EXHIBIT 99.2
OCCIDENTAL PETROLEUM CORPORATION
STEPHEN CHAZEN
CHIEF FINANCIAL OFFICER AND
EXECUTIVE VICE PRESIDENT - CORPORATE DEVELOPMENT
- CONFERENCE CALL -
THIRD QUARTER 2003 EARNINGS ANNOUNCEMENT
OCTOBER 21, 2003
Los Angeles, California
Good morning, and thank you for joining us.
If you would like a copy of the press release announcing our third 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 third quarter were $446 million, or
$1.16 per share, compared with last year's third quarter reported earnings of
$402 million, or $1.07 per share, and core earnings of $312 million, or $0.83
per share. The improvement was driven mainly by higher energy prices and
increased oil production.
o The price of WTI for the quarter averaged $30.20 per barrel compared
to $28.27 per barrel in last year's third quarter.
o Worldwide oil and gas production for the quarter was 546,000 barrels
of oil equivalent - an increase of 9 percent compared with the 502,000
barrels we produced in last year's third quarter. This is the third
consecutive quarter this year we have set new production records.
1
o For the first nine months, production was up by 5 percent compared to
last year - from 513,000 to 541,000 BOE per day.
o WTI averaged $30.98 per barrel for the first nine months compared with
$25.39 for the comparable period last year, for an increase of 22
percent.
Core earnings for the first nine months of $1.25 billion, or $3.27 per
share, were 85 percent higher than the $676 million, or $1.80 per share, we
earned for the comparable period last year.
On a segment basis, oil and gas third quarter earnings were $660 million -
35 percent higher than the $490 million in earnings during the same period a
year ago. As I noted earlier, the increase was due primarily to higher prices
and increased production.
Chemical segment earnings were $61 million compared to third quarter 2002
earnings of $214 million, which included an after-tax gain of $164 million for
the sale of our Equistar interest. Core chemical business earnings of $61
million for the quarter exceed last year's third quarter core earnings of $50
million by 22 percent.
This year's third quarter core chemical earnings represent an $18 million
improvement compared to the second quarter. While lower product prices, which
were slightly offset by better volumes, resulted in a net decline of $21 million
in the third quarter compared to the second quarter, this decline was more than
offset by $25 million in improvements resulting from lower energy and feedstock
costs and internal cost reductions.
Cash flow from operations for the quarter was approximately $750 million
and $2.2 billion for the first nine months.
2
Turning to the balance sheet at the end of the quarter, we increased
shareholder equity to $7.5 billion, or $441 million higher than at the end of
the second quarter. During the first nine months of the year, shareholder equity
increased by a total of $1.2 billion, an improvement of 19 percent above the
year-end 2002 level.
Our debt-to-total capitalization was down to 38 percent at the end of the
quarter, compared to 40 percent at the end of the second quarter and 43 percent
at the end of last year. At the end of the quarter, we had $529 million in cash
on the balance sheet. We expect to call $454 million in 8.16 percent Trust
Preferred Securities in December to be redeemed in January.
During the quarter, Moody's upgraded our credit rating to Baa1. This
follows upgrades by S&P and Fitch to BBB+ during the second quarter.
Capital spending for the quarter was $360 million and $1.15 billion for the
first nine months, including $180 million for the chemical plant lease buyout in
the second quarter and $44 million for the buyout of chemical railcar leases in
the first quarter. Excluding the lease buyouts, we expect total capital spending
for the year to be approximately $1.4 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 increase modestly in the fourth
quarter due primarily to the startup of the new oil pipeline in
Ecuador known by its Spanish acronym OCP. The pipeline began
operations on September 1 and we will be increasing production during
the fourth quarter from the new Eden-Yuturi field as well as from
other recent discoveries in Block 15.
o Production also can be impacted from quarter to quarter due to
price-driven adjustments in the volumes under our production-
3
sharing contracts in Oman, Qatar, Yemen and our THUMS operation in
Long Beach. In addition, our Colombia production is always difficult
to forecast.
o We expect exploration expense for the quarter to be about $35 million.
o The fourth and first quarters are typically the weakest quarters for
the chemical business due to seasonal factors. We therefore expect
fourth quarter chemical earnings to be in the $45 to $55 million
range.
o We expect fourth quarter interest expense to be approximately $66
million. That includes what we expect will be the final quarterly
payment on our Trust Preferred Securities.
o A $1.00 per barrel change in oil prices impacts oil and gas quarterly
earnings by about $30 million. As I noted earlier, the WTI price in
the third quarter was $30.20 per barrel. A swing of 10-cents per
million BTUs in gas prices has a $5 million impact on quarterly
segment earnings. The NYMEX gas price for the third quarter was $5.59
per thousand cubic feet.
o Our overall effective tax rate, both foreign and U.S., is about 43%.
Our reported oil and gas earnings are after foreign taxes. We expect
our U.S. tax rate in the 4th quarter, which applies to the net, to be
the same 30 percent as it was in the first nine months.
o We currently own approximately 39 million shares of Lyondell Chemical
Company, which we account for on an equity basis. We have no way of
forecasting Lyondell's results.
Now we're ready to take your questions.
4
- --------------------------------------------------------------------------------
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 consideration, 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.
- --------------------------------------------------------------------------------
5