 58
2000 2nd Quarter 154
--------
$ (96)
========
Sales Price $ (51)
Sales Volume/Mix (3)
Operations/Manufacturing (7) *
All Other (35) **
--------
TOTAL VARIANCE $ (96)
========
* Higher energy and lower feedstock costs.
** Lower equity earnings partially offset by lower costs.
18
Investor Relations Supplemental Schedules
[OXY LOGO]
OCCIDENTAL PETROLEUM
SUMMARY OF OPERATING STATISTICS
-------------------------------
SECOND QUARTER SIX MONTHS
2001 2000 2001 2000
---- ---- ---- ----
NET PRODUCTION PER DAY:
UNITED STATES
CRUDE OIL AND LIQUIDS (MBL)
California 72 76 72 63
Permian 137 114 136 64
US Other 0 2 0 4
---- ---- ---- ----
TOTAL 209 192 208 131
NATURAL GAS (MMCF)
California 298 298 307 301
Hugoton 163 164 165 165
Permian 146 105 147 78
US Other 0 113 0 108
---- ---- ---- ----
TOTAL 607 680 619 652
LATIN AMERICA
CRUDE OIL (MBL)
Colombia 0 44 10 40
Ecuador 14 18 13 17
---- ---- ---- ----
TOTAL 14 62 23 57
EASTERN HEMISPHERE
CRUDE OIL (MBL)
Oman 10 10 10 10
Pakistan 8 5 7 5
Qatar 41 61 42 51
Russia 27 26 28 26
Yemen 32 28 34 32
---- ---- ---- ----
TOTAL 118 130 121 124
NATURAL GAS (MMCF)
Pakistan 49 51 50 51
BARRELS OF OIL EQUIVALENT (MBOE) 450 506 463 429
--------------------------------------------------------------------------------
United States: California crude oil and liquids production is down due to the
swap of Milne Point production for the Bravo Dome CO2 assets. US Other natural
gas production is down due to the sale of a partial interest in the Gulf of
Mexico assets in the third quarter of last year.
Latin America: The decrease in Colombia's oil production is a result of pipeline
disruption. The decline in Ecuador's production is a result of a farm out of 40
percent of Occidental's interest to Alberta Energy Company in the fourth quarter
of last year.
Eastern Hemisphere: The decline in Qatar production is due primarily to a timing
issue. In the second quarter of this year there was one less cargo shipment than
normal while the second quarter of last year had an extra cargo shipment.
19
Investor Relations Supplemental Schedules
[OXY LOGO]
SUMMARY OF OPERATING STATISTICS
SECOND QUARTER SIX MONTHS
2001 2000 2001 2000
---- ---- ---- ----
OIL & GAS:
----------
PRICES
UNITED STATES
Crude Oil ($/BBL) 23.11 24.98 23.71 24.68
Natural gas ($/MCF) 8.55 2.81 9.30 2.63
LATIN AMERICA
Crude oil ($/BBL) 18.90 25.86 21.69 26.11
EASTERN HEMISPHERE
Crude oil ($/BBL) 23.36 23.64 22.69 23.93
Natural Gas ($/MCF) 2.41 1.69 2.30 1.71
United States: The price of natural gas in the second quarter of 2001 mainly
reflects the premium of approximately $8.00 per million BTU's above the average
NYMEX received for gas sales from Elk Hills.
SECOND QUARTER SIX MONTHS
2001 2000 2001 2000
---- ---- ---- ----
EXPLORATION EXPENSE
Domestic $ 9 $ 14 $ 22 $ 19
Latin America 2 1 4 2
Eastern Hemisphere 7 -- 13 --
---- ---- ---- ----
TOTAL $ 18 $ 15 $ 39 $ 21
==== ==== ==== ====
20
Investor Relations Supplemental Schedules
[OXY LOGO]
OCCIDENTAL PETROLEUM
CHEMICALS
VOLUME (M TONS)
SECOND QUARTER SIX MONTHS
2001 2000 2001 2000
---- ---- ----- -----
MAJOR PRODUCTS
Chlorine 786 751 1,491 1,604
Caustic 750 842 1,419 1,645
Ethylene Dichloride 154 242 376 546
PVC Resins 496 487 997 937
CHEMICALS
PRICES (INDEX)
SECOND QUARTER SIX MONTHS
2001 2000 2001 2000
---- ---- ---- ----
MAJOR PRODUCTS
Chlorine 0.76 1.67 0.82 1.49
Caustic 1.42 0.65 1.37 0.69
Ethylene Dichloride 0.74 1.66 0.78 1.65
PVC Resins 0.77 1.03 0.75 0.99
CHLORINE
--------
OXYCHEM COMMENTARY
------------------
o Demand for chlorine is expected to remain weak in the 2nd half of 2001.
Chlorine to EDC is expected to remain significantly below 2000 levels, as
demand is not expected to rebound until 2002.
o Prices are not expected to improve from the 2nd quarter levels for the
remainder of 2001.
INFLUENCING FACTORS:
--------------------
Demand into the vinyls sector has been adversely affected and overall demand
into other key market segments has been lackluster due to reduced
housing/construction demand and the general economic slowdown. With limited new
production capacity, returning demand will drive long-term volume and upward
price pressures.
21
Investor Relations Supplemental Schedules
[OXY LOGO]
CAUSTIC
-------
OXYCHEM COMMENTARY
------------------
o Pricing is expected to be under pressure in the 2nd half due to continued
weak demand and higher imports.
o Demand continues to remain balanced.
o U.S. Gulf Coast spot prices are expected to fall $50-70 per ton from peak
1st half levels due to the continued economic slowdown.
INFLUENCING FACTORS:
--------------------
Demand has been weakened as a result of global economic slowdown, but more
importantly, as a result of additional caustic volume from Qatar and lower
exports to Asia and Australia. Lower operating rates will continue to limit
supply, but weak caustic demand has begun exerting downward pressure on prices.
EDC
---
OXYCHEM COMMENTARY
------------------
o Demand in general is expected to remain weak. Additional supply due to
lower feedstock cost still exists in other parts of the world. Total sales
for 2001 are expected to be the lowest since 1991.
o Pricing continues to come under pressure due to weak demand and oversupply.
o Based on forecasted weak demand, low prices and high feedstock costs,
OxyChem idled its 750,000 ton per year EDC facility at Ingleside, Texas on
June 1st. It will remain idle until improved economics justify resumption
of operations.
INFLUENCING FACTORS:
--------------------
Lower demand into the export vinyls market and declining volumes for VCM/PVC
continue to soften pricing from all-time highs in 2000.
PVC/VCM
-------
OXYCHEM COMMENTARY
------------------
o Domestic PVC demand improved through the 2nd quarter as converters
increased operating rates in order to maintain a balanced supply chain.
22
Investor Relations Supplemental Schedules
[OXY LOGO]
o Domestic PVC prices fell slightly through the 2nd quarter, down from a high
in March 2001, as feedstock costs weakened.
o Export PVC prices into Asia continued to decline from previous levels for
June delivery. Export volumes from the U.S. are being impacted as margins
have been squeezed below break-even points.
o Domestic demand for VCM is weak but steady. Despite significant planned and
unplanned VCM outages at Dow, OxyVinyls, Formosa and Georgia Gulf, VCM
supply continues to outpace current demand.
o VCM export prices peaked at the beginning of the 2nd quarter due to Asian
outages. Recent prices have dropped rapidly as demand in Asia did not
return to expected levels.
INFLUENCING FACTORS:
--------------------
Prices will remain under pressure due to the combined effects of industry excess
capacity and anticipated feedstock price erosion.
23
Investor Relations Supplemental Schedules
[OXY LOGO]
SUMMARY OF OPERATING STATISTICS
-------------------------------
SECOND QUARTER SIX MONTHS
2001 2000 2001 2000
---- ---- ---- ----
CAPITAL EXPENDITURES ($MM)
Oil & Gas
California $ 64 $ 51 $123 $ 84
Permian 76 33 126 37
Other - U.S. 44 18 67 32
Latin America 17 23 38 32
Eastern Hemisphere 78 55 144 102
Chemicals 27 29 45 44
Corporate 3 2 4 2
---- ---- ---- ----
TOTAL $309 $211 $547 $333
==== ==== ==== ====
DEPRECIATION, DEPLETION &
AMORTIZATION OF ASSETS ($MM)
Oil & Gas
Domestic $130 $119 $262 $186
Latin America 4 11 10 20
Eastern Hemisphere 45 46 93 94
Chemicals 48 48 97 98
Corporate 10 10 20 21
---- ---- ---- ----
TOTAL $237 $234 $482 $419
==== ==== ==== ====
24
Investor Relations Supplemental Schedules
[OXY LOGO]
OCCIDENTAL PETROLEUM
CORPORATE
($ MILLIONS)
CAPITALIZATION
30-Jun-01 31-Dec-00
--------- ---------
Oxy Long-Term Debt (including current maturities) 3,535 3,541
Permian Non-Recourse Debt 1,500 1,900
Gas Sales Obligation (current and non-current) 348 411
Trust Preferred Securities 468 473
Others 28 31
--------- ---------
TOTAL DEBT 5,879 6,356
========= =========
EQUITY 5,595 4,774
========= =========
Total Debt To Total Capitalization 51% 57%
25
Investor Relations Supplemental Schedules
[OXY LOGO]
Portions of this presentation are forward-looking and involve risks and
uncertainties that could significantly affect expected results. Factors that
could cause results to differ materially include, but are not limited to: global
commodity pricing fluctuations; competitive pricing pressures; higher than
expected costs including feedstock; the supply/demand considerations for
Occidental's products; any general economic recession domestically or
internationally; and not successfully completing any expansion, capital
expenditure or acquisition.
26
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
OCCIDENTAL PETROLEUM CORPORATION
(Registrant)
DATE: July 19, 2001 S. P. Dominick, Jr.
---------------------------------------------------
S. P. Dominick, Jr., Vice President and Controller
(Chief Accounting and Duly Authorized Officer)