01—Abstract
Summary
Summary of the 10-K filed February 26, 2013. Cited figures are marked; the original filing is the authoritative source.
Occidental Petroleum Corporation's 2012 10-K report highlights a company with diversified operations across oil and gas, chemicals, and midstream/marketing.
Despite a significant year-over-year decrease in net income, driven by a substantial $1.7 billiona impairment charge on domestic gas assets, the company maintained robust revenue, largely on the back of higher oil prices. Strategic priorities include growing oil and gas production through development and acquisitions, allocating capital for returns exceeding the cost of capital, consistent dividend growth, and maintaining financial discipline.
The company demonstrated resilience by increasing its debt-to-capitalization ratio to a healthy 16%b, while also returning value to shareholders through dividends and share repurchases. Key operational areas include the Permian Basin and California for domestic oil and gas, with significant international interests in Oman and the UAE, underpinning its global production strategy.
02—Key points
Key Highlights
- Occidental reported a net income of $4.6 billion for 2012, a decrease from $6.8 billion in 2011, primarily due to a $1.7 billion pre-tax impairment charge on domestic gas assets.
- Total net sales were $24.2 billion, slightly up from $23.9 billion in 2011, supported by higher oil prices and increased domestic oil volumes.
- The company's oil and gas segment remained the largest revenue generator, though segment earnings decreased significantly due to the aforementioned impairment charges and lower natural gas/NGL prices.
- Occidental maintained financial discipline with a total debt-to-capitalization ratio of 16% at year-end 2012, following the issuance of $1.75 billion in senior unsecured notes.
- Capital expenditures increased to $10.2 billion in 2012, with a significant portion allocated to oil and gas properties, particularly in the Permian Basin, California, and international projects like Al Hosn gas project in Abu Dhabi.
- Shareholder returns were a focus, with dividends paid increasing to $2.1 billion in 2012, and the company repurchased 7.5 million shares.
- The chemical segment (OxyChem) experienced lower earnings due to weaker economic conditions in Europe and Asia, impacting demand and pricing for its products.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2012filed February 26, 2013Financial Statements
FY2012 against FY2011
| Line item | FY2012FY2011 | Change |
|---|---|---|
| Revenue | $20.10B$23.94B | −16.0% |
| Operating Expenses | $1.37B$1.52B | −10.3% |
| Operating Income | $3.83B$6.64B | −42.3% |
| Net Income | $4.60B$6.77B | −32.1% |
| EPS (Basic) | $5.67$8.32 | −31.9% |
| EPS (Diluted) | $5.67$8.32 | −31.9% |
| Shares Outstanding (Basic) | 809.30M812.10M | −0.3% |
| Shares Outstanding (Diluted) | 810.00M812.90M | −0.4% |
05—Questions
Frequently Asked Questions
What were the main drivers of Occidental's financial performance in 2012?
The primary drivers for Occidental's financial performance in 2012 were higher oil prices and increased domestic oil volumes, which helped offset lower natural gas and NGL prices. However, a significant $1.7 billion impairment charge on domestic gas assets negatively impacted net income.
How did Occidental manage its capital and debt in 2012?
Occidental increased its capital expenditures to $10.2 billion, primarily investing in oil and gas properties. Despite this, the company maintained financial discipline, issuing $1.75 billion in senior unsecured notes, which resulted in a debt-to-capitalization ratio of 16% by year-end. Dividends paid increased, and share repurchases continued.
What are Occidental's key strategic priorities as outlined in the report?
Occidental's key strategic priorities include growing oil and gas production through development and acquisitions, allocating capital to achieve returns above its cost of capital, providing consistent dividend growth, and maintaining financial discipline with a strong balance sheet.
How did the impairment charge affect the company's results?
The $1.7 billion pre-tax impairment charge on domestic gas assets significantly reduced net income and oil and gas segment earnings. This charge was primarily related to natural gas properties acquired when gas prices were higher and was driven by persistently low natural gas prices and negative reserve revisions.
06—Continue