8-KEarnings & ResultsOther Events

OCCIDENTAL PETROLEUM CORP /DE/ 8-K Report, Financial Results (Feb 7, 2006)

Filed February 7, 2006For Securities:OXYOXY-WT

Summary

Occidental Petroleum Corporation (OXY) reported a significant increase in financial performance for the fourth quarter and full year ended December 31, 2005. The company announced net income of $1.152 billion ($2.84 per share) for the fourth quarter of 2005, a substantial rise from $742 million ($1.86 per share) in the prior year's fourth quarter. For the full year 2005, net income more than doubled to $5.281 billion ($13.09 per share), compared to $2.568 billion ($6.49 per share) in 2004. This strong performance was driven by robust results in both the Oil and Gas and Chemical segments. The Oil and Gas segment saw earnings surge by over 57% in the fourth quarter, primarily due to higher crude oil and gas prices and increased sales volumes. The Chemicals segment also demonstrated healthy growth, with earnings up 37% in the fourth quarter, attributed to higher sales prices and contributions from recent acquisitions. Investors should note that the company also provided 'core earnings,' a non-GAAP measure that excludes certain significant items, which also showed substantial year-over-year improvements in both segments.

Key Highlights

  • 1Fourth quarter 2005 net income of $1.152 billion ($2.84/share), up from $742 million ($1.86/share) in Q4 2004.
  • 2Full year 2005 net income of $5.281 billion ($13.09/share), a significant increase from $2.568 billion ($6.49/share) in 2004.
  • 3Oil and Gas segment earnings increased by over 57% in Q4 2005 year-over-year, driven by higher commodity prices and volumes.
  • 4Chemical segment earnings rose by 37% in Q4 2005 year-over-year, benefiting from higher sales prices and acquisition contributions.
  • 5Worldwide oil and gas production increased to an average of 589,000 BOE per day in Q4 2005, up 5.6% from Q4 2004.
  • 6Significant non-recurring items in 2005 included substantial tax benefits and gains from asset sales, contributing to reported net income.
  • 7Capital expenditures increased to $2.423 billion for the full year 2005, up from $1.843 billion in 2004.

Frequently Asked Questions

The substantial increase in earnings for 2005 was driven by a combination of factors, including significantly higher worldwide crude oil and natural gas prices, increased sales volumes in the Oil and Gas segment, and improved margins in the Chemical segment due to higher sales prices. Additionally, the company benefited from strategic acquisitions and significant one-time items such as tax benefits related to IRS resolutions and gains from the sale of investments.

The company reported strong growth in both core earnings and net income. For example, in the fourth quarter of 2005, core earnings were $1.158 billion ($2.86 per share), compared to reported net income of $1.152 billion ($2.84 per share). For the full year, core earnings were $3.964 billion ($9.83 per share), compared to reported net income of $5.281 billion ($13.09 per share). Core earnings are presented by management as a measure to compare performance between periods, excluding items such as gains on asset sales and significant tax adjustments.

Yes, the company reported some negative impacts. For instance, the fourth quarter 2005 results included insurance premium increases related to Hurricane Rita in the Gulf of Mexico, totaling $9 million for the Oil and Gas segment and $6 million for the Chemicals segment. Additionally, higher worldwide prices negatively impacted production under certain production-sharing contracts in Oman, Qatar, Yemen, and Long Beach.

Capital expenditures for the full year 2005 totaled $2.423 billion, an increase from $1.843 billion in 2004. Worldwide production averaged 568,000 barrels of oil equivalent (BOE) per day for the twelve months of 2005, a slight increase compared to 566,000 BOE per day in 2004. The 2005 production included contributions from recent Permian acquisitions and operations in Libya.