01—Abstract
Summary
Summary of the 10-K filed February 23, 2015. Cited figures are marked; the original filing is the authoritative source.
Occidental Petroleum Corporation's (OXY) 2014 10-K filing reveals a company undergoing significant strategic restructuring, notably the spin-off of its California oil and gas operations into California Resources Corporation.
This move reshaped Occidental's asset base and financial reporting, with California Resources now treated as discontinued operations. Despite a challenging commodity price environment, particularly a sharp decline in oil prices in the fourth quarter of 2014, Occidental demonstrated resilience across its core businesses. The company's oil and gas segment, a primary revenue driver, showed varied performance across regions, with strong contributions from the Permian Basin operations and Enhanced Oil Recovery (EOR) projects.
However, the declining oil prices led to substantial asset impairments, particularly in the Williston Basin and certain international assets. Occidental's chemical segment (OxyChem) faced margin pressures due to high ethylene prices but continued to invest in strategic growth projects. The midstream and marketing segment provided stable earnings, benefiting from asset optimization and strategic asset sales, including significant gains from the divestiture of interests in BridgeTex Pipeline and Plains Pipeline.
02—Key points
Key Highlights
- Completion of the spin-off of California Resources Corporation, creating an independent entity and classifying its operations as discontinued.
- Significant asset impairments totaling $7.4 billion were recorded in 2014, primarily in the oil and gas segment, due to declining commodity prices.
- The Permian Basin remains a key focus for oil and gas operations, with substantial capital investment in Permian Resources and Permian EOR projects.
- Strategic divestitures, including interests in BridgeTex Pipeline and Plains Pipeline, generated significant gains of over $2 billion.
- OxyChem expanded its operations by commencing a new chlor-alkali plant and breaking ground on an ethylene cracker, signaling investment in long-term chemical segment growth.
- The company maintained financial discipline with a debt-to-capitalization ratio of 16% at year-end 2014, down from 14% in 2013.
- Occidental declared consistent quarterly dividends of $0.72 per share throughout 2014, with a stated strategy of providing consistent dividend growth.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2014filed February 23, 2015Financial Statements
FY2014 against FY2013
| Line item | FY2014FY2013 | Change |
|---|---|---|
| Revenue | $19.31B$20.17B | −4.3% |
| Operating Expenses | $1.50B$1.54B | −2.7% |
| Operating Income | -$144.00M$4.93B | −102.9% |
| Net Income | $616.00M$5.90B | −89.6% |
| EPS (Basic) | $0.79$7.33 | −89.2% |
| EPS (Diluted) | $0.79$7.32 | −89.2% |
| Shares Outstanding (Basic) | 781.10M804.10M | −2.9% |
| Shares Outstanding (Diluted) | 781.10M804.60M | −2.9% |
05—Questions
Frequently Asked Questions
What was the impact of the spin-off of California Resources Corporation on Occidental's financial statements?
The spin-off of California Resources Corporation (CRC) on November 30, 2014, resulted in CRC's operations being treated as discontinued operations for all periods presented in the 2014 10-K. This means CRC's assets and liabilities were removed from Occidental's consolidated balance sheet as of that date, and its financial results are reported separately from continuing operations.
How did the decline in oil prices in late 2014 affect Occidental?
The significant drop in oil and NGL prices in the fourth quarter of 2014 led Occidental to record substantial pre-tax impairment charges of $7.4 billion across its operations. These impairments were primarily concentrated in the oil and gas segment, affecting domestic assets (especially in the Williston Basin) and certain international operations (like Bahrain). The company indicated that further sustained price declines could lead to additional impairments.
What strategic divestitures did Occidental undertake in 2014?
Occidental completed several strategic divestitures in 2014. Key transactions included the sale of its Hugoton Field operations for $1.3 billion, the sale of its interest in the BridgeTex pipeline for $1.1 billion, and the sale of a portion of its investment in Plains Pipeline for $1.7 billion. These sales generated significant gains and contributed to the company's liquidity.
What are Occidental's key strategies for maximizing shareholder returns?
Occidental's strategies to maximize shareholder returns include increasing oil and gas production through development and acquisitions, focusing on cost reduction across operations, allocating capital to projects with returns exceeding the cost of capital, maintaining financial discipline and a strong balance sheet, and providing consistent dividend growth.
06—Continue