8-KOther Events

OCCIDENTAL PETROLEUM CORP /DE/ 8-K Report (Feb 4, 2002)

Filed February 4, 2002For Securities:OXYOXY-WT

Summary

Occidental Petroleum Corporation (OXY) reported its fourth quarter and full-year 2001 results, highlighted by a significant strategic shift in its chemical segment. The company announced an agreement in principle to sell its 29.5% equity interest in Equistar to Lyondell Chemical Company. This transaction is expected to reduce earnings volatility and allow OXY to focus on its core oil and gas business. As a result of this divestiture, OXY will record a substantial after-tax loss of approximately $240 million in Q4 2001, with the Equistar interest valued at $440 million. Concurrently, OXY will acquire approximately 21% of Lyondell, providing exposure to Lyondell's broader chemical and refining operations. Financially, OXY reported a net loss of $247 million ($0.66 per share) for the fourth quarter of 2001, a significant decline from the $333 million income ($0.90 per share) in the prior year's quarter. This downturn was primarily driven by a sharp decrease in oil and natural gas prices, which reduced oil and gas segment earnings by approximately $500 million. Despite these challenges, OXY highlighted strong performance in its oil and gas operations for the full year, achieving its highest operating income historically and replacing 138% of its production. The company also made significant strides in strengthening its balance sheet, reducing total debt to its lowest level in 15 years and improving its debt-to-capitalization ratio to 46%.

Key Highlights

  • 1Agreement to sell 29.5% stake in Equistar to Lyondell Chemical Company for cash and Lyondell stock, resulting in OXY owning ~21% of Lyondell.
  • 2Occidental Petroleum will record an after-tax loss of approximately $240 million in Q4 2001 related to the Equistar sale.
  • 3Fourth quarter 2001 net loss of $247 million ($0.66/share) compared to net income of $333 million ($0.90/share) in Q4 2000, largely due to lower commodity prices.
  • 4Full-year 2001 net income was $1.2 billion ($3.10/share), the second highest in company history.
  • 5Oil and gas segment earnings before special items for the full year 2001 were the highest in OXY's history.
  • 6Total debt was reduced to $4.9 billion, its lowest level in 15 years, with the debt-to-capitalization ratio improving to 46% from 57% in the prior year.
  • 7Capital expenditures for 2001 were $1.4 billion, with expectations for 2002 to be at or below $1.1 billion.

Frequently Asked Questions

Occidental Petroleum is selling its Equistar stake to Lyondell Chemical Company to reduce the volatility of its earnings and to sharpen its strategic focus on its core oil and gas business. The transaction also provides Occidental with a significant equity interest in Lyondell, offering exposure to a broader range of chemical and refining assets while retaining some upside in petrochemicals.

The sale of the Equistar interest will result in an after-tax loss of approximately $240 million being recorded by Occidental Petroleum in the fourth quarter of 2001. The value attributed to the sold Equistar interest is $440 million.

The primary driver for the decline in fourth-quarter 2001 earnings was the sharp decrease in commodity prices, particularly for oil and natural gas. Average West Texas Intermediate prices fell by 36% year-over-year, and US natural gas prices halved, significantly impacting the oil and gas segment's profitability.

Occidental Petroleum achieved its second-highest net income in history for 2001 ($1.2 billion). The company also reported its highest-ever operating income for the oil and gas segment, successfully replaced 138% of its production, and significantly strengthened its balance sheet by reducing total debt to its lowest level in 15 years and lowering its debt-to-capitalization ratio to 46%.