10-QPeriod: Q1 FY2016

OCCIDENTAL PETROLEUM CORP /DE/ Quarterly Report for Q1 Ended Mar 31, 2016

Filed May 5, 2016For Securities:OXYOXY-WT

Summary

Occidental Petroleum Corporation reported a net income of $78 million ($0.10 per diluted share) for the first quarter of 2016, a significant improvement from the $218 million net loss ($0.28 per diluted share) in the same period of 2015. This turnaround was largely driven by a $438 million gain from discontinued operations, primarily related to a settlement with the Republic of Ecuador regarding an arbitration award, as well as gains from asset sales. Despite the overall positive net income, the company's continuing operations posted a net loss of $360 million. This loss was attributed to lower realized commodity prices in the oil, gas, and chemical segments, unfavorable marketing margins, and an impairment charge related to the distribution of California Resources shares. The company also saw a decrease in net sales to $2.1 billion from $3.1 billion year-over-year, reflecting the challenging commodity price environment. Occidental's liquidity remains robust, with approximately $3.2 billion in cash and cash equivalents at the end of the quarter, and the company proactively managed its debt by issuing new senior notes and planning to redeem existing ones.

Financial Statements
Beta
Revenue$2.12B
Operating Expenses$272.00M
Net Income$78.00M
EPS (Basic)$0.10
EPS (Diluted)$0.10
Shares Outstanding (Basic)763.40M
Shares Outstanding (Diluted)763.40M

Key Highlights

  • 1Occidental Petroleum reported a net income of $78 million for Q1 2016, a substantial recovery from a net loss of $218 million in Q1 2015.
  • 2A significant gain of $438 million from discontinued operations, primarily from an Ecuador arbitration settlement, contributed heavily to the positive net income.
  • 3Despite the overall profit, continuing operations incurred a net loss of $360 million, impacted by lower commodity prices and asset impairments.
  • 4Net sales decreased to $2.1 billion from $3.1 billion year-over-year due to lower commodity prices.
  • 5The company reduced its capital expenditures to $0.6 billion in Q1 2016 from $2.2 billion in Q1 2015, reflecting a response to the market conditions.
  • 6Occidental managed its debt by issuing $2.75 billion in senior notes in April 2016 and planning to redeem existing notes.
  • 7The company's oil and gas segment reported a loss of $485 million, widening from $266 million in the prior year's quarter, due to depressed commodity prices.

Frequently Asked Questions

The primary driver for the improved net income was a significant gain of $438 million from discontinued operations, largely resulting from a settlement with the Republic of Ecuador concerning an arbitration award. This offset a net loss from continuing operations.

The decline in commodity prices significantly impacted Occidental's performance, leading to lower net sales ($2.1 billion in Q1 2016 vs. $3.1 billion in Q1 2015). It also contributed to losses in the oil and gas segment and necessitated asset impairments.

Occidental has reduced capital expenditures significantly to $0.6 billion in Q1 2016 from $2.2 billion in Q1 2015. Additionally, in April 2016, the company issued $2.75 billion in senior notes and planned to use the proceeds to redeem existing debt obligations, indicating proactive debt management.

Yes, Occidental completed the sale of its Piceance Basin operations in Colorado for $153 million, resulting in a pre-tax gain. The company also recorded an impairment charge of $78 million related to the distribution of its remaining shares in California Resources Corporation.