SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2003
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission file number 1-9210
---------------------
OCCIDENTAL PETROLEUM CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 95-4035997
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10889 WILSHIRE BOULEVARD
LOS ANGELES, CALIFORNIA 90024
(Address of principal executive offices) (Zip Code)
(310) 208-8800
(Registrant's telephone number, including area code)
---------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at March 31, 2003
- ------------------------------- ---------------------------------
Common stock $.20 par value 379,260,500 shares
OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
CONTENTS
PAGE
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets--
March 31, 2003 and December 31, 2002 2
Consolidated Condensed Statements of Income--
Three months ended March 31, 2003 and 2002 4
Consolidated Condensed Statements of Cash Flows--
Three months ended March 31, 2003 and 2002 5
Notes to Consolidated Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
Item 3. Quantitative and Qualitative Disclosures About Market Risk 20
Item 4. Controls and Procedures 21
PART II OTHER INFORMATION
Item 1. Legal Proceedings 22
Item 4. Submission of Matters to a Vote of Security Holders 22
Item 6. Exhibits and Reports on Form 8-K 23
1
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
MARCH 31, 2003 AND DECEMBER 31, 2002
(Amounts in millions)
2003 2002
================================================================================ ========== ==========
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 146 $ 146
Receivables, net 1,277 1,079
Inventories 455 491
Prepaid expenses and other 165 157
---------- ----------
Total current assets 2,043 1,873
LONG-TERM RECEIVABLES, net 258 275
INVESTMENTS IN UNCONSOLIDATED SUBSIDIARIES 1,130 1,056
PROPERTY, PLANT AND EQUIPMENT, net of accumulated
depreciation, depletion and amortization of $6,611 at
March 31, 2003 and $6,395 at December 31, 2002 13,124 13,036
OTHER ASSETS 382 308
---------- ----------
$ 16,937 $ 16,548
================================================================================ ========== ==========
The accompanying notes are an integral part of these financial statements.
2
OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
MARCH 31, 2003 AND DECEMBER 31, 2002
(Amounts in millions)
2003 2002
================================================================================ ========== ==========
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt and capital lease liabilities $ 24 $ 206
Accounts payable 896 785
Accrued liabilities 903 1,107
Domestic and foreign income taxes 315 137
---------- ----------
Total current liabilities 2,138 2,235
---------- ----------
LONG-TERM DEBT, net of current maturities and unamortized discount 3,998 3,997
---------- ----------
DEFERRED CREDITS AND OTHER LIABILITIES
Deferred and other domestic and foreign income taxes 985 982
Other 2,359 2,228
---------- ----------
3,344 3,210
---------- ----------
MINORITY INTEREST 331 333
---------- ----------
OCCIDENTAL OBLIGATED MANDATORILY REDEEMABLE
TRUST PREFERRED SECURITIES OF A SUBSIDIARY
TRUST HOLDING SOLELY SUBORDINATED NOTES OF
OCCIDENTAL 454 455
---------- ----------
STOCKHOLDERS' EQUITY
Common stock, at par value 76 75
Additional paid-in capital 3,982 3,967
Retained earnings 2,628 2,303
Accumulated other comprehensive income (14) (27)
---------- ----------
6,672 6,318
---------- ----------
$ 16,937 $ 16,548
================================================================================ ========== ==========
The accompanying notes are an integral part of these financial statements.
3
OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002
(Amounts in millions, except per-share amounts)
2003 2002
================================================================================ ========== ==========
REVENUES
Net sales $ 2,371 $ 1,523
Interest, dividends and other income 34 25
---------- ----------
2,405 1,548
---------- ----------
COSTS AND OTHER DEDUCTIONS
Cost of sales 1,298 987
Selling, general and administrative and other operating expenses 187 151
Exploration expense 28 27
Interest and debt expense, net 131 74
---------- ----------
1,644 1,239
---------- ----------
Income before taxes and other items 761 309
Provision for domestic and foreign income and other taxes 333 126
Minority interest 19 25
Loss from equity investments 16 35
---------- ----------
Income from continuing operations 393 123
Discontinued operations, net -- (3)
Cumulative effect of changes in accounting principles, net (68) (95)
---------- ----------
NET INCOME AND EARNINGS APPLICABLE TO COMMON STOCK $ 325 $ 25
========== ==========
BASIC EARNINGS PER COMMON SHARE
Income from continuing operations $ 1.04 $ .33
Discontinued operations, net -- (.01)
Cumulative effect of changes in accounting principles, net (.18) (.25)
---------- ----------
Basic earnings per common share $ .86 $ .07
========== ==========
DILUTED EARNINGS PER COMMON SHARE
Income from continuing operations $ 1.03 $ .33
Discontinued operations, net -- (.01)
Cumulative effect of changes in accounting principles, net (.18) (.25)
---------- ----------
Diluted earnings per common share $ .85 $ .07
========== ==========
DIVIDENDS PER COMMON SHARE $ .26 $ .25
========== ==========
BASIC SHARES OUTSTANDING 379.1 374.5
DILUTED SHARES 383.2 376.6
================================================================================ ========== ==========
The accompanying notes are an integral part of these financial statements.
4
OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002
(Amounts in millions)
2003 2002
================================================================================ ========== ==========
CASH FLOW FROM OPERATING ACTIVITIES
Income from continuing operations $ 393 $ 123
Adjustments to reconcile income to net cash provided by operating activities:
Depreciation, depletion and amortization of assets 285 261
Deferred income tax provision 32 28
Other non-cash charges to income 25 22
Loss from equity investments 16 35
Dry hole and impairment expense 15 8
Changes in operating assets and liabilities (18) (233)
Other operating, net (74) (51)
---------- ----------
Operating cash flow from continuing operations 674 193
Operating cash flow from discontinued operations -- (4)
---------- ----------
Net cash provided by operating activities 674 189
---------- ----------
CASH FLOW FROM INVESTING ACTIVITIES
Capital expenditures (298) (254)
Purchase of businesses, net (42) (5)
Sales of businesses and disposal of property, plant, and equipment, net 1 --
Equity investments and other investing, net (87) 79
---------- ----------
Investing cash flow from continuing operations (426) (180)
Investing cash flow from discontinued operations -- (1)
---------- ----------
Net cash used by investing activities (426) (181)
---------- ----------
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from long-term debt 298 --
Repurchase of Trust Preferred Securities (1) (2)
Purchases for natural gas delivery commitment -- (31)
Payments on long-term debt and capital lease liabilities (482) (3)
Proceeds from issuance of common stock 1 6
Cash dividends paid (94) (94)
Stock options exercised 30 12
---------- ----------
Net cash used by financing activities (248) (112)
---------- ----------
(Decrease) increase in cash and cash equivalents -- (104)
Cash and cash equivalents--beginning of period 146 198
---------- ----------
Cash and cash equivalents--end of period $ 146 $ 94
================================================================================ ========== ==========
The accompanying notes are an integral part of these financial statements.
5
OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
March 31, 2003
1. General
The accompanying unaudited consolidated condensed financial statements have
been prepared by Occidental Petroleum Corporation and subsidiaries
(Occidental) pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and disclosures normally included
in notes to consolidated financial statements have been condensed or
omitted pursuant to such rules and regulations, but resultant disclosures
are in accordance with accounting principles generally accepted in the
United States of America as they apply to interim reporting. The
consolidated condensed financial statements should be read in conjunction
with the consolidated financial statements and the notes thereto in
Occidental's Annual Report on Form 10-K for the year ended December 31,
2002 (2002 Form 10-K).
In the opinion of Occidental's management, the accompanying consolidated
condensed financial statements contain all adjustments (consisting only of
normal recurring adjustments) necessary to fairly present Occidental's
consolidated financial position as of March 31, 2003, and the consolidated
statements of income and cash flows for the three months then ended. The
income and cash flows for the period ended March 31, 2003, are not
necessarily indicative of the income or cash flows to be expected for the
full year.
Certain financial statements and notes for the prior year have been changed
to conform to the 2003 presentation.
Refer to Note 1 to the consolidated financial statements in the 2002 Form
10-K for a summary of significant accounting policies, including critical
accounting policies.
2. Accounting Changes
See Note 7 regarding accounting changes related to asset retirement
obligations.
In April 2003, the FASB issued Statement of Financial Accounting Standards
(SFAS) No. 149, "Amendment of Statement 133 on Derivative Instruments and
Hedging Activities." SFAS No. 149 amends and clarifies financial accounting
and reporting for derivative instruments. This statement is effective for
contracts entered into or modified after June 30, 2003. Occidental will
adopt this statement in the third quarter of 2003. Occidental is currently
evaluating the provisions of this statement to determine its impact on the
financial statements.
In January 2003, the FASB issued FASB Interpretation (FIN) No. 46,
"Consolidation of Variable Interest Entities." FIN No. 46 requires a
company to consolidate a variable interest entity if it is designated as
the primary beneficiary of that entity even if the company does not have a
majority of voting interests. A variable interest entity is generally
defined as an entity where its equity is unable to finance its activities
or where the owners of the entity lack the risk and rewards of ownership.
The provisions of this statement apply at inception for any entity created
after January 31, 2003. For an entity created before February 1, 2003, the
provisions of this Interpretation must be applied at the beginning of the
first interim or annual period beginning after June 15, 2003. When
Occidental adopts the provisions of FIN No. 46 in the third quarter of 2003
for existing entities that are within the scope of this interpretation,
Occidental believes that its OxyMar investment will be consolidated. The
statement also has disclosure requirements, which Occidental adopted in the
2002 Form 10-K.
In January 2003, the FASB issued FIN No. 45, "Guarantor's Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others." FIN No. 45
6
requires a company to recognize a liability for the obligations it has
undertaken in issuing a guarantee. This liability would be recorded at the
inception of a guarantee and would be measured at fair value. The
measurement provisions of this statement apply prospectively to guarantees
issued or modified after December 31, 2002. The disclosure provisions of
the statement were adopted by Occidental in the 2002 Form 10-K. Occidental
adopted the measurement provisions of this statement in the first quarter
of 2003 and it did not have an effect on the financial statements when
adopted.
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure." SFAS No. 148 permits two
additional transition methods for companies that elect to adopt the
fair-value-based method of accounting for stock-based employee
compensation. The statement also expands the disclosure requirements for
stock-based compensation (See note 11). The provisions of this statement
apply to financial statements for fiscal years ending after December 15,
2002. The statement did not have a material effect on the financial
statements.
Since 1999, Occidental has accounted for certain energy-trading contracts
in accordance with Emerging Issues Task Force (EITF) Issue No. 98-10,
"Accounting for Contracts Involved in Energy Trading and Risk Management
Activities." EITF Issue No. 98-10 required that all energy-trading
contracts must be marked to fair value with gains and losses included in
earnings, whether the contracts were derivatives or not. In October 2002,
the EITF rescinded EITF Issue No. 98-10 thus precluding mark-to-market
accounting for all energy-trading contracts that are not derivatives and
fair value accounting for inventories purchased from third parties. Also,
the rescission requires derivative gains and losses to be presented net on
the income statement, whether or not they are physically settled, if the
derivative instruments are held for trading purposes. Occidental adopted
this accounting change in the first quarter of 2003 and recorded a
cumulative effect of a change in accounting principles charge of
approximately $18 million, after tax.
In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities." SFAS No. 146 requires that a
liability be recognized for exit and disposal costs only when the liability
has been incurred and when it can be measured at fair value. The statement
is effective for exit and disposal activities that are initiated after
December 31, 2002. Occidental adopted SFAS No. 146 in the first quarter of
2003 and it did not have a material effect on its financial statements.
3. Comprehensive Income
The following table presents Occidental's comprehensive income items (in
millions):
Three Months Ended March 31, 2003 2002
================================================== ========== ==========
Net income $ 325 $ 25
Other comprehensive income items
Foreign currency translation adjustments 2 --
Derivative mark-to-market adjustments (12) (2)
Unrealized gain on securities 23 --
---------- ----------
Other comprehensive income, net of tax 13 (2)
---------- ----------
Comprehensive income $ 338 $ 23
================================================== ========== ==========
7
4. Supplemental Cash Flow Information
During the three months ended March 31, 2003 and 2002, net cash payments
for federal, foreign and state income taxes were approximately $13 million
and $3 million, respectively. Interest paid (net of interest capitalized of
$1 million and $2 million, respectively) totaled approximately $155 million
(including a $61 million debt repayment fee) and $68 million for the three
months ended March 31, 2003 and 2002, respectively.
5. Inventories
The valuation of LIFO inventory for interim periods is based on
management's estimates of year-end inventory levels and costs. Inventories
consist of the following (in millions):
Balance at March 31, 2003 December 31, 2002
============================== ==================== ====================
Raw materials $ 59 $ 54
Materials and supplies 129 125
Finished goods 274 319
---------- ----------
462 498
LIFO adjustment (7) (7)
---------- ----------
Total $ 455 $ 491
============================== ========== ==========
6. Derivative Activities
For the three months ended March 31, 2003 and 2002, the results of
operations included net pre-tax gains of $21 million and $9 million,
respectively, related to derivative mark-to-market adjustments. The amount
of interest expense recorded in the income statement was lower by
approximately $12.8 million and $10.6 million for the three months ended
March 31, 2003 and 2002, respectively, to reflect net pre-tax gains from
fair-value hedges.
The following table summarizes after-tax derivative activity recorded in
OCI for the three months ended March 31, 2003 and 2002 (in millions):
2003 2002
======================================================= ========== ==========
Beginning Balance $ (26) $ (20)
Losses from changes in current cash flow hedges (22) (2)
Amount reclassified to income from the expiration of
cash flow hedges 10 --
---------- ----------
Ending Balance $ (38) $ (22)
======================================================= ========== ==========
During the next twelve months, Occidental expects that $14 million of net
derivative after-tax losses included in OCI, based on their valuation at
March 31, 2003, will be reclassified into earnings. Hedge ineffectiveness
did not have a significant impact on earnings for the three months ended
March 31, 2003 and 2002.
7. Asset Retirement Obligations
In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations." SFAS No. 143 requires companies to recognize the
fair value of a liability for an asset retirement obligation in the period
in which the liability is incurred if there is a legal obligation to
dismantle the asset and reclaim or remediate the property at the end of its
useful life. When the liability is initially recorded, the company
capitalizes the cost into property, plant and equipment. Over time, the
liability
8
is accreted and the cost is depreciated, both over the asset's useful life.
Occidental's asset retirement obligations primarily relate to the cost of
plugging and abandoning wells, well-site cleanup, facilities abandonment
and environmental closure and post-closure care.
Occidental adopted SFAS No. 143 in the first quarter of 2003. The initial
adoption resulted in an after-tax charge of $50 million, which was recorded
as a cumulative effect of a change in accounting principles. The adoption
increased net property, plant and equipment by $73 million, increased asset
retirement obligations by $151 million and decreased deferred tax
liabilities by $28 million. In addition, Occidental recorded a pre-tax
charge to income of approximately $3 million in the first quarter of 2003
for the accretion of the liability and $1 million for additional
depreciation expense. The pro-forma asset retirement obligation, if the
adoption of this statement had occurred on January 1, 2002, would have been
$131 million at January 1, 2002 and $151 million at December 31, 2002.
The following summarizes the activity of the asset retirement obligations
(in millions):
Three Months Ended March 31, 2003
============================================================ ==========
Beginning balance $ --
Cumulative effect of change in accounting principles 151
Liabilities settled in the period (3)
Accretion expense 3
----------
Ending balance $ 151
============================================================ ==========
8. Environmental Expenditures
Occidental's operations in the United States are subject to stringent
federal, state and local laws and regulations relating to improving or
maintaining the quality of the environment. Foreign operations also are
subject to environmental-protection laws. The laws that require or address
environmental remediation may apply retroactively to past waste disposal
practices and releases. In many cases, the laws apply regardless of fault,
legality of the original activities or current ownership or control of
sites. Occidental Petroleum Corporation (OPC) or certain of its
subsidiaries are currently participating in environmental assessments and
cleanups under these laws at federal Superfund sites and other sites
subject to the Comprehensive Environmental Response, Compensation, and
Liability Act (CERCLA), comparable state sites and other remediation sites,
including Occidental facilities and previously owned sites.
The following table presents Occidental's environmental remediation
reserves at March 31, 2003, grouped by three categories of environmental
remediation sites ($ amounts in millions):
# of Sites Reserve
============================== ========== ==========
CERCLA & Equivalent Sites 126 $ 268
Active Facilities 14 43
Closed or Sold Facilities 43 57
---------- ----------
Total 183 $ 368
============================== ========== ==========
In determining the environmental remediation reserves, Occidental refers to
currently available information, including relevant past experience,
available technology, regulations in effect, the timing of remediation and
cost-sharing arrangements. Occidental expects that it will continue to
incur additional liabilities beyond those recorded for environmental
remediation at these and other sites. The range of reasonably possible loss
for existing environmental remediation matters could be up to $400 million
beyond the amount accrued.
9
At March 31, 2003, OPC or certain of its subsidiaries have been named in
CERCLA or state equivalent proceedings, as shown below ($ amounts in
millions):
# of Sites Reserve
============================== ========== ==========
Minimal/No Exposure (a) 106 $ 6
Reserves between $1-10 MM 13 56
Reserves over $10 MM 7 206
---------- ----------
Total 126 $ 268
============================== ========== ==========
(a) Includes 33 sites for which Maxus Energy Corporation has retained the
liability and indemnified Occidental, 7 sites where Occidental has
denied liability without challenge, 53 sites where Occidental's
reserves are less than $50,000 each, and 13 sites where reserves are
between $50,000 and $1 million each.
Refer to Note 8 to the consolidated financial statements in the 2002 Form
10-K for additional information regarding Occidental's environmental
expenditures.
9. Lawsuits, Claims, Commitments, Contingencies and Related Matters
OPC and certain of its subsidiaries have been named in a substantial number
of lawsuits, claims and other legal proceedings. These actions seek, among
other things, compensation for alleged personal injury, breach of contract,
property damage, punitive damages, civil penalties or other losses; or
injunctive or declaratory relief. OPC and certain of its subsidiaries also
have been named in proceedings under CERCLA and similar federal, state and
local environmental laws. These environmental proceedings seek funding or
performance of remediation and, in some cases, compensation for alleged
property damage, punitive damages and civil penalties; however, Occidental
is usually one of many companies in these proceedings and has to date been
successful in sharing response costs with other financially-sound
companies. With respect to all such lawsuits, claims and proceedings,
including environmental proceedings, Occidental accrues reserves when it is
probable a liability has been incurred and the amount of loss can be
reasonably estimated.
During the course of its operations, Occidental is subject to audit by tax
authorities for varying periods in various federal, state, local and
foreign tax jurisdictions. Taxable years prior to 1996 are closed for U.S.
federal income tax purposes. Taxable years 1996 through 2000 are in various
stages of audit by the Internal Revenue Service. Disputes arise during the
course of such audits as to facts and matters of law.
It is impossible at this time to determine the ultimate liabilities that
OPC and its subsidiaries may incur resulting from any lawsuits, claims and
proceedings, audits, commitments, contingencies and related matters. If
these matters were to be ultimately resolved unfavorably at amounts
substantially exceeding Occidental's reserves, an outcome not currently
anticipated, it is possible that such outcome could have a material adverse
effect upon Occidental's consolidated financial position or results of
operations. However, after taking into account reserves, management does
not expect the ultimate resolution of any of these matters to have a
material adverse effect upon Occidental's consolidated financial position
or results of operations.
10. Income Taxes
The provision for taxes based on income for the 2003 and 2002 interim
periods was computed in accordance with Interpretation No. 18 of APB
Opinion No. 28 on reporting taxes for interim periods and was based on
projections of total year pretax income.
10
11. Stock-Based Compensation
Occidental accounts for stock options using the intrinsic value method
under Accounting Principles Board Opinion (APB) No. 25 and related
interpretations. Under this accounting method, Occidental did not record
any compensation expense related to its stock option plans. The following
table presents pro-forma information as if Occidental had adopted the
provisions of SFAS No. 123 at January 1, 2002 (in millions, except per
share amounts):
Three Months Ended March 31, 2003 2002
================================================== ========== ==========
Net income $ 325 $ 25
Compensation cost under SFAS No. 123, net 4 5
---------- ----------
Pro-forma net income $ 321 $ 20
========== ==========
Basic earnings per share $ 0.86 $ 0.07
SFAS No. 123 Compensation cost, net per share 0.01 0.02
---------- ----------
Pro-forma basic earnings per share $ 0.85 $ 0.05
========== ==========
Diluted earnings per share $ 0.85 $ 0.07
SFAS No. 123 Compensation cost, net per share 0.01 0.02
---------- ----------
Pro-forma diluted earnings per share $ 0.84 $ 0.05
================================================== ========== ==========
12. Investments in Unconsolidated Subsidiaries
The following table presents Occidental's proportionate interest in the
summarized financial information of its equity method investments (in
millions):
Three Months Ended March 31, 2003 2002
================================================== ========== ==========
Revenues $ 426 $ 432
Costs and expenses 442 467
---------- ----------
Net loss from continuing operations $ (16) $ (35)
================================================== ========== ==========
11
13. Industry Segments
The following table presents Occidental's interim industry segment and
corporate disclosures (in millions):
Oil and Gas Chemical Corporate Total
======================================== =========== =========== =========== ===========
Quarter ended March 31, 2003
Net sales $ 1,553 $ 790 $ 28 (d) $ 2,371
=========== =========== =========== ===========
Pretax operating profit (loss) $ 880 $ 38 $ (192)(a) $ 726
Income taxes (153) (3) (177)(b) (333)
Cumulative effect of changes in
accounting principles, net -- -- (68) (68)
----------- ----------- ----------- -----------
Net income (loss) $ 727 $ 35 $ (437)(c) $ 325
======================================== =========== =========== =========== ===========
Quarter ended March 31, 2002
Net sales $ 958 $ 565 $ -- $ 1,523
=========== =========== =========== ===========
Pretax operating profit (loss) $ 390 $ (29) $ (112)(a) $ 249
Income taxes (84) (2) (40)(b) (126)
Discontinued operations, net -- -- (3) (3)
Cumulative effect of changes in
accounting principles, net -- -- (95) (95)
----------- ----------- ----------- -----------
Net income (loss) $ 306 $ (31) $ (250) $ 25
======================================== =========== =========== =========== ===========
(a) Includes unallocated net interest expense, administration expense and
other items.
(b) Includes unallocated income taxes.
(c) Includes a $61 million pre-tax interest charge ($40 million net of
tax) to repay a $450 million 6.4 percent senior note issue that had
ten years of remaining life, but was subject to remarketing on April
1, 2003.
(d) During the first quarter of 2003, the Taft cogeneration facility began
generating revenue, which is included in the corporate net sales
amount.
14. Subsequent Event
In April 2003, Occidental exercised its purchase option related to its
LaPorte, Texas VCM plant lease for approximately $180 million.
In April 2003, Occidental announced that it had closed three acquisitions
for approximately $235 million in the Permian Basin, adding about 73
million BOE to its proved reserves.
12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CONSOLIDATED RESULTS OF OPERATIONS
Occidental Petroleum Corporation and entities in which it owns a majority voting
interest (Occidental) reported net income for the first quarter of 2003 of $325
million, on net sales of $2.4 billion, compared with net income of $25 million,
on net sales of $1.5 billion, for the same period of 2002. Basic earnings per
common share were $0.86 for the first quarter of 2003, compared with earnings
per share of $0.07 for the same period of 2002.
Net income for the first quarter of 2003 included a pre-tax debt repayment
charge of $61 million and a $68 million after-tax cumulative effect of a change
in accounting principles. Net income for the first quarter of 2002 included a
$95 million after-tax cumulative effect of a change in accounting principles and
a $3 million after-tax charge for discontinued operations. Net income for the
first quarter of 2003, compared to the same period in 2002, reflected higher
crude oil and natural gas prices. Additionally, net income in 2003 increased due
to higher chemical prices, partially offset by higher energy and raw material
costs.
The increase of $848 million in net sales in the first quarter of 2003, compared
with the same period in 2002, primarily reflected higher worldwide crude oil,
natural gas and chemical prices.
The increase of $311 million in cost of sales for the first quarter of 2003,
compared with the same period in 2002, primarily reflected higher energy and raw
material costs. The increase of $36 million in selling, general and
administrative and other operating expenses for the first quarter of 2003,
compared to the same period in 2002, primarily reflected increases in various
oil and gas costs, including higher domestic production taxes. Interest and debt
expense, net for the first quarter of 2003 included a pre-tax debt repayment
charge of $61 million.
SEGMENT OPERATIONS
The following table sets forth the sales and earnings of each industry segment
and corporate items (in millions):
Three Months Ended
March 31
-------------------------
2003 2002
================================================================================ ========== ==========
NET SALES
Oil and gas $ 1,553 $ 958
Chemical 790 565
Corporate and other 28 --
---------- ----------
NET SALES $ 2,371 $ 1,523
========== ==========
SEGMENT EARNINGS (LOSS)
Oil and gas $ 727 $ 306
Chemical 35 (31)
---------- ----------
762 275
UNALLOCATED CORPORATE ITEMS
Interest expense, net (124) (56)
Income taxes (178) (44)
Trust preferred distributions and other (11) (11)
Other (56) (41)
---------- ----------
INCOME FROM CONTINUING OPERATIONS 393 123
Discontinued operations, net -- (3)
Cumulative effect of changes in accounting principles, net (68) (95)
---------- ----------
NET INCOME $ 325 $ 25
================================================================================ ========== ==========
13
SIGNIFICANT ITEMS AFFECTING EARNINGS
Occidental's results of operations often include the effects of significant
transactions and events affecting earnings that vary widely and unpredictably in
nature, timing and amount. Therefore, management uses a measure called "core
earnings", which excludes those items. This non-GAAP measure is not meant to
disassociate those items from management's performance, but rather is meant to
provide useful information to investors interested in comparing Occidental's
earnings performance between periods. Reported earnings are considered
representative of management's performance over the long term. Core earnings is
not considered to be an alternative to operating income in accordance with
generally accepted accounting principles.
The following table sets forth the core earnings and significant items affecting
earnings for each operating segment and corporate:
Three Months Ended March 31
-------------------------------------------------
(in millions, except per share amounts) 2003 EPS 2002 EPS
================================================== ========== ========= ========= =========
TOTAL REPORTED EARNINGS $ 325 $ 0.86 $ 25 $ 0.07
========== ========= ========= =========
OIL AND GAS
Segment Earnings $ 727 $ 306
No significant items affecting earnings -- --
---------- ---------
Segment Core Earnings 727 306
---------- ---------
CHEMICAL
Segment Earnings (Loss) 35 (31)
No significant items affecting earnings -- --
---------- ---------
Segment Core Earnings (Loss) 35 (31)
---------- ---------
CORPORATE
Results (437) (250)
Less:
Debt repayment charge (61) --
Tax effect of pre-tax adjustments 21 --
Discontinued operations, net * -- (3)
Changes in accounting principles, net * (68) (95)
---------- ---------
TOTAL CORE EARNINGS $ 433 $ 1.14 $ 123 $ 0.33
================================================== ========== ========= ========= =========
* These amounts are shown after tax.
14
OIL AND GAS SEGMENT
Three Months Ended
March 31
-------------------------
Summary of Operating Statistics 2003 2002
======================================================= ========== ==========
NET PRODUCTION PER DAY:
CRUDE OIL AND NATURAL GAS LIQUIDS (MBL)
United States 241 233
Latin America 53 49
Middle East and Other Eastern Hemisphere 109 116
NATURAL GAS (MMCF)
United States 528 591
Eastern Hemisphere 75 50
BARRELS OF OIL EQUIVALENT (MBOE)
Consolidated subsidiaries 504 505
Other interests 28 20
---------- ----------
Worldwide production 532 525
======================================================= ========== ==========
AVERAGE SALES PRICE:
CRUDE OIL ($/BBL)
United States $ 31.57 $ 18.83
Latin America $ 31.23 $ 18.25
Middle East and Other Eastern Hemisphere $ 30.16 $ 20.29
NATURAL GAS ($/MCF)
United States $ 4.30 $ 2.38
Eastern Hemisphere $ 1.89 $ 2.51
======================================================= ========== ==========
Oil and gas earnings for the first quarter of 2003 were $727 million, compared
with $306 million for the same period of 2002. The increase of $421 million in
earnings for the first quarter of 2003, compared to the first quarter of 2002,
reflected higher prices for worldwide crude oil and natural gas.
The increase of $595 million in net sales in the first quarter of 2003, compared
with the same period in 2002, primarily reflected higher worldwide crude oil and
natural gas prices.
The average West Texas Intermediate price in the first quarter was $33.85 per
barrel and the average NYMEX price for natural gas was $4.75 per thousand cubic
feet. A change of 10-cents per million BTUs in NYMEX gas prices impacts
quarterly oil and gas segment earnings by approximately $5 million while a $1.00
per barrel change in oil prices has a quarterly impact of approximately $31
million. Occidental expects second quarter 2003 production to be approximately
535,000 barrels of oil equivalent (BOE) per day.
15
CHEMICAL SEGMENT
Three Months Ended
March 31
-------------------------
Summary of Operating Statistics 2003 2002
======================================================= ========== ==========
MAJOR PRODUCT VOLUMES (M TONS)
Chlorine 686 701
Caustic Soda 637 574
Ethylene Dichloride 131 152
PVC Resins 1,063 1,042
MAJOR PRODUCT PRICE INDEX (BASE 1987-1990 = 1.0)
Chlorine 1.64 0.50
Caustic Soda 0.81 0.95
Ethylene Dichloride 1.23 0.61
PVC Resins 0.89 0.54
======================================================= ========== ==========
Chemical results for the first quarter of 2003 were earnings of $35 million,
compared with a loss of $31 million for the same period of 2002. The increase in
earnings for the first quarter of 2003, compared with the same period in 2002,
primarily resulted from higher prices for polyvinyl chloride (PVC), chlorine and
ethylene dichloride (EDC) and a smaller loss from certain equity investments,
partially offset by lower caustic soda prices and higher energy and raw material
costs. Additionally, the 2002 chemical earnings include a loss from the Equistar
equity investment, which was sold in August 2002. The results from the Lyondell
equity investment for the first quarter of 2003 are included in corporate and
other results, as discussed below.
The increase of $225 million in net sales in the first quarter of 2003, compared
with the same period in 2002, primarily reflected higher prices for PVC,
chlorine and EDC and higher sales volume, partially offset by lower prices for
caustic soda.
Occidental expects second quarter chemical segment earnings to be between $40
million and $70 million unless energy prices spike in the second quarter as they
did in the first quarter.
CORPORATE AND OTHER
During the first quarter of 2003, the Taft cogeneration facility began
generating revenue, which is included in the corporate and other net sales
amount.
The results from the Lyondell equity investment for the first quarter of 2003
are included in unallocated corporate items - other. Unallocated corporate items
- - income taxes exclude U.S. federal income tax charges and credits allocated to
the segments and foreign taxes. In the first quarter of 2003, segment earnings
benefited by $1 million (all for oil and gas) from credits allocated. In the
first quarter of 2002, segment earnings benefited by $5 million from credits
allocated: $1 million to oil and gas and $4 million to chemical.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Occidental's net cash provided by operating activities was $674 million for the
first quarter of 2003, compared with $189 million for the same period of 2002.
The increase of $485 million in the 2003 amount is primarily attributable to
higher income from continuing operations compared with the first quarter of the
prior year. Additionally, changes in operating assets and liabilities reflected
significantly increased income tax expense payable in future quarters.
16
Occidental's net cash used by investing activities was $426 million for the
first quarter of 2003, compared with $181 million for the same period of 2002.
The 2003 amount includes a deposit for the purchase of Permian assets, advances
to equity investees, purchases of equity investee debt and an additional stock
purchase of a cost-method investee. The 2002 amount includes the receipt of
partial repayments of amounts that were advanced to equity affiliates in prior
years. Capital expenditures for the first quarter of 2003 were $298 million,
including $225 million in oil and gas and $68 million for chemical. The chemical
amount included $44 million related to the exercise of purchase options for
certain leased assets. Capital expenditures for the first quarter of 2002 were
$254 million, including $228 million in oil and gas.
Occidental's net cash used by financing activities was $248 million in the first
quarter of 2003, compared with $112 million for the same period of 2002. The
2003 amount includes net debt payments of approximately $184 million.
Available but unused lines of committed bank credit totaled approximately $1.8
billion at March 31, 2003. Occidental currently expects to spend $1.3 billion on
its capital spending program in 2003. Occidental expects to have sufficient cash
in 2003 from operations to fund its operating needs, capital expenditure
requirements, dividend payments and mandatory debt repayments. If needed,
Occidental could access its existing credit facilities.
DERIVATIVE ACTIVITIES
For the three months ended March 31, 2003 and 2002, the results of operations
included net pre-tax gains of $21 million and $9 million, respectively, related
to derivative mark-to-market adjustments. The amount of interest expense
recorded in the income statement was lower by approximately $12.8 million and
$10.6 million for the three months ended March 31, 2003 and 2002, respectively,
to reflect net pre-tax gains from fair-value hedges.
The following table summarizes after-tax derivative activity recorded in OCI for
the three months ended March 31, 2003 and 2002 (in millions):
2003 2002
============================================================== ======== ========
Beginning Balance $ (26) $ (20)
(Losses) gains from changes in current cash flow hedges (22) (2)
Amount reclassified to income from the expiration of cash
flow hedges 10 --
-------- --------
Ending Balance $ (38) $ (22)
============================================================== ======== ========
During the next twelve months, Occidental expects that $14 million of net
derivative after-tax losses included in OCI, based on their valuation at March
31, 2003, will be reclassified into earnings. Hedge ineffectiveness did not have
a significant impact on earnings for the three months ended March 31, 2003 and
2002.
ENVIRONMENTAL EXPENDITURES
Occidental's operations in the United States are subject to stringent federal,
state and local laws and regulations relating to improving or maintaining the
quality of the environment. Foreign operations also are subject to
environmental-protection laws. The laws that require or address environmental
remediation may apply retroactively to past waste disposal practices and
releases. In many cases, the laws apply regardless of fault, legality of the
original activities or current ownership or control of sites. Occidental
Petroleum Corporation (OPC) or certain of its subsidiaries are currently
participating in environmental assessments and cleanups under these laws at
federal Superfund sites and other sites subject to the Comprehensive
Environmental Response, Compensation and Liability Act (CERCLA), comparable
state sites and other remediation sites, including Occidental facilities and
previously owned sites.
17
The following table presents Occidental's environmental remediation reserves at
March 31, 2003, grouped by three categories of environmental remediation sites
($ amounts in millions):
# of Sites Reserve
=================================== ========== ==========
CERCLA & Equivalent Sites 126 $ 268
Active Facilities 14 43
Closed or Sold Facilities 43 57
---------- ----------
Total 183 $ 368
=================================== ========== ==========
In determining the environmental remediation reserves, Occidental refers to
currently available information, including relevant past experience, available
technology, regulations in effect, the timing of remediation and cost-sharing
arrangements. Occidental expects that it will continue to incur additional
liabilities beyond those recorded for environmental remediation at these and
other sites. The range of reasonably possible loss for existing environmental
remediation matters could be up to $400 million beyond the amount accrued.
At March 31, 2003, OPC or certain of its subsidiaries have been named in CERCLA
or state equivalent proceedings, as shown below ($ amounts in millions):
Description # of Sites Reserve
=================================== ========== ==========
Minimal/No Exposure (a) 106 $ 6
Reserves between $1-10 MM 13 56
Reserves over $10 MM 7 206
---------- ----------
Total 126 $ 268
=================================== ========== ==========
(a) Includes 33 sites for which Maxus Energy Corporation has retained the
liability and indemnified Occidental, 7 sites where Occidental has denied
liability without challenge, 53 sites where Occidental's reserves are less
than $50,000 each, and 13 sites where reserves are between $50,000 and $1
million each.
Refer to the "Environmental Expenditures" section of Management's Discussion and
Analysis of Financial Condition and Results of Operations in the 2002 Form 10-K
for additional information regarding Occidental's environmental expenditures.
LAWSUITS, CLAIMS, COMMITMENTS, CONTINGENCIES AND RELATED MATTERS
OPC and certain of its subsidiaries have been named in a substantial number of
lawsuits, claims and other legal proceedings. These actions seek, among other
things, compensation for alleged personal injury, breach of contract, property
damage, punitive damages, civil penalties or other losses; or injunctive or
declaratory relief. OPC and certain of its subsidiaries also have been named in
proceedings under CERCLA and similar federal, state and local environmental
laws. These environmental proceedings seek funding or performance of remediation
and, in some cases, compensation for alleged property damage, punitive damages
and civil penalties; however, Occidental is usually one of many companies in
these proceedings and has to date been successful in sharing response costs with
other financially-sound companies. With respect to all such lawsuits, claims and
proceedings, including environmental proceedings, Occidental accrues reserves
when it is probable a liability has been incurred and the amount of loss can be
reasonably estimated.
During the course of its operations, Occidental is subject to audit by tax
authorities for varying periods in various federal, state, local and foreign tax
jurisdictions. Taxable years prior to 1996 are closed for U.S. federal income
tax purposes. Taxable years 1996 through 2000 are in various stages of audit by
the Internal Revenue Service. Disputes arise during the course of such audits as
to facts and matters of law.
It is impossible at this time to determine the ultimate liabilities that OPC and
its subsidiaries may incur resulting from any lawsuits, claims and proceedings,
audits, commitments, contingencies and related matters. If these matters were to
be ultimately resolved unfavorably at amounts substantially exceeding
18
Occidental's reserves, an outcome not currently anticipated, it is possible that
such outcome could have a material adverse effect upon Occidental's consolidated
financial position or results of operations. However, after taking into account
reserves, management does not expect the ultimate resolution of any of these
matters to have a material adverse effect upon Occidental's consolidated
financial position or results of operations.
ACCOUNTING CHANGES
In June 2001, the FASB issued Statement of Financial Accounting Standards (SFAS)
No. 143, "Accounting for Asset Retirement Obligations." SFAS No. 143 requires
companies to recognize the fair value of a liability for an asset retirement
obligation in the period in which the liability is incurred if there is a legal
obligation to dismantle the asset and reclaim or remediate the property at the
end of its useful life. When the liability is initially recorded, the company
capitalizes the cost into property, plant and equipment. Over time, the
liability is accreted and the cost is depreciated, both over the asset's useful
life. Occidental's asset retirement obligations primarily relate to the cost of
plugging and abandoning wells, well-site cleanup, facilities abandonment and
environmental closure and post-closure care. Occidental adopted SFAS No. 143 in
the first quarter of 2003. The initial adoption resulted in an after-tax charge
of $50 million, which was recorded as a cumulative effect of a change in
accounting principles. The adoption increased net property, plant and equipment
by $73 million, increased asset retirement obligations by $151 million and
decreased deferred tax liabilities by $28 million. In addition, Occidental
recorded a pre-tax charge to income of approximately $3 million in the first
quarter of 2003 for the accretion of the liability and $1 million for additional
depreciation expense.
In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities." SFAS No. 149 amends and
clarifies financial accounting and reporting for derivative instruments. This
statement is effective for contracts entered into or modified after June 30,
2003. Occidental will adopt this statement in the third quarter of 2003.
Occidental is currently evaluating the provisions of this statement to determine
its impact on the financial statements.
In January 2003, the FASB issued FASB Interpretation (FIN) No. 46,
"Consolidation of Variable Interest Entities." FIN No. 46 requires a company to
consolidate a variable interest entity if it is designated as the primary
beneficiary of that entity even if the company does not have a majority of
voting interests. A variable interest entity is generally defined as an entity
where its equity is unable to finance its activities or where the owners of the
entity lack the risk and rewards of ownership. The provisions of this statement
apply at inception for any entity created after January 31, 2003. For an entity
created before February 1, 2003, the provisions of this Interpretation must be
applied at the beginning of the first interim or annual period beginning after
June 15, 2003. When Occidental adopts the provisions of FIN No. 46 in the third
quarter of 2003 for existing entities that are within the scope of this
interpretation, Occidental believes that its OxyMar investment will be
consolidated. The statement also has disclosure requirements, which Occidental
adopted in the 2002 Form 10-K.
In January 2003, the FASB issued FIN No. 45, "Guarantor's Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others." FIN No. 45 requires a company to recognize a liability
for the obligations it has undertaken in issuing a guarantee. This liability
would be recorded at the inception of a guarantee and would be measured at fair
value. The measurement provisions of this statement apply prospectively to
guarantees issued or modified after December 31, 2002. The disclosure provisions
of the statement were adopted by Occidental in the 2002 Form 10-K. Occidental
adopted the measurement provisions of this statement in the first quarter of
2003 and it did not have an effect on the financial statements when adopted.
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure." SFAS No. 148 permits two additional
transition methods for companies that elect to adopt the fair-value-based method
of accounting for stock-based employee compensation. The statement also expands
the disclosure requirements for stock-based compensation. The provisions of
19
this statement apply to financial statements for fiscal years ending after
December 15, 2002. The statement did not have a material effect on the financial
statements.
Since 1999, Occidental has accounted for certain energy-trading contracts in
accordance with Emerging Issues Task Force (EITF) Issue No. 98-10, "Accounting
for Contracts Involved in Energy Trading and Risk Management Activities." EITF
Issue No. 98-10 required that all energy-trading contracts must be marked to
fair value with gains and losses included in earnings, whether the contracts
were derivatives or not. In October 2002, the EITF rescinded EITF Issue No.
98-10 thus precluding mark-to-market accounting for all energy-trading contracts
that are not derivatives and fair value accounting for inventories purchased
from third parties. Also, the rescission requires derivative gains and losses to
be presented net on the income statement, whether or not they are physically
settled, if the derivative instruments are held for trading purposes. Occidental
adopted this accounting change in the first quarter of 2003 and recorded a
cumulative effect of a change in accounting principles charge of approximately
$18 million, after tax.
In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities." SFAS No. 146 requires that a liability be
recognized for exit and disposal costs only when the liability has been incurred
and when it can be measured at fair value. The statement is effective for exit
and disposal activities that are initiated after December 31, 2002. Occidental
adopted SFAS No. 146 in the first quarter of 2003 and it did not have a material
effect on its financial statements.
SAFE HARBOR STATEMENT REGARDING OUTLOOK AND FORWARD-LOOKING INFORMATION
Portions of this report contain forward-looking statements and involve risks and
uncertainties that could significantly affect expected results of operations,
liquidity, cash flows and business prospects. Factors that could cause results
to differ materially include, but are not limited to: global commodity pricing
fluctuations; competitive pricing pressures; higher-than-expected costs,
including feedstocks; crude oil and natural gas prices; chemical prices;
potential liability for remedial actions under existing or future environmental
regulations and litigation; potential liability resulting from pending or future
litigation; general domestic and international political conditions; potential
disruption or interruption of Occidental's production or manufacturing
facilities due to accidents, political events or insurgent activity; potential
failure to achieve expected production from existing and future oil and gas
development projects; the supply/demand considerations for Occidental's
products; any general economic recession or slowdown domestically or
internationally; regulatory uncertainties; and not successfully completing, or
any material delay of, any development of new fields, expansion, capital
expenditure, efficiency-improvement project, acquisition or disposition.
Forward-looking statements are generally accompanied by words such as
"estimate", "project", "predict", "will", "anticipate", "plan", "intend",
"believe", "expect" or similar expressions that convey the uncertainty of future
events or outcomes. Occidental expressly disclaims any obligation to publicly
update or revise any forward-looking statements, whether as a result of new
information or otherwise. In light of these risks, uncertainties and
assumptions, the forward-looking events discussed might not occur.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
For the three months ended March 31, 2003, there were no material changes in the
information required to be provided under Item 305 of Regulation S-X included
under the caption "Management's Discussion and Analysis of Financial Condition
and Results of Operations (Incorporating Item 7A) - Derivative Activities and
Market Risk" in Occidental's 2002 Annual Report on Form 10-K.
20
ITEM 4. CONTROLS AND PROCEDURES
Within 90 days before filing this Quarterly Report, Occidental's Chief Executive
Officer and Chief Financial Officer supervised and participated in Occidental's
evaluation of its disclosure controls and procedures. Disclosure controls and
procedures are controls and procedures designed to ensure that information
required to be disclosed in Occidental's periodic reports filed or submitted
under the Securities Exchange Act of 1934 is recorded, processed, summarized and
reported within the time periods specified in the Securities and Exchange
Commission's rules and forms. Based upon that evaluation, Occidental's Chief
Executive Officer and Chief Financial Officer concluded that Occidental's
disclosure controls and procedures are effective.
There have been no significant changes in Occidental's internal controls or in
other factors that could significantly affect internal controls after the date
Occidental carried out its evaluation.
21
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
This item incorporates by reference the information regarding legal proceedings
in Note 9 to the consolidated condensed financial statements in Part I of this
Form 10-Q.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Occidental's 2003 Annual Meeting of Stockholders (the Annual Meeting) was held
on April 25, 2003. The following actions were taken at the Annual Meeting, for
which proxies were solicited pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended:
1. The twelve nominees proposed by Occidental's Board of Directors were
elected as directors by the following votes:
Name For Withheld
------------------------- -------------------- --------------------
Ronald W. Burkle 315,776,240 20,918,014
John S. Chalsty 315,619,741 21,074,513
Edward P. Djerejian 315,663,233 21,031,021
R. Chad Dreier 321,257,506 15,436,748
John E. Feick 315,478,833 21,215,421
Dr. Ray R. Irani 315,276,788 21,417,466
Dr. Dale R. Laurance 315,562,271 21,131,983
Irvin W. Maloney 315,173,873 21,520,381
Rodolfo Segovia 315,713,840 20,980,414
Aziz D. Syriani 315,319,473 21,374,781
Rosemary Tomich 315,250,143 21,444,111
Walter L. Weisman 321,497,383 15,196,871
2. A proposal to ratify the selection of KPMG LLP as Occidental's
independent auditors for 2003 was approved. The proposal received
331,716,964 votes for, 2,699,502 votes against and 2,277,788
abstentions.
3. A proposal to amend the 2001 Incentive Compensation Plan (the Plan),
to increase, among other things, the number of shares of Common Stock
available for issuance under the Plan was approved. The proposal
received 291,134,359 votes for, 38,226,199 votes against and 7,333,696
abstentions.
4. A stockholder proposal requesting Occidental's Board of Directors to
adopt a stockholder vote policy on poison pills was defeated. The
proposal received 129,582,911 votes for, 160,188,489 votes against,
8,984,887 abstentions and 37,937,967 broker non-votes.
5. A stockholder proposal to report on the enforceability of stockholder
votes was defeated. The proposal received 28,770,952 votes for,
260,867,748 votes against, 9,117,568 abstentions and 37,937,986 broker
non-votes.
22
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.(i) Restated Certificate of Incorporation of Occidental,
dated November 12, 1999 (incorporated by reference to
Exhibit 3.(i) to the Annual Report on Form 10-K of
Occidental for the fiscal year ended December 31, 1999,
File No. 1-9210).
3.(i)(a) Certificate of Change in Location of Registered Office
and of Registered Agent, dated July 6, 2001
(incorporated by reference to Exhibit 3.1(i) to the
Registration Statement on Form S-3 of Occidental, File
No. 333-82246).
3.(ii) Bylaws of Occidental, as amended through April 24, 2003
(incorporated by reference to Exhibit 3.(ii) to the
Registration Statement on Form S-8 of Occidental, File
No. 333-104827).
10.1 Occidental Petroleum Corporation 1996 Restricted Stock
Plan for Non-Employee Directors (as amended effective
April 25, 2003).
10.2 Occidental Petroleum Corporation 2001 Incentive
Compensation Plan (as amended through April 25, 2003)
(incorporated by reference to Exhibit 99.1 to the
Registration Statement on Form S-8 of Occidental, File
No. 333-104827).
10.3 Form of Restricted Stock Agreement under Occidental
Petroleum Corporation 1996 Restricted Stock Plan for
Non-Employee Directors.
11 Statement regarding the computation of earnings per
share for the three months ended March 31, 2003 and
2002.
12 Statement regarding the computation of total enterprise
ratios of earnings to fixed charges for the three
months ended March 31, 2003 and 2002 and the five years
ended December 31, 2002.
99.1 Certifications of CEO and CFO.
(b) Reports on Form 8-K
During the quarter ended March 31, 2003, Occidental filed the
following Current Report on Form 8-K:
1. Current Report on Form 8-K dated January 29, 2003 (date of
earliest event reported), filed on January 29, 2003, for the
purpose of reporting, under Item 5, Occidental's results of
operations for the fourth quarter and fiscal year ended
December 31, 2002, and under Item 9, speeches and
supplemental investor information relating to Occidental's
fourth quarter 2002 earnings announcement.
From March 31, 2003 to the date hereof, Occidental filed the
following Current Reports on Form 8-K:
1. Current Report on Form 8-K dated April 22, 2003 (date of
earliest event reported), filed on April 22, 2003, for the
purpose of reporting, under Items 9 and 12, Occidental's
results of operations for the first quarter ended March 31,
2003, and speeches and supplemental investor information
relating to Occidental's first quarter 2003 earnings
announcement.
23
2. Current Report on Form 8-K dated April 25, 2003 (date of
earliest event reported), filed on April 25, 2003, for the
purpose of reporting, under Item 9, a speech made by Dr. Ray
R. Irani, Chief Executive Officer, at Occidental's 2003
Annual Meeting of Stockholders.
24
SIGNATURES
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
DATE: May 8, 2003 S. P. Dominick, Jr.
--------------------------------------------------
S. P. Dominick, Jr., Vice President and Controller
(Chief Accounting and Duly Authorized Officer)
25
CERTIFICATIONS
I, Ray R. Irani, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Occidental Petroleum
Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: May 8, 2003
Ray R. Irani
----------------------------------------
Ray R. Irani
Chief Executive Officer
26
I, Stephen I. Chazen, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Occidental Petroleum
Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: May 8, 2003
Stephen I. Chazen
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Stephen I. Chazen
Chief Financial Officer
27
EXHIBIT INDEX
EXHIBITS
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10.1 Occidental Petroleum Corporation 1996 Restricted Stock Plan for
Non-Employee Directors (as amended effective April 25, 2003).
10.3 Form of Restricted Stock Agreement under Occidental Petroleum
Corporation 1996 Restricted Stock Plan for Non-Employee Directors.
11 Statement regarding the computation of earnings per share for the
three months ended March 31, 2003 and 2002.
12 Statement regarding the computation of total enterprise ratios of
earnings to fixed charges for the three months ended March 31, 2003
and 2002 and the five years ended December 31, 2002.
99.1 Certifications of CEO and CFO.