LOS ANGELES, Oct. 21, 2003 (PRIMEZONE) -- Occidental Petroleum Corporation (NYSE:OXY) announced net income for the third quarter 2003 of $446 million ($1.16 per share), compared with $402 million ($1.07 per share) for the third quarter 2002.
In announcing the results, Dr. Ray R. Irani, chairman and chief executive officer, said, "Core earnings of $446 million, or $1.16 per share, were 43 percent higher than the $312 million, or $0.83 per share, the company earned in the third quarter of 2002. Higher oil and gas prices and a nine percent increase in production contributed to a 35 percent increase in oil and gas earnings over last year's third quarter.
Core earnings of $1.25 billion, or $3.27 per share, for the first nine months of 2003 were 85 percent higher than the $676 million, or $1.80 per share, the company earned in the comparable period last year."
Oil and Gas
Oil and gas segment earnings were $660 million for the third quarter 2003, compared with $490 million for the third quarter 2002. The improvement in the third quarter 2003 earnings reflected higher worldwide crude oil and natural gas prices and increased crude oil sales volumes; partially offset by higher exploration expenses and operating costs. The increased crude oil production results largely from higher Ecuador production, reflecting the completion of the Oleoducto de Crudos Pesados Ltd. oil export pipeline, and Horn Mountain production, which came on line in the fourth quarter 2002.
Chemicals
Chemical core earnings were $61 million for the third quarter 2003, compared with $50 million for the third quarter 2002. The third quarter 2002 core earnings excluded a $164 million net of tax gain from the sale of the investment in Equistar. The third quarter 2003 results reflected higher sales prices in chlor-alkali, which were more than offset by higher energy and raw material costs. The third quarter 2002 core earnings included a $37 million pre-tax charge for the impairment of various operating assets.
Nine Months Results
For the first nine months of 2003, net income was $1.15 billion ($2.99 per share), compared with $667 million ($1.77 per share) for the first nine months of 2002.
Core earnings for the first nine months of 2003 were $1.25 billion ($3.27 per share), compared with $676 million ($1.80 per share) for 2002. The debt to total capitalization ratio was 38 percent compared with 43 percent at the end of last year. See the attached schedules for a reconciliation of net income to core earnings for the third quarter and nine months.
Statements in this presentation that contain words such as "will" or "expect," or otherwise relate to the future, are forward-looking and involve risks and uncertainties that could significantly affect expected results. Factors that could cause results to differ materially include, but are not limited to: global commodity pricing fluctuations, and supply/demand consideration, for oil, gas and chemicals; higher-than-expected costs; and not successfully completing (or any material delay in) any expansion, capital expenditure, acquisition, or disposition. Occidental disclaims any obligation to update any forward-looking statements.
SUMMARY OF SEGMENT NET SALES AND EARNINGS ($ millions, except per-share amounts) Third Quarter Nine Months ---------------- ---------------- 2003 2002 2003 2002 ================================= ======= ======= ======= ======= SEGMENT NET SALES Oil and gas $ 1,480 $ 1,224 $ 4,473 $ 3,347 Chemical 793 739 2,368 2,006 Other 46 - 115 - ------- ------- ------- ------- Net sales $ 2,319 $ 1,963 $ 6,956 $ 5,353 ================================ ======= ======= ======= ======= SEGMENT EARNINGS Oil and gas $ 660 $ 490 $ 2,024 $ 1,217 Chemical 61 214 139 217 ------- ------- ------- ------- 721 704 2,163 1,434 Unallocated Corporate Items Interest expense, net (a) Debt, net (59) (73) (236) (195) Trust preferred distributions & other (12) (12) (34) (35) Income taxes (b) (160) (105) (505) (250) Other (c) (44) (38) (175) (114) ------- ------- ------- ------- Income from continuing operations 446 476 1,213 840 Discontinued operations, net -- (74) -- (78) Cumulative effect of changes in accounting principles, net (d) -- -- (68) (95) ------- ------- ------- ------- NET INCOME $ 446 $ 402 $ 1,145 $ 667 ======= ======= ======= ======= BASIC EARNINGS PER COMMON SHARE Income from continuing operations $ 1.16 $ 1.26 $ 3.17 $ 2.23 Discontinued operations, net -- (0.19) -- (0.21) Cumulative effect of changes in accounting principles, net -- -- (0.18) (0.25) ------- ------- ------- ------- $ 1.16 $ 1.07 $ 2.99 $ 1.77 ======= ======= ======= ======= DILUTED EARNINGS PER COMMON SHARE Income from continuing operations $ 1.14 $ 1.25 $ 3.14 $ 2.22 Discontinued operations, net -- (0.19) -- (0.21) Cumulative effect of changes in accounting principles, net - - -- (0.18) (0.25) ------- ------- ------- ------- $ 1.14 $ 1.06 $ 2.96 $ 1.76 ======= ======= ======= ======= AVERAGE BASIC COMMON SHARES OUTSTANDING 385.5 376.8 382.6 375.7 ============================ ======= ======= ======= ======= (a) The nine-months 2003 includes a $61 million interest charge to repay a $450-million 6.4-percent senior-notes issue that had ten years of remaining life, but was subject to remarketing on April 1, 2003. The nine months 2002 includes $22 million of interest income on notes receivable from Altura partners. The partnership exercised an option in May 2002 to redeem the sellers' remaining partnership interests in exchange for the outstanding balance on the notes. (b) Excludes U.S. federal income tax charges and credits allocated to the segments and foreign taxes. Oil and gas segment earnings include a credit of $1 million in the third quarter of 2003 and a charge of $3 million in the third quarter of 2002. Chemical segment earnings include a $395 million credit in the third quarter of 2002, almost entirely related to the sale of the Equistar investment. Oil and gas segment earnings for the nine-months 2003 and 2002 include charges of $6 million and $2 million, respectively. Chemical segment earnings include credits of $403 million for the nine months 2002. (c) The nine-months 2002 includes $20 million of preferred distributions to the Occidental Permian partners. This is essentially offset by the interest income discussed in (a) above. The partnership exercised an option in May 2002 to redeem the sellers' remaining partnership interests in exchange for the outstanding balance on the notes. The nine-months 2003 also includes $42 million equity losses from investments in unconsolidated subsidiaries, compared with $3 million losses for the same period in 2002. (d) Effective January 1, 2003, Occidental implemented SFAS No. 143 - "Accounting For Asset Retirement Obligations." Adoption of this new accounting standard resulted in a cumulative after-tax reduction in net income of $50 million. Also effective January 1, 2003, Occidental implemented the rescission of EITF 98-10, which precludes mark-to-market accounting for all energy-trading contracts that are not derivatives and fair value accounting for inventories purchased from third parties. Adoption of this accounting change resulted in a cumulative after-tax reduction in net income of $18 million. Effective January 1, 2002, Occidental implemented SFAS No. 142 - "Goodwill and Other Intangible Assets." Adoption of this new accounting standard resulted in a cumulative after-tax reduction in net income of $95 million. SUMMARY OF OPERATING STATISTICS Third Quarter Nine Months ---------------- ---------------- 2003 2002 2003 2002 =============================== ======= ======= ======= ======= NET OIL, GAS AND LIQUIDS PRODUCTION PER DAY United States Crude oil and liquids (MBBL) California 80 84 79 87 Permian 151 143 150 141 Horn Mountain 24 -- 19 -- Hugoton 4 3 4 3 ------- ------- ------- ------- Total 259 230 252 231 Natural Gas (MMCF) California 248 283 254 293 Hugoton 136 149 141 152 Permian 134 132 128 129 Horn Mountain 16 -- 12 -- ------- ------- ------- ------- Total 534 564 535 574 Latin America Crude oil (MBBL) Colombia 31 38 35 39 Ecuador 27 13 20 13 ------- ------- ------- ------- Total 58 51 55 52 Middle East and Other Eastern Hemisphere Crude oil (MBBL) Oman 13 9 12 14 Pakistan 10 12 10 10 Qatar 44 44 47 43 Yemen 34 29 36 36 ------- ------- ------- ------- Total 101 94 105 103 Natural Gas (MMCF) Pakistan 71 74 74 58 Barrels of Oil Equivalent (MBOE) Subtotal consolidated subsidiaries 519 481 514 491 Other Interests Colombia-minority interest (4) (5) (4) (5) Russia-Occidental net interest 30 26 30 27 Yemen-Occidental net interest 1 - 1 - ------- ------- ------- ------- Total worldwide production 546 502 541 513 ======= ======= ======= ======= CAPITAL EXPENDITURES (millions) $ 360 $ 283 $ 1,151 $ 840 ======= ======= ======= ======= DEPRECIATION, DEPLETION AND AMORTIZATION OF ASSETS (millions) $ 295 $ 245 $ 866 $ 759 ======================= ======= ======= ======= =======
SIGNIFICANT TRANSACTIONS AND EVENTS AFFECTING EARNINGS
Occidental's results of operations often include the effects of significant transactions and events affecting earnings that vary widely and unpredictably in nature, timing, and amount. Therefore, management uses a measure called "core earnings", which excludes those items. This non-GAAP measure is not meant to disassociate those items from management's performance, but rather is meant to provide useful information to investors interested in comparing Occidental's earnings performance between periods. Reported earnings are considered representative of management's performance over the long term. Core earnings is not considered to be an alternative to operating income in accordance with generally accepted accounting principles. The following table sets forth the core earnings and significant items affecting earnings for each operating segment and corporate:
Third Quarter ---------------------------------- ($ millions) 2003 EPS 2002 EPS =========================== ======= ======== ======== ======== TOTAL REPORTED EARNINGS $ 446 $ 1.16 $ 402 $ 1.07 ======= ======== ======== ======== Oil and Gas Segment Earnings $ 660 $ 490 No significant items affecting earnings -- -- ------- -------- Segment Core Earnings 660 490 ------- -------- Chemicals Segment Earnings 61 214 Less: Sale of Equistar investment* -- 164 ------- -------- Segment Core Earnings 61 50 ------- -------- Corporate Results (275) (302) Less: Discontinued operations, net* -- (74) ------- -------- TOTAL CORE EARNINGS $ 446 $ 1.16 $ 312 $ 0.83 ================================ ======= ======== ======== ======== * These amounts are shown after tax. SIGNIFICANT TRANSACTIONS AND EVENTS AFFECTING EARNINGS (continued) Nine Months ---------------------------------- ($ millions) 2003 EPS 2002 EPS ================================ ======= ======== ======== ======== TOTAL REPORTED EARNINGS $ 1,145 $ 2.99 $ 667 $ 1.77 ======= ======== ======== ======== Oil and Gas Segment Earnings $ 2,024 $ 1,217 No significant items affecting earnings -- -- ------- -------- Segment Core Earnings 2,024 1,217 ------- -------- Chemicals Segment Earnings 139 217 Less: Sale of Equistar investment* -- 164 ------- -------- Segment Core Earnings 139 53 ------- -------- Corporate Results (1,018) (767) Less: Debt repayment charge (61) -- Tax effect of pre-tax adjustment 21 -- Discontinued operations, net* -- (78) Changes in accounting principles, net* (68) (95) ------- -------- TOTAL CORE EARNINGS $ l,253 $ 3.27 $ 676 $ 1.80 =========================== ======= ======== ======== ======== * These amounts are shown after tax. ITEMS AFFECTING COMPARABILITY OF CORE EARNINGS BETWEEN PERIODS Third Quarter Nine Months ($ millions) 2003 2002 2003 2002 =========================== ======= ======= ======= ======= PRE-TAX INCOME / (EXPENSE) Oil and Gas Gain on sale of GOM assets (a) -- $ 7 $ 14 $ 7 Exploration asset write-offs -- -- -- (33) Chemicals Asset idling and impairments -- (37) (9) (37) Equistar equity results -- 7 -- (33) Reorganizations/severance -- -- (15) (14) Corporate Environmental remediation -- (8) (13) (8) Equity earnings (6) (3) (42) (3) (a) Net of tax.