8-KEarnings & ResultsOther EventsExhibits & Filings

OCCIDENTAL PETROLEUM CORP /DE/ 8-K Report, Financial Results (Jan 31, 2013)

Filed January 31, 2013For Securities:OXYOXY-WT

Summary

Occidental Petroleum Corporation (OXY) reported its fourth quarter and full-year 2012 financial results on January 31, 2013. The company announced a significant after-tax charge of $1.1 billion ($1.41 per diluted share) in the fourth quarter, primarily due to the impairment of gas assets in the Midcontinent. This charge substantially impacted reported net income, bringing it down to $336 million ($0.42 per diluted share) for the fourth quarter of 2012, a sharp decline from $1.6 billion ($2.01 per diluted share) in the prior year's quarter. Despite the impairment charge, Occidental's "core income," which excludes such items, remained robust. Fourth-quarter core income was $1.5 billion ($1.83 per diluted share), slightly down from $1.6 billion ($2.02 per diluted share) in the fourth quarter of 2011. For the full year 2012, core income was $5.8 billion ($7.09 per diluted share), compared to $6.8 billion ($8.39 per diluted share) in 2011. The company also saw increased oil and gas production volumes, driven by domestic operations, although lower commodity prices and higher depreciation, depletion, and amortization (DD&A) rates impacted segment earnings.

Key Highlights

  • 1Significant $1.1 billion after-tax charge in Q4 2012 related to impairment of Midcontinent gas assets impacted reported net income.
  • 2Reported Q4 2012 net income of $336 million ($0.42/share) versus $1.6 billion ($2.01/share) in Q4 2011.
  • 3Core income (non-GAAP) for Q4 2012 was $1.5 billion ($1.83/share), a slight decrease from $1.6 billion ($2.02/share) in Q4 2011.
  • 4Full-year 2012 core income was $5.8 billion ($7.09/share), down from $6.8 billion ($8.39/share) in 2011.
  • 5Oil and gas production volumes increased in Q4 2012 (779,000 BOE/day) and full-year 2012 (766,000 BOE/day) compared to the prior year periods, driven by domestic growth.
  • 6Lower commodity prices (crude oil, NGLs, and natural gas) negatively affected oil and gas segment earnings for both the quarter and the full year.
  • 7Chemical segment earnings saw an increase in Q4 2012 due to higher export volumes and lower ethylene costs, but full-year chemical earnings declined due to weaker economic conditions and competitive pressures.

Frequently Asked Questions

The substantial decrease in reported net income for the fourth quarter of 2012 was primarily due to an after-tax charge of $1.1 billion, related to the impairment of gas assets in the Midcontinent region. This charge significantly reduced the company's GAAP net income, although 'core income' remained relatively strong.

Occidental uses 'core income' as a non-GAAP measure to provide a view of ongoing operational performance, excluding significant items like asset impairments. While reported net income was heavily impacted by the $1.1 billion impairment charge, core income for Q4 2012 was $1.5 billion ($1.83/share), only a modest decrease from $1.6 billion ($2.02/share) in Q4 2011, indicating that the core business operations remained healthy.

The Oil and Gas segment experienced higher production volumes, particularly from domestic operations, which was a positive. However, this was offset by lower year-over-year realized prices for crude oil, NGLs, and natural gas, as well as higher DD&A rates, which negatively impacted segment earnings for both the quarter and the full year.

The Chemical segment saw an increase in earnings for the fourth quarter of 2012, driven by higher export volumes for caustic soda and vinyl chloride monomer, and lower ethylene costs. However, for the full twelve months of 2012, chemical segment earnings decreased compared to 2011, primarily due to weaker economic conditions impacting margins in Europe and Asia, and increased competition, along with specific impacts on calcium chloride and potassium hydroxide businesses.