SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission file number 1-9210
---------------------
OCCIDENTAL PETROLEUM CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 95-4035997
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10889 WILSHIRE BOULEVARD
LOS ANGELES, CALIFORNIA 90024
(Address of principal executive offices) (Zip Code)
(310) 208-8800
(Registrant's telephone number, including area code)
---------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at June 30, 2000
--------------------------- ----------------------------
Common stock $.20 par value 368,879,875 shares
OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
CONTENTS
PAGE
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets--
June 30, 2000 and December 31, 1999 2
Consolidated Condensed Statements of Operations--
Three and six months ended June 30, 2000 and 1999 4
Consolidated Condensed Statements of Cash Flows--
Six months ended June 30, 2000 and 1999 5
Notes to Consolidated Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Item 3. Quantitative and Qualitative Disclosures About Market Risk 17
PART II OTHER INFORMATION
Item 1. Legal Proceedings 18
Item 6. Exhibits and Reports on Form 8-K 18
1
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
JUNE 30, 2000 and DECEMBER 31, 1999
(Amounts in millions)
2000 1999
================================================================================= ============ =============
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 97 $ 214
Receivables, net 1,196 774
Inventories 510 503
Prepaid expenses and other 176 197
------------ -------------
Total current assets 1,979 1,688
LONG-TERM RECEIVABLES, net 2,119 168
EQUITY INVESTMENTS 1,434 1,754
PROPERTY, PLANT AND EQUIPMENT, at cost, net of
accumulated depreciation, depletion and amortization of $6,814
at June 30, 2000 and $7,675 at December 31, 1999 13,547 10,029
OTHER ASSETS 477 486
------------ -------------
$ 19,556 $ 14,125
================================================================================= ============ =============
The accompanying notes are an integral part of these financial statements.
2
OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
JUNE 30, 2000 and DECEMBER 31, 1999
(Amounts in millions)
2000 1999
================================================================================= ============= ============
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt and capital lease liabilities $ 5 $ 5
Current portion of non-recourse debt 35 --
Notes payable 49 29
Accounts payable 944 812
Accrued liabilities 1,070 953
Domestic and foreign income taxes 174 168
------------- ------------
Total current liabilities 2,277 1,967
------------- ------------
LONG-TERM DEBT, net of current maturities and unamortized discount 4,421 4,368
------------- ------------
NON-RECOURSE DEBT 2,240 --
------------- ------------
DEFERRED CREDITS AND OTHER LIABILITIES
Deferred and other domestic and foreign income taxes 1,225 995
Obligation under natural gas delivery commitment 348 411
Other 2,097 2,123
------------- ------------
3,670 3,529
------------- ------------
MINORITY INTEREST 2,270 252
------------- ------------
OCCIDENTAL OBLIGATED MANDATORILY REDEEMABLE
TRUST PREFERRED SECURITIES OF A SUBSIDIARY
TRUST HOLDING SOLELY SUBORDINATED NOTES OF
OCCIDENTAL 476 486
------------- ------------
STOCKHOLDERS' EQUITY
Common stock, at par value 74 73
Additional paid-in capital 3,714 3,787
Retained earnings (deficit) 456 (286)
Accumulated other comprehensive income (42) (51)
------------- ------------
4,202 3,523
------------- ------------
$ 19,556 $ 14,125
================================================================================= ============= ============
The accompanying notes are an integral part of these financial statements.
3
OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(Amounts in millions, except per-share amounts)
Three Months Ended Six Months Ended
June 30 June 30
------------------------ ------------------------
2000 1999 2000 1999
================================================================= ========== =========== =========== ==========
REVENUES
Net sales
Oil and gas operations $ 2,122 $ 944 $ 3,649 $ 1,690
Chemical operations 1,006 703 1,987 1,301
---------- ----------- ----------- ----------
3,128 1,647 5,636 2,991
Interest, dividends and other income 63 43 100 86
Gains (losses) on disposition of assets, net 491 (21) 495 (18)
Income from equity investments 52 15 85 7
---------- ----------- ----------- ----------
3,734 1,684 6,316 3,066
---------- ----------- ----------- ----------
COSTS AND OTHER DEDUCTIONS
Cost of sales 2,175 1,280 3,897 2,367
Selling, general and administrative and other
operating expenses 291 160 445 320
Minority interest 57 11 86 20
Exploration expense 16 36 21 52
Interest and debt expense, net 142 129 247 255
---------- ----------- ----------- ----------
2,681 1,616 4,696 3,014
---------- ----------- ----------- ----------
Income before taxes 1,053 68 1,620 52
Provision for domestic and foreign income and
other taxes 489 56 785 97
---------- ----------- ----------- ----------
Income (loss) before extraordinary item and effect of changes
in accounting principles 564 12 835 (45)
Extraordinary loss, net -- (3) -- (3)
Cumulative effect of changes in accounting principles, net -- -- -- (13)
---------- ----------- ----------- ----------
NET INCOME (LOSS) 564 9 835 (61)
Preferred dividends -- (3) -- (7)
Effect of repurchase of Trust Preferred Securities -- -- 1 --
---------- ----------- ----------- ----------
EARNINGS (LOSS) APPLICABLE TO COMMON STOCK $ 564 $ 6 $ 836 $ (68)
========== =========== =========== ==========
BASIC EARNINGS PER COMMON SHARE
Income (loss) before extraordinary item and effect of
changes in accounting principles $ 1.53 $ .03 $ 2.27 $ (.15)
Extraordinary loss, net -- (.01) -- (.01)
Cumulative effect of changes in accounting principles, net -- -- -- (.04)
---------- ----------- ----------- ----------
Basic earnings (loss) per common share $ 1.53 $ .02 $ 2.27 $ (.20)
========== =========== =========== ==========
DILUTED EARNINGS PER COMMON SHARE
Income (loss) before extraordinary item and effect of
changes in accounting principles $ 1.53 $ .03 $ 2.27 $ (.15)
Extraordinary loss, net -- (.01) -- (.01)
Cumulative effect of changes in accounting principles, net -- -- -- (.04)
---------- ----------- ----------- ----------
Diluted earnings (loss) per common share $ 1.53 $ .02 $ 2.27 $ (.20)
========== =========== =========== ==========
DIVIDENDS PER COMMON SHARE $ .25 $ .25 $ .50 $ .50
========== =========== =========== ==========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 368.8 348.4 368.5 348.1
================================================================= ========== =========== =========== ==========
The accompanying notes are an integral part of these financial statements.
4
OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(Amounts in millions)
2000 1999
========================================================================================= ========== ==========
CASH FLOW FROM OPERATING ACTIVITIES
Income (loss) before extraordinary item and effect of changes in accounting
principles $ 835 $ (45)
Adjustments to reconcile income (loss) to net cash provided by operating
activities:
Depreciation, depletion and amortization of assets 419 400
Deferred income tax provision 244 74
Other noncash charges to income 168 4
(Gains) losses on disposition of assets, net (495) 18
Income from equity investments (85) (7)
Exploration expense 21 52
Changes in operating assets and liabilities (108) (204)
Other operating, net (77) (100)
---------- ----------
Net cash provided by operating activities 922 192
---------- ----------
CASH FLOW FROM INVESTING ACTIVITIES
Capital expenditures (333) (263)
Purchase of businesses, net (3,701) (126)
Proceeds from sale of businesses and other assets 842 17
Collection of note receivable -- 1,395
Other investing, net 47 83
---------- ----------
Net cash (used) provided by investing activities (3,145) 1,106
---------- ----------
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from long-term and non-recourse debt 2,432 792
Net proceeds (payments) from commercial paper and revolving credit agreements 265 (2,123)
Proceeds from issuance of trust preferred securities -- 508
Repurchase of trust preferred securities (9) --
Purchases for gas sales commitment (56) --
Payments on long-term and non-recourse debt and capital lease liabilities (380) (138)
Proceeds from issuance of common stock 19 12
Proceeds from notes payable 20 3
Cash dividends paid (184) (181)
Other financing, net (1) --
---------- ----------
Net cash provided (used) by financing activities 2,106 (1,127)
---------- ----------
(Decrease) increase in cash and cash equivalents (117) 171
Cash and cash equivalents--beginning of period 214 96
---------- ----------
Cash and cash equivalents--end of period $ 97 $ 267
========================================================================================= ========== ==========
The accompanying notes are an integral part of these financial statements.
5
OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
June 30, 2000
1. General
The accompanying unaudited consolidated condensed financial statements have
been prepared by Occidental Petroleum Corporation (Occidental) pursuant to
the rules and regulations of the Securities and Exchange Commission.
Certain information and disclosures normally included in notes to
consolidated financial statements have been condensed or omitted pursuant
to such rules and regulations, but resultant disclosures are in accordance
with generally accepted accounting principles as they apply to interim
reporting. The consolidated condensed financial statements should be read
in conjunction with the consolidated financial statements and the notes
thereto in Occidental's Annual Report on Form 10-K for the year ended
December 31, 1999 (1999 Form 10-K).
In the opinion of Occidental's management, the accompanying consolidated
condensed financial statements contain all adjustments (consisting only of
normal recurring adjustments) necessary to present fairly Occidental's
consolidated financial position as of June 30, 2000 and the consolidated
results of operations for the three and six months then ended and the
consolidated cash flows for the six months then ended. The results of
operations and cash flows for the periods ended June 30, 2000 are not
necessarily indicative of the results of operations or cash flows to be
expected for the full year.
Certain financial statements and notes for the prior year have been changed
to conform to the 2000 presentation.
Reference is made to Note 1 to the consolidated financial statements in the
1999 Form 10-K for a summary of significant accounting policies.
2. Comprehensive Income
The following table presents Occidental's comprehensive income items (in
millions):
Periods Ended June 30
-----------------------------------------------------
Three Months Six Months
------------------------- -------------------------
2000 1999 2000 1999
================================================== =========== ============ =========== ============
Net income (loss) $ 564 $ 9 $ 835 $ (61)
Other comprehensive income items
Foreign currency translation adjustments 6 (20) 10 (28)
Other (1) 1 (1) 1
----------- ------------ ----------- ------------
Other comprehensive income, net of tax 5 (19) 9 (27)
----------- ------------ ----------- ------------
Comprehensive income (loss) $ 569 $ (10) $ 844 $ (88)
=========== ============ =========== ============
6
3. Asset Acquisitions and Dispositions
Reference is made to Note 3 to the consolidated financial statements in the
1999 Form 10-K for a description of asset acquisitions and dispositions.
In June 2000, Occidental announced that it had signed a letter of intent
with Olin Corporation to combine the companies' chlor-alkali and related
businesses for contribution to a newly-formed partnership. Occidental,
through its subsidiaries, will own approximately 66 percent of the
partnership. The transaction, which is subject to regulatory approvals, is
expected to close by the fourth quarter of 2000.
On May 8, 2000, Occidental completed an agreement to sell its producing
properties in Peru to Pluspetrol. In connection with this transaction,
Occidental recorded an after-tax charge of approximately $29 million in
December 1999 to write-down the properties to their fair values.
On April 24, 2000, Occidental completed the acquisition of ARCO Long Beach
Inc. (THUMS), an oil producing property, for approximately $67 million.
On April 19, 2000, Occidental completed its acquisition of all of the
common interest in Altura Energy Ltd. (now "Occidental Permian Ltd.")
(Altura), the largest oil producer in Texas. Occidental, through its
subsidiaries, paid approximately $1.2 billion to the sellers, affiliates of
BP Amoco plc and Shell Oil Company, to acquire the common limited
partnership interest and control of the general partner which manages,
operates and controls 100 percent of the Altura assets. The partnership
borrowed approximately $2.4 billion, which has recourse only to the Altura
assets. The partnership also loaned approximately $2.0 billion to
affiliates of the sellers, evidenced by two notes, which provide credit
support to the partnership. The sellers retained a preferred limited
partnership interest of approximately $2.0 billion and are entitled to
certain distributions from the partnership. The acquisition is valued at
approximately $3.6 billion. Occidental's results of operations include the
operations of the Altura assets from the date of acquisition. Pro forma net
income for the three and six months ended June 30, 2000, including
historical Altura results as if the acquisition had occurred on January 1,
2000, would have been $573 million ($1.55 earnings per share) and $915
million ($2.48 earnings per share), respectively. Pro forma net income for
the three and six months ended June 30, 1999, including historical Altura
results as if the acquisition had occurred on January 1, 1999, would have
been income of $7 million ($.02 earnings per share) and a loss of $93
million ($.27 loss per share), respectively. Pro forma revenues would have
been $6.7 billion and $3.4 billion for the six months ended June 30, 2000
and 1999, respectively, and $3.8 billion and $1.9 billion for the three
months ended June 30, 2000 and 1999, respectively. The pro forma
calculations were made with historical operating results from Altura prior
to ownership by Occidental and give effect to certain adjustments including
increased depreciation, depletion and amortization to reflect the value
assigned to the Altura property, plant and equipment, increased interest
expense, and income tax effects. The pro forma results are not necessarily
indicative of the results of operations that would have occurred if the
acquisition had been made at the beginning of the periods presented or that
may be obtained in the future. Also, the pro forma calculations do not
reflect anticipated cost savings, synergies, changes in realized prices or
production rates and certain other adjustments that are expected to result
from the acquisition and operation of Altura.
On April 18, 2000, Occidental completed the sale of its 29.2 percent stake
in Canadian Occidental Petroleum Ltd. (CanOxy) for gross proceeds of
approximately $1.2 billion Canadian, following approval of the sale by
CanOxy stockholders. Of Occidental's 40.2 million shares of CanOxy, 20.2
million were sold to the Ontario Teachers Pension Plan Board and 20 million
to CanOxy. These sales resulted in a net pre-tax gain of approximately $493
million. In addition, Occidental and CanOxy exchanged their respective 15
percent interests in joint businesses of approximately equal value,
resulting in Occidental owning 100 percent of an oil and gas operation in
Ecuador and CanOxy owning 100 percent of sodium chlorate operations in
Canada and Louisiana.
7
4. Supplemental Cash Flow Information
Cash payments during the six months ended June 30, 2000 and 1999 included
federal, foreign and state income taxes of approximately $343 million and
$51 million, respectively. Interest paid (net of interest capitalized)
totaled approximately $241 million and $219 million for the six months
ended June 30, 2000 and 1999, respectively.
5. Cash and Cash Equivalents
Cash equivalents consist of highly liquid money-market mutual funds and
bank deposits with maturities of three months or less when purchased. Cash
equivalents totaled $43 million and $162 million at June 30, 2000, and
December 31, 1999, respectively.
6. Inventories
A portion of inventories is valued under the LIFO method. The valuation of
LIFO inventory for interim periods is based on management's estimates of
year-end inventory levels and costs. Inventories consist of the following
(in millions):
Balance at June 30, 2000 December 31, 1999
======================== ===================== =====================
Raw materials $ 61 $ 60
Materials and supplies 137 167
Work in process 3 7
Finished goods 314 294
--------- ---------
515 528
LIFO adjustment (5) (25)
--------- ---------
Total $ 510 $ 503
========= =========
7. Property, Plant and Equipment
Reference is made to the consolidated balance sheets and Note 1 thereto in
the 1999 Form 10-K for a description of investments in property, plant and
equipment.
8. Trust Preferred Securities
Reference is made to Note 12 to the consolidated financial statements in
the 1999 Form 10-K for a description of the Trust Preferred Securities. The
Trust Preferred Securities balances reflected in the consolidated financial
statements at June 30, 2000, and December 31, 1999, are net of issue costs
and also reflect amortization of a portion of the issue costs, and the
repurchase during 2000 and 1999 of 433,560 shares and 937,436 shares with
liquidation values of $10.8 million and $23.4 million, respectively.
9. Retirement Plans and Postretirement Benefits
Reference is made to Note 14 to the consolidated financial statements in
the 1999 Form 10-K for a description of the retirement plans and
postretirement benefits of Occidental and its subsidiaries.
8
10. Lawsuits, Claims, Commitments, Contingencies and Related Matters
Occidental and certain of its subsidiaries have been named as defendants or
as potentially responsible parties in a substantial number of lawsuits,
claims and proceedings, including governmental proceedings under the
Comprehensive Environmental Response, Compensation and Liability Act
(CERCLA) and corresponding state acts. These governmental proceedings seek
funding, remediation and, in some cases, compensation for alleged property
damage, punitive damages and civil penalties, aggregating substantial
amounts. Occidental is usually one of many companies in these proceedings,
and has to date been successful in sharing response costs with other
financially sound companies. Occidental has accrued reserves at the most
likely cost to be incurred in those proceedings where it is probable that
Occidental will incur remediation costs which can be reasonably estimated.
In December 1998, David Croucher and others filed a purported class action
suit in the Federal District Court in Houston, Texas on behalf of persons
claiming to have been beneficiaries of the MidCon Employee Stock Ownership
Plan (ESOP). The plaintiffs allege that each of the U.S. Trust Company of
California (the ESOP Trustee) and the MidCon ESOP Administrative Committee
breached its fiduciary duty to the plaintiffs by failing to properly value
the securities held by the ESOP, and allege that Occidental actively
participated in such conduct. The plaintiffs claim that, as a result of
this alleged breach, the ESOP participants are entitled to an additional
aggregate distribution of at least $200 million and that Occidental has
been unjustly enriched and is liable for failing to make that distribution.
During the course of its operations, Occidental is subject to audit by
taxing authorities for varying periods in various tax jurisdictions.
Occidental has certain other commitments under contracts, guarantees and
joint ventures, and certain other contingent liabilities.
It is impossible at this time to determine the ultimate liabilities that
Occidental and its subsidiaries may incur resulting from the foregoing
lawsuits, claims and proceedings, audits, commitments, contingencies and
related matters. Several of these matters may involve substantial amounts,
and if these were to be ultimately resolved unfavorably to the full amount
of their maximum potential exposure, an event not currently anticipated, it
is possible that such event could have a material adverse effect upon
Occidental's consolidated financial position or results of operations.
However, in management's opinion, after taking into account reserves, it is
unlikely that any of the foregoing matters will have a material adverse
effect upon Occidental's consolidated financial position or results of
operations.
Reference is made to Note 9 to the consolidated financial statements in the
1999 Form 10-K for information concerning Occidental's long-term purchase
obligations for certain products and services.
11. Income Taxes
The provision for taxes based on income for the 2000 and 1999 interim
periods was computed in accordance with Interpretation No. 18 of APB
Opinion No. 28 on reporting taxes for interim periods and was based on
projections of total year pre-tax income.
At December 31, 1999, Occidental had, for U.S. federal income tax return
purposes, an alternative minimum tax credit carryforward of $60 million
available to reduce future income taxes. The alternative minimum tax credit
carryforward does not expire.
12. Investments
Investments in entities, other than oil and gas exploration and production
companies, in which Occidental has a voting stock interest of at least 20
percent, but not more than 50 percent, and certain partnerships are
9
accounted for on the equity method. At June 30, 2000, Occidental's equity
investments consisted primarily of a 29.5 percent interest in Equistar
acquired in May 1998 and interests in various chemical partnerships and
joint ventures. The following table presents Occidental's proportionate
interest in the summarized financial information of its equity method
investments (in millions):
Periods Ended June 30
-----------------------------------------------------------
Three Months Six Months
--------------------------- ---------------------------
2000 1999 2000 1999
=========== =========== =========== ===========
Revenues $ 674 $ 548 $ 1,363 $ 1,052
Costs and expenses 622 533 1,278 1,045
----------- ----------- ----------- -----------
Net income $ 52 $ 15 $ 85 $ 7
=========== =========== =========== ===========
13. Industry Segments
The following table presents Occidental's interim industry segment
disclosures (in millions):
Oil and Gas Chemical Corporate Total
======================================== ============ ============ ============ ============
Six months ended June 30, 2000
Net sales $ 3,649 $ 1,987 $ -- $ 5,636
============ ============ ============ ============
Pre-tax operating profit (loss) $ 1,242 $ 187 (c) $ 191 (a)(d) $ 1,620
Income taxes (291) (10) (484)(b)(e) (785)
------------ ------------ ------------ ------------
Net income (loss) $ 951 $ 177 $ (293) $ 835
======================================== ============ ============ ============ ============
Six months ended June 30, 1999
Net sales $ 1,690 $ 1,301 $ -- $ 2,991
============ ============ ============ ============
Pre-tax operating profit (loss) $ 340 $ 50 $ (338)(a) $ 52
Income taxes (109) (5) 17 (b) (97)
Extraordinary loss, net -- -- (3) (3)
Cumulative effect of changes in
accounting principles, net -- -- (13) (13)
------------ ------------ ------------ ------------
Net income (loss) $ 231 $ 45 $ (337) $ (61)
======================================== ============ ============ ============ ============
(a) Includes unallocated net interest expense, administration expense and
other items.
(b) Includes unallocated income taxes.
(c) Includes pre-tax charge of $120 million related to the decision to
exit several chemical intermediate businesses.
(d) Includes pre-tax gain of approximately $493 million related to the
sale of the CanOxy investment.
(e) Includes income taxes of approximately $193 million related to the
sale of the CanOxy investment.
14. Subsequent Event
On July 20, 2000, Occidental announced that it had entered into agreements
with respect to two transactions with Apache Corporation ("Apache")
involving Occidental's interests in the Continental Shelf of the Gulf of
Mexico ("GOM"). In one transaction, Occidental agreed to sell its share of
future gas production from these GOM interests for approximately $280
million. In the second transaction, Occidental agreed to sell an interest
in the subsidiary that holds the GOM assets for approximately $61 million,
with an option for Apache to purchase additional interests for $44 million
over the next four years. As a result of these transactions, which are
expected to close in August 2000, and the consequent elimination of a
portion of Occidental's responsibility for abandonment liabilities,
Occidental expects to record a pre-tax gain of approximately $65 million in
the third quarter of 2000.
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Occidental reported net income for the first six months of 2000 of $835 million,
on net sales of $5.6 billion, compared with a net loss of $61 million, on net
sales of $3.0 billion, for the same period of 1999. Occidental's net income for
the second quarter of 2000 was $564 million, on net sales of $3.1 billion,
compared with net income of $9 million, on net sales of $1.6 billion, for the
same period of 1999. Basic earnings per common share were $2.27 for the first
six months of 2000, compared with a loss of $.20 per share for the same period
of 1999. Basic earnings per common share were $1.53 for the second quarter of
2000, compared with earnings per share of $.02 for the same period of 1999.
The 2000 results included an after-tax gain of approximately $300 million
related to the sale of Occidental's 29.2 percent interest in Canadian Occidental
Petroleum Ltd. (CanOxy), an after-tax charge of approximately $80 million for
the decision to exit several of Occidental's chemical intermediate businesses
and a pre-tax insurance dividend of $11 million. Earnings before special items
were $343 million and $607 million for the three and six months ended June 30,
2000, respectively, compared with earnings of $4 million and a loss of $64
million for the same periods in 1999, respectively. The increase in earnings
before special items for the three months ended June 30, 2000, compared with the
same period in 1999, reflected the impact of higher worldwide crude oil, natural
gas and chemical prices, higher production volumes and lower costs. The increase
in earnings before special items for the six months ended June 30, 2000,
compared with the same period in 1999, reflected higher worldwide oil, natural
gas and chemical prices and lower costs. The 1999 second quarter earnings
included an after-tax extraordinary loss of $3 million related to the early
extinguishment of debt and a second quarter gain of $12 million related to the
sale of a chemical plant by an equity affiliate. The 1999 results also included
a pre-tax insurance dividend of $18 million in the first quarter and an
after-tax charge of $13 million, reflecting the cumulative effect of adopting
accounting principles changes mandated by the American Institute of Certified
Public Accountants and the Emerging Issues Task Force of the Financial
Accounting Standards Board.
The increase in net sales for the three and six months ended June 30, 2000,
compared with the same periods in 1999, primarily reflected higher crude oil,
natural gas and chemical prices, higher oil and gas trading revenues and higher
domestic oil production as a result of acquisitions, partially offset by lower
international production.
Interest, dividends and other income for 2000 included interest income of $30
million on notes receivable from Altura partners. Gains on disposition of assets
for 2000 included a pre-tax gain of $493 million on the sale of the investment
in CanOxy. Selling, general and administrative and other operating expenses for
2000 included a pre-tax charge of $120 million to exit several chemical
intermediate businesses. Minority interest includes distributions on the Trust
Preferred Securities and the minority interest in the net income of subsidiaries
and partnerships and, for 2000, also included a $30 million preferred
distribution to the Altura partners. The provision for income taxes increased
for the three and six months ended June 30, 2000, compared with the same periods
in 1999, primarily due to higher earnings and asset sales.
11
The following table sets forth the sales and earnings of each operating division
and corporate items (in millions):
Periods Ended June 30
---------------------------------------------------
Three Months Six Months
------------------------ -----------------------
2000 1999 2000 1999
============================================================= ========== ========== ========== ==========
DIVISIONAL NET SALES
Oil and Gas $ 2,122 $ 944 $ 3,649 $ 1,690
Chemical 1,006 703 1,987 1,301
---------- ---------- ---------- ----------
NET SALES $ 3,128 $ 1,647 $ 5,636 $ 2,991
========== ========== ========== ==========
DIVISIONAL EARNINGS
Oil and Gas $ 557 $ 166 $ 951 $ 231
Chemical 34 33 177 45
---------- ---------- ---------- ----------
591 199 1,128 276
UNALLOCATED CORPORATE ITEMS
Interest expense, net (104) (123) (203) (239)
Permian preferred distributions (30) -- (30) --
Gain on sale of CanOxy investment 493 -- 493 --
Income taxes, administration and other (386) (64) (553) (82)
---------- ---------- ---------- ----------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM AND EFFECT OF
CHANGES IN ACCOUNTING PRINCIPLES 564 12 835 (45)
Extraordinary loss, net -- (3) -- (3)
Cumulative effect of changes in accounting
principles, net -- -- -- (13)
---------- ---------- ---------- ----------
NET INCOME (LOSS) $ 564 $ 9 $ 835 $ (61)
========== ========== ========== ==========
EARNINGS BEFORE SPECIAL ITEMS (a) $ 343 $ 4 $ 607 $ (64)
============================================================= ========== ========== ========== ==========
(a) Earnings before special items reflect adjustments to net income (loss) to
exclude the after-tax effect of certain infrequent transactions that may
affect comparability between periods. These transactions are discussed in
this Management's Discussion and Analysis of Financial Condition and
Results of Operations and are shown in the table below. Management believes
the presentation of earnings before special items provides a meaningful
comparison of earnings between periods to the readers of the consolidated
financial statements. Earnings before special items is not considered to be
an alternative to operating income in accordance with generally accepted
accounting principles.
The following table sets forth the special items for each operating division and
corporate (if applicable):
Periods Ended June 30
--------------------------------------------------
Three Months Six Months
Benefit (Charge) ----------------------- -----------------------
(in millions) 2000 1999 2000 1999
============================================================= ========== ========== ========== ==========
CHEMICAL
Write-down of chemical intermediate businesses $ (120) $ -- $ (120) $ --
Gain on sale of chemical plant by Equistar -- 12 -- 12
- ------------------------------------------------------------- ---------- ---------- ---------- ----------
CORPORATE
Gain on sale of CanOxy investment 493 -- 493 --
Insurance dividend -- -- 11 18
Changes in accounting principles, net * -- -- -- (13)
Extraordinary loss on debt redemption, net * -- (3) -- (3)
============================================================= ========== ========== ========== ==========
* These amounts are shown after-tax.
12
Oil and gas earnings for the first six months of 2000 were $951 million,
compared with $231 million for the same period of 1999. Oil and gas earnings for
the second quarter of 2000 were $557 million, compared with $166 million for the
same period of 1999. The increase in earnings for the three months ended June
30, 2000, compared with the same period in 1999, reflected the impact of higher
worldwide crude oil and natural gas prices, higher production volumes and lower
costs. The increase in earnings for the six months ended June 30, 2000,
compared with the same period in 1999, reflected the impact of higher worldwide
crude oil and natural gas prices and lower costs. The increase in revenues for
the three and six months ended June 30, 2000, compared with the same periods in
1999, reflected the impact of higher worldwide crude oil and natural gas prices
and higher oil and gas trading activity. Approximately 44 percent and 38 percent
of oil and gas net sales were attributable to oil and gas trading activities in
the first six months of 2000 and 1999, respectively. The results of oil and gas
trading activity were not significant. Oil and gas prices are sensitive to
complex factors, which are outside the control of Occidental, therefore, we are
unable to predict with certainty the direction, magnitude or impact of future
trends in sales prices of oil and gas. Occidental will continue to implement its
strategy of focusing on competitive core assets with economies of scale to
further reduce both operating and overhead costs. The strong mix of long-lived
oil and gas assets that we have acquired through acquisitions and asset swaps
should continue to shape Occidental's performance in the future.
Chemical earnings for the first six months of 2000 were $177 million, compared
with $45 million for the same period of 1999. Chemical earnings before special
items were $297 million for the first six months of 2000, compared with $33
million for the first six months of 1999. Chemical earnings for the second
quarter of 2000 were $34 million, compared with $33 million for the same period
of 1999. Chemical earnings before special items were $154 million for the second
quarter of 2000, compared with $21 million for the second quarter of 1999. The
2000 results include a $120 million pre-tax charge resulting from the decision
to exit several chemical intermediate businesses. The 1999 results included a
second quarter gain of $12 million related to the sale of a chemical plant by an
equity affiliate. The increase in 2000 earnings before special items is due to
higher prices and sales volumes for polyvinyl chloride resins (PVC), ethylene
dichloride, vinyl chloride monomer and chlorine. Partially offsetting these
increases were higher raw material and feedstock costs. Occidental will continue
to implement its strategy of focusing on competitive core assets and developing
economies of scale and cost reductions through strategic alliances. Occidental's
strong chemical asset mix should continue to result in improved efficiencies and
reductions in overhead costs despite the higher raw material costs that were
absorbed in 2000. Occidental expects a moderate decrease in demand for PVC
during the second half of 2000 which in turn will temper demand for chlorine and
result in a tightening in the caustic soda markets.
Divisional earnings include credits in lieu of U.S. federal income taxes. In the
first six months of 2000 and 1999, divisional earnings benefited by $11 million
and $41 million, respectively, from credits allocated. This included credits of
$3 million and $8 million at oil and gas and chemical, respectively, in the
first six months of 2000 and credits of $33 million and $8 million at oil and
gas and chemical, respectively, for the first six months of 1999. The higher
1999 amounts related to the transactions with Unocal which is discussed below
under Financial Condition, Liquidity and Capital Resources.
Occidental and certain of its subsidiaries have been named as defendants or as
potentially responsible parties in a substantial number of lawsuits, claims and
proceedings, including governmental proceedings under the Comprehensive
Environmental Response, Compensation and Liability Act (CERCLA) and
corresponding state acts. These governmental proceedings seek funding,
remediation and, in some cases, compensation for alleged property damage,
punitive damages and civil penalties, aggregating substantial amounts.
Occidental is usually one of many companies in these proceedings, and has to
date been successful in sharing response costs with other financially sound
companies. Occidental has accrued reserves at the most likely cost to be
incurred in those proceedings where it is probable that Occidental will incur
remediation costs which can be reasonably estimated.
During the course of its operations, Occidental is subject to audit by taxing
authorities for varying periods in various tax jurisdictions. Occidental has
certain other commitments under contracts, guarantees and joint ventures, and
certain other contingent liabilities.
It is impossible at this time to determine the ultimate liabilities that
Occidental and its subsidiaries may incur resulting from the foregoing lawsuits,
claims and proceedings, audits, commitments, contingencies and related matters.
Several of these matters may involve substantial amounts, and if these were to
be ultimately resolved
13
unfavorably to the full amount of their maximum potential exposure, an event not
currently anticipated, it is possible that such event could have a material
adverse effect upon Occidental's consolidated financial position or results of
operations. However, in management's opinion, after taking into account
reserves, it is unlikely that any of the foregoing matters will have a material
adverse effect upon Occidental's consolidated financial position or results of
operations.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Occidental's net cash provided by operating activities from continuing
operations was $922 million for the first six months of 2000, compared with net
cash provided of $192 million for the same period of 1999. The 2000 amount is
primarily attributed to higher net income before special items.
Occidental's net cash used by investing activities was $3.1 billion for the
first six months of 2000, compared with net cash provided of $1.1 billion for
the same period of 1999. The 2000 amount primarily reflected the $3.6 billion
cost of the Altura acquisition partially offset by pre-tax asset sale proceeds
mainly from the sale of Occidental's 29.2 percent interest in CanOxy for
approximately $800 million. The 1999 amount included the proceeds from the $1.4
billion note receivable received in connection with the sale of MidCon,
Occidental's natural gas pipeline subsidiary. The 1999 amount also reflected net
cash used of $113 million in connection with the formation of a PVC resin
partnership. Capital expenditures for the first six months of 2000 were $333
million, including $287 million in oil and gas and $44 million in chemical.
Capital expenditures for the first six months of 1999 were $263 million,
including $205 million in oil and gas and $55 million in chemical.
Financing activities provided net cash of $2.1 billion in the first six months
of 2000, compared with cash used of $1.1 billion for the same period of 1999.
The 2000 amount mainly reflects proceeds of $2.4 billion from non-recourse debt
and cash dividends paid of $184 million. The 1999 amount reflected the use of
the proceeds from the $1.4 billion note receivable to repay outstanding debt and
also reflected the payment of dividends of $181 million.
On July 20, 2000, Occidental announced that it had entered into agreements with
respect to two transactions with Apache Corporation ("Apache") involving its
interests in the Continental Shelf of the Gulf of Mexico ("GOM"). In one
transaction, Occidental agreed to sell its share of gas production from these
GOM interests for approximately $280 million. In the second transaction,
Occidental agreed to sell an interest in the subsidiary that holds the GOM
assets for approximately $61 million, with an option for Apache to purchase
additional interests for $44 million over the next four years. As a result of
these transactions, which are expected to close in August 2000, and the
consequent elimination of a portion of Occidental's responsibility for
abandonment liabilities, Occidental expects to record a pre-tax gain of
approximately $65 million in the third quarter of 2000.
In June 2000, Occidental announced that it had signed a letter of intent with
Olin Corporation to combine the companies' chlor-alkali and related businesses
for contribution to a newly-formed partnership. Occidental, through its
subsidiaries, will own approximately 66 percent of the partnership. The
transaction, which is subject to regulatory approvals, is expected to close by
the fourth quarter of 2000. The partnership is expected to have annual sales of
approximately $1.2 billion and to achieve annual cost savings of $60 million
from operating efficiencies and consolidation of administrative functions.
On May 8, 2000, Occidental completed an agreement to sell its producing
properties in Peru to Pluspetrol. In connection with this transaction,
Occidental recorded an after-tax charge of approximately $29 million in December
1999 to write-down the properties to their fair values.
On April 24, 2000, Occidental completed the acquisition of ARCO Long Beach Inc.
(THUMS), an oil producing property, for approximately $67 million. The
acquisition adds approximately 95 million barrels of net oil reserves and
approximately 25,000 barrels per day of net oil production to Occidental's
growing California operations.
On April 19, 2000, Occidental completed its acquisition of all of the common
interest in Altura Energy Ltd. (now "Occidental Permian Ltd.") (Altura), the
largest oil producer in Texas. Occidental, through its subsidiaries, paid
approximately $1.2 billion to the sellers, affiliates of BP Amoco plc and Shell
Oil Company, to acquire the common limited partnership interest and control of
the general partner which manages, operates and controls 100 percent of
14
the Altura assets. The partnership borrowed approximately $2.4 billion, which
has recourse only to the Altura assets. The partnership also loaned
approximately $2.0 billion to affiliates of the sellers, evidenced by two notes,
which provide credit support to the partnership. The sellers retained a
preferred limited partnership interest of approximately $2.0 billion and are
entitled to certain distributions from the partnership. As a result of the
acquisition, which is valued at approximately $3.6 billion, Occidental's
worldwide oil and gas production is expected to increase by approximately
135,000 barrels per day of oil equivalent and Occidental's worldwide production
is expected to increase by 12 percent to an average of approximately 475,000
barrels of oil equivalent per day this year versus 425,000 barrels per day in
1999. Proved reserves at Altura were 850 million barrels of oil equivalent at
December 31, 1999. This acquisition will bring Occidental's proved reserves to
approximately 2.2 billion barrels of oil equivalent.
On April 18, 2000, Occidental completed the sale of its 29.2 percent stake in
Canadian Occidental Petroleum Ltd. (CanOxy) for gross proceeds of approximately
$1.2 billion Canadian, following approval of the sale by CanOxy stockholders. Of
Occidental's 40.2 million shares of CanOxy, 20.2 million were sold to the
Ontario Teachers Pension Plan Board and 20 million to CanOxy. In addition,
Occidental and CanOxy exchanged their respective 15 percent interests in joint
businesses of approximately equal value, resulting in Occidental owning 100
percent of an oil and gas operation in Ecuador and CanOxy owning 100 percent of
sodium chlorate operations in Canada and Louisiana. After-tax proceeds from the
CanOxy disposition together with tax benefits from the disposition of the Peru
producing properties totaled approximately $700 million and were applied to the
acquisition of the Altura and THUMS acquisition.
In December 1999, Occidental and EOG Resources, Inc. (EOG) exchanged certain oil
and gas assets. Occidental received producing properties and exploration acreage
in its expanding California asset base, as well as producing properties in the
western Gulf of Mexico near existing operations in exchange for oil and gas
production and reserves in east Texas. Occidental also farmed out Oklahoma
panhandle properties to EOG and retained a carried interest.
In the third quarter of 1999, pursuant to a series of transactions, Occidental
indirectly acquired the remaining ownership of INDSPEC Chemical Corporation
(INDSPEC) through the issuance of approximately 3.2 million shares of Occidental
common stock at an estimated value of approximately $68 million and the
assumption of approximately $80 million of bank debt. As a result of the
transactions, Occidental owns 100 percent of the stock of INDSPEC.
In the third quarter of 1999, Occidental acquired Unocal International
Corporation's (UNOCAL) oil and gas interests in Yemen and UNOCAL acquired
Occidental's properties in Bangladesh.
Effective April 30, 1999, Occidental and The Geon Company (Geon) formed two
partnerships. Occidental has a 76 percent interest in the PVC commodity resin
partnership, OxyVinyls, LP (OxyVinyls), which is the larger of the partnerships,
and a 10 percent interest in a PVC powder compounding partnership. OxyVinyls
also has entered into long-term agreements to supply PVC resin to Geon and VCM
to Occidental and Geon. In addition, as part of the transaction, Occidental sold
its pellet compounding plant in Pasadena, Texas and its vinyl film assets in
Burlington, New Jersey to Geon.
On June 1, 2000, Occidental redeemed all of its outstanding 11-1/8 percent
senior debentures due June 1, 2019, at a redemption price of 100 percent of the
principal amount thereof. The outstanding aggregate principal amount of the
debentures, which were issued on May 15, 1989, was $75 million.
On June 30, 1999, Occidental established a program under which Occidental may
offer, from time to time, up to $1 billion aggregate initial offering price of
its Medium-Term Senior Notes, Series C and its Medium-Term Subordinated Notes,
Series A.
On June 1, 1999, Occidental called for redemption $68.7 million of its 11-1/8
percent senior debentures due June 1, 2019, at a redemption price of 105.563
percent of the principal amount thereof. Occidental recorded an after-tax
extraordinary loss of $3 million in the second quarter of 1999 related to the
redemption.
15
In February 1999, Occidental issued $450 million of 7.65 percent senior notes
due 2006 and $350 million of 8.45 percent senior notes due 2029 for net proceeds
of approximately $792 million.
In January 1999, a subsidiary of Occidental issued $525 million of 8.16 percent
Trust Preferred Securities due in 2039, for net proceeds of $508 million. The
net proceeds were used to repay commercial paper. The Trust Preferred Securities
balances reflected in the consolidated financial statements at June 30, 2000 and
December 31, 1999 are net of issue costs and also reflect amortization of a
portion of the issue costs, and the repurchase during 2000 and 1999 of 433,560
shares and 937,436 shares, respectively, with liquidation values of $10.8
million and $23.4 million, respectively.
Occidental expects to have sufficient cash in 2000 for its operating needs,
capital expenditure requirements, dividend payments and debt repayments.
Occidental currently expects to spend, in total, approximately $1.0 billion on
its 2000 capital spending program, of which approximately $800 million has been
allocated to the oil and gas division and approximately $200 million has been
allocated to the chemical division. Available but unused lines of committed bank
credit totaled approximately $1.8 billion at June 30, 2000, compared with $2.1
billion at December 31, 1999.
Occidental has a projected target of reducing total debt by $2.0 billion by the
end of 2000. In April, total debt, which includes the Trust Preferred Securities
and the obligation under natural gas delivery commitment but excludes
non-recourse debt, was $6.6 billion, mainly resulting from $1.2 billion of
short-term borrowings to finance the cash cost of the Altura acquisition. Since
April, Occidental has reduced total debt by approximately $1.2 billion, with
$700 million generated from asset sales and $500 million from internal cash
flow. Additionally, Occidental reduced non-recourse debt related to Altura by
$125 million. Occidental plans to meet this debt reduction target through
internal cash flow and further asset sales in the second half of the year.
ENVIRONMENTAL MATTERS
Occidental's operations in the United States are subject to stringent federal,
state and local laws and regulations relating to improving or maintaining the
quality of the environment. Foreign operations also are subject to varied
environmental protection laws. Costs associated with environmental compliance
have increased over time and may continue to rise in the future.
The laws which require or address environmental remediation may apply
retroactively to previous waste disposal practices. And, in many cases, the laws
apply regardless of fault, legality of the original activities or ownership or
control of sites. Occidental is currently participating in environmental
assessments and cleanups under these laws at federal Superfund sites, comparable
state sites and other remediation sites, including Occidental facilities and
previously owned sites.
Occidental does not consider the number of Superfund and comparable state sites
at which it has been notified that it has been identified as being involved to
be a relevant measure of exposure. Although the liability of a potentially
responsible party (PRP), and in many cases its equivalent under state law, may
be joint and several, Occidental is usually one of many companies cited as a PRP
at these sites and has, to date, been successful in sharing cleanup costs with
other financially sound companies.
As of June 30, 2000, Occidental had been notified by the Environmental
Protection Agency (EPA) or equivalent state agencies or otherwise had become
aware that it had been identified as being involved at 126 Superfund or
comparable state sites. (This number does not include those sites where
Occidental has been successful in resolving its involvement.) The 126 sites
include 34 former Diamond Shamrock Chemical sites as to which Maxus Energy
Corporation has retained all liability. Of the remaining 92 sites, Occidental
has denied involvement at 10 sites and has yet to determine involvement in 20
sites. With respect to the remaining 62 of these sites, Occidental is in various
stages of evaluation, and the extent of liability retained by Maxus Energy
Corporation is disputed at 2 of these sites. For 54 of these sites, where
environmental remediation efforts are probable and the costs can be reasonably
estimated, Occidental has accrued reserves at the most likely cost to be
incurred. The 54 sites include 11 sites as to which present information
indicates that it is probable that Occidental's aggregate exposure is
immaterial. In determining the reserves, Occidental uses the most current
information available, including similar past
16
experiences, available technology, regulations in effect, the timing of
remediation and cost-sharing arrangements. For the remaining 8 of the 62 sites
being evaluated, Occidental does not have sufficient information to determine a
range of liability, but Occidental does have sufficient information on which to
base the opinion expressed above under the caption "Results of Operations."
SAFE HARBOR STATEMENT REGARDING OUTLOOK AND FORWARD-LOOKING INFORMATION
Portions of this report contain forward-looking statements and involve risks and
uncertainties that could significantly affect expected results of operations,
liquidity and cash flows. Factors that could cause results to differ materially
include, but are not limited to: global commodity pricing fluctuations;
competitive pricing pressures; higher than expected costs including feedstocks;
the supply/demand considerations for Occidental's products; any general economic
recession domestically or internationally; regulatory uncertainties; and not
successfully completing any development of new fields, expansion, capital
expenditure, efficiency improvement, acquisition or disposition. Forward-looking
statements are generally accompanied by words such as "estimate", "project",
"predict", "believes" or "expect", that convey the uncertainty of future events
or outcomes. Occidental undertakes no obligation to publicly update or revise
any forward-looking statements, whether as a result of new information or
otherwise. In light of these risks, uncertainties and assumptions, the
forward-looking events discussed might not occur.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
For the period ended June 30, 2000 there were no material changes in the
information provided under Item 305 of Regulation S-K included under the caption
"Hedging Activities" as part of Occidental's Management's Discussion and
Analysis section of Occidental's 1999 Annual Report on Form 10-K.
17
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
GENERAL
There is incorporated by reference herein the information regarding legal
proceedings in Note 10 to the consolidated condensed financial statements in
Part I hereof.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
11 Statement regarding the computation of earnings per share
for the three and six months ended June 30, 2000 and 1999
12 Statement regarding the computation of total enterprise
ratios of earnings to fixed charges for the six months ended
June 30, 2000 and 1999 and the five years ended December 31,
1999
27 Financial data schedule for the six-month period ended June
30, 2000 (included only in the copy of this report filed
electronically with the Securities and Exchange Commission)
(b) Reports on Form 8-K
During the quarter ended June 30, 2000, Occidental filed the
following Current Reports on Form 8-K:
1. Current Report on Form 8-K dated April 19, 2000 (date of
earliest event reported), filed on April 20, 2000, for the
purpose of reporting, under Item 5, Occidental's results of
operations for the first quarter ended March 31, 2000.
2. Current Report on Form 8-K dated March 7, 2000 (date of
earliest event reported), filed on May 12, 2000, for the
purpose of reporting, under Item 7, certain financial
statements and pro forma financial information.
3. Current Report on Form 8-K dated June 16, 2000 (date of
earliest event reported), filed on June 19, 2000, for the
purpose of reporting, under Item 5, Occidental's intention
to exit several of its chemical intermediate businesses.
From June 30, 2000 to the date hereof, Occidental filed the
following Current Reports on Form 8-K:
4. Current Report on Form 8-K dated June 28, 2000 (date of
earliest event reported), filed on July 13, 2000, for the
purpose of reporting, under Item 5, the signing of a letter
of intent with Olin Corporation to form a partnership.
5. Current Report on Form 8-K dated July 19, 2000 (date of
earliest event reported), filed on July 20, 2000, for the
purpose of reporting, under Item 5, Occidental's results of
operations for the quarter ended June 30, 2000 and
Occidental's agreement to monetize its Gulf of Mexico
assets.
18
SIGNATURES
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 thereunto duly authorized.
OCCIDENTAL PETROLEUM CORPORATION
DATE: August 10, 2000 S. P. Dominick, Jr.
----------------------------------------
S. P. Dominick, Jr., Vice President and
Controller (Chief Accounting and Duly
Authorized Officer)
19
EXHIBIT INDEX
EXHIBITS
- --------
11 Statement regarding the computation of earnings per share for the
three and six months ended June 30, 2000 and 1999
12 Statement regarding the computation of total enterprise ratios of
earnings to fixed charges for the six months ended June 30, 2000 and
1999 and the five years ended December 31, 1999
27 Financial data schedule for the six-month period ended June 30, 2000
(included only in the copy of this report filed electronically with
the Securities and Exchange Commission)
EXHIBIT 11
OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(Amounts in millions, except per-share amounts)
Three Months Ended Six Months Ended
June 30 June 30
--------------------------- ---------------------------
2000 1999 2000 1999
- ------------------------------------------------------- ------------ ------------ ------------ ------------
BASIC EARNINGS PER SHARE
Income (loss) before extraordinary item and effect
of changes in accounting principles $ 564 $ 12 $ 835 $ (45)
Effect of repurchase of Trust Preferred Securities -- -- 1 --
Preferred stock dividends -- (3) -- (7)
------------ ------------ ------------ ------------
Earnings (loss) before extraordinary item and effect
of changes in accounting principles applicable
to common stock 564 9 836 (52)
Extraordinary loss, net -- (3) -- (3)
Cumulative effect of changes in
accounting principles, net -- -- -- (13)
------------ ------------ ------------ ------------
Earnings (loss) applicable to common stock $ 564 $ 6 $ 836 $ (68)
============ ============ ============ ============
Weighted average common shares outstanding 368.8 348.4 368.5 348.1
============ ============ ============ ============
Basic earnings per share
Income (loss) before extraordinary item and
effect of changes in accounting principles $ 1.53 $ .03 $ 2.27 $ (.15)
Extraordinary loss, net -- (.01) -- (.01)
Cumulative effect of changes in
accounting principles, net -- -- -- (.04)
------------ ------------ ------------ ------------
Basic earnings (loss) per common share $ 1.53 $ .02 $ 2.27 $ (.20)
============ ============ ============ ============
DILUTED EARNINGS PER SHARE
Earnings (loss) before extraordinary item and effect
of changes in accounting principles applicable
to common stock $ 564 $ 9 $ 836 $ (52)
Extraordinary loss, net -- (3) -- (3)
Cumulative effect of changes in
accounting principles, net -- -- -- (13)
------------ ------------ ------------ ------------
Earnings (loss) applicable to common stock $ 564 $ 6 $ 836 $ (68)
============ ============ ============ ============
Weighted average common shares outstanding 368.8 348.4 368.5 348.1
Dilutive effect of exercise of options outstanding .3 .1 .2 --
------------ ------------ ------------ ------------
369.1 348.5 368.7 348.1
============ ============ ============ ============
Diluted earnings per share
Income (loss) before extraordinary item and
effect of changes in accounting principles $ 1.53 $ .03 $ 2.27 $ (.15)
Extraordinary loss, net -- (.01) -- (.01)
Cumulative effect of changes in
accounting principles, net -- -- -- (.04)
------------ ------------ ------------ ------------
Diluted earnings (loss) per common share $ 1.53 $ .02 $ 2.27 $ (.20)
======================================================= ============ ============ ============ ============
EXHIBIT 11 (CONTINUED)
OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(Amounts in millions, except per-share amounts)
The following items were not included in the computation of diluted earnings per
share because their effect was antidilutive:
Three Months Ended Six Months Ended
June 30 June 30
------------------------------------------- -------------------------------------------
2000 1999 2000 1999
-------------------- -------------------- -------------------- --------------------
STOCK OPTIONS
Number of shares 4.2 3.3 4.6 4.4
Price range per share $23.125 -- $29.438 $21.250-- $29.625 $21.250-- $29.438 $17.750-- $29.625
Expiration range 8/18/00 --7/08/08 8/20/99-- 4/29/08 8/18/00-- 4/29/08 8/20/99-- 4/29/08
CONVERTIBLE PREFERRED
STOCK $3.00
Number of shares -- 11.5 -- 11.5
Dividends paid -- $3 -- $7
- --------------------------- -------------------- -------------------- -------------------- --------------------
EXHIBIT 12
OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
COMPUTATION OF TOTAL ENTERPRISE RATIOS OF EARNINGS TO FIXED CHARGES
(Amounts in millions, except ratios)
Six Months Ended
June 30 Year Ended December 31
-------------------- -----------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
- ---------------------------------------- --------- --------- --------- --------- --------- --------- ---------
Income (loss) from continuing
operations(a) $ 921 $ 17 $ 699 $ 400 $ 245 $ 486 $ 325
--------- --------- --------- --------- --------- --------- ---------
Add:
Provision (credit) for taxes on
income (other than foreign
and gas taxes) 482 16 306 204 47 99 155
Interest and debt expense(b) 258 263 515 576 446 492 591
Portion of lease rentals
representative of the interest
factor 3 17 31 36 39 38 43
--------- --------- --------- --------- --------- --------- ---------
743 296 852 816 532 629 789
--------- --------- --------- --------- --------- --------- ---------
Earnings before fixed charges $ 1,664 $ 313 $ 1,551 $ 1,216 $ 777 $ 1,115 $ 1,114
========= ========= ========= ========= ========= ========= =========
Fixed charges
Interest and debt expense
including capitalized
interest(b) $ 258 $ 268 $ 522 $ 594 $ 462 $ 499 $ 595
Portion of lease rentals
representative of the interest
factor 3 17 31 36 39 38 43
--------- --------- --------- --------- --------- --------- ---------
Total fixed charges $ 261 $ 285 $ 553 $ 630 $ 501 $ 537 $ 638
========= ========= ========= ========= ========= ========= =========
Ratio of earnings to fixed charges 6.38 1.10 2.80 1.93 1.55 2.08 1.75
- ---------------------------------------- ========= ========= ========= ========= ========= ========= =========
(a) Includes (1) minority interest in net income of majority-owned subsidiaries
and partnerships having fixed charges and (2) income from
less-than-50-percent-owned equity investments adjusted to reflect only
dividends received.
(b) Includes proportionate share of interest and debt expense of
50-percent-owned equity investments.
5
1,000,000
6-MOS
DEC-31-1999
JUN-30-2000
97
0
916
24
510
1,979
20,361
6,814
19,556
2,277
6,687
0
0
74
4,128
19,556
5,636
6,316
3,897
3,897
21
0
247
1,535
785
835
0
0
0
835
2.27
2.27
