10-QPeriod: Q2 FY2008

OCCIDENTAL PETROLEUM CORP /DE/ Quarterly Report for Q2 Ended Jun 30, 2008

Filed August 5, 2008For Securities:OXYOXY-WT

Summary

Occidental Petroleum Corporation (OXY) reported a significant increase in financial performance for the first six months of 2008 compared to the same period in 2007, driven by higher crude oil and natural gas prices and increased production. Net income more than doubled to $4.14 billion on revenues of $13.14 billion, up from $2.62 billion on revenues of $8.43 billion in the prior year. The company's balance sheet reflects substantial growth in assets, primarily due to increased property, plant, and equipment. This is supported by strategic investments in oil and gas properties, including a significant acquisition in the Permian Basin and substantial capital expenditures. The company also finalized long-term agreements with the Libyan National Oil Company, signaling future investment and production growth potential. Despite increased liabilities, particularly in accounts payable and accrued liabilities due to higher operational costs and upcoming payments, Occidental maintains a strong liquidity position with significant cash and cash equivalents and available credit lines.

Financial Highlights

25 data points
Beta

Revenue

$7.12B

63.3% Gross Margin

Net Income

$2.30B

32.3% Net Margin

EPS (Diluted)

$2.78

Cash & Equivalents

$1.51B

Free Cash Flow

$3.16B

Financial Statements
Beta
Revenue$7.12B
Cost of Revenue$2.61B
Gross Profit$4.51B
Operating Expenses$380.00M
Net Income$2.30B
EPS (Basic)$2.79
EPS (Diluted)$2.78

Key Highlights

  • 1Net income surged to $4.14 billion for the first six months of 2008, a substantial increase from $2.62 billion in the same period of 2007, driven by favorable commodity prices and higher production.
  • 2Total assets grew to $41.44 billion as of June 30, 2008, up from $36.52 billion at the end of 2007, largely due to significant capital expenditures and strategic acquisitions in oil and gas properties.
  • 3The company significantly increased its investment in future growth through substantial capital expenditures, including a $1.5 billion acquisition of Permian Basin properties and a $1.9 billion commitment for redevelopment in Libya.
  • 4Cash flow from operating activities showed robust growth, reaching $5.03 billion for the first six months of 2008, up from $2.95 billion in the prior year, reflecting strong operational performance.
  • 5Occidental repurchased approximately 11.4 million shares of common stock during the first six months of 2008 for $860 million, indicating a commitment to returning capital to shareholders.
  • 6The company's oil and gas segment earnings more than doubled to $6.69 billion, demonstrating the positive impact of high commodity prices and increased production volumes.
  • 7Despite increased liabilities, Occidental's liquidity remains strong, with $1.5 billion in cash and cash equivalents and approximately $1.5 billion in available credit facilities as of June 30, 2008.

Frequently Asked Questions

The primary drivers of Occidental Petroleum's increased profitability were significantly higher worldwide crude oil and natural gas prices, coupled with an increase in oil and gas production volumes. Higher commodity prices directly boosted revenues, while increased production allowed the company to capitalize on these favorable market conditions.

During the first half of 2008, Occidental Petroleum made substantial investments. Key activities included the acquisition of a 50-percent interest in oil and gas properties in the Permian Basin and Colorado for approximately $1.5 billion, and the signing of long-term agreements with the Libyan National Oil Company for an estimated capital investment of $1.9 billion over five years. Additionally, the company signed an agreement to construct a hydrocarbon gas processing plant and pipeline infrastructure in West Texas for enhanced oil recovery projects, expecting to spend approximately $1.1 billion.

Occidental Petroleum generated strong cash flow from operations, totaling $5.03 billion in the first six months of 2008, an increase from $2.95 billion in the prior year. This robust operating cash flow, combined with $1.5 billion in cash and cash equivalents and $1.5 billion in available credit facilities as of June 30, 2008, provides ample liquidity. The company used its cash for significant capital expenditures, acquisitions, share repurchases totaling $860 million, and dividend payments.

Total liabilities increased, with notable rises in accounts payable and accrued liabilities, partly due to higher crude oil and natural gas prices influencing marketing and trading operations, and the accrual of significant payments such as the signature bonus for the Libya agreements. While liabilities have increased, the company's strong cash flow and available credit lines indicate that it is managing its liquidity effectively to meet its obligations.