Consolidated Results of Operations

Occidental (which means Occidental Petroleum Corporation (OPC) and/or one or more entities in which it owns a majority voting interest) reported net income for the first nine months of 2007 of $3.9 billion, on net sales of $13.3 billion, compared with net income of $3.3 billion, on net sales of $13.1 billion for the same period of 2006. Diluted earnings per common share were $4.69 and $3.78 for the first nine months of 2007 and 2006. Occidental reported net income for the third quarter of 2007 of $1.3 billion, on net sales of $4.8 billion, compared with net income of $1.2 billion, on net sales of $4.4 billion for the same period of 2006. Diluted earnings per common share were $1.58 for the third quarter of 2007, compared with diluted earnings per share of $1.36 for the same period of 2006.

Net income for the three and nine months ended September 30, 2007, included the following after-tax amounts: a $79 million gain from the sale of miscellaneous oil and gas interests, net of oil and gas asset impairments, and a $26 million gain from the sale of 2.4 million shares of Lyondell Chemical Company (Lyondell) common stock. Net income for the first nine months of 2007 also included a $167 million pre-tax interest charge for the redemption and partial repurchase of various debt issues and the following after-tax amounts: a $181 million gain from the sale of 18.6 million shares of Lyondell common stock, a $226 million gain from a series of transactions with BP p.l.c. (BP), a $412 million gain from the sale of Occidental's interest in a Russian joint venture, a $112 million gain from certain litigation settlements, and a $30 million provision for a plant closure related to environmental remediation. Net income for the nine months ended September 30, 2006, included a $415 million after-tax loss for the write-off of assets.

Net income for the three and nine months ended September 30, 2007, compared to the same periods of 2006, also was impacted by increased depreciation, depletion and amortization (DD&A) rates, higher operating expenses and lower margins for polyvinyl chloride resins. For the three and nine months ended September 30, 2007, crude oil and natural gas production were higher compared to the same periods in 2006. The three months ended September 30, 2007, compared to the same period in 2006 reflected higher crude oil prices, while the 2007 nine-month period reflects lower crude oil prices compared to 2006.

Selected Income Statement Items

The increase in net sales of $439 million for the three months ended September 30, 2007, compared with the same period of 2006, reflected higher crude oil prices and higher crude oil and natural gas production, partially offset by lower chemical prices. The increase in interest, dividends and other income of $95 million for the nine months ended September 30, 2007, compared with the same period of 2006, reflected $112 million of after-tax gains from certain litigation settlements in 2007. The gains on disposition of assets for the nine months ended September 30, 2007, included a $326 million pre-tax gain from the sale of 21 million shares of Lyondell and a gain of $412 million from the sale of Occidental's interest in a Russian joint venture. The gains on disposition of assets for the three and nine months ended September 30, 2007, included a pre-tax gain of $103 million from the sale of exploration properties in West Africa.

The increases in cost of sales of $231 million and $477 million for the three and nine months ended September 30, 2007, respectively, compared with the same periods of 2006, reflected higher DD&A rates and higher oil and gas production and maintenance costs. The increases in selling, general and administrative and other operating expenses of $61 million and $103 million for the three and nine months ended September, 30, 2007, respectively, compared to the same periods in 2006, included higher stock-based compensation expense and, for the nine month period only, foreign exchange losses in Colombia. Plant closure charges of $47 million are included in environmental remediation expenses for the nine months ended September 30, 2007. The increase in exploration expense of $52 million for the three months ended September 30, 2007, compared to the same period of 2006, was due to an increase in the Middle East/North Africa exploration program and impairments in California. The increase in exploration expense of $126 million for the nine months ended September 30, 2007, compared to the same period of 2006, was due to increases in the Colombia and Middle East/North Africa exploration programs

and impairments in California. Interest and debt expense for the nine months ended September 30, 2007, included a $167 million pre-tax charge for the redemption and partial repurchase of various debt issues. Otherwise, interest and debt expense for the three and nine months ended September 30, 2007, compared to the same periods in 2006, reflected lower debt levels in 2007. Discontinued operations for the nine months ended September 30, 2007, included an after-tax gain of $226 million from a series of transactions with BP, as well as the results of operations of these assets before disposal. Discontinued operations for the nine months ended September 30, 2006, included a $415 million after-tax loss for the write-off of assets and the after-tax results of the operations of Pakistan, Horn Mountain, Ecuador and the Vintage Petroleum, LLC (Vintage) properties held for sale.

Selected Analysis of Financial Position

The decrease in short-term investments of $240 million at September 30, 2007, compared with December 31, 2006, was due to the sale of Occidental's investments in auction rate securities. The increase in receivables, net of $856 million at September 30, 2007, compared with December 31, 2006, was due to higher crude oil and natural gas production and higher crude oil, natural gas, power and NGL volumes in the marketing and trading operations. The increase of $127 million in inventories at September 30, 2007, compared to December 31, 2006, reflects higher materials and supplies in Libya and Colombia and higher purchases from third parties in the marketing and trading operations. The decrease in assets of discontinued operations of $184 million at September 30, 2007, compared with December 31, 2006, was due to the sale of Pakistan operations and an exchange involving the Horn Mountain operations during the second quarter of 2007. The decrease in investments in unconsolidated entities of $590 million at September 30, 2007, compared to December 31, 2006, was due to the sale of 21 million shares of Lyondell common stock and the sale of Occidental's interest in a Russian joint venture. The increase in property, plant and equipment of $1.4 billion at September 30, 2007, compared with December 31, 2006, was due to capital expenditures in 2007 and various oil and gas acquisitions, partially offset by 2007 DD&A. The increase in other assets of $120 million at September 30, 2007, compared with December 31, 2006, reflected additional line-fill acquired from BP as part of the West Texas Pipeline System.

The increase of $805 million in accounts payable at September 30, 2007, compared to December 31, 2006, was mainly due to higher crude oil, natural gas, power and NGL volumes in the marketing and trading operations. The decrease in accrued liabilities of $255 million at September 30, 2007, compared to December 31, 2006, was due to 2007 payments for contingencies related to acquisitions, accrued interest and lower mark-to-market adjustments on derivative instruments. The decrease in domestic and foreign income taxes of $242 million at September 30, 2007, compared to December 31, 2006, was due to the adoption of FIN 48 and 2007 tax payments. The decrease in long-term debt of $871 million at September 30, 2007, compared to December 31, 2006, was due to the January 2007 debt repurchases under the cash tender offers and the May 2007 redemption of the Vintage senior notes due 2012. The decrease in minority interest of $247 million at September 30, 2007, compared with December 31, 2006, was due to the purchase of the minority interest of a chemical operation. The increase in the contra-equity treasury stock account of $910 million at September 30, 2007, compared with December 31, 2006, was due to the repurchase of approximately 17.4 million shares of stock in the nine months ended September 30, 2007.

Segment Operations

The following table sets forth the sales and earnings of each industry segment
and unallocated corporate items (in millions):

                                                              Periods Ended September 30
                                              Three Months Ended       Nine Months Ended
                                                2007        2006         2007       2006
Net Sales
Oil and gas                                $   3,536     $ 3,087    $   9,597   $  9,244
Chemical                                       1,241       1,265        3,530      3,779
Other                                             64          50          140        114
Net Sales                                  $   4,841     $ 4,402    $  13,267   $ 13,137
Segment Earnings
Oil and gas (a)                            $   2,029     $ 1,790    $   5,719   $  5,458
Chemical                                         212         248          507        749
                                               2,241       2,038        6,226      6,207
Unallocated Corporate Items
Interest expense, net (a)                        (11 )       (18 )       (186 )      (80 )
Income taxes                                    (862 )      (858 )     (2,450 )   (2,583 )
Other (a)                                        (52 )       (59 )         40       (212 )
Income from Continuing Operations              1,316       1,103        3,630      3,332
Discontinued operations, net of tax (a)            8          67          318        (71 )
Net Income                                 $   1,324     $ 1,170    $   3,948   $  3,261

(a) Refer to "Significant Items Affecting Earnings", "Oil and Gas Segment", "Chemical Segment" and "Corporate and Other" discussions that follow.

Significant Items Affecting Earnings

The following table sets forth the effects of significant transactions and
events affecting Occidental's earnings that vary widely and unpredictably in
nature, timing and amount for the three and nine months ended September 30, 2007
and 2006 (in millions):

                                                    Periods Ended September 30
                                               Three Months        Nine Months
                                             2007      2006       2007    2006
Oil & Gas
Gain on sale of a Russian joint venture    $    ?     $   ?    $   412   $   ?
Legal settlements                               ?         ?        112       ?
Gain on sale of oil and gas interests          12         ?         35       ?
Gain on sale of exploration properties        103         ?        103       ?
Impairments                                   (74 )       ?        (74 )     ?
Total Oil and Gas                          $   41     $   ?    $   588   $   ?
Chemical
No Significant Items Affecting Earnings    $    ?     $   ?    $     ?   $   ?
Total Chemical                             $    ?     $   ?    $     ?   $   ?
Corporate and Other
Debt purchase expense                      $    ?     $   ?    $  (167 ) $   ?
Gain on sale of Lyondell shares                42         ?        326       ?
Facility closure                                ?         ?        (47 )     ?
Tax effect of pre-tax adjustments              23         ?        (11 )     ?
Discontinued operations, net (1)                8        67        318     (71 )
Total Corporate and other                  $   73     $  67    $   419   $ (71 )

Total                                      $  114     $  67    $ 1,007   $ (71 )


(1) Amounts shown net of tax.

Worldwide Effective Tax Rate

The following table sets forth the calculation of the worldwide effective tax
rate for income from

continuing operations (in millions):

                                                 Periods Ended September 30
                                           Three Months         Nine Months
                                         2007      2006      2007      2006
Oil & Gas earnings (a)                $ 2,029   $ 1,790   $ 5,719   $ 5,458
Chemicals earnings                        212       248       507       749
Unallocated corporate & other items       (63 )     (77 )    (146 )    (292 )
Pre-tax income                          2,178     1,961     6,080     5,915
Income tax expense
Federal and state                         363       416     1,085     1,251
Foreign (a)                               499       442     1,365     1,332
Total                                     862       858     2,450     2,583

Income from continuing operations     $ 1,316   $ 1,103   $ 3,630   $ 3,332
Worldwide effective tax rate              40%       44%       40%       44%

(a) Revenues and income tax expense include taxes owed by Occidental but paid by governmental entities on its behalf. Oil and gas pre-tax income includes revenue amounts by period (in millions): third quarter 2007-$331 and third quarter 2006-$299, first nine months 2007-$919 and first nine months 2006-$871.

Oil and Gas Segment

                                                          Periods Ended September 30
                                                    Three Months         Nine Months
Summary of Operating Statistics                   2007      2006      2007      2006
Net Production per Day:
Crude Oil and Natural Gas Liquids (MBBL)
United States                                      265       255       259       253
Latin America                                       73        70        76        68
Middle East/North Africa                           109       100       115       111
Natural Gas (MMCF)
United States                                      604       592       597       585
Latin America                                       40        35        41        34
Middle East                                        103        35        54        32
Barrels of Oil Equivalent (MBOE) per day (a)
Consolidated subsidiaries                          572       535       566       541
Other interests                                     (2 )      (2 )      (3 )      (2 )
Worldwide production - continuing operations       570       533       563       539
Average Sales Price:
Crude Oil ($/BBL)
United States                                  $ 68.83   $ 62.38   $ 59.71   $ 59.74
Latin America                                  $ 60.77   $ 55.19   $ 53.00   $ 54.58
Middle East/North Africa                       $ 71.30   $ 65.84   $ 63.93   $ 62.85
Total consolidated subsidiaries                $ 67.87   $ 61.85   $ 59.52   $ 59.62
Other interests                                $ 74.08   $ 64.71   $ 65.30   $ 64.13
Worldwide production - continuing operations   $ 67.81   $ 61.83   $ 59.47   $ 59.61
Natural Gas ($/MCF)
United States                                  $  5.90   $  5.88   $  6.45   $  6.79
Latin America                                  $  2.68   $  2.08   $  2.31   $  1.91
Worldwide production - continuing operations   $  5.05   $  5.42   $  5.78   $  6.25

(a) Natural gas volumes have been converted to equivalent BOE based on energy content of 6,000 cubic feet (one thousand cubic feet is referred to as a "Mcf") of gas to one barrel of oil.

Oil and gas segment earnings for the three and nine months ended September 30, 2007, were $2.0 billion and $5.7 billion, respectively, compared with $1.8 billion and $5.5 billion of segment earnings for the same periods of 2006. Oil and gas segment earnings for the three and nine months ended September 30, 2007, included pre-tax gains of $12 million from the sale of miscellaneous domestic oil and gas interests and $103 million from the sale of exploration properties, partially offset by a $74 million pre-tax charge from the impairment of assets. Oil and gas earnings for the nine months ended September 30, 2007 also included an after-tax gain of $412 million from the sale of Occidental's interest in a Russian joint venture, an after-tax gain of $112 million from certain litigation settlements and an additional $23 million pre-tax gain from the sale of domestic oil and gas interests. The increase in oil and gas segment earnings for the third quarter of 2007, compared to the same period of 2006, reflected higher crude oil prices and production volumes, partially offset by increased DD&A rates and higher exploration and operating expenses. In addition to the matters discussed above, oil and gas segment earnings for the nine months ended September 30, 2007, compared to the same period in 2006, reflected lower crude oil and natural gas prices, increased DD&A rates and higher operating expenses, partially offset by higher crude oil and natural gas production.

In the third quarter of 2007, the average West Texas Intermediate (WTI) price was $75.38 per barrel and the average New York Mercantile Exchange (NYMEX) price for natural gas was $6.69 per million BTUs, compared to $70.53 per barrel and $6.33 per million BTUs, respectively, for the third quarter of 2006. Occidental's realized oil price for the third quarter of 2007 was $67.81 per barrel compared to $61.83 per barrel for the third quarter of 2006. A change of 50 cents per million BTUs in domestic NYMEX gas prices impacts quarterly oil and gas segment earnings by approximately $24 million, while a $1.00 per-barrel change in oil prices has a quarterly pre-tax impact of approximately $35 million before the effect of the Dolphin Project (Dolphin).

The increase in production for the three and nine months ended September 30, 2007, compared to the same periods of 2006, was due to the increase in production from Dolphin and the Middle East/North Africa region, Colombia and the full year effect of the 2006 acquisition of oil and gas assets from Plains Exploration and Production Co. (Plains).

Average production cost for the first nine months of 2007 was $12.56 per BOE compared to the average annual 2006 production cost of $11.70 per BOE. The increase was a result of higher field operating and maintenance costs mainly in the U.S. and Latin America.

In September 2007, Occidental sold its exploration properties in West Africa and recorded a pre-tax gain of $103 million.

In June 2007, Occidental completed a fair value exchange under which BP acquired Occidental's oil and gas interests in Horn Mountain and cash and Occidental acquired oil and gas interests in the Permian Basin and a gas processing plant in Texas from BP. Occidental also purchased for cash BP's West Texas Pipeline System and, in a separate transaction, Occidental sold its oil and gas interests in Pakistan to BP. As a result of these transactions, both the Horn Mountain and Pakistan operations were classified as discontinued operations for all periods presented. The nine months of 2007 includes after-tax gains of $226 million related to these transactions.

In January 2007, Occidental sold its interest in a Russian joint venture to TNK-BP for approximately $485 million and recorded an after-tax gain of $412 million.

Chemical Segment

Chemical segment earnings for the three and nine months ended September 30, 2007, were $212 million and $507 million, respectively, compared with $248 million and $749 million for the same periods of 2006. The decrease in chemical segment earnings for the three and nine months ended September 30, 2007, compared with the same periods of 2006, was due to lower margins on polyvinyl chloride resins.

Corporate and Other

In 2007, Occidental sold all of its shares of Lyondell common stock (approximately 21 million shares) for a price of approximately $32 per share and recorded an after-tax gain of $208 million.

In May 2007, Occidental redeemed all $276 million of the outstanding principal amount of its 8.25-percent Vintage senior notes due 2012. In January 2007, Occidental completed cash tender offers for its 10.125-percent senior debentures due 2009, 9.25-percent senior debentures due 2019, 8.75-percent senior notes due 2023, 7.2-percent senior debentures due 2028 and 8.45-percent senior notes due 2029, resulting in the repurchase of a portion of these debt instruments totaling $659 million in principal amount. The redemption and repurchases resulted in a pre-tax interest expense of $167 million.

Liquidity and Capital Resources

Occidental's net cash provided by operating activities was $4.3 billion for the first nine months of 2007, compared with $4.8 billion for the same period of 2006. The most important drivers for the decrease in operating cash flow in

2007, compared to 2006, were lower chemical margins and the reduction of operating cash flow from discontinued operations partially offset by increases in cash flow provided by oil and gas continuing operations.

Occidental's net cash used by investing activities was $1.8 billion for the first nine months of 2007, compared with $3.6 billion for the same period of 2006. The 2007 amount included cash proceeds of $672 million from the sale of 21 million shares of Lyondell, $485 million received from the sale of Occidental's interest in a Russian joint venture, $460 million from the sale of other businesses and properties, and $250 million from the sale of auction rate securities. The 2007 amount also included the cash paid for the acquisitions of the West Texas Pipeline System, a gas processing plant in Texas and various other oil and gas and chemical interests totaling $991 million. The 2006 amount included $1.3 billion in cash consideration paid as part of the Vintage acquisition and $859 million paid for the acquisition of certain oil and gas properties from Plains, partially offset by cash proceeds of $944 million from the Vintage assets held for sale. Capital expenditures for the first nine months of 2007 were $2.5 billion, including $2.3 billion for oil and gas. Capital expenditures for the first nine months of 2006 were $2.0 billion, including $1.8 billion for oil and gas.

Occidental's net cash used by financing activities was $2.4 billion in the first nine months of 2007, compared with $2.2 billion for the same period of 2006. The 2007 amount included net debt payments of $1.0 billion which included the repurchase of various debt issues under cash tender offers and the redemption of the Vintage senior notes due 2012. The 2007 amount also included $910 million of cash paid for repurchases of 17.4 million shares of Occidental's common stock at an average price of $52.27 per share through September 30, 2007. The weighted average basic shares for the nine months of 2007 totaled 837.0 million and the weighted average diluted shares totaled 840.9 million. At September 30, 2007, there were 829.7 million basic shares outstanding and 833.7 million shares outstanding on a diluted basis. The share repurchases will continue to be funded solely from available cash from operations. The 2006 amount included $1.3 billion of cash paid for repurchases of Occidental's common stock.

Available but unused lines of committed bank credit totaled approximately $1.5 billion at September 30, 2007, and cash and cash equivalents totaled $1.5 billion on the September 30, 2007 balance sheet.

At September 30, 2007, under the most restrictive covenants of certain financing agreements, Occidental's capacity for additional unsecured borrowing was approximately $52 billion, and the capacity for the payment of cash dividends and other distributions on, and for acquisitions of, Occidental's capital stock was approximately $20 billion, assuming that such dividends, distributions and acquisitions were made without incurring additional borrowing.

Occidental currently expects to spend approximately $3.5 billion on its 2007 capital spending program. Although its income and cash flows are largely dependent on oil and gas prices and production, Occidental believes that cash on hand and cash generated from operations will be sufficient to fund its operating needs, capital expenditure requirements and dividend payments.

In July 2007, Occidental's Board of Directors authorized an increase in the quarterly dividend to $0.25 per share of common stock compared to the previous quarterly rate of $0.22 per share.

Environmental Liabilities and Expenditures

Stringent federal, state, local and foreign laws and regulations relating to improving or maintaining environmental quality govern Occidental's operations. The laws that require or address environmental remediation may apply retroactively to past waste disposal practices and releases of substances to the environment. In many cases, the laws apply regardless of fault, legality of the original activities or current ownership or control of sites. OPC or certain of its subsidiaries currently participate in environmental assessments and cleanups under these laws at third-party sites, currently-owned sites and previously-owned sites.

At September 30, 2007, the current portion of Occidental's environmental remediation reserves ($79 million) is included in accrued liabilities and the remaining amount ($357 million) is included in deferred credits and other liabilities-other. The following table presents the environmental remediation reserves in three categories of sites ($ amounts in millions):

                            Number of    Reserve
                              Sites      Balance
CERCLA & equivalent sites         104   $     201
Active facilities                  21         156
Closed or sold facilities          42          79
Total                             167   $     436

In determining the environmental remediation reserves and the reasonably possible range of loss, Occidental refers to currently available information, including relevant past experience, available technology, regulations in effect, the timing of remediation and cost-sharing arrangements. Occidental believes it is reasonably possible that it will continue to incur additional liabilities beyond those recorded for environmental remediation at these sites. The range of reasonably possible loss for existing environmental remediation matters could be up to $400 million beyond the amount accrued.

The following table shows additional detail regarding reserves for Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) or CERCLA-equivalent proceedings in which OPC or certain of its subsidiaries were involved at September 30, 2007:

                                                Reserve
                                  Number        Balance
Description                      of Sites    (in millions)
Minimal/No Exposure (a)                84   $             4
Reserves between $1-10 million         14                47
Reserves over $10 million               6               150
Total                                 104   $           201

(a) Includes 30 sites for which Maxus Energy Corporation has retained the liability and indemnified Occidental, 6 sites where Occidental has denied liability without challenge, 36 sites where Occidental's reserves are less than $50,000 each, and 12 sites where reserves are between $50,000 and $1 million each.

Refer to the "Environmental Liabilities and Expenditures" section of Management's Discussion and Analysis of Financial Condition and Results of Operations in Occidental's Annual Report on Form 10-K for the year ended December 31, 2006 (2006 Form 10-K) for additional information regarding Occidental's environmental expenditures.

Lawsuits, Claims, Commitments, Contingencies and Related Matters

OPC or certain of its subsidiaries have been named in many lawsuits, claims and other legal proceedings. These actions seek, among other things, compensation for alleged personal injury, breach of contract, property damage, punitive damages, civil penalties or other losses, or injunctive or declaratory relief. OPC or certain of its

subsidiaries also have been named in proceedings under CERCLA and similar . . .