================================================================================
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 29, 2003
OCCIDENTAL PETROLEUM CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 1-9210 95-4035997
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
10889 WILSHIRE BOULEVARD
LOS ANGELES, CALIFORNIA 90024
(Address of principal executive offices) (ZIP code)
Registrant's telephone number, including area code:
(310) 208-8800
================================================================================
Item 5. Other Events and Regulation FD Disclosure
------ -----------------------------------------
On January 29, 2003, Occidental Petroleum Corporation announced net income
for the fourth quarter 2002 of $322 million ($0.85 per share), compared with a
net loss of $247 million ($0.66 per share) for the fourth quarter 2001. The
fourth quarter 2001 included a $240 million after-tax charge, reflecting the
effect of the agreement to sell Occidental's interest in Equistar.
In announcing the results, Dr. Ray R. Irani, chairman and chief executive
officer, said, "Our strong fourth quarter performance completed another year of
major accomplishments that included exceeding our combined oil and natural gas
production forecast, the continued strengthening of our balance sheet and the
generation of competitive returns on equity and capital employed. Oil and gas
production in the fourth quarter averaged 518,000 barrels of oil equivalent
(BOE) per day. That's 7.5 percent higher than in the fourth quarter of 2001 and
keeps us on target to meet or exceed our 2003 forecast of 525,000 BOE per day.
We ended the year with our debt to capitalization ratio at 43 percent, the
lowest level in 21 years. Our strong earnings performance produced a return on
equity of nearly 17 percent and return on capital employed of almost 11
percent."
OIL AND GAS
-----------
Oil and gas segment and core earnings were $490 million for the fourth
quarter 2002, compared with $166 million for the fourth quarter 2001. The
improvement in the fourth quarter 2002 earnings reflected $299 million from
higher worldwide crude oil and natural gas prices and a $35 million increase
from higher production volumes; partially offset by higher exploration expense.
CHEMICALS
---------
Chemical segment earnings were $58 million for the fourth quarter 2002,
compared with a loss of $412 million for the fourth quarter 2001. The 2001 loss
resulted from a $412 million pre-tax charge, reflecting the effect of the sale
of the company's interest in the Equistar petrochemicals joint venture.
Chemical core earnings also were $58 million for the fourth quarter 2002,
compared with breakeven core earnings for the fourth quarter 2001. The
improvement in the fourth quarter 2002 core earnings reflected higher sales
prices for PVC, chlorine and EDC, lower self-insured reserve requirements and
the absence of the Equistar fourth quarter 2001 loss; partially offset by lower
caustic sales prices and higher energy and raw material costs.
TWELVE-MONTH RESULTS
--------------------
For the twelve months of 2002, net income was $989 million ($2.63 per
share), compared with $1.154 billion ($3.10 per share) for the twelve months of
2001.
Core earnings were $999 million for 2002 compared with $1.246 billion for
2001. See the attached schedule for a reconciliation of earnings to core
earnings.
For details of items affecting the comparability of core earnings between
periods in 2002 and 2001, see the attached schedule.
1
Statements in this presentation that contain words such as "will" or
"expect", or otherwise related to the future, are forward-looking and involve
risks and uncertainties that could significantly affect expected results.
Factors that could cause results to differ materially include, but are not
limited to: global commodity pricing fluctuations, and supply/demand
consideration for oil, gas and chemicals; higher-than-expected costs; and not
successfully completing (or any material delay in) any expansion, capital
expenditure, acquisition, or disposition. Occidental disclaims any obligation to
update any forward-looking statements.
2
SUMMARY OF SEGMENT NET SALES AND EARNINGS
($ millions, except per-share amounts)
Fourth Quarter Twelve Months
------------------- -------------------
2002 2001 2002 2001
================================= ======== ======== ======== ========
SEGMENT NET SALES
Oil and gas $ 1,287 $ 824 $ 4,634 $ 5,134
Chemical 698 560 2,704 2,968
-------- -------- -------- --------
Net sales $ 1,985 $ 1,384 $ 7,338 $ 8,102
================================= ======== ======== ======== ========
SEGMENT EARNINGS (LOSSES)
Oil and gas $ 490 $ 166 $ 1,707 $ 2,845
Chemical 58 (412) 275 (399)
-------- -------- -------- --------
548 (246) 1,982 2,446
UNALLOCATED CORPORATE ITEMS
Interest expense, net (a) (58) (62) (253) (272)
Income taxes (b) (114) 190 (364) (359)
Trust preferred distributions
& other (12) (13) (47) (56)
Other (c) (41) (113) (155) (580)
-------- -------- -------- --------
INCOME/(LOSS) FROM CONTINUING
OPERATIONS 323 (244) 1,163 1,179
Discontinued operations, net (1) (3) (79) (1)
Cumulative effect of changes
in accounting principles, net -- -- (95) (24)
-------- -------- -------- --------
NET INCOME/(LOSS) $ 322 $ (247) $ 989 $ 1,154
======== ======== ======== ========
BASIC EARNINGS PER COMMON SHARE
Income/(loss) from continuing
operations $ 0.85 $ (0.65) $ 3.09 $ 3.16
Discontinued operations, net -- (0.01) (0.21) --
Cumulative effect of changes
in accounting principles, net -- -- (0.25) (0.06)
-------- -------- -------- --------
$ 0.85 $ (0.66) $ 2.63 $ 3.10
======== ======== ======== ========
DILUTED EARNINGS PER COMMON SHARE
Income/(loss) from continuing
operations $ 0.84 $ (0.65) $ 3.07 $ 3.15
Discontinued operations, net -- $ (0.01) $ (0.21) --
Cumulative effect of changes
in accounting principles, net -- -- (0.25) (0.06)
-------- -------- -------- --------
$ 0.84 $ (0.66) $ 2.61 $ 3.09
======== ======== ======== ========
AVERAGE BASIC COMMON SHARES
OUTSTANDING 377.6 373.8 376.2 372.4
================================= ======== ======== ======== ========
See footnotes on following page.
3
(a) Includes interest income on notes receivable from Altura partners. The
partnership exercised an option in May 2002 to redeem the sellers'
remaining partnership interests in exchange for the outstanding balance on
the notes. The twelve months 2002 amount includes $21 million and the
fourth quarter and twelve months 2001 amounts include $17 million and $102
million, respectively.
(b) Excludes U.S. federal income tax charges and credits allocated to the
segments and foreign taxes. Oil and gas segment earnings include credits of
$1 million in both the fourth quarters of 2002 and 2001. Chemical segment
earnings include a credit of $4 million in the fourth quarter of 2001.
The fourth quarter 2001 amount includes a $172 million credit reflecting
the statutory tax effect of the agreement, in principle, to sell
Occidental's interest in Equistar.
Oil and gas segment earnings for the twelve months 2002 and 2001 include
charges of $1 million and $36 million, respectively. The amounts include
charges for asset sales of $4 million and $39 million for the years 2002
and 2001, respectively. Chemical segment earnings have been impacted by
credits of $403 million for the twelve months 2002 and by credits of $42
million for the twelve months 2001. The 2002 amount includes a $392 million
credit for the tax effects of the sale of the Equistar investment and the
2001 amount includes $26 million of credits for asset sales.
(c) Includes preferred distributions to the Occidental Permian partners. The
twelve months 2002 amount includes $22 million. The fourth quarter and
twelve months 2001 amounts include $17 million and $104 million,
respectively. This is essentially offset by the interest income discussed
in (a) above. The partnership exercised an option in May 2002 to redeem the
sellers' remaining partnership interests in exchange for the outstanding
balance on the notes.
The twelve months 2001 amount includes a $272 million net-of-tax loss
related to the sale of Occidental's residual interest in Occidental Texas
Pipeline Company.
4
SUMMARY OF OPERATING STATISTICS
Fourth Quarter Twelve Months
------------------- -------------------
2002 2001 2002 2001
================================= ======== ======== ======== ========
NET OIL, GAS AND LIQUIDS
PRODUCTION PER DAY
United States
Crude oil and liquids (MBBL)
California 84 82 86 76
Permian 142 137 142 137
Other 6 -- 4 --
-------- -------- -------- --------
Total 232 219 232 213
Natural Gas (MMCF)
California 266 297 286 303
Hugoton 139 153 148 159
Permian 133 150 130 148
-------- -------- -------- --------
Total 538 600 564 610
Latin America
Crude oil (MBBL)
Colombia 41 17 35 18
Ecuador 13 13 13 13
-------- -------- -------- --------
Total 54 30 48 31
Eastern Hemisphere
Crude oil (MBBL)
Oman 13 14 13 12
Pakistan 12 7 10 7
Qatar 37 43 42 43
Russia 29 28 27 27
Yemen 39 32 38 33
-------- -------- -------- --------
Total 130 124 130 122
Natural Gas (MMCF)
Pakistan 76 51 63 50
Barrels of Oil Equivalent (MBOE) 518 482 515 476
======== ======== ======== ========
Consolidated subsidiaries 516 482 514 476
Non-consolidated interests - net 2 -- 1 --
-------- -------- -------- --------
Total worldwide production 518 482 515 476
======== ======== ======== ========
CAPITAL EXPENDITURES (millions) $ 396 $ 400 $ 1,236 $ 1,308
======== ======== ======== ========
DEPRECIATION, DEPLETION AND
AMORTIZATION OF ASSETS (millions) $ 253 $ 243 $ 1,012 $ 965
================================= ======== ======== ======== ========
5
SIGNIFICANT TRANSACTIONS AND EVENTS AFFECTING EARNINGS
Occidental's results of operations often include the effects of significant
transactions and events affecting earnings that vary widely and unpredictably in
nature and amount. Therefore, management uses a measure called "core earnings",
which excludes those items. This non-GAAP measure is not meant to disassociate
those items from management's performance, but rather is meant to provide useful
information to investors interested in comparing Occidental's earnings
performance between periods. Core earnings is not considered to be an
alternative to operating income in accordance with generally accepted accounting
principles.
The following table sets forth the core earnings and significant items affecting
earnings for each operating segment and corporate:
Fourth Quarter Twelve Months
------------------- -------------------
($ millions) 2002 2001 2002 2001
================================= ======== ======== ======== ========
TOTAL EARNINGS (LOSS) $ 322 $ (247) $ 989 $ 1,154
======== ======== ======== ========
OIL AND GAS
Segment Earnings $ 490 $ 166 $ 1,707 $ 2,845
Less:
Gain on sale of interest in
the Indonesian Tangguh
LNG project* -- -- -- 399
-------- -------- -------- --------
Segment Core Earnings 490 166 1,707 2,446
-------- -------- -------- --------
CHEMICALS
Segment Earnings (Loss) 58 (412) 275 (399)
Less:
Gain on sale of Equistar
investment* -- -- 164 --
Equistar writedown -- (412) -- (412)
-------- -------- -------- --------
Segment Core Earnings 58 -- 111 13
-------- -------- -------- --------
CORPORATE AND OTHER
Results (226) (1) (993) (1,292)
Less:
Loss on sale of pipeline-owning
entity* -- -- -- (272)
Settlement of state tax issue -- -- -- 70
Changes in accounting
principles, net* -- -- (95) (24)
Discontinued operations, net* (1) (3) (79) (1)
Tax effect of pre-tax
adjustments -- 172 -- 148
-------- -------- -------- --------
TOTAL CORE EARNINGS (LOSS) $ 323 $ (4) $ 999 $ 1,246
================================= ======== ======== ======== ========
*These amounts are shown after tax.
6
ITEMS AFFECTING COMPARABILITY OF CORE EARNINGS BETWEEN PERIODS
Fourth Quarter Twelve Months
------------------- -------------------
($ millions) 2002 2001 2002 2001
================================= ======== ======== ======== ========
INCOME / (EXPENSE)
OIL AND GAS
Exploration asset write-offs $ (25) $ -- $ (58) $ (66)
Self insurance and litigation
adjustments (4) -- (4) --
CHEMICALS
Asset idling and impairments -- (11) (37) (20)
State tax reserves adjustment 7 14 7 14
Self insurance and litigation
adjustments 15 -- 15 --
Reorganizations/severance -- -- (14) (17)
CORPORATE
Gain on sale of stock investment 32 -- 32 --
Environmental remediation (15) (60) (23) (109)
Equity earnings (a) (22) (20) (58) (80)
Interest - early debt
extinguishments -- (8) -- (12)
(a) Includes share of Equistar results that were previously reported in the
Chemical segment.
7
Item 9. Regulation FD Disclosure
------ ------------------------
Text of Speech by Stephen I. Chazen, Chief Financial Officer and
----------------------------------------------------------------
Executive Vice President - Corporate Development
------------------------------------------------
Occidental Petroleum Corporation
STEPHEN CHAZEN
Chief Financial Officer and
Executive Vice President - Corporate Development
- Conference Call -
Fourth Quarter 2002 Earnings Announcement
January 29, 2003
Los Angeles, California
Good morning, and thanks for joining us.
Those of you who have not received a copy of the press release announcing
our fourth quarter earnings, along with the Investor Relations Supplemental
Schedules, can find them on our website - oxy.com or on the SEC's EDGAR site. We
have added two schedules to the format we used in previous earnings
announcements.
The first schedule lists the "Significant Transactions and Events Affecting
Earnings" that impacted reported fourth quarter and annual earnings for 2002 and
2001. We have narrowly defined the term "Significant Transactions and Events" to
include only material gains and losses, discontinued operations and changes in
accounting standards.
The second schedule contains a list of items affecting comparability
between quarters and annually. We leave it to the individual users of this
schedule to decide whether to adjust our core earnings by segment or reporting
period. For the fourth quarter of 2002 these are U. S. source items so it would
be appropriate to apply a 35 percent tax rate to them.
Net income for the quarter was $322 million, or $0.85 per share. Net income
for the 2001 fourth quarter was a loss of $247 million, or $0.66 per share. If
the 2001 fourth quarter transactions and events are eliminated, core earnings
for the quarter would have been a loss of $4 million, or 1-cent per share.
On a segment basis, oil and gas fourth quarter earnings were $490 million,
compared to $166 million for the fourth quarter of 2001. The following factors
affected fourth quarter earnings.
o The increase in fourth quarter 2002 worldwide oil and gas price
realizations added $299 million of earnings over the comparable period
in 2001.
8
o Production in the fourth quarter 2002 was 7.5 percent higher than the
fourth quarter of 2001 and accounted for $35 million of earnings.
Production started up at Horn Mountain late in the fourth quarter.
When this project becomes fully operational later this year, we expect
our share of production to be approximately 20,000 BOE per day.
o Exploration expense was $61 million in the quarter compared to $54
million in fourth quarter of 2001. The fourth quarter 2002 expense
includes a $25 million write-off for the Thunderball deep gas well in
California.
For the year 2002, oil and gas segment earnings were $1.7 billion compared
to $2.8 billion in 2001. The single largest factor accounting for the variance
was substantially higher natural gas prices in 2001, particularly in California,
which made up $830 million of the difference. The other major factor was the
2001 sale of our Indonesian gas interests for $399 million. These factors were
partially offset by higher oil prices and higher production in 2002.
Chemical segment earnings for the fourth quarter 2002 were $58 million
compared to a loss of $412 million in the fourth quarter of 2001. The fourth
quarter 2001 included a pre-tax charge of $412 million related to the announced
sale of our interest in Equistar. Excluding this significant item, earnings from
our core chemical operations were break-even in the 2001 fourth quarter.
The primary factors affecting fourth quarter 2002 chemical earnings
compared to the 2001 fourth quarter were:
o higher chlorine, PVC and ethylene dichloride prices, and;
o the elimination of the Equistar loss.
The chemical business weakened in October and November, but strengthened in
December. PVC markets and prices are strong and we expect caustic prices to
strengthen this year.
For the year, our consolidated net income was $989 million, or $2.63 per
share, compared to $1.2 billion, or $3.10 per share, in 2001.
Cash flow from operations for the year was approximately $2.1 billion.
Interest expense, including distributions on trust-preferred securities,
was $70 million during the fourth quarter 2002, compared to $92 million in the
2001 fourth quarter. Included in the fourth quarter of 2001 was a one-time
charge of $8 million relating to early debt extinguishment. For the year 2002,
total interest expense of $320 million was $112 million less than our interest
expense in 2001.
Turning to the year-end 2002 balance sheet, we increased shareholder equity
to $6.3 billion, or $684 million higher than the year-end 2001 level. At the
same time, we reduced total debt by $131 million to $4.76 billion, compared to
$4.89 billion at the end of 2001. At the end of last year, our debt to total
capitalization ratio was down to 43-percent, compared to 46-percent at the end
of 2001.
9
At the end of the year we had approximately $146 million of cash.
Capital spending for the quarter was $396 million and $1.2 billion for the
year. We expect total spending for 2003 to be at roughly the same level. The
company also made acquisitions in 2002 totaling $485 million, including $350 for
our interest in the Dolphin Project.
As we look forward in the first quarter of this year:
o We expect production to average about 525,000 BOE per day - which is
consistent with our 2003 forecast. This could vary slightly due to
high oil prices affecting our production sharing contracts in Oman,
Qatar, Yemen and THUMS. Also, Colombia production is always difficult
to forecast.
o We expect exploration expense for the quarter to be about $35 million.
o Chemical earnings should be in the range of $60 million. This outlook
is based on current conditions featuring high energy prices and new
prices for caustic as well as seasonal factors which typically result
in the fourth and first quarters being weak. We expect quarterly
earnings to increase during the remainder of the year.
o We expect interest expense, including distributions on trust-preferred
securities, to be about $75 million. This does not include an unusual
charge which I'll discuss later.
o We record the equity earnings from our 34.5 million shares of Lyondell
in corporate "Other" and we rely on the estimates provided by
Lyondell's management.
o A $1.00 per barrel change in oil prices impacts segment quarterly
earnings by about $27.5 million. The WTI price in the fourth quarter
was $28.15. A swing of 10-cents per million BTUs in gas prices has a
$6 million impact on quarterly oil and gas earnings. The NYMEX gas
price for the fourth quarter was $3.57.
o Our tax rate in the first quarter should be about 33 percent. This
reflects our expectation of higher U.S. source income during 2003 than
in 2002.
There are three unusual items we expect in the first quarter.
1) The adoption of accounting standard 143, which is related to asset
abandonment costs, requires companies to record on their books the
present value of the liability for the ultimate abandonment of the
fixed asset when the asset is placed in service. For Oxy, this is
expected to result in a non-cash cumulative catch-up charge of
approximately $50 million after-tax in the first quarter for assets
currently in service. This is primarily related to on-shore oil and
gas properties. In addition, there will be an annual pre-tax non-cash
charge to income of about $17 million to reflect the accretion of the
liability and higher depreciation expense. The actual cash abandonment
cost will not be incurred until the asset is retired.
10
2) The FASB has rescinded EITF Issue Number 98-10 that was in effect
since 1999 which required the mark to market of non-derivative trading
positions. In Oxy's case, non-derivative energy trading positions
relate mainly to physical natural gas inventories.
As a result of the change by FASB, we must reverse the mark to market
gain for the physical gas inventory that was on our books at year-end.
This reversal will result in a non-cash, after-tax charge of about $18
million in the first quarter. As the gas is sold, we will book the
gains in operating income. We expect to realize about $13 million in
income in the first quarter and the remainder later in the year.
3) We also expect to record a pre-tax interest charge of $50-$70 million
to repay a $450 million bond issue that has 10 years of remaining
life. We intend to refinance this issue. This action will lower our
future interest expense.
We have been focusing on improving our returns on equity and capital
employed - and the results have been striking as we have moved from the bottom
to the top quartile among our oil and gas competitors during the last four
years.
For the year 2002, our return on equity was nearly 17 percent and the four
year average from 1999 through 2002 was about 21 percent. During that same
four-year period our equity increased from $3.5 billion to $6.3 billion.
Our return on capital employed for 2002 was 11 percent and the four year
average was 13 percent.
And finally, I would like to remind everyone that we announced a 4 percent
increase in our annual dividend rate last December and indicated that we would
review our dividend policy annually.
Our chairman and CEO, Dr. Ray Irani, is traveling on business and is unable
to tie into this conference call. I am joined this morning by our president,
Dale Laurance, and we're now ready to answer questions.
11
Supplemental Investor Information
---------------------------------
Investor Relations Supplemental Schedules
[OXY LOGO]
OCCIDENTAL PETROLEUM
2002 Fourth Quarter
Net Income (Loss)
($ millions)
REPORTED CORE
INCOME SIGNIFICANT ITEMS AFFECTING INCOME EARNINGS
-------- ---------------------------------- --------
Oil & Gas $ 490 $ 490
Chemical 58 58
Corporate
Interest (58) (58)
Trust pfd distributions & other (12) (12)
Other (41) (41)
Taxes (114) (114)
-------- -------- --------
Income from continuing operations 323 -- 323
Discontinued operations, net (1) 1 Discontinued operations --
-------- -------- --------
NET INCOME $ 322 $ 1 $ 323
======== ======== ========
BASIC EARNINGS PER SHARE $ 0.85 $ 0.86
======== ========
12
Investor Relations Supplemental Schedules
[OXY LOGO]
OCCIDENTAL PETROLEUM
2001 Fourth Quarter
Net Income (Loss)
($ millions)
REPORTED CORE
INCOME SIGNIFICANT ITEMS AFFECTING INCOME EARNINGS
-------- ---------------------------------- --------
Oil & Gas $ 166 $ 166
Chemical (412) 412 Equistar --
Corporate
Interest - Permian non-recourse debt (5) (5)
Interest - all others (74) (74)
Trust pfd distributions & other (13) (13)
Other (96) (96)
Taxes 190 (172) Tax effect of adjustments 18
-------- -------- --------
Income / (loss) from continuing operations (244) 240 (4)
Discontinued operations, net (3) 3 Discontinued operations --
-------- -------- --------
NET INCOME (LOSS) $ (247) $ 243 $ (4)
======== ======== ========
BASIC EARNINGS PER SHARE
Income / (loss) from continuing operations $ (0.65)
Discontinued operations, net (0.01)
--------
NET INCOME (LOSS) $ (0.66) $ (0.01)
======== ========
13
Investor Relations Supplemental Schedules
[OXY LOGO]
OCCIDENTAL PETROLEUM
2002 Total Year
Net Income (Loss)
($ millions)
REPORTED CORE
INCOME SIGNIFICANT ITEMS AFFECTING INCOME EARNINGS
-------- ---------------------------------- --------
Oil & Gas $ 1,707 $ 1,707
Chemical 275 (164) Sale of Equistar investment 111
Corporate
Interest (275) (275)
Trust pfd distributions & other (45) (45)
Other (135) (135)
Taxes (364) (364)
-------- -------- --------
Income from continuing operations 1,163 (164) 999
Discontinued operations, net (79) 79 Discontinued operations --
Cumulative effect of changes in accounting (95) 95 Goodwill impairment --
principles, net
-------- -------- --------
NET INCOME $ 989 $ 10 $ 999
======== ======== ========
BASIC EARNINGS PER SHARE
Income from continuing operations $ 3.09
Discontinued operations, net (0.21)
Cumulative effect of changes in accounting (0.25)
principles, net
--------
NET INCOME $ 2.63 $ 2.66
======== ========
14
Investor Relations Supplemental Schedules
[OXY LOGO]
OCCIDENTAL PETROLEUM
2001 Total Year
Net Income (Loss)
($ millions)
REPORTED CORE
INCOME SIGNIFICANT ITEMS AFFECTING INCOME EARNINGS
-------- ---------------------------------- --------
Oil & Gas $ 2,845 $ (399) Indonesia - Tangguh LNG $ 2,446
Chemical (399) 412 Equistar 13
Corporate
Interest - Permian non-recourse debt (74) (74)
Interest - all others (300) (300)
Trust pfd distributions & other (58) (58)
Other (476) 272 Occidental Texas Pipeline (204)
Taxes (359) (70) State tax reserve reversal (577)
(148) Tax effect of adjustments
-------- -------- --------
Income from continuing operations 1,179 67 1,246
Discontinued operations, net (1) 1 Discontinued operations --
Cumulative effect of changes in accounting (24) 24 Derivative & hedge accounting --
principles, net
-------- -------- --------
NET INCOME $ 1,154 $ 92 $ 1,246
======== ======== ========
BASIC EARNINGS PER SHARE
Income from continuing operations $ 3.16
Discontinued operations, net --
Cumulative effect of changes in accounting (0.06)
principles, net
--------
NET INCOME $ 3.10 $ 3.35
========= ========
15
Investor Relations Supplemental Schedules
[OXY LOGO]
OCCIDENTAL PETROLEUM
Items Affecting Comparability of Core Earnings Between Periods
INCOME / (EXPENSE) FOURTH QUARTER TWELVE MONTHS
----------------------- -----------------------
2002 2001 2002 2001
---------- ---------- ---------- ----------
OIL & GAS
Exploration asset write-offs $ (25) $ -- $ (58) $ (66)
Self insurance and litigation (4) -- (4) --
adjustments
CHEMICALS
Asset idling and impairments -- (11) (37) (20)
State tax reserves adjustment 7 14 7 14
Self insurance and litigation 15 -- 15 --
adjustments
Reorganizations / severance -- -- (14) (17)
CORPORATE
Gain on sale of stock investment 32 -- 32 --
Environmental remediation (15) (60) (23) (109)
Equity earnings (a) (22) (20) (58) (80)
Interest - early debt extinguishments -- (8) -- (12)
(a) Includes share of Equistar results that were previously reported in the
Chemcial segment
16
Investor Relations Supplemental Schedules
[OXY LOGO]
OCCIDENTAL PETROLEUM
2002 Fourth Quarter Net Income (Loss)
Reported Income Comparison
FOURTH THIRD
QUARTER QUARTER
2002 2002 B / (W)
--------- --------- ---------
OIL & GAS $ 490 $ 490 $ --
CHEMICAL 58 214 (156)
CORPORATE
INTEREST - ALL OTHERS (58) (73) 15
TRUST PFD DISTRIBUTIONS & OTHER (12) (12) --
OTHER (41) (38) (3)
TAXES (114) (105) (9)
--------- --------- ---------
INCOME FROM CONTINUING OPERATIONS 323 476 (153)
DISCONTINUED OPERATIONS, NET (1) (74) 73
--------- --------- ---------
NET INCOME $ 322 $ 402 $ (80)
========= ========= =========
BASIC EARNINGS PER SHARE $ 0.85 $ 1.07 $ (0.22)
========= ========= =========
EFFECTIVE TAX RATE 26% -152% -178%
========= ========= =========
================================================================================
OCCIDENTAL PETROLEUM
2002 Fourth Quarter Net Income (Loss)
Core Earnings Comparison
FOURTH THIRD
QUARTER QUARTER
2002 2002 B / (W)
--------- --------- ---------
OIL & GAS $ 490 $ 490 $ --
CHEMICAL 58 50 8
CORPORATE
INTEREST - ALL OTHERS (58) (73) 15
TRUST PFD DISTRIBUTIONS & OTHER (12) (12) --
OTHER (41) (38) (3)
TAXES (114) (105) (9)
--------- --------- ---------
NET INCOME $ 323 $ 312 $ 11
========= ========= =========
BASIC EARNINGS PER SHARE $ 0.86 $ 0.83 $ 0.03
========= ========= =========
EFFECTIVE TAX RATE 26% 24% -2%
========= ========= =========
17
Investor Relations Supplemental Schedules
[OXY LOGO]
OCCIDENTAL PETROLEUM
OIL & GAS
CORE EARNINGS VARIANCE ANALYSIS
($ MILLIONS)
2002 4th Quarter $ 490
2002 3rd Quarter 490
----------
$ --
==========
Price Variance $ 22
Volume Variance 12
Exploration Expense Variance (29)
All Other (5)
----------
TOTAL VARIANCE $ --
==========
================================================================================
OCCIDENTAL PETROLEUM
CHEMICAL
CORE EARNINGS VARIANCE ANALYSIS
($ MILLIONS)
2002 4th Quarter $ 58
2002 3rd Quarter 50
----------
$ 8
==========
Sales Price $ (15)
Sales Volume/Mix 0
Operations/Manufacturing (20)*
All Other 43 **
----------
TOTAL VARIANCE $ 8
==========
* Higher energy and feedstock costs
** Includes lower equity earnings
18
Investor Relations Supplemental Schedules
[OXY LOGO]
OCCIDENTAL PETROLEUM
2002 Fourth Quarter Net Income (Loss)
Reported Income Comparison
FOURTH THIRD
QUARTER QUARTER
2002 2002 B / (W)
--------- --------- ---------
OIL & GAS $ 490 $ 166 $ 324
CHEMICAL 58 (412) 470
CORPORATE
INTEREST - PERMIAN NON-RECOURSE DEBT -- (5) 5
INTEREST - ALL OTHERS (58) (74) 16
TRUST PFD DISTRIBUTIONS & OTHER (12) (13) 1
OTHER (41) (96) 55
TAXES (114) 190 (304)
--------- --------- ---------
INCOME FROM CONTINUING OPERATIONS 323 (244) 567
DISCONTINUED OPERATIONS, NET (1) (3) 2
--------- --------- ---------
NET INCOME $ 322 $ (247) $ 569
========= ========= =========
BASIC EARNINGS PER SHARE $ 0.85 $ (0.66) $ 1.51
========= ========= =========
EFFECTIVE TAX RATE 26% 43% 17%
========= ========= =========
================================================================================
OCCIDENTAL PETROLEUM
2002 Fourth Quarter Net Income (Loss)
Core Earnings Comparison
FOURTH THIRD
QUARTER QUARTER
2002 2002 B / (W)
--------- --------- ---------
OIL & GAS $ 490 $ 166 $ 324
CHEMICAL 58 -- 58
CORPORATE
INTEREST - PERMIAN NON-RECOURSE DEBT -- (5) 5
INTEREST - ALL OTHERS (58) (74) 16
TRUST PFD DISTRIBUTIONS & OTHER (12) (13) 1
OTHER (41) (96) 55
TAXES (114) 18 (132)
--------- --------- ---------
NET INCOME $ 323 $ (4) $ 327
========= ========= =========
BASIC EARNINGS PER SHARE $ 0.86 $ (0.01) $ 0.87
========= ========= =========
EFFECTIVE TAX RATE 26% 85% 59%
========= ========= =========
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Investor Relations Supplemental Schedules
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OCCIDENTAL PETROLEUM
OIL & GAS
CORE EARNINGS VARIANCE ANALYSIS
($ MILLIONS)
2002 4th Quarter $ 490
2001 4th Quarter 166
----------
$ 324
==========
Price Variance $ 299
Volume Variance 35
Exploration Expense Variance (8)
All Other (2)
----------
TOTAL VARIANCE $ 324
==========
================================================================================
OCCIDENTAL PETROLEUM
CHEMICAL
CORE EARNINGS VARIANCE ANALYSIS
($ MILLIONS)
2002 4th Quarter $ 58
2001 4th Quarter --
----------
$ 58
==========
Sales Price $ 62
Sales Volume/Mix 3
Operations/Manufacturing (58)*
All Other 51 **
----------
TOTAL VARIANCE $ 58
==========
* Higher energy and feedstock costs.
** Includes higher equity earnings
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Investor Relations Supplemental Schedules
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OCCIDENTAL PETROLEUM
--------------------
SUMMARY OF OPERATING STATISTICS
-------------------------------
FOURTH QUARTER TWELVE MONTHS
--------------------- ---------------------
2002 2001 2002 2001
-------- -------- -------- --------
NET PRODUCTION PER DAY:
UNITED STATES
CRUDE OIL AND LIQUIDS (MBL)
California 84 82 86 76
Permian 142 137 142 137
US Other 6 -- 4 -
-------- -------- -------- --------
TOTAL 232 219 232 213
NATURAL GAS (MMCF)
California 266 297 286 303
Hugoton 139 153 148 159
Permian 133 150 130 148
-------- -------- -------- --------
TOTAL 538 600 564 610
LATIN AMERICA
CRUDE OIL (MBL)
Colombia 41 17 35 18
Ecuador 13 13 13 13
-------- -------- -------- --------
TOTAL 54 30 48 31
EASTERN HEMISPHERE
CRUDE OIL (MBL)
Oman 13 14 13 12
Pakistan 12 7 10 7
Qatar 37 43 42 43
Russia 29 28 27 27
Yemen 39 32 38 33
-------- -------- -------- --------
TOTAL 130 124 130 122
NATURAL GAS (MMCF)
Pakistan 76 51 63 50
BARRELS OF OIL EQUIVALENT (MBOE) 518 482 515 476
--------------------------------- ======== ======== ======== ========
CONSOLIDATED SUBSIDIARIES 516 482 514 476
NON-CONSOLIDATED INTERESTS - NET 2 -- 1 -
-------- -------- -------- --------
TOTAL WORLDWIDE PRODUCTION (MBOE) 518 482 515 476
======== ======== ======== ========
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Investor Relations Supplemental Schedules
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SUMMARY OF OPERATING STATISTICS
-------------------------------
FOURTH QUARTER TWELVE MONTHS
--------------------- ---------------------
2002 2001 2002 2001
-------- -------- -------- --------
OIL & GAS:
---------
PRICES
UNITED STATES
Crude Oil ($/BBL) 25.40 16.79 23.47 21.74
Natural gas ($/MCF) 3.36 2.44 2.89 6.40
LATIN AMERICA
Crude oil ($/BBL) 25.03 15.36 23.01 19.95
EASTERN HEMISPHERE
Crude oil ($/BBL) 23.31 17.43 22.05 21.32
Natural Gas ($/MCF) 1.94 2.16 2.08 2.29
FOURTH QUARTER TWELVE MONTHS
--------------------- ---------------------
2002 2001 2002 2001
-------- -------- -------- --------
Exploration Expense
Domestic $ 48 $ 21 $ 120 $ 58
Latin America 3 5 20 77
Eastern Hemisphere 10 28 36 49
-------- -------- -------- --------
TOTAL $ 61 $ 54 $ 176 $ 184
======== ======== ======== ========
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Investor Relations Supplemental Schedules
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OCCIDENTAL PETROLEUM
CHEMICALS
Volume (M Tons)
FOURTH QUARTER TWELVE MONTHS
--------------------- ---------------------
MAJOR PRODUCTS 2002 2001 2002 2001
-------- -------- -------- --------
Chlorine 686 636 2,807 2,847
Caustic 684 678 2,717 2,857
Ethylene Dichloride 187 151 573 735
PVC Resins 917 822 4,132 3,950
CHEMICALS
Prices (Index)
FOURTH QUARTER TWELVE MONTHS
--------------------- ---------------------
MAJOR PRODUCTS 2002 2001 2002 2001
-------- -------- -------- --------
Chlorine 1.57 0.61 1.01 0.74
Caustic 0.66 1.18 0.71 1.33
Ethylene Dichloride 0.99 0.44 1.01 0.61
PVC Resins 0.82 0.52 0.73 0.68
CHLORINE
--------
OXYCHEM COMMENTARY
------------------
o Overall demand in the 4th quarter was down as expected due to the seasonal
decline in the PVC market. However, a rebound occurred in December as
buyers began building inventories in anticipation of a stronger 1st quarter
demand.
o Industry effective operating rates dropped to 85% in the 4th quarter from
94% in the 3rd quarter. Rates are expected to increase in the 1st quarter
2003 as demand continues to improve.
o Despite the reduced operating rates, prices remained stable throughout the
4th quarter, aided by expectations of a tightening market in early 2003.
INFLUENCING FACTORS:
-------------------
An expected economic recovery in 2003 combined with a lack of new capacity is
expected to tighten the market, increase operating rates and improve prices.
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Investor Relations Supplemental Schedules
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CAUSTIC
-------
OXYCHEM COMMENTARY
------------------
o Demand for caustic soda continued to improve in the 4th quarter despite a
seasonal slowdown in the bleach market. Demand improved in several major
market segments including pulp and paper, refining, organic chemicals and
alumina. Demand in the 1st quarter 2003 is expected to remain at current
levels.
o Domestic pricing for caustic soda improved as a result of a $50 per ton
price increase announced by U.S. producers for the 4th quarter. An
additional $70 per ton increase was announced for the 1st quarter 2003 but
subsequently moderated to $40 per ton.
INFLUENCING FACTORS:
-------------------
Supply and demand for caustic soda remains balanced. Demand is dependent on the
US manufacturing sector. The anticipated improvement in the US economy in
conjunction with a strengthening global economy and reduced US operating
capacity is expected to support continued price improvement.
EDC
---
OXYCHEM COMMENTARY
------------------
o The supply/demand balance tightened in the 4th quarter as a result of low
inventory levels of PVC, VCM and EDC in Asia.
o The downward pressure on prices experienced in the 3rd quarter and early in
the 4th quarter has reversed itself. As the PVC market has improved, buyers
have been accepting higher EDC prices in anticipation of higher PVC prices.
INFLUENCING FACTORS:
-------------------
Continued growth in China and an increasing demand for EDC, VCM and PVC is
expected to result in further improvements in EDC prices.
PVC/VCM
-------
OXYCHEM COMMENTARY
------------------
o Demand was slow going into the 4th quarter due to the seasonal slowdown in
the pipe sector. This changed in mid-December as resin producers began
announcing price increases for January and pipe prices improved.
o OxyVinyls' PVC operating rates for the 4th quarter were at 88%. The
estimated industry average operating rate was 85%. The feedstock shortages
seen earlier in the
24
Investor Relations Supplemental Schedules
[OXY LOGO]
year have temporarily eased as producers had sufficient chlorine and VCM to
operate at rates necessary to meet demand and rebuild some inventory.
Capacities used to calculate operating rates have been modified to exclude
both the former Borden Geismar and Addis facilities, which are currently
idle. These plants are not expected to start up during the 1st half of
2003.
o Domestic PVC resin market prices decreased $.01/lb in September, October,
and November, and were flat in December. A $.02/lb increase was implemented
January 1, 2003. An additional $.02/lb increase was announced by several
resin producers for February.
o Demand for PVC exports to Asia was weak going into the quarter but improved
in November due to VCM outages and raw material shortages in the region.
Prices bottomed out at $470/MT in mid-November, increasing to $520-530/MT
in late-November and $580-600/MT by late-December.
o Demand for VCM tapered off gradually throughout the quarter, due primarily
to seasonal reductions in the PVC market, although not as much as
previously expected. Some VCM producers reduced rates in an effort to
manage inventory levels, while others built inventory for planned outages
in early 2003 or attempted to capitalize on spot shipments. Demand is
expected to increase in the 1st quarter 2003 as the PVC market improves.
o Export VCM prices declined in 4th quarter, which is typical for this time
of the year. The export price peaked in July at the $510-$530/MT but fell
each month, finishing the year at the $400-$420/MT level in December.
Increased PVC demand and pricing is expected to lead to improved prices for
VCM in the 1st quarter 2003.
INFLUENCING FACTORS:
-------------------
Increased demand and operating rates will result in increased prices for PVC and
VCM in the 1st quarter 2003, offsetting expected increases in energy and
feedstock costs.
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Investor Relations Supplemental Schedules
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OCCIDENTAL PETROLEUM
Chemical Segment
Historical Financials Excluding Petrochemicals
Average
1993 -
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2002
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ---------
EBIT $ 185 $ 236 $ 634 $ 414 $ 315 $ 243 $ 120 $ 216 $ 109 $ 195 $ 267
DD&A 190 184 178 145 158 152 182 183 184 183 174
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ---------
EBITDA 375 420 812 559 473 395 302 399 293 378 441
Capital Spending (1) (128) (153) (195) (215) (346) (300) (112) (148) (114) (108) (182)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ---------
Free Cash Flow (2) $ 247 $ 267 $ 617 $ 344 $ 127 $ 95 $ 190 $ 251 $ 179 $ 270 $ 259
====== ====== ====== ====== ====== ====== ====== ====== ====== ====== =========
(1) Excludes divestiture proceeds and acquisitions
(2) Excludes working capital changes
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SUMMARY OF OPERATING STATISTICS
FOURTH QUARTER TWELVE MONTHS
--------------------- ---------------------
2002 2001 2002 2001
-------- -------- -------- --------
Capital Expenditures ($MM)
Oil & Gas
California $ 62 $ 76 $ 240 $ 304
Permian 65 92 218 285
Other - U.S. 22 38 86 133
Latin America 29 46 106 102
Eastern Hemisphere 118 86 388 314
Chemicals 53 48 109 112
Corporate 47 14 89 58
-------- -------- -------- --------
TOTAL $ 396 $ 400 $ 1,236 $ 1,308
======== ======== ======== ========
DEPRECIATION, DEPLETION &
AMORTIZATION OF ASSETS ($MM)
Oil & Gas
Domestic $ 141 $ 144 $ 575 $ 540
Latin America 9 6 36 24
Eastern Hemisphere 56 47 209 186
Chemicals 44 44 183 184
Corporate 3 2 9 31
-------- -------- -------- --------
TOTAL $ 253 $ 243 $ 1,012 $ 965
======== ======== ======== ========
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OCCIDENTAL PETROLEUM
CORPORATE
($ millions)
31-DEC-02 31-DEC-01
------------- -------------
CAPITALIZATION
Oxy Long-Term Debt (including current maturities) $ 4,203 $ 4,065
Gas Sales Obligation (current and non-current) -- 282
Trust Preferred Securities 455 463
Subsidiary Preferred Stock 75 --
Others 26 80
------------- -------------
TOTAL DEBT $ 4,759 $ 4,890
============= =============
EQUITY $ 6,318 $ 5,634
============= =============
Total Debt To Total Capitalization 43% 46%
============= =============
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Investor Relations Supplemental Schedules
[OXY LOGO]
Portions of this presentation are "forward-looking statements" as defined by the
Private Securities Litigation Reform Act of 1995, and involve risks and
uncertainties that could significantly affect expected results. No assurance can
be given that the results or statement of expectations or beliefs will be
attained. Factors that may cause actual results to differ materially are
contained in the March 13, 2002 form 10-K on file with the SEC.
29
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 28, 2003 S. P. Dominick, Jr.
--------------------------------------------------
S. P. Dominick, Jr., Vice President and Controller
(Chief Accounting and Duly Authorized Officer)