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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 6, 1999
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 5. Other Events
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Liquidity and Capital Resources
The principal bank credit facilities of Occidental Petroleum
Corporation, a Delaware corporation ("Occidental" or the "Registrant"), limit
certain of its indebtedness in relation to its tangible net worth and impose a
minimum net worth requirement. At December 31, 1998, Occidental projects that,
under these covenants, it will be permitted to incur approximately $1.7 billion
of additional indebtedness and will have approximately $.6 billion in excess of
the minimum net worth requirement.
Occidental currently proposes to effect an approximate $500 million
capital securities offering through an affiliate (the "Offering"). The capital
securities will not constitute indebtedness, and all or substantially all of the
net proceeds of the Offering will have the effect of increasing Occidental's
tangible net worth. If the net proceeds of the Offering were approximately $500
million and were used to repay indebtedness, then Occidental's capacity for
indebtedness would be approximately $3.4 billion and it would have approximately
$1.1 billion in excess of its minimum net worth requirement. All references in
this report to "indebtedness", "tangible net worth" and "minimum net worth" are
qualified in their entirety by reference to the applicable defined term in the
agreement governing Occidental's principal bank credit facilities.
Occidental anticipates that it will have a net cash shortfall for 1998.
In addition, Occidental anticipates a decrease in net equity from September 30,
1998 levels, primarily due to the declaration of regular common and preferred
dividends for the fourth quarter of $91 million. If oil and gas prices and
chemical margins remain at their current depressed levels, operations will
continue to generate a net cash shortfall. A net cash shortfall coupled with the
payment of regular common and preferred dividends will result in a further
reduction of net equity. In the event of a continued net cash shortfall,
Occidental may sell assets, reduce capital spending, restructure debt covenants,
obtain additional equity financing or take other actions in order to mitigate
the shortfall. Based on the foregoing, Occidental believes that it has the
ability to fund operations for the foreseeable future.
1993-1995 Tax Audit
As previously reported, in May 1997, the Registrant was informed by the
SEC that it would conduct a private, formal investigation with regard to the
Registrant's dealings with several foreign consultants. In that connection, the
Registrant produced documents to the SEC in 1997. In November 1998, the
Registrant also made these documents available to the Internal Revenue Service
for their review in connection with its audit covering the 1993-1995 tax years.
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Recent Litigation Development
In December 1998, a purported class action was filed in the Federal
District Court in Houston, Texas by persons claiming to have been beneficiaries
of the Employee Stock Ownership Plan ("ESOP"). The ESOP was created by
Occidental in 1996 for employees of its then MidCon Corp. subsidiary, which was
sold to KN Energy, Inc. in 1998. The plaintiffs allege that each of the ESOP
Trustee and the ESOP Administrative Committee breached its fiduciary duty to the
plaintiffs by failing to properly value the securities held by the ESOP, and
allege that Occidental actively participated in such conduct. In brief, the
plaintiffs allege that in connection with the sale of MidCon, KN assumed various
obligations of MidCon, that by doing so the value of MidCon was increased, and
that this increase was not properly accounted for and shared for distribution to
the ESOP participants. The plaintiffs claim that, as a result of this alleged
breach, the ESOP participants are entitled to an additional aggregate
distribution of at least $200 million. Upon initial examination of the
complaint, Occidental believes the action has no merit. Occidental intends to
defend the action vigorously.
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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: January 6, 1999 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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EXHIBIT INDEX
EXHIBIT
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10.1 Occidental Petroleum Corporation Supplemental Retirement Plan, Amended
and Restated Effective as of January 1, 1999
10.2 Occidental Petroleum Corporation Incentive Stock Option Agreement
10.3 Occidental Petroleum Corporation Nonqualified Stock Option Agreement