10-QPeriod: Q3 FY2014

OCCIDENTAL PETROLEUM CORP /DE/ Quarterly Report for Q3 Ended Sep 30, 2014

Filed October 31, 2014For Securities:OXYOXY-WT

Summary

Occidental Petroleum Corporation's (OXY) Q3 2014 10-Q filing reveals a mixed financial performance compared to the prior year. While net sales saw a slight increase for the nine-month period, net income attributable to common stock decreased primarily due to lower realized oil prices and international oil volumes, alongside higher operating costs and depreciation. However, higher domestic oil production and improved domestic natural gas prices provided some offset. Strategically, Occidental is preparing for a significant spin-off of its California oil and gas business into California Resources Corporation (CRC). This transaction, expected to be tax-free for shareholders, involves CRC issuing $5.0 billion in senior notes and securing $3.0 billion in credit facilities. The company also announced an increase in its share repurchase authorization, signaling confidence in its financial position and a commitment to returning capital to shareholders.

Financial Highlights

47 data points
Beta

Revenue

$4.90B

31.0% Gross Margin

Net Income

$1.21B

24.6% Net Margin

EPS (Diluted)

$1.55

Total Assets

$71.51B

Cash & Equivalents

$2.90B

Free Cash Flow

$603.00M

Financial Statements
Beta
Revenue$4.90B
Cost of Revenue$3.38B
Gross Profit$1.52B
Operating Expenses$355.00M
Operating Income$3.29B
Net Income$1.21B
EPS (Basic)$1.55
EPS (Diluted)$1.55
Shares Outstanding (Basic)777.40M
Shares Outstanding (Diluted)777.70M

Key Highlights

  • 1Net income for the nine months ended September 30, 2014, was $4.0 billion, a decrease from $4.3 billion in the prior year, largely impacted by lower oil prices and volumes.
  • 2The company reported a pre-tax gain of $532 million from the sale of its Hugoton Field operations in April 2014.
  • 3Occidental announced plans to spin off its California oil and gas business into a new publicly traded entity, California Resources Corporation (CRC), expected to be completed in late 2014.
  • 4Capital expenditures for the first nine months of 2014 totaled $7.5 billion, with a significant portion allocated to the oil and gas segment ($6.1 billion).
  • 5The company's share repurchase program continued, with $2.1 billion spent on treasury stock during the first nine months of 2014.
  • 6Despite a decrease in net income, cash provided by operating activities remained strong at $8.2 billion for the nine months ended September 30, 2014.
  • 7Occidental entered into a new $2.0 billion bank credit facility, replacing its previous one, with no amounts drawn as of September 30, 2014.

Frequently Asked Questions

The primary driver for the decrease in net income for the nine months ended September 30, 2014, compared to the same period in 2013, was lower realized oil prices and lower international oil volumes. These factors were compounded by higher oil and gas segment operating costs and depreciation, depletion, and amortization (DD&A) expenses.

Occidental plans to spin off its California oil and gas business into CRC. The spin-off is structured to be tax-free for U.S. shareholders. CRC has issued $5.0 billion in senior notes and secured $3.0 billion in credit facilities in preparation for the separation, which is expected to occur by the end of November 2014. Upon completion, CRC's results will be reclassified into discontinued operations for Occidental.

Occidental generated $8.2 billion in cash from operating activities. The company invested $7.5 billion in capital expenditures, primarily in its oil and gas segment. Additionally, $2.1 billion was used for share repurchases and $1.6 billion was paid out in dividends. Short-term borrowings of $1.6 billion also provided funding.

Occidental reported $2.9 billion in cash on hand as of September 30, 2014. Management believes that current cash on hand and cash generated from operations will be sufficient to fund operating needs, planned capital expenditures, dividends, and debt payments. The company also has substantial capacity for additional unsecured borrowings and remains in compliance with its financing agreement covenants.