What drove the significant increase in Occidental Petroleum's earnings in Q2 2011?

The primary driver was a substantial increase in crude oil prices, which rose to $103.12 per barrel in Q2 2011 from $74.39 per barrel in Q2 2010. This significantly boosted the earnings of the Oil and Gas segment. Additionally, strong performance in the Chemicals and Midstream segments, supported by robust export demand, improved margins, and higher marketing revenues, also contributed to the overall earnings growth.

How did production volumes change in Q2 2011 compared to Q2 2010?

Daily oil and gas production volumes saw a modest increase, averaging 715,000 BOE per day in Q2 2011 compared to 701,000 BOE per day in Q2 2010. This increase was mainly due to higher domestic volumes from recent acquisitions in South Texas and the Williston Basin, which offset some production decreases in the Middle East/North Africa and Colombia.

Were there any significant one-time items or charges impacting the results?

For the six-month period of 2011, the company reported pre-tax charges related to exploration write-offs in Libya ($35 million) and a Colombian net worth tax ($29 million). There was also a pre-tax gain from the sale of an interest in a Colombia pipeline ($22 million). Additionally, the first six months of 2011 included a pre-tax charge of $163 million for the premium on debt extinguishment. The first six months of 2011 also included a $144 million after-tax gain from the sale of Argentina operations, which impacted discontinued operations.

What is 'core income' and how does it differ from reported net income?

Occidental Petroleum uses 'core results' as a non-GAAP measure to provide a clearer view of operational performance by excluding items that can vary widely and unpredictably. In this filing, core income excludes items such as gains or losses from discontinued operations and certain charges or gains, allowing for better period-over-period comparisons of ongoing business performance. For Q2 2011, core income was $1.8 billion ($2.23 per diluted share), very close to the reported net income of $1.8 billion ($2.23 per diluted share).

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

Summary

Occidental Petroleum Corporation (OXY) reported strong financial results for the second quarter and first half of 2011, driven by a significant increase in oil and gas prices. The company's core income more than doubled year-over-year for the second quarter, reaching $1.8 billion ($2.23 per diluted share), compared to $1.1 billion ($1.32 per diluted share) in the prior year period. This performance was primarily fueled by the Oil and Gas segment, which saw earnings jump to $2.6 billion from $1.9 billion, largely due to a substantial rise in crude oil prices to $103.12 per barrel. The company also experienced robust growth in its Chemicals and Midstream, Marketing and Other segments. Chemical segment earnings more than doubled to $253 million, attributed to strong export demand and improved margins. The Midstream segment saw a dramatic increase in earnings to $187 million from $13 million, driven by higher marketing margins and improved pipeline operations. These strong results across all segments indicate robust operational performance and favorable market conditions for Occidental Petroleum during the reporting period.

Key Highlights

1Second quarter 2011 core income surged to $1.8 billion ($2.23 per diluted share), a significant increase from $1.1 billion ($1.32 per diluted share) in Q2 2010.
2Oil and Gas segment earnings rose to $2.6 billion in Q2 2011, up from $1.9 billion in Q2 2010, primarily due to higher crude oil prices ($103.12/barrel vs. $74.39/barrel).
3Daily oil and gas production volumes showed a modest increase to 715,000 BOE in Q2 2011 from 701,000 BOE in Q2 2010, with domestic volumes boosted by acquisitions in South Texas and the Williston Basin.
4Chemical segment earnings more than doubled to $253 million in Q2 2011, compared to $108 million in Q2 2010, driven by strong export demand and improved margins.
5The Midstream, Marketing and Other segment experienced a significant earnings increase to $187 million in Q2 2011, up from $13 million in Q2 2010, due to higher marketing margins and pipeline business performance.
6Year-to-date 2011 core income reached $3.4 billion ($4.19 per diluted share), compared to $2.2 billion ($2.67 per diluted share) in the same period of 2010.
7Capital expenditures nearly doubled in Q2 2011 to $1.633 billion from $792 million in Q2 2010, indicating increased investment in the business.

OCCIDENTAL PETROLEUM CORP /DE/ 8-K Report, Financial Results (Jul 26, 2011)

Summary

Key Highlights

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