01—Abstract
Summary
Summary of the 10-K filed February 25, 2010. Cited figures are marked; the original filing is the authoritative source.
Occidental Petroleum Corporation (OXY) operates as a multinational entity with a diversified business structure encompassing oil and gas exploration and production, chemical manufacturing, and midstream and marketing services.
In 2009, the company navigated a challenging economic environment marked by lower commodity prices, particularly for oil and natural gas, which significantly impacted its Oil and Gas segment's earnings. Despite this, Occidental demonstrated resilience by increasing its oil and gas sales volumes and focusing on cost management. The Chemical segment also faced headwinds from the economic slowdown, leading to decreased earnings, though feedstock and energy costs provided some offset.
The Midstream, Marketing, and Other segment experienced reduced earnings primarily due to lower marketing income and gas processing margins. Financially, Occidental maintained a strong balance sheet, evidenced by a declining debt-to-capitalization ratio and robust stockholders' equity growth. The company continued to return value to shareholders through dividends, which saw an increase in rate over the period.
Management's strategy focuses on long-lived oil and gas assets with growth potential, financial discipline, and efficient management of its chemical and midstream operations to generate cash flow. Occidental also made strategic acquisitions and investments in 2009 to strengthen its asset base.
02—Key points
Key Highlights
- Occidental Petroleum experienced a significant decline in segment earnings for its Oil and Gas segment in 2009, largely due to lower average crude oil and natural gas prices, despite an increase in production volumes.
- The Chemical segment's earnings also decreased in 2009, impacted by lower prices and volumes for its key products like chlorine, caustic soda, and PVC, reflecting the broader economic slowdown.
- The company maintained financial discipline, with its debt-to-capitalization ratio decreasing to 9% by the end of 2009, down from 16% in 2005.
- Occidental increased its dividend rate by 50% and saw its stock price rise by 67% between 2007 and 2009.
- Proved oil and gas reserves increased to 3,225 million BOE at the end of 2009, up from 2,977 million BOE in 2008, driven by reserve additions from improved recovery, extensions, discoveries, and acquisitions.
- Capital expenditures in 2009 totaled $3.58 billion, with significant investments in oil and gas properties in California and the Permian Basin, as well as acquisitions in the midstream sector.
- The company's strategy prioritizes large, long-lived oil and gas assets, financial discipline, and cash generation from its chemical and midstream segments.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2009filed February 25, 2010Financial Statements
FY2009 against FY2008
| Line item | FY2009FY2008 | Change |
|---|---|---|
| Revenue | $14.81B$23.71B | −37.5% |
| Operating Expenses | $1.30B$1.25B | +4.3% |
| Operating Income | $3.15B$7.18B | −56.1% |
| Net Income | $2.92B$6.86B | −57.5% |
| EPS (Basic) | $3.59$8.37 | −57.1% |
| EPS (Diluted) | $3.58$8.34 | −57.1% |
| Shares Outstanding (Basic) | 811.30M817.60M | −0.8% |
| Shares Outstanding (Diluted) | 813.80M820.50M | −0.8% |
05—Questions
Frequently Asked Questions
What were the primary drivers of Occidental's financial performance in 2009?
The primary drivers of Occidental's financial performance in 2009 were the significant decrease in average crude oil and natural gas prices, which directly impacted the Oil and Gas segment's earnings. The Chemical segment's performance was also affected by lower prices and volumes due to the global economic slowdown. However, the company managed to offset some of these impacts through increased production volumes and cost control measures.
How did Occidental's financial position strengthen in 2009?
Occidental strengthened its financial position by focusing on financial discipline. This is demonstrated by a significant reduction in its debt-to-capitalization ratio, which fell to 9% by year-end 2009 from 16% in 2005. Concurrently, the company increased its stockholders' equity by 89% over the same period.
What is Occidental's strategy for generating shareholder value?
Occidental's strategy for generating shareholder value involves focusing on large, long-lived oil and gas assets with growth potential, maintaining financial discipline, and managing its chemical and midstream/marketing segments to provide cash flow in excess of capital expenditures. Excess cash is used to enhance shareholder returns through dividends, acquisitions, and potential stock repurchases.
How did Occidental manage its proved oil and gas reserves in 2009?
In 2009, Occidental's total proved reserves increased to 3,225 million BOE from 2,977 million BOE in 2008. Reserve additions were primarily driven by improved recovery techniques, extensions and discoveries of new fields, and strategic acquisitions of oil and gas properties, particularly in California and the Permian Basin.
06—Continue