LOS ANGELES, July 19, 2004 (PRIMEZONE) -- Occidental Petroleum Corporation (NYSE:OXY) announced net income for the second quarter 2004 of $581 million ($1.48 per share), compared with $374 million ($0.98 per share) for the second quarter 2003.
In announcing the results, Dr. Ray R. Irani, chairman and chief executive officer, said, "Robust energy prices and record oil and gas production combined to generate the highest reported earnings for any quarter or six-month period in the company's history. Oil and gas production averaged 574,000 barrels of oil equivalent per day in the second quarter and 571,000 barrels per day for the first six months, 6 percent higher than the comparable periods in 2003. We also have used our strong cash flow from operations to pay off $360 million in other obligations during the quarter, thereby bringing the total reduction in debt-like obligations since the beginning of the year to more than one billion dollars."
Oil and Gas
Oil and gas segment and core earnings were $814 million for the second quarter 2004, compared with $637 million for the second quarter 2003. The improvement in the second quarter 2004 earnings reflected approximately $294 million from higher worldwide crude oil and gas prices and increased sales volumes; partially offset by higher operating expenses and increased DD&A rates. The second quarter 2003 included $14 million in after-tax gains on asset sales.
Chemicals
Chemical segment and core earnings were $85 million for the second quarter 2004, compared with $43 million for the second quarter 2003. The improvement in the second quarter 2004 results was primarily due to higher sales volumes for all major products and higher sales prices for vinyl chloride monomer, polyvinyl chloride, ethylene dichloride and chlorine; partially offset by lower caustic soda prices and higher ethylene and energy costs. The second quarter 2003 included a $9 million asset-writedown charge and a $15 million severance charge.
Six-Months Results
For the first six months of 2004, net income was $1.07 billion ($2.72 per share), compared with $699 million ($1.84 per share) for the first six months of 2003.
Core earnings were $1.06 billion for 2004 compared with $807 million for 2003. See the attached schedule for a reconciliation of net income to core earnings.
Statements in this release that contain words such as "will" or "expect," or otherwise relate to the future, are forward-looking and involve risks and uncertainties that could significantly affect expected results. Factors that could cause results to differ materially include, but are not limited to: global commodity pricing fluctuations, and supply/demand consideration for oil, gas and chemicals; higher-than-expected costs; and not successfully completing (or any material delay in) any expansion, capital expenditure, acquisition, or disposition. Occidental disclaims any obligation to update any forward-looking statements.
SUMMARY OF SEGMENT NET SALES AND EARNINGS
Second Quarter Six Months
($ millions, except ---------------- ----------------
per share amounts) 2004 2003 2004 2003
================================ ======= ======= ======= =======
SEGMENT NET SALES
Oil and gas $ 1,783 $ 1,440 $ 3,476 $ 2,993
Chemical 937 785 1,794 1,575
Other 30 41 60 69
------- ------- ------- -------
Net sales $ 2,750 $ 2,266 $ 5,330 $ 4,637
================================ ======= ======= ======= =======
SEGMENT EARNINGS
Oil and gas $ 814 $ 637 $ 1,564 $ 1,364
Chemical 85 43 135 78
------- ------- ------- -------
899 680 1,699 1,442
Unallocated Corporate Items
Interest expense, net(a) -
debt and trust preferred
distributions (60) (64) (128) (199)
Income taxes (b) (209) (167) (399) (345)
Other (49) (75) (104) (131)
------- ------- ------- -------
Income from Continuing Operations 581 374 1,068 767
Cumulative effect of changes in
accounting principles, net -- -- -- (68)
------- ------- ------- -------
NET INCOME $ 581 $ 374 $ 1,068 $ 699
======= ======= ======= =======
BASIC EARNINGS PER COMMON SHARE
Income from continuing
operations $ 1.48 $ 0.98 $ 2.72 $ 2.02
Cumulative effect of changes in
accounting principles, net -- -- -- (0.18)
------- ------- ------- -------
$ 1.48 $ 0.98 $ 2.72 $ 1.84
======= ======= ======= =======
DILUTED EARNINGS PER COMMON SHARE
Income from continuing
operations $ 1.46 $ 0.97 $ 2.68 $ 1.99
Cumulative effect of changes in
accounting principles, net -- -- -- (0.18)
------- ------- ------- -------
$ 1.46 $ 0.97 $ 2.68 $ 1.81
======= ======= ======= =======
AVERAGE BASIC COMMON SHARES
OUTSTANDING 393.9 382.6 392.8 380.9
================================ ======= ======= ======= =======
See footnotes on following page.
(a) The six months 2004 includes an $11 million pre-tax interest charge to redeem all the outstanding 8.16 percent Trust Preferred Redeemable Securities on January 20, 2004. The six months 2003 includes a $61 million pre-tax interest charge to repay a $450 million 6.4 percent senior notes issue that had ten years of remaining life, but was subject to re-marketing on April 1, 2003.
(b) The six months 2004 includes a $20 million credit related to a first quarter settlement of an issue with the Internal Revenue Service. The second quarter of 2004 reflected a lower U.S. income tax rate resulting from the crediting of foreign income taxes.
SUMMARY OF OPERATING STATISTICS
Second Quarter Six Months
---------------- ----------------
2004 2003 2004 2003
================================ ======= ======= ======= =======
NET OIL, GAS AND LIQUIDS
PRODUCTION PER DAY
United States
Crude oil and liquids (MBBL)
California 78 81 78 79
Permian 156 151 155 147
Horn Mountain 23 19 23 16
Hugoton 3 3 3 4
------- ------- ------- -------
Total 260 254 259 246
Natural Gas (MMCF)
California 234 252 239 257
Hugoton 132 143 129 143
Permian 132 131 136 125
Horn Mountain 15 15 16 10
------- ------- ------- -------
Total 513 541 520 535
Latin America
Crude oil (MBBL)
Colombia 39 36 37 37
Ecuador 47 18 45 17
------- ------- ------- -------
Total 86 54 82 54
Middle East
Crude oil (MBBL)
Oman 12 11 12 12
Qatar 44 51 43 49
Yemen 30 35 35 37
------- ------- ------- -------
Total 86 97 90 98
Natural Gas (MMCF)
Oman 56 - 33 -
Other Eastern Hemisphere
Crude oil (MBBL)
Pakistan 8 10 8 10
Natural Gas (MMCF)
Pakistan 73 77 74 76
Barrels of Oil Equivalent (MBOE)
Subtotal consolidated subsidiaries 547 518 544 510
Colombia-minority interest (5) (5) (4) (4)
Russia-Occidental net interest 31 30 30 30
Yemen-Occidental net interest 1 1 1 2
------ ------- ------- -------
Total Worldwide Production (MBOE) 574 544 571 538
======= ======= ======= =======
CAPITAL EXPENDITURES (millions) $ 461 $ 493 $ 804 $ 791
======= ======= ======= =======
DEPRECIATION, DEPLETION
AND AMORTIZATION
OF ASSETS (millions) $ 325 $ 286 $ 650 $ 571
================================ ======= ======= ======= =======
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:
Second Quarter
($ millions, except ----------------------------------
per-share amounts) 2004 EPS 2003 EPS
================================ ======= ======= ======= =======
TOTAL REPORTED EARNINGS $ 581 $ 1.48 $ 374 $ 0.98
======= ======= ======= =======
Oil and Gas
Segment Earnings $ 814 $ 637
No significant items
affecting earnings -- --
------- -------
Segment Core Earnings 814 637
------- -------
Chemicals
Segment Earnings 85 43
No significant items
affecting earnings -- --
------- -------
Segment Core Earnings 85 43
------- -------
Corporate
Results (318) (306)
No significant items
affecting earnings -- --
------- -------
TOTAL CORE EARNINGS $ 581 $ 1.48 $ 374 $ 0.98
================================ ======= ======= ======= =======
SIGNIFICANT TRANSACTIONS AND EVENTS AFFECTING EARNINGS (continued)
Six Months
($ millions, except ----------------------------------
per-share amounts) 2004 EPS 2003 EPS
================================ ======= ======= ======= =======
TOTAL REPORTED EARNINGS $ 1,068 $ 2.72 $ 699 $ 1.84
======= ======= ======= =======
Oil and Gas
Segment Earnings $ 1,564 $ 1,364
No significant items
affecting earnings -- --
------- -------
Segment Core Earnings 1,564 1,364
------- -------
Chemicals
Segment Earnings 135 78
No significant items
affecting earnings -- --
------- -------
Segment Core Earnings 135 78
------- -------
Corporate
Results (631) (743)
Less:
6.4% senior note remarket fee -- (61)
Trust preferred
redemption charge (11) --
IRS settlement 20 --
Tax effect of pre-tax adjustments 4 21
Changes in accounting
principles, net* -- (68)
------- -------
TOTAL CORE EARNINGS $ 1,055 $ 2.69 $ 807 $ 2.12
================================ ======= ======= ======= =======
* Amount shown after tax.
ITEMS AFFECTING COMPARABILITY OF CORE EARNINGS BETWEEN PERIODS
Second Quarter Six Months
---------------- ----------------
($ millions) 2004 2003 2004 2003
================================ ======= ======= ======= =======
PRE-TAX
INCOME / (EXPENSE)
Oil and Gas
Gain on sale of GOM assets (a) $ -- $ 14 $ -- $ 14
Chemicals
Reorganizations/severance -- (15) -- (15)
Chlorine derivatives asset
impairment -- (9) -- (9)
Corporate
Equity earnings 1 (14) (2) (35)
Environmental remediation -- (13) -- (13)
(a) Amount shown after-tax.