Occidental Petroleum Announces Second Quarter Earnings


LOS ANGELES, Aug. 4, 2006 (PRIMEZONE) -- Occidental Petroleum Corporation (NYSE:OXY) announced income from continuing operations was $2.77 per diluted share for the second quarter 2006, compared with $3.63 per diluted share for the second quarter 2005. Net income for the second quarter 2006 was $857 million ($1.97 per diluted share), compared with $1.536 billion ($3.77 per diluted share) for the second quarter 2005.

In announcing the results, Dr. Ray R. Irani, chairman, president and chief executive officer, said, "Daily production from continuing operations increased to 609,000 barrels of oil equivalent, 93,000 barrels higher than in the second quarter 2005. Higher production and robust crude oil prices were key factors in our financial performance that drove our core earnings 50 percent higher than last year's second quarter results."

Core earnings for the second quarter 2006 were $1.204 billion ($2.77 per diluted share), compared with $799 million ($1.96 per diluted share) for the same period in 2005. The second quarter 2006 core earnings excludes a net after-tax loss of $347 million in discontinued operations, which includes the impairment charge for Occidental's Block 15 investment in Ecuador and income from Vintage properties held for sale. The second quarter 2005 core income excludes a $619 million tax benefit related to the resolution of tax issues with the IRS and an $89 million after-tax gain from the sale of an investment. See the attached schedule for a reconciliation of net income to core earnings.

Oil and Gas

Oil and gas segment earnings were $1.953 billion for the second quarter 2006, a 56 percent increase from the $1.255 billion segment earnings for the second quarter 2005. The improvement in the second quarter 2006 earnings reflected a $557 million increase from higher worldwide crude oil prices, a $262 million increase from higher production, and lower exploration expense, partially offset by higher operating expenses and increased DD&A rates.

The average price for West Texas Intermediate crude oil in the second quarter 2006 was $70.70 per barrel compared to $53.17 per barrel in the second quarter 2005. Occidental's realized price for worldwide crude oil was $60.67 per barrel for the second quarter 2006, compared with $46.27 per barrel for the second quarter 2005. The average price for NYMEX gas in the second quarter 2006 was $7.26 per MMCF, compared with $6.80 per MMCF in the second quarter 2005. Domestic realized gas prices increased from $6.18 per MMCF in the second quarter 2005 to $6.24 per MMCF for the second quarter 2006.

Production

For the quarter, oil and gas daily production from continuing operations averaged 609,000 barrels of oil equivalent(BOE), which was an 18 percent increase over the 516,000 equivalent barrels per day produced in the second quarter 2005. The increase included Vintage production of 62,000 BOE per day and Libya production of 27,000 BOE per day.

Worldwide daily production from continuing operations for the six months of 2006 averaged 601,000 BOE, compared with 519,000 BOE for the six months of 2005. The increase included five months of Vintage production at 60,000 BOE per day which added 50,000 BOE per day to Occidental's year-to-date production and Libya production of 25,000 BOE per day that came on line in the third quarter of 2005.

Chemicals

Chemical segment earnings were $250 million for the second quarter 2006, compared with $225 million for the second quarter 2005. The improvement in the second quarter 2006 results was due to chlor-alkali volume increases.

Six-Months Results

For the first six months of 2006, net income was $2.086 billion ($4.83 per diluted share), compared with $2.382 billion ($5.86 per diluted share) for the first six months of 2005.

Core earnings were $2.355 billion ($5.45 per diluted share) for 2006, compared with $1.612 billion ($3.96 per diluted share)for 2005. See the attached schedule for a reconciliation of net income to core earnings.

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, changes in tax rates, and supply/demand considerations 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. You should not place undue reliance on these forward-looking statements which speak only as of the date of this presentation. Unless legally required, Occidental does not undertake any obligation to update any forward-looking statements as a result of new information, future events or otherwise. U.S. investors are urged to consider carefully the disclosure in our Form 10-K, available through the following toll-free telephone number, 1-888-OXYPETE (1-888-699-7383) or on the Internet at http://www.oxy.com. You also can obtain a copy from the SEC by calling 1-800-SEC-0330.



 SUMMARY OF SEGMENT NET SALES AND EARNINGS

                                     Second Quarter        Six Months
 ($ millions, except               ----------------  ----------------
  per share amounts)                  2006     2005     2006     2005
 ================================  =======  =======  =======  =======
 SEGMENT NET SALES
  Oil and Gas                      $ 3,292  $ 2,220  $ 6,417  $ 4,309
  Chemical                           1,273    1,128    2,514    2,189
  Other                                 34       37       64       60
                                   -------  -------  -------  -------
  Net sales                        $ 4,599  $ 3,385  $ 8,995  $ 6,558
 ================================  =======  =======  =======  =======
 SEGMENT EARNINGS
  Oil and Gas                      $ 1,953  $ 1,255  $ 3,863  $ 2,534
  Chemical                             250      225      498      439
                                   -------  -------  -------  -------
                                     2,203    1,480    4,361    2,973
 Unallocated Corporate Items
  Interest expense, net (a)            (33)     (47)     (62)    (108)
  Income taxes (b)                    (882)     (26)  (1,787)    (610)
  Other (c)                            (84)      73     (157)      22
                                   -------  -------  -------  -------

 Income from Continuing Operations   1,204    1,480    2,355    2,277
  Discontinued operations, net (d)    (347)      56     (269)     105
                                   -------  -------  -------  -------
 NET INCOME                        $   857  $ 1,536  $ 2,086  $ 2,382
                                   =======  =======  =======  =======
 BASIC EARNINGS PER COMMON SHARE
  Income from continuing
    operations                     $  2.80  $  3.68  $  5.51  $  5.68
  Discontinued operations, net (d)   (0.81)    0.14    (0.63)    0.26
                                   -------  -------  -------  -------
                                   $  1.99  $  3.82  $  4.88  $  5.94
                                   =======  =======  =======  =======
 DILUTED EARNINGS PER COMMON SHARE
  Income from continuing
    operations                     $  2.77  $  3.63  $  5.45  $  5.60
  Discontinued operations, net (d)   (0.80)    0.14    (0.62)    0.26
                                   -------  -------  -------  -------
                                   $  1.97  $  3.77  $  4.83  $  5.86
                                   =======  =======  =======  =======
 AVERAGE COMMON SHARES OUTSTANDING
  BASIC                              430.1    401.9    427.3    401.2
                                   =======  =======  =======  =======
  DILUTED                            433.9    407.3    432.2    406.8
 ================================  =======  =======  =======  =======

 Occidental has classified its Ecuador Block 15 operations as
 discontinued operations on a retrospective application basis.

 See footnotes on following page.

(a) The second quarter and six months 2006 include $4 million pre-tax interest charges to purchase various debt issues in the open market. The six months 2005 includes $11 million pre-tax interest charges to purchase various debt issues in the open market.

(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 tax issues. The six months 2005 also includes a net $10 million charge related to a state income tax issue.

(c) The second quarter 2005 includes a $140 million pre-tax gain from the sale of 11 million shares of Lyondell Chemical Company.

(d) On May 15, 2006, Ecuador's Minister of Energy terminated Occidental's contract for the operation of Block 15 and the Government of Ecuador seized Occidental's Block 15 assets shortly thereafter. As a result of the seizure, Occidental has classified its Block 15 operations as discontinued operations on a retrospective application basis. The second quarter and six months 2006 discontinued operations also include income from the Vintage properties that were held for sale.



 SUMMARY OF CAPITAL EXPENDITURES AND DD&A EXPENSE

                                     Second Quarter        Six Months
                                   ----------------  ----------------
 ($ millions)                         2006     2005     2006     2005
 ================================  =======  =======  =======  =======

 CAPITAL EXPENDITURES              $   646  $   492  $ 1,242  $   998
                                   =======  =======  =======  =======
 DEPRECIATION, DEPLETION
  AND AMORTIZATION
   OF ASSETS                       $   494  $   342  $   953  $   673
 ================================  =======  =======  =======  =======


 SUMMARY OF OPERATING STATISTICS
                                     Second Quarter        Six Months
                                   ----------------  ----------------
                                      2006     2005     2006     2005
 ================================  =======  =======  =======  =======

 NET OIL, GAS AND LIQUIDS
   PRODUCTION PER DAY

 United States
  Crude oil and liquids (MBBL)
    California                          82       75       83       76
    Permian                            168      156      167      152
    Horn Mountain                       12       11       13       14
    Hugoton and other                    3        3        3        3
                                   -------  -------  -------  -------
      Total                            265      245      266      245

  Natural Gas (MMCF)
    California                         258      240      255      240
    Hugoton and other                  136      133      134      131
    Permian                            199      166      194      156
    Horn Mountain                        8        9        9       11
                                   -------  -------  -------  -------
      Total                            601      548      592      538

 Latin America
  Crude oil (MBBL)
    Argentina                           38       --       31       --
    Colombia                            34       36       36       34
                                   -------  -------  -------  -------
      Total                             72       36       67       34

 Natural Gas (MMCF)
    Argentina                           21       --       17       --
    Bolivia                             20       --       17       --
                                   -------  -------  -------  -------
      Total                             41       --       34       --

 Middle East/North Africa
  Crude oil (MBBL)
    Oman                                17       19       17       21
    Qatar                               44       43       44       43
    Yemen                               30       28       31       31
    Libya                               27       --       25       --
                                   -------  -------  -------  -------
      Total                            118       90      117       95

  Natural Gas (MMCF)
    Oman                                35       61       30       58

 Other Eastern Hemisphere
  Crude oil (MBBL)
    Pakistan                             5        6        4        6

  Natural Gas (MMCF)
    Pakistan                            80       72       77       75

 Barrels of Oil Equivalent (MBOE)
  Subtotal consolidated subsidiaries   586      491      576      492
    Colombia-minority interest          (5)      (5)      (5)      (4)
    Russia-Occidental net interest      27       28       28       29
    Yemen-Occidental net interest        1        2        2        2
                                   -------  -------  -------  -------
 Total Worldwide Production (MBOE)     609      516      601      519
 ================================= =======  =======  =======  =======
 Occidental has classified its Ecuador Block 15 operations as
 discontinued operations on a retrospective application basis.

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                       Diluted           Diluted
  per-share amounts)                  2006      EPS     2005      EPS
 ================================  =======  =======  =======  =======
 TOTAL REPORTED EARNINGS           $   857  $  1.97  $ 1,536  $  3.77
                                   =======  =======  =======  =======
 Oil and Gas
  Segment Earnings                 $ 1,953           $ 1,255
  Less: Contract settlement             --               (26)
                                   -------           -------
  Segment Core Earnings              1,953             1,281
                                   -------           -------
 Chemicals
  Segment Earnings                     250               225
  No significant items
    affecting earnings                  --                --
                                   -------           -------
  Segment Core Earnings                250               225
                                   -------           -------
 Total Segment Core Earnings         2,203             1,506
                                   -------           -------
 Corporate
  Corporate Results --
    Non Segment*                    (1,346)               56
  Less:
    Gain on sale of Lyondell shares     --               140
    Settlement of federal
      tax issue                         --               619
    Debt purchase expense               --                (1)
    Tax effect of pre-tax
      adjustments                       --               (51)
    Discontinued operations, net**    (347)               56
                                   -------           -------
  Corporate Core Results --
    Non Segment                       (999)             (707)
     -------           -------
 TOTAL CORE EARNINGS               $ 1,204  $  2.77  $   799  $  1.96
 ================================  =======  =======  =======  =======
  *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                       Diluted           Diluted
  per-share amounts)                  2006      EPS     2005      EPS
 ================================  =======  =======  =======  =======
 TOTAL REPORTED EARNINGS           $ 2,086  $  4.83  $ 2,382  $  5.86
                                   =======  =======  =======  =======
 Oil and Gas
  Segment Earnings                 $ 3,863           $ 2,534
  Less:
    Contract settlement                 --               (26)
                                   -------           -------
  Segment Core Earnings              3,863             2,560
                                   -------           -------
 Chemicals
  Segment Earnings                     498               439
  No significant items
    affecting earnings                  --                --
                                   -------           -------
  Segment Core Earnings                498               439
                                   -------           -------

 Total Segment Core Earnings         4,361             2,999
                                   -------           -------
 Corporate
  Corporate Results ---
    Non Segment*                    (2,275)             (591)
  Less:
    Debt purchase expense               --               (11)
    Gain on sale of Lyondell shares     --               140
    State tax issue charge              --               (10)
    Settlement of federal
      tax issue                         --               619
    Tax effect of pre-tax
     adjustments                        --               (47)
    Discontinued operations, net**    (269)              105
                                   -------           -------
  Corporate Core Results --
    Non Segment                     (2,006)           (1,387)
                                   -------           -------
 TOTAL CORE EARNINGS               $ 2,355  $  5.45  $ 1,612  $  3.96
 ================================  =======  =======  =======  =======
  *Interest expense, income taxes, G&A expense and other, and non-core
   items.
 **Amount shown after tax.


            

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