What caused the significant drop in net income for the fourth quarter of 2008?

The substantial decrease in net income for the fourth quarter of 2008, compared to the prior year, was primarily due to significant after-tax charges including $599 million for asset impairments and $58 million for rig contract terminations within the Oil and Gas segment. These items, while impacting reported earnings, are excluded from the company's 'core results'.

How did the company's full-year 2008 performance compare to 2007?

Occidental Petroleum's full-year 2008 performance showed a strong increase in net income to $6.857 billion ($8.35 per diluted share) from $5.400 billion ($6.44 per diluted share) in 2007. This growth was driven by higher average realized prices for crude oil and natural gas throughout the year and increased production volumes, particularly from the Dolphin project.

What is the significance of 'core results' versus 'net income' for investors?

'Core results' is a non-GAAP measure that management uses to provide a view of earnings performance excluding items that can vary significantly and unpredictably, such as impairments, restructuring charges, or certain gains/losses. Investors often look at core results to better compare operational performance between periods, while net income represents the GAAP-reported bottom line, including all such items.

How did the realized commodity prices impact the company's results?

Realized commodity prices had a mixed impact. While full-year 2008 saw higher average crude oil and natural gas prices compared to 2007, driving overall growth, the fourth quarter of 2008 experienced a significant drop in crude oil prices to $53.52 per barrel from $80.30 per barrel in the prior year's quarter. This lower quarterly pricing, combined with increased operating expenses and depreciation, depletion, and amortization (DD&A) rates, negatively affected the Oil and Gas segment's core results for the fourth quarter.

OXY/OXY-WT 8-K: Earnings & Results

Summary

Occidental Petroleum Corporation (OXY) reported its fourth quarter and full-year 2008 financial results on January 29, 2009. The company experienced a significant decline in net income for the fourth quarter of 2008 to $443 million ($0.55 per diluted share) from $1.452 billion ($1.74 per diluted share) in the prior year quarter. This decrease was primarily driven by substantial charges in the Oil and Gas segment, including asset impairments and rig contract terminations, which negatively impacted reported earnings. Despite the weaker fourth quarter, OXY's full-year 2008 results showed strong growth, with net income rising to $6.857 billion ($8.35 per diluted share) from $5.400 billion ($6.44 per diluted share) in 2007. This annual growth was largely fueled by significantly higher crude oil and natural gas prices realized throughout the year, as well as increased production volumes from projects like Dolphin. The company's core results, which exclude special items, also reflect this divergence, with a weaker Q4 but a strong full-year performance.

Key Highlights

1Fourth quarter 2008 net income significantly declined to $443 million ($0.55/share) from $1.452 billion ($1.74/share) in Q4 2007, largely due to impairment charges.
2Full-year 2008 net income increased to $6.857 billion ($8.35/share) from $5.400 billion ($6.44/share) in 2007, driven by higher commodity prices and production.
3Oil and Gas segment earnings in Q4 2008 were negatively impacted by $599 million in asset impairments and $58 million in rig termination costs.
4Chemical segment earnings improved in Q4 2008 to $127 million from $94 million in Q4 2007, boosted by higher caustic soda margins.
5Midstream, Marketing and Other segment earnings showed growth in both Q4 2008 ($170 million vs $138 million) and full-year 2008 ($520 million vs $367 million), driven by higher pipeline income and marketing margins.
6Worldwide crude oil realized prices decreased significantly in Q4 2008 ($53.52/barrel) compared to Q4 2007 ($80.30/barrel), impacting segment profitability.
7Capital expenditures increased substantially in Q4 2008 ($1.594 billion) and full-year 2008 ($4.664 billion) compared to the prior year periods, indicating increased investment.

OCCIDENTAL PETROLEUM CORP /DE/ 8-K Report, Financial Results (Jan 29, 2009)

Summary

Key Highlights

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