================================================================================
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) APRIL 23, 2004
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
Occidental Petroleum Corporation announced on April 23, 2004, net income
for the first quarter 2004 of $487 million ($1.24 per share), compared with $325
million ($0.86 per share) for the first quarter 2003. The 2003 income included
net after-tax charges of $108 million for changes in accounting principles and a
debt-remarketing fee.
Oil and Gas
-----------
Oil and gas segment earnings were $750 million for the first quarter 2004,
compared with $727 million for the first quarter 2003. The improvement in the
first quarter 2004 earnings reflected the impact of higher energy prices and
increased crude oil volumes. This was partially offset by higher exploration
expense, operating expense -- particularly energy-related production taxes and
other costs -- and increased DD&A rates, due to accelerated drilling in Colombia
and Yemen and a facility expansion project in Qatar. Daily production increased
to 568,000 barrels of oil equivalent (BOE) for the first quarter 2004 from
532,000 BOE for the first quarter 2003.
Chemicals
---------
Chemical segment earnings were $50 million for the first quarter 2004,
compared with $35 million for the first quarter 2003. The improvement was due
primarily to higher margins and volumes in vinyls, which were partially offset
by higher ethylene costs and also by lower caustic soda margins.
Statements in this presentation that contain words such as "will" or "expect",
or otherwise relate to the future, 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, and supply/demand considerations, for oil, gas
and chemicals; higher-than-expected costs; and not successfully completing (or
any material delay in) any expansion, capital expenditure, acquisition, or
disposition. Occidental disclaims any obligation to update any forward-looking
statements.
1
SUMMARY OF SEGMENT NET SALES AND EARNINGS
First Quarter
-------------------
(In millions, except per-share amounts) 2004 2003
========================================== ======= =======
SEGMENT NET SALES
Oil and gas $ 1,693 $ 1,553
Chemical 857 790
Other 30 28
------- -------
Net sales $ 2,580 $ 2,371
========================================== ======= =======
SEGMENT EARNINGS
Oil and gas $ 750 $ 727
Chemical 50 35
------- -------
800 762
UNALLOCATED CORPORATE ITEMS
Interest expense, net (a)
Debt, net (54) (124)
Trust preferred distributions & other (14) (11)
Income taxes (b) (190) (178)
Other (55) (56)
------- -------
INCOME FROM CONTINUING OPERATIONS 487 393
Cumulative effect of changes in
accounting principles, net -- (68)
------- -------
NET INCOME $ 487 $ 325
======= =======
BASIC EARNINGS PER COMMON SHARE
Income from continuing operations $ 1.24 $ 1.04
Cumulative effect of changes in
accounting principles, net -- (0.18)
------- -------
$ 1.24 $ 0.86
======= =======
DILUTED EARNINGS PER COMMON SHARE
Income from continuing operations $ 1.23 $ 1.03
Cumulative effect of changes in
accounting principles, net -- (0.18)
------- -------
$ 1.23 $ 0.85
======= =======
AVERAGE BASIC COMMON SHARES OUTSTANDING 391.5 379.1
========================================== ======= =======
See footnotes on following page.
2
(a) The first quarter 2004 includes an $11 million pre-tax interest charge to
redeem all the outstanding 8.16 percent Trust Preferred Redeemable
Securities on January 20, 2004. The first quarter 2003 includes a $61
million pre-tax interest charge to repay a $450 million 6.4 percent senior
notes issue that had ten years of remaining life, but was subject to
re-marketing on April 1, 2003.
(b) The first quarter 2004 includes a $20 million credit related to the
settlement of an issue with the Internal Revenue Service.
3
SUMMARY OF OPERATING STATISTICS
First Quarter
-------------------
2004 2003
========================================== ======= =======
NET OIL, GAS AND LIQUIDS
PRODUCTION PER DAY
United States
Crude oil and liquids (MBBL)
California 77 78
Permian 153 144
Horn Mountain 25 15
Hugoton 3 4
------- -------
Total 258 241
Natural Gas (MMCF)
California 243 262
Hugoton 127 144
Permian 140 117
Horn Mountain 17 5
------- -------
Total 527 528
Latin America
Crude oil (MBBL)
Colombia 36 37
Ecuador 43 16
------- -------
Total 79 53
Middle East
Crude oil (MBBL)
Oman 14 13
Qatar 42 47
Yemen 39 39
------- -------
Total 95 99
Natural Gas (MMCF)
Oman 11 --
Other Eastern Hemisphere
Crude oil (MBBL)
Pakistan 9 10
Natural Gas (MMCF)
Pakistan 75 75
BARRELS OF OIL EQUIVALENT (MBOE)
- --------------------------------
Subtotal consolidated subsidiaries 543 504
Colombia-minority interest (4) (4)
Russia-Occidental net interest 28 30
Yemen-Occidental net interest 1 2
------- -------
TOTAL WORLDWIDE PRODUCTION 568 532
======= =======
CAPITAL EXPENDITURES (millions) $ 343 $ 298
======= =======
DEPRECIATION, DEPLETION AND
AMORTIZATION OF ASSETS (millions) $ 325 $ 285
========================================== ======= =======
4
SIGNIFICANT TRANSACTIONS AND EVENTS AFFECTING EARNINGS
Occidental's results of operations often include the effects of significant
transactions and events affecting earnings that vary widely and unpredictably in
nature, timing, and amount. Therefore, management uses a measure called "core
earnings", which excludes those items. This non-GAAP measure is not meant to
disassociate those items from management's performance, but rather is meant to
provide useful information to investors interested in comparing Occidental's
earnings performance between periods. Reported earnings are considered
representative of management's performance over the long term. Core earnings is
not considered to be an alternative to operating income in accordance with
generally accepted accounting principles.
The following table sets forth the core earnings and significant items affecting
earnings for each operating segment and corporate:
First Quarter
($ millions, except -------------------------------------------
per-share amounts) 2004 EPS 2003 EPS
================================ ======= ======= ======= =======
TOTAL REPORTED EARNINGS $ 487 $ 1.24 $ 325 $ 0.86
======= ======= ======= =======
OIL AND GAS
Segment Earnings $ 750 $ 727
Less:
None -- --
------- -------
Segment Core Earnings $ 750 $ 727
------- -------
CHEMICALS
Segment Earnings $ 50 $ 35
Less:
None -- --
------- -------
Segment Core Earnings $ 50 $ 35
------- -------
CORPORATE
Results $ (313) $ (437)
Less:
Trust preferred
redemption charge (11) --
IRS settlement 20 --
6.4% senior note remarket fee -- (61)
Tax effect of pre-tax
adjustments 4 21
Changes in accounting
principles, net* -- (68)
------- -------
TOTAL CORE EARNINGS $ 474 $ 1.21 $ 433 $ 1.14
================================ ======= ======= ======= =======
* These amounts are shown after tax.
5
ITEMS AFFECTING COMPARABILITY OF CORE EARNINGS BETWEEN PERIODS
First Quarter
-------------------
($ millions) 2004 2003
========================================== ======= =======
PRE-TAX
INCOME / (EXPENSE)
CORPORATE
Equity earnings (3) (21)
6
Item 9. Regulation FD Disclosure and Item 12. Results of Operations and
Financial Condition
On April 23, 2004, Occidental Petroleum Corporation released information
regarding its results of operations for the fiscal period ended March 31, 2004.
This Form 8-K is being furnished to report information pursuant to Item 9,
Regulation FD Disclosure and Item 12, Results of Operations and Financial
Condition. The full text of the speeches given by Dr. Ray R. Irani and Stephen
I. Chazen is attached to this report as Exhibit 99.1. Investor Relations
Supplemental Schedules are attached to this report as Exhibit 99.2.
7
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: April 23, 2004 S. P. Dominick, Jr.
--------------------------------------------------
S. P. Dominick, Jr., Vice President and Controller
(Chief Accounting and Duly Authorized Officer)
EXHIBIT INDEX
99.1 Full text of speeches given by Stephen I. Chazen and Dr. Ray R. Irani
99.2 Investor Relations Supplemental Schedules
EXHIBIT 99.1
OCCIDENTAL PETROLEUM CORPORATION
STEPHEN CHAZEN
CHIEF FINANCIAL OFFICER AND
EXECUTIVE VICE PRESIDENT - CORPORATE DEVELOPMENT
- CONFERENCE CALL -
FIRST QUARTER 2004 EARNINGS ANNOUNCEMENT
APRIL 23, 2004
Los Angeles, California
Good morning, and thanks for joining us.
Those of you who have not received a copy of the press release announcing
our first quarter earnings, along with the Investor Relations Supplemental
Schedules, can find them on our website - www.oxy.com or on the SEC's EDGAR
site.
Net income for the quarter was $487 million, or $1.24 per share. This
compares to $325 million, or $0.86 per share, we earned in the first quarter
last year. The quarter-to-quarter improvement was due primarily to higher oil
and natural gas prices and volumes and higher chemicals margins. 2004 income
included a net benefit of $13 million for a tax credit partly offset by a debt
retirement charge. 2003 included a net charge of $108 million for changes in
accounting principles and a debt remarketing fee. On a core income basis, our
first quarter 2004 EPS was $1.21 versus an EPS of $1.14 in 2003.
On a segment basis, oil and gas first quarter earnings were $750 million,
compared to $727 million for the first quarter of 2003.
1
o Worldwide oil and gas production for the quarter was 568,000 barrels
of oil equivalent - an increase of 7 percent compared with the 532,000
barrels we produced in last year's first quarter.
o Production is on track to meet our 2004 growth forecast of 575,000 BOE
per day. Under our production sharing agreements, prices have an
impact on volumes. For example, if prices had remained at fourth
quarter levels, our net first quarter production would have been more
than 5,000 barrels per day higher. If prices during the first quarter
were at the 2001 level, when we issued our forecast, our production
would have been more than 20,000 barrels per day higher.
o The WTI price averaged $35.15 per barrel for the first quarter
compared with $33.85 for the comparable period last year, for an
increase of about four percent.
o There are a number of items that have impacted costs in the current
quarter. Our DD&A rate is higher mainly due to the accelerated
drilling of wells in Colombia and Yemen and a major facilities
expansion project in Qatar. Increased production-related taxes and
rising utility costs are the result of higher oil and gas prices.
Apart from these and other energy price-related costs, lifting costs
are not materially higher compared to last year's first quarter.
o The average NYMEX gas price for the quarter was $5.84 per million
BTUs, up 23 percent from last year's first quarter average of $4.75.
Chemical segment earnings for the quarter were $50 million compared to $35
million last year. The primary factor driving the
2
improvement was higher margins and volumes in vinyls which were partially offset
by higher ethylene costs and also lower caustic soda margins.
Cash flow from operations for the quarter was approximately $950 million.
Interest expense, excluding a one time charge of $11 million for the
redemption of $453 million of the 8.16 Trust Preferred Securities, was $57
million during the first quarter 2004, compared to $74 million in the 2003 first
quarter. Our annual run rate going forward is $230 million.
Turning to the balance sheet, we increased shareholders' equity by $535
million to $8.5 billion and we reduced total debt to $4.14 billion, compared to
$4.57 billion at the end of last year. Our debt to total capitalization ratio
was down to 33 percent at the end of the quarter, compared to 37 percent at the
end of last year.
In addition, we redeemed $208 million of off balance sheet debt for our
share of the Elk Hills power plant. At the end of the quarter, we had $470
million of cash on the balance sheet.
Capital spending for the quarter was $343 million compared to $298 million
in last year's first quarter. Oil and gas accounted for $326 million of this
year's expenditures.
As we look ahead in the second quarter:
o We expect production to average about the same as the first quarter.
As I discussed earlier, this could vary due to price-driven
adjustments in the volumes under our production sharing contracts in
Oman, Qatar, Yemen and THUMS.
o We expect exploration expense for the quarter to be about $40 million.
3
o We are optimistic about the outlook for chemicals - assuming the
economy continues to strengthen. We expect second quarter chemical
earnings to be in the $60 to $70 million range compared to $43 million
in last year's second quarter.
o We record the equity earnings from our 40 million shares of Lyondell
in corporate "Other". In the first quarter we recorded a loss of $3
million. We have no way of forecasting the quarterly equity earnings
from our Lyondell investment, although the outlook for the business
appears to be improving.
o A $1.00 per barrel change in oil prices impacts segment quarterly
earnings by about $32 million. The average WTI price in the first
quarter was $35.15. We expect our realized gas prices to be about that
same as the first quarter.
o Both our US and foreign tax rates are included in the "Investor
Relations Supplemental Schedule". Our worldwide effective tax rate for
the first quarter was 45 percent. We expect our second quarter rate to
be in the same range.
Now I'd like to turn the conference call over to our Chairman and CEO, Dr.
Ray Irani.
4
OCCIDENTAL PETROLEUM CORPORATION
DR. RAY R. IRANI
CHAIRMAN AND CHIEF EXECUTIVE OFFICE
- CONFERENCE CALL -
FIRST QUARTER 2004 EARNINGS ANNOUNCEMENT
APRIL 23, 2004
Los Angeles, California
Thank you, Steve.
The dramatic improvement in US - Libyan relations has opened the door to
our eventual return to Libya. Occidental and other US companies who had
commercial interests in Libya were required to leave the country in 1986 when
the Reagan Administration imposed economic sanctions on Tripoli.
Let me clarify several points at the outset. We currently have no Libyan
assets on our balance sheet. After departing the country, we subsequently wrote
off 217 million barrels in proved reserves and took a $47 million charge to
income.
With the recent steps taken since last December by both the Libyan and US
Governments, significant progress has been made toward normalizing relations. In
early March, the Bush Administration reestablished a diplomatic presence in
Tripoli and lifted the ban on travel to Libya by US citizens. The Administration
authorized US oil companies, with assets in Libya when sanctions were
implemented, to negotiate and sign contracts for their return to the country.
The actual resumption of commercial activities by US firms is contingent upon
additional approvals from Washington or the Administration lifting remaining
economic
5
sanctions. Because of recent positive developments, we believe remaining
sanctions will be lifted in the very near future.
Libya played an important role in Occidental's evolution from a small
California oil company to a significant player in the global oil business.
Occidental discovered nearly 3 billion barrels of gross recoverable oil
reserves. Gross production from our Libyan operations peaked in 1970 at nearly
660,000 barrels per day and declined to about 155,000 barrels per day at the
time sanctions were imposed. Occidental's net production in 1985, the last full
year before sanctions, averaged 44,000 barrels of oil per day.
Since our departure from Libya, the fields in which Occidental had an
interest have been operated by a subsidiary of Libya's National Oil Company.
During the interim, gross production from these fields has declined to a current
average of 85,000 barrels per day due to limited investment.
Following the lifting of the US travel ban, I traveled to Libya with three
colleagues in mid-March for a series of high level meetings with senior Libyan
officials, including Colonel Moammar al-Ghadafi. We presented specific proposals
involving the application of modern oil reservoir management practices and
technology to enhance production from our historic fields and to search for new
reserves in our exploration agreements.
We are very encouraged by the reception we received from the Libyan
leadership. We were impressed by their enthusiasm in welcoming our proposal to
return and by their commitment to normalize relations with the West. With the
support of the Libyan leadership, we are confident that the implementation of
our investment and technical proposals can bring significant benefits to the
Libyan people and to our stockholders.
6
We believe investment in new technology in these historic fields can result
in a substantial increase in gross recoverable reserves and gross production. I
would like to be able to provide some specifics, but it would be premature to do
so since we're very early in the negotiation process. Let me assure you,
however, that our goal is to conclude an agreement which gives us a return on
investment that is at least as good as our average return for our current mix of
worldwide oil and gas assets.
We regard our return to Libya as one of our high priority projects, and we
look forward to continued progress in US-Libyan relations. Our technical teams
are already hard at work and we plan to open an office in Tripoli as soon as
possible. I am planning to return to Libya in the near future to help facilitate
negotiations.
Let me now shift briefly to Latin America. Today, we are signing an
agreement with Colombia's national oil company to extend the term of our
interest in the Cano Limon operations through the economic life of the field,
which is estimated to last at least through 2018. Our original contract was due
to expire in mid-2008. We expect this operation to continue generating positive
cash flow under the terms of the amended contract. Under current conditions,
gross production from Cano Limon is averaging 95,000 barrels per day.
Occidental's net share after partner and royalty interests is about 33,000
barrels per day. At current production levels, Cano Limon accounts for 6 percent
of our total worldwide production.
Thank you for your attention, and now we're ready to answer your questions.
7
- --------------------------------------------------------------------------------
See the "Investor Relations Supplemental Schedules" for the reconciliation of
non-GAAP items.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Statements in this presentation that contain words such as "will" or "expect",
or otherwise relate to the future, 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, and supply/demand considerations, for oil, gas
and chemicals; higher-than-expected costs; and not successfully completing (or
any material delay in) any expansion, capital expenditure, acquisition, or
disposition. Occidental disclaims any obligation to update any forward-looking
statements. 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.
- --------------------------------------------------------------------------------
8
EXHIBIT 99.2
Investor Relations Supplemental Schedules
[OXY LOGO]
OCCIDENTAL PETROLEUM
2004 First Quarter
Net Income (Loss)
($ millions)
REPORTED CORE
INCOME SIGNIFICANT ITEMS AFFECTING INCOME EARNINGS
------------ ------------------------------------- ------------
Oil & Gas $ 750 $ 750
Chemical 50 50
Corporate
Interest
Debt, net (54) (54)
Trust pfd distributions & other (14) 11 Trust pfd redemption charge (3)
Other (55) (55)
Taxes (190) (20) IRS settlement (214)
(4) Tax effect of adjustments
------------ ------------ ------------
NET INCOME $ 487 $ (13) $ 474
============ ============ ============
BASIC EARNINGS PER COMMON SHARE $ 1.24 $ 1.21
============ ============
1
Investor Relations Supplemental Schedules
[OXY LOGO]
OCCIDENTAL PETROLEUM
2003 First Quarter
Net Income (Loss)
($ millions)
REPORTED CORE
INCOME SIGNIFICANT ITEMS AFFECTING INCOME EARNINGS
------------ ---------------------------------------- ------------
Oil & Gas $ 727 $ 727
Chemical 35 35
Corporate
Interest
Debt, net (124) 61 Debt repayment fee (63)
Trust pfd distributions & other (11) (11)
Other (56) (56)
Taxes (178) (21) Tax effect of adjustments (199)
------------ ------------ ------------
Income from continuing operations 393 40 433
Cumulative effect of accounting changes (68) 68 Cumulative effect of acct changes --
------------ ------------ ------------
NET INCOME $ 325 $ 108 $ 433
============ ============ ============
BASIC EARNINGS PER COMMON SHARE $ 0.86 $ 1.14
============ ============
2
Investor Relations Supplemental Schedules
[OXY LOGO]
OCCIDENTAL PETROLEUM
ITEMS AFFECTING COMPARABILITY OF CORE EARNINGS BETWEEN PERIODS
PRE-TAX
INCOME / (EXPENSE) FIRST QUARTER
-----------------------------
2003 2002
------------ ------------
CORPORATE
Equity earnings (3) (21)
3
Investor Relations Supplemental Schedules
[OXY LOGO]
OCCIDENTAL PETROLEUM
Worldwide Effective Tax Rate
2004 2003 2003
REPORTED INCOME QTR 1 QTR 1 QTR 4
-------- -------- --------
Pre-tax Income 848 726 686
Income tax expense
Domestic (Federal and state) 191 179 152
Foreign (included in operating segments) 170 154 152
-------- -------- --------
Total 361 333 304
Income from continuing operations 487 393 382
Cumulative effect of acct changes -- (68) --
-------- -------- --------
Net Income 487 325 382
WORLDWIDE EFFECTIVE TAX RATE 43% 46% 44%
2004 2003 2003
CORE INCOME QTR 1 QTR 1 QTR 4
-------- -------- --------
Pre-tax Income 859 787 686
Income tax expense
Domestic (Federal and state) 215 200 152
Foreign (included in operating segments) 170 154 152
-------- -------- --------
Total 385 354 304
-------- -------- --------
Core Income 474 433 382
WORLDWIDE EFFECTIVE TAX RATE 45% 45% 44%
4
Investor Relations Supplemental Schedules
[OXY LOGO]
OCCIDENTAL PETROLEUM
2004 FIRST QUARTER NET INCOME (LOSS)
REPORTED INCOME COMPARISON
FIRST FOURTH
QUARTER QUARTER
2004 2003 B / (W)
---------- ---------- ----------
OIL & GAS $ 750 $ 640 $ 110
CHEMICAL 50 71 (21)
CORPORATE
INTEREST
DEBT, NET (54) (53) (1)
TRUST PFD DISTRIBUTIONS & OTHER (14) (10) (4)
OTHER (55) (109) 54
TAXES (190) (157) (33)
---------- ---------- ----------
NET INCOME $ 487 $ 382 $ 105
========== ========== ==========
BASIC EARNINGS PER COMMON SHARE $ 1.24 $ 0.99 $ 0.25
========== ========== ==========
EFFECTIVE TAX RATE 43% 44% 1%
========== ========== ==========
================================================================================
OCCIDENTAL PETROLEUM
2004 FIRST QUARTER NET INCOME (LOSS)
CORE EARNINGS COMPARISON
FIRST FOURTH
QUARTER QUARTER
2004 2003 B / (W)
---------- ---------- ----------
OIL & GAS $ 750 $ 640 $ 110
CHEMICAL 50 71 (21)
CORPORATE
INTEREST
DEBT, NET (54) (53) (1)
TRUST PFD DISTRIBUTIONS & OTHER (3) (10) 7
OTHER (55) (109) 54
TAXES (214) (157) (57)
---------- ---------- ----------
NET INCOME $ 474 $ 382 $ 92
========== ========== ==========
BASIC EARNINGS PER COMMON SHARE $ 1.21 $ 0.99 $ 0.22
========== ========== ==========
EFFECTIVE TAX RATE 45% 44% -1%
========== ========== ==========
5
Investor Relations Supplemental Schedules
[OXY LOGO]
OCCIDENTAL PETROLEUM
OIL & GAS
CORE EARNINGS VARIANCE ANALYSIS
($ MILLIONS)
2004 1st Quarter $ 750
2003 4th Quarter 640
--------
$ 110
========
Price Variance $ 161
Volume Variance --
Exploration Expense Variance (9)
All Other (42) *
--------
TOTAL VARIANCE $ 110
========
* 2003 includes $38 property tax settlement
======================================================================
OCCIDENTAL PETROLEUM
CHEMICAL
CORE EARNINGS VARIANCE ANALYSIS
($ MILLIONS)
2004 1st Quarter $ 50
2003 4th Quarter 71
--------
$ (21)
========
Sales Price $ 17
Sales Volume/Mix 7
Operations/Manufacturing (38) *
All Other (7)
--------
TOTAL VARIANCE $ (21)
========
* Higher energy and higher feedstock costs
6
Investor Relations Supplemental Schedules
[OXY LOGO]
OCCIDENTAL PETROLEUM
2004 FIRST QUARTER NET INCOME (LOSS)
REPORTED INCOME COMPARISON
FIRST FIRST
QUARTER QUARTER
2004 2003 B / (W)
---------- ---------- ----------
OIL & GAS $ 750 $ 727 $ 23
CHEMICAL 50 35 15
CORPORATE
INTEREST
DEBT, NET (54) (124) 70
TRUST PFD DISTRIBUTIONS & OTHER (14) (11) (3)
OTHER (55) (56) 1
TAXES (190) (178) (12)
---------- ---------- ----------
INCOME FROM CONTINUING OPERATIONS 487 393 94
DISCONTINUED OPERATIONS, NET -- (68) 68
---------- ---------- ----------
NET INCOME $ 487 $ 325 $ 162
========== ========== ==========
BASIC EARNINGS PER COMMON SHARE $ 1.24 $ 0.86 $ 0.38
========== ========== ==========
EFFECTIVE TAX RATE 43% 46% 3%
========== ========== ==========
================================================================================
OCCIDENTAL PETROLEUM
2004 FIRST QUARTER NET INCOME (LOSS)
CORE EARNINGS COMPARISON
FIRST FIRST
QUARTER QUARTER
2004 2003 B / (W)
---------- ---------- ----------
OIL & GAS $ 750 $ 727 $ 23
CHEMICAL 50 35 15
CORPORATE
INTEREST
DEBT, NET (54) (63) 9
TRUST PFD DISTRIBUTIONS & OTHER (3) (11) 8
OTHER (55) (56) 1
TAXES (214) (199) (15)
---------- ---------- ----------
NET INCOME $ 474 $ 433 $ 41
========== ========== ==========
BASIC EARNINGS PER COMMON SHARE $ 1.21 $ 1.14 $ 0.07
========== ========== ==========
EFFECTIVE TAX RATE 45% 45% 0%
========== ========== ==========
7
Investor Relations Supplemental Schedules
[OXY LOGO]
OCCIDENTAL PETROLEUM
OIL & GAS
CORE EARNINGS VARIANCE ANALYSIS
($ MILLIONS)
2004 1st Quarter $ 750
2003 1st Quarter 727
--------
$ 23
========
Price Variance $ 48
Volume Variance 46
Exploration Expense Variance (26)
All Others (45)
--------
TOTAL VARIANCE $ 23
========
======================================================================
OCCIDENTAL PETROLEUM
CHEMICAL
CORE EARNINGS VARIANCE ANALYSIS
($ MILLIONS)
2004 1st Quarter $ 50
2003 1st Quarter 35
--------
$ 15
========
Sales Price $ 16
Sales Volume/Mix 8
Operations/Manufacturing (8) *
All Other (1)
--------
TOTAL VARIANCE $ 15
========
* Higher feedstock costs.
8
Investor Relations Supplemental Schedules
[OXY LOGO]
OCCIDENTAL PETROLEUM
SUMMARY OF OPERATING STATISTICS
-------------------------------
FIRST QUARTER
---------------------
2004 2003
-------- --------
NET PRODUCTION PER DAY:
UNITED STATES
CRUDE OIL AND LIQUIDS (MBL)
California 77 78
Permian 153 144
Horn Mountain 25 15
Hugoton 3 4
-------- --------
TOTAL 258 241
NATURAL GAS (MMCF)
California 243 262
Hugoton 127 144
Permian 140 117
Horn Mountain 17 5
-------- --------
TOTAL 527 528
LATIN AMERICA
CRUDE OIL (MBL)
Colombia 36 37
Ecuador 43 16
-------- --------
TOTAL 79 53
MIDDLE EAST
CRUDE OIL (MBL)
Oman 14 13
Qatar 42 47
Yemen 39 39
-------- --------
TOTAL 95 99
NATURAL GAS (MMCF)
Oman 11 --
OTHER EASTERN HEMISPHERE
CRUDE OIL (MBL)
Pakistan 9 10
NATURAL GAS (MMCF)
Pakistan 75 75
BARRELS OF OIL EQUIVALENT (MBOE)
- --------------------------------
SUBTOTAL CONSOLIDATED SUBSIDIARIES 543 504
OTHER INTERESTS
COLOMBIA - MINORITY INTEREST (4) (4)
RUSSIA - OCCIDENTAL NET INTEREST 28 30
YEMEN - OCCIDENTAL NET INTEREST 1 2
-------- --------
TOTAL WORLDWIDE PRODUCTION (MBOE) 568 532
======== ========
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SUMMARY OF OPERATING STATISTICS
-------------------------------
FIRST QUARTER
--------------------
2004 2003
-------- --------
OIL & GAS:
- ----------
PRICES
UNITED STATES
Crude Oil ($/BBL) 32.62 31.57
Natural gas ($/MCF) 5.00 4.30
LATIN AMERICA
Crude oil ($/BBL) 28.99 31.23
MIDDLE EAST
Crude oil ($/BBL) 30.08 30.40
Natural gas ($/MCF) 0.97 --
OTHER EASTERN HEMISPHERE
Crude oil ($/BBL) 29.37 28.05
Natural Gas ($/MCF) 2.23 1.89
FIRST QUARTER
--------------------
2004 2003
-------- --------
Exploration Expense
Domestic $ 38 $ 25
Latin America 1 1
Middle East 13 3
Other Eastern Hemisphere 2 (1)
-------- --------
TOTAL $ 54 $ 28
======== ========
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Investor Relations Supplemental Schedules
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OCCIDENTAL PETROLEUM
CHEMICALS
Volume (M Tons)
FIRST QUARTER
---------------------
MAJOR PRODUCTS 2004 2003
-------- --------
Chlorine 706 686
Caustic 732 637
Ethylene Dichloride 122 131
PVC Resins 1,071 1,063
CHEMICALS
Prices (Index)
FIRST QUARTER
---------------------
MAJOR PRODUCTS 2004 2003
-------- --------
Chlorine 1.60 1.64
Caustic 0.71 0.81
Ethylene Dichloride 1.32 1.23
PVC Resins 0.94 0.89
1987 through 1990 average price = 1.00
CHLORINE
- --------
OXYCHEM COMMENTARY
- ------------------
o Chlorine operating rates strengthened in the 1st quarter due to strong
demand into the vinyl's chain. Industry operating rates increased
approximately 1% in the 1st quarter 2004 versus the 4th quarter 2003.
o OxyChem announced a $75 per ton price increase on January 27th , effective
February 26th. Other U.S. chlor-alkali producers also announced a $75 per
ton price increase in the 1st quarter.
o Due to the tightening chlorine supply/demand balance, OxyChem announced and
implemented a chlorine control program on March 15th.
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Investor Relations Supplemental Schedules
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INFLUENCING FACTORS:
- --------------------
Industry operating rates are nearing practical capacity levels. Normal seasonal
increases in the bleach, water treatment and agricultural end use markets are
expected to push chlorine demand higher in the 2nd quarter.
CAUSTIC
- -------
OXYCHEM COMMENTARY
- ------------------
o Caustic soda sales improved in the 1st quarter propelled by strong demand
in the organic and alumina markets. Continuing improvement in the U.S.
manufacturing sector also contributed to the overall increase in sales.
o Demand for caustic soda is expected to improve in the 2nd quarter as the
requirements for seasonal applications increase.
o Pricing came under pressure in the 1st quarter due to high chlorine
industry operating rates in support of increased vinyl's demand.
INFLUENCING FACTORS:
- --------------------
A narrowing supply/demand imbalance for liquid caustic soda will lend support
for future price improvement in 2004. Continued improvement in the U.S.
manufacturing sector is expected to result in higher caustic soda demand.
However, weakness in the manufacturing sector coupled with high chlorine
industry operating rates could prolong the supply/demand imbalance.
EDC
- ---
OXYCHEM COMMENTARY
- ------------------
o EDC prices improved in the Far East early in the 1st quarter in conjunction
with higher values for VCM and PVC.
o A March pullback of PVC prices in China and uncertainty about future price
movements stabilized the upward EDC price momentum experienced in the first
part of the quarter.
o While VCM and PVC remain tight, the current global EDC supply/demand
position is balanced to long. As a result, EDC is relatively undervalued in
comparison to the other intermediates in the vinyl's chain.
INFLUENCING FACTORS:
- --------------------
Higher PVC requirements in Asia, particularly China, are fueling demand for VCM
and EDC. However, despite the strong demand, Asian VCM production has been
curtailed
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Investor Relations Supplemental Schedules
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due to both scheduled and unscheduled VCM plant outages. This situation has
negatively impacted EDC sales, resulting in a weaker than expected EDC
supply/demand balance. As no significant changes are expected in Asian VCM
production in the 2nd quarter, EDC demand is projected to remain flat.
PVC/VCM
- -------
OXYCHEM COMMENTARY
- ------------------
o Domestic sales for PVC resin were strong in the 1st quarter in anticipation
of seasonal demand for pipe and other exterior building products. Inventory
throughout the vinyl's chain has remained moderate in comparison to 2003.
o PVC resin exports were also strong during the 1st quarter, due primarily to
demand from China.
o Both the Westlake Geismar and Shintech Addis facilities remain idle. There
is no indication that either plant will restart in 2004.
o Industry operating rates for PVC resin during the 1st quarter were
constrained due to scheduled and unscheduled VCM outages. OxyChem ran PVC
resin at available capacity.
o Domestic PVC resin prices increased $0.02 per pound in January versus
December and another $0.02 per pound in both February and March. An
additional $0.02 per pound increase has been implemented for April with
$0.02 more announced for May. Higher sales prices have been necessary to
offset higher ethylene and natural gas cost.
o As a result of increased PVC demand and tight VCM supply, PVC resin export
prices ended the quarter at $850 - $870 per metric ton CFR Southeast Asia.
o The on-going VCM outages at Pemex and Dow contributed to a tight VCM supply
during the 1st quarter. This tightness is expected to continue throughout
the 2nd quarter as demand outpaces supply. As of early April, VCM
inventories throughout the industry are at minimum levels
o VCM export prices closed the 1st quarter at $640 - $660 per metric ton FOB
Gulf Coast.
INFLUENCING FACTORS:
- --------------------
Strong global demand for PVC and VCM coupled with a tight VCM supply will
provide support for future price improvement throughout the vinyl's chain.
Continued economic recovery is expected to sustain a strong vinyl's business
environment through the 2nd quarter.
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Investor Relations Supplemental Schedules
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SUMMARY OF OPERATING STATISTICS
-------------------------------
FIRST QUARTER
---------------------
CAPITAL EXPENDITURES ($MM) 2004 2003
-------- --------
Oil & Gas
California $ 61 $ 44
Permian 62 55
Other - U.S. 4 14
Latin America 20 7
Middle East 168 102
Other Eastern Hemisphere 11 3
Chemicals 16 68 *
Corporate 1 5
-------- --------
TOTAL $ 343 $ 298
======== ========
(1) Includes $44 for buyout of railcar leases
FIRST QUARTER
DEPRECIATION, DEPLETION & ---------------------
AMORTIZATION OF ASSETS ($MM) 2004 2003
-------- --------
Oil & Gas
Domestic $ 156 $ 165
Latin America 22 13
Middle East 69 52
Other Eastern Hemisphere 12 8
Chemicals 61 44
Corporate 5 3
-------- --------
TOTAL $ 325 $ 285
======== ========
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OCCIDENTAL PETROLEUM
CORPORATE
($ millions)
PRELIMINARY 31-MAR-04 31-DEC-03
------------- -------------
CAPITALIZATION
Oxy Long-Term Debt (including current maturities) $ 4,041 $ 4,016
Trust Preferred Securities -- 453
Subsidiary Preferred Stock 75 75
Others 26 26
------------- -------------
TOTAL DEBT $ 4,142 $ 4,570
============= =============
EQUITY $ 8,464 $ 7,929
============= =============
Total Debt To Total Capitalization 33% 37%
============= =============
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Statements in this presentation that contain words such as "will" or "expect",
or otherwise relate to the future, 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, and supply/demand considerations, for oil, gas
and chemicals; higher-than-expected costs; and not successfully completing (or
any material delay in) any expansion, capital expenditure, acquisition, or
disposition. Occidental disclaims any obligation to update any forward-looking
statements.
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