10-QPeriod: Q1 FY2006

OCCIDENTAL PETROLEUM CORP /DE/ Quarterly Report for Q1 Ended Mar 31, 2006

Filed May 4, 2006For Securities:OXYOXY-WT

Summary

Occidental Petroleum Corporation (OXY) reported a strong first quarter for 2006, with net income soaring to $1.23 billion ($2.90 basic EPS) compared to $846 million ($2.11 basic EPS) in the prior year. This significant increase was driven by higher crude oil, natural gas, and chemical prices, alongside increased production volumes, particularly from the recent acquisition of Vintage Petroleum. The company's oil and gas segment experienced substantial revenue growth, benefiting from favorable commodity prices and production increases from new acquisitions and expanded operations. The chemical segment also showed improved performance with higher margins and volumes. The company made a significant strategic move with the acquisition of Vintage Petroleum in January 2006, which brought in new assets in Argentina, the U.S., Yemen, and Bolivia, contributing positively to the current quarter's results and future growth prospects. Occidental also announced a new share repurchase program, indicating confidence in its financial position and commitment to returning value to shareholders. Despite robust performance, the company faces ongoing risks related to commodity price volatility, environmental remediation costs, and legal proceedings in certain international jurisdictions.

Key Highlights

  • 1Occidental reported a substantial increase in net income to $1.23 billion ($2.90 basic EPS) for Q1 2006, up from $846 million ($2.11 basic EPS) in Q1 2005.
  • 2The acquisition of Vintage Petroleum, Inc. on January 30, 2006, significantly contributed to the quarter's results with new assets and expanded production capabilities.
  • 3Net sales rose to $4.57 billion, driven by higher oil and gas prices and increased production volumes, alongside improved chemical margins.
  • 4The company announced a new share repurchase program targeting approximately 30 million shares, demonstrating a commitment to shareholder returns.
  • 5Operating cash flow increased significantly to $2.02 billion, reflecting strong operational performance and favorable commodity prices.
  • 6Occidental is actively managing environmental remediation liabilities, with reserves of $408 million, and acknowledges potential additional future costs.
  • 7The company is facing legal proceedings in Nicaragua and Ecuador, with potential financial implications, though management believes current reserves are adequate.

Frequently Asked Questions

The primary drivers were significantly higher worldwide crude oil, natural gas, and chemical prices, coupled with increased oil and gas production volumes. The recent acquisition of Vintage Petroleum also contributed substantially to production and asset base, positively impacting revenue and earnings.

The acquisition, completed in January 2006, brought in new producing assets in Argentina, the United States, Yemen, and Bolivia. These assets contributed to Occidental's net sales and earnings in the first quarter and are expected to provide significant long-term growth opportunities and cash flow.

Key risks include volatility in global commodity prices, potential liabilities from environmental remediation efforts (with reserves of $408 million and a potential additional range of loss up to $415 million), and ongoing legal proceedings in Nicaragua and Ecuador. The company also notes potential impacts from new legislation in Ecuador affecting fiscal terms for oil production.

Occidental announced a new share repurchase program, indicating confidence and a commitment to returning value. They also continue to pay cash dividends, as evidenced by the $147 million in dividends paid during the quarter.