10-QPeriod: Q1 FY2004

OCCIDENTAL PETROLEUM CORP /DE/ Quarterly Report for Q1 Ended Mar 31, 2004

Filed May 4, 2004For Securities:OXYOXY-WT

Summary

Occidental Petroleum Corporation (OXY) reported a significant increase in net income for the first quarter of 2004, reaching $487 million compared to $325 million in the same period of 2003. This growth was driven by higher crude oil and natural gas prices and volumes, as well as improved chemical margins. The company also saw an increase in cash flow from operations to $965 million, up from $674 million in the prior year, indicating strong operational performance. Key financial adjustments during the quarter included a $7 million after-tax charge for the redemption of trust preferred securities and a $20 million credit from a tax settlement. Occidental also made strategic investments, including the acquisition of a 1,300-mile oil pipeline and gathering system in the Permian Basin for approximately $143 million. The company maintained a strong liquidity position with $1.5 billion in unused committed bank credit facilities.

Key Highlights

  • 1Net income increased by 49.8% to $487 million in Q1 2004, compared to $325 million in Q1 2003.
  • 2Net sales rose by 8.8% to $2.58 billion, primarily due to higher crude oil and natural gas prices and volumes, and increased chemical volumes and prices.
  • 3Cash flow from operating activities surged by 34.3% to $965 million, reflecting improved profitability and working capital management.
  • 4The company acquired a 1,300-mile oil pipeline and gathering system in the Permian Basin for $143 million.
  • 5Occidental redeemed all outstanding trust preferred securities, reducing current liabilities by approximately $453 million.
  • 6The company reported a $20 million credit from the settlement of a tax issue, positively impacting net income.
  • 7Available unused committed bank credit facilities stood at $1.5 billion, ensuring strong liquidity.

Frequently Asked Questions

The primary drivers of Occidental Petroleum's earnings growth were higher crude oil and natural gas prices and volumes, coupled with improved margins in its chemical segment. These factors contributed to a significant increase in both revenue and profitability compared to the prior year's first quarter.

Occidental Petroleum redeemed all of its outstanding 8.16 percent Trust Preferred Redeemable Securities in January 2004, which reduced current liabilities by approximately $453 million and resulted in a minor after-tax charge. The company also maintained a substantial amount of available credit, with $1.5 billion in unused committed bank credit facilities, indicating a strong liquidity position.

In January 2004, Occidental Petroleum acquired a 1,300-mile oil pipeline and gathering system located in the Permian Basin for approximately $143 million. This strategic acquisition is likely aimed at strengthening its midstream infrastructure and operational efficiency in a key producing region.

Occidental Petroleum has established reserves for environmental remediation, with a total of $363 million at March 31, 2004. The company estimates a potential additional loss of up to $400 million beyond the accrued amount for existing environmental remediation matters. Additionally, the company is involved in various lawsuits, including significant litigation in Nicaragua related to DBCP, though management believes these claims are without merit and any potential judgments would be unenforceable in the U.S.