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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ___________ TO ___________
COMMISSION FILE NUMBER 1-9210
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OCCIDENTAL PETROLEUM CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 95-4035997
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
10889 WILSHIRE BOULEVARD, LOS ANGELES, CALIFORNIA 90024
(Address of Principal Executive Offices) (ZIP Code)
(310) 208-8800
(Registrant's Telephone Number, Including Area Code)
------------
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at March 31, 1995
--------------------------- -----------------------------
Common stock $.20 par value 317,442,367 shares
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OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
CONTENTS
PAGE
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets --
March 31, 1995 and December 31, 1994 2-3
Consolidated Condensed Statements of Operations --
Three months ended March 31, 1995 and 1994 4
Consolidated Condensed Statements of Cash Flows --
Three months ended March 31, 1995 and 1994 5
Notes to Consolidated Condensed Financial Statements 6-10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11-14
PART II OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 4. Submission of Matters to a Vote of Security-Holders 16
Item 6. Exhibits and Reports on Form 8-K 16
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PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
MARCH 31, 1995 AND DECEMBER 31, 1994
(Amounts in millions)
1995 1994
============================================================================ ========= =========
ASSETS
CURRENT ASSETS
Cash and cash equivalents (Note 5) $ 118 $ 129
Receivables, net 1,038 965
Inventories (Note 6) 750 748
Prepaid expenses and other 381 416
--------- ---------
Total current assets 2,287 2,258
LONG-TERM RECEIVABLES, net 123 131
EQUITY INVESTMENTS (Note 13) 704 692
PROPERTY, PLANT AND EQUIPMENT, at cost, net of
accumulated depreciation, depletion and amortization of $9,007
at March 31, 1995 and $8,884 at December 31, 1994 (Note 7) 14,374 14,502
OTHER ASSETS 417 406
--------- ---------
$ 17,905 $ 17,989
============================================================================ ========= =========
The accompanying notes are an integral part of these financial statements.
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OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
MARCH 31, 1995 AND DECEMBER 31, 1994
(Amounts in millions)
1995 1994
============================================================================ ========= =========
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Current maturities of senior funded debt and capital lease liabilities $ 71 $ 69
Notes payable 22 20
Accounts payable 860 847
Accrued liabilities (Note 8) 1,020 1,212
Domestic and foreign income taxes 157 53
--------- ---------
Total current liabilities 2,130 2,201
--------- ---------
SENIOR FUNDED DEBT, net of current maturities and unamortized
discount 5,711 5,823
--------- ---------
DEFERRED CREDITS AND OTHER LIABILITIES
Deferred and other domestic and foreign income taxes 2,539 2,565
Other (Note 8) 2,975 2,943
--------- ---------
5,514 5,508
--------- ---------
NONREDEEMABLE PREFERRED STOCK, COMMON STOCK AND
OTHER STOCKHOLDERS' EQUITY
Nonredeemable preferred stock, stated at liquidation value 1,325 1,325
Common stock, at par value 63 63
Other stockholders' equity
Additional paid-in capital 4,910 5,004
Retained earnings (deficit) (1,751) (1,929)
Cumulative foreign currency translation adjustments 3 (6)
--------- ---------
4,550 4,457
--------- ---------
$ 17,905 $ 17,989
============================================================================ ========= =========
The accompanying notes are an integral part of these financial statements.
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OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994
(Amounts in millions, except per-share amounts)
1995 1994
============================================================================ ======== ========
REVENUES
Net sales and operating revenues
Oil and gas operations $ 705 $ 484
Natural gas transmission operations 538 634
Chemical operations 1,472 989
Interdivisional sales elimination and other (1) (1)
-------- --------
2,714 2,106
Interest, dividends and other income 26 33
Gains on asset dispositions, net 6 2
Income from equity investments (Note 13) 25 4
-------- --------
2,771 2,145
-------- --------
COSTS AND OTHER DEDUCTIONS
Cost of sales 2,027 1,813
Other operating expenses 245 205
Exploration expense 18 26
Interest and debt expense, net 149 145
-------- --------
2,439 2,189
-------- --------
INCOME (LOSS) BEFORE TAXES 332 (44)
Provision (credit) for domestic and foreign
income and other taxes (Note 12) 154 (4)
-------- --------
NET INCOME (LOSS) 178 (40)
Preferred dividends (23) (17)
-------- --------
EARNINGS (LOSS) APPLICABLE TO COMMON STOCK $ 155 $ (57)
======== ========
EARNINGS (LOSS) PER COMMON SHARE $ .49 $ (.19)
======== ========
DIVIDENDS PER SHARE OF COMMON STOCK $ .25 $ .25
======== ========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 317.3 306.2
============================================================================ ======== ========
The accompanying notes are an integral part of these financial statements.
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OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994
(Amounts in millions)
1995 1994
============================================================================ ======= =======
CASH FLOW FROM OPERATING ACTIVITIES
Net income (loss) $ 178 $ (40)
Adjustments to reconcile income to net cash from operating activities
Depreciation, depletion and amortization of assets 238 207
Deferred income tax provision (credit) 12 (25)
Other noncash charges to income 105 17
Gains on asset dispositions, net (6) (2)
Income from equity investments (25) (4)
Changes in operating assets and liabilities (188) (140)
Other operating, net (28) (43)
------- -------
286 (30)
Operating cash flow from discontinued operations (1) (9)
------- -------
Net cash provided (used) by operating activities 285 (39)
------- -------
CASH FLOW FROM INVESTING ACTIVITIES
Capital expenditures (160) (247)
Purchase of businesses (5) (5)
Sale of businesses, net 49 (53)
Proceeds from disposals of property, plant and equipment, net 15 2
Other investing, net 22 8
------- -------
Net cash used by investing activities (79) (295)
------- -------
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from senior funded debt 62 --
Net proceeds from commercial paper and revolving credit agreements (182) (141)
Principal payments on senior funded debt and capital lease liabilities (8) (60)
Proceeds from issuance of preferred stock and common stock 8 568
Payments of notes payable, current maturities of senior
funded debt and capital lease liabilities 1 (4)
Cash dividends paid (98) (87)
------- -------
Net cash provided (used) by financing activities (217) 276
------- -------
Increase (decrease) in cash and cash equivalents (11) (58)
Cash and cash equivalents -- beginning of period 129 157
------- -------
Cash and cash equivalents -- end of period $ 118 $ 99
============================================================================ ======= =======
The accompanying notes are an integral part of these financial statements.
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OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
March 31, 1995
1. General
The accompanying unaudited consolidated condensed financial statements
have been prepared by Occidental Petroleum Corporation (Occidental)
pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and disclosures normally included in
notes to consolidated financial statements have been condensed or
omitted pursuant to such rules and regulations, but resultant
disclosures are in accordance with generally accepted accounting
principles as they apply to interim reporting. The consolidated
condensed financial statements should be read in conjunction with the
consolidated financial statements and the notes thereto incorporated
by reference in Occidental's Annual Report on Form 10-K for the year
ended December 31, 1994 (1994 Form 10-K).
In the opinion of Occidental's management, the accompanying
consolidated condensed financial statements contain all adjustments
(consisting only of normal recurring adjustments) necessary to present
fairly Occidental's consolidated financial position as of March 31,
1995 and the consolidated results of operations and cash flows for the
three months then ended. The results of operations and cash flows for
the period ended March 31, 1995 are not necessarily indicative of the
results of operations or cash flows to be expected for the full year.
Certain financial statements and notes for prior years have been
changed to conform to the 1995 presentation.
Reference is made to Note 1 to the consolidated financial statements
incorporated by reference in the 1994 Form 10-K for a summary of
significant accounting policies.
2. Asset Acquisitions and Dispositions
Reference is made to Note 3 to the consolidated financial statements
incorporated by reference in the 1994 Form 10-K for a description of
asset acquisitions in 1994.
3. Accounting Changes
Reference is made to Note 4 to the consolidated financial statements
incorporated by reference in the 1994 Form 10-K for a description of
accounting changes.
4. Supplemental Cash Flow Information
Cash payments during the three month periods ended March 31, 1995 and
1994 included federal, foreign and state income taxes of approximately
$17 million and $69 million, respectively. Interest paid (net of
interest capitalized) totaled approximately $163 million and $137
million for the three month periods ended March 31, 1995 and 1994,
respectively.
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5. Cash and Cash Equivalents
Cash equivalents consist of highly liquid short-term money market
instruments with maturities of three months or less when purchased.
Cash equivalents totaled $191 million and $180 million at March 31,
1995 and December 31, 1994, respectively.
A cash management system is utilized to minimize the cash balances
required for operations and to invest the surplus cash in liquid
short-term money market instruments and/or to pay down short-term
borrowings. This can result in the balance of short-term money market
instruments temporarily exceeding cash and cash equivalents.
6. Inventories
A portion of inventories is valued under the LIFO method. The
valuation of LIFO inventory for interim periods is based on
management's estimates of year-end inventory levels and costs.
Inventories consist of the following (in millions):
Balance at March 31, 1995 December 31, 1994
====================== ============== =================
Raw materials $ 145 $ 135
Materials and supplies 197 201
Work in progress 23 21
Finished goods 432 428
------ ------
797 785
LIFO reserve (47) (37)
------ ------
Total $ 750 $ 748
====== ======
7. Property, Plant and Equipment
Reference is made to the consolidated balance sheets and Note 1
thereto incorporated by reference in the 1994 Form 10-K for a
description of investments in property, plant and equipment.
8. Contract Impairment Reserve and Other Liabilities
Accrued liabilities -- current and other liabilities -- noncurrent
include reserves for contract impairment at MidCon Corp. that
recognize the disadvantageous aspects of certain gas purchase and
sales contracts resulting from economic and regulatory conditions.
Reference is made to Note 1 to the consolidated financial statements
incorporated by reference in the 1994 Form 10-K regarding the contract
impairment reserve. The current portion of the reserve totaled $4
million at March 31, 1995 and December 31, 1994. The noncurrent
portion of the reserve totaled $137 million at March 31, 1995 and
December 31, 1994.
Other liabilities -- noncurrent include capital lease liabilities, net
of the current portion, of $284 million and $291 million at March 31,
1995 and December 31, 1994, respectively.
9. Retirement Plans and Postretirement and Postemployment Benefits
Reference is made to Note 12 to the consolidated financial statements
incorporated by reference in the 1994 Form 10-K for a description of
the retirement plans and postretirement benefits of Occidental and its
subsidiaries (see Note 3).
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10. Lawsuits, Claims and Related Matters
Occidental and certain of its subsidiaries have been named in a
substantial number of governmental proceedings as defendants or
potentially responsible parties under the Comprehensive Environmental
Response, Compensation and Liability Act (CERCLA) and corresponding
state acts. These proceedings seek funding, remediation and, in some
cases, compensation for alleged property damage, punitive damages and
civil penalties, aggregating substantial amounts. Occidental is
usually one of many companies in these proceedings, and has to date
been successful in sharing response costs with other financially sound
companies. Occidental has accrued reserves at the most likely cost to
be incurred in those proceedings where it is probable that Occidental
will incur remediation costs which can be reasonably estimated. For
the remaining proceedings as to which Occidental does not have
sufficient information to determine a range of liability, Occidental
does have sufficient information on which to base the opinion
expressed in the last paragraph of this Note.
There is a currently pending action seeking relief for remedial and
response measures under federal environmental laws brought by the
federal government in 1979 in the U.S. District Court for the Western
District of New York against Occidental Chemical Corporation (OCC),
Occidental and others, regarding a former chemical waste landfill.
The federal government is claiming $108 million, plus an estimated $90
million in pre-judgment interest. The court has held OCC jointly and
severally liable under CERCLA for response costs, but OCC has asserted
a counterclaim against the federal government for its responsibility
arising from direct deposits of waste and the performance of wartime
contracts. The amount of liability of OCC and the federal government,
respectively, will be determined in a subsequent trial. In July 1994,
the Court approved a settlement between OCC and the State of New York
which resolved all respective claims that had been asserted between
them in this action. Approximately 1,000 past and present residents
of areas adjacent to this site and another former chemical landfill
site continue to pursue actions brought in the Supreme Court, Niagara
County, New York, against OCC and, in some instances, Occidental and
others, claiming damages for personal injuries or wrongful death and
property damages allegedly resulting from exposure to chemical
residues, as well as punitive damages. The Occidental defendants deny
liability in these actions. Occidental has brought an action against
various of its insurers in the same court to enforce coverage with
respect to this site, certain other former landfill sites and two
chemical plants, including the foregoing government and private
actions in New York, which the insurers are defending.
In 1988, the Office of Hearings and Appeals (OHA) of the U.S.
Department of Energy (DOE) issued a remedial order to Cities Service
Oil and Gas Corporation, now OXY USA Inc. (OXY USA), asserting that
certain crude oil tier trades by OXY USA between 1979 and 1981
violated the DOE's petroleum price regulations and ordering OXY USA to
make restitution. In 1992, an administrative law judge (ALJ) upheld
most of the remedial order. In December 1993, the Federal Energy
Regulatory Commission (FERC) reversed the ALJ decision and the
remedial order, and held that there had been no violation of the price
regulations. In 1994, the FERC denied all motions for reconsideration
and two groups of intervenors subsequently filed for judicial review
of the FERC orders in the U.S. District Court for the District of
Columbia. In 1992, the DOE proposed a revised remedial order to seek
recovery of substantially the same amounts for most of these same tier
trades under an alternative theory, alleging violation of certain
regulations relating to the certification of crude oil to the DOE's
crude oil entitlements program, which is contested by OXY USA. The
amount sought by the DOE in the proposed revised remedial order, which
is now before the OHA, was approximately $254 million plus accrued
interest amounting to approximately $868.5 million at December 31,
1994.
OCC and affiliated entities produced products containing
dibromochloropropane (DBCP) until 1977 when the State of California
banned DBCP. This pesticide was developed and initially registered by
other chemical companies, produced by several major U.S. chemical
companies and distributed by many U.S. companies. Seven public and
private water providers have actions pending against the developers,
producers and distributors of DBCP, including OCC and Occidental, in
Superior Court, San Francisco
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County, California. Currently, there are approximately 50 wells of
such providers which exceed California's maximum contaminant level.
The actions allege DBCP contamination of water supplies and seek
contribution from all defendants for remediation costs, including
filtering of affected wells, and punitive damages.
It is impossible at this time to determine the ultimate legal
liabilities that may arise from the lawsuits, proceedings and claims
discussed above or from various other lawsuits and proceedings pending
against Occidental and its subsidiaries, some of which involve
substantial amounts. However, in management's opinion, after taking
into account reserves, none of the lawsuits, proceedings and claims
specifically discussed above nor the various other pending lawsuits
and proceedings should have a material adverse effect upon the
consolidated financial position of Occidental, although the resolution
in any reporting period of one or more of these matters could have a
material impact on Occidental's results of operations for that period.
11. Other Commitments and Contingencies
Occidental has certain other commitments and contingent liabilities
under contracts, guarantees and joint ventures, as well as other
potential obligations.
Natural Gas Pipeline Company of America (Natural) is a party to a
number of contracts that require Natural to purchase natural gas at
prices in excess of the prevailing market price. As a result of a FERC
order prohibiting interstate pipelines from using their gas
transportation and storage facilities to market gas to sales
customers, Natural no longer has a sales market for the gas it is
required to purchase under these contracts. This order went into
effect on Natural's system on December 1, 1993. Natural is incurring
substantial transition costs to reform these contracts with gas
suppliers. Settlement agreements reached by Natural and its former
sales customers, under which Natural will recover from those customers
over a four-year period a significant amount of the gas supply
realignment (GSR) costs it incurs, have been approved by the FERC.
The FERC has also permitted Natural to implement, subject to possible
refund, a tariff mechanism to recover additional portions of its GSR
costs in rates charged to transportation customers that were not party
to the settlements.
Reference is made to Note 9 to the consolidated financial statements
incorporated by reference in the 1994 Form 10-K for information
concerning Occidental's long-term purchase obligations for certain
products and services.
In management's opinion, after taking into account reserves, none of
such commitments and contingencies discussed above should have a
material adverse effect upon the consolidated financial position of
Occidental, although the resolution in any reporting period of one or
more of these matters could have a material impact on Occidental's
results of operations for that period.
12. Income Taxes
The provision for taxes based on income for the 1995 and 1994 interim
periods was computed in accordance with Interpretation No. 18 of APB
Opinion No. 28 on reporting taxes for interim periods and was based on
projections of total year pretax income.
At December 31, 1994, Occidental had, for U.S. federal income tax
return purposes, a net operating loss carryforward of approximately
$650 million, a business tax credit carryforward of $65 million and an
alternative minimum tax credit carryforward of $240 million available
to reduce future income taxes. To the extent not used, the net
operating loss carryforward expires in varying amounts beginning in
2002
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and the business tax credit expires in varying amounts during the
years 1996 through 2001. The alternative minimum tax credit
carryforward does not expire.
Occidental is subject to audit by taxing authorities for varying
periods in various tax jurisdictions. Management believes that any
required adjustments to Occidental's tax liabilities will not have a
material adverse impact on its financial position or results of
operations.
13. Equity Investments
Investments in companies in which Occidental has a voting stock
interest of at least 20 percent, but not more than 50 percent, and
certain partnerships are accounted for on the equity method. At March
31, 1995, Occidental's equity investments consisted primarily of
joint-interest pipelines, including a pipeline in the Dutch sector of
the North Sea, a 30 percent investment in the common shares of
Canadian Occidental Petroleum Ltd. (CanadianOxy) and a chemical
partnership. The following table presents Occidental's proportionate
interest in the summarized financial information of its equity method
investments (in millions):
Three Months ended March 31, 1995 1994
============================ ======= ======
Revenues $ 192 $ 147
Costs and expenses 167 143
------- ------
Net income $ 25 $ 4
======= ======
14. Summarized Financial Information of Wholly Owned Subsidiary
Occidental has guaranteed the payments of principal of, and interest
on, certain publicly traded debt securities of its subsidiary, OXY USA
Inc. (OXY USA). The following tables present summarized financial
information for OXY USA (in millions):
Three Months ended March 31, 1995 1994
============================ ======= ======
Revenues $ 176 $ 186
Costs and expenses 190 172
------- ------
Net income (loss) $ (14) $ 14
======= ======
Balance at March 31, 1995 December 31, 1994
=============================== ============== =================
Current assets $ 100 $ 113
Intercompany receivable $ 275 $ 246
Noncurrent assets $ 2,036 $ 2,069
Current liabilities $ 161 $ 167
Interest bearing note to parent $ 129 $ 137
Noncurrent liabilities $ 1,126 $ 1,114
Stockholders' equity $ 995 $ 1,010
------------------------------- -------------- -----------------
15. Subsequent Events
In May of 1995, Occidental sold its high density polyethylene business
to Lyondell Petrochemical Company and its polyvinyl chloride facility
at Addis, Louisiana to Borden Chemicals and Plastics. In addition,
Occidental sold certain Canadian oil and gas assets, which were
acquired as part of the purchase of Placid Oil Company in December
1994. The combined cash proceeds from these asset dispositions were
in excess of $500 million.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Occidental's net income for the first quarter of 1995 totaled $178 million, on
net sales and operating revenues of $2.7 billion, compared with a net loss of
$40 million, on net sales and operating revenues of $2.1 billion, for the same
period of 1994. Earnings per common share were $.49 for the first quarter of
1995, compared with a loss per common share of $.19 for the same period of
1994.
The increase in net sales and operating revenues primarily reflected the impact
of improved chemical prices and increased oil trading activity. The first
quarter earnings reflected significantly improved chemical prices and profit
margins, primarily for PVC, caustic soda and petrochemicals. In addition, the
1995 results, as compared with the similar period of 1994, reflected higher
worldwide oil and gas production and higher crude oil prices, partially offset
by lower domestic natural gas prices. The 1994 first quarter results reflected
a net benefit of $7 million resulting from the reversal of reserves no longer
required and the adoption of Statement of Financial Accounting Standards No.
112 -- "Employers' Accounting for Postemployment Benefits."
Income from equity investments totaled $25 million for the first quarter of
1995, compared with $4 million for the similar period of 1994. The increase in
1995 primarily reflected higher equity earnings from chemical and oil and gas
investments.
Income taxes were a provision of $154 million for the three months ended March
31, 1995, compared with a benefit of $4 million for the same period of 1994.
The increase primarily resulted from higher divisional earnings in 1995.
The following table sets forth the sales and earnings of each operating
division and corporate items (in millions):
First Quarter
----------------------
1995 1994
======== ========
DIVISIONAL NET SALES
Oil and gas $ 705 $ 484
Natural gas transmission 538 634
Chemical 1,472 989
Other (1) (1)
-------- --------
NET SALES $ 2,714 $ 2,106
======== ========
DIVISIONAL EARNINGS
Oil and gas $ 60 $ 4
Natural gas transmission 75 76
Chemical 307 22
-------- --------
442 102
UNALLOCATED CORPORATE ITEMS
Interest expense, net (144) (143)
Income taxes, administration and other (120) 1
-------- --------
NET INCOME (LOSS) $ 178 $ (40)
======== ========
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Oil and gas earnings for the first quarter of 1995 were $60 million, compared
with $4 million for the same period of 1994. The first quarter results of
1995, compared with 1994, reflected higher worldwide oil and gas production and
higher crude oil prices, partially offset by lower domestic natural gas prices.
Included in the 1994 results was a $7 million charge for severance and related
costs. Oil and gas prices are sensitive to complex factors, which are outside
the control of Occidental. Accordingly, Occidental is unable to predict with
certainty the direction, magnitude or impact of future trends in sales prices
for oil and gas.
Natural gas transmission earnings for the first quarter of 1995 were $75
million, compared with $76 million for the same period of 1994. The 1994 first
quarter results included a net benefit of $12 million from a reduction of the
contract impairment reserve. This reduction resulted from the elimination of
certain potential claims and the settlement of litigation. The 1994 first
quarter earnings before the benefit of special items were $64 million. The
improvement in 1995 operating earnings resulted primarily from higher margins
on gas sales from storage. The decrease in revenues for the first quarter of
1995, compared with the same period of 1994, primarily reflected lower gas
sales prices and throughput volumes. Although overall revenues were lower,
significant volumes of gas are currently being sold by the unregulated
subsidiaries of MidCon Corp.
Chemical earnings for the first quarter of 1995 were $307 million, compared
with $22 million for the same period of 1994. The increase in first quarter
earnings reflected the impact of significantly improved prices and profit
margins, primarily for PVC, caustic soda and petrochemicals. Included in the
1994 results was an $11 million unfavorable impact related to an explosion at
the Taft plant and charges for start-up costs related to the Swift Creek
chemical plant. Most of Occidental's chemical products are commodity in
nature, the prices of which are sensitive to a number of complex factors.
Although Occidental is unable to accurately forecast the trend of sales prices
for its commodity chemical products, recent industry price increases have been
accepted and prices currently appear stable.
Divisional earnings include charges and credits in lieu of U.S. federal income
taxes. In the first quarter of 1995, divisional earnings benefited by $23
million from credits allocated. This included credits of $4 million, $12
million and $7 million at oil and gas, natural gas transmission and chemical,
respectively. In the first quarter of 1994, divisional earnings benefited by
$17 million. The comparable amounts allocated to the divisions were credits of
$5 million, $5 million and $7 million at oil and gas, natural gas transmission
and chemical, respectively.
Occidental and certain of its subsidiaries are parties to various lawsuits,
proceedings and claims which involve substantial amounts. See Note 10 to the
consolidated condensed financial statements. Occidental also has commitments
under contracts, guarantees and joint ventures and certain other contingent
liabilities. See Note 11 to the consolidated condensed financial statements.
In management's opinion, after taking into account reserves, none of these
matters should have a material adverse effect upon the consolidated financial
position of Occidental, although the resolution in any reporting period of one
or more of these matters could have a material impact on Occidental's results
of operations for that period.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Occidental's net cash provided by operating activities was $285 million for the
first quarter of 1995, compared with net cash used by operating activities of
$39 million for the same period of 1994. The 1995 improvement, compared with
1994, reflected higher operating earnings primarily in the chemical and oil and
gas divisions.
Occidental's net cash used by investing activities was $79 million for the
first quarter of 1995, compared with $295 million for the same period of 1994.
Capital expenditures were $160 million in 1995, including $119 million in oil
and gas, $13 million in natural gas transmission and $28 million in chemical.
Capital expenditures were $247 million in 1994, including $206 million in oil
and gas, $10 million in natural gas transmission and $31 million in chemical.
The decrease in 1995 from 1994 reflected substantially higher spending during
1994 in oil and gas, in particular the cash portion of the purchase price of
certain U.S. Gulf
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Coast oil and gas properties acquired from Agip Petroleum Co. Inc. Net
proceeds from the sale of businesses and disposals of property, plant and
equipment for the first quarter of 1995 totaled $64 million, which primarily
reflected the proceeds from the sale of a portion of Occidental's oil and gas
operations in Pakistan. Net proceeds from the sale of businesses and disposals
of property, plant and equipment for the first quarter of 1994 included the
payment of a tax liability of $53 million following the settlement of tax
matters with foreign jurisdictions relating to the disposition of certain
international oil and gas assets.
Financing activities used net cash of $217 million in the first quarter of
1995, compared with net cash provided of $276 million for the same period of
1994. In 1995, repayments of debt, net of proceeds from borrowings, resulted
in net cash used of $127 million to reduce long-term debt. Additionally,
dividend payments were $98 million. The 1994 cash provided by financing
activities included net cash proceeds of approximately $557 million from the
February issuance of 11,388,340 shares of $3.00 cumulative CXY-indexed
convertible preferred stock. The 1994 amount also reflected net cash used of
$205 million to reduce debt, net of proceeds from borrowings, and the payment
of dividends of $87 million.
For 1995, Occidental expects that cash generated from operations and asset
sales will be more than adequate to meet its operating requirements, capital
spending and dividend payments. Excess cash generated will be applied to
debt reduction. Occidental also has substantial borrowing capacity to meet
unanticipated cash requirements.
At March 31, 1995, Occidental's working capital was $157 million, compared with
$57 million at December 31, 1994. Available but unused lines of committed bank
credit totaled approximately $2.3 billion at March 31, 1995, compared with $2.2
billion at December 31, 1994.
Accrued liabilities decreased to $1.020 billion at March 31, 1995 from $1.212
billion at December 31, 1994. The change primarily reflected the payment of
rate refunds, attributable to 1994 activity, to customers of Natural Gas
Pipeline Company of America (Natural) following the FERC's approval of
Natural's rate case settlement in January 1995.
On May 1, 1995, Occidental redeemed all of its $200 million outstanding 10 3/4%
Senior Notes due May 1, 1998, at a redemption price of 100% of the principal
amount.
In May of 1995, Occidental sold its high density polyethylene business to
Lyondell Petrochemical Company and its polyvinyl chloride facility at Addis,
Louisiana to Borden Chemicals and Plastics. In addition, Occidental sold
certain Canadian oil and gas assets, which were acquired as part of the
purchase of Placid Oil Company in December 1994. The combined cash proceeds
from these asset dispositions were in excess of $500 million.
ENVIRONMENTAL MATTERS
Occidental's operations in the United States are subject to increasingly
stringent federal, state and local laws and regulations relating to improving
or maintaining the quality of the environment. Foreign operations are also
subject to environmental protection laws. Costs associated with environmental
compliance have increased over time and are expected to continue to rise in the
future.
The laws which require or address remediation apply retroactively to previous
waste disposal practices. And, in many cases, the laws apply regardless of
fault, legality of the original activities or ownership or control of sites.
Occidental is currently participating in environmental assessments and cleanups
under these laws at federal Superfund sites, comparable state sites and other
remediation sites, including Occidental facilities and previously owned sites.
13
15
Occidental does not consider the number of Superfund and comparable state sites
at which it has been notified that it has been identified as being involved as
a relevant measure of exposure. Although the liability of a potentially
responsible party (PRP) or, in many cases, its equivalent under state law is
joint and several, Occidental is usually one of many companies cited as a PRP
at these sites and has, to date, been successful in sharing cleanup costs with
other financially sound companies.
As of March 31, 1995, Occidental had been notified by the Environmental
Protection Agency (EPA) or equivalent state agencies or otherwise had become
aware that it had been identified as being involved at 284 Superfund or
comparable state sites. (This number does not include 45 sites where
Occidental has been successful in resolving its involvement.) The 284 sites
include 77 former Diamond Shamrock Chemical sites as to which Maxus Energy
Corporation has retained all liability, and two sites at which the extent of
such retained liability is disputed. Of the remaining 205 sites, Occidental
has had no communication or activity with government agencies or other PRPs in
three years at 32 sites, and has denied or has yet to determine involvement in
54 sites. With respect to the remaining 119 of these sites, Occidental is in
various stages of evaluation. For 69 of these sites, where environmental
remediation efforts are probable and the costs can be reasonably estimated,
Occidental has accrued reserves at the most likely cost to be incurred. In
determining the reserves, Occidental uses the most current information
available, including similar past experiences, available technology,
regulations in effect, the timing of remediation and cost sharing arrangements.
For the remaining 50 of these sites, Occidental does not have sufficient
information to determine a range of liability, but Occidental does have
sufficient information on which to base management's opinion expressed above
under the caption "Results of Operations." For further discussion of one
separately disclosed site, see Note 10 to the consolidated condensed financial
statements.
14
16
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
GENERAL
There is incorporated by reference herein the information regarding lawsuits,
claims and related matters in Item 3 of Part I of Occidental's 1994 Annual
Report on Form 10-K and Note 10 to the consolidated condensed financial
statements in Part I hereof.
In 1990, Continental Trend Resources (CTR) filed an action against OXY USA Inc.
(OXY USA) in the U.S. District Court for the Western District of Oklahoma,
seeking damages for antitrust violations and tortious interference with
contract. In 1991, a jury returned a verdict in favor of CTR for $269,000 in
actual damages and $30,000,000 in punitive damages on the tortious interference
claims. The U.S. Court of Appeals for the 10th Circuit subsequently affirmed
the judgment in January 1995 and denied rehearing in April 1995. In May of
1995, OXY USA petitioned the U.S. Supreme Court for a writ of certiorari. A
stay of mandate will be maintained pending a decision by the U.S. Supreme
Court.
In 1986, the Federal Trade Commission (FTC) initiated an administrative
proceeding against Occidental Chemical Corporation and various subsidiaries
(collectively, OxyChem) alleging that its acquisition of facilities from
Tenneco Polymers, Inc. in Pasadena, Texas, and Burlington South, New Jersey
violated antitrust laws. The administrative complaint sought recision of the
acquisition agreement and divestiture of the acquired assets. In 1993, the FTC
issued an opinion and final order of divestiture. A settlement was
subsequently reached under which OxyChem agreed to divest its facilities in
Burlington South and, in lieu of Pasadena, Addis, Louisiana, and refrain from
acquiring PVC assets for a period of 10 years without FTC approval. In 1994,
the U.S. Court of Appeals for the Second Circuit approved the settlement. The
sale of the Addis facility to Borden Chemicals and Plastics has been approved
by the FTC and closed on May 1, 1995. A definitive agreement with Ozite
Corporation to sell the Burlington South facility remains subject to FTC
approval, which approval is not yet forthcoming.
ENVIRONMENTAL PROCEEDINGS
In April 1995, the State of West Virginia Division of Environmental Protection
submitted a proposed Consent Order to OxyChem and proposed that OxyChem pay an
administrative settlement of $333,000 for alleged violations of the West
Virginia Hazardous Waste Management Regulations at its closed facility located
in Belle, West Virginia. OxyChem will contest the violations and penalties and
has requested an initial meeting with the agency pursuant to applicable
procedures.
In 1995, the Enforcement Staff of the Federal Energy Regulatory Commission
(FERC) completed an investigation of alleged failures by Natural Gas Pipeline
Company of America (Natural) or its contractors to comply with certain
archeological requirements in the 1991 construction of a 1.6 mile pipeline
located in Latimer County, Oklahoma. The parties have agreed upon a civil
penalty of $200,000 to be paid by Natural, subject to approval of the
Commissioners of the FERC.
15
17
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
Occidental's 1995 Annual Meeting of Stockholders (the Annual Meeting) was held
on April 28, 1995. The following actions were taken at the Annual Meeting, for
which proxies were solicited pursuant to Regulation 14 under the Securities
Exchange Act of 1934, as amended:
1. The four nominees proposed by the Board of Directors were
elected as directors by the following votes:
Name For Withheld
-------------------- ----------- ---------
Dr. Ray R. Irani 269,400,406 6,841,106
Dr. Dale R. Laurance 269,959,531 6,281,981
Irvin W. Maloney 269,739,366 6,502,146
Aziz D. Syriani 269,521,490 6,720,022
2. A proposal to ratify the selection of Arthur Andersen LLP as
Occidental's independent public accountants for 1995 was
approved by a vote of 271,364,776 for versus 2,392,319
against. There were 2,484,417 abstentions and no broker
non-votes.
3. A proposal to approve the adoption of the Occidental Petroleum
Corporation 1995 Incentive Stock Plan was approved by a vote
of 231,106,857 for versus 39,967,932 against. There were
5,166,723 abstentions and no broker non-votes.
4. A stockholder proposal regarding declassifying the Board of
Directors was not approved, receiving 96,037,868 votes for
versus 126,796,364 against. There were 8,001,342 abstentions
and 45,405,938 broker non-votes.
5. A stockholder proposal regarding revisions to Occidental's
confidential voting policy was not approved, receiving
73,482,090 votes for versus 149,151,745 against. There were
8,201,739 abstentions and 45,405,938 broker non-votes.
6. A stockholder proposal regarding a director tenure policy was
not approved, receiving 23,025,423 votes for versus
200,516,310 against. There were 7,293,841 abstentions and
45,405,938 broker non-votes.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Occidental Petroleum Corporation 1995 Incentive Stock
Plan (filed as Exhibit A to Occidental's Proxy
Statement for its April 28, 1995, Annual Meeting of
Stockholders, File No. 1-9210)
11 Statement regarding the computation of earnings per
share for the three months ended March 31, 1995 and
1994
12 Statement regarding the computation of total
enterprise ratios of earnings to fixed charges for
the three months ended March 31, 1995 and 1994 and
the five years ended December 31, 1994
27 Financial data schedule for the three month period
ended March 31, 1995 (included only in the copy of
this report filed electronically with the Commission)
16
18
(b) Reports on Form 8-K
During the quarter ended March 31, 1995, Occidental filed the
following Current Report on Form 8-K:
1. Current Report on Form 8-K dated January 25, 1995
(date of earliest event reported), filed on January
26, 1995, for the purpose of reporting, under Item 5,
Occidental's results of operations for the quarter
ended December 31, 1994
From March 31, 1995 to the date hereof, Occidental filed the
following Current Report on Form 8-K:
1. Current Report on Form 8-K dated April 20, 1995 (date
of earliest event reported), filed on April 21, 1995,
for the purpose of reporting, under Item 5,
Occidental's results of operations for the quarter
ended March 31, 1995
17
19
SIGNATURES
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 thereunto duly authorized.
OCCIDENTAL PETROLEUM CORPORATION
DATE: May 12, 1995 S. P. Dominick, Jr.
------------------------------------
S. P. Dominick, Jr., Vice President
and Controller (Chief Accounting and
Duly Authorized Officer)
18
20
EXHIBIT INDEX
EXHIBITS
- --------
10.1 Occidental Petroleum Corporation 1995 Incentive Stock Plan (filed as Exhibit A to Occidental's
Proxy Statement for its April 28, 1995, Annual Meeting of Stockholders, File No. 1-9210)
11 Statement regarding the computation of earnings per share for the three months ended
March 31, 1995 and 1994
12 Statement regarding the computation of total enterprise ratios of earnings to fixed charges for the
three months ended March 31, 1995 and 1994 and the five years ended December 31, 1994
27 Financial data schedule for the three month period ended March 31, 1995 (included only in the
copy of this report filed electronically with the Commission)
1
EXHIBIT 11
OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994
(Amounts in thousands, except per-share amounts)
Three Months Ended March 31
---------------------------
1995 1994
---------- ----------
EARNINGS PER COMMON AND COMMON
- ------------------------------
EQUIVALENT SHARE
----------------
Earnings (loss) applicable to common stock $ 154,845 $ (56,952)
========== ==========
Common shares outstanding at beginning of period 316,853 305,603
Issue of common shares, weighted average 492 614
Conversions, weighted average options exercised and other 5 --
Repurchase of common shares (51) (43)
Effect of assumed exercises:
Dilutive effect of exercise of options outstanding and other 18 --
---------- ----------
Weighted average common stock and common stock equivalents 317,317 306,174
========== ==========
Earnings (loss) per common and common equivalent share $ .4880 $ (.1860)
========== ==========
$ .49 $ (.19)
====== =======
FULLY DILUTED EARNINGS PER SHARE
- --------------------------------
Earnings (loss) applicable to common stock $ 154,845 $ (56,952)
Dividends applicable to dilutive preferred stock:
$3.875 preferred stock(1) 14,635 --
$3.00 preferred stock(1) 8,541 --
----------- ----------
$ 178,021 $ (56,952)
=========== ==========
Common shares outstanding at beginning of period 316,853 305,603
Issues of common shares, weighted average 492 614
Conversions, weighted average options exercised and other 5 --
Repurchase of common shares (51) (43)
Effect of assumed conversions and exercises:
Dilutive effect of assumed conversion of preferred stock:
$3.875 preferred stock(1) 33,186 --
$3.00 preferred stock(1) 25,202 --
Dilutive effect of exercise of options outstanding and other 153 --
----------- ----------
Total for computation of fully diluted earnings per share 375,840 306,174
=========== ==========
Fully diluted earnings (loss) per share(2) $ .4737 $ (.1860)
=========== ==========
$ .47 $ (.19)
====== =======
(1) Convertible securities are not considered in the calculations if the effect of the conversion is anti-dilutive.
(2) Reporting not required by generally accepted accounting principles because of less than 3 percent variance on earnings per
common and common equivalent share.
1
EXHIBIT 12
OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
COMPUTATION OF TOTAL ENTERPRISE RATIOS OF EARNINGS TO FIXED CHARGES
(Amounts in millions, except ratios)
Three Months
Ended March 31 Year Ended December 31
-------------------- -----------------------------------------------------------
1995 1994 1994 1993 1992 1991 1990
====================================== ======= ======= ======= ======= ======= ======= =======
Income (loss) from continuing
operations(a) $ 170 $ (39) $ (46) $ 80 $ 131 $ 374 $(1,416)
------- ------- ------- ------- ------- ------- -------
Add:
Provision (credit) for taxes on
income (other than foreign oil
and gas taxes) 115 (18) 50 204 114 343 (78)
Interest and debt expense(b) 152 151 594 601 666 880 919
Portion of lease rentals
representative of the interest
factor 14 14 55 53 56 57 62
Preferred dividends to minority
stockholders of subsidiaries(c) -- -- -- -- 7 11 7
------- ------- ------- ------- ------- ------- -------
281 147 699 858 843 1,291 910
------- ------- ------- ------- ------- ------- -------
Earnings (loss) before fixed charges $ 451 $ 108 $ 653 $ 938 $ 974 $ 1,665 $ (506)
======= ======= ======= ======= ======= ======= =======
Fixed charges
Interest and debt expense
including capitalized interest(b) $ 153 $ 152 $ 599 $ 612 $ 685 $ 912 $ 972
Portion of lease rentals
representative of the interest
factor 14 14 55 53 56 57 62
Preferred dividends to minority
stockholders of subsidiaries(c) -- -- -- -- 7 11 7
------- ------- ------- ------- ------- ------- -------
Total fixed charges $ 167 $ 166 $ 654 $ 665 $ 748 $ 980 $ 1,041
======= ======= ======= ======= ======= ======= =======
Ratio of earnings to fixed charges 2.70 n/a(d) n/a(e) 1.41 1.30 1.70 n/a(f)
====================================== ======= ======= ======= ======= ======= ======= =======
(a) Includes (1) minority interest in net income of majority-owned subsidiaries having fixed charges and (2) income from less-
than-50-percent-owned equity investments adjusted to reflect only dividends received.
(b) Includes proportionate share of interest and debt expense of 50-percent-owned equity investments.
(c) Adjusted to a pretax basis.
(d) Not computed due to less than one-to-one coverage. Earnings were inadequate to cover fixed charges by $58 million.
(e) Not computed due to less than one-to-one coverage. Earnings were inadequate to cover fixed charges by $1 million.
(f) Not computed due to negative result. Earnings were inadequate to cover fixed charges by $1.547 billion.
5
1,000,000
3-MOS
DEC-31-1995
MAR-31-1995
118
0
807
17
750
2,287
23,381
9,007
17,905
2,130
5,995
0
1,325
63
3,162
17,905
2,714
2,771
2,027
2,272
18
0
149
307
154
178
0
0
0
178
.488
.474
