10-QPeriod: Q3 FY2020

OCCIDENTAL PETROLEUM CORP /DE/ Quarterly Report for Q3 Ended Sep 30, 2020

Filed November 9, 2020For Securities:OXYOXY-WT

Summary

Occidental Petroleum Corporation (OXY) reported a significant net loss of $3.575 billion for the third quarter of 2020, a substantial deterioration from the $752 million loss in the same period last year. This loss was driven by a combination of factors, including ongoing challenges in the oil and gas market, significant asset impairments, and the ongoing impact of the COVID-19 pandemic. The company's net sales also decreased to $4.108 billion from $5.859 billion year-over-year. Financially, the company's balance sheet reflects a reduced asset base, with Total Assets decreasing from $109.330 billion at December 31, 2019, to $84.434 billion at September 30, 2020. This reduction is largely attributable to asset impairments and divestitures. Long-term debt remains substantial at $35.899 billion, though slightly reduced from the prior year-end. The company has been actively managing its liquidity through cost reductions, dividend cuts, and asset sales, which are crucial given the challenging operating environment. Investors should monitor OXY's debt levels, cash flow generation, and progress on its asset monetization strategy.

Financial Highlights

49 data points
Beta

Revenue

$4.11B

85.0% Gross Margin

Net Income

-$3.58B

-87.0% Net Margin

EPS (Diluted)

$-4.07

Total Assets

$84.43B

Cash & Equivalents

$1.90B

Free Cash Flow

$606.00M

Financial Statements
Beta
Revenue$4.11B
Cost of Revenue$618.00M
Gross Profit$3.49B
SG&A Expenses$166.00M
Operating Income-$12.38B
Net Income-$3.58B
EPS (Basic)$-4.07
EPS (Diluted)$-4.07
Shares Outstanding (Basic)929.30M
Shares Outstanding (Diluted)929.30M

Key Highlights

  • 1Occidental reported a substantial net loss of $3.575 billion for Q3 2020, a significant increase compared to the $752 million loss in Q3 2019.
  • 2Total Assets decreased by approximately $24.9 billion to $84.4 billion as of September 30, 2020, from $109.3 billion as of December 31, 2019, largely due to asset impairments.
  • 3Net sales declined to $4.1 billion in Q3 2020 from $5.9 billion in Q3 2019, reflecting lower commodity prices and sales volumes.
  • 4Long-term debt remains significant at $35.9 billion as of September 30, 2020, although slightly down from $38.5 billion at year-end 2019.
  • 5The company incurred substantial asset impairments totaling $8.6 billion in the second quarter of 2020 related to oil and gas properties.
  • 6Occidental took significant steps to improve liquidity, including reducing capital budgets by over 50%, cutting operating costs, and reducing the common stock dividend.
  • 7The company completed an agreement to sell mineral and surface acres for approximately $1.0 billion in net proceeds, utilized to pay down debt.

Frequently Asked Questions

The primary driver of Occidental's net loss in Q3 2020 was a combination of factors including the ongoing low commodity price environment, significant asset impairments, and the continued impact of the COVID-19 pandemic on global oil demand. Specifically, asset impairments and losses on asset sales contributed significantly to the financial results.

Occidental has implemented several measures to manage its debt and liquidity. These include substantial reductions in capital expenditures and operating costs, a significant cut to the common stock dividend, and strategic divestitures of non-core assets. The company also issued new debt and used proceeds to repurchase or repay near-term maturities. They are actively monitoring their liquidity position and may seek additional sources of funding if necessary.

Occidental recognized substantial asset impairments in Q2 2020 due to the prolonged period of lower commodity prices and the COVID-19 pandemic's impact on oil demand. The company stated that if macroeconomic conditions worsen or persist, its oil and gas properties may be subject to further impairment testing, which could result in additional material non-cash asset impairments.

Occidental recognized an other-than-temporary impairment of $2.7 billion on its equity investment in WES in Q3 2020, as its fair value remained significantly below its book value. The company also previously impaired goodwill related to WES. Occidental's economic interest in WES is currently 53.5%, and the company intends to reduce its limited partner ownership interest to below 50%.