10-QPeriod: Q2 FY2022

OCCIDENTAL PETROLEUM CORP /DE/ Quarterly Report for Q2 Ended Jun 30, 2022

Filed August 2, 2022For Securities:OXYOXY-WT

Summary

Occidental Petroleum Corporation (OXY) reported strong financial results for the second quarter and the first half of 2022, driven by significantly higher commodity prices, particularly for oil and natural gas. Net sales more than doubled year-over-year for both periods, reflecting robust performance in the Oil and Gas segment. The company also achieved a substantial increase in Net Income Attributable to Common Stockholders, demonstrating improved profitability compared to the prior year. Operationally, the company focused on reducing financial leverage, maintaining liquidity, and returning capital to shareholders through dividends and share buybacks. Debt was significantly reduced through proactive repayment efforts, leading to a gain on debt extinguishment. The company maintained capital discipline, with capital expenditures supporting production levels. These positive trends are largely attributed to favorable market conditions, though the company continues to monitor global economic factors and geopolitical risks.

Financial Statements
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Key Highlights

  • 1Significant revenue growth: Net sales increased by 79% to $10.7 billion for Q2 2022 and by 69% to $19.0 billion for the first six months of 2022, compared to the prior year periods, driven by higher commodity prices.
  • 2Substantial increase in profitability: Net income attributable to common stockholders soared to $3.6 billion in Q2 2022 and $8.2 billion in the first six months of 2022, a dramatic improvement from the losses in the prior year.
  • 3Proactive debt reduction: Occidental repaid $7.1 billion of debt in the first half of 2022, significantly reducing its long-term debt and resulting in a gain on debt extinguishment.
  • 4Strong operating cash flow: Generated $8.6 billion in cash flow from operations in the first six months of 2022, up from $4.2 billion in the prior year period, due to higher commodity prices.
  • 5Shareholder returns: Declared $249 million in dividends and repurchased approximately 12.4 million shares in the first six months of 2022, underscoring a commitment to returning capital to shareholders.
  • 6Non-cash tax benefit: Recorded a significant non-cash tax benefit of $2.6 billion in Q1 2022 related to a legal entity reorganization, which positively impacted the effective tax rate.
  • 7Increased capital expenditures: Capital expenditures rose to $1.8 billion in the first six months of 2022 from $1.3 billion in the prior year, reflecting continued investment in the Oil and Gas segment.

Frequently Asked Questions

Occidental's strong financial performance in Q2 2022 was primarily driven by a significant increase in commodity prices, especially for oil and natural gas. This led to substantially higher net sales and improved profitability across its segments, particularly in the Oil and Gas division.

Occidental has actively managed its debt by making substantial repayments. In the first half of 2022, the company used $7.1 billion of cash to repay debt with a face value of $8.1 billion. This proactive deleveraging strategy has reduced its overall debt burden and improved its financial flexibility.

Occidental's strategy for shareholder returns includes a sustainable common share dividend and an active share buyback program. In the first six months of 2022, the company declared dividends totaling $249 million and repurchased approximately 12.4 million shares of its common stock.

The legal entity reorganization completed in the first quarter of 2022 resulted in a significant non-cash tax benefit of $2.6 billion due to an adjustment in the tax basis of operating assets. This reduced deferred tax liabilities and positively impacted the company's effective tax rate for the period.