10-QPeriod: Q2 FY2010

OCCIDENTAL PETROLEUM CORP /DE/ Quarterly Report for Q2 Ended Jun 30, 2010

Filed August 5, 2010For Securities:OXYOXY-WT

Summary

Occidental Petroleum Corporation (OXY) reported a strong financial performance for the second quarter and the first six months of 2010, driven by higher worldwide crude oil and natural gas prices and increased volumes. Net income for the six months ended June 30, 2010, more than doubled compared to the same period in 2009, reaching $2.1 billion on net sales of $9.5 billion. This growth was primarily fueled by the Oil and Gas segment, which saw significant increases in segment earnings due to favorable commodity prices. The company's balance sheet shows a healthy increase in cash and cash equivalents, up to $2.3 billion, indicating robust operating cash flow generation. While capital expenditures remain significant, particularly in the oil and gas segment, Occidental generated sufficient cash from operations to fund these investments, pay dividends, and manage debt. The company is actively engaged in strategic initiatives, including asset acquisitions and participation in major field development in Iraq, signaling continued investment in future growth.

Financial Highlights

46 data points
Beta

Revenue

$4.60B

50.2% Gross Margin

Net Income

$1.06B

23.1% Net Margin

EPS (Diluted)

$1.31

Total Assets

$46.26B

Cash & Equivalents

$2.30B

Free Cash Flow

$1.30B

Financial Statements
Beta
Revenue$4.60B
Cost of Revenue$2.29B
Gross Profit$2.31B
Operating Expenses$282.00M
Operating Income$2.17B
Net Income$1.06B
EPS (Basic)$1.31
EPS (Diluted)$1.31
Shares Outstanding (Basic)812.60M
Shares Outstanding (Diluted)813.80M

Key Highlights

  • 1Net income for the six months ended June 30, 2010, was $2.1 billion, a significant increase from $1.1 billion in the prior year period, reflecting improved market conditions.
  • 2Revenue for the six months ended June 30, 2010, rose to $9.5 billion from $6.8 billion in the comparable 2009 period, driven by higher commodity prices and volumes.
  • 3Operating cash flow significantly improved, reaching $4.3 billion for the first six months of 2010, compared to $2.2 billion in 2009, primarily due to higher oil and gas prices.
  • 4The Oil and Gas segment was the primary earnings driver, with segment earnings increasing substantially year-over-year, benefiting from higher realized prices for crude oil and natural gas.
  • 5The company's cash position strengthened, with cash and cash equivalents increasing to $2.3 billion as of June 30, 2010, from $1.2 billion at the end of 2009.
  • 6Occidental continues to invest in growth, with capital expenditures of $1.7 billion in the first six months of 2010, and has entered into a significant technical service contract for the Zubair Field in Iraq.
  • 7The company announced a share repurchase program, acquiring approximately 130,000 shares in April 2010 at an average price of $86.60 per share.

Frequently Asked Questions

The primary drivers were higher worldwide crude oil and natural gas prices, coupled with increased sales volumes across its segments, particularly in the Oil and Gas division. This led to a significant increase in net sales and operating income.

Occidental's cash and cash equivalents increased substantially to $2.3 billion as of June 30, 2010, from $1.2 billion at the end of 2009. The company generated strong operating cash flow of $4.3 billion in the first six months of 2010 and has $1.5 billion in available, unused credit lines, indicating a solid liquidity position sufficient for its operating needs, capital expenditures, and dividend payments.

Investors should be aware of potential environmental liabilities, with reserves established for remediation activities at 169 sites, and a possible additional loss of up to $375 million. Additionally, the company is involved in ongoing legal proceedings, including a significant lawsuit in Nicaragua concerning DBCP, although management believes these claims are without merit and unlikely to be enforceable in the U.S. Tax audits are also ongoing for recent years.

The Oil and Gas segment showed strong performance due to favorable commodity prices and volumes. The Chemical segment experienced margin erosion in caustic soda and higher raw material costs, impacting its earnings. The Midstream, Marketing, and Other segment saw mixed results, with losses from its Phibro trading unit partially offset by improved margins in other areas.