EXHIBIT 99.1
For Immediate Release: Thursday, January 25, 2007
Occidental Petroleum Announces Fourth Quarter Earnings
LOS ANGELES -- Occidental Petroleum Corporation (NYSE: OXY) announced core earnings were a record $4.349 billion ($5.05 per diluted share) for the twelve months of 2006, compared with $3.732 billion ($4.56 per diluted share) for the same period in 2005. See the attached schedule for a reconciliation of net income to core earnings. For the twelve months of 2006, net income was $4.182 billion ($4.86 per diluted share), compared with $5.281 billion ($6.45 per diluted share) for the twelve months of 2005.
Net income for the fourth quarter 2006 was $928 million ($1.09 per diluted share), compared with $1.152 billion ($1.40 per diluted share) for the fourth quarter 2005. Core earnings for the fourth quarter 2006 were $835 million ($0.98 per diluted share), compared with $1.116 billion ($1.36 per diluted share) for the same period in 2005. See the attached schedule for a reconciliation of net income to core earnings.
In announcing the results, Dr. Ray R. Irani, chairman, president and chief executive officer, said, "Oil and gas production averaged 616,000 barrels of oil equivalent per day for the quarter and a record high for the year of 601,000 equivalent barrels per day. Strong production growth and higher energy prices helped propel Oil and Gas 2006 segment earnings for the year to a historic annual record high. In addition, our Chemical segment's annual earnings were the highest in more than a decade."
The fourth quarter 2006 core income of $835 million excludes an $89 million after-tax gain for litigation settlements, a $57 million after-tax gain resulting from the sale of 10 million shares of our investment in Lyondell Chemical
Company, a $20 million after-tax charge for the purchase of debt on the open market, and a $40 million non-cash tax charge resulting from changes in compensation programs.
QUARTERLY RESULTS
Oil and Gas
Oil and gas segment earnings were $1.499 billion for the fourth quarter 2006, a 17-percent decrease from the $1.796 billion segment earnings for the fourth quarter 2005. The decline in the fourth quarter 2006 earnings reflected a $276 million decrease from lower natural gas prices, higher operating expenses and increased DD&A rates, partially offset by higher production.
The average price for West Texas Intermediate crude oil in the fourth quarter 2006 was $60.20 per barrel compared to $60.02 per barrel in the fourth quarter 2005. Occidental's realized price for worldwide crude oil was $51.18 per barrel for the fourth quarter 2006, compared with $51.87 per barrel for the fourth quarter 2005. The average price for NYMEX gas in the fourth quarter 2006 was $6.27 per MCF, compared with $11.66 per MCF in the fourth quarter 2005. Domestic realized gas prices decreased from $9.81 per MCF in the fourth quarter 2005 to $5.64 per MCF for the fourth quarter 2006.
Production
For the fourth quarter, daily oil and gas production from continuing operations averaged 616,000 barrels of oil equivalent (BOE), a 70,000 BOE increase over the 546,000 equivalent barrels per day produced in the fourth quarter 2005. The acquisitions of Vintage and certain properties from Plains accounted for 56,000 and 6,000 BOE, respectively, of this fourth quarter increase with Oman and Colombia providing the balance.
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Chemicals
Chemical fourth quarter 2006 segment earnings were $156 million, compared with fourth quarter 2005 segment earnings of $165 million. The fourth quarter 2006 decline resulted from lower volumes.
TWELVE-MONTH RESULTS
Oil and Gas
Oil and gas segment earnings were $7.239 billion for the twelve months of 2006, a 21-percent increase over the $5.968 billion segment earnings for the twelve months of 2005. The improvement in the twelve month 2006 earnings was due to record crude oil prices and higher production, partially offset by higher operating expenses, increased DD&A rates, and lower natural gas prices.
The average price for West Texas Intermediate crude oil in the twelve months of 2006 was $66.23 per barrel compared to $56.56 per barrel in the twelve months of 2005. Occidental's realized price for worldwide crude oil was $56.57 per barrel for the twelve months of 2006, compared with $49.18 per barrel for the same period in 2005. The average price for NYMEX gas in the twelve months of 2006 was $7.82 per MCF, compared with $8.11 per MCF in the twelve months of 2005. Domestic realized gas prices decreased from $7.11 per MCF in the twelve months of 2005 to $6.51 per MCF for the twelve months of 2006.
Production
Worldwide daily production from continuing operations for the twelve months of 2006 averaged 601,000 BOE, compared with 526,000 BOE for the twelve months of 2005. The increase included eleven months of Vintage production at 58,000 BOE per day, which added 53,000 BOE per day to Occidental's total year production and a Libyan increase of 15,000 BOE per day, which reflects twelve months of production in 2006, compared with four months in 2005.
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Chemicals
Chemical core earnings for the twelve months of 2006 were $901 million, compared with $777 million for the same period of 2005, after excluding charges for the write-off of plants and hurricane related insurance charges. See the attached schedule for a reconciliation of segment earnings to core earnings. The improvement in the twelve month 2006 results was due to higher margins in chlorine, caustic soda and polyvinyl chloride. Chemical segment earnings were $901 million for the twelve months of 2006, compared with $607 million for the same 2005 period.
Statements in this release that contain words such as "will," "expect" or "estimate," or otherwise relate to the future, are forward-looking and involve risks and uncertainties that could significantly affect expected results. Factors that could cause results to differ materially include, but are not limited to: exploration risks, such as drilling of unsuccessful wells; global commodity pricing fluctuations and supply/demand considerations for oil, gas and chemicals; higher-than-expected costs; political risk; and not successfully completing (or any material delay in) any expansion, capital expenditure, acquisition, or disposition. You should not place undue reliance on these forward-looking statements which speak only as of the date of this release. Unless legally required, Occidental does not undertake any obligation to update any forward-looking statements as a result of new information, future events or otherwise. U.S. investors are urged to consider carefully the disclosure in our Form 10-K, available through the following toll-free telephone number, 1-888-OXYPETE (1-888-699-7383) or on the Internet at http://www.oxy.com. You also can obtain a copy from the SEC by calling 1-800-SEC-0330.
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Contacts: | Lawrence P. Meriage (media) |
| | 310-443-6562 |
| | Christopher G. Stavros (investors) |
| | 212-603-8184 |
| | For further analysis of Occidental's quarterly performance, please visit the web site: www.oxy.com |
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SUMMARY OF SEGMENT NET SALES AND EARNINGS
| | | Fourth Quarter | | Twelve Months | |
($ millions, except | | ----------------- | | ----------------- | |
per-share amounts) | | 2006 | | 2005 | | 2006 | | 2005 | |
================================= | | ======= | | ======= | | ======= | | ======= | |
SEGMENT NET SALES | | | | | | | | | |
Oil and Gas | | $ 3,052 | | $ 2,879 | | $12,676 | | $ 9,805 | |
Chemical | | 1,036 | | 1,262 | | 4,815 | | 4,641 | |
Other | | 56 | | 41 | | 170 | | 151 | |
| | | ------- | | ------- | | ------- | | ------- | |
Net sales | | $ 4,144 | | $ 4,182 | | $17,661 | | $14,597 | |
================================= | | ======= | | ======= | | ======= | | ======= | |
SEGMENT EARNINGS | | | | | | | | | |
Oil and Gas | | $ 1,499 | | $ 1,796 | | $ 7,239 | | $ 5,968 | |
Chemical | | 156 | | 165 | | 901 | | 607 | |
| | | ------- | | ------- | | ------- | | ------- | |
| | | 1,655 | | 1,961 | | 8,140 | | 6,575 | |
Unallocated Corporate Items | | | | | | | | | |
Interest expense, net (a) | | (51 | ) | (23 | ) | (131 | ) | (201 | ) |
Income taxes (b) | | (794 | ) | (743 | ) | (3,466 | ) | (1,927 | ) |
Other (c) | | 111 | | (89 | ) | (108 | ) | 593 | |
| | | ------- | | ------- | | ------- | | ------- | |
Income from Continuing Operations | | 921 | | 1,106 | | 4,435 | | 5,040 | |
Discontinued operations, net (d) | | 7 | | 46 | | (253 | ) | 238 | |
Cumulative effect of accounting changes, net | | -- | | -- | | -- | | 3 | |
| | | ------- | | ------- | | ------- | | ------- | |
NET INCOME | | $ 928 | | $ 1,152 | | $ 4,182 | | $ 5,281 | |
| | | ======= | | ======= | | ======= | | ======= | |
BASIC EARNINGS PER COMMON SHARE | | | | | | | | | |
Income from continuing operations | | $ 1.09 | | $ 1.36 | | $ 5.20 | | $ 6.25 | |
Discontinued operations, net (d) | | 0.01 | | 0.06 | | (0.30 | ) | 0.30 | |
| | | ------- | | ------- | | ------- | | ------- | |
| | | $ 1.10 | | $ 1.42 | | $ 4.90 | | $ 6.55 | |
| | | ======= | | ======= | | ======= | | ======= | |
DILUTED EARNINGS PER COMMON SHARE | | | | | | | | | |
Income from continuing operations | | $ 1.08 | | $ 1.34 | | $ 5.15 | | $ 6.16 | |
Discontinued operations, net (d) | | 0.01 | | 0.06 | | (0.29 | ) | 0.29 | |
| | | ------- | | ------- | | ------- | | ------- | |
| | | $ 1.09 | | $ 1.40 | | $ 4.86 | | $ 6.45 | |
| | | ======= | | ======= | | ======= | | ======= | |
AVERAGE COMMON SHARES OUTSTANDING | | | | | | | | | |
BASIC | | 846.4 | | 810.9 | | 852.6 | | 806.6 | |
DILUTED | | 852.6 | | 823.3 | | 860.4 | | 818.2 | |
================================= | | ======= | | ======= | | ======= | | ======= | |
See footnotes on following page.
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(a) | Interest charges to purchase various debt issues were $31 million in the fourth quarter and the full year of 2006 and $1 million in the fourth quarter of 2005. The twelve months of 2005 included $42 million for debt purchases. |
| | |
(b) | As a result of changes in compensation programs in the fourth quarter of 2006, Occidental wrote off approximately $40 million of the deferred tax asset that had been recognized in the financial statements prior to the changes. The twelve months of 2005 included a $335 million tax benefit due to reversal of tax reserves no longer required, a $619 million tax benefit resulting from a closing agreement with the U.S. Internal Revenue Service resolving certain tax issues, and a $10 million tax charge related to a state income tax issue. |
| | |
(c) | The fourth quarter of 2006 includes a $90 million pre-tax gain from the sale of 10 million shares of Lyondell Chemical Company (Lyondell) and a $108 million pre-tax gain related to litigation settlements. The twelve months of 2005 included a $726 million pre-tax gain from Valero’s acquisition of Premcor and the subsequent sale of Valero shares received and a $140 million pre-tax gain from the sale of 11 million shares of Lyondell. |
| | |
(d) | In the second quarter 2006, Ecuador's Minister of Energy terminated Occidental's contract for the operation of Block 15 and the Government of Ecuador seized Occidental's Block 15 assets shortly thereafter. As a result of the seizure, Occidental has classified its Block 15 operations as discontinued operations on a retrospective application basis. The twelve month 2006 discontinued operations also includes income from the Vintage properties that were held for sale. |
SUMMARY OF CAPITAL EXPENDITURES AND DD&A EXPENSE
| | | Fourth Quarter | | Twelve Months | |
| | | ----------------- | | ----------------- | |
($ millions) | | 2006 | | 2005 | | 2006 | | 2005 | |
================================= | | ======= | | ======= | | ======= | | ======= | |
CAPITAL EXPENDITURES | | $ 1,013 | | $ 741 | | $ 3,005 | | $ 2,324 | |
| | | ======= | | ======= | | ======= | | ======= | |
DEPRECIATION, DEPLETION
AND AMORTIZATION
OF ASSETS | | $ 565 | | $ 387 | | $ 2,042 | | $ 1,422 | |
================================= | | ======= | | ======= | | ======= | | ======= | |
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SUMMARY OF OPERATING STATISTICS
| | | Fourth Quarter | | Twelve Months | |
| | | ----------------- | | ----------------- | |
| | | 2006 | | 2005 | | 2006 | | 2005 | |
================================= | | ======= | | ======= | | ======= | | ======= | |
NET OIL, GAS AND LIQUIDS
PRODUCTION PER DAY | | | | | | | | | |
United States | | | | | | | | | |
Crude oil and liquids (MBBL) | | | | | | | | | |
California | | 94 | | 78 | | 86 | | 76 | |
Permian | | 167 | | 170 | | 167 | | 161 | |
Horn Mountain | | 11 | | 14 | | 12 | | 13 | |
Hugoton and other | | 3 | | 3 | | 3 | | 3 | |
| | | ------- | | ------- | | ------- | | ------- | |
Total | | 275 | | 265 | | 268 | | 253 | |
Natural Gas (MMCF) | | | | | | | | | |
California | | 261 | | 247 | | 256 | | 242 | |
Hugoton and other | | 142 | | 139 | | 138 | | 133 | |
Permian | | 190 | | 180 | | 194 | | 170 | |
Horn Mountain | | 6 | | 6 | | 7 | | 8 | |
| | | ------- | | ------- | | ------- | | ------- | |
Total | | 599 | | 572 | | 595 | | 553 | |
Latin American | | | | | | | | | |
Crude oil (MBBL) | | | | | | | | | |
Argentina | | 35 | | -- | | 33 | | -- | |
Colombia | | 44 | | 36 | | 38 | | 36 | |
| | | ------- | | ------- | | ------- | | ------- | |
Total | | 79 | | 36 | | 71 | | 36 | |
Natural Gas (MMCF) | | | | | | | | | |
Argentina | | 17 | | -- | | 17 | | -- | |
Bolivia | | 18 | | -- | | 17 | | -- | |
| | | ------- | | ------- | | ------- | | ------- | |
Total | | 35 | | -- | | 34 | | -- | |
Middle East/North Africa | | | | | | | | | |
Crude oil (MBBL) | | | | | | | | | |
Oman | | 19 | | 13 | | 18 | | 17 | |
Qatar | | 44 | | 42 | | 43 | | 42 | |
Yemen | | 26 | | 24 | | 29 | | 28 | |
Libya | | 24 | | 24 | | 23 | | 8 | |
| | | ------- | | ------- | | ------- | | ------- | |
Total | | 113 | | 103 | | 113 | | 95 | |
Natural Gas (MMCF) | | | | | | | | | |
Oman | | 25 | | 25 | | 30 | | 44 | |
Other Eastern Hemisphere | | | | | | | | | |
Crude oil (MBBL) | | | | | | | | | |
Pakistan | | 4 | | 5 | | 4 | | 5 | |
Natural Gas (MMCF) | | | | | | | | | |
Pakistan | | 76 | | 77 | | 76 | | 77 | |
Barrels of Oil Equivalent (MBOE) | | | | | | | | | |
Subtotal consolidated subsidiaries | | 594 | | 521 | | 578 | | 501 | |
Other Interests | | | | | | | | | |
Colombia-minority interest | | (6 | ) | (4 | ) | (5 | ) | (4 | ) |
Russia-Occidental net interest | | 26 | | 28 | | 27 | | 28 | |
Yemen-Occidental net interest | | 2 | | 1 | | 1 | | 1 | |
| | | ------- | | ------- | | ------- | | ------- | |
Total Worldwide Production (MBOE) | | 616 | | 546 | | 601 | | 526 | |
================================= | | ======= | | ======= | | ======= | | ======= | |
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SIGNIFICANT TRANSACTIONS AND EVENTS AFFECTING EARNINGS
Occidental's results of operations often include the effects of significant transactions and events affecting earnings that vary widely and unpredictably in nature, timing and amount. Therefore, management uses a measure called "core earnings", which excludes those items. This non-GAAP measure is not meant to disassociate those items from management's performance, but rather is meant to provide useful information to investors interested in comparing Occidental's earnings performance between periods. Reported earnings are considered representative of management's performance over the long term. Core earnings is not considered to be an alternative to operating income in accordance with generally accepted accounting principles.
The following tables set forth the core earnings and significant items affecting earnings for each operating segment and corporate:
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SIGNIFICANT TRANSACTIONS AND EVENTS AFFECTING EARNINGS (continued)
| | | Fourth Quarter | |
| | | ------------------------------------ | |
($ millions, except | | | | Diluted | | | | Diluted | |
per-share amounts | | 2006 | | EPS | | 2005 | | EPS | |
================================= | | ======= | | ======= | | ======= | | ======= | |
TOTAL REPORTED EARNINGS | | $ 928 | | $ 1.09 | | $ 1,152 | | $ 1.40 | |
| | | ======= | | ======= | | ======= | | ======= | |
Oil and Gas | | | | | | | | | |
Segment Earnings | | $ 1,499 | | | | $ 1,796 | | | |
Less: | | | | | | | | | |
Hurricane insurance charge | | -- | | | | (9 | ) | | |
| | | ------- | | | | ------- | | | |
Segment Core Earnings | | 1,499 | | | | 1,805 | | | |
| | | ------- | | | | ------- | | | |
Chemicals | | | | | | | | | |
Segment Earnings | | 156 | | | | 165 | | | |
Less: | | | | | | | | | |
Hurricane insurance charge | | -- | | | | (6 | ) | | |
| | | ------- | | | | ------- | | | |
Segment Core Earnings | | 156 | | | | 171 | | | |
| | | ------- | | | | ------- | | | |
Total Segment Core Earnings | | 1,655 | | | | 1,976 | | | |
| | | ------- | | | | ------- | | | |
Corporate | | | | | | | | | |
Corporate Results --
Non Segment* | | (727 | ) | | | (809 | ) | | |
Less: | | | | | | | | | |
Litigation settlements | | 108 | | | | -- | | | |
Gain on sale of Lyondell shares | | 90 | | | | -- | | | |
Debt purchase expense | | (31 | ) | | | (1 | ) | | |
Deferred tax reversal -
compensation program changes** | | (40 | ) | | | -- | | | |
Tax effect of pre-tax
adjustments | | (41 | ) | | | 6 | | | |
Discontinued operations, net** | | 7 | | | | 46 | | | |
| | | ------- | | | | ------- | | | |
Corporate Core Results --
Non Segment | | (820 | ) | | | (860 | ) | | |
| | | ------- | | | | ------- | | | |
TOTAL CORE EARNINGS | | $ 835 | | $ 0.98 | | $ 1,116 | | $ 1.36 | |
================================= | | ======= | | ======= | | ======= | | ======= | |
* | Interest expense, income taxes, G&A expense and other, and non-core items. |
** | Amounts shown after tax. |
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SIGNIFICANT TRANSACTIONS AND EVENTS AFFECTING EARNINGS (continued)
| | | Twelve Months | |
| | | ------------------------------------ | |
($ millions, except | | | | Diluted | | | | Diluted | |
per-share amounts | | 2006 | | EPS | | 2005 | | EPS | |
================================= | | ======= | | ======= | | ======= | | ======= | |
TOTAL REPORTED EARNINGS | | $ 4,182 | | $ 4.86 | | $ 5,281 | | $ 6.45 | |
| | | ======= | | ======= | | ======= | | ======= | |
Oil and Gas | | | | | | | | | |
Segment Earnings | | $ 7,239 | | | | $ 5,968 | | | |
Less: | | | | | | | | | |
Contract settlement | | -- | | | | (26 | ) | | |
Hurricane insurance charge | | -- | | | | (18 | ) | | |
| | | ------- | | | | ------- | | | |
Segment Core Earnings | | 7,239 | | | | 6,012 | | | |
| | | ------- | | | | ------- | | | |
Chemicals | | | | | | | | | |
Segment Earnings | | 901 | | | | 607 | | | |
Less: | | | | | | | | | |
Write-off of plants | | -- | | | | (159 | ) | | |
Hurricane insurance charge | | -- | | | | (11 | ) | | |
| | | ------- | | | | ------- | | | |
Segment Core Earnings | | 901 | | | | 777 | | | |
| | | ------- | | | | ------- | | | |
Total Segment Core Earnings | | 8,140 | | | | 6,789 | | | |
| | | ------- | | | | ------- | | | |
Corporate | | | | | | | | | |
Corporate Results --
Non Segment* | | (3,958 | ) | | | (1,294 | ) | | |
Less: | | | | | | | | | |
Debt purchase expense | | (31 | ) | | | (42 | ) | | |
Gain on sale of Lyondell shares | | 90 | | | | 140 | | | |
Gain on sale of Premcor-
Valero shares | | -- | | | | 726 | | | |
State tax issue charge** | | -- | | | | (10 | ) | | |
Settlement of federal
tax issues** | | -- | | | | 619 | | | |
Reversal of tax reserves** | | -- | | | | 335 | | | |
Deferred tax reversal -
compensation program changes** | | (40 | ) | | | -- | | | |
Equity investment impairment | | -- | | | | (15 | ) | | |
Equity investment hurricane
insurance charge | | -- | | | | (2 | ) | | |
Hurricane insurance charge | | -- | | | | (10 | ) | | |
Litigation settlements | | 108 | | | | -- | | | |
Tax effect of pre-tax
adjustments | | (41 | ) | | | (219 | ) | | |
Discontinued operations, net** | | (253 | ) | | | 238 | | | |
Cumulative effect of accounting
changes, net** | | -- | | | | 3 | | | |
| | | ------- | | | | ------- | | | |
Corporate Core Results --
Non Segment | | (3,791 | ) | | | (3,057 | ) | | |
| | | ------- | | | | ------- | | | |
TOTAL CORE EARNINGS | | $ 4,349 | | $ 5.05 | | $ 3,732 | | $ 4.56 | |
================================= | | ======= | | ======= | | ======= | | ======= | |
* | Interest expense, income taxes, G&A expense and other, and non-core items. |
** | Amounts shown after tax. |
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