================================================================================
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 22, 2003
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 9. Regulation FD Disclosure and Item 12. Results of Operations and
- ------- ------------------------ -------- -------------------------
Financial Condition
- -------------------
On April 22, 2003, Occidental Petroleum Corporation released information
regarding its results of operations for the fiscal period ended March 31, 2003.
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 press release is attached to this report as
Exhibit 99.1. The full text of speeches given by Stephen I. Chazen and Ray R.
Irani is attached to this report as Exhibit 99.2. Investor Relations
Supplemental Schedules are attached to this report as Exhibit 99.3.
1
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 21, 2003 S. P. Dominick, Jr.
--------------------------------------------------
S. P. Dominick, Jr., Vice President and Controller
(Chief Accounting and Duly Authorized Officer)
EXHIBIT 99.1
====================================================================
[OXY LOGO] NEWS RELEASE OCCIDENTAL PETROLEUM CORPORATION
====================================================================
10889 Wilshire Boulevard, Los Angeles, California 90024 (310) 208-8800
For Immediate Release: April 22, 2003
OCCIDENTAL PETROLEUM ANNOUNCES FIRST QUARTER 2003 RESULTS
---------------------------------------------------------
LOS ANGELES -- Occidental Petroleum Corporation (NYSE: OXY) announced net
income for the first quarter 2003 of $325 million ($0.86 per share), compared
with $25 million ($0.07 per share) for the first quarter 2002.
In announcing the results, Dr. Ray R. Irani, chairman and chief executive
officer, said, "Oil and natural gas production for the quarter averaged 532,000
barrels of oil equivalent -- the highest level for any quarter in the company's
history. Our core earnings, which were driven by high oil and natural gas
prices, hit their highest level in the last six quarters. Strong cash flow
during the quarter resulted in additional debt reduction of $182 million which
in turn lowered our debt-to-total-capitalization to 41 percent compared to 43
percent at the end of last year. Core earnings, as shown on the attached
schedule, were $433 million for the first quarter 2003 ($1.14 per share)."
OIL AND GAS
-----------
Oil and gas segment and core earnings were $727 million for the first
quarter 2003, compared with $306 million for the first quarter 2002. The
improvement in the first quarter 2003 earnings reflected $440 million from
higher worldwide crude oil and natural gas prices.
CHEMICALS
---------
Chemical segment and core earnings were $35 million for the first quarter
2003, compared with a $31 million loss for the first quarter 2002. The
improvement in the first quarter 2003 results reflected higher sales prices for
PVC, chlorine and EDC; partially offset by higher energy and raw material costs
and lower caustic soda sales prices. The first quarter 2002 included a $36
million
pre-tax loss for Equistar, which was sold in the third quarter 2002, and a $14
million pre-tax charge for severance.
-0-
Contacts: Lawrence P. Meriage (media)
310-443-6562
Kenneth J. Huffman (investors)
212-603-8183
For further analysis of Occidental's quarterly
performance, please visit the web site: www.oxy.com
Statements in this presentation that contain words such as "will" or
"expect", or otherwise relate to the future, are forward-looking and involve
risks and uncertainties that could significantly affect expected results.
Factors that could cause results to differ materially include, but are not
limited to: global commodity pricing fluctuations, and supply/demand
considerations, for oil, gas and chemicals; higher-than-expected costs; and not
successfully completing (or any material delay in) any expansion, capital
expenditure, acquisition, or disposition. Occidental disclaims any obligation to
update any forward-looking statements.
2
SUMMARY OF SEGMENT NET SALES AND EARNINGS
($ millions, except per-share amounts)
First Quarter
---------------------
2003 2002
=================================== ======== ========
SEGMENT NET SALES
Oil and gas $ 1,553 $ 958
Chemical 790 565
Corporate and other 28 --
-------- --------
Net sales $ 2,371 $ 1,523
=================================== ======== ========
SEGMENT EARNINGS (LOSSES)
Oil and gas $ 727 $ 306
Chemical 35 (31)
-------- --------
762 275
UNALLOCATED CORPORATE ITEMS
Interest expense, net (a) (124) (56)
Income taxes (b) (178) (44)
Trust preferred distributions
& other (11) (11)
Other (c) (56) (41)
-------- --------
INCOME FROM CONTINUING OPERATIONS 393 123
Discontinued operations, net -- (3)
Cumulative effect of changes in
accounting principles, net (d) (68) (95)
-------- --------
NET INCOME $ 325 $ 25
======== ========
BASIC EARNINGS PER COMMON SHARE
Income from continuing operations $ 1.04 $ 0.33
Discontinued operations, net -- (0.01)
Cumulative effect of changes in
accounting principles, net (0.18) (0.25)
-------- --------
$ 0.86 $ 0.07
======== ========
DILUTED EARNINGS PER COMMON SHARE
Income from continuing operations $ 1.03 $ 0.33
Discontinued operations, net -- $ (0.01)
Cumulative effect of changes
in accounting principles, net (0.18) (0.25)
-------- --------
$ 0.85 $ 0.07
======== ========
AVERAGE BASIC COMMON SHARES
OUTSTANDING 379.1 374.5
=================================== ======== ========
See footnotes on following page.
3
(a) 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. The three
months 2002 includes interest income on notes receivable from Altura
partners of $14 million. The partnership exercised an option in May 2002 to
redeem the sellers' remaining partnership interests in exchange for the
outstanding balance on the notes.
(b) Excludes U.S. federal income tax charges and credits allocated to the
segments and foreign taxes. Oil and gas segment earnings include credits of
$1 million for each of the three months 2003 and 2002. Chemical segment
earnings have been impacted by credits of $4 million for the three months
2002.
(c) The three months 2002 includes preferred distributions to the Occidental
Permian Partners of $15 million. This is essentially offset by the interest
income discussed in (a) above. The partnership exercised an option in May
2002 to redeem the sellers' remaining partnership interests in exchange for
the outstanding balance on the notes.
(d) Effective January 1, 2003, Occidental implemented SFAS No. 143 --
"Accounting for Asset Retirement Obligations." Adoption of this new
accounting standard resulted in a cumulative after-tax reduction in net
income of $50 million. Also effective January 1, 2003, Occidental
implemented the rescission of EITF 98-10, which precludes mark-to-market
accounting for all energy-trading contracts that are not derivatives and
fair-value accounting for inventories purchased from third parties.
Adoption of this accounting change resulted in a cumulative after-tax
reduction in net income of $18 million. Effective January 1, 2002,
Occidental implemented SFAS No. 142 -- "Goodwill and Other Intangible
Assets." Adoption of this new accounting standard resulted in a cumulative
after-tax reduction in net income of $95 million in the first quarter 2002.
4
SUMMARY OF OPERATING STATISTICS
First Quarter
---------------------
2003 2002
=================================== ======== ========
NET OIL, GAS AND LIQUIDS
PRODUCTION PER DAY
United States
Crude oil and liquids (MBBL)
California 78 90
Permian 144 140
Horn Mountain 15 --
Hugoton 4 3
-------- --------
Total 241 233
Natural Gas (MMCF)
California 262 305
Hugoton 144 157
Permian 117 129
Horn Mountain 5 --
-------- --------
Total 528 591
Latin America
Crude oil (MBBL)
Colombia 37 36
Ecuador 16 13
-------- --------
Total 53 49
Middle East and
Other Eastern Hemisphere
Crude oil (MBBL)
Oman 13 17
Pakistan 10 8
Qatar 47 44
Yemen 39 47
-------- --------
Total 109 116
Natural Gas (MMCF)
Pakistan 75 50
BARRELS OF OIL EQUIVALENT (MBOE)
Subtotal consolidated subsidiaries 504 505
Colombia-minority interest (4) (5)
Russia-Occidental net interest 30 25
Yemen-Occidental net interest 2 --
-------- --------
Subtotal other interests 28 20
-------- --------
TOTAL WORLDWIDE PRODUCTION 532 525
======== ========
CAPITAL EXPENDITURES (millions) $ 298 $ 254
======== ========
DEPRECIATION, DEPLETION AND
AMORTIZATION OF ASSETS (millions) $ 285 $ 261
=================================== ======== ========
5
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) 2003 EPS 2002 EPS
================================ ====== ====== ====== ======
TOTAL REPORTED EARNINGS $ 325 $ 0.86 $ 25 $ 0.07
====== ====== ====== ======
OIL AND GAS
Segment Earnings $ 727 $ 306
Less:
None -- --
------ ------
Segment Core Earnings 727 306
------ ------
CHEMICALS
Segment Earnings (Loss) 35 (31)
Less:
None -- --
------ ------
Segment Core Earnings (Loss) 35 (31)
------ ------
CORPORATE
Results (437) (250)
Less:
Debt repayment charge (61) --
Tax effect of pre-tax
adjustments 21 --
Discontinued operations, net* -- (3)
Changes in accounting
principles, net* (68) (95)
------ ------
TOTAL CORE EARNINGS $ 433 $ 1.14 $ 123 $ 0.33
================================ ====== ====== ====== ======
*These amounts are shown after tax.
6
ITEMS AFFECTING COMPARABILITY OF CORE EARNINGS BETWEEN PERIODS
First Quarter
-------------------
($ millions) 2003 2002
============================================= ======= =======
INCOME / (EXPENSE)
(Pre-tax)
OIL AND GAS
On-going quarterly impact of adopting asset
retirement obligations (4) --
CHEMICALS
Reorganizations/severance -- (14)
Equistar equity results -- (36)
CORPORATE
Equity earnings (23) --
7
EXHIBIT 99.2
OCCIDENTAL PETROLEUM CORPORATION
STEPHEN CHAZEN
CHIEF FINANCIAL OFFICER AND
EXECUTIVE VICE PRESIDENT - CORPORATE DEVELOPMENT
- CONFERENCE CALL -
FIRST QUARTER 2003 EARNINGS ANNOUNCEMENT
APRIL 22, 2003
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.
Core earnings for the first quarter were $433 million, $1.14 per share,
compared with $123 million, or $0.33 per share in the first quarter of 2002.
There are three unusual items that impacted earnings for the quarter.
We recorded an interest charge of $61 million, or approximately $40 million
after-tax, to repay a $450 million bond issue that had 10 years of remaining
life. We refinanced $300 million at four-and-one quarter percent and repaid the
rest. The impact of these transactions is $16 million in annual interest
savings.
The adoption of accounting standard 143, which is related to asset
abandonment costs, resulted in a non-cash cumulative after-tax charge of
approximately $50 million primarily for onshore oil and gas assets currently in
service. This new standard also results in additional ongoing depreciation and
liability accretion expense. The first quarter income impact for these
1
non-cash charges was $4 million pre-tax and will be an ongoing charge that will
impact future quarterly results. The actual cash abandonment cost will not be
incurred until the asset is retired. In addition, there was a related one-time
depreciation adjustment of $13 million.
The FASB has rescinded EITF Issue Number 98-10 that was in effect since
1999, which required the mark to market of non-derivative trading positions. In
Oxy's case this relates mainly to physical natural gas inventories.
As a result of the FASB's rescinding of the previous requirement that
non-derivative trading positions be marked to market, we reversed the mark to
market gain for the physical gas inventory that was on our books at year-end.
This reversal resulted in a non-cash, after-tax charge of $18 million. As a
consequence of the FASB change, we will now book the gains in operating income
when the gas is sold. These sales resulted in $21 million of income in the first
quarter, which equates to $14 million after-tax. We expect to realize the
remainder in the second quarter.
Net income for the quarter was $325 million, or $0.86 per share. This
compares to $25 million, or $0.07 per share, we earned in the first quarter last
year. The quarter-to-quarter improvement was due primarily to significantly
higher oil and natural gas prices.
On a segment basis, oil and gas first quarter earnings were $727 million,
compared to $306 million for the first quarter of 2002. Higher oil and gas
prices accounted for virtually all of the improvement.
Chemical segment earnings for the quarter were $35 million compared to a
loss of $31 million last year. The primary factor driving the improvement was
higher prices for PVC, chlorine and ethylene dichloride. The positive impact of
these product price increases was weakened,
2
however, by the sharp spike in energy prices in February and early March that
could not be passed on to consumers. We began to see improvements in
profitability in late March which continued into April.
In the first quarter of 2002, our core chemical operations had earnings of
$5 million for the quarter, excluding $36 million of losses from our Equistar
equity investment, but including $14 million of severance charges.
Cash flow from operations for the quarter was approximately $670 million.
Interest expense, including distributions on trust-preferred securities but
excluding the $61 million charge for debt repayment, was $74 million during the
first quarter 2003, compared to $82 million in the 2002 first quarter.
Turning to the balance sheet at the end of the quarter, we increased
shareholder equity to $6.7 billion, or $354 million higher than the year-end
2002 level.
At the same time, we reduced total debt by $182 million to $4.58 billion,
compared to $4.76 billion at the end of 2002. Our debt to total capitalization
ratio was down to 41 percent at the end of the quarter, compared to 43 percent
at the end of last year.
Capital spending for the quarter was $298 million compared to $254 million
in last year's first quarter. Oil and gas accounted for $225 million of this
year's first quarter expenditures. Of the $68 million in capital expended for
chemicals, $44 million was for the buyout of previously leased equipment. We
expect to purchase additional leased equipment this year.
As we look ahead in the second quarter:
o We expect production to average about 535,000 BOE per day - which is
an increase of 10,000 BOE above our initial 2003
3
forecast. This could vary slightly due to price-driven adjustments in
the volumes under our production sharing contracts in Oman, Qatar,
Yemen and THUMS. In addition, our Colombia production is always
difficult to forecast.
o We expect exploration expense for the quarter to be about $30 million.
o We are cautiously optimistic about the outlook for chemicals -
assuming energy prices do not spike. Under this scenario, we expect
second quarter chemical earnings to be in the $40 to $70 million
range.
o We expect interest expense to be similar to the ongoing first quarter
expense of $74 million.
o A $1.00 per barrel change in oil prices impacts segment quarterly
earnings by about $31 million. The WTI price in the first quarter was
$33.85. A swing of 10-cents per million BTUs in gas prices has a $5
million impact on quarterly oil and gas earnings. The NYMEX gas price
for the first quarter was $4.75.
o We expect our tax rate in to be in the same range as the 31 percent
rate for the first quarter.
Now I'd like to turn the conference call over to Dr. Ray Irani, Chairman
and CEO.
- --------------------------------------------------------------------------------
This presentation includes forward-looking statements. The actual results could
differ materially from these statements based on factors listed in the
safe-harbor discussion in our 2002 Annual Report. These forward-looking
statements will not be updated or revised. See the "Investor Relations
Supplemental Schedules" and our website for the reconciliation of non-GAAP
items.
- --------------------------------------------------------------------------------
4
OCCIDENTAL PETROLEUM CORPORATION
DR. RAY R. IRANI
CHAIRMAN AND CHIEF EXECUTIVE OFFICE
- CONFERENCE CALL -
FIRST QUARTER 2003 EARNINGS ANNOUNCEMENT
APRIL 22, 2003
Los Angeles, California
Thank you, Steve.
Last year, the Permian Basin accounted for 164,000 barrels of oil
equivalent per day, or 32 percent, of our total worldwide production of 515,000
BOE per day - making the Permian the single largest contributor to our
production profile. These assets have proven to be an excellent source of cash
flow.
On April 15, we announced the closing of three acquisitions involving a net
total of 73 million BOE of proved reserves at an average cost of about $3.20 per
BOE. These acquisitions increase our holdings in the Wasson Field, the largest
in the Permian and one of the five largest in the lower 48 states. They include
the Denver Unit and Wasson ODC Units - both of which we operate. In addition, we
acquired a majority interest in - and are now the operator of - the Wasson
Field's Willard Unit, which is directly adjacent to the Denver Unit.
Since acquiring Altura in April 2000, we have completed 32 acquisitions in
the Permian totaling 139 million BOE of proven reserves for a net cost of
approximately $2.50 per BOE.
These acquisitions are consistent with our strategy of increasing
production in and around our core areas. Being, by far, the largest oil
5
producer in the Permian gives us economies of scale in a region where we have
significant competitive advantages as a consolidator. By purchasing synergistic
properties at attractive costs and integrating them with our existing
operations, we are able to generate better returns than the sellers. There are
many more such opportunities in the Permian.
When we purchased Altura we booked 850 million BOE of proven reserves. We
integrated the Altura assets with our existing Permian operations and at yearend
2000 our total proven reserves in the Permian Basin totaled nearly 970 million.
From the time of the acquisition through the end of 2002, we more than replaced
our total Permian production of approximately 160 million BOE. At the end of
last year, our total proven Permian reserves exceeded 1 billion barrels.
At current production rates, our Permian assets have a reserve life of
approximately 17 years. We expect to extend the producing life of these
operations well beyond 17 years by continuing to execute our strategy of adding
to our Permian reserves through a combination of acquisition, enhanced recovery
and exploration.
From the time we acquired them through the end of the first quarter this
year, the former Altura properties alone generated approximately $2 billion in
free cash flow after accounting for capital expenditures. That means in just
three years we've recovered 55 percent of the $3.6 billion purchase price.
The Permian acquisitions we announced last week will increase our
production by 10,000 BOE per day. Consequently, we are increasing our annual
production forecast for 2003 through 2006 by 10,000 BOE per day. The new numbers
are 535,000 BOE per day for 2003, 575,000 for 2004,
6
590,000 for 2005, and 620,000 BOE for 2006. We are highly confident we will
achieve the increased production levels in this revised forecast.
Thank you, and now we're ready to answer your questions.
- --------------------------------------------------------------------------------
See the "Investor Relations Supplemental Schedules" and our website 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.
- --------------------------------------------------------------------------------
7
EXHIBIT 99.3
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 (124) 61 Debt repayment charge (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
========== ========== ==========
Income from continuing operations $ 1.04 $ 1.14
Cumulative effect of accounting changes (0.18) --
---------- ----------
BASIC EARNINGS PER SHARE $ 0.86 $ 1.14
========== ==========
1
Investor Relations Supplemental Schedules
[OXY LOGO]
OCCIDENTAL PETROLEUM
2002 First Quarter
Net Income (Loss)
($ millions)
REPORTED CORE
INCOME SIGNIFICANT ITEMS AFFECTING INCOME EARNINGS
---------- ---------------------------------------------- ----------
Oil & Gas $ 306 $ 306
Chemical (31) (31)
Corporate
Interest - all others (70) (70)
Trust pfd distributions & other (12) (12)
Other (26) (26)
Taxes (44) (44)
---------- ---------- ----------
Income from continuing operations 123 -- 123
Discontinued operations, net (3) 3 Discontinued operations --
Cumulative effect of accounting changes (95) 95 Cumulative effect of acct changes
---------- ---------- ----------
NET INCOME $ 25 $ 98 $ 123
========== ========== ==========
BASIC EARNINGS PER SHARE
Income from continuing operations $ 0.33 $ 0.33
Discontinued operations, net (0.01) --
Cumulative effect of accounting changes (0.25) --
---------- ----------
NET INCOME (LOSS) $ 0.07 $ 0.33
========== ==========
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
---------- ----------
OIL & GAS
On-going quarterly impact of adopting (4) --
asset retirement obligations
CHEMICALS
Reorganizations / severance -- (14)
Equistar equity earnings -- (36)
CORPORATE
Equity earnings (23) --
3
Investor Relations Supplemental Schedules
[OXY LOGO]
OCCIDENTAL PETROLEUM
2003 First Quarter Net Income (Loss)
Reported Income Comparison
FIRST FOURTH
QUARTER QUARTER
2003 2002 B / (W)
--------- --------- ---------
OIL & GAS $ 727 $ 490 $ 237
CHEMICAL 35 58 (23)
CORPORATE
INTEREST (124) (58) (66)
TRUST PFD DISTRIBUTIONS & OTHER (11) (12) 1
OTHER (56) (41) (15)
TAXES (178) (114) (64)
--------- --------- ---------
INCOME FROM CONTINUING OPERATIONS 393 323 70
DISCONTINUED OPERATIONS, NET -- (1) 1
CUMULATIVE EFFECT OF ACCOUNTING CHANGES (68) -- (68)
--------- --------- ---------
NET INCOME $ 325 $ 322 $ 3
========= ========= =========
BASIC EARNINGS PER SHARE $ 0.86 $ 0.85 $ 0.01
========= ========= =========
EFFECTIVE TAX RATE 31% 26% -5%
========= ========= =========
================================================================================
OCCIDENTAL PETROLEUM
2003 First Quarter Net Income (Loss)
Core Earnings Comparison
FIRST FOURTH
QUARTER QUARTER
2003 2002 B / (W)
--------- --------- ---------
OIL & GAS $ 727 $ 490 $ 237
CHEMICAL 35 58 (23)
CORPORATE
INTEREST (63) (58) (5)
TRUST PFD DISTRIBUTIONS & OTHER (11) (12) 1
OTHER (56) (41) (15)
TAXES (199) (114) (85)
--------- --------- ---------
NET INCOME $ 433 $ 323 $ 110
========= ========= =========
BASIC EARNINGS PER SHARE $ 1.14 $ 0.86 $ 0.28
========= ========= =========
EFFECTIVE TAX RATE 31% 26% -5%
========= ========= =========
4
Investor Relations Supplemental Schedules
[OXY LOGO]
OCCIDENTAL PETROLEUM
OIL & GAS
CORE EARNINGS VARIANCE ANALYSIS
($ MILLIONS)
2003 1st Quarter $ 727
2002 4th Quarter 490
---------
$ 237
=========
Price Variance $ 221
Volume Variance 4
Exploration Expense Variance 33
All Other (21)
---------
TOTAL VARIANCE $ 237
=========
================================================================================
OCCIDENTAL PETROLEUM
CHEMICAL
CORE EARNINGS VARIANCE ANALYSIS
($ MILLIONS)
2003 1st Quarter $ 35
2002 4th Quarter 58
---------
$ (23)
=========
Sales Price $ 51
Sales Volume/Mix 4
Operations/Manufacturing (58) *
All Other (20)
---------
TOTAL VARIANCE $ (23)
=========
* Higher energy and feedstock costs
5
Investor Relations Supplemental Schedules
[OXY LOGO]
OCCIDENTAL PETROLEUM
2003 First Quarter Net Income (Loss)
Reported Income Comparison
FIRST FIRST
QUARTER QUARTER
2003 2002 B / (W)
--------- --------- ---------
OIL & GAS $ 727 $ 306 $ 421
CHEMICAL 35 (31) 66
CORPORATE
INTEREST (124) (70) (54)
TRUST PFD DISTRIBUTIONS & OTHER (11) (12) 1
OTHER (56) (26) (30)
TAXES (178) (44) (134)
--------- --------- ---------
INCOME FROM CONTINUING OPERATIONS 393 123 270
DISCONTINUED OPERATIONS, NET -- (3) 3
CUMULATIVE EFFECT OF ACCOUNTING CHANGES (68) (95) 27
--------- --------- ---------
NET INCOME $ 325 $ 25 $ 300
========= ========= =========
BASIC EARNINGS PER SHARE $ 0.86 $ 0.07 $ 0.79
========= ========= =========
EFFECTIVE TAX RATE 31% 24% -7%
========= ========= =========
================================================================================
OCCIDENTAL PETROLEUM
2003 First Quarter Net Income (Loss)
Core Earnings Comparison
FIRST FIRST
QUARTER QUARTER
2003 2002 B / (W)
--------- --------- ---------
OIL & GAS $ 727 $ 306 $ 421
CHEMICAL 35 (31) 66
CORPORATE
INTEREST (63) (70) 7
TRUST PFD DISTRIBUTIONS & OTHER (11) (12) 1
OTHER (56) (26) (30)
TAXES (199) (44) (155)
--------- --------- ---------
NET INCOME $ 433 $ 123 $ 310
========= ========= =========
BASIC EARNINGS PER SHARE $ 1.14 $ 0.33 $ 0.81
========= ========= =========
EFFECTIVE TAX RATE 31% 24% -7%
========= ========= =========
6
Investor Relations Supplemental Schedules
[OXY LOGO]
OCCIDENTAL PETROLEUM
OIL & GAS
CORE EARNINGS VARIANCE ANALYSIS
($ MILLIONS)
2003 1st Quarter $ 727
2002 1st Quarter 306
---------
$ 421
=========
Price Variance $ 440
Volume Variance 3
Exploration Expense Variance (1)
All Other (21)
---------
TOTAL VARIANCE $ 421
=========
================================================================================
OCCIDENTAL PETROLEUM
CHEMICAL
CORE EARNINGS VARIANCE ANALYSIS
($ MILLIONS)
2003 1st Quarter $ 35
2002 1st Quarter (31)
---------
$ 66
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Sales Price $ 150
Sales Volume/Mix 3
Operations/Manufacturing (136) *
All Other 49 **
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TOTAL VARIANCE $ 66
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* Higher energy and feedstock costs.
** 2002 included Equistar loss of ($36)
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Investor Relations Supplemental Schedules
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OCCIDENTAL PETROLEUM
SUMMARY OF OPERATING STATISTICS
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FIRST QUARTER
---------------------
2003 2002
-------- --------
NET PRODUCTION PER DAY:
UNITED STATES
CRUDE OIL AND LIQUIDS (MBL)
California 78 90
Permian 144 140
Horn Mountain 15 --
Hugoton 4 3
-------- --------
TOTAL 241 233
NATURAL GAS (MMCF)
California 262 305
Hugoton 144 157
Permian 117 129
Horn Mountain 5 --
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TOTAL 528 591
LATIN AMERICA
CRUDE OIL (MBL)
Colombia 37 36
Ecuador 16 13
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TOTAL 53 49
MIDDLE EAST AND OTHER
EASTERN HEMISPHERE
CRUDE OIL (MBL)
Oman 13 17
Pakistan 10 8
Qatar 47 44
Yemen 39 47
-------- --------
TOTAL 109 116
NATURAL GAS (MMCF)
Pakistan 75 50
BARRELS OF OIL EQUIVALENT (MBOE)
- --------------------------------
CONSOLIDATED SUBSIDIARIES 504 505
OTHER INTERESTS
COLOMBIA - MINORITY INTEREST (4) (5)
RUSSIA - OCCIDENTAL NET INTEREST 30 25
YEMEN - OCCIDENTAL NET INTEREST 2 --
-------- --------
TOTAL WORLDWIDE PRODUCTION (MBOE) 532 525
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Investor Relations Supplemental Schedules
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SUMMARY OF OPERATING STATISTICS
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FIRST QUARTER
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2003 2002
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OIL & GAS:
PRICES
UNITED STATES
Crude Oil ($/BBL) 31.57 18.83
Natural gas ($/MCF) 4.30 2.38
LATIN AMERICA
Crude oil ($/BBL) 31.23 18.25
MIDDLE EAST AND OTHER
EASTERN HEMISPHERE
Crude oil ($/BBL) 30.16 20.29
Natural Gas ($/MCF) 1.89 2.51
FIRST QUARTER
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2003 2002
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EXPLORATION EXPENSE
Domestic $ 25 $ 10
Latin America 1 7
Middle East and Other
Eastern Hemisphere 2 10
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TOTAL $ 28 $ 27
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Investor Relations Supplemental Schedules
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CHLORINE
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OXYCHEM COMMENTARY
- ------------------
o Demand continued to strengthen as anticipated through the 1st quarter, led
by the PVC market. Seasonal volume related to the bleach market is expected
to improve early in the 2nd quarter.
o Industry effective operating rates rose to 93% in the 1st quarter from 85%
in the 4th quarter 2002. Additional operating rate improvements are
projected for the 2nd quarter as seasonal demand improves.
o Prices remained stable in the 1st quarter and a $70 per ton price increase
was announced for April 1st. Other major producers have made similar
announcements.
INFLUENCING FACTORS:
- --------------------
A quick resolution to the war in Iraq combined with economic recovery and lack
of new capacity is expected to yield stronger demand and improved operating
rates.
CAUSTIC
- -------
OXYCHEM COMMENTARY
- ------------------
o Despite increased 1st quarter energy pricing, demand for caustic soda
improved slightly over 4th quarter 2002. Demand was particularly strong in
the pulp and paper and refining segments. Additional improvement in the 2nd
quarter is expected as the seasonal demand for bleach increases.
o Domestic pricing for caustic soda improved as a result of a $40 per ton
price increase implemented by U.S. producers in the 1st quarter.
Substantial increases in energy cost in the later part of the 1st quarter
resulted in an additional price increase of a $125 per ton.
INFLUENCING FACTORS:
- --------------------
Supply and demand for caustic soda remains balanced. Demand is dependant on the
U.S. manufacturing sector. Elevated natural gas pricing coupled with the war in
Iraq could negatively impact the domestic economy and caustic soda market.
However, higher energy costs could provide an incentive for future price
increases.
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Investor Relations Supplemental Schedules
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EDC
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OXYCHEM COMMENTARY
- ------------------
o While demand appeared strong through February, there were signs of weakness
in March due to the slower PVC market and the ability of Chinese producers
to use acetylene instead of EDC in their PVC production.
o Recent price declines in the Asian PVC market could cause some downward
pressure on future EDC pricing.
INFLUENCING FACTORS:
- --------------------
Continued economic recovery in Asia and strong demand for EDC, VCM and PVC are
required for sustainable improvement. China's ability to produce PVC without EDC
could hamper growth.
PVC/VCM
- -------
OXYCHEM COMMENTARY
- ------------------
o Demand was robust as the 1st quarter began but moderated in most market
segments as the quarter progressed due to winter storms on the East Coast
and uncertainty in the Middle East. The market rebounded in March and the
1st quarter finished strong. However, end users report that much of the
product purchased went into inventory, which could negatively impact demand
early in the 2nd quarter.
o Increases in ethylene and natural gas pricing prompted some chlor-alkali
and PVC producers to reduce output in March. The reductions have so far not
had a definitive impact on the market. Capacities still exclude the former
Borden Geismar and Addis facilities, which remain idle. The expectation is
that the Addis facility will start up no earlier than the second half of
2003 with Geismar idled until 2004.
o Domestic PVC resin market prices increased $.02/lb in January, February and
March for a total of $.06/lb in the 1st quarter. There have been price
increase announcements for April of $.02/lb and $.02/lb - $.03/lb for May.
o Demand for PVC exports weakened towards the end of the 1st quarter as China
reduced imports and many idled units restarted. However, prices managed to
gain $100/MT, starting at $550/MT and ending at $650/MT.
o Demand for VCM has been strong throughout most of the quarter due to
domestic PVC demand and export sales. PVC producers in Latin America have
benefited from heavy local demand and reduced exports to the region.
Europe's VCM position is balanced. Inventory build late in the 4th quarter
2002 enabled OxyVinyls to reduce production in March and avoid high
feedstock costs.
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Investor Relations Supplemental Schedules
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o Export prices began the year at $410-$420/MT F.O.B. Gulf Coast and
increased throughout February and March ending the quarter at $550-$560/MT.
Latin America continues to yield the highest prices, while pricing to
Europe reflects its balanced supply/demand position.
o Rising ocean freight cost early in the 1st quarter increased the delivered
price of VCM to the European and Asian markets. The availability of vessels
improved in March and costs returned to normal levels.
INFLUENCING FACTORS:
- --------------------
Margins gained through PVC price increases are largely offset by higher energy
costs during the 1st quarter. Although demand improvement is expected, it is
moderated by uncertainty in the Middle East and the slow economic recovery.
OCCIDENTAL PETROLEUM
CHEMICALS
Volume (M Tons)
FIRST QUARTER
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MAJOR PRODUCTS 2003 2002
-------- --------
Chlorine 686 701
Caustic 637 574
Ethylene Dichloride 131 152
PVC Resins 1,063 1,042
CHEMICALS
Prices (Index)
FIRST QUARTER
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MAJOR PRODUCTS 2003 2002
-------- --------
Chlorine 1.64 0.50
Caustic 0.81 0.95
Ethylene Dichloride 1.23 0.61
PVC Resins 0.89 0.54
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Investor Relations Supplemental Schedules
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SUMMARY OF OPERATING STATISTICS
FIRST QUARTER
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2003 2002
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CAPITAL EXPENDITURES ($MM)
Oil & Gas
California $ 44 $ 60
Permian 55 59
Other - U.S. 14 16
Latin America 7 9
Middle East and Other 105 84
Eastern Hemisphere
Chemicals 68 14
Corporate 5 12
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TOTAL $ 298 $ 254
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DEPRECIATION, DEPLETION &
AMORTIZATION OF ASSETS ($MM)
Oil & Gas
Domestic $ 165 $ 149
Latin America 12 9
Middle East and Other 61 53
Eastern Hemisphere
Chemicals 44 48
Corporate 3 2
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TOTAL $ 285 $ 261
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Investor Relations Supplemental Schedules
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OCCIDENTAL PETROLEUM
CORPORATE
($ millions)
31-MAR-03 31-DEC-02
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CAPITALIZATION
Oxy Long-Term Debt (including current maturities) $ 4,022 $ 4,203
Trust Preferred Securities 454 455
Subsidiary Preferred Stock 75 75
Others 26 26
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TOTAL DEBT $ 4,577 $ 4,759
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EQUITY $ 6,672 $ 6,318
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Total Debt To Total Capitalization 41% 43%
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Investor Relations Supplemental Schedules
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Portions of this presentation are "forward-looking statements" as defined by the
Private Securities Litigation Reform Act of 1995, and involve risks and
uncertainties that could significantly affect expected results. No assurance can
be given that the results or statement of expectations or beliefs will be
attained. Factors that may cause actual results to differ materially are
contained in the March 31, 2002 form 10-K on file with the SEC.
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