LOS ANGELES, Nov. 16, 2000 (PRIMEZONE) -- Strategic actions initiated since 1997 to refocus and strengthen Occidental Petroleum Corporation (NYSE:OXY) have added $1.25 per share in recurring earnings annually, Dr. Ray R. Irani, the company's chairman and chief executive, said at the company's meeting today with financial analysts in New York.
This improvement in base earnings and high energy prices in 2000 are the two key factors in the company's rapid pay-down of the debt it incurred in financing two major acquisitions since 1997, Dr. Irani said. When Occidental acquired Altura Energy, Ltd. in April 2000, debt rose to $9 billion from $5.4 billion at the end of 1999. By the end of the third quarter 2000, the company had met, three months ahead of schedule, its 2000 debt reduction goal of re-paying $2 billion. Dr. Irani said he expects additional debt reduction in the fourth quarter of $560 million, resulting in year-end 2000 total debt of approximately $6.5 billion. The company also is anticipating additional debt reduction in 2001.
"We expect our year-end 2000 debt-to-capitalization ratio to be around 57-percent," Dr. Irani said, "as we move closer to our target in the mid-40 percent range." The company's debt-to-capitalization ratio at the end of 1997 was 67 percent, prior to the acquisition of Elk Hills and Altura Energy.
Dr. Irani explained that, of the $1.25 improvement per share in recurring earnings, $1.00 came from the company's oil and gas operations and the remainder was from its chemicals business.
"This improvement in earnings is the result of actions we've taken to improve the things that are under our control," Dr. Irani said. "Based on the fact that the price-to-earnings multiple of our stock is the lowest in the industry, we don't believe these intrinsic improvements are reflected in our stock price."
Since 1997, Dr. Irani said, a series of asset sales, swaps and acquisitions has dramatically reshaped the company's capital structure and strengthened its mix of assets. Occidental sold or swapped a number of marginal oil and gas assets to concentrate on assembling a strong portfolio of large oil and gas holdings with competitive cost structures and high-quality, long-lived reserves in core areas in the U.S., the Middle East and Latin America.
"We've increased production by a compound annual rate of 6-percent since 1997. We've increased our reserves-to-production ratio by 35-percent," Dr. Irani said.
Occidental's worldwide production has grown from 395,000 barrels of oil equivalent (BOE) per day in 1997 to an estimated 495,000 BOE at the end of 2000, Dr. Irani said. From December 31, 1997, proved reserves grew from 1.3 billion BOE to an estimated 2.2 billion at the end of 2000.
He also told the analysts that Occidental's price realization, as a percentage of the benchmark West Texas Intermediate crude oil, rose from 75-percent in 1997 to an estimated 89-percent in 2000. Occidental's price realization for natural gas rose from 91-percent of the New York Mercantile Exchange average in 1997 to an estimated 96-percent in 2000. During the same period, overhead costs were reduced by nearly 40-percent and operating costs declined by more than 15-percent below the 1997 level.
"The results of what we have done to strengthen our asset mix and reduce costs is apparent in the improvement we've achieved in profitability," Dr. Irani said. "In 1999, Oxy led its competitors in operating income per barrel of oil equivalent. This shows we have excellent assets with strong earnings power. The picture is much the same through the first nine months of 2000."
"In chemicals, we've delivered on the synergies created by our alliances to add recurring earnings of 25-cents per share," Dr. Irani said.
In 1998, Occidental became a partner with a 29.5-percent interest in the Equistar alliance, a leading producer of ethylene and derivatives. The company combined its polyvinyl chloride business in 1999 with that of PolyOne Corporation, formerly The Geon Company, to form the OxyVinyls alliance, the largest producer of PVC resins in North America. Occidental is the operator with a 76-percent interest.
"We have enhanced our position in core chemical product markets by entering into strategic alliances that offered substantial cost-saving synergies," Dr. Irani said. "Our success in capturing these synergies has improved the fundamentals of our earnings and cash flow positions."
Dr. Irani also said that the company is making steady progress in improving returns on equity and capital employed. "We've set a target of achieving at least a 20-percent return on equity under normal market conditions," he said. "This is an ambitious goal and our success in reaching that goal will be impacted by energy and chemicals prices."
The company's return on equity has risen from 11.1-percent in 1998 to 12.5-percent in 1999 and an estimated 37.7-percent in 2000. The return on capital employed has increased from 7.7-percent in 1998 to 9.1-percent in 1999 and an estimated 14.8-percent in 2000.
"A debt-to-capitalization ratio in the mid-40-percent range and a return on equity of 20-percent would result in a return on capital employed in the 12 to 15-percent range that would place Occidental among the top performers in the oil and gas industry," Dr. Irani said. "That's our primary objective. We're striving to be one of the industry's best-performing companies on a consistent basis."
Forward-looking statements and estimates regarding exploration and production activities, oil, gas and commodity chemical prices, operating costs and their related earnings effects in this release are based on assumptions concerning market, competitive, regulatory, environmental, operational and other conditions. Actual results could differ materially as a result of factors discussed in Occidental's Annual Report on Form 10-K.