SEC Filing | Occidental Petroleum Corporation

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oxy-20220331

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

☐ 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
incorporation or organization)

(I.R.S. Employer
Identification No.)

5 Greenway Plaza, Suite 110

Houston,

Texas

77046

(Address of principal executive offices) (Zip Code)

(713) 215-7000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.20 par value	OXY	New York Stock Exchange
Warrants to Purchase Common Stock, $0.20 par value	OXY WS	New York Stock Exchange

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.

þ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

þ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer þ Accelerated Filer ☐ Non-Accelerated Filer ☐

Smaller Reporting Company ☐ Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

☐ Yes þ 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 as of March 31, 2022

Common Stock, $0.20 par value

937,190,982


TABLE OF CONTENTS		PAGE
Part I	Financial Information
Item 1.	Financial Statements (unaudited)
	A bbreviations U sed W ithi n T his D ocument	2
	Consolidated Condensed Balance Sheets — March 31, 2022 and December 31, 2021	3
	Consolidated Condensed Statements of Operations — Three months ended March 31, 2022 and 2021	5
	Consolidated Condensed Statements of Comprehensive Income (Loss) — Three months ended March 31, 2022 and 2021	6
	Consolidated Condensed Statements of Cash Flows — Three months ended March 31, 2022 and 2021	7
	Consolidated Condensed Statements of Equity — Three months ended March 31, 2022 and 2021	8
	Notes to Consolidated Condensed Financial Statements
	Note 1—General	9
	Note 2 —Revenue	10
	Note 3 —Inventories	11
	Note 4—Divestitures and Other Transactions	12
	Note 5 —Long-Term Debt	12
	Note 6 —Derivatives	12
	Note 7 —Income Taxes	15
	Note 8 —Retirement and Postretirement Benefit Plans	16
	Note 9 —Environmental Liabilities and Expenditures	16
	Note 10 —Lawsuits, Claims, Commitments and Contingencies	18
	Note 11—Earnings per Share and Stockholders' Equity	19
	Note 12 —Segments	20
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
	Cautionary Statement Regarding Forward-Looking Statements	22
	Current Business Outlook	23
	Consolidated Results of Operations	24
	Segment Results of Operations and Items Affecting Comparability	26
	Income Taxes	31
	Liquidity and Capital Resources	31
	Environmental Liabilities and Expenditures	32
	Lawsuits, Claims, Commitments and Contingencies	32
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32
Item 4.	Controls and Procedures	32
Part II	Other Information
Item 1.	Legal Proceedings	33
Item 1A.	Risk Factors	33
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33
Item 6.	Exhibits	33

ABBREVIATIONS USED WITHIN THIS DOCUMENT


$/Bbl			price per barrel
Andes			Andes Petroleum Ecuador Ltd.
AOC			Administrative Order on Consent
Bcf			billions of cubic feet
Boe			barrels of oil equivalent
CERCLA			Comprehensive Environmental Response, Compensation, and Liability Act
CO2			carbon dioxide
DD&A			depreciation, depletion and amortization
EPA			Environmental Protection Agency
LIFO			last in first out
Maxus			Maxus Energy Corporation
Mbbl			thousands of barrels
Mboe			thousands of barrels equivalent
Mboe/d			thousands of barrels equivalent per day
Mcf			thousand cubic feet
MMbbl			millions of barrels
MMcf			millions of cubic feet
NGL			natural gas liquids
NPL			National Priorities List
Occidental			Occidental Petroleum Corporation, a Delaware corporation and one or more entities in which it owns a controlling interest (subsidiaries)
OEPC			Occidental Exploration and Production Company
OPEC			Organization of the Petroleum Exporting Countries
OxyChem			Occidental Chemical Corporation
OXY USA			OXY USA Inc.
RCF			revolving credit facility
Repsol			Repsol, S.A.
ROD			Record of Decision
WES			Western Midstream Partners, LP
WTI			West Texas Intermediate
YPF			YPF S.A.
Zero Coupons			Zero Coupon senior notes due 2036
2021 Form 10-K			Occidental’s Annual Report on Form 10-K for the year ended December 31, 2021

PART I FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)


Consolidated Condensed Balance Sheets			Occidental Petroleum Corporation and Subsidiaries


millions	March 31, 2022		December 31, 2021

ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	1,909	$	2,764
Trade receivables, net	5,434		4,208
Inventories	1,406		1,846
Assets held for sale	—		72
Other current assets	1,309		1,321
Total current assets	10,058		10,211

INVESTMENTS IN UNCONSOLIDATED ENTITIES	3,015		2,938

PROPERTY, PLANT AND EQUIPMENT
Oil and gas	101,511		101,251
Chemical	7,588		7,571
Midstream and marketing	7,483		8,371
Corporate	960		964
Gross property, plant and equipment	117,542		118,157
Accumulated depreciation, depletion and amortization	(58,313)		(58,227)
Net property, plant and equipment	59,229		59,930

OPERATING LEASE ASSETS	689		726

LONG-TERM RECEIVABLES AND OTHER ASSETS, NET	1,231		1,231

TOTAL ASSETS	$	74,222	$	75,036

The accompanying notes are an integral part of these Consolidated Condensed Financial Statements.


Consolidated Condensed Balance Sheets			Occidental Petroleum Corporation and Subsidiaries


millions, except share and per-share amounts	March 31, 2022		December 31, 2021

LIABILITIES AND EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt (a)	$	507	$	186
Current operating lease liabilities	173		186
Accounts payable	4,664		3,899
Accrued liabilities	3,356		4,046
Liabilities of assets held for sale	—		7
Total current liabilities	8,700		8,324

LONG-TERM DEBT, NET
Long-term debt, net (b)	25,865		29,431

DEFERRED CREDITS AND OTHER LIABILITIES
Deferred income taxes, net	4,806		7,039
Asset retirement obligations	3,634		3,687
Pension and postretirement obligations	1,541		1,540
Environmental remediation liabilities	933		944
Operating lease liabilities	558		585
Other	3,278		3,159
Total deferred credits and other liabilities	14,750		16,954

STOCKHOLDERS' EQUITY
Preferred stock, at $1.00 per share par value (100,000 shares as of March 31, 2022 and December 31, 2021)	9,762		9,762
Common stock, at $0.20 per share par value, authorized shares: 1.5 billion, issued shares: 2022 — 1,087,270,122 shares and 2021 — 1,083,423,094 shares	217		217
Treasury stock: 2022 — 150,079,140 shares and 2021 — 149,348,394 shares	(10,709)		(10,673)
Additional paid-in capital	16,785		16,749
Retained earnings	9,032		4,480
Accumulated other comprehensive loss	(180)		(208)
Total stockholders' equity	24,907		20,327
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	74,222	$	75,036

(a) Included $99 million and $85 million of current finance lease liabilities as of March 31, 2022 and December 31, 2021, respectively.

(b) Included $540 million and $504 million of finance lease liabilities as of March 31, 2022 and December 31, 2021, respectively.

The accompanying notes are an integral part of these Consolidated Condensed Financial Statements.


Consolidated Condensed Statements of Operations			Occidental Petroleum Corporation and Subsidiaries


	Three months ended March 31,
millions, except per-share amounts	2022		2021

REVENUES AND OTHER INCOME
Net sales	$	8,349	$	5,293
Interest, dividends and other income	49		75
Gains on sales of assets and equity investments, net	135		111
Total	8,533		5,479

COSTS AND OTHER DEDUCTIONS
Oil and gas operating expense	864		776
Transportation and gathering expense	347		329
Chemical and midstream cost of sales	818		594
Purchased commodities	811		558
Selling, general and administrative expenses	196		166
Other operating and non-operating expense	299		258
Taxes other than on income	335		210
Depreciation, depletion and amortization	1,643		2,194
Asset impairments and other charges	—		135
Anadarko acquisition-related costs	65		41
Exploration expense	25		28
Interest and debt expense, net	371		395
Total	5,774		5,684

Income (loss) before income taxes and other items	2,759		(205)

OTHER ITEMS
Gains on interest rate swaps, net	135		399
Income from equity investments	189		121
Total	324		520

Income from continuing operations before income taxes	3,083		315
Income tax benefit (expense)	1,793		(16)
Income from continuing operations	4,876		299
Loss from discontinued operations, net of tax	—		(445)
NET INCOME (LOSS)	4,876		(146)
Less: Preferred stock dividends	(200)		(200)
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS	$	4,676	$	(346)

PER COMMON SHARE
Income from continuing operations—basic	$	4.96	$	0.11
Loss from discontinued operations—basic	$	—	$	(0.48)
Net income (loss) attributable to common stockholders—basic	$	4.96	$	(0.37)

Income from continuing operations—diluted	$	4.65	$	0.10
Loss from discontinued operations—diluted	$	—	$	(0.46)
Net income (loss) attributable to common stockholders—diluted	$	4.65	$	(0.36)

The accompanying notes are an integral part of these Consolidated Condensed Financial Statements.


Consolidated Condensed Statements of Comprehensive Income (Loss)			Occidental Petroleum Corporation and Subsidiaries


	Three months ended March 31,
millions	2022		2021

Net income (loss)	$	4,876	$	(146)
Other comprehensive income items:
Gains on derivatives (a)	27		1
Pension and postretirement gains (b)	1		52

Other comprehensive income, net of tax	28		53
Comprehensive income (loss) attributable to preferred and common stockholders	$	4,904	$	(93)

(a) Net of tax expense of $8 million and zero for the three months ended March 31, 2022 and 2021, respectively.

(b) Net of tax expense of zero and $15 million for the three months ended March 31, 2022 and 2021, respectively.

The accompanying notes are an integral part of these Consolidated Condensed Financial Statements.


Consolidated Condensed Statements of Cash Flows			Occidental Petroleum Corporation and Subsidiaries


	Three months ended March 31,
millions	2022		2021

CASH FLOW FROM OPERATING ACTIVITIES
Net income (loss)	$	4,876	$	(146)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Discontinued operations, net	—		445
Depreciation, depletion and amortization of assets	1,643		2,194
Deferred income tax benefit	(2,240)		(81)
Asset impairments and other charges	—		135
Gain on sales of assets, net	(135)		(111)
Other noncash reconciling items	34		(301)
Changes in operating assets and liabilities:
Increase in receivables	(1,238)		(937)
Decrease (increase) in inventories	439		(311)
Increase in other current assets	(158)		(82)
Decrease in accounts payable and accrued liabilities	(187)		(42)
Increase in current domestic and foreign income taxes	205		25
Operating cash flow from continuing operations	3,239		788
Operating cash flow from discontinued operations, net of taxes	—		122
Net cash provided by operating activities	3,239		910

CASH FLOW FROM INVESTING ACTIVITIES
Capital expenditures	(858)		(579)
Change in capital accrual	(39)		(75)
Purchases of businesses and assets, net	(29)		(105)
Proceeds from sales of assets, net	267		496
Equity investments and other, net	(3)		(10)
Investing cash flow from continuing operations	(662)		(273)
Investing cash flow from discontinued operations	—		(9)
Net cash used by investing activities	(662)		(282)

CASH FLOW FROM FINANCING ACTIVITIES
Payments of long-term debt	(3,259)		(174)
Proceeds from issuance of common stock	27		9
Purchases of treasury stock	(36)		(3)
Cash dividends paid on common and preferred stock	(216)		(211)
Financing portion of net cash received for derivative instruments	79		45
Other financing, net	(24)		(18)
Financing cash flow from continuing operations	(3,429)		(352)
Financing cash flow from discontinued operations	—		(2)
Net cash used by financing activities	(3,429)		(354)

Increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents	(852)		274
Cash, cash equivalents, restricted cash and restricted cash equivalents — beginning of period	2,803		2,194
Cash, cash equivalents, restricted cash and restricted cash equivalents — end of period	$	1,951	$	2,468

The accompanying notes are an integral part of these Consolidated Condensed Financial Statements.


Consolidated Condensed Statements of Equity			Occidental Petroleum Corporation and Subsidiaries


			Equity Attributable to Common Stock
millions, except per-share amounts	Preferred Stock		Common Stock		Treasury Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Equity
Balance as of December 31, 2020	$	9,762	$	216	$	(10,665)	$	16,552	$	2,996	$	(288)	$	18,573
Net loss	—		—		—		—		(146)		—		(146)
Other comprehensive income, net of tax	—		—		—		—		—		53		53
Dividends on common stock, $0.01 per share	—		—		—		—		(11)		—		(11)
Dividends on preferred stock, $2,000 per share	—		—		—		—		(200)		—		(200)
Shareholder warrants exercised	—		—		—		3		—		—		3
Issuance of common stock and other, net	—		1		—		30		—		—		31
Purchases of treasury stock	—		—		(3)		—		—		—		(3)
Balance as of March 31, 2021	$	9,762	$	217	$	(10,668)	$	16,585	$	2,639	$	(235)	$	18,300


			Equity Attributable to Common Stock
millions, except per-share amounts	Preferred Stock		Common Stock		Treasury Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Equity
Balance as of December 31, 2021	$	9,762	$	217	$	(10,673)	$	16,749	$	4,480	$	(208)	$	20,327
Net income	—		—		—		—		4,876		—		4,876
Other comprehensive income, net of tax	—		—		—		—		—		28		28
Dividends on common stock, $0.13 per share	—		—		—		—		(124)		—		(124)
Dividends on preferred stock, $2,000 per share	—		—		—		—		(200)		—		(200)
Shareholder warrants exercised	—		—		—		20		—		—		20
Options exercised	—		—		—		7		—		—		7
Issuance of common stock and other, net	—		—		—		9		—		—		9
Purchases of treasury stock	—		—		(36)		—		—		—		(36)
Balance as of March 31, 2022	$	9,762	$	217	$	(10,709)	$	16,785	$	9,032	$	(180)	$	24,907

The accompanying notes are an integral part of these Consolidated Condensed Financial Statements.


Notes to Consolidated Condensed Financial Statements			Occidental Petroleum Corporation and Subsidiaries


NOTE 1 - GENERAL

NATURE OF OPERATIONS

Occidental conducts its operations through various subsidiaries and affiliates. Occidental has made its disclosures in accordance with United States generally accepted accounting principles as they apply to interim reporting, and condensed or omitted, as permitted by the U.S. Securities and Exchange Commission’s rules and regulations, certain information and disclosures normally included in Consolidated Financial Statements and the notes thereto. These unaudited Consolidated Condensed Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and the notes thereto in Occidental's Annual Report on Form 10-K for the year ended December 31, 2021.

In the opinion of Occidental’s management, the accompanying unaudited Consolidated Condensed Financial Statements contain all adjustments (consisting of normal recurring adjustments) necessary to fairly present Occidental’s Consolidated Condensed Balance Sheets as of March 31, 2022 and December 31, 2021, and the Consolidated Condensed Statements of Operations, Comprehensive Income (Loss), Cash Flows and Stockholders' Equity for the three months ended March 31, 2022 and 2021. Certain data in the Consolidated Condensed Financial Statements and notes for prior periods have been reclassified to conform to the current presentation. The income and cash flows for the periods ended March 31, 2022 and 2021 are not necessarily indicative of the income or cash flows to be expected for the full year.

CASH EQUIVALENTS AND RESTRICTED CASH EQUIVALENTS

Occidental considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents or restricted cash equivalents. The cash equivalents and restricted cash equivalents balances for the periods presented included investments in government money market funds in which the carrying value approximates fair value.

The following table provides a reconciliation of cash, cash equivalents, restricted cash and restricted cash equivalents as reported in the Consolidated Condensed Statements of Cash Flows as of March 31, 2022 and 2021:


millions	2022		2021
Cash and cash equivalents	$	1,909	$	2,270
Restricted cash and restricted cash equivalents included in other current assets	25		183

Restricted cash and restricted cash equivalents included in long-term receivables and other assets, net	17		15
Cash, cash equivalents, restricted cash and restricted cash equivalents	$	1,951	$	2,468

SUPPLEMENTAL CASH FLOW INFORMATION

The following table represents U.S. federal, domestic state and international income taxes paid, tax refunds received and interest paid related to continuing operations during the three months ended March 31, 2022 and 2021, respectively.


millions	2022		2021
Income tax payments	$	208	$	122
Income tax refunds received	$	70	$	42
Interest paid (a)	$	598	$	607

(a) Net of capitalized interest of $11 million and $15 million for the three months ended March 31, 2022 and 2021, respectively.

DISCONTINUED OPERATIONS

During the first quarter of 2021, Occidental recorded a $403 million after-tax loss contingency in discontinued operations associated with its former operations in Ecuador, see Note 10 - Laws uits, Claims, Commitments and Contingencies. In addition, the results of operations for Ghana for the three months ended March 31, 2021, an after-tax loss of $42 million, are presented as discontinued operations.


NOTE 2 - REVENUE

Revenue from customers is recognized when obligations under the terms of a contract with our customers are satisfied; this generally occurs with the delivery of oil, NGL, gas, chemicals or services, such as transportation. As of March 31, 2022, trade receivables, net, of $5.4 billion represent rights to payment, for which Occidental has satisfied its obligations under a contract and its right to payment is conditioned only on the passage of time.

The following table shows a reconciliation of revenue from customers to total net sales for the three months ended March 31, 2022 and 2021:


	Three months ended March 31,
millions	2022		2021

Revenue from customers	$	8,213	$	5,184
All other revenues (a)	136		109
Net sales	$	8,349	$	5,293

(a) Includes net marketing derivatives, collars and calls and chemical exchange contracts in 2021 and the same in 2022 with the exception of the collars and calls which expired on or before December 31, 2021.

DISAGGREGATION OF REVENUE FROM CONTRACTS WITH CUSTOMERS

The table below presents Occidental's revenue from customers by segment, product and geographical area. The oil and gas segment typically sells its oil, NGL and gas at the lease or concession area. Chemical segment revenues are shown by geographic area based on the location of the sale. Excluding net marketing revenue, midstream and marketing segment revenues are shown by the location of sale.


millions	United States		International		Eliminations		Total

Three months ended March 31, 2022
Oil and gas
Oil	$	4,048	$	751	$	—	$	4,799
NGL	698		62		—		760
Gas	455		58		—		513
Other	2		1		—		3
Segment total	$	5,203	$	872	$	—	$	6,075
Chemical	$	1,602	$	81	$	—	$	1,683
Midstream and marketing	$	648	$	99	$	—	$	747




Eliminations	$	—	$	—	$	(292)	$	(292)
Consolidated	$	7,453	$	1,052	$	(292)	$	8,213


millions	United States		International		Eliminations		Total

Three months ended March 31, 2021
Oil and gas
Oil	$	2,464	$	549	$	—	$	3,013
NGL	384		52		—		436
Gas	253		64		—		317
Other	(31)		—		—		(31)
Segment total	$	3,070	$	665	$	—	$	3,735
Chemical	$	1,037	$	50	$	—	$	1,087
Midstream and marketing	$	497	$	131	$	—	$	628




Eliminations	$	—	$	—	$	(266)	$	(266)
Consolidated	$	4,604	$	846	$	(266)	$	5,184


NOTE 3 - INVENTORIES

Finished goods primarily represents oil, which is carried at the lower of weighted-average cost or net realizable value, and caustic soda and chlorine, which are valued under the LIFO method. Inventories consisted of the following:


millions	March 31, 2022		December 31, 2021

Raw materials	$	108	$	96
Materials and supplies	798		783
Commodity inventory and finished goods	599		1,066
	1,505		1,945
Revaluation to LIFO	(99)		(99)
Total	$	1,406	$	1,846


NOTE 4 - DIVESTITURES AND OTHER TRANSACTIONS

DIVESTITURES

In November 2021, Occidental entered into an agreement to sell certain non-strategic assets in the Permian Basin. The transaction closed in January 2022 for net cash proceeds of approximately $190 million. The difference in the proved assets' net book value and adjusted purchase price was treated as a normal retirement, which resulted in no gain or loss being recognized. The difference in the unproved assets' net book value and adjusted purchase price resulted in a gain on sale of approximately $123 million. The gain has been presented within gains on sales of assets and equity investments, net in the Consolidated Condensed Statements of Operations.


NOTE 5 - LONG-TERM DEBT

The following table summarizes Occidental's outstanding debt, including finance lease liabilities:


millions	March 31, 2022		December 31, 2021
Total borrowings at face value	$	25,187	$	28,493
Adjustments to book value:
Unamortized premium, net	660		670
Debt issuance costs	(114)		(135)
Net book value of debt	$	25,733	$	29,028
Long-term finance leases	540		504
Current finance leases	99		85
Total debt and finance leases	$	26,372	$	29,617
Less current maturities of financing leases	(99)		(85)
Less current maturities of long-term debt	(408)		(101)
Long-term debt, net	$	25,865	$	29,431

DEBT ACTIVITY

In the first quarter of 2022, Occidental used cash on hand to repay debt with maturities ranging from 2022 through 2049 by $3.3 billion. Subsequent to March 31, 2022, but before the date of this filing, Occidental paid off additional debt with maturities ranging from 2024 to 2049 and principal of $263 million.

FAIR VALUE OF DEBT

The estimated fair value of Occidental’s debt as of March 31, 2022, and December 31, 2021, substantially all of which was classified as Level 1, was approximately $26.2 billion and $31.1 billion, respectively.


NOTE 6 - DERIVATIVES

OBJECTIVE AND STRATEGY

Occidental uses a variety of derivative financial instruments and physical contracts to manage its exposure to commodity price fluctuations, interest rate risks and transportation commitments and to fix margins on the future sale of stored commodity volumes. Occidental also enters into derivative financial instruments for trading purposes.

Occidental may elect normal purchases and normal sales exclusions when physically delivered commodities are purchased or sold to a customer. Occidental occasionally applies cash flow hedge accounting treatment to derivative financial instruments to lock in margins on the forecasted sales of its natural gas storage volumes, and at times for other strategies, such as to lock in rates on debt issuances. Derivatives are carried at fair value and on a net basis when a legal right of offset exists with the same counterparty.

DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS

As of March 31, 2022, Occidental’s derivatives not designated as hedges consisted of interest rate swaps and marketing derivatives.

Derivative instruments that are not designated as hedging instruments are required to be recorded on the balance sheet at fair value. Changes in fair value will impact Occidental’s earnings through mark-to-market adjustments until the physical commodity is delivered or the financial instrument is settled. The fair value does not reflect the realized or cash value of the instrument.

INTEREST RATE SWAPS

Occidental's interest rate swap contracts lock in a fixed interest rate in exchange for a floating interest rate indexed to the three-month London InterBank Offered Rate throughout the reference period. Net gains and losses associated with interest rate swaps are recognized currently in gains on interest rate swaps, net in the Consolidated Condensed Statements of Operations.

Occidental had the following outstanding interest rate swaps as of March 31, 2022:


millions, except percentages			Mandatory	Weighted-Average
Notional Principal Amount		Reference Period	Termination Date	Interest Rate
$	275	September 2016 - 2046	September 2022	6.709	%
$	450	September 2017 - 2047	September 2023	6.445	%

Depending on market conditions, liability management actions or other factors, Occidental may enter into offsetting interest rate swap positions as well as amend or settle certain or all of the currently outstanding interest rate swaps.

Derivative settlements and collateralization are classified as cash flow from operating activities unless the derivatives contain an other-than-insignificant financing element, in which case the settlements and collateralization are classified as cash flows from financing activities. In the first quarter of 2022, net cash payments related to settlements of interest rate swap agreements were $23 million. Additionally, $102 million of collateral was returned.

MARKETING DERIVATIVES

Occidental's marketing derivative instruments not designated as hedges are short-duration physical and financial forward contracts. A substantial majority of Occidental's physically settled derivative contracts are index-based and carry no mark-to-market valuation in earnings. As of March 31, 2022, the weighted-average settlement price of these forward contracts was $96.63 per barrel and $5.15 per Mcf for crude oil and natural gas, respectively. The weighted-average settlement price was $74.85 per barrel and $4.61 per Mcf for crude oil and natural gas, respectively, as of December 31, 2021. Net gains and losses associated with marketing derivative instruments not designated as hedging instruments are recognized currently in net sales.

The following table summarizes net short volumes associated with the outstanding marketing commodity derivatives not designated as hedging instruments.


	March 31, 2022	December 31, 2021
Oil commodity contracts
Volume (MMbbl)	(23)	(28)
Natural gas commodity contracts
Volume (Bcf)	(111)	(136)

FAIR VALUE OF DERIVATIVES

The following tables present the fair values of Occidental’s outstanding derivatives. Fair values are presented at gross amounts below, including when the derivatives are subject to netting arrangements, and are presented on a net basis in the Consolidated Condensed Balance Sheets.


millions	Fair Value Measurements Using						Netting (a)		Total Fair Value
Balance Sheet Classifications	Level 1		Level 2		Level 3

March 31, 2022
Marketing Derivatives
Other current assets	$	3,486	$	323	$	—	$	(3,708)	$	101
Long-term receivables and other assets, net	71		1		—		(71)		1
Accrued liabilities	(3,796)		(264)		—		3,708		(352)
Deferred credits and other liabilities - other	(73)		—		—		71		(2)
Interest Rate Swaps


Accrued liabilities	—		(250)		—		—		(250)
Deferred credits and other liabilities - other	—		(343)		—		—		(343)

December 31, 2021
Marketing Derivatives
Other current assets	$	1,516	$	173	$	—	$	(1,645)	$	44
Long-term receivables and other assets, net	4		1		—		(4)		1
Accrued liabilities	(1,608)		(196)		—		1,645		(159)
Deferred credits and other liabilities - other	(4)		—		—		4		—
Interest Rate Swaps


Accrued liabilities	—		(315)		—		—		(315)
Deferred credits and other liabilities - other	—		(436)		—		—		(436)

(a)These amounts do not include collateral. As of March 31, 2022 and December 31, 2021, $221 million and $323 million of collateral related to interest rate swaps had been netted against derivative liabilities, respectively. Occidental netted $296 million and $110 million of collateral deposited with brokers against derivative liabilities related to marketing derivatives as of March 31, 2022 and December 31, 2021, respectively.

GAINS AND LOSSES ON DERIVATIVES

The following table presents gains and (losses) related to Occidental's derivative instruments on the Consolidated Condensed Statements of Operations:


millions	Three months ended March 31,
Income Statement Classification	2022		2021

Collars and Calls
Net sales (a)	$	—	$	(72)
Marketing Derivatives
Net sales (b)	$	135	$	180
Interest Rate Swaps
Gains on interest rate swaps, net	$	135	$	399

(a) All of Occidental's calls and collars expired on or before December 31, 2021.

(b) Includes derivative and non-derivative marketing activity.

CREDIT RISK

Certain of Occidental's over-the-counter derivative instruments contain credit-risk-contingent features, primarily tied to credit ratings for Occidental or its counterparties, which may affect the amount of collateral that each party would need to post. The aggregate fair value of derivative instruments with credit-risk-related contingent features for which a net liability position existed as of March 31, 2022, was $34 million (net of $221 million of collateral), which was primarily related to interest rate swaps. The aggregate fair value of derivative instruments with credit-risk-contingent features for which a net liability position existed as of December 31, 2021, was $107 million (net of $323 million of collateral), which was primarily related to interest rate swaps.


NOTE 7 - INCOME TAXES

LEGAL ENTITY REORGANIZATION

To align Occidental’s legal entity structure with the nature of its business activities after completing the acquisition of Anadarko and subsequent large scale post-Acquisition divestiture program, management undertook a legal entity reorganization that was completed in the first quarter of 2022.

As a result of this legal entity reorganization, management made an adjustment to the tax basis in a portion of its operating assets, thus reducing Occidental’s deferred tax liabilities. Accordingly, in the first quarter of 2022, Occidental recorded an estimated non-cash tax benefit of $2.6 billion in connection with this reorganization. The timing of any reduction in Occidental’s future cash taxes as a result of this legal entity reorganization will be dependent on a number of factors, including prevailing commodity prices, capital activity level and production mix. Further refinement of the non-cash tax benefit may be necessary as Occidental finalizes its tax basis calculations, its tax returns and other information.

The following summarizes components of income tax benefit (expense) on continuing operations for the three months ended March 31, 2022 and 2021:


	Three months ended
millions	March 31, 2022			March 31, 2021
Income from continuing operations before income taxes	$	3,083		$	315
Current
Federal	$	(215)		$	30
State and Local	(34)			(10)
Foreign	(198)			(117)
Total current tax expense	$	(447)		$	(97)
Deferred
Federal	2,213			78
State and Local	73			4
Foreign	(46)			(1)
Total deferred tax benefit	$	2,240		$	81
Total income tax benefit (expense)	$	1,793		$	(16)
Income from continuing operations	$	4,876		$	299
Worldwide effective tax rate	(58)		%	5		%

Occidental's worldwide effective tax rate for the three months ended March 31, 2022 was negative 58%. The difference between the negative 58% effective tax rate for income from continuing operations for the three months ended March 31, 2022, and the 21% U.S. federal statutory tax rate was primarily driven by a non-cash tax benefit associated with Occidental's legal entity reorganization, as described above, partially offset by higher tax rates in the foreign jurisdictions in which Occidental operates. The difference between the 5% effective tax rate for income from continuing operations for the three months ended March 31, 2021, and the 21% U.S. federal statutory tax rate was primarily driven by the jurisdictional mix of income. U.S. losses, taxed at a U.S. federal statutory rate of 21%, were mostly offset by foreign income that is subject to tax at statutory rates as high as 55%. In addition, the effective tax rate was impacted by benefits associated with the settlement of federal tax audit matters.


NOTE 8 - RETIREMENT AND POSTRETIREMENT BENEFIT PLANS

Occidental has various defined benefit pension plans for certain domestic union, non-union hourly and foreign national employees. In addition, Occidental also provides medical and other benefits for certain active, retired and disabled employees and their eligible dependents.

Net periodic benefit gains related to pension benefits were zero and $11 million for the three months ended March 31, 2022, and 2021, respectively.

Net periodic benefit costs related to postretirement benefits were $19 million and $20 million for the three months ended March 31, 2022, and 2021, respectively.

Occidental's contributions to its defined benefit plans were $1 million and $147 million for the three months ended March 31, 2022, and 2021, respectively. The 2021 contributions were primarily due to distributions related to a separation program and freezing of benefit accruals for Anadarko employees in 2020 and for contributions which were previously deferred in 2020 under the Coronavirus Aid, Relief, and Economic Security Act.


NOTE 9 - ENVIRONMENTAL LIABILITIES AND EXPENDITURES

Occidental’s operations are subject to stringent federal, regional, state, provincial, tribal, local and international laws and regulations related to improving or maintaining environmental quality. The laws that require or address environmental remediation, including CERCLA and similar federal, regional, state, provincial, tribal, local and international laws, may apply retroactively and regardless of fault, the legality of the original activities or the current ownership or control of sites.

Occidental or certain of its subsidiaries participate in or actively monitor a range of remedial activities and government or private proceedings under these laws with respect to alleged past practices at operating, closed and third-party sites. Remedial activities may include one or more of the following: investigation involving sampling, modeling, risk assessment or monitoring; cleanup measures including removal, treatment or disposal; or operation and maintenance of remedial systems. The environmental proceedings seek funding or performance of remediation and, in some cases, compensation for alleged property damage, punitive damages, civil penalties, injunctive relief and government oversight costs.

ENVIRONMENTAL REMEDIATION

As of March 31, 2022, Occidental participated in or monitored remedial activities or proceedings at 166 sites. The following table presents Occidental’s current and non-current environmental remediation liabilities as of March 31, 2022. The current portion, $155 million, is included in accrued liabilities and the non-current portion, $933 million, in deferred credits and other liabilities-environmental remediation liabilities.

Occidental’s environmental remediation sites are grouped into four categories: sites listed or proposed for listing by the U.S. EPA on the CERCLA NPL and three categories of non-NPL sites—third-party sites, Occidental-operated sites and closed or non-operated Occidental sites.


millions, except number of sites	Number of Sites	Remediation Balance
NPL sites	30	$	427
Third-party sites	69	269
Occidental-operated sites	15	120
Closed or non-operated Occidental sites	52	272
Total	166	$	1,088

As of March 31, 2022, Occidental’s environmental liabilities exceeded $10 million each at