================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) JANUARY 8, 2002
OCCIDENTAL PETROLEUM CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 1-9210 95-4035997
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
10889 WILSHIRE BOULEVARD
LOS ANGELES, CALIFORNIA 90024
(Address of principal executive offices) (ZIP code)
Registrant's telephone number, including area code:
(310) 208-8800
================================================================================
Item 9. Regulation FD Disclosure
------ ------------------------
The following is a presentation made by Dr. Ray R. Irani, Chairman and
Chief Executive Officer of Occidental Petroleum Corporation, at the Goldman
Sachs Global Energy Conference 2002.
1
--------------------------------------------------------------------------------
MIDDLE EAST OIL & GAS
INVESTMENT OPPORTUNITIES
DR. RAY R. IRANI
Chairman & Chief Executive Officer
Occidental Petroleum Corporation
GOLDMAN SACHS
Global Energy Conference 2002
New York, New York
January 8, 2002
--------------------------------------------------------------------------------
Good morning. It's a pleasure to be here at the Goldman Sachs Global Energy
Conference 2002.
I'm especially pleased to be back in New York. The spirit and resilience of
New Yorkers in overcoming adversity since September 11th is an inspiration to
all Americans and has reminded us of the enduring qualities that have made this
nation great. New York has long been a beacon to millions of immigrants who have
passed through its gates on their way to making the American dream a reality.
2
--------------------------------------------------------------------------------
New Uncertainties & Opportunities
o New political & economic uncertainties
- Concerns of weakening US ties to key Middle East allies
- Dependency of world's democracies on Middle East Oil
o New opportunities for stronger US-Middle East ties
- Acceleration of regional privatization trend
- More foreign investment opportunities in oil & gas sector
--------------------------------------------------------------------------------
As Americans rally to the cause of freedom, media pundits are telling us
that the world we knew has been replaced by a new set of political and economic
uncertainties - those unleashed by the twin fears of terrorism and recession.
Underlying these uncertainties are concerns that US ties to key Middle East
allies have weakened. These concerns are accentuated by the dependency of the
world's industrial democracies on Middle East oil to fuel the expansion of their
economies.
Far from driving a wedge between the US and its Middle East allies, the
antiterrorism coalition has the potential to establish new common ground that
will forge even stronger ties. This could accelerate the regional trend toward
privatization and lead to more foreign investment opportunities in the region's
energy sector. It's obviously too early to know whether this will be realized.
However, in the short run, the fallout from the September 11th attacks has added
to the complexity of the energy environment. This has given rise to renewed
concerns about energy security in the US.
3
--------------------------------------------------------------------------------
Economic Uncertainty & Volatility
o Downward economic trends apparent before September 11
- Energy prices showing increased volatility
- Price cycles shortening
o Despite geopolitical uncertainties Middle East will remain a focal point of
US policy
- US reliance on oil imports will continue
- Middle East oil producers' reliance on oil exports will continue
--------------------------------------------------------------------------------
The acceleration of downward economic trends apparent before September 11th
has accelerated the drop in energy demand and prices, and threatens to increase
social tensions in oil-reliant countries in the Middle East. Energy prices have
become more volatile and price uncertainty has become more pronounced as price
cycles appear to be shortening, with sharper distinctions between peaks and
troughs. These factors, coupled with escalating violence between Israelis and
Palestinians, have given rise to a pessimistic outlook among some observers
about US relations with key regional players.
Despite geopolitical uncertainties caused by terrorism and global
recession, one thing is certain. The Middle East, particularly the region's
major energy producers, will remain a focal point of US policy. The US needs the
oil, and the oil producing states need the revenue from oil exports. Despite
Washington's renewed interest in energy self-sufficiency, there is virtually no
chance of this happening in the foreseeable future.
4
--------------------------------------------------------------------------------
US/Middle East - Oil Dependent
o US is world's largest oil consumer & most mature oil producing region
o Middle East has world's largest oil reserves
- Low cost producer
- Large areas of Middle East are unexplored or under-explored
--------------------------------------------------------------------------------
The US is the largest consumer of crude oil and accounts for 25-percent of
global crude oil consumption, yet it has only 3-percent of the world's proven
reserves. The US currently relies on imports for 60-percent of its crude oil.
There is nothing the US can do to significantly reduce its reliance on imported
oil in the foreseeable future. Not only is the US the world's most mature oil
producing region, but production costs also are high - especially in comparison
to Middle East production costs.
The Middle East holds the world's largest oil reserves with almost 700
billion barrels of proven reserves. That's approximately two-thirds of the
world's proven reserves. Large areas of the Middle East are either unexplored or
under-explored.
5
--------------------------------------------------------------------------------
Other Ties - Security & Trade
o Key oil producing countries need US security umbrella
o Middle East countries are important US trading partners
o Key policy differences between US & Middle East allies
- Mutual dependency far outweighs differences
--------------------------------------------------------------------------------
Another factor in this equation is that key oil producing countries like
Kuwait and Saudi Arabia depend on the security umbrella provided by the US. This
was clearly evident during the Gulf War. In addition, good relations with the US
help stimulate investment that supports regional economic diversification and
job creation initiatives. Many Middle East countries also are important trading
partners of the US. Unquestionably, there are key policy differences between the
US and its friends in the region - and these disagreements often make headline
news.
Such disagreements are not unusual. For example, the US and its closest
ally, the UK, have a history of disagreements - even during wartime. These
disagreements do not threaten the foundation of the relationship because of the
overwhelming mutual interests binding the two nations together. Likewise, the
mutual dependency of the US and key Middle East oil producers far outweigh any
differences.
6
--------------------------------------------------------------------------------
New Investment Opportunities
o Before September 11 foreign investment climate improving
- Saudi Arabia opening natural gas sector to foreign investment
- Oman, Qatar & United Arab Emirates launching new gas projects
- Large & promising tracts in Yemen remain unexplored
--------------------------------------------------------------------------------
Before September 11th, a series of important developments had already begun
reshaping the foreign investment climate in the Middle East - particularly the
regional trend toward privatization. Saudi Arabia, for example, opened its
natural gas sector to foreign investment as part of a broad infrastructure
development project that will help diversify the Kingdom's economy and create
new jobs. Participants in the gas initiative are currently engaged in an
advanced stage of negotiations with Saudi officials.
Oman, Qatar and the United Arab Emirates also are collaborating with
foreign investors to launch new natural gas projects. Large, promising tracts in
Yemen remain unexplored, and the Yemeni government is eager to attract new
investment in the oil sector. The success of these various initiatives will have
a significant impact on structural changes driving regional economic
diversification initiatives.
7
--------------------------------------------------------------------------------
Oxy - Long History in Middle East
o Occidental operating in Middle East since making giant discoveries in Libya
in 1960's
- Current operations in Yemen, Qatar & Oman
- Beginning long-term gas project in Saudi Arabia
- Excellent relations throughout Middle East
--------------------------------------------------------------------------------
Occidental has been operating successfully in the Middle East since our
discovery of giant oil deposits in Libya in the 1960s. Since then, we've
developed projects in Yemen, Qatar and Oman. We're now beginning an historic,
long-term project in Saudi Arabia. Earlier this year we established a business
development office in Dubai to pursue other regional projects including
investment opportunities in the UAE and Kuwait.
Occidental has established excellent relations at the highest levels of
government throughout the Middle East. We've developed a reputation as a
creative partner who combines technical skills with cultural sensitivities to
create value in the energy sector for the host countries. We believe our Middle
East relationships have never been stronger.
8
--------------------------------------------------------------------------------
Middle East Opportunities
o Occidental overview
o Restructuring
o Middle East growth initiatives
--------------------------------------------------------------------------------
Today I'm going to focus on the opportunities we see in the Middle East.
But first I'd like to give you an overview of Occidental, the results we've
achieved from restructuring our operations, and how restructuring is impacting
our growth Middle East initiatives.
9
--------------------------------------------------------------------------------
Occidental - Oil & Gas Overview
o One of world's largest E&P companies
- 2001 production
o 475,000 BOE/Day.......Oil =77%
- 60% of oil produced in US
- 92% of natural gas produced in US
- 2001 yearend proven reserves - preliminary
o 2.23 Billion BOE
- 75% of oil in US
- 95% of gas in US
--------------------------------------------------------------------------------
Today, Occidental is one of the world's largest independent oil and natural
gas exploration and production companies. In 2001, our oil and gas production
averaged about 475,000 barrels of oil equivalent per day, with oil making up
77-percent of the total. Nearly 60-percent of our oil and 92-percent of our gas
came from domestic operations. Our proven reserves are in the neighborhood of
2.23 billion barrels of oil equivalent. Our domestic operations account for
75-percent of our worldwide proven oil reserves and 95-percent of our natural
gas reserves.
10
--------------------------------------------------------------------------------
Occidental - Chemicals Overview
o Leading North American chemical producer
- Chlorine and caustic soda
- Specialty products
- Partnerships
o Petrochemicals
o Polyvinyl chloride
--------------------------------------------------------------------------------
Occidental also is a major chemicals manufacturer. Our chemical subsidiary,
OxyChem, is a leading North American producer of basic chemicals such as
chlorine and caustic soda, as well as certain specialty products. OxyChem also
has investments in two partnerships, one of which is a major petrochemicals
producer and the other is a leading manufacturer of polyvinyl chloride.
The performance of our chemicals business is tied to the health of the
economy. In the current market, the downturn in the economy has depressed
chemical margins and profitability. However, even in a down year like 2001, our
chemicals business generates positive cash flow.
11
--------------------------------------------------------------------------------
Occidental Oil & Gas
o 2001
- 90% of total income & cash flow
- 90% of total capital expenditures ($1.4 billion)
o 2002
- 90% of total capital expenditures
--------------------------------------------------------------------------------
While our chemical operations are large in their own right, chemicals
represent a small part of the overall company. In 2001, our oil and gas
operations accounted for approximately 90-percent of our total income and cash
flow and 90-percent of our total capital expenditures of $1.4 billion.
The ratio of our 2002 capital expenditures between oil and gas and
chemicals will remain roughly the same as last year. Considering our emphasis on
growing our oil and gas business, chemicals will become an increasingly smaller
part of our total business. Occidental's future will be shaped by our success in
expanding our oil and gas business.
12
--------------------------------------------------------------------------------
Occidental - Restructuring
o 1997 - present
o Sharper geographic focus
o Stronger asset mix
o Improved earnings power
o Stronger balance sheet
--------------------------------------------------------------------------------
In 1997, we began reshaping our future by implementing a major
restructuring program. As a result, Occidental Petroleum is a much stronger
company today. We are more focused geographically - and we have a stronger mix
of assets, improved earnings power and a stronger balance sheet.
Much of our increased strength is due to the good timing of our
restructuring. Our emphasis on strengthening our oil and gas operations put us
in an excellent position to maximize the benefits from strong energy prices.
13
--------------------------------------------------------------------------------
Overall Business Strategy
o Focus on large, "legacy" oil and gas assets with growth potential
o Maintain strong balance sheet
o Harvest cash from chemicals
--------------------------------------------------------------------------------
Our overall business strategy focuses on large, long-lived,
cost-competitive "legacy" oil and natural gas assets in three core areas - the
US, the Middle East and Latin America. Occidental is the largest oil producer
and second largest gas producer in Texas and the largest gas producer in
California.
Another key factor in our strategy is maintaining a strong balance sheet -
and we're doing that.
The role the company's chemical sector plays in our overall strategy is to
generate cash to fund high return growth opportunities in the E & P business.
14
--------------------------------------------------------------------------------
Oil & Gas Growth Strategy
o Three-part strategy - no single part dominates
- Exploration
o Concentrating on opportunities in core areas
- Seek EOR projects with superior returns
- Acquire assets with upside potential at attractive prices & divest assets
with limited earnings potential
--------------------------------------------------------------------------------
Our oil and gas business strategy has three parts, each of which plays an
important role:
o We will continue to focus on adding commercial reserves in and around
our core areas through the drill bit.
o We will pursue opportunities with host governments in our core areas to
enhance the development of mature fields with large volumes of remaining
oil in place.
o Finally, we will maintain our disciplined approach in buying and selling
assets at the right time - and at attractive prices.
The successful implementation of our strategy relies on a business model
that is both flexible and durable.
15
--------------------------------------------------------------------------------
1999 Profitability/BOE*
[the following is a tabular representation of graphical materials]
$/BOE
OXY 5.30
APA 4.55
APC 3.98
BP 3.88
COC 3.73
XOM 3.53
KMG 3.48
CHV 3.03
MRO 2.92
P 2.91
AHC 2.72
TX 2.22
UCL 1.68
BR 0.88
* Exploration and production income (per FAS 69 format) after taxes and before
interest expense
--------------------------------------------------------------------------------
The success of our strategy is evident in the industry-leading position
we've achieved in operating profits per barrel. Based on public data, we moved
from well back in the pack to become the industry leader in profitability per
barrel in 1999.
16
--------------------------------------------------------------------------------
2000 Profitability/BOE*
[the following is a tabular representation of graphical materials]
$/BOE
OXY 11.30
APC 9.06
APA 8.92
KMG 8.76
BP 7.94
CHV 7.50
XOM 7.04
COC 7.00
TX 6.83
AHC 6.44
P 6.42
MRO 6.11
UCL 5.70
BR 5.23
* Exploration and production income (per FAS 69 format) after taxes and before
interest expense. The Marathon (MRO) results exclude a non-cash charge of
approximately $900 million.
--------------------------------------------------------------------------------
In 2000, we repeated our previous year's success by once again achieving
the highest profitability per barrel among our competitors.
17
--------------------------------------------------------------------------------
2001 Profitability/BOE*
[the following is a tabular representation of graphical materials]
First Three Quarters
$/BOE
OXY 17.66 (includes 3.84 representing California Gas Premium)
EOG 14.04
APA 13.44
APC 12.66
XOM 11.97
KMG 11.89
BP 11.83
MRO 11.79
DVN 11.63
P 11.35
BR 10.93
COC 10.70
UCL 10.26
AHC 10.22
CHX 9.17
* Exploration and production income before U.S. income taxes and before
interest expense
--------------------------------------------------------------------------------
We retained our leadership position in profitability per barrel through the
third quarter of 2001 thanks, in part, to premium prices being paid for
California gas production. The premium disappeared by the end of the third
quarter.
18
--------------------------------------------------------------------------------
Acquisition Results
Elk Hills Acquisition (2/8/98) Altura Acquisition (4/19/00)
Price = $3.5 Billion Price = $3.6 Billion
------------------------------ ------------------------------
Free Cash Flow (After Capital) Free Cash Flow (After Capital)
(2/8/98 - 9/30/01) (4/19/00 - 9/30/01)
$2.38 Billion $1.17 Billion
THUMS Acquisition (4/28/00)
Price = $110 Million
------------------------------
Free Cash Flow (After Capital)
(4/28/00 - 9/30/01)
$123 Million
--------------------------------------------------------------------------------
Our overall performance over the past three years was due largely to
strategic acquisitions, beginning with the 1998 acquisition of the Elk Hills oil
and gas field in California. Elk Hills is one of the top ten oil and gas fields
in the US and the largest source of gas in California. The $3.5 billion Elk
Hills acquisition was followed in April 2000 by our purchases of Altura Energy
in Texas for $3.6 billion and the much smaller THUMS property in Long Beach for
$110 million.
At the end of 2000, these three assets made up 67-percent of our worldwide
proven oil reserves and 53-percent of our proven gas reserves. On a barrel of
oil equivalent basis, they accounted for 65-percent of our worldwide reserves.
In 2001, the combined production from these assets averaged approximately
285,000 barrels of oil equivalent per day. That represents 60-percent of our
total worldwide production.
We've recovered $2.4 billion, or 60-percent, of the Elk Hills purchase
price. We've also recouped nearly 30-percent of the acquisition price we paid
for Altura. These are excellent results, but not as good as the results from the
THUMS acquisition. We recovered the entire purchase price for THUMS in fourteen
months.
19
--------------------------------------------------------------------------------
Total Debt
[the following is a tabular representation of graphical materials]
$ Millions
Pro-Forma
12/31/97 12/31/98 12/31/99 Post Altura 12/31/00 9/30/01
----------- ----------- ----------- ----------- ----------- -----------
Oxy Public Debt 4,965 5,402 4,372 5,766 3,541 3,506
Other Recourse Debt 1,361 776 1,076 1,009 915 811
Permian Non-recourse Debt 2,400 1,900 700
----------- ----------- ----------- ----------- ----------- -----------
Total 6,326 6,178 5,448 9,175 6,356 5,017
--------------------------------------------------------------------------------
We took full advantage of our rising production profile and high oil and
gas prices over an eighteen month period in 2000 and 2001 to reduce our total
debt. The Altura purchase increased our pro-forma debt to nearly $9.2 billion in
April 2000. By the end of last year's third quarter, our debt had been lowered
to $5 billion. That's $1.3 billion below the yearend total in 1997.
Let me put this in perspective. From the end of 1997 through the third
quarter 2001, we assumed $7.2 billion in acquisition costs, continued to fund
our capital program at an appropriate level, paid an annual dividend of one
dollar per share and still managed to reduce our total debt by more than
20-percent.
20
--------------------------------------------------------------------------------
Debt/Capitalization Ratio
[the following is a tabular representation of graphical materials]
12/31/1997 67%
12/31/1998 66%
12/31/1999 61%
Pro Forma Post Altura 71%
12/31/2000 57%
9/30/2001 46%
--------------------------------------------------------------------------------
Our debt to capitalization ratio was 46-percent at the end of September -
the lowest level in nearly twenty years.
I also want to emphasize that our total debt calculation includes long-term
debt, including current maturities, as well as non-recourse debt, current and
non-current gas sale obligations and Trust Preferred Securities.
21
--------------------------------------------------------------------------------
Interest & Preferred Dividends
[the following is a tabular representation of graphical materials]
$ Millions
3 Qtr 01
1995 1996 1997 1998 1999 2000 Annualized
---------- ---------- ---------- ---------- ---------- ---------- ----------
Oxy Public Debt 540 451 407 451 468 368 300
Permian Non-recourse Debt 118 52
Preferred Dividends 93 93 88 17 7
Capital Trust Preferred 41 40 40
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total 633 544 495 468 516 526 392
--------------------------------------------------------------------------------
As a result of our debt reduction, interest expense and preferred dividends
were lowered from $500 million in 1997 to an annualized rate of $392 million by
the fourth quarter in 2001. Lower debt and interest levels strengthen our
balance sheet and improve our earnings and cash flow.
22
--------------------------------------------------------------------------------
Return On Equity
Ten - Year Trend
(%)
Average - Years Annual Est.
------------------------------------------ ------ ----
10 Yrs 7 Yrs 5 Yrs 3 Yrs 2000 2001
------ ----- ----- ----- ---- ----
10.4 16.0 15.4 26.6 37.9 25.9
* Results are based on reported earnings through 2000 and First
Call's average earnings estimate of $3.71 per share for 2001.
(For illustration purposes only.)
--------------------------------------------------------------------------------
Our return on equity and capital employed also have improved. The return on
equity you see here shows gradual improvement over the last ten years, but the
improvements since we began restructuring in 1997 are much greater.
23
--------------------------------------------------------------------------------
Return on Capital Employed
Ten - Year Trend
(%)
Average - Years Annual Est.
------------------------------------------ ------ ----
10 Yrs 7 Yrs 5 Yrs 3 Yrs 2000 2001
------ ----- ----- ----- ---- ----
7.7 9.7 10.0 14.8 19.0 15.2
* Results are based on reported earnings through 2000 and First
Call's average earnings estimate of $3.71 per share for 2001.
(For illustration purposes only.)
--------------------------------------------------------------------------------
Our return on capital also has improved steadily since the restructuring.
We will continue striving for improvement in our returns in all our investment
decisions.
24
--------------------------------------------------------------------------------
Middle East - Oxy Interests
[map of Middle East]
--------------------------------------------------------------------------------
Now let's look at Occidental's projects in the Middle East.
We have one of the strongest positions in the Middle East of any company
our size. Occidental has operations in Oman, Qatar, Yemen and Saudi Arabia which
are shown in yellow. We also are pursuing new business opportunities in the
United Arab Emirates and Kuwait, shown in green.
Our total net oil production in Oman, Qatar and Yemen is currently
averaging about 90,000 barrels per day. This represents about 25-percent of our
worldwide oil production. We're continuing to build on our strong foundation in
these three countries as we compete for new opportunities in the region. Large
core assets in the US and a strong balance sheet provide Occidental with a sound
platform for new growth in the Middle East.
25
--------------------------------------------------------------------------------
Middle East - Saudi Arabia
[map of Middle East]
--------------------------------------------------------------------------------
Last year, Occidental was one of eight western oil companies to win a stake
in Saudi Arabia's Natural Gas Initiative. This is the first time the Kingdom has
opened its doors to foreign investment in its energy sector since the 1970s.
Saudi Arabia is the world's biggest hydrocarbon province with the world's
largest oil reserves and fourth largest natural gas reserves. On June 3rd, 2001,
I joined the CEOs of the other companies to sign preliminary agreements for the
three huge projects comprising this initiative.
The Saudi leadership expects the partnership to be a rewarding experience
for all participants and lead to other investment opportunities. I'd like to
show you why we're enthusiastic about our prospects for future growth in the
Middle East - especially in the Arabian Peninsula.
26
--------------------------------------------------------------------------------
Middle East - Arabian Peninsula
[map of Arabian Peninsula]
--------------------------------------------------------------------------------
The Arabian Peninsula is the world's largest hydrocarbon province in terms
of proved reserves - and large areas of the Peninsula remain unexplored or
under-explored.
All of Occidental's interests in Saudi Arabia and Yemen are in
under-explored areas.
27
--------------------------------------------------------------------------------
Saudi Arabia - Core Venture 2
o Core Venture 2 (Red Sea Venture)
- Occidental has 20% interest
- ExxonMobil is lead partner with 60% interest
- Marathon has 20% interest
o Project overview
- Develop Midyan & Barqan gas fields
- Construct processing & pipeline facilities
- Build one power plant & water desalination unit
- Evaluate potential for petrochemical plant
--------------------------------------------------------------------------------
In Saudi Arabia, Occidental has a 20-percent interest in the Core Venture 2
consortium, which will be investing in the Red Sea area to develop the Kingdom's
natural gas reserves for the rapidly growing domestic market. ExxonMobil is the
lead partner with a 60-percent interest and Marathon holds the remaining
20-percent stake.
The Red Sea venture involves development of discovered gas from the Midyan
and Barqan fields in the northwest part of the Kingdom, and construction of
related gas processing and pipeline facilities. The consortium expects to build
at least one power plant and a water desalination unit, as well as evaluate the
potential for a petrochemical plant.
28
--------------------------------------------------------------------------------
Saudi Arabia - Core Venture 2
o Exploration in Blocks [map of Saudi Arabia]
40-49
- Exploration success
will lead to other
investment options
o Power generation
o Water desalination
o Petrochemicals
o Project offers attractive
returns on investment &
stronger presence in
key core area
--------------------------------------------------------------------------------
The project also calls for onshore and offshore exploration in Blocks 40 to
49 located in and along the Red Sea. Exploration success in these blocks will
lay the foundation for additional investment opportunities in power generation,
water desalination and petrochemicals in the western part of the Kingdom.
The Saudis also have emphasized that participation in the Natural Gas
Initiative will open the door for other projects in the Kingdom. For Occidental,
participation in the Red Sea project means an attractive return on investment, a
stronger presence in one of our core areas and the potential for new projects.
29
--------------------------------------------------------------------------------
Oman
[map of Oman]
--------------------------------------------------------------------------------
Our Oman business centers on our 300-million barrel discovery in Block 9.
Since discovery of the Safah field, our geoscientists and engineers have
continued adding recoverable reserves in the Block. Occidental has produced more
than 150 million gross barrels from the Block, most of it from Safah. Net
production to Occidental is currently averaging 10,000 barrels of oil per day,
and we hope to expand our Oman business over the next few years.
In developing these fields, Occidental used multi-lateral horizontal wells
to increase production and recovery rates. Horizontal drilling improves
production rates and minimizes the number of wells needed. Today, 60-percent of
Occidental's production in Oman relies on horizontal wells. One 5,000 foot
horizontal section was the longest ever drilled in the Middle East.
In June 1998, we signed a contract for a 100-percent working interest to
explore Block 27. Exploratory activities are currently underway. Seismic studies
have identified potential oil and natural gas prospects. And like Saudi Arabia,
Oman has a growing domestic market for gas to support industrial development and
power generation.
30
--------------------------------------------------------------------------------
Qatar
o ISND contract awarded [map of Qatar]
in 1994
- Reversed production
drop from below
20,000 barrels/day to
138,000 barrels
o ISND success leads to
new opportunities
o South Dome contract
awarded in 1998
- South Dome being
developed as North
Dome satellite
o Combined net
production is 42,000
barrels/day
--------------------------------------------------------------------------------
In Qatar, we successfully reversed 25 years of declining production in the
Idd el Shargi North Dome field by applying new waterflooding and reservoir
characterization techniques. When Occidental took over the operation of the
North Dome field in 1994, production had fallen from a peak of 50,000 barrels
per day in 1970 to below 20,000 barrels. By introducing advanced drilling
systems and new technologies, gross production increase to more than 100,000
barrels per day, peaking at 138,000 barrels.
By nearly tripling previous peak production, Occidental established a
reputation as one of the world's leading companies in enhancing recovery from
mature fields. Our success at North Dome opened the door to new opportunities in
Qatar and other parts of the Middle East.
In 1998, the Qatari government awarded Occidental a production sharing
contract to develop the Idd El Shargi South Dome field, located 15 miles from
North Dome. Occidental is developing South Dome as a satellite field to optimize
the capital efficiency of the two projects. Combined production from the two
fields is currently about 42,000 barrels per day, net to Occidental.
31
--------------------------------------------------------------------------------
Qatar
o Implemented innovative [photo]
ISND waterflood
- Projected recovery of
additional 110 million gross
barrels
o Oxy net is 42 million
o Evaluating 2nd generation
re-development project
- Potential recovery of
additional 200 million gross
barrels
o Evaluating exploration
opportunities
- Submitted bid on Block 10
--------------------------------------------------------------------------------
Occidental also has implemented an innovative waterflood program in the
North Dome's Shuaiba Reservoir. The new waterflood project is expected to result
in the recovery of an additional 110 million gross barrels of the remaining oil
in place. Occidental's share of the incremental reserves is 42 million barrels.
We are currently evaluating a second-generation re-development project that has
the potential of recovering an additional 200 million barrels.
We also are pursuing new exploration opportunities in Qatar. We recently
submitted a bid for Block 10, which is adjacent to the billion-barrel Al Shaheen
Field ... and we're evaluating other exploration blocks.
32
--------------------------------------------------------------------------------
Yemen
[map of Yemen]
--------------------------------------------------------------------------------
In Yemen - like Oman - we've grown though the drill bit. Occidental holds a
38-percent interest in 230,000 barrels per day of production from the
billion-barrel Masila field in Block 14. Masila was one of the world's largest
oil discoveries in the 1990s. Each year since its discovery, Masila's
recoverable reserves and production have increased steadily. Today, Masila
accounts for more than half of Yemen's total production.
Occidental also holds a 20-percent interest in the East Shabwa field in
Block 10 that is currently producing 27,000 gross barrels of oil per day.
33
--------------------------------------------------------------------------------
Yemen
[map of Yemen]
--------------------------------------------------------------------------------
In addition to our producing interests in Blocks 10 and 14, we have secured
interests in seven exploration blocks, encompassing nearly 15 million acres. We
are the operator of Blocks 20 and 44 and have interests in 5 blocks along the
border with Saudi Arabia. Our combined interests in these blocks gives us access
to nearly 25-percent of the land mass of the entire country.
Occidental has a 75-percent working interest in Block 44 located in the
Hadramaut province in central Yemen. Our geoscientists targeted Block 44 because
it's on trend with the East Shabwa and Masila fields.
Occidental also holds a 50-percent working interest in Block 20 in the
central part of the country. Like Block 44, Block 20 is in the midst of a
hydrocarbon province where more than a billion barrels of oil and three trillion
cubic feet of gas have been discovered.
We have a 40-percent working interest in Blocks 11, 12, 36, 54 and 59 in
northeastern Yemen along the border with Saudi Arabia. These blocks are located
in the largely under-explored southern portion of the Rub al Khali desert. The
remoteness of the area and the high sand dunes that characterize the topography
have made it very difficult to gather high quality seismic data.
34
--------------------------------------------------------------------------------
Yemen
o Applying state-of-the-art [photo]
technology to identify
prospects
o Completed 3-D seismic in
Block 20
- Plans to begin drilling 2
wells in November
o Beginning 3-D seismic in
Block 44
o Completed seismic analysis
in Block 59
- Beginning test well in
January
o Planning to drill Masila & E.
Shabwa step-out wells
--------------------------------------------------------------------------------
Such challenges offer our geoscientists abundant opportunities to apply
their technical skills. They're applying state-of-the-art technology to obtain
the data which they hope will identify multiple high potential prospects.
Last year we completed a 3-D seismic program in Block 20. Preliminary
analysis of these data was completed, and plans are under way to begin drilling
two exploratory wells in Block 20 next November.
A 3-D seismic acquisition program will begin shortly in Block 44.
Analysis of seismic data for Block 59 along the Saudi border has been
completed and a test well is scheduled to begin drilling this month.
We also will be drilling a series of step-out wells in Masila and East
Shabwa to add additional reserves. We expect to be very active in Yemen this
year.
35
--------------------------------------------------------------------------------
Abu Dhabi - Dolphin Project
[map of Dolphin project] o Dolphin Project
- 25-year project
between UAE &
Qatar
- Deliver 2 Bcf/day
of gas from
Qatar's North
Field to UAE
- Construct 210-
mile pipeline
--------------------------------------------------------------------------------
Now I'd like to mention several new prospects we're pursuing. Last March,
the governments of the UAE and Qatar created the Dolphin Project by signing a
25-year agreement calling for delivery of 2 billion cubic feet per day of
natural gas from Qatar's North Field to markets in the UAE by installing a
210-mile sub-sea pipeline.
36
--------------------------------------------------------------------------------
Abu Dhabi - Dolphin Project
[map of Dolphin Project] o Project start-up in
early 2005
o Partnership
- UAE Offsets
Group - 51%
- Total - 24.5%
- New partner -
24.5%
Short-Listed Companies
----------------------
o Occidental
o British Petroleum
o ExxonMobil
o Royal Dutch Shell
o Conoco
--------------------------------------------------------------------------------
The $3.5 billion project is scheduled for start-up in early 2005. UAE
officials have said that Dolphin will serve as a catalyst to stimulate the
economies, not only of the UAE and Qatar, but the entire Arabian Gulf region.
The project is being spearheaded by the UAE Offsets Group which was set up in
1992 with the charge of helping to diversify the UAE's economy and to reduce its
dependence on oil.
When Dolphin was unveiled in March 1999, the Offsets Group held a
51-percent interest while private partners Enron and Total each had 24.5-percent
interests. With Enron's withdrawal from the project last May, the Offsets Group
took steps to find a replacement.
This attracted great attention from a large number of global oil and gas
companies. Several months ago, we were pleased to have been selected as one of
five companies - including BP, Exxon, Shell and Conoco - that were short-listed
for the project.
Technical meetings were held with the five companies in November and data
rooms will be opened shortly. Recent published reports indicate that a new
partner will be selected by early March.
37
--------------------------------------------------------------------------------
Libya
[map of Libya]
--------------------------------------------------------------------------------
Let me add a few words about Libya and Kuwait. Occidental's involvement
with Libya dates from the mid-60s. In fact Occidental's early success in the
international arena was due to its large Libyan oil discoveries. When the Reagan
Administration imposed sanctions on the Libyan government in 1986, Occidental
left the country but retained an interest in the assets we formerly operated.
The Libyan government would like us to return, and we're prepared to do so when
sanctions are lifted.
Despite the US Senate's vote last year to extend the sanctions for another
five years, I am encouraged to see both the US and Libyan governments engaged in
constructive dialogue aimed at resolving all outstanding issues. I believe there
are people of good will on both sides who are committed to normalizing relations
between the two countries. When that day arrives, Occidental is prepared to move
quickly. This will be a good development not only for our shareholders, but also
for the people of Libya and the US.
38
--------------------------------------------------------------------------------
Kuwait
[map of Kuwait]
--------------------------------------------------------------------------------
The much-anticipated opening of Kuwait's petroleum sector to foreign
investment has been stalled in the Kuwaiti parliament. In the meantime,
Occidental has received official approval to conduct business in Kuwait when
parliament does act. We have a number of proposals to present to Kuwaiti
officials when the opportunity arises.
39
--------------------------------------------------------------------------------
Occidental's Outlook
o Middle East to play increasingly important role
o Portfolio will continue to be dominated by large US assets
o Asset mix provides balance & safety for investors
- Secure, competitive dividend
- Strong balance sheet
--------------------------------------------------------------------------------
While we expect the Middle East to play an increasingly important role in
our future plans, our portfolio will continue to be dominated by our large core
assets in the US. Our asset mix provides balance and safety for investors. In
addition, our secure dividend of one dollar per share is very competitive
relative to our peers in the oil and gas industry and compares favorably with
the average yield for large- and mid-cap companies on the S&P 500.
Because of our increased financial strength and flexibility after
restructuring, Occidental is in a much stronger position to capitalize on our
fundamental strengths than we were four years ago. We used the strong energy
environment to strengthen our balance sheet and improve our return on equity and
capital employed.
40
--------------------------------------------------------------------------------
Occidental's Middle East Outlook
o Middle East operational experience a cornerstone for growth
- New partnerships with Middle East nations
o Find new reserves with drill bit
o Enhance production in mature fields with technology
o Contribute to economic diversification
o US-Middle East alliances will remain strong
o Occidental to be a long-term Middle East player
--------------------------------------------------------------------------------
We're confident that our financial strength and discipline, and nearly four
decades of operational experience in the Middle East, will serve as a
cornerstone for growing our business in this hydrocarbon-rich region. At
Occidental, we see a future characterized by long and mutually beneficial
partnerships with leading oil producing nations of the Middle East. We're
confident because we've done it before - not only in the Middle East, but also
in other areas of the world.
We've done it through the drill bit - by working with local and national
oil companies to find and prove new reserves.
We've done it by applying cutting edge technology to substantially enhance
production in mature and declining fields.
And we've done it by partnering with national oil companies to help their
governments diversify their economies - by bringing new ideas, new resources,
and new technologies to help them achieve their goals.
We believe relations between the US and its Middle East allies will remain
strong. The Middle East has been good for Occidental and for our shareholders.
We fully expect to be a significant player in the Middle East for many years to
come.
Thank you.
41
--------------------------------------------------------------------------------
Occidental Petroleum Corporation
o Portions of this presentation are forward-looking and involve risks and
uncertainties that could significantly affect expected results. Factors that
could cause results to differ materially include, but are not limited to:
global commodity pricing fluctuations for oil, gas and chemicals;
competitive pricing pressures; higher than expected costs including
feedstocks; the supply/demand considerations for Occidental's products; any
general economic recession domestically or internationally; and not
successfully completing any expansion, capital expenditure or acquisition.
o The United States Securities and Exchange Commission permits oil and gas
companies, in their filings with the SEC, to disclose only proved reserves
demonstrated by actual production or conclusive formation tests to be
economically producible under existing economic and operating conditions. We
use certain terms in this presentation, such as probable and possible
reserves, that the SEC's guidelines strictly prohibit us from using in
filings with the SEC. U.S. investors are urged to consider closely the
disclosure in our Form 10-K, available from us through the following
toll-free number , 1-888-OXYPETE (1-888-699-7383) or on the Internet at
http://www.oxy.com. You also can obtain a copy from the SEC by calling
1-800-SEC-0330.
--------------------------------------------------------------------------------
42
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
OCCIDENTAL PETROLEUM CORPORATION
(Registrant)
DATE: January 8, 2002 S. P. Dominick, Jr.
--------------------------------------------------
S. P. Dominick, Jr., Vice President and Controller
(Chief Accounting and Duly Authorized Officer)