LOS ANGELES, April 26, 2005 (PRIMEZONE) -- Occidental Petroleum Corporation (NYSE:OXY) announced net income for the first quarter 2005 of $846 million ($2.11 per share), compared with $487 million ($1.24 per share) for the first quarter 2004. Core earnings for the first quarter 2005 were $866 million ($2.16 per share), compared with $476 million ($1.22 per share) for the same period in 2004.
In announcing the results, Dr. Ray R. Irani, chairman, president and chief executive officer, said, "Strong oil and gas prices and improved chemical margins were key drivers in the 74 percent increase in net income compared to our performance a year ago, resulting in the highest quarterly income in the company's history."
Oil and Gas
Oil and gas segment earnings were a record $1.3 billion for the first quarter 2005, which was 47 percent higher than the $915 million in earnings for the first quarter 2004. The first quarter 2005 earnings reflected a $529 million improvement from the impact of higher energy prices, partially offset by higher operating expenses and increased DD&A rates.
For the quarter, oil and gas production averaged 565,000 barrels of oil equivalent, which was essentially flat with the 568,000 equivalent barrels per day produced in the first quarter 2004, and up slightly compared to the fourth quarter 2004 rate of 558,000 equivalent barrels per day. Compared to a year ago, production under the company's production sharing contracts in Oman, Qatar, Yemen and Long Beach was negatively impacted by higher prices. The average price for West Texas Intermediate crude oil in the first quarter 2005 was $49.84 per barrel compared to $35.15 per barrel in the first quarter 2004. If prices had remained at first quarter 2004 levels, production in the first quarter 2005 would have been more than 13,000 equivalent barrels per day higher.
Earlier this year, Occidental's executive management said that it expected to exit 2005 with a production level of approximately 600,000 equivalent barrels per day. That expectation is unchanged.
At the end of the first quarter, Occidental completed two acquisitions in the Permian Basin. These acquisitions are expected to contribute 10,000 equivalent barrels per day to the 2005 production exit rate and keep the company on track in meeting its year-end production target.
Chemicals
Chemical segment earnings were $214 million for the first quarter 2005, nearly four times higher than the $56 million earned in the first quarter 2004. The improvement was due to higher margins in all major products resulting from higher sales prices, partially offset by higher energy and feedstock costs.
Financial
During the first quarter, $450 million of 7.65 percent senior notes were redeemed with a related charge of $10 million to interest expense. At March 31, Occidental's debt was $3.5 billion compared to $3.9 billion at the end of 2004. After taking into account the $450 million in debt retirement costs and $300 million in acquisition costs, the company had cash and short-term investments of $1.4 billion at the end of the quarter, which was approximately the same level as the end of 2004. Stockholders' equity was $11.2 billion, up by nearly $700 million compared to year-end 2004.
Statements in this presentation that contain words such as "will," "expect" or "estimate," 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: exploration risks such as drilling of unsuccessful wells, 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
First Quarter
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(In millions, except per-share amounts) 2005 2004(c)
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SEGMENT NET SALES
Oil and Gas $ 2,219 $ 1,693
Chemical 1,061 834
Other 23 30
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Net sales $ 3,303 $ 2,557
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SEGMENT EARNINGS
Oil and Gas $ 1,349 $ 915
Chemical 214 56
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1,563 971
Unallocated Corporate Items
Interest expense, net (a) (61) (68)
Income taxes (b) (601) (363)
Other (51) (51)
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Income from Continuing Operations 850 489
Discontinued operations, net (4) (2)
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NET INCOME $ 846 $ 487
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BASIC EARNINGS PER COMMON SHARE
Income from continuing operations $ 2.12 $ 1.25
Discontinued operations, net (.01) (.01)
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$ 2.11 $ 1.24
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DILUTED EARNINGS PER COMMON SHARE
Income from continuing operations $ 2.09 $ 1.24
Discontinued operations, net (.01) (.01)
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$ 2.08 $ 1.23
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AVERAGE BASIC COMMON SHARES OUTSTANDING 400.4 391.5
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See footnotes on following page.
(a) The first quarter 2005 includes a $10 million pre-tax interest charge to redeem all the outstanding 7.65 percent senior notes, which were due in February 2006. The first quarter 2004 includes an $11 million pre-tax interest charge to redeem all the outstanding 8.16 percent Trust Preferred Redeemable Securities.
(b) The first quarter 2005 includes a $10 million charge, net, related to a state income tax issue. The first quarter 2004 includes a $20 million credit related to the settlement of an issue with the Internal Revenue Service.
(c) As of January 1, 2005, Occidental revised its reporting of segment earnings to show segment earnings before income taxes. All domestic and foreign income tax expense is now reflected under Unallocated Corporate Items in the income taxes line. This reporting change has been retrospectively applied to prior period results.
SUMMARY OF CAPITAL EXPENDITURES AND DD&A EXPENSE
First Quarter
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($ millions) 2005 2004
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CAPITAL EXPENDITURES $ 536 $ 343
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DEPRECIATION, DEPLETION AND
AMORTIZATION OF ASSETS $ 344 $ 324
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SUMMARY OF OPERATING STATISTICS
First Quarter
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2005 2004
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NET OIL, GAS AND LIQUIDS
PRODUCTION PER DAY
United States
Crude oil and liquids (MBBL)
California 77 77
Permian 148 153
Horn Mountain 18 25
Hugoton 4 3
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Total 247 258
Natural Gas (MMCF)
California 241 243
Hugoton 129 127
Permian 146 140
Horn Mountain 12 17
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Total 528 527
Latin America
Crude oil (MBBL)
Colombia 32 36
Ecuador 42 43
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Total 74 79
Middle East
Crude oil (MBBL)
Oman 23 14
Qatar 43 42
Yemen 35 39
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Total 101 95
Natural Gas (MMCF)
Oman 56 11
Other Eastern Hemisphere
Crude oil (MBBL)
Pakistan 5 9
Natural Gas (MMCF)
Pakistan 78 75
Barrels of Oil Equivalent (MBOE)
Subtotal consolidated subsidiaries 537 543
Colombia-minority interest (4) (4)
Russia-Occidental net interest 30 28
Yemen-Occidental net interest 2 1
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Total Worldwide Production 565 568
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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:
First Quarter
($ millions, except ----------------------------------
per-share amounts) 2005 EPS 2004 EPS
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TOTAL REPORTED EARNINGS $ 846 $ 2.11 $ 487 $ 1.24
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Oil and Gas
Segment Earnings $ 1,349 $ 915
Less:
None -- --
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Segment Core Earnings $ 1,349 $ 915
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Chemicals
Segment Earnings $ 214 $ 56
Less:
None -- --
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Segment Core Earnings $ 214 $ 56
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Corporate
Results $ (717) $ (484)
Less:
Trust preferred
redemption charge -- (11)
7.65% debt redemption charge (10) --
Settlement of tax issues -- 20
State tax charge (10) --
Tax effect of pre-tax
adjustments 4 4
Discontinued operations, net* (4) (2)
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Corporate Core Results $ (697) $ (495)
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TOTAL CORE EARNINGS $ 866 $ 2.16 $ 476 $ 1.22
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* These amounts are shown after tax.
ITEMS AFFECTING COMPARABILITY OF CORE EARNINGS BETWEEN PERIODS
The item(s) below are included in core earnings but are shown in this table because they affect the comparability of core earnings between periods.
First Quarter
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($ millions) 2005 2004
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PRE-TAX
INCOME / (EXPENSE)
Corporate
Environmental remediation (9) -