================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) JULY 19, 2004
OCCIDENTAL PETROLEUM CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 1-9210 95-4035997
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
10889 WILSHIRE BOULEVARD
LOS ANGELES, CALIFORNIA 90024
(Address of principal executive offices) (ZIP code)
Registrant's telephone number, including area code:
(310) 208-8800
================================================================================
Item 5. Other Events
1. Earnings Release
- -- ----------------
Occidental Petroleum Corporation announced on July 19, 2004, net income for
the second quarter 2004 of $581 million ($1.48 per share), compared with $374
million ($0.98 per share) for the second quarter 2003.
Oil and Gas
-----------
Oil and gas segment and core earnings were $814 million for the second
quarter 2004, compared with $637 million for the second quarter 2003. The
improvement in the second quarter 2004 earnings reflected approximately $294
million from higher worldwide crude oil and gas prices and increased sales
volumes; partially offset by higher operating expenses and increased DD&A rates.
The second quarter 2003 included $14 million in after-tax gains on asset sales.
Chemicals
---------
Chemical segment and core earnings were $85 million for the second quarter
2004, compared with $43 million for the second quarter 2003. The improvement in
the second quarter 2004 results was primarily due to higher sales volumes for
all major products and higher sales prices for vinyl chloride monomer, polyvinyl
chloride, ethylene dichloride and chlorine; partially offset by lower caustic
soda prices and higher ethylene and energy costs. The second quarter 2003
included a $9 million asset-writedown charge and a $15 million severance charge.
Six-Months Results
------------------
For the first six months of 2004, net income was $1.07 billion ($2.72 per
share), compared with $699 million ($1.84 per share) for the first six months of
2003.
Core earnings were $1.06 billion for 2004 compared with $807 million for
2003. See the attached schedule for a reconciliation of net income to core
earnings.
Statements in this release that contain words such as "will" or "expect," or
otherwise relate to the future, are forward-looking and involve risks and
uncertainties that could significantly affect expected results. Factors that
could cause results to differ materially include, but are not limited to: global
commodity pricing fluctuations, and supply/demand consideration for oil, gas and
chemicals; higher-than-expected costs; and not successfully completing (or any
material delay in) any expansion, capital expenditure, acquisition, or
disposition. Occidental disclaims any obligation to update any forward-looking
statements.
1
SUMMARY OF SEGMENT NET SALES AND EARNINGS
Second Quarter Six Months
($ millions, except ---------------------- ----------------------
per share amounts) 2004 2003 2004 2003
================================= ======== ======== ======== ========
SEGMENT NET SALES
Oil and gas $ 1,783 $ 1,440 $ 3,476 $ 2,993
Chemical 937 785 1,794 1,575
Other 30 41 60 69
-------- -------- -------- --------
Net sales $ 2,750 $ 2,266 $ 5,330 $ 4,637
================================= ======== ======== ======== ========
SEGMENT EARNINGS
Oil and gas $ 814 $ 637 $ 1,564 $ 1,364
Chemical 85 43 135 78
-------- -------- -------- --------
899 680 1,699 1,442
UNALLOCATED CORPORATE ITEMS
Interest expense, net(a) -
debt and trust preferred
distributions (60) (64) (128) (199)
Income taxes (b) (209) (167) (399) (345)
Other (49) (75) (104) (131)
-------- -------- -------- --------
INCOME FROM CONTINUING OPERATIONS 581 374 1,068 767
Cumulative effect of changes in
accounting principles, net -- -- -- (68)
-------- -------- -------- --------
NET INCOME $ 581 $ 374 $ 1,068 $ 699
======== ======== ======== ========
BASIC EARNINGS PER COMMON SHARE
Income from continuing
operations $ 1.48 $ 0.98 $ 2.72 $ 2.02
Cumulative effect of changes in
accounting principles, net -- -- -- (0.18)
-------- -------- -------- --------
$ 1.48 $ 0.98 $ 2.72 $ 1.84
======== ======== ======== ========
DILUTED EARNINGS PER COMMON SHARE
Income from continuing
operations $ 1.46 $ 0.97 $ 2.68 $ 1.99
Cumulative effect of changes in
accounting principles, net -- -- -- (0.18)
-------- -------- -------- --------
$ 1.46 $ 0.97 $ 2.68 $ 1.81
======== ======== ======== ========
AVERAGE BASIC COMMON SHARES
OUTSTANDING 393.9 382.6 392.8 380.9
================================= ======== ======== ======== ========
See footnotes on following page.
2
(a) The six months 2004 includes an $11 million pre-tax interest charge to
redeem all the outstanding 8.16 percent Trust Preferred Redeemable
Securities on January 20, 2004. The six months 2003 includes a $61 million
pre-tax interest charge to repay a $450 million 6.4 percent senior notes
issue that had ten years of remaining life, but was subject to re-marketing
on April 1, 2003.
(b) The six months 2004 includes a $20 million credit related to a first
quarter settlement of an issue with the Internal Revenue Service. The
second quarter of 2004 reflected a lower U.S. income tax rate resulting
from the crediting of foreign income taxes.
3
SUMMARY OF OPERATING STATISTICS
Second Quarter Six Months
---------------------- ----------------------
2004 2003 2004 2003
================================ ======== ======== ======== ========
NET OIL, GAS AND LIQUIDS
PRODUCTION PER DAY
United States
Crude oil and liquids (MBBL)
California 78 81 78 79
Permian 156 151 155 147
Horn Mountain 23 19 23 16
Hugoton 3 3 3 4
-------- -------- -------- --------
Total 260 254 259 246
Natural Gas (MMCF)
California 234 252 239 257
Hugoton 132 143 129 143
Permian 132 131 136 125
Horn Mountain 15 15 16 10
-------- -------- -------- --------
Total 513 541 520 535
Latin America
Crude oil (MBBL)
Colombia 39 36 37 37
Ecuador 47 18 45 17
-------- -------- -------- --------
Total 86 54 82 54
Middle East
Crude oil (MBBL)
Oman 12 11 12 12
Qatar 44 51 43 49
Yemen 30 35 35 37
-------- -------- -------- --------
Total 86 97 90 98
Natural Gas (MMCF)
Oman 56 -- 33 --
Other Eastern Hemisphere
Crude oil (MBBL)
Pakistan 8 10 8 10
Natural Gas (MMCF)
Pakistan 73 77 74 76
BARRELS OF OIL EQUIVALENT (MBOE)
Subtotal consolidated subsidiaries 547 518 544 510
Colombia-minority interest (5) (5) (4) (4)
Russia-Occidental net interest 31 30 30 30
Yemen-Occidental net interest 1 1 1 2
-------- -------- -------- --------
TOTAL WORLDWIDE PRODUCTION (MBOE) 574 544 571 538
======== ======== ======== ========
CAPITAL EXPENDITURES (millions) $ 461 $ 493 $ 804 $ 791
======== ======== ======== ========
DEPRECIATION, DEPLETION
AND AMORTIZATION
OF ASSETS (millions) $ 325 $ 286 $ 650 $ 571
================================ ======== ======== ======== ========
4
SIGNIFICANT TRANSACTIONS AND EVENTS AFFECTING EARNINGS
Occidental's results of operations often include the effects of significant
transactions and events affecting earnings that vary widely and unpredictably in
nature, timing, and amount. Therefore, management uses a measure called "core
earnings", which excludes those items. This non-GAAP measure is not meant to
disassociate those items from management's performance, but rather is meant to
provide useful information to investors interested in comparing Occidental's
earnings performance between periods. Reported earnings are considered
representative of management's performance over the long term. Core earnings is
not considered to be an alternative to operating income in accordance with
generally accepted accounting principles.
The following table sets forth the core earnings and significant items affecting
earnings for each operating segment and corporate:
Second Quarter
($ millions, except ------------------------------------------
per-share amounts) 2004 EPS 2003 EPS
===================================== ======== ======= ======== =======
TOTAL REPORTED EARNINGS $ 581 $ 1.48 $ 374 $ 0.98
======== ======= ======== =======
OIL AND GAS
Segment Earnings $ 814 $ 637
No significant items
affecting earnings -- --
-------- --------
Segment Core Earnings 814 637
-------- --------
CHEMICALS
Segment Earnings 85 43
No significant items
affecting earnings -- --
-------- --------
Segment Core Earnings 85 43
-------- --------
CORPORATE
Results (318) (306)
No significant items
affecting earnings -- --
-------- --------
TOTAL CORE EARNINGS $ 581 $ 1.48 $ 374 $ 0.98
===================================== ======== ======= ======== =======
5
SIGNIFICANT TRANSACTIONS AND EVENTS AFFECTING EARNINGS (CONTINUED)
Six Months
($ millions, except ------------------------------------------
per-share amounts) 2004 EPS 2003 EPS
===================================== ======== ======= ======== =======
TOTAL REPORTED EARNINGS $ 1,068 $ 2.72 $ 699 $ 1.84
======== ======= ======== =======
OIL AND GAS
Segment Earnings $ 1,564 $ 1,364
No significant items
affecting earnings -- --
-------- --------
Segment Core Earnings 1,564 1,364
-------- --------
CHEMICALS
Segment Earnings 135 78
No significant items
affecting earnings -- --
-------- --------
Segment Core Earnings 135 78
-------- --------
CORPORATE
Results (631) (743)
Less:
6.4% senior note remarket fee -- (61)
Trust preferred
redemption charge (11) --
IRS settlement 20 --
Tax effect of pre-tax adjustments 4 21
Changes in accounting
principles, net* -- (68)
-------- --------
TOTAL CORE EARNINGS $ 1,055 $ 2.69 $ 807 $ 2.12
===================================== ======== ======= ======== =======
* Amount shown after tax.
6
ITEMS AFFECTING COMPARABILITY OF CORE EARNINGS BETWEEN PERIODS
Second Quarter Six Months
-------------------- --------------------
($ millions) 2004 2003 2004 2003
================================ ======== ======== ======== ========
PRE-TAX
INCOME / (EXPENSE)
OIL AND GAS
Gain on sale of GOM assets (a) $ -- $ 14 $ -- $ 14
CHEMICALS
Reorganizations/severance -- (15) -- (15)
Chlorine derivatives asset
impairment -- (9) -- (9)
CORPORATE
Equity earnings 1 (14) (2) (35)
Environmental remediation -- (13) -- (13)
(a) Amount shown after-tax.
7
2. Senior Management Changes
- -- -------------------------
Dr. Dale R. Laurance, President of Occidental Petroleum Corporation and
head of its oil and gas operations has announced on July 19, 2004, his plan to
retire December 31, 2004 upon completion of 21 years of service. Dr. Laurance's
decision was based on health related considerations. Dr. Laurance will
relinquish his oil and gas duties effective immediately, but will continue to
serve as President and remain on Occidental's Board of Directors through the end
of 2004. Dr. Ray R. Irani, Occidental's Chairman and Chief Executive officer,
will assume the additional title of President on January 1, 2005.
Occidental's Board of Directors has promoted Stephen I. Chazen to the
position Senior Executive Vice President and Chief Financial Officer. In
addition to his current duties as CFO and head of Corporate Development, Mr.
Chazen also will be responsible for oversight of the company's chemical
operations and investor relations function.
John W. Morgan has been promoted to the position of President, Occidental
Oil and Gas Corporation with responsibility for all worldwide exploration and
production operations. Mr. Morgan, who formerly was responsible for the
company's worldwide oil and gas production and engineering operations, remains
an Executive Vice President of Occidental Petroleum Corporation.
In addition, R. Casey Olson has been promoted to the position of President,
Occidental Development Company. In this role, Mr. Olson, who also is a Vice
President of Occidental Petroleum Corporation, will be responsible for all
international business development.
All three executives will report to Dr. Irani.
8
Item 9. Regulation FD Disclosure and Item 12. Results of Operations and
Financial Condition
On July 19, 2004, Occidental Petroleum Corporation released information
regarding its results of operations for the fiscal period ended June 30, 2004.
This Form 8-K is being furnished to report information pursuant to Item 9,
Regulation FD Disclosure and Item 12, Results of Operations and Financial
Condition. The full text of the speech given by Stephen I. Chazen is attached to
this report as Exhibit 99.1. Investor Relations Supplemental Schedules are
attached to this report as Exhibit 99.2.
9
SIGNATURE
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 hereunto duly authorized.
OCCIDENTAL PETROLEUM CORPORATION
(Registrant)
DATE: July 19, 2004 S. P. Dominick, Jr.
--------------------------------------------------
S. P. Dominick, Jr., Vice President and Controller
(Chief Accounting and Duly Authorized Officer)
EXHIBIT INDEX
99.1 Full text of speech given by Stephen I. Chazen
99.2 Investor Relations Supplemental Schedules