LOS ANGELES, Oct. 18, 2006 (PRIMEZONE) -- Occidental Petroleum Corporation (NYSE:OXY) announced core earnings for the third quarter 2006 were $1.159 billion ($1.35 per diluted share), compared with $1.004 billion ($1.22 per diluted share) for the same period in 2005. See the attached schedule for a reconciliation of net income to core earnings.
Net income for the third quarter 2006 was $1.168 billion ($1.36 per diluted share), compared with $1.747 billion ($2.12 per diluted share) for the third quarter 2005.
In announcing the results, Dr. Ray R. Irani, chairman, president and chief executive officer, said, "Our continuing focus on expanding and strengthening operations in our core businesses was a key factor in the 15 percent increase in our core earnings compared to last year's third quarter results. Our success in growing combined oil and gas production by 14 percent compared to the same period a year ago, along with sharply higher crude oil prices and a strong performance from our chemicals business, were key drivers in our financial performance for the quarter. Oil and gas production averaged 587,000 barrels of oil equivalent per day for the quarter and an all-time high for nine months of 596,000 equivalent barrels per day. Strong production growth and robust energy prices helped propel Oil and Gas segment earnings to an historic nine month high. In addition, our Chemical segment's earnings were the highest for any nine month period in more than a decade."
The third quarter 2005 core income of $1.004 billion excludes a $463 million after-tax gain resulting from the sale of an equity investment, a $335 million tax benefit due to the reversal of tax reserves no longer required and a $98 million after-tax charge from the write-off of certain chemical plants.
QUARTERLY RESULTS
Oil and Gas
Oil and gas segment earnings were $1.877 billion for the third quarter 2006, a 15 percent increase from the $1.638 billion segment earnings for the third quarter 2005. The improvement in the third quarter 2006 earnings reflected a $273 million increase from higher worldwide crude oil prices, a $141 million increase from higher production, partially offset by higher operating expenses, increased DD&A rates, and higher exploration expense.
The average price for West Texas Intermediate crude oil in the third quarter 2006 was $70.53 per barrel compared to $63.19 per barrel in the third quarter 2005. Occidental's realized price for worldwide crude oil was $60.52 per barrel for the third quarter 2006, compared with $55.97 per barrel for the third quarter 2005. The average price for NYMEX gas in the third quarter 2006 was $6.33 per MMCF, compared with $7.09 per MMCF in the third quarter 2005. Domestic realized gas prices decreased from $6.33 per MMCF in the third quarter 2005 to $5.88 per MMCF for the third quarter 2006.
Production
For the third quarter, oil and gas daily production from continuing operations averaged 587,000 barrels of oil equivalent (BOE), a 71,000 BOE increase over the 516,000 equivalent barrels per day produced in the third quarter 2005.
Chemicals
Chemical third quarter 2006 core earnings were $247 million and third quarter 2005 core earnings were $167 million, after excluding charges for write-off of plants and hurricane related insurance charges. See the attached schedule for a reconciliation of segment earnings to core earnings. The improvement in the third quarter 2006 results was due to increased chlor-alkali volumes and higher margins in all chlorovinyls products. Chemical segment earnings were $247 million for the third quarter 2006, compared with $3 million for the third quarter 2005.
NINE-MONTHS RESULTS
Core earnings were $3.514 billion ($4.07 per diluted share) for the first nine months of 2006, compared with $2.616 billion ($3.20 per diluted share) for the same period in 2005. See the attached schedule for a reconciliation of net income to core earnings.
For the first nine months of 2006, net income was $3.254 billion ($3.77 per diluted share), compared with $4.129 billion ($5.06 per diluted share) for the first nine months of 2005.
Oil and Gas
Oil and gas segment earnings were $5.740 billion for the first nine months of 2006, a 38 percent increase over the $4.172 billion segment earnings for the first nine months of 2005. The improvement in the nine months 2006 earnings was due to record crude oil and higher natural gas prices and higher production, partially offset by higher operating expenses and increased DD&A rates.
The average price for West Texas Intermediate crude oil in the first nine months of 2006 was $68.24 per barrel compared to $55.40 per barrel in the nine months of 2005. Occidental's realized price for worldwide crude oil was $58.41 per barrel for the nine months of 2006, compared with $48.24 per barrel for the same period in 2005. The average price for NYMEX gas in the nine months of 2006 was $8.34 per MMCF, compared with $6.93 per MMCF in the nine months of 2005. Domestic realized gas prices increased from $6.16 per MMCF in the nine months of 2005 to $6.80 per MMCF for the nine months of 2006.
Production
Worldwide daily production from continuing operations for the nine months of 2006 averaged 596,000 BOE, compared with 519,000 BOE for the nine months of 2005. The increase included eight months of Vintage production at 59,000 BOE per day, which added 53,000 BOE per day to Occidental's year-to-date production and a Libyan increase of 18,000 BOE per day, which reflects nine months production in 2006, compared with one month in 2005.
Chemicals
Chemical core earnings for the first nine months of 2006 were $745 million, compared with $606 million for the same period of 2005, after excluding the same charges discussed in the third quarter analysis above. See the attached schedule for a reconciliation of segment earnings to core earnings. The improvement in the nine months 2006 results was due to higher chlor-alkali volumes and higher margins in all chlorovinyl products. Chemical segment earnings were $745 million for the first nine months of 2006, compared with $442 million for the same 2005 period.
Statements in this presentation that contain words such as "will", "expect" or "estimate", or otherwise relate to the future, are forward-looking and involve risks and uncertainties that could significantly affect expected results. Factors that could cause results to differ materially include, but are not limited to: exploration risks, such as drilling of unsuccessful wells; global commodity pricing fluctuations and supply/demand considerations for oil, gas and chemicals; higher-than-expected costs; political risk; and not successfully completing (or any material delay in) any expansion, capital expenditure, acquisition, or disposition. You should not place undue reliance on these forward-looking statements which speak only as of the date of this presentation. Unless legally required, Occidental does not undertake any obligation to update any forward-looking statements as a result of new information, future events or otherwise. U.S. investors are urged to consider carefully the disclosure in our Form 10-K, available through the following toll-free telephone number, 1-888-OXYPETE (1-888-699-7383) or on the Internet at http://www.oxy.com. You also can obtain a copy from the SEC by calling 1-800-SEC-0330.
For further analysis of Occidental's quarterly performance, please visit the web site: www.oxy.com
SUMMARY OF SEGMENT NET SALES AND EARNINGS
Third Quarter Nine Months
($ millions, except ---------------- ----------------
per-share amounts) 2006 2005 2006 2005
================================ ======= ======= ======= =======
SEGMENT NET SALES
Oil and Gas $ 3,207 $ 2,617 $ 9,624 $ 6,926
Chemical 1,265 1,190 3,779 3,379
Other 50 50 114 110
------- ------- ------- -------
Net sales $ 4,522 $ 3,857 $13,517 $10,415
================================ ======= ======= ======= =======
SEGMENT EARNINGS
Oil and Gas $ 1,877 $ 1,638 $ 5,740 $ 4,172
Chemical 247 3 745 442
------- ------- ------- -------
2,124 1,641 6,485 4,614
Unallocated Corporate Items
Interest expense, net (a) (18) (70) (80) (178)
Income taxes (b) (885) (574) (2,672) (1,184)
Other (c) (62) 660 (219) 682
------- ------- ------- -------
Income from Continuing Operations 1,159 1,657 3,514 3,934
Discontinued operations, net (d) 9 87 (260) 192
Cumulative effect of accounting
changes, net -- 3 -- 3
------- ------- ------- -------
NET INCOME $ 1,168 $ 1,747 $ 3,254 $ 4,129
======= ======= ======= =======
BASIC EARNINGS PER COMMON SHARE
Income from continuing
operations $ 1.36 $ 2.05 $ 4.11 $ 4.89
Discontinued operations, net (d) 0.01 0.11 (0.30) 0.24
------- ------- ------- -------
$ 1.37 $ 2.16 $ 3.81 $ 5.13
======= ======= ======= =======
DILUTED EARNINGS PER COMMON SHARE
Income from continuing
operations $ 1.35 $ 2.01 $ 4.07 $ 4.82
Discontinued operations, net (d) 0.01 0.11 (0.30) 0.24
------- ------- ------- -------
$ 1.36 $ 2.12 $ 3.77 $ 5.06
======= ======= ======= =======
AVERAGE COMMON SHARES OUTSTANDING
BASIC 852.8 808.5 854.2 804.8
DILUTED 860.3 822.4 863.0 816.5
================================ ======= ======= ======= =======
See footnotes on following page.
(a) The nine months 2006 includes $4 million pre-tax interest charges
to purchase various debt issues in the open market. Interest
charges to purchase various debt issues in 2005 were $41 million
for the nine months, which included $30 million in the third
quarter.
(b) The third quarter 2005 includes a $335 million tax benefit due to
the reversal of tax reserves no longer required. The nine months
2005 also includes a $619 million tax benefit resulting from a
closing agreement with the U.S. Internal Revenue Service (IRS)
resolving certain tax issues, and a $10 million tax charge related
to a state income tax issue.
(c) The third quarter 2005 includes a $726 million pre-tax gain from
Valero's acquisition of Premcor and the subsequent sale of Valero
shares received. The nine months 2005 also includes a $140
million pre-tax gain from the sale of 11 million shares of
Lyondell Chemical Company.
(d) In the second quarter 2006, Ecuador's Minister of Energy
terminated Occidental's contract for the operation of Block 15
and the Government of Ecuador seized Occidental's Block 15 assets
shortly thereafter. As a result of the seizure, Occidental has
classified its Block 15 operations as discontinued operations on a
retrospective application basis. The nine months 2006 discontinued
operations also includes income from the Vintage properties that
were held for sale.
SUMMARY OF CAPITAL EXPENDITURES AND DD&A EXPENSE
Third Quarter Nine Months
---------------- ----------------
($ millions) 2006 2005 2006 2005
================================ ======= ======= ======= =======
CAPITAL EXPENDITURES $ 750 $ 585 $ 1,992 $ 1,583
======= ======= ======= =======
DEPRECIATION, DEPLETION
AND AMORTIZATION
OF ASSETS $ 524 $ 362 $ 1,477 $ 1,035
================================ ======= ======= ======= =======
SUMMARY OF OPERATING STATISTICS
Third Quarter Nine Months
---------------- ----------------
2006 2005 2006 2005
================================ ======= ======= ======= =======
NET OIL, GAS AND LIQUIDS
PRODUCTION PER DAY
United States
Crude oil and liquids (MBBL)
California 84 73 83 75
Permian 168 165 167 156
Horn Mountain 10 10 12 13
Hugoton and other 3 3 3 4
------- ------- ------- -------
Total 265 251 265 248
Natural Gas (MMCF)
California 255 239 254 240
Hugoton and other 139 133 137 131
Permian 198 186 194 167
Horn Mountain 5 6 8 9
------- ------- ------- -------
Total 597 564 593 547
Latin America
Crude oil (MBBL)
Argentina 37 -- 33 --
Colombia 33 38 35 35
------- ------- ------- -------
Total 70 38 68 35
Natural Gas (MMCF)
Argentina 19 -- 18 --
Bolivia 16 -- 16 --
------- ------- ------- -------
Total 35 -- 34 --
Middle East/North Africa
Crude oil (MBBL)
Oman 17 12 17 18
Qatar 41 42 43 43
Yemen 27 23 30 29
Libya 15 9 21 3
------- ------- ------- -------
Total 100 86 111 93
Natural Gas (MMCF)
Oman 35 35 32 51
Other Eastern Hemisphere
Crude oil (MBBL)
Pakistan 5 5 4 5
Natural Gas (MMCF)
Pakistan 75 81 77 77
Barrels of Oil Equivalent (MBOE)
Subtotal consolidated subsidiaries 564 493 571 494
Other Interests
Colombia-minority interest (4) (5) (4) (4)
Russia-Occidental net interest 25 27 27 27
Yemen-Occidental net interest 2 1 2 2
------- ------- ------- -------
Total Worldwide Production (MBOE) 587 516 596 519
================================ ======= ======= ======= =======
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 tables set forth the core earnings and significant items affecting earnings for each operating segment and corporate:
SIGNIFICANT TRANSACTIONS AND EVENTS AFFECTING EARNINGS (continued)
Third Quarter
----------------------------------
($ millions, except Diluted Diluted
per-share amounts) 2006 EPS 2005 EPS
================================ ======= ======= ======= =======
TOTAL REPORTED EARNINGS $ 1,168 $ 1.36 $ 1,747 $ 2.12
======= ======= ======= =======
Oil and Gas
Segment Earnings $ 1,877 $ 1,638
Less:
Hurricane insurance charge -- (9)
------- -------
Segment Core Earnings 1,877 1,647
------- -------
Chemicals
Segment Earnings 247 3
Less:
Write-off of plants -- (159)
Hurricane insurance charge -- (5)
------- -------
Segment Core Earnings 247 167
------- -------
Total Segment Core Earnings 2,124 1,814
------- -------
Corporate
Corporate Results --
Non Segment(1) (956) 106
Less:
Gain on sale of Premcor-
Valero shares -- 726
Reversal of tax reserves -- 335
Debt purchase expense -- (30)
Equity investment impairment -- (15)
Equity investment hurricane
insurance charge -- (2)
Hurricane insurance charge -- (10)
Tax effect of pre-tax
adjustments -- (178)
Discontinued operations, net(2) 9 87
Cumulative effect of accounting
changes, net(2) -- 3
------- -------
Corporate Core Results --
Non Segment (965) (810)
------- -------
TOTAL CORE EARNINGS $ 1,159 $ 1.35 $ 1,004 $ 1.22
=============================== ======= ======= ======= =======
(1) Interest expense, income taxes, G&A expense and other, and
non-core items.
(2) Amounts shown after tax.
SIGNIFICANT TRANSACTIONS AND EVENTS AFFECTING EARNINGS (continued)
Nine Months
----------------------------------
($ millions, except Diluted Diluted
per-share amounts) 2006 EPS 2005 EPS
================================ ======= ======= ======= =======
TOTAL REPORTED EARNINGS $ 3,254 $ 3.77 $ 4,129 $ 5.06
======= ======= ======= =======
Oil and Gas
Segment Earnings $ 5,740 $ 4,172
Less:
Contract settlement -- (26)
Hurricane insurance charge -- (9)
------- -------
Segment Core Earnings 5,740 4,207
------- -------
Chemicals
Segment Earnings 745 442
Less:
Write-off of plants -- (159)
Hurricane insurance charge -- (5)
------- -------
Segment Core Earnings 745 606
------- -------
Total Segment Core Earnings 6,485 4,813
------- -------
Corporate
Corporate Results --
Non Segment(1) (3,231) (485)
Less:
Debt purchase expense -- (41)
Gain on sale of Lyondell shares -- 140
Gain on sale of Premcor-
Valero shares -- 726
State tax issue charge -- (10)
Settlement of federal
tax issues -- 619
Reversal of tax reserves -- 335
Equity investment impairment -- (15)
Equity investment hurricane
insurance charge -- (2)
Hurricane insurance charge -- (10)
Tax effect of pre-tax
adjustments -- (225)
Discontinued operations, net(2 (260) 192
Cumulative effect of accounting
changes, net(2) -- 3
------- -------
Corporate Core Results --
Non Segment (2,971) (2,197)
------- -------
TOTAL CORE EARNINGS $ 3,514 $ 4.07 $ 2,616 $ 3.20
================================ ======= ======= ======= =======
(1) Interest expense, income taxes, G&A expense and other, and
non-core items.
(2) Amounts shown after tax.