10-QPeriod: Q2 FY2020

OCCIDENTAL PETROLEUM CORP /DE/ Quarterly Report for Q2 Ended Jun 30, 2020

Filed August 10, 2020For Securities:OXYOXY-WT

Summary

Occidental Petroleum Corporation's Q2 2020 10-Q filing reveals significant financial challenges, largely attributed to the severe downturn in oil prices exacerbated by the COVID-19 pandemic. The company reported a substantial net loss of $8.131 billion for the quarter, primarily driven by massive asset impairments totaling $6.4 billion recognized in the oil and gas segment. This led to a significant reduction in total assets and stockholders' equity compared to the previous year. Despite the challenging environment, Occidental took proactive steps to bolster liquidity. These included substantial reductions in capital expenditures and operating costs, a significant cut in the common stock dividend, and the issuance of new debt to refinance existing maturities. The company also strategically managed its debt, extending maturities and continuing to pursue asset divestitures. While liquidity appears sufficient for the next 12 months, management acknowledges the uncertainty of the market and the potential need for additional liquidity sources.

Financial Highlights

49 data points
Beta

Revenue

$2.93B

80.3% Gross Margin

Net Income

-$8.13B

-277.7% Net Margin

EPS (Diluted)

$-9.12

Total Assets

$89.45B

Cash & Equivalents

$1.01B

Free Cash Flow

-$15.00M

Financial Statements
Beta
Revenue$2.93B
Cost of Revenue$577.00M
Gross Profit$2.35B
SG&A Expenses$225.00M
Operating Income-$8.73B
Net Income-$8.13B
EPS (Basic)$-9.12
EPS (Diluted)$-9.12
Shares Outstanding (Basic)915.50M
Shares Outstanding (Diluted)915.50M

Key Highlights

  • 1Significant net loss of $8.131 billion for the quarter, largely due to $6.4 billion in asset impairments in the oil and gas segment.
  • 2Total assets decreased from $109.3 billion at the end of 2019 to $89.5 billion at June 30, 2020, reflecting the impact of impairments and asset sales.
  • 3Stockholders' equity dropped from $34.2 billion to $23.3 billion, primarily due to the net loss.
  • 4Proactive liquidity measures were implemented, including a more than 50% reduction in the 2020 capital budget to $2.4-$2.6 billion and over $1.0 billion in expected cash savings from operating and corporate cost cuts.
  • 5The quarterly common stock dividend was reduced to $0.01 per share, a significant cut from $0.78 in the prior year's quarter, to preserve liquidity.
  • 6The company issued $2.0 billion in senior unsecured notes in July 2020 to refinance approximately $2.0 billion of 2021 maturities.
  • 7Ghana assets were reclassified as held for sale, with a $1.4 billion after-tax impairment recorded to adjust them to fair value less costs to sell.

Frequently Asked Questions

The primary driver of Occidental's significant net loss of $8.131 billion in the second quarter of 2020 was the recognition of substantial asset impairments, totaling $6.4 billion, within its oil and gas segment. These impairments were a direct consequence of the prolonged period of lower commodity prices driven by the COVID-19 pandemic and its impact on oil demand.

Occidental has implemented several measures to enhance its liquidity and financial flexibility. These include significantly reducing its 2020 capital expenditure budget, implementing substantial cuts to operating and corporate costs, drastically reducing its common stock dividend, and issuing new debt to refinance upcoming maturities. The company is also continuing to pursue divestitures of non-core assets.

The COVID-19 pandemic has severely impacted Occidental's operations by causing a dramatic reduction in oil and gas demand and contributing to significant price volatility and declines. This has led to lower revenues, increased impairments, and a need for proactive liquidity management. While the company has implemented measures to mitigate these impacts, management acknowledges the uncertainty of the pandemic's duration and severity and its potential to materially affect future financial results.

Occidental has taken steps to manage its debt, including issuing $2.0 billion in senior notes in July 2020 to refinance approximately $2.0 billion of debt maturing in 2021. As of June 30, 2020, the company had approximately $1.0 billion in cash and cash equivalents and access to $5.0 billion under its revolving credit facility. Management believes its current liquidity and available credit are sufficient to meet obligations for the next 12 months, but notes the potential need for additional liquidity or refinancing due to market uncertainties.