10-QPeriod: Q3 FY2008

OCCIDENTAL PETROLEUM CORP /DE/ Quarterly Report for Q3 Ended Sep 30, 2008

Filed November 4, 2008For Securities:OXYOXY-WT

Summary

Occidental Petroleum Corporation's (OXY) Q3 2008 report shows robust financial performance, driven by significantly higher crude oil and natural gas prices and increased production, particularly from the Dolphin Project. Net income surged to $2.3 billion for the quarter and $6.4 billion for the nine months, compared to $1.3 billion and $3.9 billion in the prior year periods, respectively. This strong operational performance has led to substantial increases in cash flow from operations. The company has also been actively pursuing strategic growth initiatives, including significant acquisitions in the Permian Basin and Colorado, an investment in the Joslyn Oil Sands Project, and new agreements in Libya, signaling a commitment to expanding its asset base and future production capacity. Despite these investments and ongoing share repurchases, Occidental maintains a strong liquidity position with significant available credit lines and cash on hand, positioning it well to navigate the current market environment and fund future growth.

Financial Highlights

25 data points
Beta

Revenue

$7.06B

60.6% Gross Margin

Net Income

$2.27B

32.2% Net Margin

EPS (Diluted)

$2.77

Cash & Equivalents

$1.45B

Free Cash Flow

$1.91B

Financial Statements
Beta
Revenue$7.06B
Cost of Revenue$2.78B
Gross Profit$4.28B
Operating Expenses$295.00M
Net Income$2.27B
EPS (Basic)$2.78
EPS (Diluted)$2.77

Key Highlights

  • 1Significant increase in Net Income to $2.27 billion for Q3 2008 and $6.41 billion for the nine months ended Sept 30, 2008, up from $1.32 billion and $3.95 billion respectively in the prior year, driven by higher commodity prices and production.
  • 2Revenue growth of over 45% for the quarter ($7.1 billion vs $5.1 billion) and over 40% for the nine months ($20.4 billion vs $14.4 billion) compared to the prior year periods.
  • 3Strong operating cash flow generation of $8.1 billion for the first nine months of 2008, more than double the $4.3 billion generated in the same period of 2007, reflecting improved profitability.
  • 4Active strategic investments and acquisitions, including a significant expansion in the Permian Basin, a new oil sands project in Canada, and major agreements in Libya, indicating a forward-looking growth strategy.
  • 5Increased capital expenditures to $3.2 billion for the nine months ending Sept 30, 2008, up from $2.5 billion in the prior year, supporting the company's expansion efforts.
  • 6Robust financial position with $1.45 billion in cash and cash equivalents and $1.5 billion in available credit lines as of September 30, 2008.
  • 7Continued commitment to shareholder returns through dividend payments ($0.32 per share in Q3 2008) and significant share repurchases ($1.49 billion in the first nine months of 2008).

Frequently Asked Questions

Occidental Petroleum's improved financial performance in the third quarter of 2008 was primarily driven by significantly higher crude oil and natural gas prices, coupled with an increase in oil and gas production, notably from the Dolphin Project. These factors led to a substantial rise in net sales and net income compared to the same period in the previous year.

During the period, Occidental Petroleum actively pursued growth through strategic investments and acquisitions. Key activities included purchasing additional interests in oil and gas properties in the Permian Basin and Colorado, acquiring a 15% interest in the Joslyn Oil Sands Project in Canada, and signing significant 30-year agreements with the Libyan National Oil Company (NOC) for field redevelopment and exploration.

Occidental Petroleum demonstrated strong liquidity and capital management. For the nine months ended September 30, 2008, the company generated $8.1 billion in cash flow from operations. As of September 30, 2008, it held $1.45 billion in cash and cash equivalents and had access to $1.5 billion in unused committed bank credit lines. The company believes these resources are sufficient to fund its operations, capital expenditures, dividend payments, and anticipated acquisitions.

The filing notes potential risks and liabilities related to environmental remediation, with estimated future liabilities potentially ranging up to $410 million beyond current reserves. Additionally, the company is involved in various lawsuits and legal proceedings, including a significant case in Nicaragua concerning alleged pesticide exposure, though management believes these claims are without merit and any potential judgments would be unenforceable in the U.S. Management has reserved appropriately and does not anticipate a material adverse effect from these matters.