10-QPeriod: Q2 FY2012

OCCIDENTAL PETROLEUM CORP /DE/ Quarterly Report for Q2 Ended Jun 30, 2012

Filed August 6, 2012For Securities:OXYOXY-WT

Summary

Occidental Petroleum Corporation (OXY) reported its financial results for the quarterly period ended June 30, 2012. The company experienced a decrease in net income and earnings per share (EPS) for both the three- and six-month periods compared to the prior year. This decline was primarily attributed to lower oil, natural gas liquids (NGLs), and natural gas prices, coupled with increased operating costs and depreciation, depletion, and amortization (DD&A) rates. Despite revenue pressures, OXY demonstrated resilience through increased oil production volumes and solid performance in its pipeline businesses. The company also actively managed its capital structure, issuing new debt while continuing to pay dividends and repurchase shares. Management expressed confidence in the company's liquidity and ability to fund operations and capital expenditures, supported by existing cash reserves and available credit facilities.

Financial Highlights

46 data points
Beta

Revenue

$5.77B

46.9% Gross Margin

Net Income

$1.33B

23.0% Net Margin

EPS (Diluted)

$1.64

Total Assets

$64.28B

Cash & Equivalents

$4.41B

Free Cash Flow

$480.00M

Financial Statements
Beta
Revenue$5.77B
Cost of Revenue$3.06B
Gross Profit$2.71B
Operating Expenses$335.00M
Operating Income$2.89B
Net Income$1.33B
EPS (Basic)$1.64
EPS (Diluted)$1.64
Shares Outstanding (Basic)810.30M
Shares Outstanding (Diluted)811.00M

Key Highlights

  • 1Net income decreased to $1.3 billion for Q2 2012 from $1.8 billion in Q2 2011, with diluted EPS falling to $1.64 from $2.23.
  • 2For the six months ended June 30, 2012, net income was $2.9 billion, down from $3.4 billion in the same period of 2011, with diluted EPS at $3.55 versus $4.13.
  • 3Key drivers for the earnings decline include lower commodity prices (oil, NGLs, natural gas), increased operating costs, and higher DD&A expenses.
  • 4Offsetting factors included higher oil production volumes and improved performance in the midstream pipeline businesses.
  • 5The company issued $1.75 billion in senior unsecured notes in June 2012 to manage its capital structure.
  • 6Capital expenditures for the first six months of 2012 were $5.1 billion, with $1.0 billion allocated to domestic oil and gas property acquisitions.
  • 7Cash flow from operations increased to $6.0 billion in the first six months of 2012 from $5.6 billion in the prior year, driven by non-cash adjustments and favorable oil price impacts.

Frequently Asked Questions

The decline in net income and EPS was primarily due to lower average selling prices for oil, NGLs, and natural gas, as well as increased operating costs and higher depreciation, depletion, and amortization (DD&A) rates. These factors were partially offset by higher oil production volumes and stronger performance in the midstream pipeline businesses.

Occidental Petroleum maintained a strong liquidity position with approximately $4.4 billion in cash on hand and $2.0 billion in available credit facilities. The company also issued $1.75 billion in new debt to enhance its capital structure. Management indicated that existing cash and future operational cash flows are expected to be sufficient to cover operating needs, capital expenditures, dividends, and debt obligations.

Occidental Petroleum expects capital spending to be approximately $9.2 billion for the full year 2012, focusing on increasing oil and gas production and ensuring returns above the cost of capital. This includes significant investment in the Al Hosn Shah gas project. For the first six months of 2012, capital expenditures totaled $5.1 billion, with $1.0 billion used for domestic oil and gas property acquisitions, primarily in key basins like the Permian and Williston.

Occidental Petroleum is involved in various environmental remediation activities at 164 sites, with established reserves of $336 million as of June 30, 2012. The company estimates potential additional losses beyond these reserves to be up to $370 million. Management stated that its involvement and related assumptions have not changed materially since the end of 2011. The company is also involved in routine legal proceedings, with no individually material adverse effects expected on its financial position or results of operations.