01—Abstract
Summary
Summary of the 10-K filed February 28, 2020. Cited figures are marked; the original filing is the authoritative source.
Occidental Petroleum Corporation (OXY) completed a transformative year in 2019, marked by the significant acquisition of Anadarko Petroleum Corporation.
This acquisition substantially expanded OXY's oil and gas operations, particularly in the Permian Basin, and strengthened its overall market position. While the acquisition drove increased revenues and production volumes, it also resulted in higher debt levels and acquisition-related costs, impacting the company's net income for the year. OXY's strategy remains focused on delivering a sustainable dividend, allocating capital to high-return projects, and deleveraging its balance sheet through operational efficiencies and planned asset divestitures.
The company's chemical segment (OxyChem) experienced a downturn in demand and pricing, while its marketing and midstream segment navigated challenging market spreads. Key risks highlighted include commodity price volatility, integration challenges from the Anadarko acquisition, and the ongoing impact of environmental regulations.
02—Key points
Key Highlights
- Completed the significant acquisition of Anadarko Petroleum Corporation, expanding OXY's oil and gas portfolio, primarily in the Permian Basin and DJ Basin.
- Increased net sales by 14% year-over-year to $20.4 billion, driven by higher production volumes from the acquired Anadarko assets and legacy Permian Resources operations.
- Reported a net loss of $985 million ($1.22 per diluted share) for the year, a substantial decrease from the prior year's net income of $4.1 billion, primarily due to acquisition-related costs and increased interest expenses.
- Ended the year with total assets of $109.3 billion, up significantly from $43.9 billion in the prior year, largely due to the Anadarko acquisition.
- Long-term debt increased substantially to $38.5 billion from $10.2 billion, reflecting the financing of the Anadarko acquisition.
- Initiated a divestiture program of approximately $15 billion in connection with the Anadarko acquisition, including the sale of Mozambique LNG assets for $4.2 billion.
- Maintained a strong position in Enhanced Oil Recovery (EOR) operations, particularly with CO2 flooding in the Permian Basin, leveraging decades of expertise.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2019filed February 28, 2020Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $20.91B$17.82B | +17.3% |
| Cost of Revenue | $2.79B$2.83B | −1.5% |
| Gross Profit | $18.12B$14.99B | +20.9% |
| SG&A Expenses | $893.00M$585.00M | +52.6% |
| Net Income | -$985.00M$4.11B | −123.9% |
| EPS (Basic) | $-1.22$5.40 | −122.6% |
| EPS (Diluted) | $-1.22$5.39 | −122.6% |
| Shares Outstanding (Basic) | 809.50M761.70M | +6.3% |
| Shares Outstanding (Diluted) | 809.50M763.30M | +6.1% |
05—Questions
Frequently Asked Questions
What was the primary strategic move made by Occidental Petroleum in 2019?
Occidental Petroleum's primary strategic move in 2019 was the acquisition of Anadarko Petroleum Corporation. This significant transaction expanded OXY's asset base, particularly in key U.S. shale basins like the Permian and DJ Basins, and bolstered its overall production and reserves.
How did the Anadarko acquisition impact Occidental's financial performance in 2019?
The Anadarko acquisition led to a substantial increase in Occidental's net sales and asset base due to higher production volumes. However, it also resulted in significantly higher debt levels, substantial acquisition-related costs, and increased interest expenses, which collectively led to a net loss for the year compared to a profit in the prior year.
What is Occidental Petroleum's strategy for managing its debt following the Anadarko acquisition?
Following the Anadarko acquisition, Occidental's strategy includes deleveraging its balance sheet by prioritizing debt reduction. This is being pursued through a combination of generating free cash flow from operations, optimizing capital expenditures, and executing a planned divestiture program of non-core assets, aiming to raise approximately $15 billion.
What were the key performance drivers and challenges for Occidental's segments in 2019?
The Oil and Gas segment saw increased production and revenue driven by the Anadarko acquisition, particularly in the Permian Basin. The Chemical segment (OxyChem) faced challenges with lower demand and pricing for its products. The Marketing and Midstream segment experienced reduced margins due to lower spreads between the Midland and Gulf Coast regions.
06—Continue