10-QPeriod: Q1 FY2010

OCCIDENTAL PETROLEUM CORP /DE/ Quarterly Report for Q1 Ended Mar 31, 2010

Filed May 6, 2010For Securities:OXYOXY-WT

Summary

Occidental Petroleum Corporation reported a significant turnaround in the first quarter of 2010 compared to the same period in 2009, driven primarily by a substantial increase in oil and gas prices and volumes. Net income surged to $1.088 billion from $377 million, with diluted EPS rising to $1.31 from $0.45. This robust performance was largely attributable to the Oil and Gas segment, which saw pretax operating profit increase dramatically due to higher crude oil and natural gas prices. While the Oil and Gas segment demonstrated strong recovery, the Chemical segment experienced continued weakness and margin erosion. The Midstream, Marketing and Other segment showed improvement. The company maintained a strong liquidity position with approximately $1.9 billion in cash and $1.5 billion in available credit lines, sufficient to cover operating needs, capital expenditures, dividends, and debt payments. Occidental plans capital expenditures of approximately $4.5 billion for 2010.

Financial Highlights

45 data points
Beta

Revenue

$4.62B

50.8% Gross Margin

Net Income

$1.06B

23.1% Net Margin

EPS (Diluted)

$1.31

Total Assets

$45.53B

Cash & Equivalents

$1.89B

Free Cash Flow

$1.46B

Financial Statements
Beta
Revenue$4.62B
Cost of Revenue$2.27B
Gross Profit$2.34B
Operating Expenses$349.00M
Operating Income$1.10B
Net Income$1.06B
EPS (Basic)$1.31
EPS (Diluted)$1.31
Shares Outstanding (Basic)812.10M
Shares Outstanding (Diluted)813.50M

Key Highlights

  • 1Significant year-over-year increase in Net Income to $1.088 billion (from $377 million) and Diluted EPS to $1.31 (from $0.45) driven by improved commodity prices and volumes.
  • 2Oil and Gas segment was the primary driver of improved performance, with pretax operating profit increasing substantially due to higher crude oil and natural gas prices and volumes.
  • 3The Chemical segment continued to face challenges, showing weakness and margin erosion, resulting in a significant decrease in segment earnings.
  • 4Midstream, Marketing, and Other segment earnings improved, reflecting better margins in gas processing and marketing/trading businesses.
  • 5Strong cash flow from operations of $2.210 billion, a significant increase from $780 million in Q1 2009, primarily due to higher commodity prices.
  • 6Maintained a healthy liquidity position with $1.9 billion in cash and $1.5 billion in available credit facilities.
  • 7Planned 2010 capital expenditures of approximately $4.5 billion, with a focus on maintaining returns above the cost of capital.

Frequently Asked Questions

The primary drivers were significantly higher worldwide crude oil and domestic natural gas prices, coupled with increased production volumes in the Oil and Gas segment. These factors led to a substantial increase in net sales and net income compared to the prior year's quarter.

The Oil and Gas segment showed a strong rebound. The Chemical segment continued to struggle with weakness and margin erosion. The Midstream, Marketing, and Other segment experienced an improvement in earnings.

Occidental anticipates its cash flow from operations and existing cash reserves to be sufficient for its operating needs, planned capital expenditures, dividends, and debt payments. The company plans capital expenditures of approximately $4.5 billion for 2010, with a focus on achieving returns above its cost of capital.

Occidental is involved in various legal proceedings and environmental remediation activities. While the company has accrued reserves for these matters and, based on current information, does not expect them to have a material adverse effect on its financial position or results of operations, significant unfavorable resolutions could potentially have an impact. The company notes specific ongoing litigation, including a case in Nicaragua related to DBCP, where management believes the claims against its subsidiary are without merit.