LOS ANGELES, Oct. 21, 2004 (PRIMEZONE) -- Occidental Petroleum Corporation (NYSE:OXY) announced record net income for the third quarter 2004 of $758 million ($1.91 per share), compared with $446 million ($1.16 per share) for the third quarter 2003. Earnings of $1.83 billion ($4.63 per share) for the first nine months of 2004 were 55 percent higher than the $1.15 billion ($2.99 per share) the company earned in the comparable period last year.
In announcing the results, Dr. Ray R. Irani, chairman and chief executive officer, said, "Earnings of $758 million, $1.91 per share, were 65 percent higher than the third quarter 2003. High oil prices and robust gas prices, plus improved chemical margins, contributed to the record high income for both the third quarter and the nine month period. Oil and gas production per day was up 3 percent for the quarter and 5 percent year-to-date over the comparable periods last year."
Core earnings for the first nine months of 2004 were $1.81 billion ($4.60 per share), compared with $1.25 billion ($3.27 per share) for 2003. The debt-to-total capitalization at the end of the third quarter was 29 percent, compared with 37 percent at the end of last year. Interest expense of $187 million for the first nine months of 2004 was 31 percent lower than the comparable 2003 period.
Oil and Gas
Oil and gas segment earnings were $1.0 billion for the third quarter 2004, compared with $660 million for the third quarter 2003, an increase of 52 percent. The improvement in the third quarter 2004 earnings reflected higher worldwide crude oil and natural gas prices, partially offset by increased DD&A rates and higher operating costs.
Chemicals
Chemical segment earnings were $137 million for the third quarter 2004, compared with $61 million for the third quarter 2003, an increase of 125 percent. The improvement in the third quarter 2004 was primarily due to higher sales prices and margins in chlorine, ethylene dichloride, polyvinyl chloride and vinyl chloride monomer, partially offset by higher ethylene and energy costs. Chemical earnings of $272 million for the nine months were almost double that of 2003.
See the attached schedules for a reconciliation of net income to core earnings for the third quarter and nine months.
For further analysis of Occidental's quarterly performance, please visit the website: www.oxy.com
Statements in this release that contain words such as "will" or "expect", or otherwise relate to the future, are forward-looking and involve risks and uncertainties that could significantly affect expected results. Factors that could cause results to differ materially include, but are not limited to: global commodity pricing fluctuations and supply/demand considerations for oil, gas and chemicals; higher-than-expected costs; political risk; and not successfully completing (or any material delay in) any expansion, capital expenditure, acquisition, or disposition. Occidental disclaims any obligation to update any forward-looking statements.
SUMMARY OF SEGMENT NET SALES AND EARNINGS
Third Quarter Nine Months
($ millions, except ---------------- ----------------
per-share amounts) 2004 2003 2004 2003
================================ ======= ======= ======= =======
SEGMENT NET SALES
Oil and gas $ 2,033 $ 1,480 $ 5,509 $ 4,473
Chemical 973 793 2,767 2,368
Other 27 46 87 115
------- ------- ------- -------
Net sales $ 3,033 $ 2,319 $ 8,363 $ 6,956
================================ ======= ======= ======= =======
SEGMENT EARNINGS
Oil and gas $ 1,003 $ 660 $ 2,567 $ 2,024
Chemical 137 61 272 139
------- ------- ------- -------
1,140 721 2,839 2,163
Unallocated Corporate Items
Interest expense, net (a)--
debt and trust preferred
distributions (59) (71) (187) (270)
Income taxes (b) (274) (160) (673) (505)
Other (49) (44) (153) (175)
------- ------- ------- -------
Income from Continuing Operations 758 446 1,826 1,213
Cumulative effect of changes in
accounting principles, net -- -- -- (68)
------- ------- ------- -------
NET INCOME $ 758 $ 446 $ 1,826 $ 1,145
======= ======= ======= =======
BASIC EARNINGS PER COMMON SHARE
Income from continuing
operations $ 1.91 $ 1.16 $ 4.63 $ 3.17
Cumulative effect of changes in
accounting principles, net -- -- -- (0.18)
------- ------- ------- -------
$ 1.91 $ 1.16 $ 4.63 $ 2.99
======= ======= ======= =======
DILUTED EARNINGS PER COMMON SHARE
Income from continuing
operations $ 1.88 $ 1.14 $ 4.57 $ 3.14
Cumulative effect of changes in
accounting principles, net -- -- -- (0.18)
------- ------- ------- -------
$ 1.88 $ 1.14 $ 4.57 $ 2.96
======= ======= ======= =======
AVERAGE BASIC COMMON SHARES
OUTSTANDING 396.3 385.5 394.1 382.6
================================ ======= ======= ======= =======
See footnotes on following page.
(a) The third quarter 2004 includes a $2 million pre-tax interest charge to purchase in the open market and retire $19 million of Occidental's senior notes and a $3 million pre-tax interest charge to redeem all the $157 million outstanding 6.5 percent senior notes which were due in 2005. The nine months 2004 also 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 nine 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 nine months 2004 includes a $20 million credit related to a first quarter settlement of an issue with the Internal Revenue Service. The nine months 2004 also reflected a lower U.S. income tax rate resulting from the crediting of foreign income taxes.
SUMMARY OF CAPITAL EXPENDITURES AND DD&A EXPENSE
Third Quarter Nine Months
---------------- ----------------
($ millions) 2004 2003 2004 2003
================================ ======= ======= ======= =======
CAPITAL EXPENDITURES $ 467 $ 360 $ 1,271 $ 1,151
======= ======= ======= =======
DEPRECIATION, DEPLETION
AND AMORTIZATION
OF ASSETS $ 322 $ 295 $ 972 $ 866
================================ ======= ======= ======= =======
SUMMARY OF OPERATING STATISTICS
Third Quarter Nine Months
---------------- ----------------
2004 2003 2004 2003
================================ ======= ======= ======= =======
NET OIL, GAS AND LIQUIDS
PRODUCTION PER DAY
United States
Crude oil and liquids (MBBL)
California 77 80 77 79
Permian 154 151 155 150
Horn Mountain 17 24 22 19
Hugoton 3 4 3 4
------- ------- ------- -------
Total 251 259 257 252
Natural Gas (MMCF)
California 228 248 235 254
Hugoton 124 136 128 141
Permian 122 134 131 128
Horn Mountain 14 16 15 12
------- ------- ------- -------
Total 488 534 509 535
Latin America
Crude oil (MBBL)
Colombia 38 31 37 35
Ecuador 49 27 46 20
------- ------- ------- -------
Total 87 58 83 55
Middle East
Crude oil (MBBL)
Oman 14 13 13 12
Qatar 44 44 44 47
Yemen 28 34 33 36
------- ------- ------- -------
Total 86 91 90 95
Natural Gas (MMCF)
Oman 88 -- 52 --
Other Eastern Hemisphere
Crude oil (MBBL)
Pakistan 7 10 8 10
Natural Gas (MMCF)
Pakistan 73 71 74 74
Barrels of Oil Equivalent (MBOE)
Subtotal consolidated subsidiaries 539 519 544 514
Other Interests
Colombia-minority interest (4) (4) (5) (4)
Russia-Occidental net interest 27 30 29 30
Yemen-Occidental net interest 1 1 1 1
------- ------- ------- -------
Total Worldwide Production (MBOE) 563 546 569 541
================================ ======= ======= ======= =======
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, except ----------------------------------
per-share amounts) 2004 EPS 2003 EPS
================================ ======= ======= ======= =======
TOTAL REPORTED EARNINGS $ 758 $ 1.91 $ 446 $ 1.16
======= ======= ======= =======
Oil and Gas
Segment Earnings $ 1,003 $ 660
No significant items
affecting earnings -- --
------- -------
Segment Core Earnings 1,003 660
------- -------
Chemicals
Segment Earnings 137 61
No significant items
affecting earnings -- --
------- -------
Segment Core Earnings 137 61
------- -------
Corporate
Results (382) (275)
No significant items
affecting earnings -- --
------- -------
TOTAL CORE EARNINGS $ 758 $ 1.91 $ 446 $ 1.16
================================ ======= ======= ======= =======
* These amounts are shown after-tax.
SIGNIFICANT TRANSACTIONS AND EVENTS AFFECTING EARNINGS (continued)
Nine Months
($ millions, except ----------------------------------
per-share amounts) 2004 EPS 2003 EPS
================================ ======= ======= ======= =======
TOTAL REPORTED EARNINGS $ 1,826 $ 4.63 $ 1,145 $ 2.99
======= ======= ======= =======
Oil and Gas
Segment Earnings $ 2,567 $ 2,024
No significant items
affecting earnings -- --
------- -------
Segment Core Earnings 2,567 2,024
------- -------
Chemicals
Segment Earnings 272 139
No significant items
affecting earnings -- --
------- -------
Segment Core Earnings 272 139
------- -------
Corporate
Results (1,013) (1,018)
Less:
6.4% senior note remarket fee -- (61)
Trust preferred redemption
charge (11) --
IRS settlement 20 --
Tax effect of pre-tax adjustment 4 21
Changes in accounting
principles, net* -- (68)
------- -------
TOTAL CORE EARNINGS $ 1,813 $ 4.60 $ 1,253 $ 3.27
================================ ======= ======= ======= =======
* These amounts are shown after-tax.
ITEMS AFFECTING COMPARABILITY OF CORE EARNINGS BETWEEN PERIODS
Third Quarter Nine Months
---------------- ----------------
($ millions) 2004 2003 2004 2003
================================ ======= ======= ======= =======
PRE-TAX
INCOME / (EXPENSE)
Oil and Gas
Gain on sale of GOM assets (a) $ -- $ -- $ -- $ 14
Chemicals
Chlorine derivatives asset
impairment -- -- -- (9)
Reorganizations/severance -- -- -- (15)
Corporate
Environmental remediation -- -- -- (13)
Equity earnings 15 (6) 13 (42)
Interest expense - early debt
extinguishments - 2004/
consolidation of variable
interest entity - 2003 (5) -- (5) 6
(a) Net of tax.