EXHIBIT 99.1
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[OXY LOGO]
OCCIDENTAL PETROLEUM CORPORATION
2004 ANNUAL MEETING
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2003 was an outstanding year for Occidental in delivering superior total
returns to our stockholders. Actually, we have been generating highly
competitive total returns over a number of years.
This morning I'm going to review our past performance, as well as our
vision for the future. When a company achieves the kind of results we have, your
management and investors want to know how we will be able to sustain that level
of performance in the future.
1
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[OXY LOGO] OXY BUSINESS MODEL
Building Blocks for Profitable Growth
o Exploration
o Enhanced Oil Recovery (EOR)
o Acquisitions
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I'm confident we can because we have a durable business model that will
continue to generate profitable growth projects. Our business model is driven by
three engines to add commercial oil and gas reserves and generate profitable
production growth - exploration, enhanced oil recovery projects and
acquisitions.
2
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[OXY LOGO] BUILDING LONG-TERM VALUE
Growth Tools
o Focused Strategy
o Long-Lived Assets
o Disciplined Investment Philosophy
o Strong Balance Sheet
o Talented Workforce
o Responsible Corporate Citizenship
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Sustainable, profitable growth is essential to building long-term value for
stockholders. Our business model is supported by the tools we believe are
necessary to build and sustain profitable growth. These tools include a focused
business strategy, a long-lived asset base, a disciplined investment philosophy,
a strong balance sheet, a talented work force and a commitment to the principles
of responsible corporate citizenship.
3
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[OXY LOGO] FINANCIAL PERFORMANCE CRITERIA
o Return on Capital Employed
- Measures Efficient Use of Capital
o Return on Equity
o Total Return to Stockholders
- Stock Price Change Plus Dividend
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We use a number of financial criteria to measure our overall performance
versus our strategy and objectives - relative to our competition.
Return on capital employed is especially important because it measures the
efficient use of capital, which is critical to building long-term value.
Return on equity is a measure of the profitability of a business as a
percentage of stockholders' equity.
However, in the final analysis, the most significant measure is the total
return to stockholders, which includes stock price change plus dividends.
Let's look first at return on capital employed.
4
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[OXY LOGO] RETURN ON CAPITAL EMPLOYED
2001-2003 Average
(Percentage)
[the following is a tabular representation of graphical materials]
STOCK SYMBOL RETURN ON CAPITAL EMPLOYED
- ------------ --------------------------
XOM 18.2
OXY 12.6
APA 11.5
BR 10.7
BP 10.2
UCL 9.4
CVX 8.7
MRO 8.3
DVN 6.5
AHC 6.3
APC 6.1
COP 5.8
KMG 3.4
Total 2001-2003 income before interest expense divided by average capital
employed (average debt plus equity); interest is added back after-tax (using 35%
statutory rate, not effective rate). See Addendum for GAAP reconciliation.
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No company can be successful in building long-term value if does not get
good returns on its invested capital.
For the period 2001 through 2003, our return of 12.6 percent was in the top
quartile performance, and is 30 percent higher than the industry average of 8.8
percent. Our goal is to be in the top quartile in our industry.
5
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[OXY LOGO] RETURN ON EQUITY
2001-2003 Average
(Percentage)
[the following is a tabular representation of graphical materials]
STOCK SYMBOL RETURN ON EQUITY
- ------------ ----------------
XOM 20.3
OXY 18.5
BR 17.2
APA 15.4
UCL 15.2
MRO 12.4
BP 12.3
CVX 11.4
DVN 10.1
AHC 9.2
APC 8.9
COP 7.8
KMG 2.6
Income applicable to common shares in 2001-2003 divided by average equity during
the year - per SEC filings.
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Good returns on equity are synonymous with high profitability and strong
asset management.
We're pleased that our three-year average return on equity of 18.5 percent
for the period 2001 through 2003 also was in the top quartile. The average for
our competitors was 11.9 percent.
6
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[OXY LOGO] ANNUAL AVERAGE TOTAL RETURNS
1, 3, & 5 Years
(Percentage*)
[the following is a tabular representation of graphical materials]
YEAR(S) OXY DOW JONES
- --------- --------- ---------
2003 53 28
2001-2003 31 1
1999-2003 41 (1)
*Data Source: Bloomberg
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Since investors have many choices, it's instructive to see how our total
return to stockholders compares to the broader market. This chart shows that
Occidental's total return to stockholders in 2003 was a robust 53 percent, while
the Dow Jones Industrial Average generated a total return of 28 percent.
During the three years from 2001 through 2003 our average annual return was
31 percent compared to the Dow's one percent.
Over the five years from 1999 through 2003, our average annual total return
was 41 percent compared to negative one percent for the Dow.
Let's now look at how our total returns compared to our large
capitalization oil and gas industry competitors.
7
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[OXY LOGO] COMPARATIVE TOTAL RETURNS
(12/31/02 - 12/31/03)*
(Percentage)
[the following is a tabular representation of graphical materials]
STOCK SYMBOL COMPARATIVE TOTAL RETURNS
- ------------ -------------------------
MRO 61
OXY 53
APA 50
COP 40
CVX 35
BR 31
BP 27
DVN 25
UCL 24
XOM 21
KMG 9
APC 8
AHC (1)
*Data Source: Bloomberg
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As I noted earlier, one of our objectives was to be a top quartile total
return performer in the oil and gas industry. As you can see, we clearly
achieved that objective last year. During 2003, robust energy prices contributed
to good returns for most of the peers shown here. However, we did exceptionally
well.
Before addressing the underlying reasons for our strong comparative
performance, let's look at how our total returns compared to our industry
competitors over the last three years, as well as the last five years.
8
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[OXY LOGO] COMPARATIVE TOTAL RETURNS
3 Years (12/31/00 - 12/31/03)*
(Percentage)
[the following is a tabular representation of graphical materials]
STOCK SYMBOL COMPARATIVE TOTAL RETURNS
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OXY 93
APA 36
MRO 32
COP 20
BP 14
BR 14
CVX 14
UCL 3
XOM 2
DVN (5)
KMG (23)
AHC (23)
APC (27)
*Data Source: Bloomberg
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Our total return of 93 percent from 2001 through 2003 was nearly three
times higher than our nearest competitor. Once again, these returns are based on
the assumption that all dividends were reinvested and the stock was held for the
entire three-year period.
9
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[OXY LOGO] COMPARATIVE TOTAL RETURNS
5 Years (12/31/98 - 12/31/03)*
(Percentage)
[the following is a tabular representation of graphical materials]
STOCK SYMBOL COMPARATIVE TOTAL RETURNS
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APA 282
OXY 205
DVN 90
APC 70
BR 65
COP 60
KMG 45
UCL 43
MRO 30
XOM 26
CVX 23
BP 21
AHC 16
*Data Source: Bloomberg
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Over the last five years, our 205-percent return was clearly in the upper
quartile and significantly exceeded the returns of most of our competitors.
These overall results are linked to our success in executing our strategy
at the operational level in our oil and gas and chemicals businesses.
10
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[OXY LOGO] OVERALL VALUE CREATION STRATEGY
o Focus on Three Core Geographic Areas
o Maximize Free Cash Flow from Chemicals
o Maintain Strong Balance Sheet
o Review Dividend Policy Annually
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Our overall strategy to continue building long-term value is focused on our
core oil and gas areas in the United States, the Middle East and Latin America.
Our ability to generate a rising stream of free cash flow is especially
critical to our ability to invest in new projects, reduce debt and support
dividend growth. By free cash flow, I mean cash flow from our operations less
capital expenditures. Our primary sources of free cash flow are our domestic oil
and gas and chemical businesses.
We are committed to maintaining a strong balance sheet to reduce the risk
for investors and provide the company with the financial strength and
flexibility to compete for new business.
We will continue to review our dividend policy annually as part of our
commitment to build long-term value for our stockholders.
11
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[OXY LOGO] WORLDWIDE PRODUCTION
Millions BOE
[photo]
Qatar
[the following is a tabular representation of graphical materials]
YEAR PRODUCTION
- ---- ----------
2000 168
2001 173
2002 188
2003 200
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This chart shows that our oil and gas production has grown at an average
annual rate of approximately 6 percent from 2000 through 2003.
12
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[OXY LOGO] PRODUCTION REPLACEMENT
Percentage
[photo]
Kern County, California
[the following is a tabular representation of graphical materials]
YEAR PRODUCTION REPLACEMENT
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2001 141%
2002 140%
2003 184%
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As we succeed in increasing production each year, the challenge of
replacing the reserves we produce becomes increasingly demanding. Our team has
done a great job of meeting the challenge. In 2001 and 2002, we replaced
approximately 140 percent of our production. Last year we did even better with a
replacement rate of 184 percent.
13
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[OXY LOGO] WORLDWIDE PROVEN RESERVES
Millions BOE
[photo]
Horn Mountain
[the following is a tabular representation of graphical materials]
YEAR U.S. INTERNATIONAL TOTAL
- ---- ------------- ------------- -------------
2001 1,698 543 2,241
2002 1,755 556 2,311
2003 1,805 666 2,471
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These replacement rates increased our proved oil and gas reserves to new
historical highs in each of the last three years.
Domestic reserves, shown in green, accounted for more than 70 percent of
our worldwide total during this period. The predominance of a large, low-risk
domestic base provides a solid portfolio to generate the free cash flow needed
to support future growth opportunities.
14
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[OXY LOGO] FINDING & DEVELOPMENT COSTS*
2001-2003 Average
All Sources
($/BOE)
[the following is a tabular representation of graphical materials]
STOCK SYMBOL FINDING & DEVELOPMENT COSTS
- ------------ ---------------------------
BP 4.09
OXY 4.53
CVX 5.16
XOM 5.36
COP 5.57
APA 6.20
BR 7.31
UCL 7.48
MRO 7.56
APC 8.44
KMG 8.74
DVN 9.26
AHC 12.91
*Total 2001-2003 exploration plus development costs incurred divided by reserves
additions, including purchased reserves - per SEC filings.
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As you can see, Occidental's average replacement costs for 2001 through
2003 put us in the top quartile. We are in excellent shape as we look to the
future since our costs are $2.80 per BOE below the average costs of our
competition. Keeping our finding and development costs low is one of the keys to
maintaining a competitive edge in terms of future profitability.
15
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[OXY LOGO] 2001-2003 AVERAGE PROFITABILITY*
$/BOE
[the following is a tabular representation of graphical materials]
STOCK SYMBOL AVERAGE PROFITABILITY
- ------------ ---------------------
OXY 9.33
APA 7.14
XOM 6.52
BR 6.13
MRO 5.87
COP 5.66
CVX 5.50
BP 5.44
APC 4.74
UCL 4.69
DVN 4.50
KMG 2.88
AHC 2.69
*Exploration & production income after taxes and before interest, divided by BOE
sales.
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Our industry-leading profit of $9.33 per BOE for 2001 through 2003 is more
than 80 percent higher than the average among our competition.
This performance measure speaks to both the quality of our assets and the
efficiency of our operations. Above all, it demonstrates the durability of both
our business model and our strategy to deliver sustainable results.
Top quartile profits are closely linked to top quartile returns on capital
employed and returns on equity.
16
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[OXY LOGO] 2001-2003 AVERAGE FREE CASH FLOW*
$/BOE
[the following is a tabular representation of graphical materials]
STOCK SYMBOL AVERAGE FREE CASH FLOW
- ------------ ----------------------
OXY 8.83
BR 6.06
MRO 5.32
APA 5.15
XOM 4.86
CVX 4.27
BP 4.01
AHC 3.84
DVN 3.82
COP 3.38
UCL 3.05
KMG 2.76
APC 0.89
*Exploration & production income after taxes and before interest, plus DD&A,
plus exploration expense, less capital (excluding acquisitions) - divided by BOE
sales. See Addendum for GAAP reconciliation.
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Our free cash flow per barrel, which is net of capital expenditures, shows
a high correlation with our profitability. From 2001 through 2003, Occidental's
free cash flow per barrel of $8.83 led the industry - and was more than double
the industry average of $3.95 per barrel.
Our ability to produce top quartile free cash flow gives us the flexibility
and financial leverage to compete successfully for new high potential investment
opportunities to build long-term value.
17
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[OXY LOGO] CHEMICAL HIGHLIGHTS
o Role of Chemicals Business
- Generate Free Cash Flow Through the
Ups and Downs of the Business Cycle
o Restructuring Has Improved Efficiencies
o Goal
- Generate in Excess of $300 Million of
Free Cash Flow Per Year
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Over the past 10 years, our chemical business has provided free cash flow
to invest in our oil and gas business, reduce debt or pay dividends. We have
restructured our chemical business to improve the overall efficiency of the
operations. We expect this business to generate annual free cash flow in excess
of $300 million in 2004 and beyond.
18
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[OXY LOGO] DEBT/CAPITALIZATION RATIO
Percentage
[the following is a tabular representation of graphical materials]
YEAR DEBT/CAPITALIZATION RATIO
- ---- -------------------------
2000 57
2001 46
2002 43
2003 37
2004 Q1 33
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Since 2000, we have improved our financial leverage by lowering our
debt-to-capitalization ratio from 57 percent to 33 percent. We have no
significant debt maturities in the remainder of 2004.
Our success in strengthening our balance sheet resulted in all three credit
agencies upgrading our credit ratings in 2003. Moody's upgraded us to B Double A
One, while S&P and Fitch raised our rating to "Triple B+".
19
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[OXY LOGO] INTEREST EXPENSE
$ Millions
[the following is a tabular representation of graphical materials]
YEAR INTEREST EXPENSE
- ---- ----------------
2000 546
2001 432
2002 320
2003* 272
*Excludes $61 million debt repayment fee
o Impact of $274 Million in Pre-Tax Interest Savings
- Net Improvement of $0.46 Per Share
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One of the effects of paying down debt is lower interest expense. Annual
interest expense declined from $546 million in 2000 to $272 million last year.
That's a total savings of $274 million compared to 2000 and equates to an
annual net improvement of 46 cents per share.
The improvement in our balance sheet, combined with the outlook for future
earnings and free cash flow growth, were key drivers in the decision taken by
the Board of Directors to increase our dividend payouts in 2003 and 2004.
20
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[OXY LOGO] NON-CORE INVESTMENTS
$ Millions
4/23/04
----------
[LYONDELL LOGO] 40 Million Shares (23%) $ 685
[PREMCOR LOGO] 9.0 Million Shares (12%) $ 315
----------
$ 1000
Implied Value ($/Oxy Share) $ 2.55
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The improvement in our balance sheet does not reflect a significant source
of cash represented by our two non-core investments.
We hold an interest of approximately 23 percent in Lyondell Chemical
Company. At the close of business on April 23rd, our approximately 40 million
Lyondell shares had a market value of $685 million.
We also have a 9 percent stake in the Premcor refining business. As of
April 23rd, our 9 million Premcor shares had a market value of $315 million.
21
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[OXY LOGO] WHAT ABOUT THE FUTURE?
Can Occidental Sustain Past Growth Patterns?
o Yes!
o Solid Foundation for Future Growth in Place
o Continued Execution of Value Creating Strategy
in Core Oil and Gas Areas
o Continued Maximization of Free Cash Flow
From Chemicals
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Our past success has raised expectations for the future. The primary
interest of investors today is whether we can sustain this pattern of profitable
growth in future years.
The simple answer to that question is, "yes". Our strong past performance
has laid a solid foundation for building long-term value.
We are continuing to execute our strategy of creating value through a
combination of exploration, enhanced oil recovery projects and acquisitions in
our core oil and gas business, while maximizing free cash flow from chemicals.
22
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[OXY LOGO] OIL & GAS PRODUCTION FORECAST
Thousands BOE/Day
[the following is a tabular representation of graphical materials]
2001 2002 2003 2004E 2005E 2006E
---- ---- ---- ----- ----- -----
Production 476 515 547 575 590 620
United States 66% 64% 63% 63% 58% 55%
Middle East 18% 18% 17% 27% 22% 26%
Latin America 7% 9% 10% 10% 12% 11%
Other 9% 9% 10% 10% 8% 8%
5% Annual Average Growth Rate
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Let's focus now on our forecast through 2006.
As you can see, we expect the U.S. to remain the dominant region in our
production profile and account for 55 percent of our worldwide production in
2006.
We expect the Middle East to be our primary growth area and to contribute
26 percent of our 2006 production.
We expect our 2006 Latin American production to make up 11 percent of the
total.
The "Other" category is made up of Russia and Pakistan.
Maintaining a strong U.S. base is a critical element in supporting our
growth plans.
23
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[OXY LOGO] UNITED STATES
2003 Production
[map of United States]
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In 2003, our U.S. production averaged 344,000 BOE per day, which accounted
for 63 percent of our worldwide total.
24
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[OXY LOGO] 2003 US PRODUCTION
Thousand BOE/Day
[the following is a tabular representation of graphical materials]
REGION PRODUCTION
- ------ ----------
Texas and New Mexico
Permian 171
California
Elk Hills 100
THUMS 23
---------
123
Kansas and Oklahoma
Hugoton 27
Gulf of Mexico
Horn Mt. 23
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Of this total, our Permian operations in Texas and New Mexico accounted for
about one-third of our worldwide production.
In California, our Elk Hills operation near Bakersfield and our THUMS
operation in Long Beach accounted for 22 percent of our worldwide production.
Our Hugoton operations in Kansas and Oklahoma and the Horn Mountain project
in the deep water Gulf of Mexico together contributed about 10 percent of our
worldwide total.
Let's look at a few of our growth projects outside the U.S.
25
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[OXY LOGO] ECUADOR - PRODUCTION GROWTH
Production (BOE/Day)
[map] 2002 - 13,000
2003 - 25,000
2004 - 45,000
2005 - 45,000
2006 - 45,000
[photo]
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In Ecuador, our production is growing as a result of exploration success.
Our 2003 average net production of 25,000 barrels of oil per day was nearly
double our 2002 rate. The increase is the result of the commissioning last
September of the new OCP pipeline.
We expect the impact of a full year of production from the new Eden-Yuturi
field and another smaller discovery to increase our total Ecuador production to
an average of 45,000 barrels per day in 2004 - and we expect to remain at that
level at least through 2006.
We believe our Block 15 has additional exploration potential and we are
evaluating EOR opportunities outside our block that can have a material effect
on future production growth.
26
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[OXY LOGO] OMAN - NEW GAS PROJECT
[map]
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In Oman, we have a new natural gas project that came on stream this year.
The project is supplying gas associated with oil production from our Block 9
operations through a new pipeline and processing facilities to the Fujairah
power plant in the United Arab Emirates.
Occidental's sale agreement calls for the delivery of 120 million gross
cubic feet per day. Occidental's share is 78 million cubic feet per day.
The installed facilities are capable of handling 150 million cubic feet per
day. In the second half of this year, Occidental expects to make available
additional sales volumes up to the maximum capacity.
27
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[OXY LOGO] QATAR
[map] Production
(Barrels/Day)
o 1994
Gross 20,000
Oxy Net 3,000
o 2003
Gross 95,000
Oxy Net 45,000
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With a contract that runs through 2019, Qatar represents another long-lived
asset in the Middle East
This successful EOR project began in October 1994. Before Occidental took
over the operation, gross production had fallen from a peak of 50,000 barrels
per day to approximately 20,000 barrels per day.
Thanks to our efforts, gross production during 2003 averaged approximately
95,000 barrels, with Oxy's net share at 45,000 barrels per day. We are now
implementing a second phase of development investment focused on the large ISND
Field to further increase production.
28
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[OXY LOGO] QATAR
[photo]
[photo]
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A major part of this project is the construction of an additional structure
and related facilities depicted in the drawing on the right. This project will
double our processing capacity at the offshore PS-1 complex shown in the photo
on the left. The yellow box with the letter "K" shows the location of the new
facility which is scheduled for start up next year.
These facilities will allow us to increase production and improve recovery
over the next 15 years.
29
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[OXY LOGO] MIDDLE EAST - DOLPHIN PROJECT
[map]
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Now let me provide you with an overview of the $4 billion Dolphin Project,
which is the single largest trans-border energy project in the Middle East.
We have a 24.5-percent stake in this project. The project includes the
development of offshore gas reserves in Qatar's giant North Field. The produced
gas will be processed at Ras Laffan to remove the natural gas liquids for sale
at market prices. Approximately 2 billion cubic feet per day of dry gas will be
transported through a new 48-inch, 260-mile-long pipeline to supply growing
power and water desalination markets in the United Arab Emirates.
30
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[OXY LOGO] DOLPHIN PROJECT - NET PRODUCTION
Projected Start - 2006
[map] o Invest $1 billion in This
$4 Billion Project
(2004-2006)
o Peak Net Production
- 275 Million Cubic Ft./Day
- 20,000 Barrels Liquids/Day
- Equals 65,000 BOE/Day
o 25-Year Cumulative Net
Production
- 1.3 trillion Cubic Feet
- 85 Million Barrels Liquids
- Total = 300 Million BOE
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Occidental's share of the $4 billion capital for this project is
approximately $1 billion over the next three years. We expect to finance a
portion of the project.
When this project is fully operational in late 2006, we expect Occidental's
net production to be about 275 million cubic feet of gas per day and 20,000
barrels of liquids per day. Over the 25-year life of the project, we expect our
cumulative production to be approximately 1.3 trillion cubic feet of gas and 85
million barrels of liquids.
31
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[OXY LOGO] LIBYA - US RELATIONS
[map]
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Last week's announcement by the Bush Administration that it was lifting the
remaining economic sanctions on Libya removes the final obstacle to Occidental's
return to Libya after an absence of nearly 18 years.
Occidental and other U.S. companies, who had commercial interests in Libya,
were required to leave the country in 1986 when the Reagan Administration
imposed economic sanctions on the Libyan Government.
32
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[OXY LOGO] LIBYA - OCCIDENTAL'S HISTORY
1966 Oxy Discovers Giant Field
Occidental Production Areas
1968 First Oil to Oxy Export
Terminal
[map]
Military Officers Led by
Ghadafi Depose King Idris
1970 Gross Peak Production of
Nearly 660,000 Barrels/Day
1974 Libya Completes 51%
Nationalization of Foreign
Oil Interests
1986 US Orders Oxy's Departure
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Libya played an important role in Occidental's evolution from a small
California oil company into a significant player in the global oil business. In
1966, Occidental made its first of several giant discoveries that together
totaled nearly 3 billion gross barrels.
Production began flowing to our export terminal in 1968, the same year that
a group of army officers led by Colonel Ghadafi deposed King Idris.
The following year gross production rose to a peak of nearly 660,000
barrels of oil per day.
By 1974, while OPEC's influence was on the rise, Libya completed the
nationalization of 51 percent of all foreign oil interests - including
Occidental's operations.
Increasingly strained U.S. - Libyan relations during the Carter
Administration culminated with the implementation of broad economic sanctions
against Libya by President Reagan. In 1986, Occidental was ordered to leave
Libya in compliance with the sanctions.
33
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[OXY LOGO] LIBYA - RECENT DEVELOPMENTS
1999 Oxy Receives US Permission
Occidental Production Areas for Technical Teams to Visit
Libya for Data Exchanges
[map] 2004 US Removes Travel
Restrictions for US Citizens'
Travel to Libya
US Grants Oxy the Right to
Negotiate Its Return to Libya
Oxy CEO & Key Staff Visit
Libya to Meet with Ghadafi
and Other Senior Libyan
Officials
US Lifts Remaining Sanctions
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In 1999, the Clinton Administration permitted Oxy technical teams to visit
Libya for the purpose of assessing the condition of our existing assets. Since
that time, our team has made several visits to Libya.
Real improvement in U.S. - Libyan relations did not begin until December
2003 when the Libyan Government agreed to abandon its pursuit of weapons of mass
destruction and to cooperate in the war on terror.
In early March of this year, the Bush Administration reestablished a
diplomatic presence in Tripoli, lifted the ban on travel to Libya by U.S.
citizens and authorized U.S. oil companies, with assets in Libya when sanctions
were implemented, to negotiate and sign contracts for their return to the
country.
From March 13th through the 15th, I visited Libya with three of my Oxy
colleagues for high level visits with the Libyan leadership, including Colonel
Ghadafi. We were impressed by their enthusiasm in welcoming our return.
The lifting of U.S. sanctions last week will allow Occidental to resume
commercial activities in Libya.
34
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[OXY LOGO] LIBYA - WHERE DO WE GO FROM HERE?
o Presented Proposals to
Occidental Contract Areas Enhance Production from
Existing Fields
[map] o Return to Libya is a High
Priority
o Look to Continuing
Improvement in US-Libyan
Relations
o Update Existing Contracts
o Technical Teams Now at Work
o CEO to Return Shortly to Libya
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During our visit, we presented Libyan authorities with our investment and
technical proposals that we believe can bring significant benefits to the Libyan
people and to our stockholders by significantly increasing Libya's reserves and
production.
We regard our return to Libya as one of our high priority projects. We look
forward to continued progress in U.S. - Libyan relations and in our negotiations
to update our existing exploration and production agreements. Our technical
teams are already hard at work, and we plan to open an office in Tripoli as soon
as possible. I am planning to return to Libya in the near future to help
facilitate negotiations.
35
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[OXY LOGO] 2004 1ST QUARTER RESULTS
Consolidated Results
o Net Income ($ Million) $ 487
o Earnings Per Share ($/Share) $ 1.24
o Cash from Operations ($/Millions) $ 965
o Stockholders' Equity ($/Billions) $ 8.5
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As our business development teams focus on new opportunities for building
profitable long-term growth, our operations teams are producing strong near-
term results. The momentum we developed last year has carried over into the
first quarter, resulting in a very strong first quarter this year.
Our consolidated quarterly net income was $487 million, or $1.24 per share.
Cash from operations was approximately $965 million. Stockholders' equity
increased to a record $8.5 billion.
36
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[OXY LOGO] DIVIDEND INCREASES
Annual Payout
[the following is a tabular representation of graphical materials]
YEAR ANNUAL DIVIDEND
- ---- ---------------
2002 $ 1.00
2003 $ 1.04
2004 $ 1.10
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A key element in building long-term value for stockholders is the payment
of dividends. Occidental has been paying cash dividends without interruption
since 1975.
The Board of Directors increased the dividend by 6 percent this February.
This is on top of last year's increase of 4 percent.
The Board will continue to review dividend policy annually as part of our
continuing commitment to increase total returns for our shareholders.
37
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[OXY LOGO] WHAT'S AHEAD?
o Success Riding on Two Factors
- Take Care of Our Asset Base to Generate Cash
to Support Growth
- Continue Adding Highly Profitable New Projects
o Stay Focused on the Fundamentals
- Maintaining Discipline and Focus
- Executing Our Strategy
- Balancing Growth With Profitability
o Create Long-Term Value
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The company's future success depends on two factors. First, we must
continue to take care of our asset base in order to generate the cash to support
our strategy of building long-term growth. Second, we must continue to add
profitable new projects to our portfolio, like Dolphin. We believe the interests
of our stockholders are best served by remaining focused on these fundamentals.
Our strength has been our financial discipline and focus in executing our
strategy that balances long-term growth with near term profitability. The
investments we are making now in projects will yield profitable growth
opportunities and stockholder value for many years.
I would like to pay special tribute to our employees who take the execution
of our strategy personally and who have demonstrated a passion for our company's
success. I am also thankful for the foresight and guidance of our directors who
are committed to creating long-term value for our stockholders. Finally, I would
like to express my appreciation to our loyal stockholders who supported us
through a difficult transition.
Ladies and gentlemen - let me assure you, the best is yet to come.
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[OXY LOGO]
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I would now like to introduce Dr. Larry Meriage, our Vice President for
Communications and Public Affairs, who will present our report on social
responsibility.
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ADDENDUM
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RETURN ON CAPITAL EMPLOYED (ROCE)
RECONCILIATION TO GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP)
ANNUAL
($ in millions) AVERAGE
2001-
2001 2002 2003 2003
---------- ---------- ---------- ----------
GAAP measure - earnings applicable $ 1,154 989 1,527 1,223
to common stockholders
Interest expense $ 392 281 295 323
Tax effect of interest expense $ (137) (98) (103) (113)
---------- ---------- ---------- ----------
Earnings before tax-effected interest expense $ 1,409 1,172 1,719 1,433
========== ========== ========== ==========
GAAP average stockholders' equity $ 5,634 6,318 7,918 6,623
Average debt
GAAP debt
Notes payable $ 54 -- -- 18
Debt, including current maturities 4,065 4,203 4,016 4,095
Non-GAAP debt --
Capital lease obligation 26 26 26 26
Subsidiary preferred stock -- 75 75 50
Gas sales agreements 282 -- -- 94
Trust preferred securities 463 455 453 457
---------- ---------- ---------- ----------
Average total debt $ 4,890 4,759 4,570 4,740
Total average capital employed $ 10,524 11,077 12,488 11,363
ROCE 13.0% 10.9% 14.6% 12.6%
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OIL AND GAS FREE CASH FLOW/BOE
RECONCILIATION TO GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP)
There is no GAAP cash flow measure comparable to this calculation; operating
cash flow, investing cash, financing cash flow, and change in cash are the GAAP
measures of cash flow presented below for reference.
Ann. Avg.
Occidental Petroleum 2003 2001-2003
Consolidated Statement of Cash Flow ($ millions) ($ millions)
-------------- --------------
Cash Flow From Operating Activities 3,074 2,580
Cash Flow From Investing Activities (2,021) (1,456)
Cash Flow From Financing Activities (516) (929)
Change in Cash 537 195
Oxy calculates free cash flow per barrel of oil equivalent (BOE) by taking
exploration and production income after taxes but before interest, adding back
the depreciation, depletion & amortization and exploration expense and
subtracting from that total capital expenditures excluding acquisitions. This is
then divided by the BOE sales volumes.
Ann. Avg.
2003 2001-2003
($ millions) ($ millions)
-------------- --------------
FAS 69 GAAP Oil and Gas Results of Operations 2,068 1,789
Depreciation, Depletion & Amortization 971 845
Exploration Expenses 138 166
Capital Expenditures (excluding acquisitions) (1,204) (1,108)
-------------- --------------
Free Cash Flow From Oil & Gas Operations $ 1,973 $ 1,692
BOE Sales Volumes (millions) 202 192
Cash Flow per BOE $ 9.78 $ 8.83
Occidental management believes that Free Cash Flow per BOE is a useful
operational statistic to show the net cash results of the oil and gas operation
on a per barrel basis. This measure is useful to compare different-sized
companies.
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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.
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