================================================================================
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 22, 2003
OCCIDENTAL PETROLEUM CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 1-9210 95-4035997
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
10889 Wilshire Boulevard
Los Angeles, California 90024
(Address of principal executive offices) (ZIP code)
Registrant's telephone number, including area code:
(310) 208-8800
================================================================================
Item 9. Regulation FD Disclosure and Item 12. Results of Operations and
- ------ ------------------------ ------- -------------------------
Financial Condition
- -------------------
On July 22, 2003, Occidental Petroleum Corporation released information
regarding its results of operations for the fiscal period ended June 30, 2003.
This Form 8-K is being furnished to report information pursuant to Item 9,
Regulation FD Disclosure and Item 12, Results of Operations and Financial
Condition. The full text of the press release is attached to this report as
Exhibit 99.1. The full text of speeches given by Stephen I. Chazen and Dale R.
Laurance is attached to this report as Exhibit 99.2. Investor Relations
Supplemental Schedules are attached to this report as Exhibit 99.3.
1
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
OCCIDENTAL PETROLEUM CORPORATION
(Registrant)
DATE: July 21, 2003 S. P. Dominick, Jr.
--------------------------------------------------
S. P. Dominick, Jr., Vice President and Controller
(Chief Accounting and Duly Authorized Officer)
EXHIBIT INDEX
99.1 Press release dated July 22, 2003
99.2 Full text of speeches given by Stephen I. Chazen and Dale R.
Laurance
99.3 Investor Relations Supplemental Schedules
EXHIBIT 99.1
====================================================================
[OXY LOGO] NEWS RELEASE OCCIDENTAL PETROLEUM CORPORATION
====================================================================
10889 Wilshire Boulevard, Los Angeles, California 90024 (310) 208-8800
For Immediate Release: July 22, 2003
OCCIDENTAL PETROLEUM ANNOUNCES SECOND QUARTER 2003 RESULTS
----------------------------------------------------------
LOS ANGELES -- Occidental Petroleum Corporation (NYSE: OXY) announced net
income for the second quarter 2003 of $374 million ($0.98 per share), compared
with $240 million ($0.64 per share) for the second quarter 2002.
In announcing the results, Dr. Ray R. Irani, chairman and chief executive
officer, said, "Core earnings of $374 million, or $0.98 per share, were 55
percent higher than the $241 million, or $0.64 per share, the company earned in
the second quarter of 2002. Higher oil and gas prices and record production of
544,000 barrels of oil equivalent per day resulted in a 51 percent increase in
oil and gas earnings over last year's second quarter. Core earnings of $807
million, or $2.12 per share, for the first half of this year were more than
double the $364 million, or $0.97 per share, the company earned in the
comparable period last year."
OIL AND GAS
-----------
Oil and gas segment and core earnings were $637 million for the second
quarter 2003, compared with $421 million for the second quarter 2002. The
improvement in the second quarter 2003 earnings reflected approximately $200
million from higher worldwide crude oil and natural gas prices, increased sales
volumes and lower exploration expense. The second quarter 2003 also included $14
million in after-tax gains on asset sales; partially offset by higher operating
costs.
CHEMICALS
---------
Chemical segment and core earnings were $43 million for the second quarter
2003, compared with $34 million for the second quarter 2002. The second quarter
2003 results reflected higher sales prices for PVC, chlorine and caustic;
partially offset by higher energy and raw material costs and lower sales
volumes. The second quarter 2003 included a $9-million asset-writedown charge
and a $15 million severance charge.
OTHER
-----
Occidental adopted FASB Interpretation No.46, Consolidation of Variable
Interest Entities, during the second quarter 2003 and added $56 million to debt
as a result of consolidating its OxyMar joint venture. The
debt-to-capitalization ratio was 40 percent at June 30, 2003, the lowest level
in over 20 years.
SIX-MONTHS RESULTS
------------------
For the first six months of 2003, net income was $699 million ($1.84 per
share), compared with $265 million ($0.71 per share) for the first six months of
2002.
Core earnings were $807 million for 2003 compared with $364 million for
2002. See the attached schedule for a reconciliation of net income to core
earnings.
-0-
Contacts: Lawrence P. Meriage (media)
310-443-6562
Kenneth J. Huffman (investors)
212-603-8183
For further analysis of Occidental's quarterly performance, please
visit the web site: www.oxy.com
2
SUMMARY OF SEGMENT NET SALES AND EARNINGS
($ millions, except per-share amounts)
Second Quarter Six Months
------------------- -------------------
2003 2002 2003 2002
=================================== ======= ======= ======= =======
SEGMENT NET SALES
Oil and gas $ 1,440 $ 1,165 $ 2,993 $ 2,123
Chemical 785 702 1,575 1,267
Other 41 -- 69 --
------- ------- ------- -------
Net sales $ 2,266 $ 1,867 $ 4,637 $ 3,390
=================================== ======= ======= ======= =======
SEGMENT EARNINGS
Oil and gas $ 637 $ 421 $ 1,364 $ 727
Chemical 43 34 78 3
------- ------- ------- -------
680 455 1,442 730
UNALLOCATED CORPORATE ITEMS
Interest expense, net (a) (53) (66) (177) (122)
Income taxes (b) (167) (101) (345) (145)
Trust preferred distributions
& other (11) (12) (22) (23)
Other (c) (75) (35) (131) (76)
------- ------- ------- -------
INCOME FROM CONTINUING OPERATIONS 374 241 767 364
Discontinued operations, net -- (1) -- (4)
Cumulative effect of changes in
accounting principles, net (d) -- -- (68) (95)
------- ------- ------- -------
NET INCOME $ 374 $ 240 $ 699 $ 265
======= ======= ======= =======
BASIC EARNINGS PER COMMON SHARE
Income from continuing operations $ 0.98 $ 0.64 $ 2.02 $ 0.97
Discontinued operations, net -- -- -- (0.01)
Cumulative effect of changes in
accounting principles, net -- -- (0.18) (0.25)
------- ------- ------- -------
$ 0.98 $ 0.64 $ 1.84 $ 0.71
======= ======= ======= =======
DILUTED EARNINGS PER COMMON SHARE
Income from continuing operations $ 0.97 $ 0.63 $ 1.99 $ 0.96
Discontinued operations, net -- -- -- (0.01)
Cumulative effect of changes in
accounting principles, net -- -- (0.18) (0.25)
------- ------- ------- -------
$ 0.97 $ 0.63 $ 1.81 $ 0.70
======= ======= ======= =======
BASIC SHARES OUTSTANDING 382.6 375.5 380.9 375.1
=================================== ======= ======= ======= =======
See footnotes on following page.
3
(a) The six months 2003 amount includes a $61 million interest charge to repay
a $450-million 6.4-percent senior-notes issue that had ten years of
remaining life, but was subject to remarketing on April 1, 2003. The second
quarter and six-months 2002 amounts include $8 million and $22 million,
respectively, of interest income on notes receivable from the Occidental
Permian partners. The partnership exercised an option in May 2002 to redeem
the sellers' remaining partnership interests in exchange for the
outstanding balance on the notes.
(b) Excludes U.S. federal income tax charges and credits allocated to the
segments and foreign taxes. Oil and gas segment earnings include charges of
$8 million in the second quarter of 2003 and credits of $1 million in the
second quarter of 2002. Chemical segment earnings include $4 million of
credits in the second quarter of 2002.
Oil and gas segment earnings for the six months 2003 and 2002 include
charges of $7 million and credits of $1 million, respectively. Chemical
segment earnings included credits of $8 million for the six months 2002.
(c) Includes preferred distributions to the Occidental Permian partners. The
second quarter and six-months 2002 amounts include $5 million and $20
million, respectively. This is essentially offset by the interest income
from the Occidental Permian partners discussed in (a) above. The
partnership exercised an option in May 2002 to redeem the sellers'
remaining partnership interests in exchange for the outstanding balance on
the notes.
(d) Effective January 1, 2003, Occidental implemented SFAS No. 143 -
"Accounting for Asset Retirement Obligations." Adoption of this new
accounting standard resulted in a cumulative after-tax reduction in net
income of $50 million. Also effective January 1, 2003, Occidental
implemented the rescission of EITF 98-10, which precludes mark-to-market
accounting for all energy-trading contracts that are not derivatives and
fair-value accounting for inventories purchased from third parties.
Adoption of this accounting change resulted in a cumulative after-tax
reduction in net income of $18 million. Effective January 1, 2002,
Occidental implemented SFAS No. 142 - "Goodwill and Other Intangible
Assets." Adoption of this new accounting standard resulted in a cumulative
after-tax reduction in net income of $95 million.
4
SUMMARY OF OPERATING STATISTICS
Second Quarter Six Months
------------------- -------------------
2003 2002 2003 2002
================================== ======= ======= ======= =======
NET OIL, GAS AND LIQUIDS
PRODUCTION PER DAY
United States
Crude Oil and Liquids (MBBL)
California 81 86 79 88
Permian 151 143 147 141
Horn Mountain 19 -- 16 --
Hugoton 3 3 4 3
------- ------- ------- -------
Total 254 232 246 232
Natural Gas (MMCF)
California 252 290 257 298
Hugoton 143 150 143 154
Permian 131 125 125 127
Horn Mountain 15 -- 10 --
------- ------- ------- -------
Total 541 565 535 579
Latin America
Crude Oil (MBBL)
Colombia 36 42 37 39
Ecuador 18 12 17 13
------- ------- ------- -------
Total 54 54 54 52
Middle East and
Other Eastern Hemisphere
Crude Oil (MBBL)
Oman 11 15 12 16
Pakistan 10 9 10 8
Qatar 51 43 49 43
Yemen 35 33 37 40
------- ------- ------- -------
Total 107 100 108 107
Natural Gas (MMCF)
Pakistan 77 50 76 50
BARRELS OF OIL EQUIVALENT (MBOE)
Subtotal consolidated subsidiaries 518 489 510 496
Other interests
Colombia-minority interest (5) (5) (4) (5)
Russia-Occidental net interest 30 28 30 27
Yemen-Occidental net interest 1 -- 2 --
------- ------- ------- -------
Total worldwide production 544 512 538 518
======= ======= ======= =======
CAPITAL EXPENDITURES (millions) $ 493 $ 303 $ 791 $ 557
======= ======= ======= =======
DEPRECIATION, DEPLETION AND
AMORTIZATION OF ASSETS (millions) $ 286 $ 253 $ 571 $ 514
================================== ======= ======= ======= =======
5
SIGNIFICANT TRANSACTIONS AND EVENTS AFFECTING EARNINGS
Occidental's results of operations often include the effects of significant
transactions and events affecting earnings that vary widely and unpredictably in
nature, timing, and amount. Therefore, management uses a measure called "core
earnings", which excludes those items. This non-GAAP measure is not meant to
disassociate those items from management's performance, but rather is meant to
provide useful information to investors interested in comparing Occidental's
earnings performance between periods. Reported earnings are considered
representative of management's performance over the long term. Core earnings is
not considered to be an alternative to operating income in accordance with
generally accepted accounting principles.
The following table sets forth the core earnings and significant items affecting
earnings for each operating segment and corporate:
Second Quarter
-------------------------------------------
($ millions) 2003 EPS 2002 EPS
================================= ======= ======= ======= =======
TOTAL REPORTED EARNINGS $ 374 $ 0.98 $ 240 $ 0.64
======= ======= ======= =======
Oil and Gas
Segment Earnings $ 637 $ 421
No significant items
affecting earnings -- --
------- -------
Segment Core Earnings 637 421
------- -------
Chemicals
Segment Earnings 43 34
No significant items
affecting earnings -- --
------- -------
Segment Core Earnings 43 34
------- -------
Corporate
Results (306) (215)
Less:
Discontinued operations, net* -- (1)
------- -------
TOTAL CORE EARNINGS $ 374 $ 0.98 $ 241 $ 0.64
================================= ======= ======= ======= =======
*These amounts are shown after tax.
6
SIGNIFICANT TRANSACTIONS AND EVENTS AFFECTING EARNINGS (continued)
Six Months
--------------------------------------------
($ millions) 2003 EPS 2002 EPS
================================= ======= ======= ======= =======
TOTAL REPORTED EARNINGS $ 699 $ 1.84 $ 265 $ 0.71
======= ======= ======= =======
Oil and Gas
Segment Earnings $ 1,364 $ 727
No significant items
affecting earnings -- --
------- -------
Segment Core Earnings 1,364 727
------- -------
Chemicals
Segment Earnings 78 3
No significant items
affecting earnings -- --
------- -------
Segment Core Earnings 78 3
------- -------
Corporate
Results (743) (465)
Less:
Debt repayment charge (61) --
Tax effect of pre-tax charge 21 --
Discontinued operations, net* -- (4)
Changes in accounting
principles, net* (68) (95)
------- -------
TOTAL CORE EARNINGS $ 807 $ 2.12 $ 364 $ 0.97
================================= ======= ======= ======= =======
*These amounts are shown after tax.
7
ITEMS AFFECTING COMPARABILITY OF CORE EARNINGS BETWEEN PERIODS
Second Quarter Six Months
------------------- -------------------
($ millions) 2003 2002 2003 2002
================================= ======= ======= ======= =======
PRE-TAX INCOME / (EXPENSE)
Oil and Gas
Gain on sale of GOM assets 1 $ 14 $ -- $ 14 $ --
Exploration asset write-offs -- (33) -- (33)
Chemicals
Reorganizations/severance (15) -- (15) (14)
Equistar equity results -- (4) -- (40)
Chlorine derivatives asset
impairment (9) -- (9) --
Corporate
Environmental remediation (13) -- (13) --
Equity earnings (15) -- (38) --
1 Net of tax.
8
EXHIBIT 99.2
OCCIDENTAL PETROLEUM CORPORATION
STEPHEN CHAZEN
CHIEF FINANCIAL OFFICER AND
EXECUTIVE VICE PRESIDENT - CORPORATE DEVELOPMENT
- CONFERENCE CALL -
SECOND QUARTER 2003 EARNINGS ANNOUNCEMENT
JULY 22, 2003
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 $374 million, or
$0.98 per share, compared with $241 million, or $0.64 per share in the second
quarter of 2002. The improvement was driven mainly by higher energy prices and
increased oil and gas production.
o Oil and gas production for the quarter averaged 544,000 barrels of oil
equivalent compared to 512,000 barrels in last year's second quarter.
For the first half of this year, worldwide production was up by 4
percent compared to last year - from 518,000 to 538,000 BOE per day.
For the first half of this year, core earnings were $807 million, or $2.12
per share compared to $364 million, or $0.97 per share, during the first half of
2002.
1
On a segment basis, oil and gas second quarter earnings were $637 million,
compared to $421 million during the same period a year ago. As I noted earlier,
the increase was due primarily to higher prices and increased production.
We recorded an after-tax gain of $14 million resulting from Apache
Corporation exercising its option to purchase Oxy's remaining interest in a
subsidiary holding assets in the Continental Shelf in the Gulf of Mexico. Oxy's
only remaining interest in the Gulf of Mexico is its one-third interest in the
deep water Horn Mountain operation.
Chemical segment earnings were $43 million compared to second quarter 2002
earnings of $34 million. Our core chemical business earnings of $78 million for
the first half exceeds last year's first half earnings by $75 million. Included
in the 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 our Niagara Falls chemical plant.
Corporate "Other" includes a $15 million loss attributable to our equity
investments and $13 million in environmental remediation charges.
The net effect of the gain from the Apache transaction, the severance and
environmental charges and the plant write-off was an after-tax charge of $10
million, or about 3-cents per share.
Cash flow from operations for the first half of the year was approximately
$1.4 billion.
Turning to the balance sheet at the end of the quarter, we increased
shareholder equity to $7.1 billion, or $382 million higher than at the end of
the first quarter. During the first half of the year, shareholder equity
2
increased by a total of $736 million, an increase of 12 percent above the
year-end 2002 level.
Our balance sheet was impacted by the adoption of the new accounting rule
known as FIN 46 which applies to variable interest entities. We implemented this
rule change a quarter earlier than required which resulted in the consolidation
of our ownership interest in the OxyMar VCM plant on our balance sheet. During
the quarter we paid off $105 million in revolving credit and purchased a lease
on the La Porte, Louisiana PVC facility for approximately $180 million. The net
effect of the FIN 46 consolidation was that it added $56 million in public
OxyMar bonds to our balance sheet.
Our debt-to-total capitalization was down to 40 percent at the end of the
quarter, compared to 41 percent at the end of the first quarter and 43 percent
at the end of last year. This brings us within our target range of 35 to 40
percent.
Through year-end, our potential for additional debt reduction is limited to
$44 million because there are no other maturities or callable debt. We have $454
million in 8.16 percent Trust Preferred Securities callable at par in the fourth
quarter, but they're not redeemable until January.
During the quarter both Fitch and Standard & Poor's upgraded our debt
rating to BBB+ and Moody's announced they were reviewing our BAA2 credit rating
for possible upgrade.
Capital spending for the quarter was $493 million and $791 for the first
half, including the $180 million lease buyout and $44 million for the buyout of
chemical railcar leases in the first quarter. Excluding the lease buyouts, we
expect total spending for the year to be approximately $1.4
4
billion - with oil and gas accounting for about 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 as the
second quarter. This could vary slightly due to price-driven
adjustments in the volumes under our production sharing contracts in
Oman, Qatar, Yemen and THUMS. In addition, our Colombia production is
always difficult to forecast. Dale Laurance will have more to say
about our oil and gas production outlook.
o We expect exploration expense for the quarter to be about $35 million.
o We see no sign of an upturn in chemical markets since business remains
sluggish. We therefore expect third quarter chemical earnings to be in
the $30 to $45 million range.
o We expect third quarter interest expense to be approximately $70
million. That includes the quarterly payment on our Trust Preferred
Securities.
o A $1.00 per barrel change in oil prices impacts segment quarterly
earnings by about $30 million. The WTI price in the second quarter was
$28.89. 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 $5.83.
o We expect our tax rate to be in the same range as the 32 percent rate
for the second quarter. Let me add that our reported oil and gas
earnings are after foreign taxes so the 32 percent rate applies
4
only to U.S. taxes - with our overall effective tax rate at
approximately 45 percent.
o We currently own approximately 36 million shares of Lyondell Chemical
Company. As we look ahead in the quarter, we don't have an estimate
for their results, but it appears to us that their markets are weak.
Now I'd like to turn the conference call over to Oxy's president and CEO of
the oil and gas segment, Dale Laurance.
5
OCCIDENTAL PETROLEUM CORPORATION
DALE R. LAURANCE
PRESIDENT
- CONFERENCE CALL -
SECOND QUARTER 2003 EARNINGS ANNOUNCEMENT
JULY 22, 2003
Los Angeles, California
Thank you, Steve.
For the second consecutive quarter, our worldwide oil and natural gas
production hit a record high. The 544,000 barrels of oil equivalent per day of
production in the second quarter exceeded our record first quarter rate by
12,000 barrels per day. Our average production for the first six months was
538,000 BOE per day and keeps us on track to meet or exceed our forecast of
535,000 BOE per day for the year.
Our domestic operations account for most of the growth. Since acquiring
Altura and THUMS in 2000, our domestic oil and gas production through the second
quarter has been growing at an average annual rate of 7 percent.
The major increases have come from the Permian Basin and new production
from Horn Mountain in the deep water Gulf of Mexico.
Our Permian production is up by 9,000 BOE per day over the first quarter
rate, due primarily to the acquisition of additional producing properties in
mid-April this year. Our total Permian production for the quarter was 173,000
BOE per day, or 32 percent of our worldwide total.
Our newest operation at Horn Mountain came on stream last December and
averaged nearly 22,000 BOE per day in the second quarter.
6
California accounted for 123,000 BOE per day, or 23 percent of our second
quarter worldwide production. As expected, natural gas production from
California is declining as we continue to blow down the Elk Hills gas cap, but
sound technical work extended the production peak and slowed the decline rate.
During the second quarter, our California gas production averaged 252 million
cubic feet per day compared to 262 million cubic feet per day in the first
quarter and 286 million cubic feet per day in 2002.
Our international production for the quarter of 200,000 BOE per day was 6
percent higher than our 2002 rate. The startup of the new trans-Ecuadorian
pipeline later this quarter will add to the rate of increase.
All our oil and gas assets are performing well, and we expect to meet or
exceed our production forecast of 535,000 BOE per day for the year.
Thank you, and now we're ready to answer 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" or "expect",
or otherwise relate to the future, are forward-looking and involve risks and
uncertainties that could significantly affect expected results. Factors that
could cause results to differ materially include, but are not limited to: global
commodity pricing fluctuations, and supply/demand considerations, for oil, gas
and chemicals; higher-than-expected costs; and not successfully completing (or
any material delay in) any expansion, capital expenditure, acquisition, or
disposition. Occidental disclaims any obligation to update any forward-looking
statements. The United States Securities and Exchange Commission (SEC) permits
oil and natural gas companies, in their filings with the SEC, to disclose only
proved reserves demonstrated by actual production or conclusive formation tests
to be economically producible under existing economic and operating conditions.
We use certain terms in this presentation, such as probable, possible and
recoverable reserves, that the SEC's guidelines strictly prohibit us from using
in filings with the SEC. U.S. investors are urged to consider carefully the
disclosure in our form 10-K, available through the following toll-free telephone
number, 1-888-OXYPETE (1-888-699-7383) or on the Internet at http://www.oxy.com.
You also can obtain a copy from the SEC by calling 1-800-SEC-0330.
- --------------------------------------------------------------------------------
7
EXHIBIT 99.3
Investor Relations Supplemental Schedules
[OXY LOGO]
OCCIDENTAL PETROLEUM
2003 Second Quarter
Net Income (Loss)
($ millions)
REPORTED CORE
INCOME SIGNIFICANT ITEMS AFFECTING INCOME EARNINGS
------------ ------------------------------------- ------------
Oil & Gas $ 637 $ 637
Chemical 43 43
Corporate
Interest on debt, net (53) (53)
Trust pfd distributions & other (11) (11)
Other (75) (75)
Taxes (167) (167)
------------ ------------ ------------
NET INCOME $ 374 $ -- $ 374
============ ============ ============
BASIC EARNINGS PER SHARE
NET INCOME $ 0.98 $ 0.98
============ ============
1
Investor Relations Supplemental Schedules
[OXY LOGO]
OCCIDENTAL PETROLEUM
2002 Second Quarter
Net Income (Loss)
($ millions)
REPORTED CORE
INCOME SIGNIFICANT ITEMS AFFECTING INCOME EARNINGS
------------ ------------------------------------- ------------
Oil & Gas $ 421 $ 421
Chemical 34 34
Corporate
Interest on debt, net (74) (74)
Trust pfd distributions & other (9) (9)
Other (30) (30)
Taxes (101) (101)
------------ ------------ ------------
Income from continuing operations 241 -- 241
Discontinued operations, net (1) 1 Discontinued operations --
------------ ------------ ------------
NET INCOME $ 240 $ 1 $ 241
============ ============ ============
BASIC EARNINGS PER SHARE
Income from continuing operations $ 0.64 $ 0.64
Discontinued operations, net -- --
------------ ------------
NET INCOME (LOSS) $ 0.64 $ 0.64
============ ============
2
Investor Relations Supplemental Schedules
[OXY LOGO]
OCCIDENTAL PETROLEUM
2003 First Six Months
Net Income (Loss)
($ millions)
REPORTED CORE
INCOME SIGNIFICANT ITEMS AFFECTING INCOME EARNINGS
------------ ----------------------------------------------- ------------
Oil & Gas $ 1,364 $ 1,364
Chemical 78 78
Corporate
Interest on debt, net (177) 61 Debt remarket fee (116)
Trust pfd distributions & other (22) (22)
Other (131) (131)
Taxes (345) (21) Tax effect of adjustments (366)
------------ ------------ ------------
Income from continuing operations 767 40 807
Cumulative effect of accounting changes (68) 68 Cumulative effect of acct changes --
------------ ------------ ------------
NET INCOME $ 699 $ 108 $ 807
============ ============ ============
BASIC EARNINGS PER SHARE
Income from continuing operations $ 2.02 $ 2.12
Cumulative effect of accounting changes (0.18) --
------------ ------------
BASIC EARNINGS PER SHARE $ 1.84 $ 2.12
============ ============
3
Investor Relations Supplemental Schedules
[OXY LOGO]
OCCIDENTAL PETROLEUM
2002 First Six Months
Net Income (Loss)
($ millions)
REPORTED CORE
INCOME SIGNIFICANT ITEMS AFFECTING INCOME EARNINGS
------------ ----------------------------------------------- ------------
Oil & Gas $ 727 $ 727
Chemical 3 3
Corporate
Interest on debt, net (144) (144)
Trust pfd distributions & other (21) (21)
Other (56) (56)
Taxes (145) (145)
------------ ------------ ------------
Income from continuing operations 364 -- 364
Discontinued operations, net (4) 4 Discontinued operations --
Cumulative effect of accounting changes (95) 95 Cumulative effect of acct changes
------------ ------------ ------------
NET INCOME $ 265 $ 99 $ 364
============ ============ ============
BASIC EARNINGS PER SHARE
Income from continuing operations $ 0.97 $ 0.97
Discontinued operations, net (0.01) --
Cumulative effect of accounting changes (0.25) --
------------ ------------
NET INCOME (LOSS) $ 0.71 $ 0.97
============ ============
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
----------------------------- -----------------------------
2003 2002 2003 2002
------------ ------------ ------------ ------------
OIL & GAS
Exploration asset write-offs -- (33) -- (33)
Gain on sale of GOM assets 1 14 -- 14 --
CHEMICALS
Reorganizations / severance (15) -- (15) (14)
Equistar equity earnings -- (4) -- (40)
Chlorine derivatives asset impairment (9) -- (9) --
CORPORATE
Equity earnings (15) -- (38) --
Environmental remediation (13) -- (13) --
1 Amount shown after-tax
5
Investor Relations Supplemental Schedules
[OXY LOGO]
OCCIDENTAL PETROLEUM
2003 SECOND QUARTER NET INCOME (LOSS)
REPORTED INCOME COMPARISON
SECOND FIRST
QUARTER QUARTER
2003 2003 B / (W)
---------- ---------- ----------
OIL & GAS $ 637 $ 727 $ (90)
CHEMICAL 43 35 8
CORPORATE
INTEREST ON DEBT, NET (53) (124) 71
TRUST PFD DISTRIBUTIONS & OTHER (11) (11) --
OTHER (75) (56) (19)
TAXES (167) (178) 11
---------- ---------- ----------
INCOME FROM CONTINUING OPERATIONS 374 393 (19)
CUMULATIVE EFFECT OF ACCOUNTING CHANGES -- (68) 68
---------- ---------- ----------
NET INCOME $ 374 $ 325 $ 49
========== ========== ==========
BASIC EARNINGS PER SHARE $ 0.98 $ 0.86 $ 0.12
========== ========== ==========
EFFECTIVE TAX RATE 32% 31% -1%
========== ========== ==========
================================================================================
OCCIDENTAL PETROLEUM
2003 SECOND QUARTER NET INCOME (LOSS)
CORE EARNINGS COMPARISON
SECOND FIRST
QUARTER QUARTER
2003 2003 B / (W)
---------- ---------- ----------
OIL & GAS $ 637 $ 727 $ (90)
CHEMICAL 43 35 8
CORPORATE
INTEREST ON DEBT, NET (53) (63) 10
TRUST PFD DISTRIBUTIONS & OTHER (11) (11) --
OTHER (75) (56) (19)
TAXES (167) (199) 32
---------- ---------- ----------
NET INCOME $ 374 $ 433 $ (59)
========== ========== ==========
BASIC EARNINGS PER SHARE $ 0.98 $ 1.14 $ (0.16)
========== ========== ==========
EFFECTIVE TAX RATE 32% 31% -1%
========== ========== ==========
6
Investor Relations Supplemental Schedules
[OXY LOGO]
OCCIDENTAL PETROLEUM
OIL & GAS
CORE EARNINGS VARIANCE ANALYSIS
($ MILLIONS)
2003 2nd Quarter $ 637
2003 1st Quarter 727
--------
$ (90)
========
Price Variance $ (133)
Volume Variance 29
Exploration Expense Variance (1)
All Other 15
--------
TOTAL VARIANCE $ (90)
========
======================================================================
OCCIDENTAL PETROLEUM
CHEMICAL
CORE EARNINGS VARIANCE ANALYSIS
($ MILLIONS)
2003 2nd Quarter $ 43
2003 1st Quarter 35
--------
$ 8
========
Sales Price $ 32
Sales Volume/Mix (12)
Operations/Manufacturing 8
All Other (20)
--------
TOTAL VARIANCE $ 8
========
7
Investor Relations Supplemental Schedules
[OXY LOGO]
OCCIDENTAL PETROLEUM
2003 SECOND QUARTER NET INCOME (LOSS)
REPORTED INCOME COMPARISON
SECOND SECOND
QUARTER QUARTER
2003 2002 B / (W)
---------- ---------- ----------
OIL & GAS $ 637 $ 421 $ 216
CHEMICAL 43 34 9
CORPORATE
INTEREST ON DEBT, NET (53) (74) 21
TRUST PFD DISTRIBUTIONS & OTHER (11) (9) (2)
OTHER (75) (30) (45)
TAXES (167) (101) (66)
---------- ---------- ----------
INCOME FROM CONTINUING OPERATIONS 374 241 133
DISCONTINUED OPERATIONS, NET -- (1) 1
---------- ---------- ----------
NET INCOME $ 374 $ 240 $ 134
========== ========== ==========
BASIC EARNINGS PER SHARE $ 0.98 $ 0.64 $ 0.34
========== ========== ==========
EFFECTIVE TAX RATE 32% 29% -3%
========== ========== ==========
================================================================================
OCCIDENTAL PETROLEUM
2003 SECOND QUARTER NET INCOME (LOSS)
CORE EARNINGS COMPARISON
SECOND SECOND
QUARTER QUARTER
2003 2002 B / (W)
---------- ---------- ----------
OIL & GAS $ 637 $ 421 $ 216
CHEMICAL 43 34 9
CORPORATE
INTEREST ON DEBT, NET (53) (74) 21
TRUST PFD DISTRIBUTIONS & OTHER (11) (9) (2)
OTHER (75) (30) (45)
TAXES (167) (101) (66)
---------- ---------- ----------
NET INCOME $ 374 $ 241 $ 133
========== ========== ==========
BASIC EARNINGS PER SHARE $ 0.98 $ 0.64 $ 0.34
========== ========== ==========
EFFECTIVE TAX RATE 32% 29% -3%
========== ========== ==========
8
Investor Relations Supplemental Schedules
[OXY LOGO]
OCCIDENTAL PETROLEUM
OIL & GAS
CORE EARNINGS VARIANCE ANALYSIS
($ MILLIONS)
2003 2nd Quarter $ 637
2002 2nd Quarter 421
--------
$ 216
========
Price Variance $ 201
Volume Variance 30
Exploration Expense Variance 30
All Other (45)
--------
TOTAL VARIANCE $ 216
========
======================================================================
OCCIDENTAL PETROLEUM
CHEMICAL
CORE EARNINGS VARIANCE ANALYSIS
($ MILLIONS)
2003 2nd Quarter $ 43
2002 2nd Quarter 34
--------
$ 9
========
Sales Price $ 130
Sales Volume/Mix (20)
Operations/Manufacturing (76) *
All Other (25)
--------
TOTAL VARIANCE $ 9
========
* Higher energy and feedstock costs.
9
Investor Relations Supplemental Schedules
[OXY LOGO]
OCCIDENTAL PETROLEUM
SUMMARY OF OPERATING STATISTICS
-------------------------------
SECOND QUARTER SIX MONTHS
--------------------- ---------------------
2003 2002 2003 2002
-------- -------- -------- --------
NET PRODUCTION PER DAY:
UNITED STATES
CRUDE OIL AND LIQUIDS (MBL)
California 81 86 79 88
Permian 151 143 147 141
Horn Mountain 19 -- 16 3
Hugoton 3 3 4 --
-------- -------- -------- --------
TOTAL 254 232 246 232
NATURAL GAS (MMCF)
California 252 290 257 298
Hugoton 143 150 143 154
Permian 131 125 125 127
Horn Mountain 15 -- 10 --
-------- -------- -------- --------
TOTAL 541 565 535 579
LATIN AMERICA
CRUDE OIL (MBL)
Colombia 36 42 37 39
Ecuador 18 12 17 13
-------- -------- -------- --------
TOTAL 54 54 54 52
MIDDLE EAST AND OTHER
EASTERN HEMISPHERE
CRUDE OIL (MBL)
Oman 11 15 12 16
Pakistan 10 9 10 8
Qatar 51 43 49 43
Yemen 35 33 37 40
-------- -------- -------- --------
TOTAL 107 100 108 107
NATURAL GAS (MMCF)
Pakistan 77 50 76 50
BARRELS OF OIL EQUIVALENT (MBOE)
- ---------------------------------
CONSOLIDATED SUBSIDIARIES 518 489 510 496
OTHER INTERESTS
COLOMBIA - MINORITY INTEREST (5) (5) (4) (5)
RUSSIA - OCCIDENTAL NET INTEREST 30 28 30 27
YEMEN - OCCIDENTAL NET INTEREST 1 -- 2 --
-------- -------- -------- --------
TOTAL WORLDWIDE PRODUCTION (MBOE) 544 512 538 518
======== ======== ======== ========
10
Investor Relations Supplemental Schedules
[OXY LOGO]
SUMMARY OF OPERATING STATISTICS
-------------------------------
SECOND QUARTER SIX MONTHS
-------------------- --------------------
2003 2002 2003 2002
-------- -------- -------- --------
OIL & GAS:
- ----------
PRICES
UNITED STATES
Crude Oil ($/BBL) 26.89 23.88 29.15 21.35
Natural gas ($/MCF) 5.46 2.92 4.89 2.64
LATIN AMERICA
Crude oil ($/BBL) 25.01 22.78 28.06 20.67
MIDDLE EAST AND OTHER
EASTERN HEMISPHERE
Crude oil ($/BBL) 25.22 24.27 27.71 22.15
Natural Gas ($/MCF) 1.91 2.04 1.91 2.28
SECOND QUARTER SIX MONTHS
-------------------- --------------------
2003 2002 2003 2002
-------- -------- -------- --------
Exploration Expense
Domestic $ 20 $ 44 $ 45 $ 54
Latin America 5 7 6 14
Middle East and Other 4 8 6 18
Eastern Hemisphere
-------- -------- -------- --------
TOTAL $ 29 $ 59 $ 57 $ 86
======== ======== ======== ========
11
Investor Relations Supplemental Schedules
[OXY LOGO]
OCCIDENTAL PETROLEUM
CHEMICALS
Volume (M Tons)
SECOND QUARTER SIX MONTHS
--------------------- ---------------------
MAJOR PRODUCTS 2003 2002 2003 2002
-------- -------- -------- --------
Chlorine 664 735 1,350 1,436
Caustic 719 743 1,356 1,317
Ethylene Dichloride 108 140 239 292
PVC Resins 872 1,151 1,935 2,193
CHEMICALS
Prices (Index)
SECOND QUARTER SIX MONTHS
--------------------- ---------------------
MAJOR PRODUCTS 2003 2002 2003 2002
-------- -------- -------- --------
Chlorine 1.81 0.77 1.72 0.64
Caustic 0.87 0.66 0.84 0.79
Ethylene Dichloride 1.17 1.29 1.21 0.94
PVC Resins 0.97 0.70 0.92 0.62
CHLORINE
- --------
OXYCHEM COMMENTARY
- ------------------
o The expected seasonal demand improvement was hindered by Spring weather
that was both cooler and wetter than normal. This resulted in a slower than
anticipated start to the bleach and water treatment season and reduced
construction activity.
o Pricing improved in the 2nd quarter as the $70 per ton price increase,
announced for April 1st, was implemented where contract terms permitted.
o Concerns over product availability in the vinyl's chain resulted in demand
peaking earlier in 2003 versus previous years. Consequently, chlorine
operating rates came under pressure in the 2nd quarter as customers worked
down inventories built in the 1st quarter.
o Chlorine industry operating rates declined approximately 1% in the 2nd
quarter versus 1st quarter 2003.
12
Investor Relations Supplemental Schedules
[OXY LOGO]
INFLUENCING FACTORS:
- --------------------
Demand is expected to pick up in the 3rd quarter as downstream inventories are
depleted, but will continue to be impacted by weak overall economic conditions.
CAUSTIC
- -------
OXYCHEM COMMENTARY
- ------------------
o Demand for caustic soda improved marginally over the 1st quarter led by the
seasonal demand for bleach. Volume into the refining and organic markets
also showed slight improvement over the prior quarter. Continued
improvement is expected through the 3rd quarter.
o As a result of higher natural gas pricing in the 1st quarter, U.S.
producers announced a $125 per ton price increase for domestic liquid
caustic soda in the 2nd quarter. However, this price increase was only
marginally successful due to strong competitive activity and a decline in
natural gas pricing from 1st quarter levels. Aggressive pricing from import
liquid caustic soda has also adversely impacted the domestic market.
INFLUENCING FACTORS:
- --------------------
Supply and demand for caustic soda remains precariously balanced. Forecasted
improvement in the U.S. manufacturing sector is expected to lead to a gradual
upswing in caustic soda demand. Tightening of caustic supply and higher energy
costs would provide an incentive for future price increases.
EDC
- ---
OXYCHEM COMMENTARY
- ------------------
o Strong demand in the 1st quarter led to rising prices and increased
inventories throughout the Far East vinyl's chain. Demand began to falter
in the 2nd quarter due to the uncertainty associated with Iraq and the SARS
outbreak. As a result, prices fell quickly before beginning a slow recovery
in mid May.
o Recent price improvements have been dampened by reduced VCM production due
to scheduled EDC outages in the 2nd quarter. The completion of the outages
should lead to price improvement in the 3rd quarter but will be very
dependent on downstream PVC demand in China.
13
Investor Relations Supplemental Schedules
[OXY LOGO]
INFLUENCING FACTORS:
- --------------------
Continued economic recovery in Asia and the U.S. are required for sustainable
improvement. China's ability to produce PVC without EDC could hamper growth.
Also uncertain is the impact of duties imposed by China on select PVC importers.
PVC/VCM
- -------
OXYCHEM COMMENTARY
- ------------------
o Sales were weak in the 2nd quarter as end users drew down inventories built
in the 1st quarter. Softness in the underlying demand worsened the
slowdown.
o Resin producers have reduced output in an effort to control inventories.
2nd quarter resin inventories are expected to end at or slightly below
beginning year levels. High costs continue to limit incremental production
for exports and the spot market.
o Capacities still exclude the former Borden Geismar and Addis facilities,
which remain idle. With the weakness in the domestic market and the import
duties implemented in China, the expectation is that the Addis facility
will start up no earlier than the 1st quarter of 2004, if then. There is
little indication that the Geismar PVC plant will restart in the near
future.
o After 1st quarter price increases totaling $.06/lb, another price increase
of $.02/lb was implemented in April. May prices were flat with April, while
June prices dropped $.01/lb in certain markets. Most producers are
supporting an announced $.02/lb increase for August.
o Demand for PVC exports improved slightly in the 2nd quarter due mostly to
outages in Asia. After declining initially, prices stabilized at 1st
quarter levels of $650/MT.
o Demand for VCM fell as PVC sales declined in North America. VCM sales to
Latin America also weakened due to reduced local demand and increased PVC
exports from the U.S.
o Export VCM prices began the quarter at $550-$560/MT and ended the quarter
at $480/MT.
INFLUENCING FACTORS:
- --------------------
Margins gained through PVC price increases and lower raw material costs are
largely offset by volume reductions. Volume and margin improvement is dependant
on the strengthening of underlying demand and economic recovery.
14
Investor Relations Supplemental Schedules
[OXY LOGO]
SUMMARY OF OPERATING STATISTICS
SECOND QUARTER SIX MONTHS
--------------------- ---------------------
CAPITAL EXPENDITURES ($MM) 2003 2002 2003 2002
-------- -------- -------- --------
Oil & Gas
California $ 53 $ 61 $ 97 $ 121
Permian 60 44 115 103
Other - U.S. 12 28 26 44
Latin America 30 42 37 51
Middle East and Other 128 94 233 178
Eastern Hemisphere
Chemicals 205 1 21 273 2 35
Corporate 5 13 10 25
-------- -------- -------- --------
TOTAL $ 493 $ 303 $ 791 $ 557
======== ======== ======== ========
1 Includes $180 for buyout of VCM plant lease
2 Includes $180 for buyout of VCM plant lease and $44 for buyout of railcar
leases
SECOND QUARTER SIX MONTHS
DEPRECIATION, DEPLETION & --------------------- ---------------------
AMORTIZATION OF ASSETS ($MM) 2003 2002 2003 2002
-------- -------- -------- --------
Oil & Gas
Domestic $ 158 $ 147 $ 323 $ 296
Latin America 14 9 27 18
Middle East and Other 62 48 122 101
Eastern Hemisphere
Chemicals 48 47 92 95
Corporate 4 2 7 4
-------- -------- -------- --------
TOTAL $ 286 $ 253 $ 571 $ 514
======== ======== ======== ========
15
Investor Relations Supplemental Schedules
[OXY LOGO]
OCCIDENTAL PETROLEUM
CORPORATE
($ millions)
30-JUN-03 31-DEC-02
------------- -------------
CAPITALIZATION
Oxy Long-Term Debt (including current maturities) $ 4,093 1 $ 4,203
Trust Preferred Securities 454 455
Subsidiary Preferred Stock 75 75
Others 26 26
------------- -------------
TOTAL DEBT $ 4,648 $ 4,759
============= =============
EQUITY $ 7,054 $ 6,318
============= =============
Total Debt To Total Capitalization 40% 43%
============= =============
1 Includes $56 million due to the adoption of FIN 46
16
Investor Relations Supplemental Schedules
[OXY LOGO]
Portions of this presentation are "forward-looking statements" as defined by the
Private Securities Litigation Reform Act of 1995, and involve risks and
uncertainties that could significantly affect expected results. No assurance can
be given that the results or statement of expectations or beliefs will be
attained. Factors that may cause actual results to differ materially are
contained in the March 31, 2002 form 10-K on file with the SEC.
17