UNITED STATES
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 25, 2006
OCCIDENTAL PETROLEUM CORPORATION
(Exact name of registrant as specified in its charter)
|
Delaware |
1-9210 |
95-4035997 |
|
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(I.R.S. Employer 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
Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Section 2 – Financial Information
Item 2.02. Results of Operations and Financial Condition
On April 25, 2006, Occidental Petroleum Corporation released information regarding its results of operations for the three months ended March 31, 2006. The exhibits to this Form 8-K and the information set forth in this Item 2.02 are being furnished pursuant to Item 2.02, 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 the speech given by Stephen I. Chazen is attached to this report as Exhibit 99.2. Investor Relations Supplemental Schedules are attached to this report as Exhibit 99.3.
Section 8 – Other Events
Item 8.01. Other Events
On April 25, 2006, Occidental Petroleum Corporation announced net income for the first quarter 2006 of $1.23 billion ($2.90 basic per share), compared with $846 million ($2.11 basic per share) for the first quarter 2005. Diluted earnings were $2.86 per share for the first quarter 2006, compared with $2.08 per share for the first quarter 2005.
Oil and Gas
Oil and gas segment earnings were a record $2.0 billion for the first quarter 2006, which was a 48 percent increase from the $1.35 billion in earnings for the first quarter 2005. The first quarter 2006 earnings reflected a $700 million improvement from the impact of higher energy prices and $198 million increase from higher production, partially offset by higher operating expenses and increased DD&A rates.
For the quarter, oil and gas daily production averaged a record high 636,000 barrels of oil equivalent (BOE), which was a 13 percent increase over the 565,000 equivalent barrels per day produced in the first quarter 2005. The increase included two months of Vintage production at 57,000 BOE per day which added 38,000 BOE per day to Occidental's quarterly production, Libya production of 22,000 BOE per day that came on line in the third quarter of 2005, and 25,000 BOE per day from Permian acquisitions that were acquired in the second quarter of 2005. Compared to a year ago, production under the Company's production sharing contracts in Oman, Qatar, Yemen and Long Beach was negatively impacted by higher prices. The average price for West Texas Intermediate crude oil in the first quarter 2006 was $63.48 per barrel compared to $49.84 per barrel in the first quarter 2005. If prices had remained at first quarter 2005 levels, production in the first quarter 2006 would have been 8,000 equivalent barrels per day higher.
Chemicals
Chemical segment earnings were $248 million for the first quarter 2006, compared with $214 million for the first quarter 2005. The improvement was due to increased volumes in chlor-alkali and higher margins in chlor-alkali and polyvinyl chloride, resulting from higher sales prices, partially offset by higher energy and feedstock costs.
Core Earnings
Core earnings for the first quarter 2006 were $1.22 billion ($2.87 basic per share), compared with $866 million ($2.16 basic per share) for the same period in 2005. See the attached schedule for a reconciliation of net income to core earnings for the first quarter.
Statements in this release that contain words such as "will," "expect" or "estimate," 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: exploration risks such as drilling of unsuccessful wells, global commodity pricing fluctuations, changes in tax rates, 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. You should not place undue reliance on these forward-looking statements which speak only as of the date of this presentation. Unless legally required, Occidental does not undertake any obligation to update any forward-looking statements as a result of new information, future events or otherwise. 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.
2
SUMMARY OF SEGMENT NET SALES AND EARNINGS
|
First Quarter |
|||||||
|
(In millions, except per-share amounts) |
2006 |
2005 |
|||||
|
SEGMENT NET SALES |
|||||||
|
Oil and Gas |
$ |
3,299 |
$ |
2,219 |
|||
|
Chemical |
1,241 |
1,061 |
|||||
|
Other |
30 |
23 |
|||||
|
Net sales |
$ |
4,570 |
$ |
3,303 |
|||
|
SEGMENT EARNINGS |
|||||||
|
Oil and Gas |
$ |
2,002 |
$ |
1,349 |
|||
|
Chemical |
248 |
214 |
|||||
|
2,250 |
1,563 |
||||||
|
Unallocated Corporate Items |
|||||||
|
Interest expense, net (a) |
(29 |
) |
(61 |
) | |||
|
Income taxes (b) |
(932 |
) |
(601 |
) | |||
|
Other |
(73 |
) |
(51 |
) | |||
|
Income from Continuing Operations |
1,216 |
850 |
|||||
|
Discontinued operations, net (c) |
13 |
(4 |
) | ||||
|
NET INCOME |
$ |
1,229 |
$ |
846 |
|||
|
BASIC EARNINGS PER COMMON SHARE |
|||||||
|
Income from continuing operations |
$ |
2.87 |
$ |
2.12 |
|||
|
Discontinued operations, net (c) |
0.03 |
(0.01 |
) | ||||
|
$ |
2.90 |
$ |
2.11 |
||||
|
DILUTED EARNINGS PER COMMON SHARE |
|||||||
|
Income from continuing operations |
$ |
2.83 |
$ |
2.09 |
|||
|
Discontinued operations, net (c) |
0.03 |
(0.01 |
) | ||||
|
$ |
2.86 |
$ |
2.08 |
||||
|
AVERAGE BASIC COMMON SHARES OUTSTANDING |
424.2 |
400.4 |
|||||
See footnotes on following page.
3
|
(a) |
The first quarter 2005 includes a $10 million pre-tax interest charge to redeem all the outstanding 7.65 percent senior notes, which were due in February 2006. |
|
(b) |
The first quarter 2005 includes a $10 million charge, net, related to a state income tax issue. |
|
(c) |
The first quarter 2006 discontinued operations represent the net after tax results of the operations of the Vintage properties that are held for sale. |
SUMMARY OF CAPITAL EXPENDITURES AND DD&A EXPENSE
|
First Quarter | ||||||
|
($ millions) |
2006 |
2005 | ||||
|
CAPITAL EXPENDITURES |
$ |
605 |
$ |
536 | ||
|
DEPRECIATION, DEPLETION AND |
||||||
|
AMORTIZATION OF ASSETS |
$ |
480 |
$ |
344 | ||
4
SUMMARY OF OPERATING STATISTICS
|
First Quarter |
|||||
|
2006 |
2005 |
||||
|
NET OIL, GAS AND LIQUIDS |
|||||
|
PRODUCTION PER DAY |
|||||
|
United States |
|||||
|
Crude oil and liquids (MBBL) |
|||||
|
California |
82 |
77 |
|||
|
Permian |
166 |
148 |
|||
|
Horn Mountain |
15 |
18 |
|||
|
Hugoton and other |
3 |
4 |
|||
|
Total |
266 |
247 |
|||
|
Natural Gas (MMCF) |
|||||
|
California |
250 |
241 |
|||
|
Hugoton and other |
133 |
129 |
|||
|
Permian |
189 |
146 |
|||
|
Horn Mountain |
10 |
12 |
|||
|
Total |
582 |
528 |
|||
|
Latin America |
|||||
|
Crude oil (MBBL) |
|||||
|
Argentina |
24 |
– |
|||
|
Colombia |
39 |
32 |
|||
|
Ecuador |
44 |
42 |
|||
|
Total |
107 |
74 |
|||
|
Natural Gas (MMCF) |
|||||
|
Argentina |
13 |
– |
|||
|
Bolivia |
13 |
– |
|||
|
Total |
26 |
– |
|||
|
Middle East/North Africa |
|||||
|
Crude oil (MBBL) |
|||||
|
Oman |
17 |
23 |
|||
|
Qatar |
44 |
43 |
|||
|
Yemen |
32 |
35 |
|||
|
Libya |
22 |
– |
|||
|
Total |
115 |
101 |
|||
|
Natural Gas (MMCF) |
|||||
|
Oman |
25 |
56 |
|||
|
Other Eastern Hemisphere |
|||||
|
Crude oil (MBBL) |
|||||
|
Pakistan |
4 |
5 |
|||
|
Natural Gas (MMCF) |
|||||
|
Pakistan |
75 |
78 |
|||
|
Barrels of Oil Equivalent (MBOE) |
|||||
|
Subtotal consolidated subsidiaries |
610 |
537 |
|||
|
Colombia-minority interest |
(5 |
) |
(4 |
) | |
|
Russia-Occidental net interest |
29 |
30 |
|||
|
Yemen-Occidental net interest |
2 |
2 |
|||
|
Total Worldwide Production (MBOE) |
636 |
565 |
|||
5
SIGNIFICANT TRANSACTIONS AND EVENTS AFFECTING EARNINGS (continued)
Occidental's results of operation 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.
|
($ millions, except |
First Quarter | |||||||||||
|
per-share amounts) |
2006 |
EPS |
2005 |
EPS | ||||||||
|
TOTAL REPORTED EARNINGS |
$ |
1,229 |
$ |
2.90 |
$ |
846 |
$ |
2.11 | ||||
|
Oil and Gas |
||||||||||||
|
Segment Earnings |
$ |
2,002 |
$ |
1,349 |
||||||||
|
No significant items affecting earnings |
– |
– |
||||||||||
|
Segment Core Earnings |
2,002 |
1,349 |
||||||||||
|
Chemicals |
||||||||||||
|
Segment Earnings |
248 |
214 |
||||||||||
|
No significant items affecting earnings |
– |
– |
||||||||||
|
Segment Core Earnings |
248 |
214 |
||||||||||
|
Total Segment Core Earnings |
2,250 |
1,563 |
||||||||||
|
Corporate |
||||||||||||
|
Corporate Results – |
(1,021 |
) |
(717 |
) |
||||||||
|
Less: |
||||||||||||
|
Debt purchase expense |
– |
(10 |
) |
|||||||||
|
State tax issue |
– |
(10 |
) |
|||||||||
|
Tax effect of pre-tax adjustments |
– |
4 |
||||||||||
|
Discontinued operations, net** |
13 |
(4 |
) |
|||||||||
|
Corporate Core Results – |
(1,034 |
) |
(697 |
) |
||||||||
|
TOTAL CORE EARNINGS |
$ |
1,216 |
$ |
2.87 |
$ |
866 |
$ |
2.16 | ||||
|
* |
Interest expense, income taxes, G&A expense and other, and non-core items. |
|
** |
Amounts shown after tax. |
6
ITEMS AFFECTING COMPARABILITY OF CORE EARNINGS BETWEEN PERIODS
The item(s) below are included in core earnings but are shown in this table because they affect the comparability of core earnings between periods.
|
First Quarter |
|||||
|
($ millions) |
2006 |
2005 |
|||
|
PRE-TAX INCOME / (EXPENSE) |
|||||
|
Corporate |
|||||
|
Environmental remediation |
(7 |
) |
(9 |
) | |
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 25, 2006 |
/s/ Jim A. Leonard |
|
|
Jim A. Leonard, Vice President and Controller (Principal Accounting and Duly Authorized Officer) |
EXHIBIT INDEX
|
99.1 |
Press release dated April 25, 2006. | |
|
99.2 |
Full text of speech given by Stephen I. Chazen. | |
|
99.3 |
Investor Relations Supplemental Schedules. |
EXHIBIT 99.1
For Immediate Release: April 25, 2006
OCCIDENTAL PETROLEUM ANNOUNCES FIRST QUARTER 2006 RESULTS
LOS ANGELES -- Occidental Petroleum Corporation (NYSE: OXY) announced net income for the first quarter 2006 of $1.23 billion ($2.90 basic per share), compared with $846 million ($2.11 basic per share) for the first quarter 2005. Diluted earnings were $2.86 per share for the first quarter 2006, compared with $2.08 per share for the first quarter 2005.
In announcing the results, Dr. Ray R. Irani, chairman, president and chief executive officer, said, "The first quarter daily production was 636,000 barrels of oil equivalent, the highest quarterly production in Oxy's history. This was an increase of 13 percent over the first quarter of 2005. We expect production for the second quarter to be approximately 650,000 BOE, which would be another record. First quarter core earnings of $1.22 billion set a new record surpassing the previous record set in the last quarter of 2005."
Oil and Gas
Oil and gas segment earnings were a record $2.0 billion for the first quarter 2006, which was a 48 percent increase from the $1.35 billion in earnings for the first quarter 2005. The first quarter 2006 earnings reflected a $700 million improvement from the impact of higher energy prices and $198 million increase from higher production, partially offset by higher operating expenses and increased DD&A rates.
For the quarter, oil and gas daily production averaged a record high 636,000 barrels of oil equivalent(BOE), which was a 13 percent increase over the 565,000 equivalent barrels per day produced in the first quarter 2005. The increase included two months of Vintage production at 57,000 BOE per day which added 38,000 BOE per day to Occidental's quarterly production, Libya production of 22,000 BOE per day that came on line in the third quarter of 2005, and 25,000 BOE per day from Permian acquisitions that were acquired in the second quarter of 2005. Compared to a
year ago, production under the Company's production sharing contracts in Oman, Qatar, Yemen and Long Beach was negatively impacted by higher prices. The average price for West Texas Intermediate crude oil in the first quarter 2006 was $63.48 per barrel compared to $49.84 per barrel in the first quarter 2005. If prices had remained at first quarter 2005 levels, production in the first quarter 2006 would have been 8,000 equivalent barrels per day higher.
Chemicals
Chemical segment earnings were $248 million for the first quarter 2006, compared with $214 million for the first quarter 2005. The improvement was due to increased volumes in chlor-alkali and higher margins in chlor-alkali and polyvinyl chloride, resulting from higher sales prices, partially offset by higher energy and feedstock costs.
Core Earnings
Core earnings for the first quarter 2006 were $1.22 billion ($2.87 basic per share), compared with $866 million ($2.16 basic per share) for the same period in 2005. See the attached schedule for a reconciliation of net income to core earnings for the first quarter.
Statements in this release that contain words such as "will," "expect" or "estimate," 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: exploration risks such as drilling of unsuccessful wells, global commodity pricing fluctuations, changes in tax rates, 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. You should not place undue reliance on these forward-looking statements which speak only as of the date of this presentation. Unless legally
2
required, Occidental does not undertake any obligation to update any forward-looking statements as a result of new information, future events or otherwise. 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.
-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 |
3
SUMMARY OF SEGMENT NET SALES AND EARNINGS
|
First Quarter |
|||||||
|
(In millions, except per-share amounts) |
2006 |
2005 |
|||||
|
SEGMENT NET SALES |
|||||||
|
Oil and Gas |
$ |
3,299 |
$ |
2,219 |
|||
|
Chemical |
1,241 |
1,061 |
|||||
|
Other |
30 |
23 |
|||||
|
Net sales |
$ |
4,570 |
$ |
3,303 |
|||
|
SEGMENT EARNINGS |
|||||||
|
Oil and Gas |
$ |
2,002 |
$ |
1,349 |
|||
|
Chemical |
248 |
214 |
|||||
|
2,250 |
1,563 |
||||||
|
Unallocated Corporate Items |
|||||||
|
Interest expense, net (a) |
(29 |
) |
(61 |
) | |||
|
Income taxes (b) |
(932 |
) |
(601 |
) | |||
|
Other |
(73 |
) |
(51 |
) | |||
|
Income from Continuing Operations |
1,216 |
850 |
|||||
|
Discontinued operations, net (c) |
13 |
(4 |
) | ||||
|
NET INCOME |
$ |
1,229 |
$ |
846 |
|||
|
BASIC EARNINGS PER COMMON SHARE |
|||||||
|
Income from continuing operations |
$ |
2.87 |
$ |
2.12 |
|||
|
Discontinued operations, net (c) |
0.03 |
(0.01 |
) | ||||
|
$ |
2.90 |
$ |
2.11 |
||||
|
DILUTED EARNINGS PER COMMON SHARE |
|||||||
|
Income from continuing operations |
$ |
2.83 |
$ |
2.09 |
|||
|
Discontinued operations, net (c) |
0.03 |
(0.01 |
) | ||||
|
$ |
2.86 |
$ |
2.08 |
||||
|
AVERAGE BASIC COMMON SHARES OUTSTANDING |
424.2 |
400.4 |
|||||
See footnotes on following page.
4
|
(a) |
The first quarter 2005 includes a $10 million pre-tax interest charge to redeem all the outstanding 7.65 percent senior notes, which were due in February 2006. |
|
(b) |
The first quarter 2005 includes a $10 million charge, net, related to a state income tax issue. |
|
(c) |
The first quarter 2006 discontinued operations represent the net after tax results of the operations of the Vintage properties that are held for sale. |
SUMMARY OF CAPITAL EXPENDITURES AND DD&A EXPENSE
|
First Quarter | ||||||
|
($ millions) |
2006 |
2005 | ||||
|
CAPITAL EXPENDITURES |
$ |
605 |
$ |
536 | ||
|
DEPRECIATION, DEPLETION AND |
||||||
|
AMORTIZATION OF ASSETS |
$ |
480 |
$ |
344 | ||
5
SUMMARY OF OPERATING STATISTICS
|
First Quarter |
|||||
|
2006 |
2005 |
||||
|
NET OIL, GAS AND LIQUIDS |
|||||
|
PRODUCTION PER DAY |
|||||
|
United States |
|||||
|
Crude oil and liquids (MBBL) |
|||||
|
California |
82 |
77 |
|||
|
Permian |
166 |
148 |
|||
|
Horn Mountain |
15 |
18 |
|||
|
Hugoton and other |
3 |
4 |
|||
|
Total |
266 |
247 |
|||
|
Natural Gas (MMCF) |
|||||
|
California |
250 |
241 |
|||
|
Hugoton and other |
133 |
129 |
|||
|
Permian |
189 |
146 |
|||
|
Horn Mountain |
10 |
12 |
|||
|
Total |
582 |
528 |
|||
|
Latin America |
|||||
|
Crude oil (MBBL) |
|||||
|
Argentina |
24 |
– |
|||
|
Colombia |
39 |
32 |
|||
|
Ecuador |
44 |
42 |
|||
|
Total |
107 |
74 |
|||
|
Natural Gas (MMCF) |
|||||
|
Argentina |
13 |
– |
|||
|
Bolivia |
13 |
– |
|||
|
Total |
26 |
– |
|||
|
Middle East/North Africa |
|||||
|
Crude oil (MBBL) |
|||||
|
Oman |
17 |
23 |
|||
|
Qatar |
44 |
43 |
|||
|
Yemen |
32 |
35 |
|||
|
Libya |
22 |
– |
|||
|
Total |
115 |
101 |
|||
|
Natural Gas (MMCF) |
|||||
|
Oman |
25 |
56 |
|||
|
Other Eastern Hemisphere |
|||||
|
Crude oil (MBBL) |
|||||
|
Pakistan |
4 |
5 |
|||
|
Natural Gas (MMCF) |
|||||
|
Pakistan |
75 |
78 |
|||
|
Barrels of Oil Equivalent (MBOE) |
|||||
|
Subtotal consolidated subsidiaries |
610 |
537 |
|||
|
Colombia-minority interest |
(5 |
) |
(4 |
) | |
|
Russia-Occidental net interest |
29 |
30 |
|||
|
Yemen-Occidental net interest |
2 |
2 |
|||
|
Total Worldwide Production (MBOE) |
636 |
565 |
|||
6
SIGNIFICANT TRANSACTIONS AND EVENTS AFFECTING EARNINGS (continued)
Occidental's results of operation 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.
|
($ millions, except |
First Quarter | |||||||||||
|
per-share amounts) |
2006 |
EPS |
2005 |
EPS | ||||||||
|
TOTAL REPORTED EARNINGS |
$ |
1,229 |
$ |
2.90 |
$ |
846 |
$ |
2.11 | ||||
|
Oil and Gas |
||||||||||||
|
Segment Earnings |
$ |
2,002 |
$ |
1,349 |
||||||||
|
No significant items affecting earnings |
– |
– |
||||||||||
|
Segment Core Earnings |
2,002 |
1,349 |
||||||||||
|
Chemicals |
||||||||||||
|
Segment Earnings |
248 |
214 |
||||||||||
|
No significant items affecting earnings |
– |
– |
||||||||||
|
Segment Core Earnings |
248 |
214 |
||||||||||
|
Total Segment Core Earnings |
2,250 |
1,563 |
||||||||||
|
Corporate |
||||||||||||
|
Corporate Results – |
(1,021 |
) |
(717 |
) |
||||||||
|
Less: |
||||||||||||
|
Debt purchase expense |
– |
(10 |
) |
|||||||||
|
State tax issue |
– |
(10 |
) |
|||||||||
|
Tax effect of pre-tax adjustments |
– |
4 |
||||||||||
|
Discontinued operations, net** |
13 |
(4 |
) |
|||||||||
|
Corporate Core Results – |
(1,034 |
) |
(697 |
) |
||||||||
|
TOTAL CORE EARNINGS |
$ |
1,216 |
$ |
2.87 |
$ |
866 |
$ |
2.16 | ||||
|
* |
Interest expense, income taxes, G&A expense and other, and non-core items. |
|
** |
Amounts shown after tax. |
7
ITEMS AFFECTING COMPARABILITY OF CORE EARNINGS BETWEEN PERIODS
The item(s) below are included in core earnings but are shown in this table because they affect the comparability of core earnings between periods.
|
First Quarter |
|||||
|
($ millions) |
2006 |
2005 |
|||
|
PRE-TAX INCOME / (EXPENSE) |
|||||
|
Corporate |
|||||
|
Environmental remediation |
(7 |
) |
(9 |
) | |
8
EXHIBIT 99.2
Occidental Petroleum Corporation
STEPHEN CHAZEN
Senior Executive Vice President and Chief Financial Officer
– Conference Call –
First Quarter 2006 Earnings Announcement
April 25, 2006
Los Angeles, California
Thank you, Ken.
Net income for the quarter was $1.23 billion, or $2.90 per share, compared to $846 million, or $2.11 per share in the first quarter of 2005. First quarter core income of $1.22 billion was the third quarter in a row of new core income records. The improvement in our performance was driven by higher energy prices, higher oil and gas volumes and improved chemical earnings. First quarter oil and gas production increased to a record of 636,000 barrels of oil equivalent per day. Occidental closed on the purchase of Vintage Petroleum, Inc. on January 30, 2006, which contributed to the production increase.
On a segment basis, oil and gas first quarter earnings were $2.00 billion, compared to $1.35 billion for the first quarter of 2005, an increase of 48 percent. The following factors accounted for the change in oil and gas earnings between these quarters:
|
• |
Higher worldwide oil and gas price realizations added $700 million of earnings over the comparable period in 2005. |
|
• |
The average price of West Texas Intermediate crude oil for the first quarter was $63.48 per barrel compared to Occidental’s net realized price of $53.11. The average first quarter price for WTI |
|
was $13.64 per barrel higher in 2006 than in the first quarter of 2005, while Occidental’s average realized oil price in the first quarter of 2006 was $11.40 per barrel higher than in the comparable period in 2005. | |
|
• |
Oil and gas production for the quarter averaged 636,000 barrels of oil equivalent per day – which was 13 percent higher than the first quarter 2005. The improvement was the result of the Vintage acquisition, a series of Permian acquisitions completed last year and the resumption of producing operations in Libya. Our guidance for the first quarter was in the range of 620,000 to 630,000 BOE per day. We exceeded this amount due to higher than expected Vintage and Middle East production in the first quarter. |
|
• |
Exploration expense of $71 million in the quarter was in line with our previous guidance. The first quarter 2006 expense was $24 million higher than the first quarter of 2005, with the increase coming in the Middle East / North Africa. |
Oil and gas operating costs were $10.22 a barrel which compares to $8.71 last year. Approximately 60 percent of the increase was a result of higher energy prices pushing up utility, gas plant, ad valorem and export taxes, CO2 costs, and the impact of higher energy prices on our production sharing contracts. Argentina export taxes represent 26 cents of this increase. The remaining cost changes were the result of workover, maintenance and other costs.
Chemical segment earnings for the first quarter 2006 were $248 million compared to $214 million in the first quarter of 2005.
2
The primary factors that accounted for the improvement in our first quarter 2006 chemical earnings compared to the 2005 first quarter were stronger prices resulting in higher margins for our core chlor-vinyl business, particularly for caustic soda and PVC. This is better than our prior outlook for the quarter due to lower than expected natural gas and ethylene costs.
Cash flow from operations for the quarter was approximately $2.0 billion, compared with $1.2 billion in the first quarter of 2005.
Interest expense was $29 million during the first quarter 2006, compared to $61 million in the 2005 first quarter. Last year’s first quarter interest expense included debt repayment fees of $10 million.
Turning to the first quarter 2006 balance sheet, we increased shareholder equity to $17.9 billion, or $2.9 billion higher than the year-end 2005 level. Even with this increase, Oxy’s annualized return on equity was 30 percent, with an annualized return on capital employed of 25 percent. Total debt increased $609 million to $3.628 billion during the first quarter as a result of the Vintage acquisition. We have reclassified $209 million of Vintage debt as current, which will be redeemed on May 15. We ended the quarter with approximately $2 billion of cash in hand, having begun the quarter at $2.4 billion. During the first quarter, Occidental repurchased 2.4 million shares of its common stock at an average price of $91.79 per share, 2.3 million of these shares were purchased after the February 23 investors meeting. We issued 28 million shares of Occidental common stock for the purchase of Vintage. The weighted average basic shares outstanding for the first quarter were 424.2 million and the weighted average diluted shares outstanding were 430.5 million. At March 31, there were 432.0 million basic shares outstanding and the fully dilutive share amount was approximately 438.2 million.
3
Capital spending for the quarter was $605 million. Oil and gas accounted for 94 percent of the total.
As we look ahead in the current quarter:
|
• |
We expect our combined worldwide tax rate in the second quarter to remain about 44 percent. |
|
• |
We expect second quarter production to be approximately 650,000 barrels per day, including a full quarter of Vintage production. About 19,000 barrels per day are being held for sale and will continue to not show up as production, revenues or costs. This net income after tax will still be reported in discontinued operations. Cash generated from the asset sales will be used to reduce the purchase price of the remaining Vintage assets. |
|
• |
Oxy has seen significant interest in the Vintage assets held for sale. We will announce the results of these sales once the deals are closed. We expect gross proceeds of about $1.1 billion for the approximately 72 million BOE of assets held for sale. |
|
• |
We expect exploration expense for the quarter to be about $90 million. The increase from the first quarter is for seismic and exploration drilling resulting from our Middle East / North Africa exploration programs. |
|
• |
We expect chemical segment earnings to be about $225 million, compared to the $248 million in the first quarter of 2006. This outlook is based on current conditions which provides for both planned and unplanned outages in the Houston plants. |
|
• |
We expect interest expense to be about $28 million in the second quarter. |
4
|
• |
A $1.00 per barrel change in oil prices impacts oil and gas quarterly earnings by about $40 million before the impact of income taxes. The WTI price in the first quarter was $63.48 per barrel and our realized price was $53.11 per barrel. The March WTI increased $1.04 per barrel compared to February; however, Occidental’s realized domestic price decreased by $0.98 per barrel. This change was primarily the result of higher differentials from sour domestic crude in March, however these differentials have begun to improve in April. |
|
• |
A swing of 25-cents per million BTUs in gas prices has a $12 million impact on quarterly earnings before income taxes. Our realized first quarter domestic gas price averaged $8.36 per thousand cubic feet. We expect our realized domestic price for the second quarter to be $5.83 per thousand cubic feet, which will reduce segment income by approximately $120 million. |
|
• |
Dr. Ray R. Irani is not planning to stand for re-election to the Lyondell Board of Directors at their May 4th annual meeting. As a result of this change, Occidental will discontinue accruing its share of Lyondell earnings or losses under equity-method accounting. Therefore, Occidental will recognize equity income through May 4th and thereafter will switch to the cost method to account for this investment. Under the cost method, only dividends received after May 4th will be treated as income. Therefore, starting in the third quarter, if Lyondell earns and declares a dividend at $0.225 per share, Occidental will record quarterly dividend income of $6.0 million after-tax on the 30.3 million shares we currently own. |
5
Copies of the press release announcing our first quarter earnings and the Investor Relations Supplemental Schedules are available on our website www.oxy.com or through the SEC’s EDGAR system.
Now we’re ready to take your questions.
See the investor relations supplemental schedules for the reconciliation of non-GAAP items. Statements in this presentation that contain words such as "will", "expect" or "estimate", 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: exploration risks such as drilling of unsuccessful wells; global commodity pricing fluctuations and supply/demand considerations for oil, gas and chemicals; higher-than-expected costs; political risk; changes in tax rates; unrealized acquisition benefits or higher than expected integration costs; and not successfully completing (or any material delay in) any expansion, capital expenditure, acquisition, or disposition. You should not place undue reliance on these forward-looking statements which speak only as of the date of this presentation. Unless legally required, Occidental does not undertake any obligation to update any forward-looking statements as a result of new information, future events or otherwise. 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.
6
EXHIBIT 99.3
Investor Relations Supplemental Schedules
OCCIDENTAL PETROLEUM
2006 First Quarter
Net Income (Loss)
($ millions)
|
Reported Income |
Significant Items Affecting Income |
Core Earnings |
||||||||||
|
Oil & Gas |
$ |
2,002 |
$ |
2,002 |
||||||||
|
Chemical |
248 |
248 |
||||||||||
|
Corporate |
||||||||||||
|
Interest expense, net |
(29 |
) |
(29 |
) | ||||||||
|
Other |
(73 |
) |
(73 |
) | ||||||||
|
Taxes |
(932 |
) |
(932 |
) | ||||||||
|
Income from continuing operations |
1,216 |
– |
1,216 |
|||||||||
|
Discontinued operations, net of tax |
13 |
(13 |
) |
Discontinued operations, net |
– |
|||||||
|
Net Income |
$ |
1,229 |
$ |
(13 |
) |
$ |
1,216 |
|||||
|
Basic Earnings Per Common Share |
||||||||||||
|
Income from continuing operations |
$ |
2.87 |
$ |
2.87 |
||||||||
|
Discontinued operations, net |
0.03 |
– |
||||||||||
|
Net Income |
$ |
2.90 |
$ |
2.87 |
||||||||
1
Investor Relations Supplemental Schedules
OCCIDENTAL PETROLEUM
2005 First Quarter
Net Income (Loss)
($ millions)
|
Reported Income |
Significant Items Affecting Income |
Core Earnings |
||||||||||
|
Oil & Gas |
$ |
1,349 |
$ |
1,349 |
||||||||
|
Chemical |
214 |
214 |
||||||||||
|
Corporate |
||||||||||||
|
Interest expense, net |
(61 |
) |
10 |
Debt purchases |
(51 |
) | ||||||
|
Other |
(51 |
) |
(51 |
) | ||||||||
|
Taxes |
(601 |
) |
10 |
State tax issue |
(595 |
) | ||||||
|
(4 |
) |
Tax effect of adjustments |
||||||||||
|
Income from continuing operations |
850 |
16 |
866 |
|||||||||
|
Discontinued operations, net of tax |
(4 |
) |
4 |
Discontinued operations, net |
– |
|||||||
|
Net Income |
$ |
846 |
$ |
20 |
$ |
866 |
||||||
|
Basic Earnings Per Common Share |
||||||||||||
|
Income from continuing operations |
$ |
2.12 |
$ |
2.16 |
||||||||
|
Discontinued operations, net of tax |
(0.01 |
) |
– |
|||||||||
|
Net Income |
$ |
2.11 |
$ |
2.16 |
||||||||
2
Investor Relations Supplemental Schedules
OCCIDENTAL PETROLEUM
Items Affecting Comparability of Core Earnings Between Periods
The item(s) below are included in core earnings but are shown in this table because they affect the comparability of core earnings between periods.
|
Pre-tax Income / (Expense) |
First Quarter |
|||
|
|
2006 |
2005 |
||
|
Corporate |
||||
|
Environmental remediation |
(7 |
) |
(9 |
) |
3
Investor Relations Supplemental Schedules
OCCIDENTAL PETROLEUM
Worldwide Effective Tax Rate
|
|
QUARTERLY |
|||||
|
REPORTED INCOME |
2006 QTR 1 |
2005 QTR 4 |
2005 QTR 1 |
|||
|
Oil & Gas (a) |
2,002 |
1,859 |
1,349 |
|||
|
Chemicals |
248 |
165 |
214 |
|||
|
Corporate & other |
(102 |
) |
(112 |
) |
(112 |
) |
|
Pre-tax income |
2,148 |
1,912 |
1,451 |
|||
|
Income tax expense |
||||||
|
Federal and state |
460 |
393 |
349 |
|||
|
Foreign (a) |
472 |
371 |
252 |
|||
|
Total |
932 |
764 |
601 |
|||
|
Income from continuing operations |
1,216 |
1,148 |
850 |
|||
|
Worldwide effective tax rate |
43% |
40% |
41% |
|||
|
CORE INCOME |
2006 QTR 1 |
2005 QTR 4 |
2005 QTR 1 |
|||
|
Oil & Gas (a) |
2,002 |
1,868 |
1,349 |
|||
|
Chemicals |
248 |
171 |
214 |
|||
|
Corporate & other |
(102 |
) |
(111 |
) |
(102 |
) |
|
Pre-tax income |
2,148 |
1,928 |
1,461 |
|||
|
Income tax expense |
||||||
|
Federal and state |
460 |
399 |
343 |
|||
|
Foreign (a) |
472 |
371 |
252 |
|||
|
Total |
932 |
770 |
595 |
|||
|
Core income |
1,216 |
1,158 |
866 |
|||
|
Worldwide effective tax rate |
43% |
40% |
41% |
|||
(a) Revenues and income tax expense include taxes owed by Occidental but paid by governmental entities on its behalf. Oil and gas pre-tax income includes the following revenue amounts by periods.
|
2006 QTR 1 |
2005 QTR 4 |
2005 QTR 1 |
||||
|
290 |
211 |
187 |
4
Investor Relations Supplemental Schedules
OCCIDENTAL PETROLEUM
2006 First Quarter Net Income (Loss)
Reported Income Comparison
|
First Quarter 2006 |
Fourth Quarter 2005 |
B / (W) |
||||||||
|
Oil & Gas |
$ |
2,002 |
$ |
1,859 |
$ |
143 |
||||
|
Chemical |
248 |
165 |
83 |
|||||||
|
Corporate |
||||||||||
|
Interest expense, net |
(29 |
) |
(23 |
) |
(6 |
) | ||||
|
Other |
(73 |
) |
(89 |
) |
16 |
|||||
|
Taxes |
(932 |
) |
(764 |
) |
(168 |
) | ||||
|
Income from continuing operations |
1,216 |
1,148 |
68 |
|||||||
|
Discontinued operations, net |
13 |
4 |
9 |
|||||||
|
Net Income |
$ |
1,229 |
$ |
1,152 |
$ |
77 |
||||
|
Basic Earnings Per Common Share |
||||||||||
|
Income from continuing operations |
$ |
2.87 |
$ |
2.83 |
$ |
0.04 |
||||
|
Discontinued operations, net |
0.03 |
0.01 |
0.02 |
|||||||
|
Net Income |
$ |
2.90 |
$ |
2.84 |
$ |
0.06 |
||||
|
Worldwide Effective Tax Rate |
43% |
40% |
-3% |
|||||||
OCCIDENTAL PETROLEUM
2006 First Quarter Net Income (Loss)
Core Earnings Comparison
|
First Quarter 2006 |
Fourth Quarter 2005 |
B / (W) |
||||||||
|
Oil & Gas |
$ |
2,002 |
$ |
1,868 |
$ |
134 |
||||
|
Chemical |
248 |
171 |
77 |
|||||||
|
Corporate |
||||||||||
|
Interest expense, net |
(29 |
) |
(22 |
) |
(7 |
) | ||||
|
Other |
(73 |
) |
(89 |
) |
16 |
|||||
|
Taxes |
(932 |
) |
(770 |
) |
(162 |
) | ||||
|
Net Income |
$ |
1,216 |
$ |
1,158 |
$ |
58 |
||||
|
Core Earnings Per Common Share |
$ |
2.87 |
$ |
2.86 |
$ |
0.01 |
||||
|
Worldwide Effective Tax Rate |
43% |
40% |
-3% |
|||||||
5
Investor Relations Supplemental Schedules
OCCIDENTAL PETROLEUM
Oil & Gas
Core Earnings Variance Analysis
($ millions)
|
2006 1st Quarter |
$ |
2,002 |
|||
|
2005 4th Quarter |
1,868 |
||||
|
$ |
134 |
||||
|
Sales Price |
$ |
92 |
|||
|
Sales Volume/Mix |
62 |
||||
|
Exploration Expense |
53 |
||||
|
All Others * |
(73 |
) |
|||
|
TOTAL VARIANCE |
$ |
134 |
*DD&A rate increase (30) and higher operating and general and administrative costs
OCCIDENTAL PETROLEUM
Chemical
Core Earnings Variance Analysis
($ millions)
|
2006 1st Quarter |
$ |
248 |
|||
|
2005 4th Quarter |
171 |
||||
|
$ |
77 |
||||
|
Sales Price |
$ |
(27 |
) |
||
|
Sales Volume/Mix |
16 |
||||
|
Operations/Manufacturing |
100 |
* | |||
|
All Others |
(12 |
) |
|||
|
TOTAL VARIANCE |
$ |
77 |
* Lower feedstock and energy costs
6
Investor Relations Supplemental Schedules
OCCIDENTAL PETROLEUM
2006 First Quarter Net Income (Loss)
Reported Income Comparison
|
First Quarter 2006 |
First Quarter 2005 |
B / (W) |
||||||||
|
Oil & Gas |
$ |
2,002 |
$ |
1,349 |
$ |
653 |
||||
|
Chemical |
248 |
214 |
34 |
|||||||
|
Corporate |
||||||||||
|
Interest expense, net |
(29 |
) |
(61 |
) |
32 |
|||||
|
Other |
(73 |
) |
(51 |
) |
(22 |
) | ||||
|
Taxes |
(932 |
) |
(601 |
) |
(331 |
) | ||||
|
Income from continuing operations |
1,216 |
850 |
366 |
|||||||
|
Discontinued operations, net |
13 |
(4 |
) |
17 |
||||||
|
Net Income |
$ |
1,229 |
$ |
846 |
$ |
383 |
||||
|
Basic Earnings Per Common Share |
||||||||||
|
Income from continuing operations |
$ |
2.87 |
$ |
2.12 |
$ |
0.75 |
||||
|
Discontinued operations, net |
0.03 |
(0.01 |
) |
0.04 |
||||||
|
Net Income |
$ |
2.90 |
$ |
2.11 |
$ |
0.79 |
||||
|
Worldwide Effective Tax Rate |
43% |
41% |
-2% |
|||||||
OCCIDENTAL PETROLEUM
2006 First Quarter Net Income (Loss)
Core Earnings Comparison
|
First Quarter 2006 |
First Quarter 2005 |
B / (W) |
||||||||
|
Oil & Gas |
$ |
2,002 |
$ |
1,349 |
$ |
653 |
||||
|
Chemical |
248 |
214 |
34 |
|||||||
|
Corporate |
||||||||||
|
Interest expense, net |
(29 |
) |
(51 |
) |
22 |
|||||
|
Other |
(73 |
) |
(51 |
) |
(22 |
) | ||||
|
Taxes |
(932 |
) |
(595 |
) |
(337 |
) | ||||
|
Net Income |
$ |
1,216 |
$ |
866 |
$ |
350 |
||||
|
Basic Earnings Per Common Share |
$ |
2.87 |
$ |
2.16 |
$ |
0.71 |
||||
|
Worldwide Effective Tax Rate |
43% |
41% |
-2% |
|||||||
7
Investor Relations Supplemental Schedules
OCCIDENTAL PETROLEUM
Oil & Gas
Core Earnings Variance Analysis
($ millions)
|
2006 1st Quarter |
$ |
2,002 |
|||
|
2005 1st Quarter |
1,349 |
||||
|
$ |
653 |
||||
|
Sales Price |
$ |
700 |
|||
|
Sales Volume/Mix |
198 |
||||
|
Exploration Expense |
(24 |
) |
|||
|
All Others * |
(221 |
) |
|||
|
TOTAL VARIANCE |
$ |
653 |
*DD&A rate increase (68) and higher operating and general and administrative costs
OCCIDENTAL PETROLEUM
Chemical
Core Earnings Variance Analysis
($ millions)
|
2006 1st Quarter |
$ |
248 |
|||
|
2005 1st Quarter |
214 |
||||
|
$ |
34 |
||||
|
Sales Price |
$ |
93 |
|||
|
Sales Volume/Mix |
28 |
||||
|
Operations/Manufacturing |
(81 |
) |
* | ||
|
All Others |
(6 |
) |
|||
|
TOTAL VARIANCE |
$ |
34 |
* Higher energy and feedstock costs
8
Investor Relations Supplemental Schedules
OCCIDENTAL PETROLEUM
SUMMARY OF OPERATING STATISTICS
|
First Quarter |
|||||
|
2006 |
2005 |
||||
|
NET PRODUCTION PER DAY: |
|||||
|
United States |
|||||
|
Crude Oil and Liquids (MBL) |
|||||
|
California |
82 |
77 |
|||
|
Permian |
166 |
148 |
|||
|
Horn Mountain |
15 |
18 |
|||
|
Hugoton and other |
3 |
4 |
|||
|
Total |
266 |
247 |
|||
|
Natural Gas (MMCF) |
|||||
|
California |
250 |
241 |
|||
|
Hugoton and other |
133 |
129 |
|||
|
Permian |
189 |
146 |
|||
|
Horn Mountain |
10 |
12 |
|||
|
Total |
582 |
528 |
|||
|
Latin America |
|||||
|
Crude Oil (MBL) |
|||||
|
Argentina |
24 |
– |
|||
|
Colombia |
39 |
32 |
|||
|
Ecuador |
44 |
42 |
|||
|
Total |
107 |
74 |
|||
|
Natural Gas (MMCF) |
|||||
|
Argentina |
13 |
– |
|||
|
Bolivia |
13 |
– |
|||
|
26 |
– |
||||
|
Middle East / North Africa |
|||||
|
Crude Oil (MBL) |
|||||
|
Oman |
17 |
23 |
|||
|
Qatar |
44 |
43 |
|||
|
Yemen |
32 |
35 |
|||
|
Libya |
22 |
– |
|||
|
Total |
115 |
101 |
|||
|
Natural Gas (MMCF) |
|||||
|
Oman |
25 |
56 |
|||
|
Other Eastern Hemisphere |
|||||
|
Crude Oil (MBL) |
|||||
|
Pakistan |
4 |
5 |
|||
|
Natural Gas (MMCF) |
|||||
|
Pakistan |
75 |
78 |
|||
|
Barrels of Oil Equivalent (MBOE) |
|||||
|
Subtotal consolidated subsidiaries |
610 |
537 |
|||
|
Other interests |
|||||
|
Colombia – minority interest |
(5 |
) |
(4 |
) | |
|
Russia – Occidental net interest |
29 |
30 |
|||
|
Yemen – Occidental net interest |
2 |
2 |
|||
|
Total worldwide production (MBOE) |
636 |
565 |
|||
9
Investor Relations Supplemental Schedules
OCCIDENTAL PETROLEUM
SUMMARY OF OPERATING STATISTICS
|
First Quarter | ||||
|
2006 |
2005 | |||
|
OIL & GAS: |
||||
|
PRICES |
||||
|
United States |
||||
|
Crude Oil ($/BBL) |
55.25 |
44.24 | ||
|
Natural gas ($/MCF) |
8.36 |
5.94 | ||
|
Latin America |
||||
|
Crude Oil ($/BBL) |
48.84 |
39.87 | ||
|
Natural Gas ($/MCF) |
1.76 |
– | ||
|
Middle East / North Africa |
||||
|
Crude Oil ($/BBL) |
57.94 |
42.00 | ||
|
Natural Gas ($/MCF) |
0.97 |
0.96 | ||
|
Other Eastern Hemisphere |
||||
|
Crude Oil ($/BBL) |
50.63 |
37.97 | ||
|
Natural Gas ($/MCF) |
2.85 |
2.21 | ||
|
Total Worldwide |
||||
|
Crude Oil ($/BBL) |
53.11 |
41.71 | ||
|
Natural Gas ($/MCF) |
6.94 |
4.89 | ||
|
First Quarter | ||||||
|
2006 |
2005 | |||||
|
Exploration Expense |
||||||
|
Domestic |
$ |
32 |
$ |
27 | ||
|
Latin America |
3 |
15 | ||||
|
Middle East / North Africa |
23 |
1 | ||||
|
Other Eastern Hemisphere |
13 |
4 | ||||
|
TOTAL |
$ |
71 |
$ |
47 | ||
10
Investor Relations Supplemental Schedules
OCCIDENTAL PETROLEUM
CHEMICALS
Volume (M Tons, except PVC Resins)
|
First Quarter | ||||
|
MAJOR PRODUCTS |
2006 |
2005 | ||
|
Chlorine |
845 |
705 | ||
|
Caustic soda |
771 |
714 | ||
|
Ethylene Dichloride |
117 |
130 | ||
|
PVC Resins (millions of pounds) |
949 |
1,025 | ||
CHEMICALS
Prices (Index)
|
First Quarter | ||||
|
MAJOR PRODUCTS |
2006 |
2005 | ||
|
Chlorine |
2.59 |
2.56 | ||
|
Caustic soda |
1.89 |
1.52 | ||
|
Ethylene Dichloride |
1.44 |
1.78 | ||
|
PVC Resins |
1.48 |
1.29 | ||
1987 through 1990 average price = 1.00
CHLORINE
OxyChem Commentary
|
• |
Industry operating rates were impacted by normal seasonality in the chlorinated derivative and vinyls demand. Downstream chlorinated derivative inventories remain at minimum levels in the expectation that both raw material and energy costs could ease. Uncertainty regarding domestic and export demand in 2006 has also contributed to lower downstream inventory levels. |
|
• |
The normal seasonal slowdown in chlorine demand during the 1st quarter resulted in increased competitive pricing activity. Chlorine market prices moved lower during the 1st quarter, negating the impact of the $25 per ton price increase announced in the 3rd quarter of 2005. |
11
Investor Relations Supplemental Schedules
|
• |
OxyChem announced a $25 per ton price increase effective March 22nd or as contract terms permit. Other U.S. chlor-alkali producers have announced similar increases. This increase is in response to a tightening supply/demand balance expected in the 2nd quarter of 2006. |
|
• |
OxyChem anticipates improved 2nd quarter operating rates due to stronger demand in the vinyls, bleach, MDI/TDI and derivative markets. |
Influencing Factors:
All operating issues related to the 2005 hurricanes have been corrected for chlorine producers and consumers. Chlorine demand has improved moving into the 2nd quarter with the expectation that the supply/demand balance will tighten in the 2nd and 3rd quarters. Gulf Coast rebuilding should begin to have a positive impact on chlorine demand starting in the 2nd quarter, further tightening the supply/demand balance.
CAUSTIC
OxyChem Commentary
|
• |
OxyChem’s liquid caustic soda sales volume declined in the 1st quarter vs. the 4th quarter of 2005 due to normal seasonal weakness. Sales are expected to improve in the 2nd quarter as seasonal demand improves. |
|
• |
Pricing for liquid caustic soda came under pressure in the 1st quarter due to imports and seasonally low demand as the market continued to recover from the effects of the 2005 hurricanes and historically high caustic soda pricing. |
|
• |
OxyChem anticipates imports to return to more moderate levels in the 2nd quarter as the global supply/demand balance narrows and the U.S. Gulf Coast production returns to normal operating status. |
Influencing Factors:
Demand for liquid caustic soda is expected to improve in the 2nd quarter narrowing the supply/demand balance. As a result, pricing is expected to stabilize in the 2nd quarter. However, unseasonably cool weather, increased imports or unfavorable changes in the U.S. manufacturing sector could impact the supply/demand balance and exert some pressure on 2nd quarter pricing.
EDC
OxyChem Commentary
|
• |
EDC price improved slightly in the middle of the 1st quarter but fell back to 2005 end-of-year values by the end of the quarter as demand softened. |
12
Investor Relations Supplemental Schedules
|
• |
EDC prices ended the 1st quarter at $310-$330 per metric ton CFR Asia and are expected to further decline in April. |
|
• |
Balances remained long in the 1st quarter as Asian PVC demand was weaker than anticipated. Producers opted to slow PVC and VCM production rather than buy EDC and sell their product at low values. |
Influencing Factors:
Demand for U.S. EDC exports will remain limited. Small fluctuations may be seen in EDC price but significant gains are not expected as PVC demand in Asia is not strong enough to overcome the economic advantage of calcium carbide based VCM production.
PVC/VCM
OxyChem Commentary
|
• |
Declines in ethylene and natural gas resulted in expanding PVC spreads as PVC prices eroded at a slower pace. |
|
• |
Anticipation of lower PVC pricing due to declining feedstock costs moderated the normal seasonal build up in downstream PVC inventory. Buyers continued to focus on maintaining low inventories and selling higher cost inventory purchased in the 4th quarter 2005. |
|
• |
Domestic PVC resin prices were flat in January before declining $0.015 per pound in February and an additional $0.02 per pound in March. OxyVinyls announced a $0.02 per pound price increase effective April 1st. |
|
• |
Due to attractive domestic PVC margins, spot activity was elevated in the 1st quarter. |
|
• |
The Scotford PVC plant in Alberta, Canada was shut down at the end of January due to the lack of an economical supply of VCM. |
|
• |
PVC resin export prices ended the quarter at $720 - $730 per metric ton CFR Southeast Asia. |
|
• |
Due in part to the influence of Asian PVC in the Latin American market, the U.S. export spot VCM price to Latin America ended the quarter at $700 per metric ton FOB U.S. Gulf Coast. |
|
• |
Asian VCM prices ended the quarter at $600 per metric ton CFR, an increase of $50 per metric ton from year end 2005. With the continued high freight rates and ethylene cost, this price was not economical for U.S. producers. Since January, U.S. producers have began supplying Latin America based on lower energy cost. |
13
Investor Relations Supplemental Schedules
Influencing Factors:
PVC demand was seasonally slow in the 1st quarter. It is believed that the lackluster demand is a result of anticipated lower domestic PVC pricing due to sharp declines in feedstock costs. Vinyls demand is expected to improve in the 2nd quarter as the spring construction season begins. Dow’s permanent closure of the Fort Saskatchewan VCM facility is expected to tighten the VCM supply/demand balance in the Americas.
14
Investor Relations Supplemental Schedules
OCCIDENTAL PETROLEUM
SUMMARY OF OPERATING STATISTICS
|
First Quarter | ||||||
|
Capital Expenditures ($MM) |
2006 |
2005 | ||||
|
Oil & Gas |
||||||
|
California |
$ |
103 |
$ |
82 | ||
|
Permian |
127 |
63 | ||||
|
Other - U.S. |
67 |
29 | ||||
|
Latin America |
56 |
51 | ||||
|
Middle East / North Africa |
209 |
273 | ||||
|
Other Eastern Hemisphere |
6 |
8 | ||||
|
Chemicals |
33 |
28 | ||||
|
Corporate |
4 |
2 | ||||
|
TOTAL |
$ |
605 |
$ |
536 | ||
|
Depreciation, Depletion & |
First Quarter | |||||
|
Amortization of Assets ($MM) |
2006 |
2005 | ||||
|
Oil & Gas |
||||||
|
Domestic |
$ |
205 |
$ |
154 | ||
|
Latin America |
70 |
25 | ||||
|
Middle East / North Africa |
129 |
90 | ||||
|
Other Eastern Hemisphere |
9 |
10 | ||||
|
Chemicals |
62 |
59 | ||||
|
Corporate |
5 |
6 | ||||
|
TOTAL |
$ |
480 |
$ |
344 | ||
15
Investor Relations Supplemental Schedules
OCCIDENTAL PETROLEUM
CORPORATE
($ millions)
|
31-Mar-06 |
31-Dec-05 | |||||
|
CAPITALIZATION |
||||||
|
Current Maturities of Long-Term Debt |
$ |
255 |
$ |
46 | ||
|
Long-Term Debt (including current maturities) |
3,273 |
2,873 | ||||
|
Subsidiary Preferred Stock |
75 |
75 | ||||
|
Others |
25 |
25 | ||||
|
Total Debt |
$ |
3,628 |
$ |
3,019 | ||
|
EQUITY |
$ |
17,947 |
$ |
15,032 | ||
|
Total Debt To Total Capitalization |
17% |
17% | ||||
16
Investor Relations Supplemental Schedules
See the investor relations supplemental schedules for the reconciliation of non-GAAP items. Statements in this presentation that contain words such as "will", "expect" or "estimate", 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: exploration risks, such as drilling of unsuccessful wells; global commodity pricing fluctuations and supply/demand considerations for oil, gas and chemicals; higher-than-expected costs; political risk; 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.
17