01—Abstract
Summary
Summary of the 10-K filed February 23, 2017. Cited figures are marked; the original filing is the authoritative source.
Occidental Petroleum Corporation's (OXY) 2016 10-K filing reveals a company navigating a challenging commodity price environment, particularly in its core oil and gas segment.
While net sales declined compared to 2015 and 2014, the company demonstrated resilience, increasing its proved reserves by 206 million BOE in 2016, largely driven by improved recovery and strategic acquisitions in the Permian Basin. Occidental maintained its commitment to shareholder returns through consistent dividend payments, though it experienced a net loss attributable to common stock for the year.
The chemical segment (OxyChem) showed stable performance, and the midstream and marketing segment experienced a significant charge related to contract terminations. The company is strategically focusing on high-return projects, particularly in the Permian Basin, and is optimizing its asset base to enhance value.
02—Key points
Key Highlights
- Occidental experienced a net loss attributable to common stock of $(574) million in 2016, a significant improvement from the $(7,829) million loss in 2015, primarily due to a substantial decrease in asset impairments.
- The company's proved oil and gas reserves increased by 206 million BOE in 2016, reaching a total of 2,406 million BOE, driven by improvements in recovery and strategic acquisitions, notably in the Permian Basin.
- Occidental's Oil and Gas segment reported a pretax operating loss of $(636) million in 2016, an improvement from $(8,060) million in 2015, reflecting higher commodity prices in the latter half of 2016 and strategic asset sales.
- The Chemical segment (OxyChem) reported stable pretax operating profit of $571 million in 2016, with gains from asset sales partially offset by impairments.
- Midstream and Marketing segment reported a pretax operating loss of $(381) million in 2016, significantly impacted by charges related to contract terminations.
- Capital expenditures were reduced to $2.7 billion in 2016 from $5.3 billion in 2015, reflecting a disciplined approach to capital allocation amidst lower commodity prices. The company anticipates 2017 capital spending to be between $3.0 billion and $3.6 billion.
- The company maintained its dividend, paying $3.02 per common share in 2016, consistent with its strategy of consistent dividend growth.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2016filed February 23, 2017Financial Statements
FY2016 against FY2015
| Line item | FY2016FY2015 | Change |
|---|---|---|
| Revenue | $10.09B$12.48B | −19.2% |
| Operating Income | -$1.00B-$8.15B | +87.7% |
| Net Income | -$574.00M-$7.83B | +92.7% |
| EPS (Basic) | $-0.75$-10.23 | +92.7% |
| EPS (Diluted) | $-0.75$-10.23 | +92.7% |
| Shares Outstanding (Basic) | 763.80M765.60M | −0.2% |
| Shares Outstanding (Diluted) | 763.80M765.60M | −0.2% |
05—Questions
Frequently Asked Questions
How did Occidental's financial performance change in 2016 compared to 2015?
Occidental's financial performance showed improvement in 2016 compared to 2015. The company reported a net loss attributable to common stock of $(574) million in 2016, a significant improvement from the $(7,829) million loss in 2015. This improvement was largely due to a substantial reduction in asset impairments, which were $825 million in 2016 compared to $10,239 million in 2015. While net sales decreased due to lower commodity prices, the oil and gas segment's pretax operating loss narrowed considerably.
What was Occidental's strategy in response to the challenging commodity price environment?
Occidental's strategy focused on navigating the challenging commodity price environment by prioritizing high-return projects, particularly in the Permian Basin. They aimed to maximize total shareholder return through consistent dividend growth, value growth via oil and gas development meeting specific return targets (15% domestic, 20% international), targeting 5%-8% average annual production growth long-term, and maintaining a strong balance sheet. This involved cost-reduction efficiencies, improved well productivity, and strategic acquisitions in core areas like the Permian Basin, alongside an exit from non-core international operations.
How did Occidental manage its capital expenditures and debt in 2016?
In 2016, Occidental significantly reduced its capital expenditures to $2.7 billion from $5.3 billion in 2015, reflecting a disciplined approach in response to lower commodity prices. The company also actively managed its debt, issuing $4.2 billion in senior notes and using the proceeds to retire $2.7 billion of existing debt, including early redemptions. As of December 31, 2016, Occidental had substantial capacity for additional unsecured borrowings.
What is the outlook for Occidental's key business segments in 2017 based on this filing?
The filing suggests a cautious but focused outlook for 2017. Occidental expects to continue allocating capital to high-return projects, with an estimated 2017 capital spending range of $3.0 billion to $3.6 billion. The Permian Basin remains a strategic focus for oil and gas development. The chemical segment's performance is expected to be driven by improvements in the housing, automotive, and durable goods markets, and the midstream and marketing segment anticipates stable pipeline transportation and power generation businesses, with marketing results subject to price volatility.
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