10-QPeriod: Q3 FY2004

OCCIDENTAL PETROLEUM CORP /DE/ Quarterly Report for Q3 Ended Sep 30, 2004

Filed November 2, 2004For Securities:OXYOXY-WT

Summary

Occidental Petroleum Corporation (OXY) reported strong financial performance for the nine months ended September 30, 2004, with net income of $1.8 billion on net sales of $8.4 billion, a significant increase from the prior year. This growth was driven by higher worldwide crude oil and natural gas prices, along with increased crude oil production and improved chemical segment performance. The company's balance sheet shows robust liquidity, with cash and cash equivalents at $998 million and significant unused committed bank credit facilities. Key financial activities during the period included the redemption of trust preferred securities and senior notes, contributing to a reduction in long-term debt. Capital expenditures were substantial, primarily in the oil and gas segment, supporting ongoing operations and development. While the company faces ongoing environmental remediation and legal matters, management expresses confidence that these will not materially impact the financial position or results of operations, especially after accounting for accrued reserves.

Key Highlights

  • 1Net income increased substantially to $1.8 billion for the nine months ended September 30, 2004, up from $1.1 billion in the prior year, driven by higher commodity prices and production volumes.
  • 2Net sales grew to $8.4 billion for the nine months ended September 30, 2004, reflecting strong performance in both the Oil and Gas and Chemical segments.
  • 3The company demonstrated strong operational cash flow, generating $2.7 billion in net cash from operating activities for the first nine months of 2004.
  • 4Liquidity remains strong with cash and cash equivalents totaling $998 million and approximately $1.5 billion in available but unused committed bank credit lines.
  • 5Occidental redeemed $453 million in Trust Preferred Redeemable Securities and $157 million in 6.5% senior notes during the period, reducing overall debt.
  • 6Capital expenditures were $1.3 billion for the first nine months of 2004, predominantly invested in the oil and gas segment.
  • 7The company has accrued $337 million for environmental remediation liabilities, with a potential additional range of loss up to $400 million.

Frequently Asked Questions

The primary driver for the significant increase in net income was higher worldwide crude oil and natural gas prices, coupled with increased crude oil production volumes. Additionally, the chemical segment also contributed positively due to higher prices and volumes.

Occidental actively managed its debt by redeeming its outstanding 8.16% Trust Preferred Redeemable Securities for approximately $453 million in January 2004 and also redeemed $157 million of its 6.5% senior notes. These actions reduced current liabilities and long-term debt respectively.

The company maintains a strong liquidity position with $998 million in cash and cash equivalents and $1.5 billion in available committed bank credit facilities. Management believes that its current cash on hand and cash generated from operations will be sufficient to fund its operating needs, capital expenditures, and dividend payments.

Occidental faces ongoing risks related to environmental remediation liabilities, for which $337 million has been reserved, with a potential additional range of loss up to $400 million. The company is also involved in various lawsuits and legal proceedings, including environmental proceedings, but management believes that the ultimate resolution of these matters, after considering reserves, will not have a material adverse effect on the company's financial position or results of operations.