LOS ANGELES, July 22, 2005 (PRIMEZONE) -- Occidental Petroleum Corporation (NYSE:OXY) announced net income for the second quarter 2005 of $1.536 billion ($3.82 per share), compared with $581 million ($1.48 per share) for the second quarter 2004. Included in the second quarter 2005 net income are the benefits of two previously announced transactions -- a $619 million tax benefit related to the resolution of certain IRS tax issues and an $89 million after-tax gain from the sale of 11 million shares of Lyondell Chemical Company. Core earnings for the second quarter were $851 million ($2.12 per share), compared with $584 million ($1.49 per share) for the same period in 2004.
In announcing the results, Dr. Ray R. Irani, chairman, president and chief executive officer, said, "Robust energy prices and strong chemical margins were key factors in our financial performance that drove our core earnings 46 percent higher than last year's second quarter and contributed to the strongest earnings for any six-month period in Oxy's history. We also were successful in setting the stage for future growth by concluding a new production-sharing contract to develop Oman's giant Mukhaizna oil field, reaching an agreement to resume operations in our historic contract areas in Libya and acquiring oil and gas producing properties in the Permian Basin of Texas."
Oil and Gas
Oil and gas segment earnings were $1.325 billion for the second quarter 2005, compared with $980 million for the second quarter 2004. After adjusting for a $26 million charge related to a contract settlement, core earnings were $1.351 billion for the second quarter 2005. The improvement in the second quarter 2005 earnings reflected higher worldwide crude oil and gas prices, partially offset by higher operating and exploration expenses and increased DD&A rates. Exploration expenses were higher primarily as a result of a $66 million property impairment resulting from an unsuccessful deep gas well at Elk Hills.
Chemicals
Chemical segment and core earnings were $225 million for the second quarter 2005, compared with $92 million for the second quarter 2004. The improvement in the second quarter 2005 results was due to higher margins in chlorine, caustic soda and polyvinyl chloride resulting from higher sales prices, partially offset by higher energy and feedstock costs.
Other Items
The tax benefit recorded in the second quarter was the result of a closing agreement with the IRS, which resolved certain foreign tax credit issues as part of the IRS audit of tax years 1997-2000. As a result, Occidental reversed tax reserves that were previously established for those foreign tax credit issues. This resolution did not have a significant current cash effect.
After the sale of 11 million shares, Occidental still owns 30.3 million Lyondell shares and warrants to purchase an additional 5 million shares. Occidental accounts for its Lyondell investment on the equity basis.
Six-Months Results
For the first six months of 2005, net income was $2.382 billion ($5.94 per share), compared with $1.068 billion ($2.72 per share) for the first six months of 2004.
Core earnings were $1.717 billion for 2005, compared with $1.060 billion for 2004. See the attached schedule for a reconciliation of net income to core earnings.
Worldwide production for the first six months of 2005 was 560,000 barrels of oil equivalent per day, compared to 571,000 barrels for the first six months of 2004. Horn Mountain's production for the first six months of 2005 was 16,000 barrels of oil equivalent, compared to 26,000 barrels of oil equivalent in 2004, primarily as a result of weather in the Gulf of Mexico and maintenance downtime. Compared to a year ago, production under the company's production-sharing contracts in Oman, Qatar, Yemen and Long Beach was negatively impacted by higher prices. If prices had remained at the six months 2004 levels, production in the first six months of 2005 would have been about 15,000 equivalent barrels per day higher.
Statements in this release that contain words such as "will," "expect" or "estimate," or otherwise relate to the future, are forward-looking and involve risks and uncertainties that could significantly affect expected results. Factors that could cause results to differ materially include, but are not limited to: exploration risks such as drilling of unsuccessful wells, global commodity pricing fluctuations, and supply/demand consideration for oil, gas and chemicals; higher-than-expected costs; and not successfully completing (or any material delay in) any expansion, capital expenditure, acquisition, or disposition. Occidental disclaims any obligation to update any forward-looking statements.
SUMMARY OF SEGMENT NET SALES AND EARNINGS
Second Quarter Six Months
($ millions, except ---------------- ----------------
per share amounts) 2005 2004 2005 2004
================================ ======= ======= ======= =======
SEGMENT NET SALES
Oil and Gas $ 2,353 $ 1,783 $ 4,572 $ 3,476
Chemical 1,128 911 2,189 1,745
Other 37 30 60 60
------- ------- ------- -------
Net sales $ 3,518 $ 2,724 $ 6,821 $ 5,281
================================ ======= ======= ======= =======
SEGMENT EARNINGS
Oil and Gas $ 1,325 $ 980 $ 2,674 $ 1,895
Chemical 225 92 439 148
------- ------- ------- -------
1,550 1,072 3,113 2,043
Unallocated Corporate Items
Interest expense, net (a) (47) (60) (108) (128)
Income taxes (b) (44) (384) (645) (747)
Other (c) 73 (44) 22 (95)
------- ------- ------- -------
Income from Continuing Operations 1,532 584 2,382 1,073
Discontinued operations, net 4 (3) -- (5)
------- ------- ------- -------
NET INCOME $ 1,536 $ 581 $ 2,382 $ 1,068
======= ======= ======= =======
BASIC EARNINGS PER COMMON SHARE
Income from continuing
operations $ 3.81 $ 1.48 $ 5.94 $ 2.73
Discontinued operations, net .01 -- -- (.01)
------- ------- ------- -------
$ 3.82 $ 1.48 $ 5.94 $ 2.72
======= ======= ======= =======
DILUTED EARNINGS PER COMMON SHARE
Income from continuing
operations $ 3.77 $ 1.46 $ 5.86 $ 2.69
Discontinued operations, net .01 -- -- (.01)
------- ------- ------- -------
$ 3.78 $ 1.46 $ 5.86 $ 2.68
======= ======= ======= =======
AVERAGE BASIC COMMON SHARES
OUTSTANDING 401.9 393.9 401.2 392.8
================================ ======= ======= ======= =======
See footnotes on following page.
(a) The second quarter 2005 includes a $1 million pre-tax interest charge to redeem all the outstanding 4.1-percent medium term notes and the six months 2005 also includes a $10 million charge to redeem all the outstanding 7.65-percent senior notes. The six months 2004 includes an $11 million pre-tax interest charge to redeem all the outstanding 8.16-percent Trust Preferred Redeemable Securities.
(b) The second quarter 2005 includes a $619 million tax benefit resulting from a closing agreement with the U.S. Internal Revenue Service (IRS) resolving certain foreign tax credit issues. The six months 2005 also includes a net $10 million charge related to a state income tax issue. The six months 2004 includes a $20 million credit related to a first quarter settlement of an issue with the IRS.
(c) The second quarter 2005 includes a $140 million pre-tax gain from the sale of 11 million shares of Lyondell Chemical Company, which represented approximately 27 percent of Occidental's investment.
SUMMARY OF CAPITAL EXPENDITURES AND DD&A EXPENSE
Second Quarter Six Months
---------------- ----------------
($ millions) 2005 2004 2005 2004
================================ ======= ======= ======= =======
CAPITAL EXPENDITURES $ 518 $ 461 $ 1,054 $ 804
======= ======= ======= =======
DEPRECIATION, DEPLETION
AND AMORTIZATION
OF ASSETS $ 356 $ 324 $ 700 $ 648
================================ ======= ======= ======= =======
SUMMARY OF OPERATING STATISTICS
Second Quarter Six Months
---------------- ----------------
2005 2004 2005 2004
================================ ======= ======= ======= =======
NET OIL, GAS AND LIQUIDS
PRODUCTION PER DAY
United States
Crude oil and liquids (MBBL)
California 75 78 76 78
Permian 156 156 152 155
Horn Mountain 11 23 14 23
Hugoton 3 3 3 3
------- ------- ------- -------
Total 245 260 245 259
Natural Gas (MMCF)
California 240 234 240 239
Hugoton 133 132 131 129
Permian 166 132 156 136
Horn Mountain 9 15 11 16
------- ------- ------- -------
Total 548 513 538 520
Latin America
Crude oil (MBBL)
Colombia 36 39 34 37
Ecuador 39 47 41 45
------- ------- ------- -------
Total 75 86 75 82
Middle East
Crude oil (MBBL)
Oman 19 12 21 12
Qatar 43 44 43 43
Yemen 28 30 31 35
------- ------- ------- -------
Total 90 86 95 90
Natural Gas (MMCF)
Oman 61 56 58 33
Other Eastern Hemisphere
Crude oil (MBBL)
Pakistan 6 8 6 8
Natural Gas (MMCF)
Pakistan 72 73 75 74
Barrels of Oil Equivalent (MBOE)
Subtotal consolidated subsidiaries 530 547 533 544
Colombia-minority interest (5) (5) (4) (4)
Russia-Occidental net interest 28 31 29 30
Yemen-Occidental net interest 2 1 2 1
------- ------- ------- -------
Total Worldwide Production (MBOE) 555 574 560 571
======= ======= ======= =======
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) 2005 EPS 2004 EPS
================================ ======= ======= ======= =======
TOTAL REPORTED EARNINGS $ 1,536 $ 3.82 $ 581 $ 1.48
======= ======= ======= =======
Oil and Gas
Segment Earnings $ 1,325 $ 980
Less: Contract settlement (26) --
------- -------
Segment Core Earnings 1,351 980
------- -------
Chemicals
Segment Earnings 225 92
No significant items
affecting earnings -- --
------- -------
Segment Core Earnings 225 92
------- -------
Total Segment Core Earnings 1,576 1,072
------- -------
Corporate
Corporate Results --
Non Segment* (14) (491)
Less:
Gain on sale of Lyondell shares 140 --
Settlement of federal
tax issues 619 --
Debt repurchase expense (1) --
Tax effect of pre-tax
adjustments (51) --
Discontinued operations, net** 4 (3)
------- -------
Corporate Core Results --
Non Segment (725) (488)
------- -------
TOTAL CORE EARNINGS $ 851 $ 2.12 $ 584 $ 1.49
================================ ======= ======= ======= =======
*Interest expense, income taxes, G&A expense and other,and non-core
items.
**Amount shown after tax.
SIGNIFICANT TRANSACTIONS AND EVENTS AFFECTING EARNINGS (continued)
Six Months
($ millions, except ----------------------------------
per-share amounts) 2005 EPS 2004 EPS
================================ ======= ======= ======= =======
TOTAL REPORTED EARNINGS $ 2,382 $ 5.94 $ 1,068 $ 2.72
======= ======= ======= =======
Oil and Gas
Segment Earnings $ 2,674 $ 1,895
Less:
Contract settlement (26) --
------- -------
Segment Core Earnings 2,700 1,895
------- -------
Chemicals
Segment Earnings 439 148
No significant items
affecting earnings -- --
------- -------
Segment Core Earnings 439 148
------- -------
Total Segment Core Earnings 3,139 2,043
------- -------
Corporate
Corporate Results --
Non Segment* (731) (975)
Less:
Debt repurchase expense (11) --
Trust preferred
redemption charge -- (11)
Gain on sale of Lyondell shares 140 --
State tax issue charge (10) --
Settlement of federal
tax issues 619 20
Tax effect of pre-tax
adjustments (47) 4
Discontinued operations, net** -- (5)
------- -------
Corporate Core Results --
Non Segment (1,422) (983)
------- -------
TOTAL CORE EARNINGS $ 1,717 $ 4.28 $ 1,060 $ 2.70
================================ ======= ======= ======= =======
*Interest expense, income taxes, G&A expense and other,and non-core
items.
**Amount shown after tax.
ITEMS AFFECTING COMPARABILITY OF CORE EARNINGS BETWEEN PERIODS
Second Quarter Six Months
---------------- ----------------
($ millions) 2005 2004 2005 2004
================================ ======= ======= ======= =======
PRE-TAX
INCOME / (EXPENSE)
Oil & Gas
Exploration impairments (66) (12) (85) (45)
Corporate
Environmental remediation (10) -- (19) --