EXHIBIT 99.2
OCCIDENTAL PETROLEUM CORPORATION
STEPHEN CHAZEN
CHIEF FINANCIAL OFFICER AND
EXECUTIVE VICE PRESIDENT - CORPORATE DEVELOPMENT
- CONFERENCE CALL -
SECOND QUARTER 2003 EARNINGS ANNOUNCEMENT
JULY 22, 2003
Los Angeles, California
Good morning, and thank you for joining us.
If you would like a copy of the press release announcing our second quarter
earnings, along with the Investor Relations Supplemental Schedules, you can find
them on our website www.oxy.com or through the SEC's EDGAR system.
Reported and core earnings for the second quarter were $374 million, or
$0.98 per share, compared with $241 million, or $0.64 per share in the second
quarter of 2002. The improvement was driven mainly by higher energy prices and
increased oil and gas production.
o Oil and gas production for the quarter averaged 544,000 barrels of oil
equivalent compared to 512,000 barrels in last year's second quarter.
For the first half of this year, worldwide production was up by 4
percent compared to last year - from 518,000 to 538,000 BOE per day.
For the first half of this year, core earnings were $807 million, or $2.12
per share compared to $364 million, or $0.97 per share, during the first half of
2002.
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On a segment basis, oil and gas second quarter earnings were $637 million,
compared to $421 million during the same period a year ago. As I noted earlier,
the increase was due primarily to higher prices and increased production.
We recorded an after-tax gain of $14 million resulting from Apache
Corporation exercising its option to purchase Oxy's remaining interest in a
subsidiary holding assets in the Continental Shelf in the Gulf of Mexico. Oxy's
only remaining interest in the Gulf of Mexico is its one-third interest in the
deep water Horn Mountain operation.
Chemical segment earnings were $43 million compared to second quarter 2002
earnings of $34 million. Our core chemical business earnings of $78 million for
the first half exceeds last year's first half earnings by $75 million. Included
in the second quarter chemical results was $15 million in severance expenses
resulting from a significant reorganization of our chemical business that was
focused on reducing overhead as well as a $9 million write-off of certain assets
at our Niagara Falls chemical plant.
Corporate "Other" includes a $15 million loss attributable to our equity
investments and $13 million in environmental remediation charges.
The net effect of the gain from the Apache transaction, the severance and
environmental charges and the plant write-off was an after-tax charge of $10
million, or about 3-cents per share.
Cash flow from operations for the first half of the year was approximately
$1.4 billion.
Turning to the balance sheet at the end of the quarter, we increased
shareholder equity to $7.1 billion, or $382 million higher than at the end of
the first quarter. During the first half of the year, shareholder equity
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increased by a total of $736 million, an increase of 12 percent above the
year-end 2002 level.
Our balance sheet was impacted by the adoption of the new accounting rule
known as FIN 46 which applies to variable interest entities. We implemented this
rule change a quarter earlier than required which resulted in the consolidation
of our ownership interest in the OxyMar VCM plant on our balance sheet. During
the quarter we paid off $105 million in revolving credit and purchased a lease
on the La Porte, Louisiana PVC facility for approximately $180 million. The net
effect of the FIN 46 consolidation was that it added $56 million in public
OxyMar bonds to our balance sheet.
Our debt-to-total capitalization was down to 40 percent at the end of the
quarter, compared to 41 percent at the end of the first quarter and 43 percent
at the end of last year. This brings us within our target range of 35 to 40
percent.
Through year-end, our potential for additional debt reduction is limited to
$44 million because there are no other maturities or callable debt. We have $454
million in 8.16 percent Trust Preferred Securities callable at par in the fourth
quarter, but they're not redeemable until January.
During the quarter both Fitch and Standard & Poor's upgraded our debt
rating to BBB+ and Moody's announced they were reviewing our BAA2 credit rating
for possible upgrade.
Capital spending for the quarter was $493 million and $791 for the first
half, including the $180 million lease buyout and $44 million for the buyout of
chemical railcar leases in the first quarter. Excluding the lease buyouts, we
expect total spending for the year to be approximately $1.4
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billion - with oil and gas accounting for about 90 percent of the expenditures.
As we look ahead in the current quarter:
o We expect oil and gas production to remain at about the same as the
second quarter. This could vary slightly due to price-driven
adjustments in the volumes under our production sharing contracts in
Oman, Qatar, Yemen and THUMS. In addition, our Colombia production is
always difficult to forecast. Dale Laurance will have more to say
about our oil and gas production outlook.
o We expect exploration expense for the quarter to be about $35 million.
o We see no sign of an upturn in chemical markets since business remains
sluggish. We therefore expect third quarter chemical earnings to be in
the $30 to $45 million range.
o We expect third quarter interest expense to be approximately $70
million. That includes the quarterly payment on our Trust Preferred
Securities.
o A $1.00 per barrel change in oil prices impacts segment quarterly
earnings by about $30 million. The WTI price in the second quarter was
$28.89. A swing of 10-cents per million BTUs in gas prices has a $5
million impact on quarterly oil and gas earnings. The NYMEX gas price
for the second quarter was $5.83.
o We expect our tax rate to be in the same range as the 32 percent rate
for the second quarter. Let me add that our reported oil and gas
earnings are after foreign taxes so the 32 percent rate applies
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only to U.S. taxes - with our overall effective tax rate at
approximately 45 percent.
o We currently own approximately 36 million shares of Lyondell Chemical
Company. As we look ahead in the quarter, we don't have an estimate
for their results, but it appears to us that their markets are weak.
Now I'd like to turn the conference call over to Oxy's president and CEO of
the oil and gas segment, Dale Laurance.
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OCCIDENTAL PETROLEUM CORPORATION
DALE R. LAURANCE
PRESIDENT
- CONFERENCE CALL -
SECOND QUARTER 2003 EARNINGS ANNOUNCEMENT
JULY 22, 2003
Los Angeles, California
Thank you, Steve.
For the second consecutive quarter, our worldwide oil and natural gas
production hit a record high. The 544,000 barrels of oil equivalent per day of
production in the second quarter exceeded our record first quarter rate by
12,000 barrels per day. Our average production for the first six months was
538,000 BOE per day and keeps us on track to meet or exceed our forecast of
535,000 BOE per day for the year.
Our domestic operations account for most of the growth. Since acquiring
Altura and THUMS in 2000, our domestic oil and gas production through the second
quarter has been growing at an average annual rate of 7 percent.
The major increases have come from the Permian Basin and new production
from Horn Mountain in the deep water Gulf of Mexico.
Our Permian production is up by 9,000 BOE per day over the first quarter
rate, due primarily to the acquisition of additional producing properties in
mid-April this year. Our total Permian production for the quarter was 173,000
BOE per day, or 32 percent of our worldwide total.
Our newest operation at Horn Mountain came on stream last December and
averaged nearly 22,000 BOE per day in the second quarter.
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California accounted for 123,000 BOE per day, or 23 percent of our second
quarter worldwide production. As expected, natural gas production from
California is declining as we continue to blow down the Elk Hills gas cap, but
sound technical work extended the production peak and slowed the decline rate.
During the second quarter, our California gas production averaged 252 million
cubic feet per day compared to 262 million cubic feet per day in the first
quarter and 286 million cubic feet per day in 2002.
Our international production for the quarter of 200,000 BOE per day was 6
percent higher than our 2002 rate. The startup of the new trans-Ecuadorian
pipeline later this quarter will add to the rate of increase.
All our oil and gas assets are performing well, and we expect to meet or
exceed our production forecast of 535,000 BOE per day for the year.
Thank you, and now we're ready to answer your questions.
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See the "Investor Relations Supplemental Schedules" for the reconciliation of
non-GAAP items.
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Statements in this presentation that contain words such as "will" or "expect",
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: global
commodity pricing fluctuations, and supply/demand considerations, for oil, gas
and chemicals; higher-than-expected costs; and not successfully completing (or
any material delay in) any expansion, capital expenditure, acquisition, or
disposition. Occidental disclaims any obligation to update any forward-looking
statements. The United States Securities and Exchange Commission (SEC) permits
oil and natural gas companies, in their filings with the SEC, to disclose only
proved reserves demonstrated by actual production or conclusive formation tests
to be economically producible under existing economic and operating conditions.
We use certain terms in this presentation, such as probable, possible and
recoverable reserves, that the SEC's guidelines strictly prohibit us from using
in filings with the SEC. 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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