Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
OXY > SEC Filings for OXY > Form 10-Q on 5-Aug-2014All Recent SEC Filings

Show all filings for OCCIDENTAL PETROLEUM CORP /DE/

Form 10-Q for OCCIDENTAL PETROLEUM CORP /DE/


5-Aug-2014

Quarterly Report


Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations

Consolidated Results of Operations

In this report, "Occidental" means Occidental Petroleum Corporation (OPC), or OPC and one or more entities in which it owns a controlling interest (subsidiaries). Occidental reported net income of $1.4 billion for the second quarter of 2014 on net sales of $6.3 billion, compared to net income of $1.3 billion on net sales of $6.0 billion for the same period of 2013. Diluted earnings per share (EPS) were $1.82 and $1.64 for the second quarters of 2014 and 2013, respectively. Occidental reported net income of $2.8 billion for the first six months of 2014 on net sales of $12.4 billion, compared to net income of $2.7 billion on net sales of $11.8 billion for the same period of 2013. Diluted EPS were $3.58 for the six months of 2014, compared to $3.32 for the same period of 2013.

Net income for the three and six months ended June 30, 2014, compared to the same periods of 2013, reflected higher domestic realized prices for oil, gas, and natural gas liquids (NGLs), higher domestic oil volumes, and improved marketing and trading performance, partially offset by lower chemical earnings, lower Middle East and North Africa oil volumes, and higher operating costs.

Income for the three and six months ended June 30, 2014 included an after-tax gain of $341 million from the sale of Occidental's operations in Hugoton Field, and a $300 million after-tax impairment charge related to certain non-producing domestic oil and gas acreage.

Selected Income Statement Items

Net sales for the three and six months ended June 30, 2014, compared to the same periods of 2013, reflected higher domestic realized prices for oil, gas, and NGLs, higher domestic oil volumes, and improved marketing and trading performance, partially offset by lower Middle East and North Africa oil volumes.

Cost of sales for the three and six months ended June 30, 2014, compared to the same periods in 2013, reflected higher domestic oil and gas operating expenses, in particular the cost of energy, the higher cost of injectants, such as carbon dioxide (CO2 ) and steam, as well as higher raw material and manufacturing costs for the chemical segment.
The increase in the provision for domestic and foreign income taxes for the six months ended June 30, 2014, compared to the same period of 2013, was due to a higher pre-tax income and effective tax rate in 2014, compared to the 2013 rate, which included a benefit resulting from the relinquishment of an international exploration block.

Selected Analysis of Financial Position

See "Liquidity and Capital Resources" for discussion about the changes in cash and cash equivalents.

The increase in inventories was due to higher oil inventories at June 30, 2014, compared to December 31, 2013. The increase in other current assets reflected the timing of oil and gas joint venture and partner receivables. The increase in property, plant and equipment, net, reflected capital expenditures of $4.7 billion after partner contributions, partially offset by DD&A, asset sales and impairments.
The increase in accounts payable reflected an increase in drilling and production activity in the Permian and higher domestic marketing and trading volumes and crude prices during the second quarter of 2014. The decrease in accrued liabilities reflected the second quarter 2014 payments of ad valorem taxes and the final installment payment on a prior acquisition. The increase in deferred domestic and foreign income taxes was mainly due to accelerated tax depreciation on capital expenditures. The increase in stockholders' equity reflected net income for the six months of 2014 offset partially by stock repurchases and dividends.


Segment Operations

Occidental conducts its operations through three segments: (1) oil and gas;
(2) chemical; and (3) midstream, marketing and other (midstream and marketing). The oil and gas segment explores for, develops and produces oil and condensate, NGLs and natural gas. The chemical segment mainly manufactures and markets basic chemicals and vinyls. The midstream and marketing segment gathers, processes, transports, stores, purchases and markets oil, condensate, NGLs, natural gas, CO2 and power. It also trades around its assets, including transportation and storage capacity, and trades oil, NGLs, gas and other commodities. Additionally, the midstream and marketing segment invests in entities that conduct similar activities.

The following table sets forth the sales and earnings of each operating segment and corporate items for the three and six months ended June 30, 2014 and 2013 (in millions):

                                                             Three months ended June 30              Six months ended June 30
                                                               2014                2013              2014                2013
Net Sales (a)
Oil and Gas                                           $       4,807       $       4,721     $       9,483       $       9,161
Chemical                                                      1,242               1,187             2,462               2,362
Midstream and Marketing                                         530                 269               965                 722
Eliminations                                                   (304 )              (215 )            (547 )              (411 )
                                                      $       6,275       $       5,962     $      12,363       $      11,834
Segment Earnings (b)
Oil and Gas                                           $       2,182       $       2,100     $       4,286       $       4,020
Chemical                                                        133                 275               269                 434
Midstream and Marketing (c)                                     219                  48               389                 263
                                                              2,534               2,423             4,944               4,717

Unallocated Corporate Items (b)
Interest expense, net                                           (15 )               (29 )             (34 )               (59 )
Income taxes                                                   (957 )              (901 )          (1,889 )            (1,745 )
Other expense, net                                             (130 )              (166 )            (202 )              (227 )

Income from continuing operations (c)                         1,432               1,327             2,819               2,686
Discontinued operations, net                                     (1 )                (5 )               2                  (9 )

Net income attributable to common stock (c)           $       1,431       $       1,322     $       2,821       $       2,677

(a)Intersegment sales eliminate upon consolidation and are generally made at prices approximating those that the selling entity would be able to obtain in third-party transactions.
(b)Refer to "Significant Transactions and Events Affecting Earnings," "Oil and Gas Segment," "Chemical Segment," "Midstream and Marketing Segment" and "Corporate" discussions that follow.
(c)Represents amounts attributable to common stock shown after deducting a noncontrolling interest amount of $3 million and $5 million for the three and six months ended June 30, 2014, respectively.


Significant Transactions and Events Affecting Earnings

The following table sets forth, for the three and six months ended June 30, 2014
and 2013, significant transactions and events affecting Occidental's earnings
that vary widely and unpredictably in nature, timing and amount (in millions):

                                                             Three months ended June 30              Six months ended June 30
                                                              2014                 2013             2014                 2013

Oil & Gas
Hugoton sale gain                                     $        535         $          -     $        535         $          -
Asset impairments                                             (471 )                  -             (471 )                  -
Total Oil and Gas                                     $         64         $          -     $         64         $          -

Chemical
Carbocloro sale gain                                  $          -         $        131     $          -         $        131
Total Chemical                                        $          -         $        131     $          -         $        131

Midstream and Marketing
No significant items affecting earnings               $          -         $          -     $          -         $          -
Total Midstream and Marketing                         $          -         $          -     $          -         $          -

Corporate
Charge for former executives and consultants          $          -         $        (55 )   $          -         $        (55 )
Spin-off costs and other                                       (17 )                  -              (17 )                  -
Tax effect of pre-tax adjustments                              (19 )                (25 )            (19 )                (25 )
Discontinued operations, net*                                   (1 )                 (5 )              2                   (9 )
Total Corporate                                       $        (37 )       $        (85 )   $        (34 )       $        (89 )

Total                                                 $         27         $         46     $         30         $         42

*Amounts shown after tax.


Worldwide Effective Tax Rate

The following table sets forth the calculation of the worldwide effective tax
rate for income from continuing operations for the three and six months ended
June 30, 2014 and 2013 ($ in millions):

                                                             Three months ended June 30              Six months ended June 30
                                                               2014                2013              2014                2013

Oil & Gas earnings                                    $       2,182       $       2,100     $       4,286       $       4,020
Chemical earnings                                               133                 275               269                 434
Midstream and Marketing earnings                                219                  48               389                 263
Unallocated corporate items                                    (145 )              (195 )            (236 )              (286 )
Pre-tax income                                                2,389               2,228             4,708               4,431

Income tax expense
Federal and state                                               427                 332               805                 624
Foreign                                                         530                 569             1,084               1,121
Total                                                           957                 901             1,889               1,745

Income from continuing operations                     $       1,432       $       1,327     $       2,819       $       2,686

Worldwide effective tax rate (a)                                 40 %               40%                40 %               39%

(a) The six months ended 2013 amount includes the benefit from the relinquishment of an international exploration block.


Oil and Gas Segment

The following tables set forth the production and sales volumes of oil, NGLs and
natural gas per day for the three and six months ended June 30, 2014 and
2013. The differences between the production and sales volumes per day are
generally due to the timing of shipments at Occidental's international locations
where the product is loaded onto tankers.

                                                         Three months          Six months
                                                        ended June 30       ended June 30
Production per Day                                     2014      2013      2014      2013

Oil (MBBL)
United States (a)                                       278       261       275       262
Middle East/North Africa                                174       193       169       184
Latin America                                            19        28        24        29
NGLs (MBBL)
United States (a)                                        72        77        74        77
Middle East/North Africa                                  7         7         7         7
Natural Gas (MMCF)
United States (a)                                       718       792       737       808
Middle East/North Africa                                420       433       412       433
Latin America                                            12        13        12        13
Total production (MBOE) (a,b)                           742       772       743       768

Sales Volumes per Day

Oil (MBBL)
United States (a)                                       278       261       275       262
Middle East/North Africa                                168       186       160       172
Latin America                                            24        26        28        28
NGLs (MBBL)
United States (a)                                        72        77        74        77
Middle East/North Africa                                  7         7         7         7
Natural Gas (MMCF)
United States (a)                                       720       795       738       810
Middle East/North Africa                                420       433       412       433
Latin America                                            12        13        12        13
Total sales volumes (MBOE) (a,b)                        741       764       738       755

Note: MBBL represents thousand barrels. MMCF represents million cubic feet.
(a)Includes Hugoton daily production and sales volumes of 2 MBBL, 1 MBBL, and 16 MMCF for the three months ended June 30, 2014 and 6 MBBL, 3 MBBL, and 60 MMCF for the three months ended June 30, 2013, for oil, NGLs, and natural gas, respectively. Includes Hugoton daily production and sales volumes of 4 MBBL, 2 MBBL, and 35 MMCF for the six months ended June 30, 2014 and 6 MBBL, 3 MBBL, and 60 MMCF for the six months ended June 30, 2013 for oil, NGLs, and natural gas, respectively.
(b)Natural gas volumes have been converted to barrels of oil equivalent (BOE) based on energy content of six thousand cubic feet (Mcf) of gas to one barrel of oil. Barrels of oil equivalence does not necessarily result in price equivalence. The price of natural gas on a BOE basis is currently substantially lower than the corresponding price for oil and has been similarly lower for a number of years. For example, for the six months ending June 30, 2014 the average prices of West Texas Intermediate (WTI) oil and New York Mercantile Exchange (NYMEX) natural gas were $100.84 per barrel and $4.60 per Mcf, respectively, resulting in an oil-to-gas ratio of over 20 to 1.


The following tables present information about Occidental's average realized prices and index prices for the three and six months ended June 30, 2014 and 2013:

                                                       Three months ended June 30        Six months ended June 30
Average Realized Prices                                         2014         2013               2014         2013
Oil ($/BBL)
United States                                         $        97.48     $  95.08     $        96.72     $  93.33
Middle East/North Africa                              $       105.15     $ 101.83     $       104.91     $ 104.40
Latin America                                         $       101.30     $  98.85     $        99.73     $ 103.29
Total Worldwide                                       $       100.38     $  97.91     $        99.70     $  97.99
NGLs ($/BBL)
United States                                         $        43.91     $  39.70     $        45.30     $  40.15
Middle East/North Africa                              $        32.00     $  29.14     $        34.94     $  32.65
Total Worldwide                                       $        42.82     $  38.78     $        44.43     $  39.52
Natural Gas ($/MCF)
United States                                         $         4.28     $   3.82     $         4.43     $   3.44
Latin America                                         $        10.99     $  11.32     $        10.90     $  11.46
Total Worldwide                                       $         3.07     $   2.83     $         3.20     $   2.60



                                                       Three months ended June 30        Six months ended June 30
Average Index Prices                                            2014         2013               2014         2013
WTI oil ($/BBL)                                       $       102.99     $  94.22     $       100.84     $  94.30
Brent oil ($/BBL)                                     $       109.77     $ 103.35     $       108.83     $ 108.00
NYMEX gas ($/MCF)                                     $         4.55     $   4.00     $         4.60     $   3.68


                                                           Three months          Six months
                                                          ended June 30       ended June 30
Average Realized Prices as Percentage of Average
Index Prices                                            2014       2013     2014       2013
Worldwide oil as a percentage of average WTI             97%       104%      99%       104%
Worldwide oil as a percentage of average Brent           91%        95%      92%        91%
Worldwide NGLs as a percentage of average WTI            42%        41%      44%        42%
Domestic natural gas as a percentage of average
NYMEX                                                    94%        95%      96%        93%

Oil and gas segment earnings were $2.2 billion for the second quarter of 2014, which included a $535 million gain from the sale of the Hugoton Field operations and a $471 million charge for the impairment of domestic non-producing acreage, compared with $2.1 billion for the second quarter of 2013. The increase reflected higher domestic realized prices for all products and higher domestic oil volumes, partially offset by lower Middle East and North Africa oil volumes and higher operating costs.

For the second quarter of 2014, total company average daily oil and gas production volumes, excluding the Hugoton production, averaged 736,000 BOE, compared with 753,000 BOE in the second quarter of 2013. The sale of Hugoton assets closed on April 30, 2014. Hugoton production was 6,000 BOE per day and 19,000 BOE per day for the second quarter of 2014 and 2013, respectively. Domestic daily production increased by 13,000 BOE to 464,000 BOE in the second quarter of 2014 compared to 451,000 BOE in the second quarter of 2013. Domestic average oil production increased by 21,000 barrels per day, primarily from California and Permian Resources. International average daily production decreased to 272,000 BOE in the second quarter of 2014 from 302,000 BOE in second quarter of 2013. The decrease primarily resulted from insurgent activities in Colombia, continued field and port strikes in Libya and lower cost recovery barrels in Iraq. Worldwide average daily sales volumes decreased to 735,000 BOE in the second quarter of 2014 from 745,000 BOE in the second quarter of 2013, mainly due to the timing of liftings.


Worldwide realized crude oil prices increased by 3 percent to $100.38 per barrel for the second quarter of 2014 compared with $97.91 per barrel for the second quarter of 2013 and improved slightly compared to the first quarter of 2014. Worldwide NGL prices increased by 10 percent to $42.82 per barrel in the second quarter of 2014, compared with $38.78 per barrel in the second quarter of 2013, but decreased by 7 percent compared with $46.05 in the first quarter of 2014. Domestic natural gas prices increased 12 percent in the second quarter of 2014 to $4.28 per MCF compared with $3.82 in the second quarter of 2013, and fell by 6 percent compared with the first quarter of 2014.

Approximately 60 percent of Occidental's oil production tracks world oil prices, such as Brent, and 40 percent tracks WTI. For example, the realized pricing for Occidental's California oil production has typically exceeded WTI for comparable grades. Price changes at current global prices and levels of production affect Occidental's quarterly pre-tax income by approximately $37 million for a $1.00 per barrel change in global oil prices and approximately $7 million for a $1.00 per barrel change in NGL prices. A change of $0.50 per Mcf in domestic gas prices affects quarterly pre-tax earnings by approximately $25 million. These price change sensitivities include the impact of volume changes from production-sharing and similar contracts. If production levels change in the future, the sensitivity of Occidental's results to oil, NGLs and gas prices also would change.
Oil and gas earnings were $4.3 billion for the first six months of 2014, compared with $4.0 billion for the same period of 2013. The increase reflects higher domestic realized prices for all products, and higher domestic volumes partially offset by lower Middle East and North Africa oil volumes and higher operating costs.
Oil and gas production volumes, excluding Hugoton production for the first six months of 2014 averaged 731,000 BOE per day, compared with 749,000 BOE per day for the first six months of 2013. Domestic daily production averaged 460,000 BOE and 455,000 BOE for the first six months of 2014 and 2013, respectively. Average domestic oil production increased by 15,000 barrels per day in the first six months of 2014 compared to the first six months of 2013. Average international daily production volumes decreased to 271,000 BOE for the first six months of 2014 from 294,000 BOE for the first six months of 2013. The decrease was primarily due to insurgent activities in Colombia, continued field and port strikes in Libya and lower cost recovery barrels in Iraq. Worldwide average daily sales volumes were 726,000 BOE in the first six months of 2014, compared with 736,000 BOE for 2013. Sales volumes were lower than production volumes due to the timing of liftings in Middle East/North Africa.
Worldwide realized crude oil prices rose by 2 percent to $99.70 per barrel for the first six months of 2014, compared with $97.99 per barrel for the first six months of 2013. Worldwide NGL prices increased by 12 percent to $44.43 per barrel for the first six months of 2014, compared with $39.52 per barrel for the first six months of 2013. Domestic gas prices increased by 29 percent to $4.43 per MCF for the first six months of 2014, compared to $3.44 per MCF for the first six months of 2013.
Chemical Segment

Chemical segment earnings for the three months ended June 30, 2014 were $133 million, compared to $144 million, excluding the $131 million gain from the sale of Carbocloro, for the same period of 2013. The decrease in chemical segment earnings for the second quarter of 2014 reflected lower caustic soda prices driven by new chlor-alkali capacity in the industry and higher natural gas costs partially offset by higher vinyl margins, resulting from improvement in United States construction markets.

Chemical segment earnings for the six months ended June 30, 2014 were $269 million, compared to $303 million, excluding the $131 million gain from the sale of Carbocloro, for the same period of 2013. The lower earnings resulted primarily from lower caustic soda prices driven by new chlor-alkali capacity in the industry and higher natural gas costs, partially offset by higher vinyl margins and volume improvements across most products.

Midstream and Marketing Segment

Midstream and marketing segment earnings for the three months ended June 30, 2014 and 2013 were $219 million and $48 million, respectively. Earnings for the six months ended June 30, 2014 and 2013 were $389 million and $263 million, respectively. The increases reflected improved marketing and trading performance.

Liquidity and Capital Resources


At June 30, 2014, Occidental had approximately $2.4 billion in cash on hand. In addition, Occidental has a bank credit facility (Credit Facility) with a $2.0 billion commitment expiring in 2016. No amounts have been drawn under this Credit Facility. Income and cash flows are largely dependent on the oil and gas segment's prices, sales volumes and costs. Occidental believes that cash on hand and cash generated from operations will be sufficient to fund its operating needs and planned capital expenditures, dividends and any debt payments. Occidental, from time to time, may access and has accessed debt markets for general corporate purposes, including acquisitions.

Net cash provided by operating activities was $5.6 billion for the six months ended June 30, 2014, compared to $6.2 billion for the same period in 2013. The 2014 decrease in cash provided by operating activities reflected a $0.5 billion higher tax payment and the 2013 collection of a $0.4 billion tax receivable. Cash flow from operations in the first six months of 2014, compared to the same period of 2013, reflected higher domestic oil volumes, 4-percent higher domestic oil prices, 29-percent higher domestic gas prices, and 13-percent higher domestic NGL prices, offset by lower international oil volumes. The impact of the chemical and the midstream and marketing segments on overall cash flows is typically less significant than the impact of the oil and gas segment because the chemical and midstream and marketing segments are significantly smaller.

Occidental's net cash used by investing activities was $4.1 billion for the first six months of 2014, compared to $4.3 billion for the same period of 2013. Capital expenditures for the first six months of 2014 were $4.9 billion of which $3.9 billion was for the oil and gas segment and $0.9 billion was for the midstream and marketing segment. Capital expenditures for the first six months of 2013 were $4.3 billion of which $3.4 billion was for the oil and gas segment and $0.7 billion was for the midstream and marketing segment. The 2014 amount also included $1.3 billion in proceeds from the sale of Occidental's operations in the Hugoton Field.

Occidental's net cash used by financing activities was approximately $2.5 billion for the first six months of 2014, compared to net cash used by financing activities of approximately $0.4 billion for the same period of 2013. The 2014 amount included purchases of treasury stock of $1.6 billion and $1.1 billion used to pay dividends, partly offset by $272 million of contributions received from a noncontrolling interest. The first six months of 2013 included dividend payments of $0.5 billion. The 2013 dividends were lower due to the accelerated payment in 2012 of that year's fourth quarter dividend.

As of June 30, 2014, Occidental was in compliance with all covenants of its financing agreements and had substantial capacity for additional unsecured borrowings, the payment of cash dividends and other distributions on, or acquisitions of, Occidental stock.

Environmental Liabilities and Expenditures

. . .

  Add OXY to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for OXY - All Recent SEC Filings
Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.