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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) January 31, 1998
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
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Item 2. Acquisition or Disposition of Assets
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1. Completion of MidCon Sale. Occidental Petroleum
Corporation, a Delaware corporation ("Occidental" or the
"Registrant"), completed the sale (the "Sale") of all of the
issued and outstanding shares of common stock, $.01 par
value per share (the "Shares"), of MidCon Corp., a Delaware
corporation ("MidCon"), through which the Registrant
conducted its natural gas transmission and marketing
business, to KN Energy, Inc., a Kansas corporation ("KN"),
effective 11:59 p.m., C.S.T., on January 31, 1998 (the
"Closing Date").
Occidental sold the Shares to KN in return for a cash
payment of $2,103,974,390. In connection with the Sale, KN
issued a fixed-rate interest bearing note secured by letters
of credit, payable January 4, 1999, to Occidental in the
initial principal amount of $1,394,846,122 (the "Note"), in
exchange for a note previously issued to Occidental by the
MidCon Corp. ESOP Trust (the "Trust"). KN also assumed
responsibility for certain Texas intrastate pipeline lease
obligations of MidCon with a 29 year term and average lease
rentals of approximately $30 million per year.
Concurrently with the closing of the Sale, Occidental
effected the redemption of all 1,400,000 issued and
outstanding shares of Occidental's Cumulative MidCon-Indexed
Convertible Preferred Stock, par value $1.00 per share (the
"CMIC Preferred Stock"), which were issued to and held by
the Trust. In addition to the Note, after payment of the
redemption price for the CMIC Preferred Stock, taxes and
certain other expenses of the Sale, the estimated net cash
proceeds from the transaction were approximately $1.7
billion.
As a result of these transactions, in the fourth
quarter Occidental classified MidCon and its subsidiaries as
a discontinued operation and took a charge against earnings
of approximately $750,000,000.
2. Completion of Elk Hills Naval Petroleum Reserve
Acquisition. On February 5, 1998, Occidental acquired the
U.S. government's 78.1 percent interest (the "Elk Hills
Interest") in the Elk Hills Naval Reserve oil and gas fields
for approximately $3.5 billion. The acquisition of the Elk
Hills Interest was funded using a portion of the proceeds
from the divestiture of MidCon, together with the proceeds
of commercial paper borrowings. The commercial paper will
eventually be repaid from the proceeds of sales of other non-
strategic assets or the issuance of other securities. The
Elk Hills Field is about 35 miles west of Bakersfield,
California and is approximately 15 miles long and 5 miles
wide. The field produces premium, light (an average 31
degree API gravity), low -sulfur crude oil.
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Occidental believes that production for the account of
the Elk Hills Interest will increase from the application of
improved drilling techniques. Occidental also expects that
income from the Elk Hills Interest will be increased through
various cost efficiencies. The Elk Hills Field has produced
more than one billion barrels to date, making it one of the
fourteen most productive fields in the United States.
Item 5. Other Events
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Recent Developments.
1. Preferred Stock Redemption. The Registrant
announced on February 4, 1998, that it will redeem on March
6, 1998, all 3,606,484 outstanding shares of its $3.875
cumulative convertible voting preferred stock at a call
price of $51.9375 per share plus accumulated and unpaid
dividends to the redemption date. Each share of $3.875
voting preferred stock is currently convertible at the
option of the holder, to the redemption date, into
approximately 2.2 shares of common stock of Occidental. The
closing price of the Occidental common stock on the New York
Stock Exchange on February 3, 1998, was $25.8125 per share.
If all of the shares of $3.875 voting preferred stock were
converted into common stock, Occidental would issue
approximately 7.9 million shares of common stock.
2. Share Repurchase Program. In late 1997 Occidental
announced a 40 million share common stock repurchase
program. Since then, approximately 9.9 million shares of
Occidental common stock have been repurchased. Occidental
expects to complete its share repurchase program by the end
of 1998.
3. New Oil Field in Qatar. On December 10, 1997,
Occidental announced the signing of a production-sharing
agreement with state-owned Qatar General Petroleum
Corporation to develop the Idd El Shargi South Dome ("ISSD")
oil field offshore Qatar. The field is approximately 15
miles from the Idd El Shargi North Dome that has been
operated by Occidental since late 1994. The ISSD
development program calls for drilling 36 wells on three
platforms, including 21 producers, 13 injectors and two
water-disposal wells.
4. Completion of Venezuela Oil Operation Sale. On
February 4, 1998, the Registrant sold 100 percent of the
stock of Compania Occidental de Hidrocarburos, Inc., which
held Occidental's interest in the DZO Block oilfield-
development project in Venezuela, to Union Texas Petroleum
Holdings for approximately $204.5 million in cash plus
contingent payments of up to $90 million over six years,
based on oil prices. Its interest produced an average of
approximately 25,000 barrels of oil per day in 1997.
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5. Legal Proceedings.
(a) In its Form 8-K filing on July 18, 1997, the
Registrant reported that it had been informed that the
Securities and Exchange Commission (the "SEC") would conduct
a private, formal investigation as a result of certain
matters described in a May 12, 1997, Wall Street Journal
article concerning the Registrant's business dealings with
several foreign consultants. According to the SEC, the
purpose of its investigation is to determine whether the
Registrant may have violated the federal securities laws,
including the Foreign Corrupt Practices Act and the
reporting requirements of the Securities Exchange Act of
1934, as amended. That investigation is currently ongoing.
The Registrant has cooperated with the SEC and has produced
documents in response to an SEC subpoena.
The Registrant is unable to predict how long the
SEC investigation will take, what the results of the
investigation may be or the specific impact that the SEC
investigation, or any investigation relating to these
matters by any other government agency, may have on the
Registrant's business or financial position. However, based
upon the information available to the Registrant, the
Registrant does not believe that the results of any such
investigation should have a material adverse effect upon the
Registrant's consolidated financial position or results of
operations in any given year.
(b) On January 28 and 29, 1998, two shareholder
derivative actions were filed in Los Angeles Superior Court
against the Board of Directors of Occidental and Occidental,
as a nominal defendant, with respect to the payments made in
1997 to the Registrant's Chairman and President in
connection with the restructuring of their respective
employment agreements. The Teachers' Retirement System of
Louisiana is the plaintiff in the first case, while Rita
Edelson, Paul Klingenstein and Clayton J. Steenson are named
as plaintiffs in the second action. Occidental is named as
a nominal defendant in these derivative actions. No relief
is sought against Occidental. The complaints allege, among
other things, corporate waste, breach of fiduciary duty and
unjust enrichment. The plaintiffs in both actions seek,
among other things, compensatory damages and equitable and
declaratory relief and seek to impose a constructive trust
on the 1997 payments and request that the Occidental Board
be ordered to rescind the payments. In addition, the
plaintiffs in one of the actions seek a declaration that the
restated and amended employment agreements are null and void
and an order enjoining the receipt of remuneration under the
amended and restated agreements. In both actions, the
plaintiffs seek award of attorneys' fees and costs.
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Item 7. Financial Statements and Exhibits
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(a) Financial statements of businesses acquired.
1. To be filed by amendment.*
(b) Pro forma financial information.
1. Pro forma information with respect to the
acquisition of the Elk Hills Field to be filed by
amendment.*
2. The pro forma information with respect to the
disposition of MidCon is not required, but restated
financial statements for the past year, reflecting the
treatment of MidCon as a discontinued operation, are
included in Occidental's Current Report on Form 8-K, dated
January 30, 1998, which was filed with the SEC on such date.
(c) Exhibits.
10.1. Stock Purchase Agreement dated as of December
18, 1997, by and among Occidental, as seller, and KN Energy,
Inc., as buyer, together with the exhibits thereto.
10.2. Amendment No. 1 to Stock Purchase Agreement
dated January 30, 1998, between Occidental, as seller,
and KN Energy, Inc., as buyer, together with exhibit
thereto.
10.3. Supplemental Agreement dated as of January
20, 1998, by and between Occidental and KN Energy, Inc.,
together with the exhibits thereto.
10.4. Grant of Option Agreement, executed October
5, 1997, between the U.S. Department of Energy and
Occidental (filed as Exhibit 10.1 of the Quarterly Report on
Form 10-Q of Occidental for the fiscal quarter ended
September 30, 1997, File No. 1-9210, and incorporated herein
by this reference).
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* Financial statements and pro forma information with
respect to the acquisition of the Interest in the Elk Hills
field are to be filed by amendment not later than 60 days
after the date that this report on Form 8-K is filed with
the SEC.
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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: February 10, 1998 S. P. DOMINICK, JR.
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S. P. Dominick, Jr., Vice
President and Controller
(Chief Accounting and Duly
Authorized Officer)
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