10-QPeriod: Q3 FY2011

OCCIDENTAL PETROLEUM CORP /DE/ Quarterly Report for Q3 Ended Sep 30, 2011

Filed November 3, 2011For Securities:OXYOXY-WT

Summary

Occidental Petroleum Corporation (OXY) reported a strong third quarter and nine-month performance for 2011, driven by higher crude oil and natural gas liquids (NGL) prices and increased production volumes. Net income for the nine months ended September 30, 2011, more than doubled year-over-year, reaching $5.1 billion on revenues of $17.9 billion. This growth was supported by robust performance in the oil and gas segment, which benefited from favorable commodity prices, and improved results in the chemical segment due to higher product pricing. The company continued its strategic investments, with significant capital expenditures for acquisitions, particularly in domestic oil and gas properties and the Al Hosn Gas project in Abu Dhabi. Occidental also strengthened its balance sheet by issuing new debt and managing existing debt, including the early redemption of some senior notes. Despite ongoing environmental remediation and legal matters, the company maintains a solid liquidity position with substantial cash on hand and available credit facilities, indicating financial stability and capacity for future growth and shareholder returns.

Financial Highlights

46 data points
Beta

Revenue

$6.01B

52.1% Gross Margin

Net Income

$1.77B

29.5% Net Margin

EPS (Diluted)

$2.17

Total Assets

$57.24B

Cash & Equivalents

$4.04B

Free Cash Flow

$1.06B

Financial Statements
Beta
Revenue$6.01B
Cost of Revenue$2.88B
Gross Profit$3.13B
Operating Expenses$242.00M
Operating Income$5.00B
Net Income$1.77B
EPS (Basic)$2.17
EPS (Diluted)$2.17
Shares Outstanding (Basic)812.50M
Shares Outstanding (Diluted)813.20M

Key Highlights

  • 1Net income for the nine months ended September 30, 2011, was $5.1 billion, a significant increase from $3.3 billion in the same period of 2010, driven by higher commodity prices and production volumes.
  • 2Revenue for the nine months increased to $17.9 billion from $14.0 billion in the prior year, reflecting strong performance across the oil and gas and chemical segments.
  • 3The company made significant investments in acquisitions, totaling approximately $3.6 billion for domestic oil and gas properties and a 40% stake in the Al Hosn Gas project in Abu Dhabi.
  • 4Occidental strengthened its financial position by issuing $2.15 billion in senior unsecured notes and replacing its existing credit facility with a larger $2.0 billion facility.
  • 5Oil and gas segment earnings showed substantial year-over-year growth, reaching $7.7 billion for the nine months, driven by higher crude oil and NGL prices and increased production.
  • 6The company experienced a $163 million pre-tax charge related to the early redemption of $1.4 billion in debt in the first quarter of 2011.
  • 7Environmental remediation reserves stood at $355 million as of September 30, 2011, with an estimated range of possible additional loss of up to $380 million.

Frequently Asked Questions

Occidental's strong financial performance was primarily driven by higher average realized prices for crude oil and NGLs, which were up 32% and 27% respectively, compared to the same period in 2010. Increased oil and gas segment volumes, along with improved pricing across most chemical products and higher income from midstream and marketing operations, also contributed significantly to the revenue and earnings growth.

In August 2011, Occidental issued $2.15 billion of debt through senior unsecured notes (1.75% due 2017 and 3.125% due 2022). Additionally, in October 2011, the company entered into a new $2.0 billion bank credit facility, replacing a previous $1.4 billion facility. These actions reflect strategic debt management and improved access to liquidity. The company also redeemed $1.4 billion of senior notes in March 2011, incurring a $163 million pre-tax charge.

Due to political unrest and sanctions, Occidental ceased exploration activities in Libya in the first quarter of 2011, writing off approximately $35 million in exploration costs. While operational restrictions were lifted in September 2011, the company anticipates a slow ramp-up in production due to logistical challenges. The net book value of its Libyan producing properties was $800 million as of September 30, 2011. Libyan operations constituted less than 2% of Occidental's 2010 reserves and production, so the near-term impact on overall results is limited, though future production is uncertain.

Occidental maintains environmental remediation reserves totaling $355 million as of September 30, 2011, for 169 sites. The company expects to spend approximately half of these reserves over the next four years, with the remainder over the following decade. Occidental also estimates a potential additional loss of up to $380 million beyond the recorded liabilities. Environmental compliance costs are factored into business planning, and while they may increase, the company believes its current reserves and estimated potential losses are manageable relative to its financial position.