================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) JULY 19, 2004
OCCIDENTAL PETROLEUM CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 1-9210 95-4035997
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
10889 WILSHIRE BOULEVARD
LOS ANGELES, CALIFORNIA 90024
(Address of principal executive offices) (ZIP code)
Registrant's telephone number, including area code:
(310) 208-8800
================================================================================
Item 5. Other Events
1. Earnings Release
- -- ----------------
Occidental Petroleum Corporation announced on July 19, 2004, net income for
the second quarter 2004 of $581 million ($1.48 per share), compared with $374
million ($0.98 per share) for the second quarter 2003.
Oil and Gas
-----------
Oil and gas segment and core earnings were $814 million for the second
quarter 2004, compared with $637 million for the second quarter 2003. The
improvement in the second quarter 2004 earnings reflected approximately $294
million from higher worldwide crude oil and gas prices and increased sales
volumes; partially offset by higher operating expenses and increased DD&A rates.
The second quarter 2003 included $14 million in after-tax gains on asset sales.
Chemicals
---------
Chemical segment and core earnings were $85 million for the second quarter
2004, compared with $43 million for the second quarter 2003. The improvement in
the second quarter 2004 results was primarily due to higher sales volumes for
all major products and higher sales prices for vinyl chloride monomer, polyvinyl
chloride, ethylene dichloride and chlorine; partially offset by lower caustic
soda prices and higher ethylene and energy costs. The second quarter 2003
included a $9 million asset-writedown charge and a $15 million severance charge.
Six-Months Results
------------------
For the first six months of 2004, net income was $1.07 billion ($2.72 per
share), compared with $699 million ($1.84 per share) for the first six months of
2003.
Core earnings were $1.06 billion for 2004 compared with $807 million for
2003. See the attached schedule for a reconciliation of net income to core
earnings.
Statements in this release that contain words such as "will" or "expect," or
otherwise relate to the future, are forward-looking and involve risks and
uncertainties that could significantly affect expected results. Factors that
could cause results to differ materially include, but are not limited to: global
commodity pricing fluctuations, and supply/demand consideration for oil, gas and
chemicals; higher-than-expected costs; and not successfully completing (or any
material delay in) any expansion, capital expenditure, acquisition, or
disposition. Occidental disclaims any obligation to update any forward-looking
statements.
1
SUMMARY OF SEGMENT NET SALES AND EARNINGS
Second Quarter Six Months
($ millions, except ---------------------- ----------------------
per share amounts) 2004 2003 2004 2003
================================= ======== ======== ======== ========
SEGMENT NET SALES
Oil and gas $ 1,783 $ 1,440 $ 3,476 $ 2,993
Chemical 937 785 1,794 1,575
Other 30 41 60 69
-------- -------- -------- --------
Net sales $ 2,750 $ 2,266 $ 5,330 $ 4,637
================================= ======== ======== ======== ========
SEGMENT EARNINGS
Oil and gas $ 814 $ 637 $ 1,564 $ 1,364
Chemical 85 43 135 78
-------- -------- -------- --------
899 680 1,699 1,442
UNALLOCATED CORPORATE ITEMS
Interest expense, net(a) -
debt and trust preferred
distributions (60) (64) (128) (199)
Income taxes (b) (209) (167) (399) (345)
Other (49) (75) (104) (131)
-------- -------- -------- --------
INCOME FROM CONTINUING OPERATIONS 581 374 1,068 767
Cumulative effect of changes in
accounting principles, net -- -- -- (68)
-------- -------- -------- --------
NET INCOME $ 581 $ 374 $ 1,068 $ 699
======== ======== ======== ========
BASIC EARNINGS PER COMMON SHARE
Income from continuing
operations $ 1.48 $ 0.98 $ 2.72 $ 2.02
Cumulative effect of changes in
accounting principles, net -- -- -- (0.18)
-------- -------- -------- --------
$ 1.48 $ 0.98 $ 2.72 $ 1.84
======== ======== ======== ========
DILUTED EARNINGS PER COMMON SHARE
Income from continuing
operations $ 1.46 $ 0.97 $ 2.68 $ 1.99
Cumulative effect of changes in
accounting principles, net -- -- -- (0.18)
-------- -------- -------- --------
$ 1.46 $ 0.97 $ 2.68 $ 1.81
======== ======== ======== ========
AVERAGE BASIC COMMON SHARES
OUTSTANDING 393.9 382.6 392.8 380.9
================================= ======== ======== ======== ========
See footnotes on following page.
2
(a) The six months 2004 includes an $11 million pre-tax interest charge to
redeem all the outstanding 8.16 percent Trust Preferred Redeemable
Securities on January 20, 2004. The six months 2003 includes a $61 million
pre-tax interest charge to repay a $450 million 6.4 percent senior notes
issue that had ten years of remaining life, but was subject to re-marketing
on April 1, 2003.
(b) The six months 2004 includes a $20 million credit related to a first
quarter settlement of an issue with the Internal Revenue Service. The
second quarter of 2004 reflected a lower U.S. income tax rate resulting
from the crediting of foreign income taxes.
3
SUMMARY OF OPERATING STATISTICS
Second Quarter Six Months
---------------------- ----------------------
2004 2003 2004 2003
================================ ======== ======== ======== ========
NET OIL, GAS AND LIQUIDS
PRODUCTION PER DAY
United States
Crude oil and liquids (MBBL)
California 78 81 78 79
Permian 156 151 155 147
Horn Mountain 23 19 23 16
Hugoton 3 3 3 4
-------- -------- -------- --------
Total 260 254 259 246
Natural Gas (MMCF)
California 234 252 239 257
Hugoton 132 143 129 143
Permian 132 131 136 125
Horn Mountain 15 15 16 10
-------- -------- -------- --------
Total 513 541 520 535
Latin America
Crude oil (MBBL)
Colombia 39 36 37 37
Ecuador 47 18 45 17
-------- -------- -------- --------
Total 86 54 82 54
Middle East
Crude oil (MBBL)
Oman 12 11 12 12
Qatar 44 51 43 49
Yemen 30 35 35 37
-------- -------- -------- --------
Total 86 97 90 98
Natural Gas (MMCF)
Oman 56 -- 33 --
Other Eastern Hemisphere
Crude oil (MBBL)
Pakistan 8 10 8 10
Natural Gas (MMCF)
Pakistan 73 77 74 76
BARRELS OF OIL EQUIVALENT (MBOE)
Subtotal consolidated subsidiaries 547 518 544 510
Colombia-minority interest (5) (5) (4) (4)
Russia-Occidental net interest 31 30 30 30
Yemen-Occidental net interest 1 1 1 2
-------- -------- -------- --------
TOTAL WORLDWIDE PRODUCTION (MBOE) 574 544 571 538
======== ======== ======== ========
CAPITAL EXPENDITURES (millions) $ 461 $ 493 $ 804 $ 791
======== ======== ======== ========
DEPRECIATION, DEPLETION
AND AMORTIZATION
OF ASSETS (millions) $ 325 $ 286 $ 650 $ 571
================================ ======== ======== ======== ========
4
SIGNIFICANT TRANSACTIONS AND EVENTS AFFECTING EARNINGS
Occidental's results of operations often include the effects of significant
transactions and events affecting earnings that vary widely and unpredictably in
nature, timing, and amount. Therefore, management uses a measure called "core
earnings", which excludes those items. This non-GAAP measure is not meant to
disassociate those items from management's performance, but rather is meant to
provide useful information to investors interested in comparing Occidental's
earnings performance between periods. Reported earnings are considered
representative of management's performance over the long term. Core earnings is
not considered to be an alternative to operating income in accordance with
generally accepted accounting principles.
The following table sets forth the core earnings and significant items affecting
earnings for each operating segment and corporate:
Second Quarter
($ millions, except ------------------------------------------
per-share amounts) 2004 EPS 2003 EPS
===================================== ======== ======= ======== =======
TOTAL REPORTED EARNINGS $ 581 $ 1.48 $ 374 $ 0.98
======== ======= ======== =======
OIL AND GAS
Segment Earnings $ 814 $ 637
No significant items
affecting earnings -- --
-------- --------
Segment Core Earnings 814 637
-------- --------
CHEMICALS
Segment Earnings 85 43
No significant items
affecting earnings -- --
-------- --------
Segment Core Earnings 85 43
-------- --------
CORPORATE
Results (318) (306)
No significant items
affecting earnings -- --
-------- --------
TOTAL CORE EARNINGS $ 581 $ 1.48 $ 374 $ 0.98
===================================== ======== ======= ======== =======
5
SIGNIFICANT TRANSACTIONS AND EVENTS AFFECTING EARNINGS (CONTINUED)
Six Months
($ millions, except ------------------------------------------
per-share amounts) 2004 EPS 2003 EPS
===================================== ======== ======= ======== =======
TOTAL REPORTED EARNINGS $ 1,068 $ 2.72 $ 699 $ 1.84
======== ======= ======== =======
OIL AND GAS
Segment Earnings $ 1,564 $ 1,364
No significant items
affecting earnings -- --
-------- --------
Segment Core Earnings 1,564 1,364
-------- --------
CHEMICALS
Segment Earnings 135 78
No significant items
affecting earnings -- --
-------- --------
Segment Core Earnings 135 78
-------- --------
CORPORATE
Results (631) (743)
Less:
6.4% senior note remarket fee -- (61)
Trust preferred
redemption charge (11) --
IRS settlement 20 --
Tax effect of pre-tax adjustments 4 21
Changes in accounting
principles, net* -- (68)
-------- --------
TOTAL CORE EARNINGS $ 1,055 $ 2.69 $ 807 $ 2.12
===================================== ======== ======= ======== =======
* Amount shown after tax.
6
ITEMS AFFECTING COMPARABILITY OF CORE EARNINGS BETWEEN PERIODS
Second Quarter Six Months
-------------------- --------------------
($ millions) 2004 2003 2004 2003
================================ ======== ======== ======== ========
PRE-TAX
INCOME / (EXPENSE)
OIL AND GAS
Gain on sale of GOM assets (a) $ -- $ 14 $ -- $ 14
CHEMICALS
Reorganizations/severance -- (15) -- (15)
Chlorine derivatives asset
impairment -- (9) -- (9)
CORPORATE
Equity earnings 1 (14) (2) (35)
Environmental remediation -- (13) -- (13)
(a) Amount shown after-tax.
7
2. Senior Management Changes
- -- -------------------------
Dr. Dale R. Laurance, President of Occidental Petroleum Corporation and
head of its oil and gas operations has announced on July 19, 2004, his plan to
retire December 31, 2004 upon completion of 21 years of service. Dr. Laurance's
decision was based on health related considerations. Dr. Laurance will
relinquish his oil and gas duties effective immediately, but will continue to
serve as President and remain on Occidental's Board of Directors through the end
of 2004. Dr. Ray R. Irani, Occidental's Chairman and Chief Executive officer,
will assume the additional title of President on January 1, 2005.
Occidental's Board of Directors has promoted Stephen I. Chazen to the
position Senior Executive Vice President and Chief Financial Officer. In
addition to his current duties as CFO and head of Corporate Development, Mr.
Chazen also will be responsible for oversight of the company's chemical
operations and investor relations function.
John W. Morgan has been promoted to the position of President, Occidental
Oil and Gas Corporation with responsibility for all worldwide exploration and
production operations. Mr. Morgan, who formerly was responsible for the
company's worldwide oil and gas production and engineering operations, remains
an Executive Vice President of Occidental Petroleum Corporation.
In addition, R. Casey Olson has been promoted to the position of President,
Occidental Development Company. In this role, Mr. Olson, who also is a Vice
President of Occidental Petroleum Corporation, will be responsible for all
international business development.
All three executives will report to Dr. Irani.
8
Item 9. Regulation FD Disclosure and Item 12. Results of Operations and
Financial Condition
On July 19, 2004, Occidental Petroleum Corporation released information
regarding its results of operations for the fiscal period ended June 30, 2004.
This Form 8-K is being furnished to report information pursuant to Item 9,
Regulation FD Disclosure and Item 12, Results of Operations and Financial
Condition. The full text of the speech given by Stephen I. Chazen is attached to
this report as Exhibit 99.1. Investor Relations Supplemental Schedules are
attached to this report as Exhibit 99.2.
9
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
OCCIDENTAL PETROLEUM CORPORATION
(Registrant)
DATE: July 19, 2004 S. P. Dominick, Jr.
--------------------------------------------------
S. P. Dominick, Jr., Vice President and Controller
(Chief Accounting and Duly Authorized Officer)
EXHIBIT INDEX
99.1 Full text of speech given by Stephen I. Chazen
99.2 Investor Relations Supplemental Schedules
EXHIBIT 99.1
OCCIDENTAL PETROLEUM CORPORATION
STEPHEN CHAZEN
SENIOR EXECUTIVE VICE PRESIDENT & CHIEF FINANCIAL OFFICER
- CONFERENCE CALL -
SECOND QUARTER 2004 EARNINGS ANNOUNCEMENT
JULY 19, 2004
Los Angeles, California
Good morning, and thank you for joining us.
If you would like a copy of the press release announcing our second quarter
earnings, along with the Investor Relations Supplemental Schedules, you can find
them on our website www.oxy.com or through the SEC's EDGAR system.
Reported and core earnings for the second quarter were $ 581 million, or
$1.48 per share, compared with $374 million, or $0.98 per share in the second
quarter of 2003. The improvement was driven mainly by higher energy prices and
increased oil and gas production.
o Oil and gas production for the quarter averaged 574,000 barrels of oil
equivalent per day compared to 544,000 barrels in last year's second
quarter. For the first half of this year, worldwide production was up
by 6 percent compared to last year - from 538,000 to 571,000 BOE per
day.
For the first half of this year, core earnings were $1.06 billion, or $2.69
per share compared to $807 million, or $2.12 per share, during the first half of
2003.
On a segment basis, oil and gas second quarter earnings were $814 million,
compared to $637 million during the same period a year ago. As I
1
noted earlier, the increase was due primarily to higher prices and increased
production, partially offset by higher operating expenses and increased DD&A
rates.
Chemical segment earnings were $85 million compared to second quarter 2003
earnings of $43 million. Higher prices for vinyl chloride monomer, polyvinyl
chloride, ethylene dichloride and chlorine contributed to improved margins that
were partially offset by higher energy and feedstock costs. Our core chemical
business earnings of $135 million for the first half compares to last year's
first half earnings of $78 million. Included in last year's second quarter
chemical results was $15 million in severance expenses resulting from a
significant reorganization of our chemical business that was focused on reducing
overhead as well as a $9 million write-off of certain assets at a chemical
plant.
We reduced our debt-like obligations during the quarter by $360 million by
discontinuing the sale of an interest in our outstanding accounts receivable
balance. This action reduced our cash flow from operations for the first half of
the year from approximately $1.8 billion to $1.4 billion.
Discontinuing the sale of the receivables, together with the first quarter
redemption of our share of the debt for the Elk Hills power plant and $453
million of trust preferred securities, has reduced our obligations since the
beginning of the year by just over a billion dollars.
Our net interest expense, including the trust preferred distributions,
declined to $60 million for the quarter and $128 million for the first half
compared to $64 million and $199 million for the comparable periods last year.
At the end of the quarter, stockholders' equity had grown to $9 billion,
and our debt to capitalization ratio was down to 31 percent compared
2
to 37 percent at the end of last year. We had $383 million of cash on the
balance sheet at the end of the quarter.
Capital spending for the quarter was $461 million and $804 million for the
first half - with oil and gas accounting for more than 90 percent of the
expenditures.
As we look ahead in the current quarter:
o We expect oil and gas production to remain at about the same level as
the second quarter.
o We expect exploration expense for the quarter to be about $45 million.
o We see the upturn in chemical markets continuing in the third quarter.
We expect some margin improvement as well as high utilization rates.
Therefore, we expect third quarter chemical earnings to be in the $100
million range, compared to $85 million in the second quarter.
o We expect third quarter interest expense to be approximately the same
as the second quarter.
o A $1.00 per barrel change in oil prices impacts segment annual
earnings by about $138 million, before the effect of foreign income
taxes. The average WTI price in the second quarter was $38.32 per
barrel. 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 second quarter was $5.79 per million BTUs. Our average
realized price for the second quarter was $4.26, and we expect our
realized price for the third quarter to be about $4.90.
3
o Our worldwide effective tax rate for the second quarter was 40
percent. The second quarter reflects a lower U. S. income tax rate
resulting from the crediting of foreign income taxes. Previously,
foreign income taxes were taken as a deduction from U. S. income
taxes. U. S. taxpayers may elect annually to apply whichever method is
more beneficial. The effect of this change resulted in an improvement
of approximately 8 cents per share in second quarter earnings. We
expect to make this election every year from now on. This will not
only result in improved earnings for the remainder of 2004, but in
future years. We expect the rate for the rest of this year to be about
40 percent. Both our U. S. and foreign tax rates are included in the
"Investor Relations Supplemental Schedule" which has been modified to
reflect the effect of this tax election.
o We record the equity earnings from our investment in Lyondell Chemical
Company in corporate "Other". We currently own about 41 million
Lyondell shares. We have no way of forecasting the quarterly equity
earnings from our Lyondell investment, although the outlook for the
business appears to be favorable.
Now we're ready to take your questions.
4
----------------------------------------------------------------------
See the "Investor Relations Supplemental Schedules" for the
reconciliation of non-GAAP items.
Statements in this presentation that contain words such as "will" or
"expect", or otherwise relate to the future, are forward-looking and
involve risks and uncertainties that could significantly affect
expected results. Factors that could cause results to differ
materially include, but are not limited to: global commodity pricing
fluctuations, and supply/demand considerations, for oil, gas and
chemicals; higher-than-expected costs; and not successfully completing
(or any material delay in) any expansion, capital expenditure,
acquisition, or disposition. Occidental disclaims any obligation to
update any forward-looking statements. The United States Securities
and Exchange Commission (SEC) permits oil and natural gas companies,
in their filings with the SEC, to disclose only proved reserves
demonstrated by actual production or conclusive formation tests to be
economically producible under existing economic and operating
conditions. We use certain terms in this presentation, such as
probable, possible and recoverable reserves, that the SEC's guidelines
strictly prohibit us from using in filings with the SEC. U.S.
investors are urged to consider carefully the disclosure in our form
10-K, available through the following toll-free telephone number,
1-888-OXYPETE (1-888-699-7383) or on the Internet at
http://www.oxy.com. You also can obtain a copy from the SEC by calling
1-800-SEC-0330.
----------------------------------------------------------------------
5
EXHIBIT 99.2
Investor Relations Supplemental Schedules
[OXY LOGO]
OCCIDENTAL PETROLEUM
2004 Second Quarter
Net Income (Loss)
($ millions)
REPORTED CORE
INCOME SIGNIFICANT ITEMS AFFECTING INCOME EARNINGS
-------------- ---------------------------------- --------------
Oil & Gas $ 814 $ 814
Chemical 85 85
Corporate
Interest expense, net - debt and
trust preferred distributions (60) (60)
Other (49) (49)
Taxes (209) (209)
-------------- -------------- --------------
NET INCOME $ 581 $ -- $ 581
============== ============== ==============
BASIC EARNINGS PER COMMON SHARE $ 1.48 $ 1.48
============== ==============
1
Investor Relations Supplemental Schedules
[OXY LOGO]
OCCIDENTAL PETROLEUM
2003 Second Quarter
Net Income (Loss)
($ millions)
REPORTED CORE
INCOME SIGNIFICANT ITEMS AFFECTING INCOME EARNINGS
-------------- ---------------------------------- --------------
Oil & Gas $ 637 $ 637
Chemical 43 43
Corporate
Interest expense, net - debt and
trust preferred distributions (64) (64)
Other (75) (75)
Taxes (167) (167)
-------------- -------------- --------------
NET INCOME $ 374 $ -- $ 374
============== ============== ==============
BASIC EARNINGS PER COMMON SHARE $ 0.98 $ 0.98
============== ==============
2
Investor Relations Supplemental Schedules
[OXY LOGO]
OCCIDENTAL PETROLEUM
2004 First Six Months
Net Income (Loss)
($ millions)
REPORTED CORE
INCOME SIGNIFICANT ITEMS AFFECTING INCOME EARNINGS
-------------- ---------------------------------- --------------
Oil & Gas $ 1,564 $ 1,564
Chemical 135 135
Corporate
Interest expense, net - debt and
trust preferred distributions (128) 11 Trust pfd redemption charge (117)
Other (104) (104)
Taxes (399) (20) IRS settlement (423)
(4) Tax effect of adjustments
-------------- -------------- --------------
NET INCOME $ 1,068 $ (13) $ 1,055
============== ============== ==============
BASIC EARNINGS PER COMMON SHARE $ 2.72 $ 2.69
============== ==============
3
Investor Relations Supplemental Schedules
[OXY LOGO]
OCCIDENTAL PETROLEUM
2003 First Six Months
Net Income (Loss)
($ millions)
REPORTED CORE
INCOME SIGNIFICANT ITEMS AFFECTING INCOME EARNINGS
-------------- ---------------------------------- --------------
il & Gas $ 1,364 $ 1,364
Chemical 78 78
Corporate
Interest expense, net - debt and
trust preferred distributions (199) 61 Debt repayment fee (138)
Other (131) (131)
Taxes (345) (21) Tax effect of adjustments (366)
-------------- -------------- --------------
Income from continuing operations 767 40 807
Cumulative effect of accounting (68) 68 Cumulative effect of acct --
changes changes
-------------- -------------- --------------
NET INCOME $ 699 $ 108 $ 807
============== ============== ==============
BASIC EARNINGS PER COMMON SHARE
Income from continuing operations $ 2.02 $ 2.12
Cumulative effect of accounting changes (0.18) --
-------------- --------------
$ 1.84 $ 2.12
============== ==============
4
Investor Relations Supplemental Schedules
[OXY LOGO]
OCCIDENTAL PETROLEUM
Items Affecting Comparability of Core Earnings Between Periods
PRE-TAX
INCOME / (EXPENSE) SECOND QUARTER SIX MONTHS
------------------------------- -------------------------------
2004 2003 2004 2003
------------ ------------ ------------ ------------
OIL & GAS
Gain on sale of GOM assets (a) -- 14 -- 14
CHEMICALS
Reorganizations / severance -- (15) -- (15)
Chlorine derivatives asset impairment -- (9) -- (9)
CORPORATE
Equity earnings 1 (14) (2) (35)
Environmental remediation -- (13) -- (13)
(a) Amount shown after-tax
5
Investor Relations Supplemental Schedules
[OXY LOGO]
OCCIDENTAL PETROLEUM
WORLDWIDE EFFECTIVE TAX RATE
---------------------------------------------- -----------------------------
QUARTERLY YEAR TO-DATE
---------------------------------------------- -----------------------------
2004 2004 2003 2004 2003
REPORTED INCOME QTR 2 QTR 1 QTR 2 6 MONTHS 6 MONTHS
------------ ------------ ------------ ------------ ------------
Oil & Gas (a) 985 919 757 1,904 1,637
Chemicals 88 52 46 140 83
Corporate & other (109) (123) (139) (232) (330)
------------ ------------ ------------ ------------ ------------
Pre-tax income 964 848 664 1,812 1,390
Income tax expense
Federal and state 213 191 175 404 354
Foreign (included in segments) (a) 170 170 115 340 269
------------ ------------ ------------ ------------ ------------
Total 383 361 290 744 623
------------ ------------ ------------ ------------ ------------
Income from continuing operations 581 487 374 1,068 767
============ ============ ============ ============ ============
WORLDWIDE EFFECTIVE TAX RATE 40% 43% 44% 41% 45%
2004 2004 2003 2004 2003
CORE INCOME QTR 2 QTR 1 QTR 2 6 MONTHS 6 MONTHS
------------ ------------ ------------ ------------ ------------
Oil & Gas (a) 985 919 757 1,904 1,637
Chemicals 88 52 46 140 83
Corporate & other (109) (112) (139) (221) (269)
------------ ------------ ------------ ------------ ------------
Pre-tax income 964 859 664 1,823 1,451
Income tax expense
Federal and state 213 215 175 428 375
Foreign (included in segments) (a) 170 170 115 340 269
------------ ------------ ------------ ------------ ------------
Total 383 385 290 768 644
------------ ------------ ------------ ------------ ------------
Income from continuing operations 581 474 374 1,055 807
============ ============ ============ ============ ============
WORLDWIDE EFFECTIVE TAX RATE 40% 45% 44% 42% 44%
(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.
2004 2004 2003 2004 2003
QTR 2 QTR 1 QTR 2 6 MONTHS 6 MONTHS
------------ ------------ ------------ ------------ ------------
116 116 87 232 191
6
Investor Relations Supplemental Schedules
[OXY LOGO]
OCCIDENTAL PETROLEUM
2004 Second Quarter Net Income (Loss)
Reported Income Comparison
SECOND FIRST
QUARTER QUARTER
2004 2004 B / (W)
------------ ------------ ------------
Oil & Gas $ 814 $ 750 $ 64
Chemical 85 50 35
Corporate
Interest expense, net - debt and
trust preferred distributions (60) (68) 8
Other (49) (55) 6
Taxes (209) (190) (19)
------------ ------------ ------------
Net Income $ 581 $ 487 $ 94
============ ============ ============
Basic Earnings Per Common Share $ 1.48 $ 1.24 $ 0.24
============ ============ ============
Worldwide Effective Tax Rate 40% 43% 3%
============ ============ ============
================================================================================
OCCIDENTAL PETROLEUM
2004 Second Quarter Net Income (Loss)
Core Earnings Comparison
SECOND FIRST
QUARTER QUARTER
2004 2004 B / (W)
------------ ------------ ------------
Oil & Gas $ 814 $ 750 $ 64
Chemical 85 50 35
Corporate
Interest expense, net - debt and
trust preferred distributions (60) (57) (3)
Other (49) (55) 6
Taxes (209) (214) 5
------------ ------------ ------------
Net Income $ 581 $ 474 $ 107
============ ============ ============
Basic Earnings Per Common Share $ 1.48 $ 1.21 $ 0.27
============ ============ ============
Worldwide Effective Tax Rate 40% 45% 5%
============ ============ ============
7
Investor Relations Supplemental Schedules
[OXY LOGO]
OCCIDENTAL PETROLEUM
OIL & GAS
CORE EARNINGS VARIANCE ANALYSIS
($ MILLIONS)
2004 2nd Quarter $ 814
2004 1st Quarter 750
------------
$ 64
============
Price Variance $ 88
Volume/Mix Variance (8)
Exploration Expense Variance 14
All Others (30)
------------
TOTAL VARIANCE $ 64
============
================================================================================
OCCIDENTAL PETROLEUM
CHEMICAL
CORE EARNINGS VARIANCE ANALYSIS
($ MILLIONS)
2004 2nd Quarter $ 85
2004 1st Quarter 50
------------
$ 35
============
Sales Price $ 37
Sales Volume/Mix 4
Operations/Manufacturing (6)*
------------
TOTAL VARIANCE $ 35
============
* Higher energy costs
8
Investor Relations Supplemental Schedules
[OXY LOGO]
OCCIDENTAL PETROLEUM
2004 SECOND QUARTER NET INCOME (LOSS)
REPORTED INCOME COMPARISON
SECOND SECOND
QUARTER QUARTER
2004 2003 B / (W)
------------ ------------ ------------
Oil & Gas $ 814 $ 637 $ 177
Chemical 85 43 42
Corporate
Interest expense, net - debt and
trust preferred distributions (60) (64) 4
Other (49) (75) 26
Taxes (209) (167) (42)
------------ ------------ ------------
Net Income $ 581 $ 374 $ 207
============ ============ ============
Basic Earnings Per Common Share $ 1.48 $ 0.98 $ 0.50
============ ============ ============
Worldwide Effective Tax Rate 40% 44% 4%
============ ============ ============
================================================================================
OCCIDENTAL PETROLEUM
2004 SECOND QUARTER NET INCOME (LOSS)
CORE EARNINGS COMPARISON
SECOND SECOND
QUARTER QUARTER
2004 2003 B / (W)
------------ ------------ ------------
Oil & Gas $ 814 $ 637 $ 177
Chemical 85 43 42
Corporate
Interest expense, net - debt and
trust preferred distributions (60) (64) 4
Other (49) (75) 26
Taxes (209) (167) (42)
------------ ------------ ------------
Net Income $ 581 $ 374 $ 207
============ ============ ============
Basic Earnings Per Common Share $ 1.48 $ 0.98 $ 0.50
============ ============ ============
Worldwide Effective Tax Rate 40% 44% 4%
============ ============ ============
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Investor Relations Supplemental Schedules
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OCCIDENTAL PETROLEUM
OIL & GAS
CORE EARNINGS VARIANCE ANALYSIS
($ MILLIONS)
2004 2nd Quarter $ 814
2003 2nd Quarter 637
------------
$ 177
============
Price Variance $ 287
Volume/Mix Variance 7
Exploration Expense Variance (11)
All Others (106)
------------
TOTAL VARIANCE $ 177
============
================================================================================
OCCIDENTAL PETROLEUM
CHEMICAL
CORE EARNINGS VARIANCE ANALYSIS
($ MILLIONS)
2004 2nd Quarter $ 85
2003 2nd Quarter 43
------------
$ 42
============
Sales Price $ 15
Sales Volume/Mix 20
Operations/Manufacturing (18)*
All Other 25
------------
TOTAL VARIANCE $ 42
============
* Higher energy and feedstock costs.
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Investor Relations Supplemental Schedules
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OCCIDENTAL PETROLEUM
SUMMARY OF OPERATING STATISTICS
SECOND QUARTER SIX MONTHS
------------------------------- -------------------------------
2004 2003 2004 2003
------------ ------------ ------------ ------------
NET PRODUCTION PER DAY:
United States
Crude Oil and Liquids (MBL)
California 78 81 78 79
Permian 156 151 155 147
Horn Mountain 23 19 23 16
Hugoton 3 3 3 4
------------ ------------ ------------ ------------
TOTAL 260 254 259 246
Natural Gas (MMCF)
California 234 252 239 257
Hugoton 132 143 129 143
Permian 132 131 136 125
Horn Mountain 15 15 16 10
------------ ------------ ------------ ------------
TOTAL 513 541 520 535
Latin America
Crude Oil (MBL)
Colombia 39 36 37 37
Ecuador 47 18 45 17
------------ ------------ ------------ ------------
TOTAL 86 54 82 54
Middle East
Crude Oil (MBL)
Oman 12 11 12 12
Qatar 44 51 43 49
Yemen 30 35 35 37
------------ ------------ ------------ ------------
TOTAL 86 97 90 98
Natural Gas (MMCF)
Oman 56 -- 33 --
Other Eastern Hemisphere
Crude Oil (MBL)
Pakistan 8 10 8 10
Natural Gas (MMCF)
Pakistan 73 77 74 76
Barrels of Oil Equivalent (MBOE)
- --------------------------------------------
Subtotal Consolidated Subsidiaries 547 518 544 510
Other interests
Colombia - minority interest (5) (5) (4) (4)
Russia - Occidental net interest 31 30 30 30
Yemen - Occidental net interest 1 1 1 2
------------ ------------ ------------ ------------
Total worldwide production (MBOE) 574 544 571 538
============ ============ ============ ============
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Investor Relations Supplemental Schedules
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OCCIDENTAL PETROLEUM
SUMMARY OF OPERATING STATISTICS
SECOND QUARTER SIX MONTHS
-------------------------------- --------------------------------
2004 2003 2004 2003
------------ ------------- ------------- ------------
OIL & GAS:
- ----------
PRICES
UNITED STATES
Crude Oil ($/BBL) 35.44 26.89 34.02 29.15
Natural gas ($/MCF) 4.90 5.46 4.95 4.89
LATIN AMERICA
Crude Oil ($/BBL) 30.60 25.01 29.83 28.06
MIDDLE EAST
Crude Oil ($/BBL) 34.51 25.16 32.18 27.80
Natural Gas ($/MCF) 0.97 -- 0.97 --
OTHER EASTERN HEMISPHERE
Crude Oil ($/BBL) 32.26 25.75 30.79 26.89
Natural Gas ($/MCF) 2.47 1.91 2.35 1.91
SECOND QUARTER SIX MONTHS
-------------------------------- --------------------------------
2004 2003 2004 2003
------------ ------------- ------------- ------------
Exploration Expense
Domestic $ 22 $ 20 $ 60 $ 45
Latin America 2 5 3 6
Middle East 1 3 14 6
Other Eastern Hemisphere 15 1 17 --
------------- ------------- ------------- ------------
TOTAL $ 40 $ 29 $ 94 $ 57
============= ============= ============= ============
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OCCIDENTAL PETROLEUM
CHEMICALS
Volume (M Tons, except PVC Resins)
SECOND QUARTER SIX MONTHS
-------------------------------- --------------------------------
MAJOR PRODUCTS 2004 2003 2004 2003
------------ ------------- ------------- ------------
Chlorine 740 664 1,446 1,350
Caustic 819 719 1,551 1,356
Ethylene Dichloride 100 108 222 239
PVC Resins (millions of pounds) 1,090 872 2,161 1,935
CHEMICALS
Prices (Index)
SECOND QUARTER SIX MONTHS
-------------------------------- --------------------------------
MAJOR PRODUCTS 2004 2003 2004 2003
------------ ------------- ------------- ------------
Chlorine 2.00 1.81 1.80 1.72
Caustic 0.61 0.87 0.66 0.84
Ethylene Dichloride 1.51 1.17 1.40 1.21
PVC Resins 1.06 0.97 1.00 0.92
1987 through 1990 average price = 1.00
CHLORINE
- --------
OXYCHEM COMMENTARY
- ------------------
o Chlorine operating rates were at maximum practical capacity in the 2nd
quarter due to strong seasonal demand.
o As contract terms permitted, OxyChem fully implemented the $75 per ton
price increase announced in the 1st quarter.
o OxyChem and other U.S. producers announced a $20 per ton increase to be
effective July 1. Market conditions are expected to remain favorable for
the successful implementation of the announced price increase.
o OxyChem continues to manage chlorine shipments via a 100% order control
program. Other major merchant producers also announced order control
programs in the 2nd quarter.
INFLUENCING FACTORS:
- --------------------
Avoiding customer shutdowns will remain difficult due to tight chorine
supply/demand conditions, reduced inventories and deteriorating rail service.
Continued strong
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Investor Relations Supplemental Schedules
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seasonal demand for chlorine is expected to further tighten the
supply/demand balance in the 3rd quarter.
CAUSTIC
- -------
OXYCHEM COMMENTARY
- ------------------
o Caustic soda demand continued to strengthen with 2nd quarter sales
improving over 1st quarter volumes due to strong demand in the pulp and
paper, bleach, and distribution markets.
o Seasonal applications are expected to support continued strong demand for
caustic soda through the 3rd quarter.
o Increased requirements for liquid caustic soda and a narrowing
supply/demand balance have necessitated the implementation of order control
programs for many U.S. producers.
o Asian supply/demand balance tightened dramatically over the quarter, with
spot U.S. export prices rising dramatically from lows in April.
o Between late April and May, OxyChem and other U.S. producers announced
price increases totaling $95 per dry short ton. The increases are expected
to be largely realized in the 3rd quarter as contract terms permit.
INFLUENCING FACTORS:
- --------------------
A narrowing supply/demand imbalance for liquid caustic soda will continue to
lend support for future price improvement in 2004 as demand keeps pace with high
chlorine industry operating rates.
EDC
- ---
OXYCHEM COMMENTARY
- ------------------
o The gap between EDC and VCM prices narrowed in the 2nd quarter as EDC
prices gained upward momentum due to the combination of higher VCM
operating rates and scheduled EDC outages.
o The tightness in the chlorine market limited the availability of U.S.
produced EDC in the 2nd quarter.
o Raw material and power availability within China has restricted calcium
carbide based VCM production. This has increased demand for both EDC and
VCM into Asia.
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Investor Relations Supplemental Schedules
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INFLUENCING FACTORS:
- --------------------
Reduced EDC demand could result from VCM production curtailments in the Far East
if the profit margins for converting EDC to VCM face downward pressure due to
high ethylene costs. VCM prices are expected to limit EDC prices in the 3rd
quarter.
PVC/VCM
- -------
OXYCHEM COMMENTARY
- ------------------
o Robust demand in the construction sector led to strong domestic PVC sales
in the 2nd quarter. Inventories at PVC producers continued to decline while
they remained at moderate levels at pipe producers and distributors.
o Export sales volumes for PVC held strong in the 2nd quarter and netbacks to
all regions remained healthy. However, Chinese demand for PVC was
negatively influenced when the Chinese government restricted lending and
the producers faced energy issues that curtailed VCM and PVC production
rates.
o Both the Westlake Geismar and Shintech Addis facilities remain idle. There
is no indication that either plant will restart in 2004.
o North American producers operated at near capacity for both PVC resin and
VCM during the 2nd quarter.
o Domestic PVC resin prices increased $0.02 per pound in April and $0.01 per
pound in both May and June. Additional increases of a $0.01 per pound have
been announced for both July and August.
o PVC resin export prices ended the quarter at $815 - $840 per metric ton CFR
Southeast Asia.
o Pemex experienced VCM operating problems in the 2nd quarter, contributing
to a VCM supply/demand position that remained balanced to tight.
o VCM export prices closed the 2nd quarter at $630 - $640 per metric ton FOB
Gulf Coast.
INFLUENCING FACTORS:
- --------------------
While prices have moved up, margin improvement has been limited due to high
energy and ethylene costs. Strong global demand for PVC and VCM coupled with a
tight VCM supply will provide support for future price improvement throughout
the vinyl's chain. Continued economic recovery is expected to sustain a strong
vinyl's business environment through the 3rd quarter.
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Investor Relations Supplemental Schedules
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OCCIDENTAL PETROLEUM
SUMMARY OF OPERATING STATISTICS
SECOND QUARTER SIX MONTHS
------------------------------- -------------------------------
CAPITAL EXPENDITURES ($MM) 2004 2003 2004 2003
------------ ------------ ------------ ------------
Oil & Gas
California $ 83 $ 53 $ 144 $ 97
Permian 63 60 125 115
Other - U.S. 8 12 12 26
Latin America 63 30 83 37
Middle East 191 122 359 224
Other Eastern Hemisphere 10 6 21 9
Chemicals 40 205 (a) 56 273 (b)
Corporate 3 5 4 10
------------ ------------ ------------ ------------
TOTAL $ 461 $ 493 $ 804 $ 791
============ ============ ============ ============
(a) Includes $180 million for the buyout of a VCM plant lease
(b) Includes $180 million for the buyout of a VCM plant lease and $44 million
for buyout of railcar leases
SECOND QUARTER SIX MONTHS
DEPRECIATION, DEPLETION & ------------------------------- -------------------------------
AMORTIZATION OF ASSETS ($MM) 2004 2003 2004 2003
------------ ------------ ------------ ------------
Oil & Gas
Domestic $ 157 $ 158 $ 313 $ 323
Latin America 26 14 48 27
Middle East 65 49 134 101
Other Eastern Hemisphere 10 13 22 21
Chemicals 62 48 123 92
Corporate 5 4 10 7
------------ ------------ ------------ ------------
TOTAL $ 325 $ 286 $ 650 $ 571
============ ============ ============ ============
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Investor Relations Supplemental Schedules
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OCCIDENTAL PETROLEUM
CORPORATE
($ millions)
30-JUN-04 31-DEC-03
----------------- -----------------
CAPITALIZATION
Oxy Long-Term Debt (including current maturities) $ 3,970 $ 4,016
Trust Preferred Securities -- 453
Subsidiary Preferred Stock 75 75
Others 26 26
----------------- -----------------
TOTAL DEBT $ 4,071 $ 4,570
================= =================
EQUITY $ 9,006 $ 7,929
================= =================
Total Debt To Total Capitalization 31% 37%
================= =================
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Investor Relations Supplemental Schedules
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Statements in this presentation that contain words such as "will" or
"expect", or otherwise relate to the future, are forward-looking and
involve risks and uncertainties that could significantly affect
expected results. Factors that could cause results to differ
materially include, but are not limited to: global commodity pricing
fluctuations, and supply/demand considerations, for oil, gas and
chemicals; higher-than-expected costs; and not successfully completing
(or any material delay in) any expansion, capital expenditure,
acquisition, or disposition. Occidental disclaims any obligation to
update any forward-looking statements.
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