10-QPeriod: Q1 FY2009

OCCIDENTAL PETROLEUM CORP /DE/ Quarterly Report for Q1 Ended Mar 31, 2009

Filed April 30, 2009For Securities:OXYOXY-WT

Summary

Occidental Petroleum Corporation (OXY) reported a significant decline in financial performance for the first quarter of 2009 compared to the same period in 2008, primarily driven by a substantial drop in crude oil and natural gas prices. Net income attributable to common stock fell to $368 million from $1.8 billion, and diluted EPS decreased to $0.45 from $2.22. This downturn was largely due to reduced commodity prices, despite an increase in oil and gas production volumes and a strong performance in the chemical segment. The company's liquidity remains solid, with substantial cash on hand and available credit facilities, though capital expenditures were elevated. Investors should note the company's proactive approach to managing costs and its strategic focus on projects with higher return potential amidst a challenging commodity price environment.

Financial Highlights

24 data points
Beta

Revenue

$3.07B

32.8% Gross Margin

Net Income

$368.00M

12.0% Net Margin

EPS (Diluted)

$0.45

Cash & Equivalents

$1.13B

Free Cash Flow

-$285.00M

Financial Statements
Beta
Revenue$3.07B
Cost of Revenue$2.06B
Gross Profit$1.01B
Operating Expenses$270.00M
Net Income$368.00M
EPS (Basic)$0.45
EPS (Diluted)$0.45

Key Highlights

  • 1Significant year-over-year decline in net income and earnings per share due to lower commodity prices.
  • 2Oil and Gas segment earnings saw a sharp decrease, impacted by prices falling from $86.75/bbl to $39.29/bbl for oil.
  • 3Chemical segment demonstrated resilience with stable earnings, driven by higher caustic soda margins.
  • 4Midstream, Marketing and Other segment experienced a substantial earnings drop due to lower NGL prices and marketing adjustments.
  • 5Capital expenditures increased to $1.1 billion, with a focus on higher-return projects and potential for project delays.
  • 6The company maintained strong liquidity with $1.1 billion in cash and $1.5 billion in available credit lines.
  • 7Occidental Petroleum adopted several new accounting standards, including those related to participating securities, derivatives, and noncontrolling interests, with no material immediate impact.

Frequently Asked Questions

The primary driver for the significant drop in net income was the substantial decrease in crude oil and natural gas prices compared to the first quarter of 2008. Lower commodity prices directly impacted revenues and profitability, particularly in the Oil and Gas segment.

Occidental Petroleum increased its capital expenditures to $1.1 billion in Q1 2009, with a significant portion allocated to the Oil and Gas segment. However, the company stated that its 2009 capital spending estimate of $3.5 billion is flexible, and a substantial portion of projects can be delayed if industry costs do not align with product prices. The focus is on projects with higher return and growth potential.

Occidental Petroleum maintained a strong liquidity position as of March 31, 2009, with $1.1 billion in cash and approximately $1.5 billion in available but unused committed bank credit. The company believes its cash on hand and operational cash flow will be sufficient to fund its operating needs, planned capital expenditures, and dividends. The company also has significant capacity for additional unsecured borrowing and for the payment of cash dividends under its existing financing agreements.

Occidental Petroleum accrues reserves for probable liabilities related to environmental remediation and legal proceedings when an amount can be reasonably estimated. As of March 31, 2009, environmental remediation reserves totaled $419 million, with a reasonably possible additional loss estimated up to $400 million. The company is also involved in lawsuits, including claims related to DBCP, but management believes these matters, after considering reserves, will not have a material adverse effect on its consolidated financial position or results of operations.