In June 2017, the court overseeing the Maxus bankruptcy approved a Plan of Liquidation (Plan) to liquidate Maxus and create a trust to pursue claims against YPF, Repsol, and others to satisfy claims by Occidental and other creditors for past and future cleanup and other costs. In July 2017, the court-approved Plan became final and the trust became effective. Among other responsibilities, the trust will pursue claims against YPF, Repsol and others and distribute assets to Maxus' creditors in accordance with the trust agreement and Plan. In June 2018, the trust filed its complaint against YPF and Repsol in Delaware bankruptcy court asserting claims based upon, among other things, fraudulent transfer and alter ego. On February 15,During 2019, the bankruptcy court denied Repsol's and YPF's motions to dismiss the complaint.complaint as well as their motions to move the case away from the bankruptcy court. Discovery remains ongoing at the time of this report.
Note 13 - Retirement and Postretirement Benefit Plans | | |
| NOTE 12 - RETIREMENT AND POSTRETIREMENT BENEFIT PLANS |
Occidental has various defined benefit pension plans for certain domestic union, non-union hourly and foreign national employees. In addition, Occidental also provides medical and other benefits for certain active, retired and disabled employees and their eligible dependents.
In conjunction with the Merger,Acquisition, Occidental acquired certain Anadarko contributory and non-contributory defined benefit pension plans, which include both qualified and supplemental plans, and plans that provide health care and life insurance benefits for certain retired employees. The Anadarko pension and postretirement obligations were remeasured as of the MergerAcquisition date. The disclosures below exclude the Africa Assets classified as held for saleEffective as of SeptemberJune 30, 2019.
The remeasurement resulted in an increase to2020, the defined benefit obligationpension plans and certain of $193 million. Accumulated other comprehensive income balances of $390 millionthe supplemental plans covering active Anadarko employees were eliminated in purchase price accounting.
Net periodic benefit costs related to pension benefits included anet gains related to settlement, curtailment gainand special termination benefits of $34$118 million for three months ended June 30, 2020, and a $10$116 million cost offor the six months ended June 30, 2020, respectively.
The settlement and curtailment gains and special termination benefits for both the three and nine months ended September 30, 2019. The curtailment gain and cost of special termination benefits for 20192020 primarily relate to thea separation program initiated in conjunction with the Merger.Acquisition and the freezing of benefit accruals for Anadarko employees. Excluding these items, net periodic benefit costs related to pension benefits were $15$13 million and $19$24 million for the three and ninesix months ended SeptemberJune 30, 2019, respectively, compared2020, respectively. Net periodic benefit costs related to $2 million and $4 millionpension benefits were not material for the same periods in 2018.
Net periodic benefit costs related to postretirement benefits were $19$18 million and $48$38 million for the three and ninesix months ended SeptemberJune 30, 2019,2020, respectively, compared to $15 million and $55$29 million for the same periods in 2018.2019.
During the three and six months ended June 30, 2020, Occidental contributed approximately $7$11 million and $2$102 million, inrespectively, to its qualified and supplemental plans. During the three and six months ended SeptemberJune 30, 2019, and 2018, respectively, and approximately $8 million and $4 million in the nine months ended September 30, 2019, and 2018, respectively,Occidental contributed an immaterial amount to its defined benefit plans.
Note 14 - Stockholders' Equity
The following tableincrease in contributions is primarily due to distributions from the Anadarko supplemental plans related to the severance program described above. Occidental is reimbursed for a summarymajority of common stock issuances:these contributions from a trust for former Anadarko employees. Occidental is deferring all required contributions to the qualified defined benefit plans as permitted by the CARES Act.
|
| | | |
shares in thousands | | Common Stock |
Balance at December 31, 2018 | | 895,116 |
|
Issued in the ordinary course | | 2,394 |
|
Issued as part of the Merger NOTE 13 - EARNINGS PER SHARE AND STOCKHOLDERS' EQUITY(a)
| | 146,131 |
|
Balance at September 30, 2019 | | 1,043,641 |
|
(a) Includes
The following table presents the calculation of basic and diluted net income (loss) attributable to common stockholders per share:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended
June 30, | | | | Six months ended
June 30, | | |
| millions except per-share amounts | | 2020 | | 2019 | | 2020 | | 2019 |
| | | | | | | | |
| Net income (loss) from continuing operations | | $ | (6,716) | | | $ | 635 | | | $ | (8,729) | | | $ | 1,266 | |
| Loss from discontinued operations | | (1,415) | | | — | | | (1,415) | | | — | |
| Net income (loss) | | (8,131) | | | 635 | | | (10,144) | | | 1,266 | |
| Less: Preferred stock dividends | | (222) | | | — | | | (441) | | | — | |
| Net income (loss) attributable to common stock | | $ | (8,353) | | | $ | 635 | | | $ | (10,585) | | | $ | 1,266 | |
| Less: Net income allocated to participating securities | | — | | | (3) | | | — | | | (6) | |
| Net income (loss) attributable to common stock, net of participating securities | | (8,353) | | | 632 | | | (10,585) | | | 1,260 | |
| | | | | | | | |
| Weighted average number of basic shares | | 915.5 | | 748.3 | | 906.2 | | 748.7 |
| | | | | | | | |
| Net income (loss) attributable to common stockholders per share—basic | | $ | (9.12) | | | $ | 0.84 | | | $ | (11.68) | | | $ | 1.68 | |
| | | | | | | | |
| Net income (loss) attributable to common stock, net of participating securities | | (8,353) | | | 632 | | | (10,585) | | | 1,260 | |
| | | | | | | | |
| Weighted-average number of basic shares | | 915.5 | | | 748.3 | | | 906.2 | | | 748.7 | |
| Dilutive securities | | — | | | 1.2 | | | — | | | 1.3 | |
| Total diluted weighted-average common shares | | 915.5 | | | 749.5 | | | 906.2 | | | 750.0 | |
| | | | | | | | |
| Net income (loss) attributable to common stockholders per share—diluted | | $ | (9.12) | | | $ | 0.84 | | | $ | (11.68) | | | $ | 1.68 | |
For the three and six months ended June 30, 2020, the Berkshire Warrants, Common Stock Warrants, and options covering approximately 2200 million shares of Occidental common stock issued to a benefits trust for former Anadarko employees treatedwere excluded from the diluted shares as treasury stock at September 30, 2019.their effect would have been anti-dilutive.
Occidental has authorized 50 million shares of preferred stock with a par value of $1.00 per share. On August 8, 2019, inPREFERRED STOCK
In connection with the Merger,Acquisition, Occidental issued 100,000 shares of a new series A preferred stock (the Preferred Stock), having a face value of $100,000 per share. Dividends on the Preferred Stock will accrue on the face value at a rate per annum of 8 percent, but will be paid only when, as and if declared by Occidental’s Board of Directors. The Board of Directors will assess market conditions and Occidental's financial position on a quarterly basis to determine whether the dividend on the Preferred Stock will be paid in shares of common stock, in cash or a combination of shares of common stock and cash. At any time, when such dividends have not been paid in full, the unpaid amounts will accrue dividends, compounded quarterly, at a rate per annum of 9 percent. Following the payment in full of any accrued but unpaid dividends, the dividend rate will remain at 9 percent per annum. On October 15, 2019,If preferred dividends are not paid in full, Occidental paid approximately $149 million inis prohibited from paying dividends on common stock.
In March and June, 2020, the Board of Directors elected to declare its quarterly dividend on the Preferred Stock dividends. At September 30, 2019, Occidental had 100,000in shares of preferred stockcommon stock. In accordance with the Certificate of Designations, the number of shares issued and outstanding, and NaN were outstanding at December 31, 2018.
The following table presents the calculation of basic and diluted net income (loss) attributable to common stockholders per share:
|
| | | | | | | | | | | | | | | | |
| | | Three months ended September 30 | | Nine months ended September 30 |
| millions except per-share amounts | | 2019 | | 2018 | | 2019 | | 2018 |
| | | | | | | | | |
| Net income (loss) attributable to common stockholders | | $ | (912 | ) | | $ | 1,869 |
| | $ | 354 |
| | $ | 3,425 |
|
| Less: Net income allocated to participating securities | | — |
| | 8 |
| | 1 |
| | 16 |
|
| Net income (loss), net of participating securities | | $ | (912 | ) | | $ | 1,861 |
| | $ | 353 |
| | $ | 3,409 |
|
| | | | | | | | | |
| Weighted average number of basic shares | | 845.7 |
| | 761.7 |
| | 781.1 |
| | 764.3 |
|
| | | | | | | | | |
| Net income (loss) attributable to common stockholders per share—basic | | $ | (1.08 | ) | | $ | 2.44 |
| | $ | 0.45 |
| | $ | 4.46 |
|
| | | | | | | | | |
| Net income (loss), net of participating securities | | $ | (912 | ) | | $ | 1,861 |
| | $ | 353 |
| | $ | 3,409 |
|
| | | | | | | | | |
| Weighted average number of basic shares | | 845.7 |
| | 761.7 |
| | 781.1 |
| | 764.3 |
|
| Dilutive securities | | — |
| | 1.6 |
| | 1.1 |
| | 1.5 |
|
| Total diluted weighted-average common shares | | 845.7 |
| | 763.3 |
| | 782.2 |
| | 765.8 |
|
| | | | | | | | | |
| Net income (loss) attributable to common stockholders per share—diluted | | $ | (1.08 | ) | | $ | 2.44 |
| | $ | 0.45 |
| | $ | 4.45 |
|
Accumulated other comprehensive loss consistedwas calculated based on 90 percent of the average of the volume weighted average price over each of the 10 consecutive trading days following after-tax amounts:the dividend declaration date. On July 15, 2020, Occidental issued approximately 11.6 million shares of common stock to the holders of Preferred Stock as of June 30, 2020.
|
| | | | | | | | | | | | | | | | |
| millions | | Gains and (losses) on derivatives | | Pension and postretirement benefit plans | | Foreign currency translation adjustments | | Total |
| Balance at December 31, 2018 | | $ | 5 |
| | $ | (170 | ) | | $ | (7 | ) | | $ | (172 | ) |
| Other comprehensive loss, before reclassifications | | (130 | ) | | (30 | ) | | — |
| | (160 | ) |
| Balance at September 30, 2019 | | $ | (125 | ) | | $ | (200 | ) | | $ | (7 | ) | | $ | (332 | ) |
29
On June 26, 2020, the Board of Directors declared a distribution to holders of its common stock of warrants to purchase shares of Occidental’s common stock, at a rate of 0.125 warrants per share of Occidental common stock (the Common Stock Warrants). Occidental issued approximately 116 million Common Stock Warrants on or about August 3, 2020 to holders of record of outstanding shares of Occidental’s common stock as of the close of business on July 6, 2020 and pursuant to Occidental’s outstanding equity-based incentive awards in connection with anti-dilution adjustments resulting from such distribution. The Common Stock Warrants have an exercise price of $22.00 per share and will expire on August 3, 2027. The Common Stock Warrants are listed on the the New York Stock Exchange and trade under the symbol "OXY WS".
The Common Stock Warrants were measured at fair value on the declaration date using the Black-Scholes option model and were classified as equity, "Additional paid-in capital". The following level 2 inputs were used in the Black-Scholes option model: the expected life of the Common Stock Warrants, a volatility factor and the exercise price. The expected life is based on the estimated term of the Common Stock Warrants, the volatility factor is based on historical volatilities of Occidental common stock, and the exercise of $22.00 per share of Occidental common stock. As of the declaration date, the fair value of the Common Stock Warrants was determined to be $767 million.
Note 15 - Industry Segments
Occidental conducts its operations through 43 segments: (1) Oiloil and Gas;gas; (2) Chemical;chemical; and (3) Marketingmidstream and Other Midstream; and (4) WES Midstream.
marketing. Income taxes, interest income, interest expense, environmental remediation expenses, Anadarko merger-relatedacquisition-related costs and unallocated corporate expenses are included under Corporate and Eliminations. Intersegment sales eliminate upon consolidation and are generally made at prices approximating those that the selling entity would be able to obtain in third-party transactions. The following tables presenttable presents Occidental’s industry segments:
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| millions | | Oil and Gas | | Chemical | | Marketing and Other Midstream | | WES Midstream (a) | | Corporate and Eliminations | | Total |
Three months ended September 30, 2019 | | | | | | | | | | | | |
| Net sales | | $ | 3,821 |
| | $ | 1,071 |
| | $ | 780 |
| | $ | 383 |
| | $ | (368 | ) | | $ | 5,687 |
|
| Income (loss) from continuing operations before income taxes | | $ | 221 |
| | $ | 207 |
| | $ | 266 |
| | $ | 134 |
| | $ | (1,449 | ) | (b) | $ | (621 | ) |
| Income tax expense | | — |
| | — |
| | — |
| | — |
| | (116 | ) | | (116 | ) |
| Income (loss) from continuing operations | | $ | 221 |
| | $ | 207 |
| | $ | 266 |
| | $ | 134 |
| | $ | (1,565 | ) | | $ | (737 | ) |
| | | | | | | | | | | | | |
Three months ended September 30, 2018 | | | | | | | | | | | | |
| Net sales | | $ | 2,889 |
| | $ | 1,185 |
| | $ | 1,367 |
| | $ | — |
| | $ | (225 | ) | | $ | 5,216 |
|
| Income (loss) from continuing operations before income taxes | | $ | 767 |
| | $ | 321 |
| | $ | 1,698 |
| | $ | — |
| | $ | (207 | ) | | $ | 2,579 |
|
| Income tax expense | | — |
| | — |
| | — |
| | — |
| | (710 | ) | | (710 | ) |
| Income (loss) from continuing operations | | $ | 767 |
| | $ | 321 |
| | $ | 1,698 |
| | $ | — |
| | $ | (917 | ) | | $ | 1,869 |
|
| | | | | | | | | | | | | |
Nine months ended September 30, 2019 | | | | | | | | | | | | |
| Net sales | | $ | 8,890 |
| | $ | 3,128 |
| | $ | 2,505 |
| | $ | 383 |
| | $ | (795 | ) | | $ | 14,111 |
|
| Income (loss) from continuing operations before income taxes | | $ | 1,431 |
| | $ | 680 |
| | $ | 876 |
| | $ | 134 |
| | $ | (1,945 | ) | (b) | $ | 1,176 |
|
| Income tax expense | | — |
| | — |
| | — |
| |
|
| | (647 | ) | | (647 | ) |
| Income (loss) from continuing operations | | $ | 1,431 |
| | $ | 680 |
| | $ | 876 |
| | $ | 134 |
| | $ | (2,592 | ) | | $ | 529 |
|
| | | | | | | | | | | | | |
Nine months ended September 30, 2018 | | | | | | | | | | | | |
| Net sales | | $ | 7,874 |
| | $ | 3,515 |
| | $ | 2,359 |
| | $ | — |
| | $ | (686 | ) | | $ | 13,062 |
|
| Income (loss) from continuing operations before income taxes | | $ | 2,297 |
| | $ | 936 |
| | $ | 2,127 |
| | $ | — |
| | $ | (584 | ) | | $ | 4,776 |
|
| Income tax expense | | — |
| | — |
| | — |
| |
|
| | (1,351 | ) | | (1,351 | ) |
| Income (loss) from continuing operations | | $ | 2,297 |
| | $ | 936 |
| | $ | 2,127 |
| | $ | — |
| | $ | (1,935 | ) | | $ | 3,425 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| millions | | Oil and Gas (a) | | Chemical | | Midstream and Marketing (b) | | Corporate and Eliminations (c) | | Total |
| Three months ended June 30, 2020 | | | | | | | | | | |
| Net sales | | $ | 2,040 | | | $ | 846 | | | $ | 204 | | | $ | (162) | | | $ | 2,928 | |
| Income (loss) from continuing operations before income taxes | | $ | (7,734) | | | $ | 108 | | | $ | (7) | | | $ | (551) | | | $ | (8,184) | |
| Income tax benefit | | | | | | | | 1,468 | | | 1,468 | |
| Income (loss) from continuing operations | | $ | (7,734) | | | $ | 108 | | | $ | (7) | | | $ | 917 | | | $ | (6,716) | |
| | | | | | | | | | |
| Three months ended June 30, 2019 | | | | | | | | | | |
| Net sales | | $ | 2,718 | | | $ | 998 | | | $ | 909 | | | $ | (205) | | | $ | 4,420 | |
| Income (loss) from continuing operations before income taxes | | $ | 726 | | | $ | 208 | | | $ | 331 | | | $ | (324) | | | $ | 941 | |
| Income tax expense | | — | | | — | | | — | | | (306) | | | (306) | |
| Income (loss) from continuing operations | | $ | 726 | | | $ | 208 | | | $ | 331 | | | $ | (630) | | | $ | 635 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| millions | | Oil and Gas (a) | | Chemical | | Midstream and Marketing (b) | | Corporate and Eliminations (c) | | Total |
| Six months ended June 30, 2020 | | | | | | | | | | |
| Net sales | | $ | 7,100 | | | $ | 1,808 | | | $ | 994 | | | $ | (361) | | | $ | 9,541 | |
| Income (loss) from continuing operations before income taxes | | $ | (7,498) | | | $ | 294 | | | $ | (1,294) | | | $ | (1,724) | | | $ | (10,222) | |
| Income tax benefit | | | | | | | | 1,493 | | | 1,493 | |
| Income (loss) from continuing operations | | $ | (7,498) | | | $ | 294 | | | $ | (1,294) | | | $ | (231) | | | $ | (8,729) | |
| | | | | | | | | | |
| Six months ended June 30, 2019 | | | | | | | | | | |
| Net sales | | $ | 5,069 | | | $ | 2,057 | | | $ | 1,725 | | | $ | (427) | | | $ | 8,424 | |
| Income (loss) from continuing operations before income taxes | | $ | 1,210 | | | $ | 473 | | | $ | 610 | | | $ | (496) | | | $ | 1,797 | |
| Income tax expense | | — | | | — | | | — | | | (531) | | | (531) | |
| Income (loss) from continuing operations | | $ | 1,210 | | | $ | 473 | | | $ | 610 | | | $ | (1,027) | | | $ | 1,266 | |
(a) The WES Midstream segment results representIncludes $6.4 billion and $7.0 billion related to asset impairments and other charges for the period from August 8, 2019, the Merger date, through September 30, 2019.
(b) The three and six months ended SeptemberJune 30, 20192020, respectively. Additionally includes merger-related costsa $957 million gain on the oil collars and calls for the six months ended June 30, 2020.
(b) Includes $1.4 billion of $924impairments related to the write-off of goodwill and a loss from an equity investment related to WES's write-off of its goodwill for the six months ended June 30, 2020.
(c) Includes $149 million and amortized debt financing fees of $65 million. The nine$297 million in expenses related to Anadarko acquisition-related costs for the three and six months ended SeptemberJune 30, 2019 includes merger-related costs of $9742020, respectively, and a $665 million and amortized debt financing fees of $122 million.loss on interest rate swaps for the six months ended June 30, 2020.
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A)
The following discussion should be read together with the Consolidated Condensed Financial Statements and the Notes to Consolidated Condensed Financial Statements, which are included in this report in Part I, Item 1; the information set forth in Risk Factors under Part II, Item 1A; the Consolidated Financial Statements and the Notes to the Consolidated Financial Statements, which are included in Part II, Item 8 of Occidental's Annual Report on Form 10-K for the year ended December 31, 2019 (the 2019 Form 10-K); the information set forth in Risk Factors under Part I, Item 1A of the 2019 Form 10-K; and the information set forth in Risk Factors under Part II, Item 1A of the Form 10-Q for the quarter ended March 31, 2020.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS | | | | | |
| INDEX | PAGE |
| Cautionary Statement Regarding Forward-Looking Statements | |
| Current Business Outlook | |
| Consolidated Results of Operations | |
| |
| Income Taxes | |
| Liquidity and Capital Resources | |
| Environmental Liabilities and Expenditures | |
| Lawsuits, Claims, Commitments and Contingencies | |
| Recently Adopted Accounting and Disclosure Changes | |
| | |
| CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS |
In this report, “Occidental” means Occidental Petroleum Corporation (OPC), or OPC and one or more entities in which it owns a controlling interest (subsidiaries). Portions of this report contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, and they include, but are not limited to: any projections of earnings, revenue or other financial items or future financial position or sources of financing; any statements of the plans, strategies and objectives of management for future operations or business strategy; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing. Words such as “estimate,” “project,” “predict,” “will,” “would,” “should,” “could,” “may,” “might,” “anticipate,” “plan,” “intend,” “believe,” “expect,” “aim,” “goal,” “target,” “objective,” “likely” or similar expressions that convey the prospective nature of events or outcomes are generally indicative of forward-looking statements. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this report. Unless legally required, Occidental does not undertake any obligation to update, modify or withdraw any forward-looking statements as a result of new information, future events or otherwise.
Although Occidental believes that the expectations reflected in any of ourits forward-looking statements are reasonable, actual results may differ from anticipated results, sometimes materially. Factors that could cause results to differ from those projected or assumed in any forward-looking statement include, but are not limited to: the extentscope and duration of the COVID-19 pandemic and actions taken by governmental authorities and other third parties in response to which Occidental is ablethe pandemic; Occidental’s indebtedness and other payment obligations, including the need to generate sufficient cash flows to fund operations; Occidental’s ability to successfully integrate Anadarko Petroleum Corporation (Anadarko), manage expandedmonetize select assets, repay or refinance debt and the impact of changes in Occidental’s credit ratings; assumptions about energy markets; global and local commodity and commodity-futures pricing fluctuations, such as the sharp decline in crude oil prices that occurred in the first half of 2020; supply and demand considerations for, and the prices of, Occidental’s products and services; actions by OPEC and non-OPEC oil producing countries; results from operations and competitive conditions; future impairments of our proved and unproved oil and gas properties or equity investments, or write-downs of productive assets, causing charges to earnings; unexpected changes in costs; availability of capital resources, levels of capital expenditures and contractual obligations; the regulatory approval environment, including Western Midstream Partners, LP (WES), and realize the anticipated benefits of combining Occidental and Anadarko;Occidental's ability to timely obtain or maintain permits or other governmental approvals, including those necessary for drilling and/or development projects; Occidental's ability to successfully complete, the sale of the remaining assets, liabilities, businesses and operations of the Africa assets to Total S.A. (Total); global commodity pricing fluctuations; supply and demand considerations for Occidental’s products; higher-than-expected costs; the regulatory approval environment; not successfully completing, or any material delay of, field developments, expansion projects, capital expenditures, efficiency projects, acquisitions or dispositions; risks associated with acquisitions, mergers and joint ventures, such as difficulties integrating businesses, uncertainty associated with financial projections, projected synergies, restructuring, increased costs and adverse tax consequences; uncertainties and liabilities associated with acquired and divested properties and businesses; uncertainties about the estimated quantities of oil, natural gas and natural gas liquids reserves; lower-than-expected production from development projects or acquisitions; Occidental’s ability to realize the anticipated benefits from prior or future streamlining actions to reduce fixed costs, simplify or improve processes and improve Occidental’s competitiveness; exploration, drilling and other operational risks; disruptions to, capacity constraints in, or other limitations on the pipeline systems that deliver ourOccidental’s oil and natural gas and other processing and transportation considerations; general economic conditions, including slowdowns, domestically or internationally; difficultinternationally, and adverse conditionsvolatility in the domestic and globalsecurities, capital andor credit markets; the impact of potential changes in Occidental's credit ratings; uncertainty from the expected discontinuance of LIBOR and transition to any other interest rate benchmark; governmental actions and political conditions and events; legislative or regulatory changes, including changes relating to hydraulic fracturing or other oil and natural gas operations, retroactive royalty or production tax regimes, deepwater and onshore drilling and permitting regulations and environmental regulation (including regulations related to climate change); environmental risks and liability under international, provincial, federal, regional, state, tribal, local and foreign environmental laws and regulations including(including remedial actions;actions); potential liability resulting from pending or future litigation; disruption or interruption of production or manufacturing or facility damage due to accidents, chemical releases, labor unrest, weather, natural disasters, cyber attackscyber-attacks or insurgent activity; the creditworthiness and performance of Occidental's counterparties, including financial institutions, operating partners and other parties; failure of risk management; changes in law or regulations;Occidental’s ability to retain and hire key personnel; reorganization or restructuring of Occidental’s operations; changes in state, federal or foreign tax rates; and actions by third parties that are beyond Occidental's control;control. The unprecedented nature of the COVID-19 pandemic and recent market decline may make it more difficult to identify potential risks, give rise to risks that are currently unknown or amplify the ability to generate cash to fund operations and repay indebtedness.
Additional information concerning these and other factors can be found in Occidental’s filings with the U.S. Securities and Exchange Commission, including Occidental’s Annual Report on2019 Form 10-K, for the year ended December 31, 2018 (the 2018 Form 10-K), Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.
Occidental’s operations, financial condition, cash flows and levels of expenditures are highly dependent on oil prices and, to a lesser extent, natural gas and NGL prices, the Midland to Gulf Coast oil spreads and the prices it receives for its chemical products. The Mergerworldwide economy has been severely impacted by the ongoing effects of the COVID-19 pandemic, which began during the first quarter of 2020. Beginning in the first quarter and continuing through the date of this report, travel restrictions and stay at home orders were implemented for much of the world to limit the spread of COVID-19, which has resulted in a dramatic reduction in oil and gas demand. In March 2020, despite falling demand, certain members of the Organization of the Petroleum Exporting Countries and its broader partners (OPEC+) announced their intention to increase crude oil production, and the resulting oversupply led to further declines in oil and gas prices. On April 12, 2020, certain members of OPEC+ agreed to production cuts intended to mitigate the oil supply and demand imbalance to stabilize prices. These production cuts coupled with declining U.S. production helped mitigate the supply and demand imbalance, yet these reductions are not expected to be enough in the near-term to fully offset the decline in demand from the COVID-19 pandemic and prices have remained volatile. With the recent modest crude oil price recovery, several U.S. producers have announced plans to begin restoring some of their curtailed production. We expect that oil prices in the near-term will continue to be influenced by the duration and severity of the COVID-19 pandemic and its resulting impact on oil and gas demand, the extent to which countries abide by the OPEC+ production agreement, and U.S. production levels.
On August 8,
LIQUIDITY
In response to the dramatic drop in oil prices, Occidental has taken significant measures to reduce its 2020 capital expenditures and cash operating and corporate costs to increase its liquidity. Specifically, Occidental has:
•Reduced its 2020 capital budget to a range of $2.4 to $2.6 billion from $5.2 to $5.4 billion, a midpoint reduction of more than 50%;
•Made significant cuts to its 2020 operating and corporate costs that are expected to result in cash savings of over $1.0 billion;
•Reduced the quarterly common stock dividend to $0.01 per share from $0.79 per share, effective July 2020, which on an annualized basis will reduce its dividend outlay by approximately $2.9 billion to enhance Occidental’s liquidity;
•Elected to pay its quarterly dividend on the Series A preferred stock in the form of shares of common stock, in lieu of cash, for the first and second quarters of 2020, preserving $400 million of liquidity. The Board of Directors will assess market conditions and Occidental's financial position on a quarterly basis to determine whether the Series A preferred stock dividend will be paid in shares of common stock, in cash or a combination of shares of common stock and cash; and
•Issued $2.0 billion in senior unsecured notes in July 2020 and used the proceeds to satisfy $2.0 billion of 2021 maturities.
In 2019, Occidental acquired allentered into three-way oil collar and calls derivative instruments to reduce its exposure to commodity-price risk and increase the predictability of near-term cash flows. As of June 30, 2020, these three-way oil collars covered 350 MBOED for the remainder of the outstanding sharescalendar year. Through June 30, 2020, Occidental has received $322 million of Anadarko Petroleum Corporation (Anadarko) through a transaction in which an indirect, wholly owned subsidiary of Occidental mergedproceeds associated with these instruments, and into Anadarko (the Merger). Occidental believes that the Merger will enhance Occidental’s Permian Basin leadership position and bolster its portfolio with additional free cash flow-generating assets; generate significant cost and capital synergies as well as capital spending efficiency; enhance its dividend growth strategy while maintaining balance sheet strength; permit Occidental to apply its proven technology and operational excellence to Anadarko’s asset portfolio; and create a global energy leader with enhanced scale and expertise to lead energy into a lower-carbon future.
In connection with the Merger, Occidental agreed to sell to Total all of Anadarko's assets, liabilities, businesses, and operations for Algeria, Ghana, Mozambique, and South Africa (collectively, the Africa Assets) for $8.8 billion, subject to certain purchase price adjustments. In August 2019, a purchase and sale agreement was executed for these assets. On September 27, 2019, Occidental completed the sale of Anadarko’s Mozambique LNG assets to Total for $4.2 billion. The assets and liabilities for Algeria, Ghana and South Africa, are presented as held for sale at September 30, 2019. The results of operationsremaining net fair value of the Africa Assets are presentedthree-way collars and calls was $463 million as discontinued operations.
of June 30, 2020. See Note 36 - The MergerDerivatives, in the Notes to Consolidated Condensed Financial Statements in Part 1I, Item 1 of this Form 10-Q,10-Q. Occidental believes that the significant actions outlined above enhance its liquidity position to fund its operations. Occidental will continue to evaluate the economic environment as well as the commodity price environment and may make further adjustments to its levels of expenditures and operating and corporate costs. However, the ultimate impact of the COVID-19 pandemic on Occidental's results of operations, cash flows and financial position are unknown, and those impacts could be material. Additionally, actions taken in response to the current macro-environment may result in the long-term reduction of its capital expenditure and production profile.
DEBT MATURITIES
In July 2020, Occidental issued $2.0 billion in senior unsecured notes (the Senior Notes Offering) of which $500 million matures in each of 2025 and 2027 and $1.0 billion matures in 2030. The net proceeds from the Senior Notes Offering were used to fund its concurrent cash tender offers for certain outstanding senior notes (the Tender Offers). The Tender Offers were completed in July 2020, resulting in the repayment of approximately $2.0 billion of maturities in 2021. After the completion of the Tender Offer, Occidental has debt maturities of approximately $4.4 billion in 2021 (including $480 million due in the first quarter of 2021) and $4.7 billion in 2022. Occidental’s Zero Coupon senior notes due 2036 (Zero Coupons) can be put to Occidental in October of each year, in whole or in part, for the then-accreted
value of the outstanding Zero Coupons. The Zero Coupons can next be put to Occidental in October 2020, which, if put in whole, would require a payment of $992 million at such date. Occidental currently has the intent and ability to meet this obligation, including using amounts available under the revolving credit facility (RCF) should the put right be exercised. As of June 30, 2020, Occidental had approximately $1.0 billion of cash and cash equivalents on hand, and as of the date of this filing, $5.0 billion of borrowing capacity under its existing RCF which matures in 2023.
Occidental continues to pursue divestitures of certain assets and intends to use the proceeds from asset sales and free cash flow to repay its nearer-term debt maturities, but the expected timing and final proceeds from such asset sales are uncertain. Occidental currently expects its cash on hand and funds available under its RCF to be sufficient to meet its debt maturities, operating expenditures and other obligations for the next 12 months from the date of this filing. However, given the inherent uncertainty associated with the duration and severity of the COVID-19 pandemic and its resulting impact on oil demand, Occidental may need to seek additional liquidity sources, refinance debt maturities, or both, to fund its operations.
DEBT RATINGS
In connection with the Senior Notes Offering, Occidental's long-term debt credit ratings were reviewed by the three major rating agencies. As of June 30, 2020, Occidental’s long-term debt was rated BB+ by Standard and Poor’s (S&P), BB by Fitch Ratings (Fitch), and Ba2 by Moody’s Investors Service (Moody’s). Any additional downgrade in credit ratings could impact Occidental's ability to access capital and increase its cost of capital. In addition, given that Occidental’s current debt ratings are non-investment grade , Occidental may be requested, and in some cases required, to provide collateral in the form of cash, letters of credit, surety bonds, or other acceptable support as financial assurance of its performance and payment obligations under certain contractual arrangements such as pipeline transportation contracts, oil and gas purchase contracts and certain derivative instruments.
As of the date of this filing, Occidental has provided required financial assurances through a combination of cash, surety bonds, and letters of credit made available to us on a bilateral basis and has not issued any letters under the RCF. For additional information, see Risk Factors in Part II1, Item 1A of thisOccidental’s 2019 Form 10-Q10-K.
IMPACT OF COVID-19 PANDEMIC TO GLOBAL OPERATIONS
Occidental is focused on protecting the health and safety of its employees and contractors during the COVID-19 pandemic. Occidental has implemented workplace restrictions in our offices and work sites for more information. Occidental'shealth and safety reasons, including guidance for employees to work remotely, if able. Occidental has not incurred material costs as a result of new protocols and procedures. Occidental continues to monitor national, state and local government directives where we have operations and/or offices. While Occidental has not incurred any significant disruptions to its day-to-day operations as a result of any workplace restrictions related to the COVID-19 pandemic to-date, the extent to which the COVID-19 pandemic adversely affects our business, results of operations, includeand financial condition will depend on future developments, which are highly uncertain and cannot be predicted.
Occidental's current and future operations are impacted by the resultslower crude oil price environment. In order to maximize liquidity and free cash flow for the second half of Anadarko from August 8, 20192020 at the current commodity price forecast, Occidental plans to September 30, 2019.limit remaining 2020 capital expenditures to between $700 million and $900 million, which is expected to result in lower production volumes, compared to the first half of the year, for the remainder of 2020.
Consolidated ResultsPOTENTIAL FOR ADDITIONAL FUTURE IMPAIRMENTS
As a result of Operations
the expected prolonged period of lower commodity prices brought on by the COVID-19 pandemic’s impact on oil demand, Occidental reported a loss fromtested substantially all of its oil and gas assets for impairment during the second quarter of 2020. Occidental recognized pre-tax impairment charges of $6.4 billion related to continuing operations of $737 million for the third quarter of 2019 on net sales of $5.7and $2.2 billion comparedrelated to income from continuing operations of $1.9 billion on net sales of $5.2 billion for the third quarter of 2018. Diluted earnings from continuing operations per share was a loss of $1.06 for the third quarter of 2019 compared to earnings of $2.44 for the third quarter of 2018.
Occidental reported income from continuing operations of $529 million for the nine months ended September 30, 2019 on net sales of $14.1 billion, compared to income from continuing operations of $3.4 billion on net sales of $13.1 billion for the nine months ended September 30, 2018. Diluted earnings from continuing operations per share was $0.47 for the nine months ended September 30, 2019, compared to $4.45 for the nine months ended September 30, 2018.
Excluding the impact of Anadarko merger-related costs, asset impairments, asset and equity investment sales gains, the decrease in income from continuingdiscontinued operations for the three and nine months ended SeptemberJune 30, 2020. If there is a further worsening of the macro-economic conditions and if such worsened condition is expected to be prolonged, Occidental’s oil and gas properties may be subject to further testing for impairment, which could result in additional non-cash asset impairments, and such impairments could be material to our financial statements.
Occidental’s equity method investment carrying amount in WES is $4.9 billion as of June 30, 2020. The initial carrying amount was established based on WES’s market capitalization as of December 31, 2019 comparedupon Occidental’s loss of control of WES’s general partner. WES’ unit price has been volatile during the second quarter of 2020 trading from approximately $3.00 to over $12.00 per unit and closing at $10.04 per unit as of June 30, 2020. Accordingly, Occidental has concluded that the same periodscurrent short-term loss in 2018, is primarily related to lower crude oil prices, lower realized caustic soda pricesvalue has not met the other-than-temporary criteria under accounting literature governing equity method investments as of June 30, 2020 given the volatility of WES’ unit price and lower marketing margins, the effects of which were partially offset by higher crude oil production volumes acquired withsignificant unit price improvement over the Merger and from legacy Occidental operations in the Permian Basin.
Selected Statements of Operations Items
Net sales increasedsecond quarter. However, if WES’s unit price remains significantly below its year-end 2019 unit price for the three and nine months ended September 30, 2019, comparedremainder of 2020, Occidental may be be required to reduce the same periodcarrying amount of its equity method investment in 2018, primarily due to higher domestic crude oil volumes from the assets acquired through the Merger and from legacy Permian Resources operations. Increases in net sales were partially offset by lower crude oil prices and lower realized caustic soda prices in the Chemical segment.
Oil and gas operating expense and transportation expense increased for the three and nine months ended September 30, 2019, compared to the same periods in 2018, primarily due to higher production costs for surface operations and maintenance due to increased production as a result of the Merger. Purchased commodities increased for the three and nine months ended September 30, 2019, compared to the same periods in 2018, due to higher third-party crude purchases related to the Marketing and Other Midstream segment. DD&A (depreciation, depletion and amortization) expense increased for the three and nine months ended September 30, 2019, compared to the same periods in 2018, was primarily due to depreciation associated with assets acquired through the Merger.
Interest and debt expense, net, increased for the three and nine months ended September 30, 2019, compared to the same periods in 2018, due to the increase in debt issued to partially fund the Merger, as well as the debt assumed through the Merger.
The decrease in the provision for income taxes for the three and nine months ended September 30, 2019 compared to the same periods in 2018 reflects lower pre-tax income, which is offset by an increase in tax as a result of transaction-related costs for which Occidental received no tax benefit.
Segment Operations
Occidental conducts its operations through four segments: (1) Oil and Gas; (2) Chemical; (3) Marketing and Other Midstream; and (4)WES. WES Midstream. The Oil and Gas segment explores for, develops and produces oil and condensate, natural gas liquids (NGL) and natural gas. The Chemical segment mainly manufactures and markets basic chemicals and vinyls. The Marketing and Other Midstream segment purchases, markets, gathers, processes, transports and stores oil, condensate, NGL, natural gas, CO2 and power. Additionally, the Marketing and Other Midstream segment invests in entities that conduct similar activities. The WES Midstream segment owns gathering systems, plants and pipelines and earns revenue from fee-based and service-based contracts with Occidental and third parties.parties, which could be impacted by lower demand for oil and gas associated with the ongoing COVID-19 pandemic.
Occidental's proved reserves are estimated using the unweighted arithmetic average of the first-day-of-the-month price for each month within the applicable year. The average first-day-of-the-month prices used to compute proved reserves at December 31, 2019, were $55.69 per barrel for WTI, $63.03 per barrel for Brent, and $2.58 per MMBtu for Henry Hub. The average first-day-of-the-month prices for the first eight months of 2020 are $39.13 per barrel for WTI, $43.69 per barrel for Brent, and $1.75 per MMBtu for Henry Hub. If commodity prices continue to remain below the average prices used to estimate Occidental's year-end 2019 proved reserves, Occidental would expect negative price-related reserve revisions at year-end 2020, the magnitude of which could be significant. In addition, as Occidental lowers its projected capital spending this could result in a material amount of proved undeveloped reserves no longer being supportable within a five-year development plan and thus no longer meeting the criteria to be classified as proved. Occidental had proved undeveloped reserves of 905 MMBOE at December 31, 2019.
The most significant ongoing financial statement effect from a change in Occidental’s oil and gas reserves or impairment of its proved properties would be to the DD&A (depreciation, depletion and amortization) rate. For example, a 5 percent increase or decrease in the amount of oil and gas reserves would increase or decrease pre-tax income by approximately $165 million for the remainder of the year.
| | |
| CONSOLIDATED RESULTS OF OPERATIONS |
Occidental reported a loss from continuing operations of $6.7 billion for the second quarter of 2020 on net sales of $2.9 billion, compared to income from continuing operations of $635 million on net sales of $4.4 billion for the second quarter of 2019. Diluted earnings from continuing operations per share was a loss of $7.58 for the second quarter of 2020 compared to earnings per share of $0.84 for the second quarter of 2019.
Occidental reported a loss from continuing operations of $8.7 billion for the six months ended June 30, 2020, on net sales of $9.5 billion, compared to income from continuing operations of $1.3 billion on net sales of $8.4 billion for the six months ended June 30, 2019. Diluted earnings from continuing operations per share was a loss of $10.12 for the six months ended June 30, 2020 compared to earnings per share of $1.68 for the six months ended June 30, 2019.
Excluding the impact of asset impairments, gains on the oil collars and calls, net losses on the interest rate swaps and acquisition-related costs, the decrease in income from continuing operations for the three and six months ended June 30, 2020, compared to the same periods in 2019, is primarily related to lower crude oil prices, which declined over 35%, lower marketing margins due to the tightening of the Midland to MEH differential and higher interest expense due to the increase in debt issued to partially fund the Acquisition, as well as the debt assumed through the Acquisition, the effects of which were partially offset by higher crude oil, NGLs, and natural gas production volumes acquired with the Acquisition.
SELECTED STATEMENTS OF OPERATIONS ITEMS
Net sales decreased for the second quarter of 2020 compared to the same period in 2019, primarily as a result of lower crude oil prices, which declined over 35%, lower marketing margins due to the tightening of the Midland to MEH differentials, and lower realized caustic soda prices and overall sales volumes in the chemical segment, which was partially offset by higher crude oil, NGLs, and natural gas production volumes.
Net sales increased for the six months ended June 30, 2020, compared to the same period in 2019, primarily due to higher crude oil, NGLs, natural gas production volumes from the assets acquired through the Acquisition, which was partially offset by lower crude oil prices, lower marketing margins and lower realized caustic soda prices and overall sales volumes in the chemical segment.
Oil and gas operating expense and transportation expense increased for the three and six months ended June 30, 2020, compared to the same period in 2019, primarily due to higher transportation expenses and production costs for surface operations and maintenance due to increased production as a result of the Acquisition. Purchased commodities decreased for the three and six months ended June 30, 2020, compared to the same period in 2019, due to lower crude oil prices on third-party crude purchases related to the midstream and marketing segment. DD&A expense increased for the three and six months ended June 30, 2020, compared to the same period in 2019, primarily due to depreciation associated with assets acquired through the Acquisition. Asset impairments and other charges for the three months ended June 30, 2020 included $6.4 billion in pre-tax impairments on oil and gas proved and unproved properties. In addition, asset impairments and other charges for the six months ended June 30, 2020 included a $1.2 billion impairment of goodwill attributable to Occidental's ownership in WES as well as other impairments to both proved and unproved oil and gas properties and lower of cost or net realizable value adjustments for crude inventory.
Interest and debt expense, net, increased for the three and six months ended June 30, 2020, compared to the same period in 2019, due to the increase in debt issued to partially fund the Acquisition, as well as the debt assumed through the Acquisition.
The decrease in the provision for income taxes from continuing operations for the three and six months ended June 30, 2020 compared to the same period in 2019 reflects lower pre-tax income, which is primarily offset by the impairment of certain international assets and the WES goodwill, for which the company receives no tax benefit. The difference between the 15 percent effective tax rate for the first half of 2020 and the 21 percent U.S. federal statutory tax rate is similarly primarily driven by the international asset impairments and WES goodwill.
| | |
| SEGMENT RESULTS OF OPERATIONS AND ITEMS AFFECTING COMPARABILITY |
SEGMENT RESULTS OF OPERATIONS
Occidental’s principal businesses consist of three reporting segments: oil and gas, chemical, and midstream and marketing. The oil and gas segment explores for, develops and produces oil and condensate, natural gas liquids (NGL) and natural gas. The chemical segment (OxyChem) mainly manufactures and markets basic chemicals and vinyls. The midstream and marketing segment purchases, markets, gathers, processes, transports and stores oil, condensate, NGL, natural gas, carbon dioxide (CO2) and power. It also trades around its assets, including transportation and storage capacity, and invests in entities that conduct similar activities such as Western Midstream Partners, L.P. (WES).
The following table sets forth the sales and earnings of each operating segment and corporate items for the three and ninesix months ended SeptemberJune 30, 2019,2020, and 2018:2019:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended June 30, | | | | Six months ended June 30, | | |
| millions | | 2020 | | 2019 | | 2020 | | 2019 |
Net sales (a) | | | | | | | | |
Oil and Gas (b) | | $ | 2,040 | | | $ | 2,718 | | | $ | 7,100 | | | $ | 5,069 | |
| Chemical | | 846 | | | 998 | | | 1,808 | | | 2,057 | |
Midstream and Marketing (c) | | 204 | | | 909 | | | 994 | | | 1,725 | |
| Eliminations | | (162) | | | (205) | | | (361) | | | (427) | |
| Total | | 2,928 | | | 4,420 | | | 9,541 | | | 8,424 | |
| Income (loss) from continuing operations | | | | | | | | |
| Oil and Gas | | (7,734) | | | 726 | | | (7,498) | | | 1,210 | |
| Chemical | | 108 | | | 208 | | | 294 | | | 473 | |
| Midstream and Marketing | | (7) | | | 331 | | | (1,294) | | | 610 | |
| Total | | (7,633) | | | 1,265 | | | (8,498) | | | 2,293 | |
| Unallocated corporate items | | | | | | | | |
| Interest expense, net | | (310) | | | (143) | | | (662) | | | (226) | |
| Income tax benefit (expense) | | 1,468 | | | (306) | | | 1,493 | | | (531) | |
Other items, net (d) | | (241) | | | (181) | | | (1,062) | | | (270) | |
| Income (loss) from continuing operations | | $ | (6,716) | | | $ | 635 | | | $ | (8,729) | | | $ | 1,266 | |
|
| | | | | | | | | | | | | | | | |
| | | Three months ended September 30 | | Nine months ended September 30 |
| millions | | 2019 | | 2018 | | 2019 | | 2018 |
Net sales (a) | | | | | | | | |
| Oil and Gas | | $ | 3,821 |
| | $ | 2,889 |
| | $ | 8,890 |
| | $ | 7,874 |
|
| Chemical | | 1,071 |
| | 1,185 |
| | 3,128 |
| | 3,515 |
|
| Marketing and Other Midstream | | 780 |
| | 1,367 |
| | 2,505 |
| | 2,359 |
|
WES Midstream (b) | | 383 |
| | — |
| | 383 |
| | — |
|
| Eliminations | | (368 | ) | | (225 | ) | | (795 | ) | | (686 | ) |
| | | $ | 5,687 |
| | $ | 5,216 |
| | $ | 14,111 |
| | $ | 13,062 |
|
| Income from continuing operations | | | | | | | | |
| Oil and Gas | | $ | 221 |
| | $ | 767 |
| | $ | 1,431 |
| | $ | 2,297 |
|
| Chemical | | 207 |
| | 321 |
| | 680 |
| | 936 |
|
| Marketing and Other Midstream | | 266 |
| | 1,698 |
| | 876 |
| | 2,127 |
|
WES Midstream (b) | | 134 |
| | — |
| | 134 |
| | — |
|
| | | $ | 828 |
|
| $ | 2,786 |
| | $ | 3,121 |
| | $ | 5,360 |
|
| Unallocated corporate items | | | | | | | | |
| Interest expense, net | | (360 | ) | | (92 | ) | | (586 | ) | | (275 | ) |
| Income tax expense | | (116 | ) | | (710 | ) | | (647 | ) | | (1,351 | ) |
Other items, net (c) | | (1,089 | ) | | (115 | ) | | (1,359 | ) | | (309 | ) |
| Income (loss) from continuing operations | | $ | (737 | ) | | $ | 1,869 |
| | $ | 529 |
| | $ | 3,425 |
|
(a) Intersegment sales eliminate upon consolidation and are generally made at prices approximating those that the selling entity would be able to obtain in third-party transactions.
(b) The WES Midstream segment results representIncludes $6.4 billion and $7.0 billion related to asset impairments and other charges for the period from August 8, 2019, the Merger date, through September 30, 2019.
(c) The three and six months ended SeptemberJune 30, 20192020, respectively. Additionally includes merger-related costsa $957 million gain on the oil collars and calls for the six months ended June 30, 2020.
(c) Includes $1.4 billion of $924impairments related to the write-off of goodwill and a loss from an equity investment related to WES's write-off of its goodwill for the six months ended June 30, 2020.
(d) Includes $149 million and amortized debt financing fees of $65 million. The nine$297 million in expenses related to Anadarko acquisition-related costs for the three and six months ended SeptemberJune 30, 2019 includes merger-related costs of $9742020, respectively, and a $665 million and amortized debt financing fees of $122 million.loss on interest rate swaps for the six months ended June 30, 2020.
Items Affecting ComparabilityITEMS AFFECTING COMPARABILITY
The following table sets forth items affecting the comparability of Occidental's earnings that either arose in connection with the MergerAcquisition or vary widely and unpredictably in nature, timing, and amount for the three and nine months ended September 30, 2019, and 2018:amount:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended June 30, | | | | Six months ended June 30, | | |
| millions | | 2020 | | 2019 | | 2020 | | 2019 |
| Oil and Gas | | | | | | | | |
| Asset impairments - domestic | | $ | (5,514) | | | $ | — | | | $ | (5,796) | | | $ | — | |
| Asset impairments - international | | (931) | | | — | | | (1,195) | | | — | |
| Asset sales gains, net | | 14 | | | — | | | 14 | | | — | |
| Rig termination and other - domestic | | (3) | | | — | | | (38) | | | — | |
| Rig termination and other - international | | (6) | | | — | | | (6) | | | — | |
| Oil collars gains | | 5 | | | — | | | 957 | | | — | |
| Total Oil and Gas | | (6,435) | | | — | | | (6,064) | | | — | |
| | | | | | | | |
| Midstream and Marketing | | | | | | | | |
| Goodwill and other asset impairment | | (7) | | | — | | | (1,465) | | | — | |
| | | | | | | | |
| Corporate | | | | | | | | |
| Anadarko acquisition-related costs | | (149) | | | (107) | | | (297) | | | (107) | |
| Acquisition-related pension and curtailment gains | | 114 | | | — | | | 114 | | | — | |
| Interest rate swap mark-to-market (MTM) | | 4 | | | — | | | (665) | | | — | |
| Berkshire Warrants MTM | | (79) | | | — | | | 5 | | | — | |
| Total Corporate | | (110) | | | (107) | | | (843) | | | (107) | |
| | | | | | | | |
| Tax effect of items affecting comparability | | 1,226 | | | 13 | | | 1,281 | | | 13 | |
| Loss from continuing operations | | $ | (5,326) | | | $ | (94) | | | $ | (7,091) | | | $ | (94) | |
| Discontinued operations, net taxes | | $ | (1,415) | | | $ | — | | | $ | (1,415) | | | $ | — | |
| Total | | $ | (6,741) | | | $ | (94) | | | $ | (8,506) | | | $ | (94) | |
|
| | | | | | | | | | | | | | | | |
| | | Three months ended September 30 | | Nine months ended September 30 |
| millions | | 2019 | | 2018 | | 2019 | | 2018 |
| | | | | | | | | |
| | | | | | | | | |
| Oil and Gas | | | | | | | | |
| Asset impairments - domestic | | $ | (285 | ) |
| $ | — |
|
| $ | (285 | ) |
| $ | — |
|
| Asset impairments - international | | (40 | ) |
| (196 | ) |
| (40 | ) |
| (196 | ) |
| Oil collars gains | | 75 |
|
| — |
|
| 75 |
|
| — |
|
| Total oil and gas | | $ | (250 | ) |
| $ | (196 | ) |
| $ | (250 | ) |
| $ | (196 | ) |
| | |
|
|
|
|
|
|
|
|
|
|
|
| Marketing and Other Midstream | |
|
|
|
|
|
|
|
|
|
|
|
| Asset and equity investment sales gains | | $ | 111 |
|
| $ | 902 |
|
| $ | 111 |
|
| $ | 902 |
|
| | |
|
|
|
|
|
|
|
|
|
|
|
| Corporate | |
|
|
|
|
|
|
|
|
|
|
|
| Anadarko merger-related costs | | $ | (924 | ) |
| $ | — |
|
| $ | (974 | ) |
| $ | — |
|
| Bridge loan financing fees | | (65 | ) |
| — |
|
| (122 | ) |
| — |
|
| Merger-related pension and other termination benefits | | 20 |
|
| — |
|
| 20 |
|
| — |
|
| Gains (losses) on interest rate swaps and warrants, net | | (33 | ) |
| — |
|
| (33 | ) |
| — |
|
| Total Corporate | | $ | (1,002 | ) |
| $ | — |
|
| $ | (1,109 | ) |
| $ | — |
|
| | |
|
|
|
|
|
|
|
|
|
|
|
| Tax effect of items affecting comparability | | 151 |
|
| (197 | ) |
| 164 |
|
| (197 | ) |
| Income from continuing operations | | (990 | ) | | 509 |
| | (1,084 | ) | | 509 |
|
| Discontinued operations | | (15 | ) | | — |
| | (15 | ) | | — |
|
| Total | | $ | (1,005 | ) |
| $ | 509 |
|
| $ | (1,099 | ) |
| $ | 509 |
|
Worldwide Effective Tax Rate
The following table sets forth the calculation of the worldwide effective tax rate:
|
| | | | | | | | | | | | | | | | |
| | | Three months ended September 30 | | Nine months ended September 30 |
| millions, except percentages | | 2019 | | 2018 | | 2019 | | 2018 |
| | | | | | | | | |
| Income (loss) from continuing operations before income taxes | | $ | (621 | ) | | $ | 2,579 |
| | $ | 1,176 |
| | $ | 4,776 |
|
| Income tax (expense) benefit | | | | | | | | |
| Federal and state | | 181 |
| | (362 | ) | | 69 |
| | (533 | ) |
| Foreign | | (297 | ) | | (348 | ) | | (716 | ) | | (818 | ) |
| Total income tax expense | | (116 | ) |
| (710 | ) | | (647 | ) | | (1,351 | ) |
| Income (loss) from continuing operations | | $ | (737 | ) | | $ | 1,869 |
| | $ | 529 |
| | $ | 3,425 |
|
| Worldwide effective tax rate | | (19 | )% | | 28 | % | | 55 | % | | 28 | % |
The decrease in the provision for income taxes for the three and nine months ended September 30, 2019 compared to the same periods in 2018, reflects lower pre-tax income, which is offset by an increase in tax as a result of merger-related costs for which Occidental received no tax benefit.
Oil and Gas SegmentOIL AND GAS SEGMENT
Oil and Gasgas segment earningslosses were $221 million$7.7 billion and $1.4$7.5 billion for the three and ninesix months ended SeptemberJune 30, 2019,2020, respectively, compared with segment earnings of $767$726 million and $2.3$1.2 billion for the same periods of 2018. The2019. Excluding the impact of asset impairments and other charges and gains on the oil collars and calls, the decrease in earnings primarily reflected lower realized crude oil NGL and natural gas prices, partially offset by higher crude oil, NGL and natural gas sales volumes mostly due to added production from the Merger and increased production in the legacy Occidental Permian Resources business unit.Acquisition.
The following table sets forth the total sales volumes per day for oil NGL, and NGLs in thousands of barrels (MBBL) or millions of cubic feet per day for natural gas:gas (MMCF):
| | | | | Three months ended September 30 | | Nine months ended September 30 | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2019 | | 2018 | | 2019 | | 2018 | | Three months ended June 30, | | | Six months ended June 30, | |
| | | | | | | | | | | 2020 | | 2019 | | 2020 | | 2019 |
| Sales Volumes per Day | | | | | | | | | Sales Volumes per Day | |
| Oil (MBBL) | | | | | | | | | Oil (MBBL) | |
| United States | | 486 |
| | 256 |
| | 351 |
| | 241 |
| United States | | 603 | | | 289 | | | 633 | | | 283 | |
| Middle East | | 120 |
| | 154 |
| | 133 |
| | 138 |
| |
| Middle East / Africa | | Middle East / Africa | | 136 | | | 86 | | | 134 | | | 86 | |
| Latin America | | 35 |
| | 31 |
| | 33 |
| | 31 |
| Latin America | | 30 | | | 37 | | | 32 | | | 32 | |
| NGL (MBBL) | | | | | | | | | NGL (MBBL) | |
| United States | | 168 |
| | 73 |
| | 112 |
| | 65 |
| United States | | 230 | | | 87 | | | 230 | | | 83 | |
| Middle East | | 33 |
| | 34 |
| | 33 |
| | 30 |
| |
| Middle East / Africa | | Middle East / Africa | | 39 | | | 34 | | | 37 | | | 34 | |
| Natural Gas (MMCF) | | | | | | | | | Natural Gas (MMCF) | | |
| United States | | 1,085 |
| | 332 |
| | 633 |
| | 315 |
| United States | | 1,697 | | | 419 | | | 1,696 | | | 405 | |
| Middle East | | 550 |
| | 552 |
| | 540 |
| | 504 |
| Middle East | | 564 | | | 528 | | | 545 | | | 536 | |
| Latin America | | 8 |
| | 6 |
| | 7 |
| | 6 |
| Latin America | | 7 | | | 6 | | | 7 | | | 6 | |
Total Continuing Operations Volumes (MBOE) (a) | | 1,116 |
| | 696 |
| | 859 |
| | 643 |
| Total Continuing Operations Volumes (MBOE) (a) | | 1,416 | | | 692 | | | 1,441 | | | 676 | |
| Discontinued Operations - Africa | | 41 |
| | — |
| | 14 |
| | — |
| |
| Discontinued & Exited Operations | | Discontinued & Exited Operations | | 28 | | | 52 | | | 28 | | | 52 | |
Total Sales Volumes (MBOE) (a) | | 1,157 |
| | 696 |
| | 873 |
| | 643 |
| Total Sales Volumes (MBOE) (a) | | 1,444 | | | 744 | | | 1,469 | | | 728 | |
(a) Natural gas volumes have been converted to BOEbarrels of oil equivalent (BOE) based on energy content of six MCF of gas to one barrel of oil. Barrels of oil equivalent does not necessarily result in price equivalence.
Average daily sales volumes from continuing operations were 1,116 MBOE1,416 thousands of barrels of oil equivalent per day (MBOED) for the thirdsecond quarter of 2019,2020, compared to 696 MBOE692 MBOED for the thirdsecond quarter of 2018.2019. The increase in average daily sales volumes from continuing operations of 420 MBOE724 MBOED is primarily due to 377 MBOE in acquired production from the MergerAcquisition, including 163 MBOE187 MBOED in the Permian Basin, 312 MBOED in the DJ Basin 90 MBOEand 142 MBOED in the Gulf of Mexico, and 90 MBOE in the Delaware Basin as well as an increase of 75 MBOE, or 33 percent, in the legacy Occidental Permian Resources business unit as a result of increased drilling and well productivity.Mexico.
AverageTotal average daily sales volumes from continuing operations for the first ninesix months of 2020 and 2019 were 859 MBOE compared to 643 MBOE for the same period in 2018.1,441 MBOED and 676 MBOED, respectively. The increase in average daily sales volumes from continuing operations of 216 MBOE 765 MBOED is primarily due to 127 MBOE in acquired production from the MergerAcquisition, including 55 MBOE184 MBOED in the Permian Basin, 319 MBOED in the DJ Basin 30 MBOEand 153 MBOED in the Gulf of Mexico and 30 MBOE in the Delaware Basin as well as an increase of Mexico.
83 MBOE, or 41 percent, in the legacy Occidental Permian Resources business unit from increased drilling and well productivity, and Al Hosn, which increased by 11 MBOE, or 16 percent, due to the expansion of capacity and improved plant performance.
The following table presents information about Occidental's average realized prices and index prices:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended June 30, | | | | Six months ended June 30, | | |
| | 2020 | | 2019 | | 2020 | | 2019 |
| Average Realized Prices | | | | | | | | |
| Oil ($/BBL) | | | | | | | | |
| United States | | $ | 21.27 | | | $ | 55.14 | | | $ | 34.07 | | | $ | 51.85 | |
| Middle East / Africa | | $ | 31.42 | | | $ | 65.83 | | | $ | 42.18 | | | $ | 63.16 | |
| Latin America | | $ | 24.02 | | | $ | 62.66 | | | $ | 36.45 | | | $ | 59.67 | |
| Total Worldwide | | $ | 23.17 | | | $ | 58.91 | | | $ | 35.52 | | | $ | 55.86 | |
| NGL ($/BBL) | | | | | | | | |
| United States | | $ | 7.22 | | | $ | 16.28 | | | $ | 9.60 | | | $ | 16.52 | |
| Middle East / Africa | | $ | 11.23 | | | $ | 22.50 | | | $ | 15.58 | | | $ | 21.89 | |
| Total Worldwide | | $ | 7.79 | | | $ | 18.00 | | | $ | 10.43 | | | $ | 18.07 | |
| Natural Gas ($/MCF) | | | | | | | | |
| United States | | $ | 0.90 | | | $ | 0.23 | | | $ | 1.04 | | | $ | 0.77 | |
| Latin America | | $ | 6.31 | | | $ | 7.01 | | | $ | 6.47 | | | $ | 7.19 | |
| Total Worldwide | | $ | 1.10 | | | $ | 1.03 | | | $ | 1.20 | | | $ | 1.28 | |
| | | | | | | | |
| Average Index Prices | | | | | | | | |
| WTI oil ($/BBL) | | $ | 27.85 | | | $ | 59.82 | | | $ | 37.01 | | | $ | 57.36 | |
| Brent oil ($/BBL) | | $ | 33.26 | | | $ | 68.32 | | | $ | 42.11 | | | $ | 66.11 | |
| NYMEX gas ($/MCF) | | $ | 1.77 | | | $ | 2.67 | | | $ | 1.91 | | | $ | 2.95 | |
| | | | | | | | |
| Average Realized Prices as Percentage of Average Index Prices | | | | | | | | |
| Worldwide oil as a percentage of average WTI | | 83% | | 98 | % | | 96% | | 97 | % |
| Worldwide oil as a percentage of average Brent | | 70% | | 86 | % | | 84% | | 84 | % |
| Worldwide NGL as a percentage of average WTI | | 28% | | 30 | % | | 28% | | 32 | % |
| Domestic natural gas as a percentage of average NYMEX | | 51% | | 9 | % | | 54% | | 26 | % |
For the three months ended June 30, 2020 average realized prices decreased relative to indexed prices due to price volatilities as a result of the COVID-19 pandemic, which decreased demand resulting in significant declines in regional oil prices especially in the Permian and DJ Basins.
|
| | | | | | | | | | | | | | | | |
| | | Three months ended September 30 | | Nine months ended September 30 |
| | | 2019 | | 2018 | | 2019 | | 2018 |
| | | | | | | | | |
| Average Realized Prices | | | | | | | | |
| Oil ($/BBL) | | | | | | | | |
| United States | | $ | 54.90 |
| | $ | 56.36 |
| | $ | 53.27 |
| | $ | 59.38 |
|
| Middle East | | $ | 62.17 |
| | $ | 71.71 |
| | $ | 62.86 |
| | $ | 66.80 |
|
| Latin America | | $ | 54.98 |
| | $ | 69.94 |
| | $ | 58.00 |
| | $ | 64.90 |
|
| Total Worldwide | | $ | 56.26 |
| | $ | 62.67 |
| | $ | 56.02 |
| | $ | 62.29 |
|
| NGL ($/BBL) | | | | | | | | |
| United States | | $ | 13.91 |
| | $ | 31.82 |
| | $ | 15.20 |
| | $ | 29.38 |
|
| Middle East | | $ | 20.22 |
| | $ | 24.66 |
| | $ | 21.33 |
| | $ | 23.50 |
|
| Total Worldwide | | $ | 14.96 |
| | $ | 29.55 |
| | $ | 16.62 |
| | $ | 27.54 |
|
| Natural Gas ($/MCF) | | | | | | | | |
| United States | | $ | 1.25 |
| | $ | 1.58 |
| | $ | 1.05 |
| | $ | 1.70 |
|
| Latin America | | $ | 7.05 |
| | $ | 6.74 |
| | $ | 7.14 |
| | $ | 6.16 |
|
| Total Worldwide | | $ | 1.38 |
| | $ | 1.62 |
| | $ | 1.33 |
| | $ | 1.67 |
|
| | | | | | | | | |
| Average Index Prices | | | | | | | | |
| WTI oil ($/BBL) | | $ | 56.45 |
| | $ | 69.50 |
| | $ | 57.06 |
| | $ | 66.75 |
|
| Brent oil ($/BBL) | | $ | 62.01 |
| | $ | 75.97 |
| | $ | 64.74 |
| | $ | 72.68 |
|
| NYMEX gas ($/MCF) | | $ | 2.27 |
| | $ | 2.88 |
| | $ | 2.72 |
| | $ | 2.83 |
|
| | | | | | | | | |
| Average Realized Prices as Percentage of Average Index Prices | | | | | | | | |
| Worldwide oil as a percentage of average WTI | | 100 | % | | 90 | % | | 98 | % | | 93 | % |
| Worldwide oil as a percentage of average Brent | | 91 | % | | 82 | % | | 87 | % | | 86 | % |
| Worldwide NGL as a percentage of average WTI | | 27 | % | | 43 | % | | 29 | % | | 41 | % |
| Domestic natural gas as a percentage of average NYMEX | | 55 | % | | 55 | % | | 39 | % | | 60 | % |
Chemical SegmentCHEMICAL SEGMENT
Chemical segment earnings for the three months ended SeptemberJune 30, 2020 and 2019 and 2018 were $207$108 million and $321$208 million, respectively. Compared to the third quarter of 2018, the third quarter of 2019 reflected a decline in realized caustic soda prices along with weaker vinyl margins, slightly offset by stronger export caustic soda demand. Chemical segment earningsrespectively, and $294 million and $473 million for the ninesix months ended SeptemberJune 30, 2019,2020 and 2018, were $680 million and $936 million,2019, respectively. Compared to the same periodperiods in 2018,2019, the ninethree and six months ended SeptemberJune 30, 2019,2020 reflected lower realized caustic soda prices and overall lower sales volumes as a result of the COVID-19 pandemic, partially offset by favorable feedstock costs. The ninelower natural gas costs and lower plant spending.
MIDSTREAM AND MARKETING SEGMENT
Midstream and marketing segment loss for the three and six months ended June 30, 2020 was $7 million and $1.3 billion, respectively, compared with earnings also reflected fees received underof $331 million and $610 million for the same periods in 2019, respectively. Segment losses for the six months ended June 30, 2020 included impairments and related charges of $1.5 billion, primarily related to the impairment of goodwill related to WES, a loss from an equity investment related to WES's write-off of its goodwill and impairments to record inventory at the lower of cost or net realizable value. Excluding these impairments, midstream and marketing earnings declined compared to the prior period mainly due to lower marketing margins from the tightening of the Midland to MEH differentials, lower sulfur prices impacting Al Hosn Gas and lower pipeline easement agreement that was executed duringincome from the firstsale of the Plains equity investment in the third quarter of 2019.2019.
Marketing and Other Midstream Segment
Marketing and Other Midstream segment earnings were $266 million
The following table sets forth the calculation of the worldwide effective tax rate for income from continuing operations:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended June 30, | | | | Six months ended June 30, | | |
| millions, except percentages | | 2020 | | 2019 | | 2020 | | 2019 |
| Income (loss) from continuing operations before income taxes | | $ | (8,184) | | | $ | 941 | | | $ | (10,222) | | | $ | 1,797 | |
| Income tax (expense) benefit | | | | | | | | |
| Federal and state | | $ | 1,577 | | | $ | (38) | | | $ | 1,667 | | | $ | (112) | |
| Foreign | | $ | (109) | | | $ | (268) | | | $ | (174) | | | $ | (419) | |
| Total income tax (expense) benefit | | $ | 1,468 | | | $ | (306) | | | $ | 1,493 | | | $ | (531) | |
| Income (loss) from continuing operations | | $ | (6,716) | | | $ | 635 | | | $ | (8,729) | | | $ | 1,266 | |
| Worldwide effective tax rate | | 18 | % | | 33 | % | | 15 | % | | 30 | % |
The difference between the 18 percent effective tax rate for income from continuing operations for the three months ended SeptemberJune 30, 2019, compared with earnings2020 and the 21 percent U.S. federal statutory tax rate is primarily driven by the impairment of $1.7 billionAlgeria oil and gas properties, for which the company receives no tax benefit. The difference between the 15 percent effective tax rate for income from continuing operations for the same period of 2018. Marketing and Other Midstream earnings were $876 million for the ninesix months ended SeptemberJune 30, 2019, compared with earnings2020 and the U.S. federal statutory tax rate is primarily driven by the impairment of $2.1 billionthe WES goodwill and international assets, for which the same period of 2018. Earnings forcompany receives no tax benefit.
On March 27, 2020, the threePresident signed into law the Coronavirus Aid, Relief and nine months ended September 30, 2018 included a $902 million gain from the sale of non-core domestic midstream assets. Excluding this gain on sale, the decreaseEconomic Security Act (hereafter, CARES Act), an economic stimulus package in earnings was attributable to lower marketing margins due to decreased crude oil price spreads, lower NGL prices impacting gas processing and lower pipeline income dueresponse to the saleCOVID-19 pandemic. The CARES Act contains several corporate income tax provisions, including provisions allowing for immediate refund of non-core domestic midstream assetsremaining unutilized AMT credits as well as allowing a 5-year carryback of net operating losses generated in tax years 2018, 2019, and 2020. As of the third quarterdate of 2018.this report, Occidental received approximately $170 million of cash refunds as a result of the aforementioned AMT credit and NOL carryback provisions and anticipates an additional $25 million cash refund by the end of the year. Occidental does not currently expect the various provisions of the CARES Act to have a material effect on current income tax expense or the realizability of deferred income tax assets. Occidental will continue to monitor additional guidance issued by the U.S. Treasury Department and the Internal Revenue Service.
WES Midstream Segment | | |
| LIQUIDITY AND CAPITAL RESOURCES |
WES Midstream segment earnings from the Merger date to September 30, 2019 was $134 million and income attributable to noncontrolling interests was $42 million.
Liquidity and Capital Resources
At SeptemberJune 30, 2019,2020, Occidental had $4.8approximately $1.0 billion in cash and cash equivalents and $0.5approximately $0.1 billion in restricted cash and restricted cash equivalents, which was primarily associated with a benefits trust for former Anadarko employees that was funded as part of the Merger.Acquisition, payments of future hard-minerals royalties conveyed, and a judicially controlled account related to a Brazilian tax dispute. Restricted cash within the benefits trust will be made available to Occidental as payments are made to former Anadarko employees. InRefer to the third quarterCurrent Business Outlook section of 2019,the Management’s Discussion and Analysis for actions Occidental initiated a voluntary severance programhas taken to align the size and composition of its workforce with its expected future operating and capital plans. Additional expenses associated with the program are expected to be incurred throughout the remainder of 2019 and through most of 2020. With a continued focus on capital and operational efficiencies, Occidental expects to fundimprove its liquidity needs,position in the current business environment, including future dividend payments, through cash on hand, cash generated from operations, monetization of non-core assets or investmentsthe July 2020 Senior Notes Offering and if necessary, proceeds from other forms of capital issuance.
Operating cash flow from continuing operations was $5.4approximately $1.7 billion for the first ninesix months of 2019,2020, compared to $5.2approximately $3.0 billion for the same period of 2018.2019. The increasedecrease in operating cash flow from continuing operations mainly reflectedis primarily due to lower crude oil prices and higher production, which wasinterest expense, partially offset by lowerhigher crude oil, pricesNGLs, and Merger-related costs.
Occidental’s net cash used by investing activities from continuing operations was $27.6approximately $2.1 billion for the first ninesix months of 2019,2020, compared to $1.7approximately $2.7 billion for the same period of 2018.2019. Capital expenditures for the first ninesix months of 2020 and 2019 were $4.2approximately $1.7 billion and $2.5 billion respectively, of which $3.8 billionsubstantially all was for the Oiloil and Gas segment, compared to $3.6 billion for the first nine months of 2018, of which $3.2 billion was for the Oil and Gasgas segment. The primary use of cash for investing activities was the cash portion of the Merger consideration, net of the cash acquired in the Merger. Proceeds from the sale of assets and equity investments, net included the sale of Anadarko's Mozambique LNG assets, as well as proceeds from the sale of Occidental's Plains All American Pipeline equity investment.
Occidental’s net cash providedused by financing activities from continuing operations was $24.7approximately $2.0 billion for the first ninesix months of 2019,2020, compared to $2.2approximately $1.5 billion cash used for the same period of 2018.2019. Cash providedused by financing activities for the first ninesix months of 2020 and 2019 mainly reflected the issuance of long-term debt and preferred shares to consummate the Merger. These proceeds were partially offset by the partial repayment of the term loans and the payment of dividends. The nine months ended September 30, 2019,dividends of $1.6 billion and 2018, each included dividend payments of $1.8 billion.
As of SeptemberJune 30, 2019,2020, and as of the date of this filing, Occidental was in compliance with all covenants ofin its financing agreementsagreements. Occidental currently expects its cash on hand and had capacityfunds available under its RCF to be sufficient to meet its debt maturities, operating expenditures and other obligations for the paymentnext 12 months from the date of cash dividendsthis filing. However, given the inherent uncertainty associated with the duration and other distributionsseverity of the COVID-19 pandemic and its resulting impact on oil demand, Occidental may need to seek additional liquidity sources, refinance debt maturities, or acquisitionsboth, to fund its operations.
For more information regarding upcoming debt maturities, liquidity-improvement initiatives and the impact of Occidental stock.the COVID-19 pandemic and challenging oil and gas demand environment on Occidental’s liquidity and capital resources, see the Current Business Outlook section of the Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Environmental Liabilities and Expenditures
| | |
| ENVIRONMENTAL LIABILITIES AND EXPENDITURES |
Occidental’s operations are subject to stringent federal, state, local and foreign laws and regulations related to improving or maintaining environmental quality. Occidental’s environmental compliance costs have generally increased over time and are expected to rise in the future. Occidental factors environmental expenditures for its operations as an integral part of its business planning process.
The laws that require or address environmental remediation, including CERCLA and similar federal, state, local and international laws, may apply retroactively and regardless of fault, the legality of the original activities or the current ownership or control of sites. OccidentalOPC or certain of its subsidiaries participate in or actively monitor a range of remedial activities and government or private proceedings under these laws with respect to alleged past practices at operating, closed and third-party sites. Remedial activities may include one or more of the following: investigation involving sampling, modeling, risk assessment or monitoring; cleanup measures including removal, treatment or disposal of hazardous substances;disposal; or operation and maintenance of remedial systems. TheseThe environmental proceedings seek funding or performance of remediation and, in some cases, compensation for alleged property damage, punitive damages, civil penalties, injunctive relief and government oversight costs.
Refer toSee Note 1211 - Environmental Liabilities and Expenditures, in the Notes to the Consolidated Condensed Financial Statements in Part I, Item 1 of this Form 10-Q and to the Environmental Liabilities and Expenditures section of Management’s Discussion and Analysis of Financial Condition and Results of Operations in the 20182019 Form 10-K for additional information regarding Occidental’s environmental liabilities and expenditures.
| | |
| LAWSUITS, CLAIMS, COMMITMENTS AND CONTINGENCIES |
Lawsuits, Claims, Commitments and Contingencies
Occidental accrues reserves for outstanding lawsuits, claims and proceedings when it is probable that a liability has been incurred and the liability can be reasonably estimated. Occidental has disclosed its reserve balances for
environmental remediation matters and its estimated range of reasonably possible additional losses for such matters. Reserve balances for other matters as of September 30, 2019, and December 31, 2018, were not material to Occidental's Consolidated Condensed Balance Sheets. See Note 1110 - Lawsuits, Claims, Commitments and Contingencies, in the Notes to Consolidated Condensed Financial Statements in Part I, Item 1 of this Form 10-Q for further information.
Recently Adopted Accounting and Disclosure Changes | | |
| RECENTLY ADOPTED ACCOUNTING AND DISCLOSURE STANDARDS |
Item 3.Quantitative and Qualitative Disclosures About Market Risk
Occidental's primary market risks are attributable to fluctuations in commodity prices and interest rates. These risks can affect revenues and cash flows, and Occidental's risk-management policies provide for the use of derivative instruments to manage these risks. The types of commodity derivative instruments used by Occidental include futures, swaps, options and fixed-price physical-delivery contracts. The volume of commodity derivatives entered into by Occidental is governed by risk-management policies and may vary from year to year. Both exchange and over-the-counter traded derivative instruments may be subject to margin-deposit requirements, and Occidental may be required from time to time to deposit cash or provide letters of credit with exchange brokers or counterparties to satisfy these margin requirements. For additional information relating to Occidental's derivative and financial instruments, see Note 7—Derivative Instruments6-Derivatives in the Notes to Consolidated Condensed Financial Statements in Part I, Item 1 of this Form 10-Q.
Occidental's most significant market risk relates to prices for oil, natural gas, and NGL.NGLs. Management expects energy prices to remain unpredictable and potentially volatile. As energy prices decline or rise significantly, revenues and cash flows are likewise affected. In addition, a non-cash write-down of Occidental's oil and gas properties or goodwill may be required if commodity prices experience further declines or persist at current levels.
As a significant decline.
Derivative Instruments Held for Non-Trading Purposes
| | |
| DERIVATIVE INSTRUMENTS HELD FOR NON-TRADING PURPOSES |
As of SeptemberJune 30, 2019,2020, Occidental had derivative instruments in place to reduce the price risk associated with future crude oil production of 300350 thousand barrels per day. As of SeptemberJune 30, 2019,2020, these derivative instruments were at a $95$463 million net derivative asset position.
The following table shows a sensitivity analysis based on both a five-percent and ten-percent change in commodity prices and their effect on the net derivative asset position of $95$463 million at SeptemberJune 30, 2019:2020:
| | | | | | | | | | | | | | | | | | | | |
| millions except percentages | | | | | | |
| Percent change in commodity prices | | Net derivative asset | | | Change to fair value from
June 30, 2020 position | |
| + 5% | | | $ | 393 | | | | $ | (69) | |
| - 5% | | | $ | 516 | | | | $ | 53 | |
| + 10% | | | $ | 307 | | | | $ | (156) | |
| - 10% | | | $ | 557 | | | | $ | 94 | |
|
| | | | |
| millions (except for percentages) | | | | |
| Percent change in commodity prices | | Resulting Net Fair Value position-asset (liability) | | Change to Fair Value from September 30, 2019 position |
| + 5% | | $(91) | | $(186) |
| - 5% | | $261 | | $166 |
| + 10% | | $(300) | | $(395) |
| -10% | | $410 | | $315 |
Interest Rate Risk
Occidental acquired interest rate swap contracts in the Merger.Acquisition. Occidental pays a fixed interest rate and receives a floating interest rate indexed to three-month London Inter-Bank Offered Rate (LIBOR). The swaps have an initial term of 30 years with mandatory termination dates in September 20202021 through 2023 and a total notional amount of $1.6$1.5 billion as of SeptemberJune 30, 2019. In October 2019, $125 million of notional interest rate swaps were terminated.2020. As of SeptemberJune 30, 2019,2020, Occidental had a net liability of $1.4approximately $1.6 billion based on the fair value of the swaps of negative $1.7$2.0 billion netted against $359$424 million in posted cash collateral. A 25-basis point decrease in implied LIBOR rates over the term of the swaps would result in an additional liability of approximately $130$120 million on these swaps.
As of SeptemberJune 30, 2019,2020, Occidental had $6.5variable rate debt with a notional value of $4.5 billion of variable-rate debt outstanding, excluding WES.outstanding. A 25-basis point increase in LIBOR interest rates would increase gross interest expense approximately $16$11 million per year.
As of SeptemberJune 30, 2019,2020, Occidental had $32.6fixed rate debt with a fair value of $27.1 billion of fixed-rate debt outstanding, excluding WES.outstanding. A 25-basis point change in Treasury rates would change the fair value of the fixed-ratefixed rate debt approximately $680$423 million.
Item 4. Controls and Procedures
Occidental's President and Chief Executive Officer and its Senior Vice President and Chief Financial Officer supervised and participated in Occidental's evaluation of the effectiveness of its disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based upon that evaluation, Occidental's President and Chief Executive Officer and Senior Vice President and Chief Financial Officer concluded that Occidental's disclosure controls and procedures were effective as of SeptemberJune 30, 2019.
Except as described below, there has been no change in Occidental's internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) during the threesix months ended SeptemberJune 30, 2019,2020, that has materially affected, or is reasonably likely to materially affect, Occidental's internal control over financial reporting.
In the thirdsecond quarter of 2019,2020, Occidental startedcontinued the process of integrating Anadarko into its operations and internal control processes, resulting in some of Anadarko’s historical internal controls over financial reporting being superseded by Occidental’s internal controls.controls over financial reporting. Management will continue to integrate Anadarko's historical internal controls over financial reporting with Occidental's internal controls over financial reporting. This integrationreporting, which may lead to changes in Occidental's or Anadarko’s historical internal controls over financial reporting in future fiscal periods. Occidental is also in the process of implementing a new Enterprise Resource Planning (ERP) system. Occidental intends to integrate Anadarko’s internal control processes into Occidental’s internal control processes in conjunction with implementation of the ERP system. Management expects the integration process to be completed during 2021.
PART II OTHER INFORMATION
Item 1.Legal Proceedings
On July 17, 2019, an Occidental subsidiary received a draft consent agreement and final order from the U.S. Environmental Protection Agency (EPA) regarding alleged violations under the Clean Air Act (CAA) and various sections of the EPA’s Chemical Accident Prevention Provisions at the Convent, Louisiana facility. EPA’s order includes allegations associated with process reviews, procedures and recordkeeping. EPA’s draft settlement proposal includes a civil penalty of $185,545. Occidental is currently negotiating a resolution of this matter with EPA.
On September 13, 2019, an Occidental subsidiary received a draft consent agreement and final order from EPA regarding alleged violations under the CAA and various sections of the EPA’s Chemical Accident Prevention Provisions at the Geismar, Louisiana facility. EPA’s order includes allegations associated with operating procedures, inspections, contractor reviews, medical protocols in the emergency response plan, administrative updates and four historical on-site incidents. EPA’s draft settlement proposal includes a civil penalty of $931,990. Occidental is currently negotiating a resolution of this matter with EPA.
Item 1A. Risk Factors
Other than as set forth below, there have been no material changes to the disclosure presented in the 20182019 Form 10-K under Part I. Item 1A and the disclosure presented in the Form 10-Q for the quarter ended March 31, 2020 under Part II. Item 1A.
The COVID-19 pandemic has adversely affected our business, and the ultimate effect on our operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted.
The COVID-19 pandemic has adversely affected the global economy, disrupted global supply chains and created significant volatility in the financial markets. In addition, the pandemic has resulted in travel restrictions, business closures and the institution of quarantining and other restrictions on movement in many communities. As a result, there has been a significant reduction in demand for and prices of crude oil, natural gas and NGL. If the reduced demand for and prices of crude oil, natural gas and NGL continue for a prolonged period, our operations, financial condition, cash flows, level of expenditures and the quantity of estimated proved reserves that may be attributed to our properties may be materially and adversely affected. Our operations also may be adversely affected if significant portions of our workforce are unable to work effectively, including because of illness, quarantines, government actions, or other restrictions in connection with the pandemic. We have implemented workplace restrictions in our offices and work sites for health and safety reasons, including guidance for our non-essential employees to work remotely if able, and continue to monitor national, state and local government directives where we have operations and/or offices. Further, our business plan, including our financing and liquidity plan, includes, among other things, planned divestitures. If general economic conditions or conditions in the energy industry persist at current levels for an extended period of time, we may not be able to complete these transactions on favorable terms, in a timely manner or at all. The extent to which the COVID-19 pandemic adversely affects our business, results of operations, and financial condition will depend on future developments, which are highly uncertain and cannot be predicted, including the scope and duration of the pandemic and actions taken by governmental authorities and other third parties in response to the pandemic. The COVID-19 pandemic may also materially adversely affect our operating and financial results in a manner that is not currently known to us or that we do not currently consider to present significant risks to our operations. To the extent the COVID-19 pandemic adversely affects our business, operations, financial condition and operating results, it may also have the effect of heightening many of the other risks described in this "Risk Factors" section, the 2019 Form 10-K under Part I Item IA and the Form 10-Q for the quarter ended March 31, 2020 under Part II Item 1A.
The diversionCrude oil prices declined significantly in the first quarter of resources2020 and management’s attentionhave remained depressed. If oil prices further decline or remain at current levels for a prolonged period, our operations and financial condition may be materially and adversely affected.
In the first half of 2020, crude oil prices fell sharply and dramatically, due in part to significantly decreased demand as a result of the integrationCOVID-19 pandemic and the announcement by Saudi Arabia of Anadarko could adversely affect day-to-day business.
The integration of Anadarko places a significant burden on Occidental’s management and internal resources. The diversion of management’s attention away from day-to-day business concerns and any difficulties encounteredincrease in the transition and integration process could adversely affect financial results.
Occidental may not be able to integrate Anadarko successfully, and many of the anticipated benefits of combining Anadarko and Occidental may not be realized.
Occidental acquired Anadarko with the expectation that the Merger will result in various benefits, including, among other things, operating efficiencies. Achieving those anticipated benefits is subject to a number of uncertainties, including whether Occidental can integrate the business of Anadarko in an efficient and effective manner, and Occidental cannot assure you that those benefits will be realized as quickly as expected or at all. If Occidental does not achieve those benefits, costs could increase, expected net income could decrease, and future business, financial condition, operating results, and prospects could suffer.
The integration process could take longer than anticipated and involve unanticipated costs. Disruptions of each company’s ongoing businesses, processes, and systems or inconsistencies in standards, controls, procedures, practices, policies, and compensation arrangements could adversely affect the combined company. Occidental may also have difficulty addressing differences in corporate cultures and management philosophies, and in harmonizing other systems and business practices. Although Occidental expects that the elimination of certain duplicative costs,its maximum crude oil production capacity as well as the realizationannouncement by Russia that previously agreed upon oil production cuts among members of other efficiencies relatedthe Organization of the Petroleum Exporting Countries and its broader partners (“OPEC+”) would expire on April 1, 2020, and the ensuing expiration thereof. Recent agreed-upon production cuts by OPEC+ along with declining U.S. production have helped to correct the supply and demand imbalance; however, these reductions are not expected to be enough in the near-term to offset the significant inventory build caused by the demand destruction from the COVID-19 pandemic in the first half of 2020. Prices for WTI crude oil were over $60 per barrel at the beginning of 2020 before declining significantly through March and further declining into April. While crude oil prices modestly recovered in June 2020, a reversal of recent improvements or a prolonged period at current prices may materially and adversely affect our operations, financial condition, cash flows, level of expenditures and the quantity of estimated proved reserves that may be attributed to our properties.
As domestic demand for crude oil has declined substantially due to the integrationCOVID-19 pandemic, we cannot ensure that there will be a physical market for our production at economic prices until markets stabilize.
As a result of the two businesses, will over time offset the substantial incremental transactionlow commodity prices, we have curtailed a portion of our estimated crude oil production and Merger-related costs, Occidental may not achieve this net benefitstore rather than sell additional crude oil production in the near term,future. Additionally, the excess supply of oil could lead to further curtailments by our crude oil purchasers. We have contracted for additional storage capacity and began incurring incremental costs for such services in the second quarter of 2020. While we believe that the shutting-in of such production will not impact the productivity of such wells when reopened, there is no assurance we will not have a degradation in well performance upon returning those wells to production. The storing or at all.
Future results will be negatively impacted if Occidental does not effectively manage its expanded operations.
With completionshutting in of a portion of our production can also result in increased costs under our midstream and other contracts. Any of the Merger,foregoing could result in an adverse impact on our revenues, financial position and cash flows.
We have recorded impairments of our proved and unproved oil and gas properties and will continue to assess further impairments in the sizefuture.
We have recorded impairments of Occidental’s business has increased significantly. Occidental’s continued success depends,our proved and unproved oil and gas properties resulting from prolonged declines in part, uponoil prices and may record such impairments in the future. Past impairments include pre-tax impairment and related charges to both proved and unproved oil and gas properties, and a lower of cost or net realizable value adjustment for crude inventory. In the second quarter of 2020, Occidental recognized a pre-tax impairment to its ability to manage this expanded business, which poses substantial challenges for management, including challenges related tooil and gas proved and unproved properties of $8.6 billion. If the management and monitoring of new operations and associated increased costs and complexity. Occidental cannot assure youmacro-economic conditions that it will be successful or that it will realize the expected operating efficiencies, cost savings, and other benefits from the combination currently anticipated.
Occidental has incurred a substantial amount of indebtedness and other payment obligations in connection with the financingexist as of the Merger and may be unable to service and repay such indebtedness.
Occidental funded the cash portion of the Merger consideration by incurring $21.8 billion of third-party indebtedness and issuing shares of series A preferred stock and a warrant to acquire common stock pursuant to the Berkshire Hathaway Inc. investment. In addition, Occidental assumed approximately $11.9 billion aggregate principal amount of Anadarko’s outstanding long-term debt, excluding finance lease liabilities, as well as approximately $7.3 billion aggregate principal amount of WES Midstream’s outstanding short- and long-term debt in the Merger. Occidental cannot guarantee that it will be able to generate sufficient cash flow to service and repay this indebtedness or to pay the dividends required to be paid on the series A preferred stock, or that it will be able to refinance such indebtedness on favorable terms, or at all. The failure to so repay or refinance such indebtedness, or to pay dividends on such series A preferred stock, could have a material adverse effect on Occidental’s business, financial condition, results of operations, cash flows and/or share price. If Occidental is unable to service such indebtedness and fund its operations, Occidental may be forced to reduce or delay capital expenditures, seek additional capital, sell assets or refinance Occidental’s indebtedness. Any such action may not be successful and Occidental may be unable to service such indebtedness and its operations, which could have a material adverse effect on Occidental’s business, financial condition, results of operations, cash flows and/or share price.
Occidental may not be able to complete the sale to Total S.A. of the assets, liabilities, businesses and operations of Anadarko in Algeria, Ghana and South Africa or complete its planned divestitures of certain assets on favorable terms or at all.
The Total transaction is conditioned on the receipt of required regulatory approvals as well as other customary closing conditions. Occidental may not be able to complete the Total transaction or obtain the proceeds that could be realized from it, and those cash proceeds may not be adequate to meet any debt service obligations then due. In addition, although Occidental intends to complete $10 billion to $15 billion of divestitures of certain assets within 24 months after completion of the Merger (including the Total transaction), Occidental may not be able to complete its planned divestitures on favorable terms or at all. Any difficulties with respect to the completion of the Total transaction or other planned divestitures could have a material adverse effect on Occidental’s business, financial condition, results of operations, cash flows and/or stock price. See Note 4 - Acquisitions, Dispositions, and Other, in the Notes to Consolidated Condensed Financial Statements in Part I Item 1date of this Form 10-Q continue or worsen for more information about the Total transaction.
Occidental’s operations and financial results could be significantly negatively impacted by its offshore operations.
Occidental is vulnerable to risks associated with our offshore operations that could negatively impacta prolonged period, our operations and financial results. Occidental conducts offshore operationscondition may be materially and adversely affected, and our oil and gas properties may be subject to further testing for impairment. This could result in the Gulf of Mexico, Ghanaadditional non-cash asset impairments, and other countries. Occidental's operations and financial resultssuch impairments could be significantly impacted by conditions in some of these areas and are also vulnerablematerial to certain unique risks associated with operating offshore, including those relating to the following:our financial statements.
• hurricanes and other adverse weather conditions
• geological complexities and water depths associated with such operations
• limited number of partners available to participate in projects
• oilfield service costs and availability
• compliance with environmental, safety, and other laws and regulations
• terrorist attacks or piracy
• remediation and other costs and regulatory changes resulting from oil spills or releases of hazardous materials
• failure of equipment or facilities
• response capabilities for personnel, equipment, or environmental incidents
In addition, Occidental conducts some of its exploration in deep waters (greater than 1,000 feet) where operations, support services, and decommissioning activities are more difficult and costly than in shallower waters. The deep waters in the Gulf of Mexico, as well as international deepwater locations, lack the physical and oilfield service infrastructure present in shallower waters. As a result, deepwater operations may require significant time between a discovery and the time that Occidental can market its production, thereby increasing the risk involved with these operations.
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
On April 15, 2020, Occidental paid the quarterly dividend on its Series A Preferred Stock in the form of shares of Occidental's common stock. Pursuant to the Certificate of Designations dated as of August 8, 2019 in connection withestablishing the Merger, Occidentalrelative powers, preferences, rights, qualifications, limitations and restrictions of the Series A Preferred Stock, an aggregate of 17,274,130 shares of common stock were issued to Berkshire Hathaway Inc. and certainthe holders of its subsidiaries 100,000 sharesrecord of seriesthe Series A preferred stock (the Preferred Stock) with a warrant to purchase 80 million shares of Occidental common stock at an exercise price of $62.50 (the Warrant) for $10 billion. The Preferred Stock andas of March 31, 2020. Occidental did not realize any proceeds from the Warrant have not been registeredissuance of the shares, which was exempt from registration under Section 4(a)(2) of the Securities Act of 1933, as amended,amended.
On June 26, 2020, the Board of Directors declared a distribution to holders of its common stock of warrants to purchase shares of Occidental’s common stock, at a rate of 0.125 warrants per share of Occidental common stock (the “Common Stock Warrants”). Occidental issued approximately 114 million Common Stock Warrants on August 3, 2020 to holders of record of outstanding shares of Occidental’s common stock as of the close of business on July 6, 2020 and were issued and sold in a private placementexpects to issue approximately 1.5 million additional Common Stock Warrants pursuant to Section 4(a)(2) thereof. See NoteOccidental’s outstanding equity-based incentive awards in connection with anti-dilution adjustments resulting from the distribution. The Common Stock Warrants have an exercise price of $22.00 per share and will expire on August 3, -2027. The Merger, Note 7 - Derivative Instruments,Common Stock Warrants are listed on the the New York Stock Exchange and Note 14 - Stockholders’ Equity, intrade under the Notes to Consolidated Condensed Financial Statements in Part I Item 1 of this Form 10-Q for more information.symbol "OXY WS".
Share Repurchase Activities
Occidental'sOccidental’s share repurchase activities for the ninesix months ended SeptemberJune 30, 2019,2020, were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Period | | Total
Number
of Shares Purchased | | | | Total Number of Shares Purchased as Part of Publicly Announced
Plans or Programs | | | Maximum Number of Shares that May Yet Be Purchased Under the
Plans or Programs | | |
| First Quarter 2020 | | — | | | $ | — | | | | — | | | | | |
| April 1 - 30, 2020 | | — | | | $ | — | | | | — | | | | | |
| May 1 - 31, 2020 | | — | | | $ | — | | | | — | | | | | |
| June 1 - 30, 2020 | | 157,808 | | (a) | $ | 24.40 | | | | — | | | | | |
| Second Quarter 2020 | | 157,808 | | | $ | 24.40 | | | | — | | | | | |
| Total 2020 | | 157,808 | | (a) | $ | 24.40 | | | | — | | | | 44,206,787 | | (b) |
(a) Includes purchases from the trustee of Occidental's defined contribution savings plan that are not part of publicly announced plans or programs.
(b)Represents the total number of shares remaining at June 30, 2020 under Occidental’s share repurchase program of 185 million shares. The program was initially announced in 2005. The program does not obligate Occidental to acquire any specific number of shares and may be discontinued at any time.
|
| | | | | | | | | | | | | |
| Period | | Total Number of Shares Purchased (a) | | Average Price Paid per Share | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | Maximum Number of Shares that May Yet be Purchased Under the Plans or Programs (b) |
| | | | | | | | | |
| First Quarter 2019 | | 2,690,000 |
| | $ | 66.94 |
| | 2,690,000 |
| | |
| Second Quarter 2019 | | — |
| | $ | — |
| | — |
| | |
| Third Quarter 2019 | | — |
| | $ | — |
| | — |
| | |
| Total | | 2,690,000 |
| | $ | 66.94 |
| | 2,690,000 |
| | 44,206,787 |
|
Item 6. Exhibits
| | | | | |
(a) | There were no purchases from the trustee of Occidental's defined contribution savings plan in the third quarter. |
| |
(b) | Represents the total number of shares remaining at September 30, 2019, under Occidental's share repurchase program of 185 million shares. The program was initially announced in 2005. The program does not obligate Occidental to acquire any specific number of shares and may be discontinued at any time. |
Item 6. Exhibits2.1* |
| |
2.1 | |
| |
| 3.1 | Restated Certificate of Incorporation of Occidental, dated November 12, 1999, and Certificates of Amendment thereto dated May 5, 2006, May 1, 2009, May 2, 2014 and June 3, 2020 (filed as Exhibit 2.14.1 to the Current ReportRegistration Statement on Form 8-KS-8 of Occidental dated August 3, 2019 (date of earliest event reported), filed August 5, 2019,June 17, 2020, File No. 1-9210)333-239236).^ |
| |
3.14.1 | |
| |
4.1 | |
| |
4.2 | |
| |
4.34.2 | Officer’s Certificate pursuant to the Indenture, dated as of August 8, 2019,July 13, 2020, establishing the Notes and their terms (filed as Exhibit 4.2 to the Current Report on Form 8-K of Occidental dated August 6, 2019 (date of earliest event reported)July 13, 2020, filed August 8, 2019,July 13, 2020, File No. 1-9210). |
| |
4.44.3 | |
| |
4.54.4 | |
| |
4.64.5 | |
| |
|
| |
4.74.6 | |
| |
4.8 | |
| |
4.9 | |
| |
4.10 | |
| |
4.11 | |
| |
4.12 | |
| |
4.13 | |
| |
4.14 | TenthThird Supplemental Indenture dated August 29, 2019, to the August 1, 1982 Indenture, by and among Kerr-McGee Corporation, Anadarko Petroleum Corporation and The Bank of New York Mellon Trust Company, N.A. (as successor in interest to Citibank, N.A.), as Trustee (filed as Exhibit 4.1 to the Current Report on Form 8-K of Occidental dated August 29, 2019 (date of earliest event reported), filed August 30, 2019, File No. 1-9210). |
| |
4.15 | First Supplementalthat certain Indenture, dated August 29, 2019, to the Marchas of April 1, 1995 Indenture,1998, by and between Anadarko Petroleum Corporation and The Bank of New York Mellon Trust Company, N.A. (as successor in interest to The Chase Manhattan Bank, N.A.), as Trustee (filed as Exhibit 4.2 to the Current Report on Form 8-K of Occidental dated August 29, 2019 (date of earliest event reported), filed August 30, 2019, File No. 1-9210). |
| |
4.16 | Second Supplemental Indenture, dated August 29, 2019, to the March 27, 1996 Indenture, by and among Anadarko Holding Company (as successor in interest to Union Pacific Resources Group Inc.), Anadarko Petroleum Corporation and The Bank of New York Mellon Trust Company, N.A. (as successor in interest to Chase Bank of Texas National Association), as Trustee (filed as Exhibit 4.3 to the Current Report on Form 8-K of Occidental dated August 29, 2019 (date of earliest event reported), filed August 30, 2019, File No. 1-9210). |
| |
4.17 | First Supplemental Indenture, dated August 29, 2019, to the September 1, 1997 Indenture, by and between Anadarko Petroleum Corporation and The Bank of New York Mellon Trust Company, N.A. (as successor in interest to Harris Trust and Savings Bank), as Trustee (filed as Exhibit 4.4 to the Current Report on Form 8-K of Occidental dated August 29, 2019 (date of earliest event reported), filed August 30, 2019, File No. 1-9210). |
| |
4.18 | Second Supplemental Indenture, dated August 29, 2019, to the April 13, 1999 Indenture, by and among Anadarko Holding Company (as successor in interest to Union Pacific Resources Group Inc.), Anadarko Finance Company (as successor in interest to UPR Capital Company), Anadarko Petroleum Corporation and The Bank of New York Mellon Trust Company, N.A. (as successor in interest to The Bank of New York), as Trustee (filed as Exhibit 4.5 to the Current Report on Form 8-K of Occidental dated August 29, 2019 (date of earliest event reported), filed August 30, 2019, File No. 1-9210). |
| |
4.19 | Second Supplemental Indenture, dated August 29, 2019, to the April 26, 2001 Indenture, by and among Anadarko Finance Company, Anadarko Petroleum Corporation and The Bank of New York Mellon Trust Company, N.A. (as successor in interest to The Bank of New York), as Trustee (filed as Exhibit 4.6 to the Current Report on Form 8-K of Occidental dated August 29, 2019 (date of earliest event reported),July 13, 2020, filed August 30, 2019,July 13, 2020, File No. 1-9210). |
| |
|
| |
4.204.7 | ThirdFirst Supplemental Indenture to that certain Indenture, dated as of August 29,8, 2019, to the August 1, 2001 Indenture, by and among Kerr-McGee Corporation, Anadarkobetween Occidental Petroleum Corporation and The Bank of New York Mellon Trust Company, N.A. (as successor in interest to Citibank, N.A.), as Trustee (filed as Exhibit 4.7 to the Current Report on Form 8-K of Occidental dated August 29, 2019 (date of earliest event reported),July 13, 2020, filed August 30, 2019,July 13, 2020, File No. 1-9210). |
| |
4.21 | Fourth Supplemental Indenture, dated August 29, 2019, to the September 19, 2006 Indenture, by and between Anadarko Petroleum Corporation and The Bank of New York Mellon Trust Company, N.A. (formerly known as The Bank of New York Trust Company, N.A.), as Trustee (filed as Exhibit 4.8 to the Current Report on Form 8-K of Occidental dated August 29, 2019 (date of earliest event reported), filed August 30, 2019, File No. 1-9210). |
| |
4.22 | |
| |
4.23 | |
| |
4.24 | |
| |
4.25 | |
| |
4.26 | |
| |
4.27 | |
| |
4.28 | |
| |
4.29 | |
| |
4.30 | |
| |
4.31 | |
| |
4.32 | |
| |
4.33 | |
| |
4.34 | |
| |
4.35 | |
| |
|
| |
4.3610.1#* | |
| |
4.37 | |
| |
4.38 | |
| |
4.39 | |
| |
4.40 | |
| |
4.41 | |
| |
4.42 | |
| |
10.1 | Term Loan Agreement, dated as of June 3, 2019, among Occidental Petroleum Corporation, the lenders party thereto and Citibank, N.A., as Administrative Agent (filed as Exhibit 10.1 to the Current Report on Form 8-K of Occidental dated August 8, 2019 (date of earliest event reported), filed August 8, 2019, File No. 1-9210).^ |
| |
10.2 | Amended and Restated Revolving Credit Agreement, dated as of June 3, 2019, among Occidental Petroleum Corporation, the lenders party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent (filed as Exhibit 10.2 to the Current Report on Form 8-K of Occidental dated August 8, 2019 (date of earliest event reported), filed August 8, 2019, File No. 1-9210).^ |
| |
10.3#
| |
| |
10.4#*
| |
| |
10.5#*
| |
| |
10.610.2#*#
| |
| |
10.710.3#*#*
| |
| |
10.8#*
| |
| |
10.9#*
| |
| |
31.1*10.4#* | |
| |
| 10.5#* | |
| |
| 10.6#* | |
| |
| 10.7# | |
| |
| 31.1* | |
| |
| 31.2* | |
| |
| 32.1** | |
| |
| 101.INS* | Inline XBRL Instance Document. |
| |
| 101.SCH* | Inline XBRL Taxonomy Extension Schema Document. |
| |
| 101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
| |
|
| |
| 101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document. |
| |
| 101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
| |
| 101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document. |
| |
| 104* | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
# Indicates a management contract or compensatory plan or arrangement.
* Filed herewith.
** Furnished herewith.
^ Exhibits and schedules omitted pursuant to Item 601(a)(5) of Regulation S-K. Occidental Petroleum Corporation agrees to furnish supplementally a copy of any omitted exhibit or schedule to the SEC upon request.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
| | | | | | | |
| OCCIDENTAL PETROLEUM CORPORATION | |
|
| | | | | | | |
November 4, 2019August 10, 2020 | /s/ Christopher O. Champion | |
| Christopher O. Champion | |
| Vice President, Chief Accounting Officer and Controller | |
| Controller | |