10-QPeriod: Q2 FY2021

OCCIDENTAL PETROLEUM CORP /DE/ Quarterly Report for Q2 Ended Jun 30, 2021

Filed August 3, 2021For Securities:OXYOXY-WT

Summary

Occidental Petroleum Corporation (OXY) reported a significant improvement in financial performance for the second quarter and first six months of 2021 compared to the same periods in 2020, driven by a substantial increase in oil prices. Net sales more than doubled year-over-year for the quarter, reaching $5.96 billion, and grew to $11.25 billion for the six-month period. The company moved from substantial net losses in 2020 to a net income of $103 million for the quarter and a net loss of $43 million for the six months, indicating a strong recovery, especially considering the prior year was heavily impacted by asset impairments. Key operational priorities for 2021 include maximizing cash flow, sustaining production, and reducing debt. The company demonstrated commitment to strengthening its balance sheet by repaying $174 million of debt in Q1 and undertaking a significant $3.1 billion debt tender offer in July 2021. While the company is still working to reduce its overall debt burden, the improved operating environment and proactive liability management efforts are positive signs for investors. The company maintained a substantial cash balance of $4.6 billion as of June 30, 2021, and expects existing cash and credit facilities to be sufficient for near-term obligations.

Financial Highlights

48 data points
Beta

Revenue

$6.10B

88.9% Gross Margin

Net Income

$103.00M

1.7% Net Margin

EPS (Diluted)

$-0.10

Total Assets

$79.94B

Cash & Equivalents

$4.77B

Free Cash Flow

$2.62B

Financial Statements
Beta
Revenue$6.10B
Cost of Revenue$676.00M
Gross Profit$5.43B
SG&A Expenses$177.00M
Operating Income$399.00M
Net Income$103.00M
EPS (Basic)$-0.10
EPS (Diluted)$-0.10
Shares Outstanding (Basic)934.20M
Shares Outstanding (Diluted)934.20M

Key Highlights

  • 1Occidental Petroleum reported a significant rebound in net sales, with Q2 2021 sales nearly doubling to $5.96 billion compared to $2.93 billion in Q2 2020. For the first six months, net sales increased to $11.25 billion from $9.54 billion.
  • 2The company returned to profitability, reporting net income of $103 million for Q2 2021, a stark contrast to a net loss of $8.13 billion in the same period last year. The six-month period showed a reduced net loss of $43 million, down from $10.14 billion.
  • 3Operating cash flow from continuing operations more than doubled to $4.11 billion for the first six months of 2021, up from $1.66 billion in the prior year, driven by higher commodity prices.
  • 4Occidental proactively managed its debt, repaying $174 million in Q1 2021 and completing a $3.1 billion debt tender offer in July 2021, reducing its overall debt face value to $32.0 billion.
  • 5Capital expenditures for the first six months of 2021 were $1.28 billion, a decrease from $1.68 billion in the prior year, reflecting disciplined capital allocation.
  • 6The company's Oil and Gas segment saw a strong recovery, with income from continuing operations at $631 million for Q2 2021, compared to a loss of $7.73 billion in Q2 2020, largely due to higher commodity prices.
  • 7As of June 30, 2021, Occidental held $4.57 billion in cash and cash equivalents, providing a strong liquidity position.

Frequently Asked Questions

The primary driver is the significant increase in oil prices. Occidental's average worldwide realized price for oil in Q2 2021 was $64.18 per barrel, a substantial increase from $23.14 per barrel in Q2 2020. This price recovery positively impacted net sales and overall profitability across its segments.

Occidental is actively managing its debt. In Q1 2021, $174 million of debt was repaid. More significantly, in July 2021, the company completed tender offers to purchase approximately $3.1 billion of outstanding senior notes, reducing the face value of its debt. The company plans to use excess cash flow and divestiture proceeds to continue strengthening its balance sheet.

Occidental continues to market certain non-strategic assets. Notably, they entered into an agreement to sell Permian Basin assets in June 2021, which closed in July 2021 for approximately $475 million. They also completed the sale of DJ Basin assets for approximately $280 million in March 2021. These divestitures are part of their strategy to strengthen the balance sheet and reduce debt.

Occidental is involved in ongoing legal and environmental matters. A notable legal matter involves an arbitration award related to Ecuador for approximately $391 million plus interest, which Occidental is contesting. While management believes the resolution of these matters, individually or in aggregate, will not have a material adverse effect on the balance sheet, unfavorable outcomes could impact future results of operations or cash flows. Environmental remediation liabilities are significant, with a recorded balance of $1.14 billion as of June 30, 2021, and a potential additional range of losses up to $1.1 billion.