EXHIBIT 12
OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
COMPUTATION OF TOTAL ENTERPRISE RATIOS OF EARNINGS TO FIXED CHARGES
FOR THE FIVE YEARS ENDED DECEMBER 31, 1996
(Amounts in millions, except ratios)
1996 1995 1994 1993 1992
- ----------------------------------------- ------ ------ ------ ------ ------
Income(loss) from continuing
operations(a) $ 672 $ 478 $ (46) $ 80 $ 131
------ ------ ------ ------ ------
Add:
Provision(credit) for taxes on income
(other than foreign oil and gas
taxes) 212 244 50 204 114
Interest and debt expense(b) 494 592 594 601 666
Portion of lease rentals
representative of the interest
factor 43 48 55 53 56
Preferred dividends to minority
stockholders of subsidiaries(c) -- -- -- -- 7
------ ------ ------ ------ ------
749 884 699 858 843
------ ------ ------ ------ ------
Earnings(loss) before fixed charges $1,421 $1,362 $ 653 $ 938 $ 974
====== ====== ====== ====== ======
Fixed charges
Interest and debt expense including
capitalized interest(b) $ 506 $ 602 $ 599 $ 612 $ 685
Portion of lease rentals
representative of the interest
factor 43 48 55 53 56
Preferred dividends to minority
stockholders of subsidiaries(c) -- -- -- -- 7
------ ------ ------ ------ ------
Total fixed charges $ 549 $ 650 $ 654 $ 665 $ 748
====== ====== ====== ====== ======
Ratio of earnings to fixed charges 2.59 2.10 n/a(d) 1.41 1.30
- ----------------------------------------- ====== ====== ====== ====== ======
(a) Includes (1) minority interest in net income of majority-owned
subsidiaries having fixed charges and (2) income from less-than-50-
percent-owned equity investments adjusted to reflect only dividends
received.
(b) Includes proportionate share of interest and debt expense of 50-percent-
owned equity investments.
(c) Adjusted to a pretax basis.
(d) Not computed due to less than one-to-one coverage. Earnings were
inadequate to cover fixed charges by $1 million.
FIVE-YEAR SUMMARY OF SELECTED FINANCIAL DATA Occidental Petroleum Corporation
Dollar amounts in millions, except per-share amounts and Subsidiaries
For the years ended December 31, 1996 1995 1994 1993 1992
==================================================== ========= ========= ========= ========= =========
RESULTS OF OPERATIONS
Net sales and operating revenues $ 10,557 $ 10,423 $ 9,236 $ 8,116 $ 8,494
Income(loss) from continuing operations $ 698 $ 511 $ (36) $ 74 $ 126
Net income(loss) $ 668 $ 511 $ (36) $ 283 $ (591)
Preferred dividend requirements $ 93 $ 93 $ 76 $ 39 $ 3
Earnings(loss) applicable to common stock $ 575 $ 418 $ (112) $ 244 $ (594)
Earnings(loss) per common share from
continuing operations $ 1.86 $ 1.31 $ (.36) $ .12 $ .41
Primary earnings(loss) per common share $ 1.77 $ 1.31 $ (.36) $ .80 $ (1.97)
Fully diluted earnings(loss) per common share $ 1.73 $ 1.30 $ (.36) $ .80 $ (1.97)
FINANCIAL POSITION
Total assets $ 17,634 $ 17,815 $ 17,989 $ 17,123 $ 17,877
Long-term debt, net $ 4,511 $ 4,819 $ 5,823 $ 5,728 $ 5,452
Capital lease liabilities, net $ 237 $ 259 $ 291 $ 319 $ 354
Stockholders' equity $ 5,140 $ 4,630 $ 4,457 $ 3,958 $ 3,440
Dividends per common share $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
AVERAGE SHARES OUTSTANDING (thousands) 324,145 318,231 310,836 304,898 302,017
- ---------------------------------------------------- --------- --------- --------- --------- ---------
See Management's Discussion and Analysis and the Notes to Consolidated Financial Statements for information regarding
accounting changes, asset acquisitions and dispositions and charges for reorganization, litigation matters,
environmental remediation and other costs and other special items affecting comparability.
MANAGEMENT'S DISCUSSION AND ANALYSIS
1996 BUSINESS ENVIRONMENT Global demand for energy continued to increase. The
United States economy expanded modestly, while certain developing nations
experienced robust growth. Harsh weather early in 1996 restricted the normal
seasonal increases in crude oil inventories. Sales of Iraqi crude oil under
United Nations Resolution 986, a psychological factor in the market all year,
did not materialize until December 1996. Expansion of non-OPEC production was
limited in 1996 and OPEC production remained sufficiently disciplined so that
excess crude oil supply did not appear in the market. The combination of
increased demand with controlled production and lower inventories provided
higher prices for the year as the benchmark grades, West Texas Intermediate
(WTI) and Brent, each averaged more than $3.50 per barrel above 1995 levels.
Volatility also increased as low inventories caused normal market messages to be
amplified and traders factored the "on-again, off-again" status of Iraqi crude
oil supply into their day-to-day market decisions. Producers, such as
Occidental, benefited from the demand for energy more than refiners as a
worldwide surplus of refining capacity continued to restrict refining margins.
As in 1995, the difference in the value of light crude oil compared to
heavy crude oil narrowed. Occidental continued to benefit from the change in
relative values since Occidental's worldwide crude oil production, on average,
is somewhat heavier than the benchmark grades.
Natural gas prices were significantly higher in 1996 than in 1995. The
1995-96 heating season had an extended period of cold weather. Heating
requirements increased demand, inventories were drawn down to low levels, and
prices increased. The cold weather was particularly severe in the eastern half
of the United States and transportation capacity from the western United States
and Canada to the eastern United States was limited. This caused high prices in
the Midwest and the East Coast compared to the rest of the country.
Summer demand, supported by economic growth and the need to restore
depleted inventories for the 1996-97 heating season, sustained relatively high
prices. As winter approached, storage inventories were below year-ago levels,
with producing area storage reduced the most.
Price volatility has encouraged trading in natural gas futures on the New
York Mercantile Exchange (NYMEX). The volume of futures trading is approximately
four times the actual amount of gas delivered to pipelines. This winter, NYMEX
natural gas futures attained another all-time high price and natural gas was
among the most volatile of U.S.-traded commodities.
With interstate natural gas pipelines operating under Federal Energy
Regulatory Commission (FERC) Order 636 for the third year, state and federal
regula-
21
tors have focused their attention on the unbundling of services traditionally
provided by local gas distribution companies (LDCs) and electric utilities.
Producers and unregulated marketing companies are beginning to sell gas directly
to retail customers previously supplied by LDCs. Unbundling of electric service
at the retail level is currently under review. The transition to total
unbundling of gas and electric services is anticipated within five years. This
is creating new opportunities for marketers of both gas and electricity.
Consolidation of gas marketing organizations continued in 1996, including
combinations with organizations in the electric power sector. Such alliances are
driven by economies of scale and the need to expand service capabilities to
compete effectively in the U.S. economy.
Although 1996 earnings for the U.S. chemical industry were lower than 1995,
steady demand growth contributed to stability and to pricing and margins that
overall were not unfavorable. Demand for OxyChem products remained strong as the
United States and other economies continued to benefit from sustained health in
such key end-use markets as construction, automotive, pulp and paper, and
aluminum. While chlorine demand and prices remained strong throughout 1996, a
softening of prices began to occur in caustic soda during the last half of the
year as customer inventories of caustic soda grew in certain important sectors.
Prices for ethylene and ethylene co-products, such as propylene, continued
to improve during 1996 due to strong demand. However, ethylene margins were
lower due to increasing feedstock costs. Polyvinyl chloride (PVC) demand
continued to grow at strong rates during 1996, but increased industry capacity
and higher raw material costs resulted in reduced margins. Sales and income from
OxyChem's specialty business increased from 1995 due to the strong economy and
contributions of complementary businesses acquired in the third quarter.
1996 INCOME SUMMARY Occidental reported net income of $668 million ($1.77 per
share) in 1996, on net sales and operating revenues of $10.6 billion. Before the
after-tax effect of the special items listed below, earnings were $643 million
in 1996 and $623 million in 1995.
DIVISIONAL OPERATIONS The following discussion of each of Occidental's three
operating divisions and corporate items should be read in conjunction with Note
17 to the Consolidated Financial Statements.
Divisional earnings exclude interest income, interest expense, unallocated
corporate expenses, extraordinary items and income from equity investments, but
include gains from dispositions of divisional assets.
Foreign income and other taxes and certain state taxes are included in
divisional earnings on the basis of operating results. U.S. federal income taxes
are not allocated to divisions except for amounts in lieu thereof that represent
the tax effect of operating charges or credits resulting from purchase
accounting adjustments which arise due to the implementation in 1992 of
Statement of Financial Accounting Standards (SFAS) No. 109--"Accounting for
Income Taxes." Divisional earnings in 1996 benefited by $89 million from credits
allocated of $15 million, $48 million and $26 million in oil and gas, natural
gas transmission and chemical, respectively. Divisional earnings in 1995
benefited by $91 million from credits allocated of $16 million, $48 million and
$27 million in oil and gas, natural gas transmission and chemical, respectively.
Divisional earnings in 1994 benefited by $91 million from net credits allocated
of $18 million, $41 million and $32 million in oil and gas, natural gas
transmission and chemical, respectively.
The following table sets forth the sales and earnings of each operating
division and corporate items:
DIVISIONAL OPERATIONS
In millions
Sales Earnings(Loss)
----------------------------------- -----------------------------------
For the years ended December 31, 1996 1995 1994 1996 1995 1994
================================ ========= ========= ========= ========= ========= =========
Oil and gas $ 3,680 $ 3,018 $ 2,451 $ 480 $ 45 $ 27
Natural gas transmission 2,574 2,038 2,110 296 213 276
Chemical 4,307 5,370 4,677 668 1,080 350
Other (4) (3) (2) -- -- --
--------- --------- --------- --------- --------- ---------
$ 10,557 $ 10,423 $ 9,236 1,444 1,338 653
========= ========= =========
Unallocated corporate items
Interest expense, net (451) (540) (564)
Income taxes (263) (295) (110)
Other (32) 8 (15)
--------- --------- ---------
Income(loss) before extraordinary items 698 511 (36)
Extraordinary gain(loss), net (30) -- --
--------- --------- ---------
Net income(loss) $ 668 $ 511 $ (36)
======================================================================= ========= ========= =========
22
OIL AND GAS
1996 1995 1994
========================================== ========= ========= =========
DIVISIONAL SALES (in millions) $ 3,680 $ 3,018 $ 2,451
DIVISIONAL EARNINGS (in millions) $ 480 $ 45 $ 27
AVERAGE SALES PRICES
CRUDE OIL PRICES (per barrel)
U.S. $ 18.98 $ 15.61 $ 14.21
Other Western Hemisphere $ 12.65 $ 10.62 $ 10.19
Eastern Hemisphere $ 17.66 $ 14.47 $ 12.08
GAS PRICES (per thousand cubic feet)
U.S. $ 2.11 $ 1.51 $ 1.85
Other Western Hemisphere $ -- $ -- $ 1.72
Eastern Hemisphere $ 2.23 $ 2.07 $ 1.15
EXPENSED EXPLORATION(a) (in millions) $ 120 $ 106 $ 127
CAPITAL EXPENDITURES (in millions)
Development $ 540 $ 373 $ 345
Exploration $ 164 $ 130 $ 147
Acquisitions and other $ 58 $ 72 $ 326
- ------------------------------------------ --------- --------- ---------
(a) Includes amounts previously shown in exploration capital expenditures.
Occidental emphasizes international oil and gas exploration and production.
Occidental seeks long-term improvement in profitability and cash flow through a
combination of improved operations in existing fields, enhanced oil recovery
projects, high potential exploration and complementary property acquisitions.
Occidental reorganized its worldwide oil and gas operations in late 1995.
This change allowed Occidental to redeploy its resources, to reduce costs and to
sharpen its focus on improving performance.
The operating results of 1996, compared with 1995, reflected higher
worldwide crude oil prices, increased international oil production, higher
domestic natural gas prices and lower costs resulting from the reorganization,
partially offset by higher exploration costs. The change in sales for 1996,
compared with 1995, largely reflected higher worldwide crude oil production and
prices and increased oil trading revenue. The operating results of 1995,
compared with 1994, reflected higher worldwide crude oil production and prices,
and higher international natural gas volumes and lower exploration costs,
partially offset by lower domestic natural gas prices. The change in sales for
1995, compared with 1994, largely reflected higher worldwide crude oil
production and prices and increased oil trading activity. Approximately one-
third of oil and gas sales for 1996, 1995 and 1994 were attributable to oil
trading activity. The results are not significant. Occidental participates in
oil trading to remain aware of the complexities affecting price volatility and
supply/demand fundamentals in order to optimize its long-term global oil
marketing.
The 1996 results included a $105 million charge for the write-down of
Occidental's investment in an oil and gas project in the Republic of Komi in the
former Soviet Union.
The 1995 results included charges of $95 million related to reorganization
costs and $109 million for settlement of litigation. The 1994 results reflected
charges of $45 million for environmental and litigation matters, $11 million for
the impairment of oil and gas properties and $12 million for a voluntary
retirement program and severance and related costs. Also included in the 1994
results was the gain of $16 million from the sale of Occidental's remaining
interests in its producing operations in Argentina and a $15 million benefit
resulting from the reversal of reserves no longer needed for anticipated
liabilities related to the sale of Occidental's U.K. North Sea interests.
NATURAL GAS TRANSMISSION
1996 1995 1994
===================================== ========= ========= =========
DIVISIONAL SALES (in millions) $ 2,574 $ 2,038 $ 2,110
DIVISIONAL EARNINGS (in millions) $ 296 $ 213 $ 276
THROUGHPUT (trillions of cubic feet)
Transportation 1.55 1.53 1.53
Sales .70 .65 .55
--------- --------- ---------
2.25 2.18 2.08
========= ========= =========
CAPITAL EXPENDITURES (in millions) $ 147 $ 150 $ 93
- ------------------------------------- --------- --------- ---------
In 1996, MidCon Corp.'s (MidCon) total throughput volume (excluding
transportation for affiliates) was 2.25 trillion cubic feet (Tcf), approximately
3 percent higher than 1995 throughput of 2.18 Tcf. Sales volumes increased
approximately 8 percent from 1995, while transportation volumes were about
equal. Revenues were higher in 1996 than in 1995, due primarily to higher sales
prices and volumes.
MidCon completed a reorganization of its operations in early 1996.
Operations were structured to expedite design of products and services to meet
changing customer needs, to optimize utilization of storage and transport
capacity, and to reduce costs.
The increased earnings in 1996, compared with 1995, primarily reflected
higher gas sales margins, higher liquid prices and cost savings related to
MidCon's reorganization, partially offset by lower transportation margins
reflecting renegotiated customer contracts.
Excluding special items, earnings for 1995 were approximately the same as
1994. Special items included a 1995 charge for reorganization costs of $37
million, and 1994 favorable items of $13 million from a reduction of LIFO gas
storage inventory and $12 million from the reduction of the contract impairment
reserve.
CHEMICAL
1996 1995 1994
===================================== ========= ========= =========
DIVISIONAL SALES (in millions) $ 4,307 $ 5,370 $ 4,677
DIVISIONAL EARNINGS (in millions) $ 668 $ 1,080 $ 350
KEY PRODUCT INDEXES (1987 through
1990 average price = 1.0)
Chlorine 1.36 1.36 1.43
Caustic soda 1.16 1.28 .54
PVC resins .82 1.01 .93
KEY PRODUCT VOLUMES
Chlorine (thousands of tons) 3,254 3,170 3,172
Caustic soda (thousands of tons) 3,401 3,275 3,471
PVC resins (millions of pounds) 1,654 1,724 1,920
CAPITAL EXPENDITURES (in millions)
Basic chemicals $ 102 $ 121 $ 87
Petrochemicals $ 41 $ 43 $ 32
Polymers and plastics $ 75 $ 33 $ 34
Specialty businesses $ 39 $ 30 $ 23
Other $ 5 $ 16 $ 14
- ------------------------------------- --------- --------- ---------
23
OxyChem's ongoing commitment to controlling costs and maintaining the
reliable operation of its manufacturing facilities continues to benefit
earnings. However, lower margins, resulting from higher feedstock and raw
material costs and lower pricing, kept 1996 earnings below last year's record
earnings.
OxyChem completed a realignment of its operations in early 1996, whereby
each of the four business units became responsible for worldwide management of
its products and businesses. The realignment resulted in consolidation of
logistical operations, more efficient delivery of products and cost reductions.
Earnings in 1996 decreased, compared with 1995, mainly because margins
declined for a number of OxyChem's key products, primarily PVC, caustic soda and
petrochemicals resulting from lower sales prices, and increased feedstock costs.
After declining in 1995, chlorine prices strengthened throughout 1996 having
little year-to-year effect, while caustic pricing declined, especially for
exports. Prices for PVC in 1996 were also lower. The drop in revenue from 1995
resulted principally from the absence of revenue from divested assets.
Otherwise, sales volume increases mostly offset the impact on sales revenue of
lower prices. The 1996 results benefited from ongoing manufacturing and
administrative cost-improvement programs. The higher earnings in 1995, compared
with 1994, reflected significantly improved prices and margins for PVC, caustic
soda and petrochemicals.
The 1996 earnings included the pretax gain of $170 million related to
favorable litigation settlements, and a charge of $75 million for additional
environmental reserves relating to various existing sites, and the related state
tax effects. Included in the 1995 results was a $40 million pretax gain related
to the sale of the PVC facility at Addis, Louisiana. The 1994 results reflected
a $55 million charge for litigation matters and charges of $48 million for
expenses related to the curtailment and closure of certain plant operations.
Also included in the 1994 results was an $11 million unfavorable impact, related
to an explosion at the Taft plant, and charges for start-up costs related to the
now divested Swift Creek chemical plant.
CORPORATE The 1996 income tax amount included a benefit of approximately $100
million primarily from a reduction in the deferred tax asset valuation allowance
due to the realization of benefits from operating loss and credit carryforwards
in the United States and Peru.
The increased costs in unallocated corporate other items in 1996, compared
with 1995, primarily reflected lower equity income from unconsolidated chemical
investments and costs associated with the initial establishment of an Employee
Stock Ownership Plan at MidCon.
The improvement in unallocated corporate other items in 1995, compared with
1994, primarily reflected the benefit of higher equity income from
unconsolidated chemical and oil and gas investments.
The 1994 amount included a net benefit of $7 million resulting from the
reversal of reserves no longer required and the adoption of SFAS No.
112--"Employers' Accounting for Postemployment Benefits."
MIDCON ESOP In November 1996, Occidental established the MidCon Corp.
Employee Stock Ownership Plan (MidCon ESOP) for the benefit of employees of
MidCon. Pursuant to the MidCon ESOP, Occidental has issued 1,400,000 shares of
its cumulative MidCon-indexed convertible preferred stock (the CMIC Preferred
Stock) to the MidCon Corp. ESOP Trust. The CMIC Preferred Stock is designed to
track the value of MidCon, which remains a wholly-owned subsidiary of
Occidental. The MidCon ESOP paid for the CMIC Preferred Stock with a $1.4
billion promissory note guaranteed by MidCon (the ESOP Note). Dividends on the
CMIC Preferred Stock are payable at an annual rate of $21 per share, when and as
declared by Occidental's Board of Directors. It is anticipated that MidCon will
make annual contributions from its operating cash flow to the MidCon ESOP which,
together with the annual dividends, will be used to repay the ESOP Note due to
Occidental.
REORGANIZATION CHARGES In the fourth quarter of 1995, Occidental recorded
pretax charges of $132 million related to the reorganization of its worldwide
oil and gas operations and the reorganization of the operations of the natural
gas transmission division.
ACCOUNTING CHANGES Occidental periodically reviews the estimated economic
lives of its assets. Beginning in 1994, Occidental revised the estimated average
useful lives used to compute depreciation for most of its chemical machinery and
equipment from 20 years to 25 years and for most of its natural gas transmission
property to a remaining life of 40 years. These revisions were made to more
properly reflect the current economic lives of the assets based on anticipated
industry conditions. The result was a reduction in net loss for the year ended
December 31, 1994 of approximately $65 million, or approximately $.21 per share.
Natural gas transmission and chemical divisional earnings benefited by
approximately $31 million and $34 million, respectively.
STATEMENT OF POSITION NO. 96-1 In October 1996, the American Institute of
Certified Public Accountants (AICPA) issued Statement of Position No.
96-1--"Environmental Remediation Liabilities" (SOP 96-1), which provides
authoritative guidance on specific accounting issues that are present in the
recognition, measurement, display and disclosure of environmental remediation
liabilities. Occidental will implement SOP 96-1 effective January 1, 1997 and
has not yet made a final determination of its impact on the financial
statements.
SFAS NO. 125 In June 1996, the Financial Accounting Standards Board issued
SFAS No. 125--"Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities." The statement provides consistent standards for
distinguishing transfers of financial assets that are sales from transfers that
are secured borrowings. Occidental will implement SFAS No. 125 effective January
1, 1997. The adoption of the statement is not expected to have a material impact
on Occidental's financial position or results of operations.
24
SFAS NO. 123 In October 1995, the Financial Accounting Standards Board issued
SFAS No. 123--"Accounting for Stock-Based Compensation." This statement defines,
among other things, a fair-value based method of accounting for options under an
employee stock option plan. However, it also allows an entity to continue to
account for such items using Accounting Principles Board (APB) Opinion No.
25--"Accounting for Stock Issued to Employees," under which no compensation
expense is recognized. Occidental elected this option, which alternatively
requires pro forma disclosures of net income and earnings per share, as if
compensation expense had been recognized. In accordance with SFAS No. 123,
Occidental will continue to use the accounting prescribed by APB Opinion No. 25.
Effective for the year ended December 31, 1996, the required pro forma
disclosures have been made as indicated above at Note 13 to the Consolidated
Financial Statements.
SFAS NO. 121 In March 1995, the Financial Accounting Standards Board issued
SFAS No. 121--"Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to Be Disposed Of." The statement requires a review of long-lived
assets for impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable. If it is determined that
an impairment loss has occurred based on expected future cash flows, then a loss
will be recognized in the income statement using a fair-value based model.
Occidental's adoption of SFAS No. 121, effective January 1, 1996, did not have a
material impact on Occidental's financial position or results of operations.
SFAS NO. 112 In December 1992, the Financial Accounting Standards Board
issued SFAS No. 112--"Employers' Accounting for Postemployment Benefits," which
substantially changed the existing method of accounting for employer benefits
provided to inactive or former employees after active employment but before
retirement. The statement requires that the cost of postemployment benefits
(principally medical benefits for inactive employees) be recognized in the
financial statements during employees' active working careers. Occidental's
adoption of SFAS No. 112, effective January 1, 1994, did not have a material
impact on Occidental's financial position or results of operations.
SPECIAL ITEMS Special items are infrequent transactions that may affect
comparability between years. The special items included in the 1996, 1995 and
1994 results are detailed below. For further information, see Note 17 to the
Consolidated Financial Statements and the discussion above.
SPECIAL ITEMS
Benefit(Charge) In millions 1996 1995 1994
========================================= ========= ========= =========
OIL AND GAS
Write-down of investment in
oil and gas project in Komi $ (105) $ -- $ --
Litigation settlement -- (109) --
Reorganization -- (95) --
Gain on sale of producing
interests in Argentina -- -- 16
U.K. North Sea reserve
reversal -- -- 15
Environmental and litigation -- -- (45)
Severance and voluntary
retirement program -- -- (12)
Property impairments -- -- (11)
- ----------------------------------------- --------- --------- ---------
NATURAL GAS TRANSMISSION
Reorganization -- (37) --
Contract impairment reserve
reversal(a) -- -- 12
Reduction of LIFO inventory -- -- 13
- ----------------------------------------- --------- --------- ---------
CHEMICAL
Favorable litigation settlements 170 -- --
Environmental reserves (75) -- --
Gain on sale of PVC facility -- 40 --
Litigation reserves -- -- (55)
Curtailment of operations
and plant closure -- -- (48)
Plant explosion and
start-up costs -- -- (11)
- ----------------------------------------- --------- --------- ---------
CORPORATE
Tax reserve reversal 100 -- --
Extraordinary loss on debt
redemption(a) (30) -- --
Reversal of reserves and
adoption of SFAS No. 112 -- -- 7
- ----------------------------------------- --------- --------- ---------
(a) These amounts are shown after-tax.
CONSOLIDATED OPERATIONS--REVENUES
SELECTED REVENUE ITEMS
In millions 1996 1995 1994
========================================= ========= ========= =========
Net sales and operating
revenues $ 10,557 $ 10,423 $ 9,236
Interest, dividends and
other income $ 247 $ 114 $ 92
Income from equity
investments $ 83 $ 112 $ 73
- ----------------------------------------- --------- --------- ---------
25
The increase in sales in 1996, compared with 1995, primarily reflected
higher worldwide crude oil prices and production, increased oil trading
activity, and higher prices and volume for domestic natural gas. These increases
were partially offset by the absence of revenues from divested assets. The
increase in sales in 1995, compared with 1994, primarily reflected higher sales
prices for most major chemical products, higher worldwide crude oil production
and prices, and increased oil trading activity. These increases were partially
offset by the impact of lower domestic natural gas prices.
The increase in interest, dividends and other income in 1996, compared with
1995, was primarily attributed to the gain of $170 million related to favorable
litigation settlements. This was partially offset by decreased interest earnings
resulting from lower investment balances compared to 1995. The increase in
interest, dividends and other income in 1995, compared with 1994, reflected
higher interest income resulting from the substantial increase in invested cash
balances. Included in the 1994 amount was the benefit of $20 million from a
pretax reduction of the contract impairment reserve at MidCon, and the $15
million benefit resulting from the reversal of reserves no longer needed for
anticipated liabilities related to the sale of Occidental's U.K. North Sea
interests.
The decrease in income from equity investments in 1996, compared with 1995,
primarily reflected lower earnings from certain unconsolidated chemical
investments.
The increase in income from equity investments in 1995, compared with 1994,
primarily reflected higher earnings from certain unconsolidated chemical and oil
and gas investments.
CONSOLIDATED OPERATIONS--EXPENSES
SELECTED EXPENSE ITEMS
In millions 1996 1995 1994
=============================== ========= ========= =========
Cost of sales $ 7,037 $ 6,962 $ 6,726
Selling, general and adminis-
trative and other
operating expenses $ 1,084 $ 1,191 $ 985
Environmental remediation $ 100 $ 21 $ 5
Interest and debt expense, net $ 484 $ 579 $ 584
Provision for domestic and
foreign income and
other taxes $ 454 $ 402 $ 143
- ------------------------------- --------- --------- ---------
Although the increase in cost of sales from 1995 to 1996 was small, it
reflected higher prices on oil traded and higher chemical feedstock costs,
largely offset by the absence of costs from divested assets.
The increase in cost of sales in 1995, compared with 1994, primarily
reflected increased oil trading activity.
Selling, general and administrative and other operating expenses in 1995
reflected the charges for reorganization costs and settlement of litigation.
Environmental remediation included a charge of $75 million in 1996, for
additional environmental reserves related to various existing sites.
Lower interest and debt expense in 1996 from 1995 primarily reflected lower
outstanding average debt levels and lower average interest rates in 1996.
The 1996 provision for domestic and foreign income and other taxes,
compared with 1995, reflected the increased divisional earnings and reduced
interest expense. In addition, income taxes for 1996 benefited by approximately
$100 million from a reduction in the deferred tax asset valuation allowance. The
1995 provision for domestic and foreign income and other taxes, compared with
1994, reflected the substantial increase in divisional earnings subject to U.S.
income tax, primarily at domestic chemical operations. In 1994, income taxes
exceeded pretax income primarily because of substantial amounts of foreign
income that were taxed individually in separate jurisdictions, before the
benefit of a U.S. tax deduction for interest and corporate expenses.
LIQUIDITY AND CAPITAL RESOURCES
OPERATING ACTIVITIES
In millions 1996 1995 1994
========= ========= =========
NET CASH PROVIDED $ 1,987 $ 1,501 $ 760
The 1996 improvement in net cash provided by operating activities, compared
with 1995, reflected higher operating earnings in both the oil and gas and
natural gas transmission divisions, proceeds from litigation settlements and
proceeds from sale of an additional $100 million of receivables.
The 1995 improvement in net cash provided by operating activities, compared
with 1994, reflected higher operating earnings in both the oil and gas and
chemical divisions and proceeds of $100 million from an advance sale of crude
oil, further discussed below.
Other noncash charges of $320 million in 1996 primarily reflected the $105
million charge for the write-down of Occidental's investment in Komi and
additional environmental reserves. Other noncash charges of $246 million in 1995
primarily reflected the charges of $132 million for reorganization costs at the
oil and gas and natural gas transmission divisions. Other noncash charges of
$175 million in 1994 primarily reflected the charges of $100 million for
environmental and litigation matters and $48 million for expenses related to the
curtailment and closure of certain chemical plant operations, partially offset
by $22 million resulting from the reversal of reserves no longer needed and $20
million from the reduction of the contract impairment reserve. Each of the three
years also included charges for employee benefit plans and other items.
INVESTING ACTIVITIES
In millions 1996 1995 1994
========= ========= =========
NET CASH USED $ (979) $ (136) $ (1,007)
Net cash used in investing activities included Occidental's capital
expenditure program as discussed below. The 1996 and 1995 investing amounts also
included proceeds from sales of businesses and other assets. The 1996 investing
amount also included the cost for replenishment of cushion gas in natural gas
reservoirs.
CAPITAL EXPENDITURES In millions 1996 1995 1994
================================= ========= ========= =========
Oil and gas $ 762 $ 575 $ 818
Natural gas transmission 147 150 93
Chemical 262 243 190
Corporate and other 14 11 2
--------- --------- ---------
$ 1,185 $ 979 $ 1,103
================================= ========= ========= =========
26
The spending in the oil and gas business continues to be the major part of
Occidental's capital program, underscoring Occidental's commitment to this core
business. Significant capital was also spent on chemical and natural gas
transmission to maintain and upgrade Occidental's businesses and to provide for
expansion.
The 1994 capital expenditures included the cash portion of the purchase
price of certain U.S. Gulf Coast oil and gas properties acquired from Agip
Petroleum Co. Inc. and payments under a production sharing agreement for an
enhanced oil recovery project in Qatar. Capital expenditures for 1997 are
estimated to be approximately $1.3 billion, with most of the increase from 1996
allocated to oil and gas.
ADDITIONAL CASH FLOW INVESTING ACTIVITIES The 1996 proceeds from the sale of
businesses and disposals of property, plant and equipment included the sale of a
subsidiary which engaged in on-shore drilling and servicing of oil and gas wells
and the sale of Occidental's royalty interest in the Congo.
The 1995 operating lease buyouts of $141 million included $71 million for
the Swift Creek chemical plant. This plant was part of the agricultural chemical
products business sold in the fourth quarter of 1995. The 1995 net proceeds from
the sale of businesses and disposal of property, plant and equipment reflected
the proceeds from the sale of Occidental's high-density polyethylene business
(HDPE), its agricultural chemicals business, its PVC facilities at Addis,
Louisiana, and Burlington South, New Jersey, which were sold pursuant to a
Federal Trade Commission divestiture order, and a portion of Occidental's oil
and gas operation in Pakistan.
The 1994 purchase of businesses reflected cash balances obtained as a
result of the acquisition of Placid Oil Company, which was consummated through
the issuance of Occidental common and preferred stock.
FINANCING ACTIVITIES
In millions 1996 1995 1994
========= ========= =========
NET CASH PROVIDED(USED) $ (1,249) $ (974) $ 219
The increase in 1996 cash used for financing activities, compared with
1995, reflected repayment of high coupon debt using proceeds from asset sales
that occurred in 1996 and 1995 and cash flow from operations. In 1996, payments
of long-term debt and capital lease liabilities and net proceeds from borrowings
totaled $867 million.
The significant change in 1995 financing activities, compared with 1994,
reflected repayment of debt using proceeds from asset sales and cash flow from
operations. In 1995, payments of long-term debt and capital lease liabilities
and net proceeds from borrowings totaled $603 million.
Financing activities in 1994 provided net cash proceeds of approximately
$557 million from the February public offering of 11,388,340 shares of $3.00
cumulative CXY-indexed convertible preferred stock. Additionally, in 1994,
proceeds from borrowings, net of payments of long-term debt and capital lease
liabilities, resulted in net cash provided of $26 million.
Occidental paid preferred and common stock dividends of $415 million in
1996, $406 million in 1995 and $376 million in 1994. The increases in 1996 and
1995 primarily reflected the dividends on the preferred and common stocks issued
in connection with acquisitions.
Cash used by investing activities exceeded cash provided by operating
activities for the year ended December 31, 1994. Occidental funded this net cash
use through borrowings and issuance of preferred stock.
Occidental has a centralized cash-management system that funds the working
capital and capital expenditure requirements of its various subsidiaries. There
are no provisions under existing debt agreements that significantly restrict the
ability to move funds among operating entities.
ANALYSIS OF FINANCIAL POSITION The changes in the following components of
Occidental's balance sheet are discussed below:
SELECTED BALANCE SHEET COMPONENTS
In millions 1996 1995
=========================================== ========= =========
Prepaid expenses and other $ 407 $ 461
Equity investments $ 1,039 $ 927
Other assets $ 445 $ 344
Current maturities of long-term debt
and capital lease liabilities $ 27 $ 522
Accounts payable $ 1,023 $ 859
Accrued liabilities $ 1,185 $ 1,064
Long-term debt, net $ 4,511 $ 4,819
Stockholders' equity $ 5,140 $ 4,630
- ------------------------------------------- --------- ---------
Prepaid expenses and other decreased reflecting the reduction of deferred
tax assets and prepaid insurance during 1996. Equity investments increased
primarily reflecting the acquisition of INDSPEC Chemical Corporation (INDSPEC).
Other assets increased primarily reflecting goodwill resulting from various
acquisitions during 1996.
Accounts payable and accrued liabilities increased primarily reflecting
significant increases in natural gas purchases. Current maturities of long-term
debt and capital lease liabilities decreased reflecting the repayment of debt
during 1996.
Long-term debt, net of current maturities and unamortized discount,
decreased reflecting debt repayments, using proceeds from asset sales and cash
flow from operations. At December 31, 1996, minimum principal payments on
long-term debt, including sinking fund requirements, totaled $367 million in
1998, $1.216 billion in 1999, $501 million in 2000, $515 million in 2001, $77
million in 2002 and $1.983 billion thereafter. However, Occidental has the
option to call certain issues of long-term debt prior to their maturity dates.
At December 31, 1996, Occidental had available approximately $2.0 billion
of committed credit lines and draws on them, as needed, to maintain sufficient
cash balances for daily operating and other purposes.
The increase in stockholders' equity primarily reflected net income and the
issuance of common stock for various acquisitions, to various employee benefit
plans, and for the dividend reinvestment plan, partially offset by dividends
declared.
ACQUISITIONS AND COMMITMENTS In August 1996, Occidental acquired three
specialty chemical producers in separate transactions for approximately $149
million through the issuance of 5,512,355 shares of Occidental common stock,
with a value of approximately $130 million, and the balance paid in cash. The
acquisitions included Laurel Industries, Inc., North America's largest producer
of antimony oxide at its LaPorte, Texas facility; Natural Gas Odorizing, Inc.,
the leading U.S. producer
27
of mercaptan-based warning agents for use in natural gas and propane from its
single plant in Baytown, Texas; and a plant in Augusta, Georgia, purchased from
Power Silicates Manufacturing, Inc., which produces sodium silicates for use in
soap and detergent formulating, paper manufacturing and silica-based catalysts.
These acquisitions have been accounted for by the purchase method. Accordingly,
the cost of each acquisition was allocated to the assets acquired, goodwill and
liabilities assumed based upon their estimated respective fair values.
In April 1996, Occidental completed its acquisition of a 64 percent equity
interest (on a fully-diluted basis) in INDSPEC for approximately $92 million
through the issuance of 3,346,421 shares of Occidental common stock, with a
value of approximately $87 million, and the balance paid in cash. Under the
terms of the acquisition agreement, INDSPEC's management and employees have
retained voting control of INDSPEC.
In December 1995, Occidental entered into a transaction with Clark USA,
Inc. (Clark) under which Occidental agreed to deliver approximately 17.7 million
barrels of WTI-equivalent oil over a six-year period. In exchange, Occidental
received $100 million in cash and approximately 5.5 million shares of Clark
common stock. As a result of this transaction, Occidental owns approximately 19
percent of Clark. Occidental has accounted for the consideration received in the
transaction as deferred revenue which is being amortized into revenue as WTI-
equivalent oil is produced and delivered during the term of the agreement. At
December 31, 1996, approximately 15.5 million barrels remain to be delivered.
During the second quarter of 1995, Occidental and Canadian Occidental
Petroleum Ltd. formed partnerships into which they contributed primarily sodium
chlorate manufacturing facilities. Occidental retained a less-than-twenty-
percent direct interest in these partnerships accounted for on the equity
method. This transaction did not result in any gain or loss.
Commitments at December 31, 1996 for major capital expenditures during 1997
and thereafter were approximately $358 million. Total capital expenditures for
1997 are estimated to be approximately $1.3 billion, the major portion of which
is for oil and gas. Occidental believes that, through internally-generated funds
and financing activity, it will have sufficient funds to continue its current
capital spending programs.
HEDGING ACTIVITIES Occidental periodically uses commodity futures contracts,
options and swaps to hedge the impact of oil and natural gas price fluctuations
and uses forward exchange contracts to hedge the risk associated with
fluctuations in foreign currency exchange rates. Occidental does not engage in
activities using complex or highly leveraged instruments. Gains and losses on
commodity futures contracts are deferred until recognized as an adjustment to
sales revenue or purchase costs when the related transaction being hedged is
finalized. Gains and losses on foreign currency forward exchange contracts that
hedge identifiable future commitments are deferred until recognized when the
related item being hedged is settled. All other contracts are recognized in
periodic income.
In addition, the oil and gas division engages in oil and gas trading
activity, primarily through the use of futures contracts. The results are not
significant and are included in periodic income.
Many of Occidental's foreign oil and gas operations and foreign chemical
operations are located in countries whose currencies generally depreciate
against the U.S. dollar on a continuing basis. An effective currency forward
market does not exist for these countries; therefore, Occidental attempts to
manage its exposure primarily by balancing monetary assets and liabilities and
maintaining cash positions only at levels necessary for operating purposes.
Additionally, almost all foreign oil and gas cash flows are denominated in U.S.
dollars. Most foreign currency positions at December 31, 1996 are generally in a
net liability position, effectively eliminating the potentially unfavorable
effects of devaluation. For those currencies that are in a net asset position,
Occidental maintains these positions at low levels so that the exposure to
currency devaluation is relatively insignificant.
Interest rate swaps are entered into as part of Occidental's overall
strategy to maintain part of its debt on a floating rate basis. From time to
time, Occidental enters into interest rate swaps on specific debt. Occidental
has outstanding interest rate swaps as of December 31, 1996 on fixed-rate debt
for notional amounts totaling $530 million, converting this fixed-rate debt to
floating-rate debt. The swap rate difference resulted in approximately $1
million and $5 million of additional interest expense in 1996 and 1995,
respectively, and $6 million savings in interest expense for 1994, compared to
what interest expense would have been had the debt remained at fixed rates. The
impact of the swaps on the weighted average interest rates for all debt in 1996,
1995 and 1994 was not significant. The fair value of interest rate swaps is the
amount at which they could be settled, based on estimates obtained from dealers.
Based on these estimates at December 31, 1996, Occidental would be required to
pay approximately $10 million to terminate its interest rate swap agreements.
Occidental will continue its strategy of maintaining part of its debt on a
floating rate basis.
TAXES Deferred tax liabilities were $2.3 billion at December 31, 1996, net of
deferred tax assets of $1.6 billion. The current portion of the deferred tax
assets of $300 million is included in prepaid expenses and other. The net
deferred tax assets are expected to be realized through future operating income
and reversal of taxable temporary differences.
LAWSUITS, COMMITMENTS AND CONTINGENCIES Occidental and certain of its
subsidiaries are parties to various lawsuits, environmental and other
proceedings and claims that may involve substantial amounts. See Note 10 to the
Consolidated Financial Statements. Occidental also has commitments under
contracts, guarantees and joint ventures and certain other contingent
liabilities. See Note 11 to the Consolidated Financial Statements. In
management's opinion, after taking into account reserves, none of these matters
should have a material adverse effect upon Occidental's consolidated financial
position or results of operations in any given year.
ENVIRONMENTAL EXPENDITURES Occidental's operations in the United States are
subject to stringent federal, state and local laws and regulations relating to
improving or maintaining the quality of the environment. Foreign operations also
are subject to environmental protection laws. Costs associated with
environmental compliance
28
have increased over time and are expected to continue to rise in the future.
Environmental expenditures, related to current operations, are factored into the
overall business planning process. These expenditures are mainly considered an
integral part of production in manufacturing quality products responsive to
market demand.
ENVIRONMENTAL REMEDIATION The laws which require or address environmental
remediation apply retroactively to previous waste disposal practices. And, in
many cases, the laws apply regardless of fault, legality of the original
activities or ownership or control of sites. Occidental is currently
participating in environmental assessments and cleanups under these laws at
federal Superfund sites, comparable state sites and other remediation sites,
including Occidental facilities and previously owned sites. Also, Occidental and
certain of its subsidiaries have been involved in a substantial number of
governmental and private proceedings involving historical practices at various
sites including, in some instances, having been named as defendants and/or as
potentially responsible parties (PRPs) under the federal Superfund law. These
proceedings seek funding and/or remediation and, in some cases, compensation for
alleged personal injury or property damage, punitive damages and civil
penalties, aggregating substantial amounts.
Occidental does not consider the number of Superfund and comparable state
sites at which it has been notified that it has been identified as being
involved to be a relevant measure of exposure. Although the liability of a PRP,
and in many cases its equivalent under state law, may be joint and several,
Occidental is usually one of many companies cited as a PRP at these sites and
has, to date, been successful in sharing cleanup costs with other financially
sound companies. Also, many of these sites are still under investigation by the
Environmental Protection Agency (EPA) or the equivalent state agencies. Prior to
actual cleanup, the parties involved assess site conditions and responsibility
and determine the appropriate remedy. The majority of remediation costs are
incurred after the parties obtain EPA or equivalent state agency approval to
proceed. The ultimate future cost of remediation of certain of the sites for
which Occidental has been notified that it has been identified as involved
cannot be reasonably determined at this time.
As of December 31, 1996, Occidental had been notified by the EPA or
equivalent state agencies or otherwise had become aware that it had been
identified as being involved at 267 Superfund or comparable state sites. (This
number does not include 71 sites where Occidental has been successful in
resolving its involvement.) The 267 sites include 81 former Diamond Shamrock
Chemical sites as to which Maxus Energy Corporation has retained all liability,
and 2 sites at which the extent of such retained liability is disputed. Of the
remaining 184 sites, Occidental has had no recent or significant communication
or activity with government agencies or other PRPs at 29 sites, has denied
involvement at 32 sites and has yet to determine involvement in 20 sites. With
respect to the remaining 103 of these sites, Occidental is in various stages of
evaluation. For 94 of these sites, where environmental remediation efforts are
probable and the costs can be reasonably estimated, Occidental has accrued
reserves at the most likely cost to be incurred. The 94 sites include 29 sites
as to which present information indicates that it is probable that Occidental's
aggregate exposure is immaterial. In determining the reserves, Occidental uses
the most current information available, including similar past experiences,
available technology, regulations in effect, the timing of remediation and
cost-sharing arrangements. For the remaining 9 of the 103 sites being evaluated,
Occidental does not have sufficient information to determine a range of
liability, but Occidental does have sufficient information on which to base the
opinion expressed above in the Lawsuits, Commitments and Contingencies section.
For management's opinion on lawsuits and proceedings and on other environmental
loss contingencies, see the Lawsuits, Commitments and Contingencies section.
ENVIRONMENTAL COSTS Occidental's costs, some of which may include estimates,
relating to compliance with environmental laws and regulations are shown below
for each division:
In millions 1996 1995 1994
================================ ========= ========= =========
OPERATING EXPENSES
Oil and gas $ 41 $ 41 $ 34
Natural gas transmission 5 7 6
Chemical 59 63 74
--------- --------- ---------
$ 105 $ 111 $ 114
========= ========= =========
REMEDIATION EXPENSES
Oil and gas $ -- $ 3 $ 4
Chemical 100 18 1
--------- --------- ---------
$ 100 $ 21 $ 5
========= ========= =========
CAPITAL EXPENDITURES
Oil and gas $ 54 $ 43 $ 42
Natural gas transmission 8 4 1
Chemical 27 27 24
--------- --------- ---------
$ 89 $ 74 $ 67
================================ ========= ========= =========
Operating expenses are incurred on a continuous basis. Remediation expenses
relate to existing conditions caused by past operations and do not contribute
to current or future revenue generation. Capital expenditures relate to longer
lived improvements in facilities. Although total costs may vary in any one year,
over the long term, divisional operating and capital expenditures for
environmental compliance generally are expected to increase. As of December 31,
1996 and 1995, Occidental had environmental reserves of approximately $566
million and $582 million, respectively. The net reduction reflects additional
provisions which are more than offset by payments for remediation programs and
settlement agreements.
FOREIGN INVESTMENTS Portions of Occidental's oil and gas assets are located
in countries outside North America, some of which may be considered politically
and economically unstable. These assets and the related operations are subject
to the risk of actions by governmental authorities and insurgent groups.
Occidental attempts to conduct its financial affairs so as to protect against
such risks and would expect to receive compensation in the event of
nationalization. At December 31, 1996, the carrying value of Occidental's oil
and gas assets in countries outside North America aggregated
29
approximately $1.924 billion, or approximately 11 percent of Occidental's total
assets at that date. Of such assets, approximately $722 million was located in
the Middle East, $639 million was located in Latin America, and substantially
all of the remainder were located in the Netherlands and the Far East.
1997 BUSINESS OUTLOOK
OIL AND NATURAL GAS INDUSTRY The petroleum industry is a highly competitive
global business subject to significant volatility due to numerous external
market forces. World oil demand for 1997 is expected to increase by over 2
percent or 1.5 million barrels a day, with the largest increase coming from
developing countries. Longer term, world GDP growth through 2001 should provide
the impetus for rising oil demand.
Oil prices will continue to be affected by short-term fundamentals such as
weather, inventory levels, competing fuel prices, availability of transport
capacity and supply conditions. Increases in crude oil supplies from non-OPEC
sources, Iraqi production allowed under United Nations supervision and a warmer
January and February 1997 have placed downward pressure on oil prices in the
first quarter of 1997. Another factor that directly influences crude oil prices
is OPEC members' compliance with production quotas. If world demand for oil
stabilizes or declines, non-compliance with production quotas by member
countries within OPEC will have a negative impact on prices. While fundamentals
are a deciding factor affecting crude oil price over the longer term, day to day
prices may be more volatile due to futures trading activity on the NYMEX. Such
volatility can be influenced by perceptions of world events, government
announcements, proposed legislation or other similar factors.
Debottlenecking of gas pipelines continues, which has increased supply and,
in turn, should reduce seasonal gas price disparities among U.S. geographic
regions. In early 1997, the overall gas supply has increased and the frequency
and magnitude of gas price spikes witnessed in 1996 were reduced. One of the
results of these developments was that average gas prices should be lower in the
first quarter than at year-end 1996.
In order to enhance its competitiveness in response to steadily increasing
global competition, Occidental continues its focus on improving both its
organizational and cost structures to increase efficiencies and improve
profitability. Increased efficiencies will help the Company increase output from
its production base.
Occidental's net worldwide oil production--which has risen by 48 percent
since 1992--is expected to increase by more than 20 percent over the next two
years principally from Qatar, Ecuador and the United States. Net worldwide gas
production is expected to rise at a more moderate pace through the end of the
century after which gas development projects now under way will result in a
sharp increase in production.
The Company's enhanced oil recovery (EOR) activities are expected to
provide a major impetus for its growth strategy in 1997 and beyond. Occidental
will continue to build on its successes in applying its engineering and
technological skills to assist foreign governments in maximizing production from
their oil fields through EOR projects. Approximately one-third of 1997 oil and
gas capital expenditures will be allocated to support worldwide EOR projects.
In addition, Occidental will continue its active global exploration program
to seek large oil and natural gas deposits and to optimize the value of large
natural gas projects in Malaysia, the Philippines and Indonesia. Occidental has
more than 30 active exploration projects in 21 foreign countries. During 1997,
Occidental expects to drill or participate in more than 40 wells worldwide, of
which approximately 80 percent will be international.
Work is moving ahead toward developing large natural gas discoveries in
Malaysia and the Philippines. In Malaysia, design work has begun for the
development of the Jintan field, which will provide initial feedstock for a new
liquefied natural gas facility. In the Philippines, Occidental and its partners
have signed a memorandum of understanding with the government to investigate the
repowering of an idle nuclear power plant in Bataan with natural gas. Fields
discovered by Occidental in Malaysia and with its partners in the Philippines
contain an estimated 7.6 trillion cubic feet of gross recoverable natural gas.
In Indonesia, Occidental has an interest in the Berau Block, where five
major natural gas discoveries have been made. Appraisal of the discoveries by
the operator will continue into 1997, but Occidental expects that the reserves
are sufficient to justify construction of a liquefied natural gas plant.
In northeastern Bangladesh, Occidental and Unocal, each with a 50 percent
interest, have rights to explore and develop a large gas discovery made by a
prior operator. In late 1996, Occidental, as operator, completed a gas sales and
purchase agreement. Appraisal of the Jalalabad gas field will begin in 1997,
with first production expected in 1998.
The Gulf of Mexico will be a focus of continued exploration and
development, while the expanding Austin Chalk operation in central Louisiana
will be a vehicle to increase domestic production. In addition, the Milne Point
operation in Alaska should contribute to the rise in domestic production.
NATURAL GAS TRANSMISSION INDUSTRY As deregulation of the natural gas industry
moves beyond the city gate, state regulators are implementing programs allowing
sales of gas by unregulated marketers directly to business and residential
customers. Deregulation has also increased the flexibility of the entire gas
pipeline infrastructure by providing incentives for relatively low-cost
interconnections and incremental pipeline extensions to relieve bottlenecks.
This increases the options available to LDCs for sources of gas. As a result,
LDCs are relying less on long-term contracts for pipeline transportation and gas
supply and more on the spot market and storage to meet their needs.
On December 1, 1995, most contracts held by Natural Gas Pipeline Company of
America (Natural), MidCon's regulated interstate pipeline company, with major
LDCs expired. Most of these contracts were renewed, but at reduced firm capacity
levels and prices, reflecting the change in LDC requirements. Natural was able
to sell, for the 1995-96 and 1996-97 winter heating seasons, substantially all
this released capacity. Also, on December 1, 1995, Natural implemented new
services and revised rates pursuant to a new rate case. Natural has filed a
settlement to resolve all rate case issues and is continuing discussions with
major parties in an effort to achieve full support for the settlement.
30
During 1996, MidCon's nonregulated unit, MidCon Gas Services Corp. (MidCon
Gas), reported gas sales to third parties of 460 billion cubic feet (Bcf), an
increase of over 10 percent from the prior year. MidCon Gas continues to be one
of the largest nonregulated storage managers in the country, with approximately
100 Bcf of working gas capacity at the start of the 1996-97 heating season.
MidCon has implemented three key growth initiatives to capture
opportunities provided by changes in the marketplace. One initiative involves
new efforts to sell gas and electricity to commercial and small industrial
customers as a bundled energy service. A new marketing unit of MidCon, "mc2",
has been established to do this and initial product rollouts are taking place in
the Chicago and New York metropolitan areas in early 1997. MidCon's power
marketing business unit will participate in several electric power pilot
programs as a first step toward offering a combined gas and electric service.
Another growth initiative is to expand gas sales and portfolio management
services to LDCs, regional marketers and industrial companies on a national
basis. New markets will be entered by contracting for capacity on third-party
systems, obtaining term gas supply and offering portfolio management services.
Portfolio management integrates the customer's gas supply, transport and storage
into MidCon's asset pool and maximizes asset utilization to create shared cost
savings.
Pipeline and storage development is MidCon's third growth initiative.
Continued excess supply in Canada and the western United States, coupled with
the growing eastern markets, demonstrates the need for more pipeline capacity to
move gas eastward, for which MidCon's pipeline and storage assets are
strategically located. The Amarillo and Trailblazer pipeline expansions are
designed to support these efforts. Additionally, Natural and Crossroads Pipeline
Company, a subsidiary of NIPSCO Industries, Inc., completed construction in
January 1997 of a 100 million cubic feet (MMcf) per day interconnect between
their systems, providing Natural an additional connection to markets east of
Chicago.
In August 1996, Natural received preliminary FERC approval, subject to an
environmental review, to expand its Amarillo system from Harper, Iowa to
Chicago. This expansion, plus use of existing capacity, will accommodate more
than 500 MMcf per day of new gas supplies received from a proposed expansion of
Northern Border Pipeline, a non-affiliated system that transports gas
originating in western Canada. Northern Border also was granted preliminary FERC
permission, subject to an environmental review, for its expansion program that
includes a new line from Harper to the Chicago area. Natural is opposing the
extension of the Northern Border system.
If Northern Border builds its proposed extension into the Chicago area,
service may commence within two to three years. Natural expects to mitigate any
negative impact over time with additional market growth and expansion of
capacity to move volumes east.
Trailblazer Pipeline Company, in which Natural is a one-third partner,
signed 10-year agreements with six shippers for additional firm transport
service. Pending final FERC approval, Trailblazer will add compression to
increase its capacity by 104 MMcf per day. The new facilities are scheduled to
be placed in service during the summer of 1997.
MidCon Texas Pipeline (MidCon Texas), MidCon's intrastate pipeline
business, signed agreements in January 1996 with a major south Texas producer
for the purchase and transportation of 274 Bcf of gas over a five-year period.
The gas comes from production in Zapata and Webb counties near the U.S.-Mexico
border. Arrangements included construction of 68 miles of large-diameter
pipeline to connect to MidCon Texas' system. The pipeline was completed in
August 1996.
MidCon was granted a permit by Mexico to construct approximately 100 miles
of pipeline from the United States to Monterrey, Mexico. This is the first
pipeline transportation permit issued since Mexico amended its Constitution to
provide for private ownership of gas pipelines and storage systems. When built,
this pipeline will deliver up to 270 MMcf per day of gas to local distribution
companies, industrial customers and electricity generators.
CHEMICAL INDUSTRY
BASIC CHEMICALS In 1996, demand for chlorine and chlorine-related derivatives
continued to be strong. For caustic soda, overall demand remained strong through
the first three quarters of the year. The result was a year in which
chlor-alkali margins overall remained at historically high levels.
Markets that offer the strongest outlet for chlorine production include
ethylene dichloride (EDC), vinyl chloride monomer (VCM) and PVC. Demand for EDC,
which is principally exported, remained strong through 1996, as did chlorine
consumption for VCM and other end uses. These market conditions are expected to
continue in 1997.
Due to strong demand, the chlorine and caustic soda industry operated
essentially at capacity in 1996. Some new capacity will become available in
1997, primarily in the United States and Middle East; however, the industry is
expected to remain capacity-constrained during the year.
Chlorine markets will continue to experience pressure from various
environmental groups and regulatory authorities seeking alternatives to, or
substitutes for, compounds containing chlorine. While there has been less demand
for chlorine in some market segments, such as pulp and paper, demand from the
PVC industry has more than offset those reductions. Occidental believes that the
overall market for chlorine will remain strong, led by PVC demand.
Overall, chlorine prices in 1996 were comparable with average 1995 prices.
Chlorine prices are expected to increase in 1997, while caustic soda prices will
remain under pressure until demand for caustic soda in key sectors, such as
alumina and automotive, returns to higher sustained levels.
PETROCHEMICALS The primary petrochemicals--ethylene, propylene, butadiene and
benzene--are precursors to a wide variety of consumer and industrial products
that include fibers, tires and plastics. Petrochemicals account for
approximately 20 percent of all chemical world trade, and changes in global
economic conditions have an immediate effect on the domestic petrochemical
industry. The cycles in the petrochemical business have been demonstrated by
periods of high profitability, as in the late 1980s, followed by large capacity
increases and subsequent depressed margins as experienced in 1991 through 1993.
31
The profitability of petrochemical plants during 1996 was below
expectations due to higher than anticipated feedstock costs. Margins in the
first quarter were extremely low but began to increase as product prices were
raised and prices for feedstocks such as refined by-products and natural gas
liquids (NGL) fell. Profitability continued to increase through the third
quarter. However, earnings declined when feedstock prices advanced as cold
weather, coupled with low inventories of liquid and NGL feedstocks, drove
margins down in the fourth quarter. OxyChem has the flexibility in some of its
plants to operate on a wide variety of feedstocks. In particular, OxyChem was
able to shift away from NGLs in certain plants when they became uneconomical in
the fourth quarter. Margins are expected to improve in the second and third
quarters of 1997, but return to lower levels near the end of the year as several
major ethylene expansions come on-line.
Throughout 1995 and 1996, OxyChem petrochemical and derivatives plants
operated at capacity. Demand in 1997 is anticipated to increase slightly in
excess of the growth in GDP. Ethylene growth in 1996 was about 5 percent, or two
times GDP growth, while propylene demand growth was 3 percent. Ethylene was
driven by both higher domestic and export demand. Propylene demand was fueled by
a 9 percent increase in polypropylene production. Propylene supply and demand is
expected to be in balance for the next several years because the new furnaces
are heavily reliant on low propylene producing feedstock. Overall, OxyChem
expects a growth rate of approximately 4 percent in ethylene and propylene in
1997. Benzene prices were driven down by the onset of new manufacturing
processes. This new source of benzene, combined with flat styrene demand, kept
benzene in an oversupplied mode which is expected to continue for several years.
Demand for ethylene oxide and glycols is expected to expand by 3 percent per
year in the United States and in excess of 5 percent globally. OxyChem expanded
the Bayport facility by 25 percent in April 1996 in anticipation of a
strengthening market for ethylene glycol.
POLYMERS AND PLASTICS North American demand for PVC resin grew at a rate of
13 percent during 1996, led primarily by construction applications. Although
lower in absolute volumes, export sales continued at a rate close to 10 percent
of annual North American production. After recovering from declines during the
latter half of 1995, PVC resin prices improved in the first half of 1996 but
declined again in the second half of the year. This decline, combined with
substantial feedstock cost increases during the second half of the year,
resulted in poor PVC resin margins by year-end. This margin erosion during a
period of demand growth can be attributed primarily to substantial capacity
additions in both the domestic and world markets during 1996. Additional
industry capacity is expected in 1997 and 1998; however, North American and
global demand in 1997 is forecasted to grow at over 5 percent.
OxyChem's 450 million-pounds-per-year PVC expansion at Pasadena, Texas is
planned to start up in the second half of 1997. The 700 million-pounds-per-year
VCM expansion at a plant, owned equally by OxyChem and Marubeni Corporation of
Tokyo and managed by OxyChem, also is planned to come on stream in the second
half of 1997 and will provide the major raw material (VCM) for the Pasadena PVC
expansion.
OxyChem's PVC business continues to be well balanced in all major end-use
markets and is supported by a completely integrated feedstock supply. OxyChem
has significant market share positions as a supplier in the following markets:
PVC pipe, vinyl siding, sheet vinyl flooring, vinyl floor tile, vinyl electrical
insulation and PVC window frames. OxyChem also is well positioned in strategic
export markets in the Asian Pacific and Latin American regions.
SPECIALTY BUSINESSES The Specialty Business Group was formed in 1995 to
emphasize OxyChem's leadership position in many smaller-volume chemical markets.
Specialty chemical products are less cyclical than commodity chemicals and
provide a more steady source of earnings.
Four separate acquisitions were made in 1996. In April, Occidental
completed its acquisition of a 64 percent interest (on a fully-diluted basis) in
INDSPEC, the world's largest producer of resorcinol, which is primarily used as
a bonding and stiffening agent in the production of tires. In August, OxyChem
completed three other acquisitions--a sodium silicate plant in Augusta, Georgia,
which strengthens OxyChem's position as the second-largest producer in the
United States; Natural Gas Odorizing, a producer of warning agents for the
natural gas and propane markets; and Laurel Industries, North America's largest
producer of antimony oxide, a flame retardant synergist used in manufacturing
plastics complementing OxyChem's existing flame retardants.
Product line extensions and additional volume in existing products are
expected to improve profits in 1997. In addition, OxyChem will benefit from
full-year operations at its recent acquisitions.
OxyChem has targeted the Specialty Business Group for substantial growth in
the coming years by expanding volume in existing products, developing new
products and making acquisitions.
SAFE HARBOR STATEMENT REGARDING OUTLOOK AND OTHER FORWARD-LOOKING DATA
Portions of the Annual Report, including Management's Discussion and Analysis,
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;
competitive pricing pressures; higher than expected costs including feedstocks;
the supply/demand considerations for Occidental's products; any general economic
recession domestically or internationally; and not successfully completing any
expansion, capital expenditure or acquisition.
REPORT OF MANAGEMENT The management of Occidental Petroleum Corporation is
responsible for the integrity of the financial data reported by Occidental and
its subsidiaries. Fulfilling this responsibility requires the preparation and
presentation of consolidated financial statements in accordance with generally
accepted accounting principles. Management uses internal accounting controls,
corporate-wide policies and procedures and judgment so that such statements
reflect fairly the consolidated financial position, results of operations and
cash flows of Occidental.
32
CONSOLIDATED STATEMENTS OF OPERATIONS Occidental Petroleum Corporation
In millions, except per-share amounts and Subsidiaries
For the years ended December 31, 1996 1995 1994
====================================================================== ========= ========= =========
REVENUES
Net sales and operating revenues
Oil and gas operations $ 3,680 $ 3,018 $ 2,451
Natural gas transmission operations 2,574 2,038 2,110
Chemical operations 4,307 5,370 4,677
Interdivisional sales elimination and other (4) (3) (2)
--------- --------- ---------
10,557 10,423 9,236
Interest, dividends and other income 247 114 92
Gains on disposition of assets, net (Note 4) 11 45 15
Income from equity investments (Note 15) 83 112 73
--------- --------- ---------
10,898 10,694 9,416
--------- --------- ---------
COSTS AND OTHER DEDUCTIONS
Cost of sales 7,037 6,962 6,726
Selling, general and administrative and other operating expenses 1,084 1,191 985
Depreciation, depletion and amortization of assets 921 922 882
Environmental remediation 100 21 5
Exploration expense 120 106 127
Interest and debt expense, net 484 579 584
--------- --------- ---------
9,746 9,781 9,309
--------- --------- ---------
INCOME(LOSS) BEFORE TAXES AND EXTRAORDINARY ITEMS 1,152 913 107
Provision for domestic and foreign income and other taxes (Note 12) 454 402 143
--------- --------- ---------
INCOME(LOSS) BEFORE EXTRAORDINARY ITEMS 698 511 (36)
Extraordinary gain(loss), net (Note 5) (30) -- --
--------- --------- ---------
NET INCOME(LOSS) $ 668 $ 511 $ (36)
========= ========= =========
EARNINGS(LOSS) APPLICABLE TO COMMON STOCK $ 575 $ 418 $ (112)
========= ========= =========
PRIMARY EARNINGS PER COMMON SHARE
Income(loss) before extraordinary items $ 1.86 $ 1.31 $ (.36)
Extraordinary gain(loss), net (.09) -- --
--------- --------- ---------
PRIMARY EARNINGS(LOSS) PER COMMON SHARE (Note 1) $ 1.77 $ 1.31 $ (.36)
========= ========= =========
FULLY DILUTED EARNINGS(LOSS) PER COMMON SHARE (Note 1) $ 1.73 $ 1.30 $ (.36)
====================================================================== ========= ========= =========
The accompanying notes are an integral part of these financial statements.
33
CONSOLIDATED BALANCE SHEETS
In millions, except share amounts
Assets at December 31, 1996 1995
======================================================================= ========= =========
CURRENT ASSETS
Cash and cash equivalents (Note 1) $ 279 $ 520
Trade receivables, net of reserves of $24 in 1996 and $19 in 1995 635 643
Receivables from joint ventures, partnerships and other 236 248
Inventories (Notes 1 and 6) 633 647
Prepaid expenses and other (Note 12) 407 461
--------- ---------
TOTAL CURRENT ASSETS 2,190 2,519
--------- ---------
LONG-TERM RECEIVABLES, NET 152 158
--------- ---------
EQUITY INVESTMENTS (Notes 1 and 15) 1,039 927
--------- ---------
PROPERTY, PLANT AND EQUIPMENT, AT COST (Notes 1, 4 and 9)
Oil and gas operations 8,443 8,377
Natural gas transmission operations 8,629 8,448
Chemical operations 5,893 5,672
Corporate and other 212 207
--------- ---------
23,177 22,704
Accumulated depreciation, depletion and amortization (9,369) (8,837)
--------- ---------
13,808 13,867
OTHER ASSETS (Note 1) 445 344
--------- ---------
$ 17,634 $ 17,815
======================================================================= ========= =========
The accompanying notes are an integral part of these financial statements.
34
Occidental Petroleum Corporation
and Subsidiaries
Liabilities and Equity at December 31, 1996 1995
=================================================================================================== ========= =========
CURRENT LIABILITIES
Current maturities of long-term debt and capital lease liabilities (Notes 7 and 9) $ 27 $ 522
Notes payable (Note 1) 20 16
Accounts payable 1,023 859
Accrued liabilities (Note 1) 1,185 1,064
Dividends payable 106 104
Domestic and foreign income taxes (Note 12) 109 92
--------- ---------
TOTAL CURRENT LIABILITIES 2,470 2,657
--------- ---------
LONG-TERM DEBT, NET OF CURRENT MATURITIES AND UNAMORTIZED DISCOUNT (Note 7) 4,511 4,819
--------- ---------
DEFERRED CREDITS AND OTHER LIABILITIES
Deferred and other domestic and foreign income taxes (Note 12) 2,560 2,620
Other (Notes 1, 8, 9 and 14) 2,953 3,089
--------- ---------
5,513 5,709
--------- ---------
CONTINGENT LIABILITIES AND COMMITMENTS (Notes 7, 9, 10, 11 and 12)
STOCKHOLDERS' EQUITY (Notes 4, 7 and 13)
Nonredeemable preferred stock, $1.00 par value; authorized 50 million shares; outstanding shares:
1996--26,493,209 and 1995--26,494,824; stated at liquidation value of $50 per share 1,325 1,325
ESOP preferred stock, $1.00 par value; authorized and outstanding shares:
1996--1,400,000 1,400 --
Unearned ESOP shares (1,394) --
Common stock, $.20 par value; authorized 500 million shares; outstanding shares:
1996--329,227,688 and 1995--318,711,037 66 64
Additional paid-in capital 4,463 4,631
Retained earnings(deficit) (726) (1,402)
Cumulative foreign currency translation adjustments (Note 1) 6 12
--------- ---------
5,140 4,630
--------- ---------
$ 17,634 $ 17,815
=================================================================================================== ========= =========
The accompanying notes are an integral part of these financial statements.
35
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY Occidental Petroleum Corporation
In millions and Subsidiaries
Cumulative
Non- Additional Retained Foreign
redeemable ESOP Unearned Common Paid-in Earnings Currency
Preferred Preferred ESOP Stock Capital (Deficit) Translation
Stock Stock Shares (Notes 4 (Notes 7 (Notes 7 Adjustments
(Note 13) (Note 13) (Note 13) and 13) and 13) and 13) (Note 1)
================================== ========== ========= ========= ========= ========== ========= ===========
BALANCE, DECEMBER 31, 1993 $ 575 $ -- $ -- $ 61 $ 5,212 $ (1,883) $ (7)
Net loss -- -- -- -- -- (36) --
Dividends on common stock -- -- -- -- (311) -- --
Dividends on preferred stock -- -- -- -- (76) -- --
Issuance of common stock -- -- -- 2 193 -- --
Issuance of preferred stock
(Note 13) 750 -- -- -- (17) -- --
Pension liability adjustment
(Note 14) -- -- -- -- -- (10) --
Exercises of options and other,
net -- -- -- -- 3 -- 1
- ---------------------------------- ---------- --------- --------- --------- ---------- --------- -----------
BALANCE, DECEMBER 31, 1994 1,325 -- -- 63 5,004 (1,929) (6)
Net income -- -- -- -- -- 511 --
Dividends on common stock -- -- -- -- (318) -- --
Dividends on preferred stock -- -- -- -- (93) -- --
Issuance of common stock -- -- -- 1 28 -- --
Pension liability adjustment
(Note 14) -- -- -- -- -- 16 --
Exercises of options and other,
net -- -- -- -- 10 -- 18
- ---------------------------------- ---------- --------- --------- --------- ---------- --------- -----------
BALANCE, DECEMBER 31, 1995 1,325 -- -- 64 4,631 (1,402) 12
Net income -- -- -- -- -- 668 --
Dividends on common stock -- -- -- -- (325) -- --
Dividends on preferred stock -- -- -- -- (93) -- --
Issuance of common stock -- -- -- 2 240 -- --
Issuance of preferred stock
(Note 13) -- 1,400 (1,394) -- (6) -- --
Pension liability adjustment
(Note 14) -- -- -- -- -- 8 --
Exercises of options and other,
net -- -- -- -- 16 -- (6)
- ---------------------------------- ---------- --------- --------- --------- ---------- --------- -----------
BALANCE, DECEMBER 31, 1996 $ 1,325 $ 1,400 $ (1,394) $ 66 $ 4,463 $ (726) $ 6
================================== ========== ========= ========= ========= ========== ========= ===========
The accompanying notes are an integral part of these financial statements.
36
CONSOLIDATED STATEMENTS OF CASH FLOWS Occidental Petroleum Corporation
In millions and Subsidiaries
For the years ended December 31, 1996 1995 1994
=============================================================================== ========= ========= =========
CASH FLOW FROM OPERATING ACTIVITIES
Net income(loss) $ 668 $ 511 $ (36)
Adjustments to reconcile income to net cash provided by operating activities:
Extraordinary (gain)loss, net 30 -- --
Depreciation, depletion and amortization of assets 921 922 882
Amortization of debt discount and deferred financing costs 7 31 15
Deferred income tax provision 3 18 26
Other noncash charges(credits) to income 320 246 175
Gains on disposition of assets, net (11) (45) (15)
Income from equity investments (83) (112) (73)
Exploration expense 120 106 127
Changes in operating assets and liabilities:
Decrease(increase) in accounts and notes receivable 33 106 (240)
Decrease(increase) in inventories -- (68) 14
Increase in prepaid expenses and other assets (35) (41) (59)
Increase(decrease) in accounts payable and accrued liabilities 150 (191) 156
Increase(decrease) in current domestic and foreign income taxes 41 48 16
Other operating, net (177) (30) (228)
--------- --------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,987 1,501 760
--------- --------- ---------
CASH FLOW FROM INVESTING ACTIVITIES
Capital expenditures (1,185) (979) (1,103)
Proceeds from disposal of property, plant and equipment, net (Note 4) 233 176 8
Buyout of operating leases -- (141) --
Purchase of businesses (18) (7) 46
Sale of businesses, net (Note 4) 31 756 2
Equity investments, net 52 60 41
Other investing, net (92) (1) (1)
--------- --------- ---------
NET CASH USED BY INVESTING ACTIVITIES (979) (136) (1,007)
--------- --------- ---------
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from long-term debt 65 322 621
Net proceeds from commercial paper and revolving credit agreements 645 (528) (160)
Payments of long-term debt and capital lease liabilities (1,577) (397) (435)
Proceeds from issuance of common stock 25 28 38
Proceeds from issuance of preferred stock (Note 13) -- -- 557
Payments of notes payable (1) (5) (22)
Cash dividends paid (415) (406) (376)
Other financing, net 9 12 (4)
--------- --------- ---------
NET CASH PROVIDED(USED) BY FINANCING ACTIVITIES (1,249) (974) 219
--------- --------- ---------
INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS (241) 391 (28)
CASH AND CASH EQUIVALENTS--BEGINNING OF YEAR 520 129 157
--------- --------- ---------
CASH AND CASH EQUIVALENTS--END OF YEAR $ 279 $ 520 $ 129
=============================================================================== ========= ========= =========
The accompanying notes are an integral part of these financial statements.
37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
NATURE OF OPERATIONS Occidental is a multinational organization whose
principal lines of business are oil and gas exploration and production, natural
gas transmission and chemicals. Oil and gas and natural gas transmission
comprise approximately 35 percent and 25 percent of sales, respectively, while
chemical represents approximately 40 percent of sales.
Internationally, Occidental has oil and gas production in 10 countries and
exploration projects in 21 countries. Domestically, Occidental has oil and gas
exploration and production in the United States, including the Gulf of Mexico.
In natural gas transmission, Occidental processes, buys, sells, stores and
transports natural gas. Occidental handles approximately 10 percent of the
natural gas consumed annually in the United States. In addition, Occidental is
one of the world's largest commodity chemical producers, with interests in basic
chemicals, petrochemicals and polymers and plastics.
PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the
accounts of Occidental Petroleum Corporation, all subsidiaries where the Company
has majority ownership of voting stock and Occidental's proportionate interests
in oil and gas exploration and production ventures (Occidental). All material
intercompany accounts and transactions have been eliminated. Investments in less
than majority-owned enterprises, including joint-interest pipelines, but
excluding oil and gas exploration and production ventures, are accounted for on
the equity method (see Note 15).
Certain financial statements, notes and supplementary data for prior years
have been changed to conform to the 1996 presentation.
RISKS AND UNCERTAINTIES The process of preparing consolidated financial
statements in conformity with generally accepted accounting principles requires
the use of estimates and assumptions regarding certain types of assets,
liabilities, revenues and expenses. Such estimates primarily relate to unsettled
transactions and events as of the date of the consolidated financial statements.
Accordingly, upon settlement, actual results may differ from estimated amounts,
generally not by material amounts. Management believes that these estimates and
assumptions provide a reasonable basis for the fair presentation of Occidental's
financial position and results of operations.
Included in the accompanying balance sheet is net property, plant and
equipment at a carrying value of $13.808 billion as of December 31, 1996. These
carrying values are based on Occidental's plans and intentions to continue to
operate, maintain and, where it is economically desirable, to expand its
businesses. If future economic conditions result in changes in management's
plans or intentions, the carrying values of the affected assets will be reviewed
again and any appropriate adjustments made.
Included in the accompanying consolidated balance sheet is a deferred tax
asset of $1.6 billion as of December 31, 1996, the noncurrent portion of which
is netted against deferred income tax liabilities. Realization of that asset is
dependent upon Occidental generating sufficient future taxable income.
Occidental expects to realize the recorded deferred tax asset through future
operating income and reversal of taxable temporary differences.
The accompanying consolidated balance sheet includes assets of $1.924
billion as of December 31, 1996 relating to Occidental's oil and gas operations
in countries outside North America. Some of these countries may be considered
politically and economically unstable. These assets and the related operations
are subject to the risk of actions by governmental authorities and insurgent
groups. Occidental attempts to conduct its financial affairs so as to protect
against such risks and would expect to receive compensation in the event of
nationalization.
Since Occidental's major products are commodities, significant changes in
the prices of oil and gas and chemical products could have a significant impact
on Occidental's results of operations for any particular year.
FOREIGN CURRENCY TRANSLATION The functional currency applicable to
Occidental's foreign oil and gas operations, except for operations in the Dutch
sector of the North Sea, is the U.S. dollar since cash flows are denominated
principally in U.S. dollars. Chemical operations in Latin America, which
historically have been subject to high inflation rates, use the U.S. dollar as
the functional currency. The effect of exchange-rate changes on transactions
denominated in nonfunctional currencies generated a loss of approximately $3
million in 1996 and gains of approximately $1 million in 1995 and $14 million in
1994, which in 1994 was mainly attributable to the highly inflationary economy
of Brazil.
CASH AND CASH EQUIVALENTS Cash equivalents consist of highly liquid money-
market mutual funds and bank deposits with initial maturities of three months or
less. Cash equivalents totaled approximately $206 million and $620 million at
December 31, 1996 and 1995, respectively.
38
TRADE RECEIVABLES In 1992, Occidental entered into an agreement to sell,
under a revolving sale program, an undivided percentage ownership interest in a
designated pool of domestic trade receivables, with limited recourse. Under this
program, Occidental serves as the collection agent with respect to the
receivables sold. An interest in new receivables is sold as collections are made
from customers. As of December 31, 1996, Occidental had received cash proceeds
totaling $600 million, of which $100 million was received in the fourth quarter
of 1996 and the remainder in 1993 and 1992. Fees and expenses under this program
are included in Selling, general and administrative and other operating
expenses. During the years ended December 31, 1996, 1995 and 1994, the cost of
this program amounted to approximately 5.8 percent, 6.3 percent and 4.8 percent,
respectively, of the weighted average amount of proceeds received.
INVENTORIES Product and raw material inventories, except certain domestic
chemicals, are stated at cost determined on the first-in, first-out (FIFO) and
average-cost methods and did not exceed market value. The remaining product and
raw material inventories are stated at cost using the last-in, first-out (LIFO)
method and also did not exceed market value. Inventories of materials and
supplies are valued at cost or less (see Note 6).
PROPERTY, PLANT AND EQUIPMENT Property additions and major renewals and
improvements are capitalized at cost. Interest costs incurred in connection with
major capital expenditures are capitalized and amortized over the lives of the
related assets (see Note 17). Depreciation of oil and gas producing properties
is determined principally by the unit-of-production method and is based on
estimated recoverable reserves. The unit-of-production method of depreciation,
based on estimated total productive life, also is used for certain chemical
plant and equipment. Depreciation of other plant and equipment, including
natural gas transmission facilities, has been provided primarily using the
straight-line method (see Note 5).
Oil and gas properties are accounted for using the successful-efforts
method. Costs of acquiring nonproducing acreage, costs of drilling successful
exploration wells and development costs are capitalized. Producing and
nonproducing properties are evaluated periodically and, if conditions warrant,
an impairment reserve is provided. Annually, a determination is made whether it
is probable that significant impairment of the carrying cost for individual
fields or groups of fields has occurred, considering a number of factors,
including profitability, political risk and Occidental's estimate of future oil
and gas prices. If impairment is believed probable, a further analysis is
performed using Occidental's estimate of future oil and gas prices to determine
any impairment to be recorded for specific properties. Annual lease rentals and
exploration costs, including geologic and geophysical costs and exploratory
dry-hole costs, are expensed as incurred.
In 1986, Occidental acquired, in a transaction accounted for as a purchase,
MidCon Corp. (MidCon), a natural gas transmission company whose interstate
pipeline subsidiary is subject to rate regulation by the Federal Energy
Regulatory Commission. Accordingly, MidCon defers or capitalizes certain costs
in property, plant and equipment, the recovery of which is subject to the
rate-regulatory process. With respect to the interstate natural gas transmission
subsidiary of MidCon, the allocated purchase price, less subsequent accumulated
depreciation, exceeded the amount subject to recovery through the
rate-regulatory process by $4.2 billion at both December 31, 1996 and 1995. This
excess amount as of December 31, 1996 is being depreciated over a remaining
period of 37 years.
OTHER ASSETS Other assets include tangible and intangible assets, certain of
which are amortized over the estimated periods to be benefited.
NOTES PAYABLE Notes payable at December 31, 1996 and 1995 consisted of
short-term notes due to financial institutions and other corporations. The
weighted average interest rate on short-term borrowings outstanding as of
December 31, 1996 and 1995 was 5.4 percent and 6.0 percent, respectively.
ACCRUED LIABILITIES--CURRENT Accrued liabilities include the following (in millions):
Balance at December 31, 1996 1995
=================================================== ========= =========
Accrued payroll, commissions and related expenses $ 182 $ 229
Accrued interest expense $ 95 $ 134
- --------------------------------------------------- --------- ---------
39
ENVIRONMENTAL COSTS Environmental expenditures that relate to current
operations are expensed or capitalized as appropriate. Expenditures that relate
to existing conditions caused by past operations and that do not contribute to
current or future revenue generation are expensed. Reserves for estimated costs
are recorded when environmental remedial efforts are probable and the costs can
be reasonably estimated. In determining the reserves, Occidental uses the most
current information available, including similar past experiences, available
technology, regulations in effect, the timing of remediation and cost-sharing
arrangements. The environmental reserves are based on management's estimate of
the most likely cost to be incurred and are reviewed periodically and adjusted
as additional or new information becomes available. Probable recoveries or
reimbursements are recorded as an asset. The environmental reserves are included
in accrued liabilities and other noncurrent liabilities and amounted to $138
million and $428 million, respectively, at December 31, 1996 and $138 million
and $444 million, respectively, at December 31, 1995.
Environmental reserves are discounted only when the aggregate amount of the
estimated costs for a specific site and the timing of cash payments are reliably
determinable. As of December 31, 1996 and 1995, reserves that were recorded on a
discounted basis were not material.
DISMANTLEMENT, RESTORATION AND RECLAMATION COSTS The estimated future
abandonment costs of oil and gas properties and removal costs for offshore
production platforms, net of salvage value, are accrued over their operating
lives. Such costs are calculated at unit-of-production rates based upon
estimated proved recoverable reserves and are taken into account in determining
depreciation, depletion and amortization. For all other operations, appropriate
reserves are provided when a decision is made to dispose of a property, since
Occidental makes capital renewal expenditures on a continual basis while an
asset is in operation. Such reserves are included in accrued liabilities and
other noncurrent liabilities and amounted to $9 million and $215 million,
respectively, at December 31, 1996 and $16 million and $222 million,
respectively, at December 31, 1995.
HEDGING ACTIVITIES Occidental periodically uses commodity futures contracts,
options and swaps to hedge the impact of oil and natural gas price fluctuations
and uses forward exchange contracts to hedge the risk associated with
fluctuations in foreign currency exchange rates. Gains and losses on commodity
futures contracts are deferred until recognized as an adjustment to sales
revenue or purchase costs when the related transaction being hedged is
finalized. Gains and losses on foreign currency forward exchange contracts that
hedge identifiable future commitments are deferred until recognized when the
related item being hedged is settled. All other contracts are recognized in
periodic income. The cash flows from such contracts are included in operating
activities in the consolidated statements of cash flows.
Interest rate swaps are entered into, from time to time, on specific debt
as part of Occidental's overall strategy to maintain part of its debt on a
floating rate basis.
EARNINGS PER COMMON SHARE Primary earnings per common share was computed by
dividing net income, less preferred dividend requirements, by the weighted
average number of common shares outstanding and the dilutive effect of stock
options during each year: approximately 324 million in 1996, 318 million in 1995
and 311 million in 1994. The computation of fully diluted earnings per share
further assumes the dilutive effect of conversion of the preferred stocks.
SUPPLEMENTAL CASH FLOW INFORMATION Cash payments during the years 1996, 1995
and 1994 included federal, foreign and state income taxes of approximately $273
million, $230 million and $133 million, respectively. Interest paid (net of
interest capitalized) totaled approximately $484 million, $546 million and $507
million for the years 1996, 1995 and 1994, respectively. See Note 4 for detail
of noncash investing and financing activities regarding certain acquisitions.
NOTE 2 FINANCIAL INSTRUMENTS
- --------------------------------------------------------------------------------
COMMODITY FUTURES AND FORWARD CONTRACTS Occidental's oil and gas and natural
gas transmission segments have, from time to time, engaged in some form of
commodity derivative activity, generally limited to hedging arrangements. The
oil and gas division engages in oil and gas trading activity primarily through
the use of futures contracts. The results are not significant and are included
in periodic income. MidCon uses commodity futures contracts, options and swaps
to hedge the impact of natural gas price fluctuations related to two major
categories of business: purchases for and sales from storage; and fixed-price
sales and purchase contracts.
STORAGE Storage activities consist of purchasing and injecting natural gas
into storage during low-price, low-demand periods (typically the months of April
through October) and withdrawing that gas for sale during high-price, high-
demand periods (typically the months of November through March). These periods
may vary depending primarily on weather conditions and competing fuel prices in
the market areas. MidCon uses derivatives to hedge the sales and purchase prices
related to its storage program mainly through futures contracts. The hedging
contracts used have terms of less than 18 months. Gains and losses on these
hedging contracts are deferred until recognized when the transactions being
hedged are finalized. A small number of options were sold against inventory
capacity or physical inventory with results included in periodic income.
40
FIXED-PRICE SALES AND PURCHASES Fixed-price gas sales and purchase contracts
vary by agreement. Hedges are placed nearly simultaneously with the consummation
of many of the sales-purchase agreements. All agreements are for less than 18
months.
Gains and losses on these hedging contracts are deferred until recognized
when the transactions being hedged are finalized. New York Mercantile Exchange
(NYMEX), Kansas City Board of Trade (KCBT) (collectively, the Exchanges) and
over-the-counter (OTC) hedge instruments are utilized.
All hedging activity is matched to physical natural gas buying and selling
activity and is done with natural gas futures or derivative instruments. There
is essentially no discrepancy with regard to timing, i.e., hedges are placed for
the same month in which the price risk for the underlying physical movement is
anticipated to occur, based on analysis of sales and purchase contracts and
historical data. Hedges are removed upon consummation of the underlying physical
activity. All deferred gains or losses are then recognized. Because the
commodity covered by the Exchanges' natural gas futures contracts is
substantially the same commodity that MidCon buys and sells in the physical
market, no special correlation studies, other than monitoring the degree of
convergence between the futures and the cash markets, are deemed necessary.
Geographic basis risk (the difference in value of gas at the Exchanges' delivery
points versus the points of MidCon's transaction) is monitored and, where
appropriate, hedged using OTC instruments. Exchange-traded futures and options
are valued using settlement prices published by the Exchanges. OTC options are
valued using a standard option pricing model that requires published exchange
prices, market volatility per broker quotes and the time value of money. Swaps
are valued by comparing current broker quotes for price or basis with the
corresponding price or basis in the related swap agreement and then discounting
the result to present value.
Although futures and options traded on the Exchanges are included in the
table below, they are not financial instruments as defined in generally accepted
accounting principles (GAAP), since physical delivery of natural gas may be, and
occasionally is, made pursuant to these contracts. However, they are a major
part of MidCon's commodity risk management program.
The following table summarizes the types of hedges used and the related
financial information as of December 31, 1996 and 1995:
1996 1995
----------------------------------- ------------------------------------
Over-the- Over-the-
Notional volumes in Bcf Hedges of Exchanges(a) Counter(b) Total Exchanges(a) Counter(b) Total
================================ ========= ========= ========= ========= ========= ========= =========
Price hedge
Futures Purchases 32 -- 32 62 -- 62
Swaps Purchases -- -- -- -- 8 8
Sales -- 1 1 -- -- --
Options Purchases -- 2 2 -- -- --
Basis hedge
Basis swaps(c) Purchases -- 33 33 -- 9 9
Sales -- 34 34 -- 7 7
- -------------------------------- --------- --------- --------- --------- --------- --------- ---------
1996 1995
--------------------------------------------- ---------------------------------------------
Over-the- Book Fair Over-the- Book Fair
Dollars in millions Exchanges Counter Value Value Exchanges Counter Value Value
================================ ========= ========= ========= ========= ========= ========= ========= =========
Deferred net gains(losses)
Firm commitment/forecast
transactions $ (3) $ -- $ 14 $ --
Assets
Basis swaps $ -- $ 1 $ -- $ --
Liabilities
Price swaps $ -- $ -- $ 2 $ 6
Basis swaps $ -- $ -- $ 1 $ 2
- -------------------------------- --------- --------- --------- --------- --------- --------- --------- ---------
(a) Not financial instruments as defined in GAAP but included as they are a major part of the program.
(b) Excluding the nine-year swap agreement, which was terminated in 1996, the average weighted term is less than 12 months. Ninety
percent of the notional volumes are hedged with counterparties with a triple B or better credit rating.
(c) Basis swaps are utilized to hedge the geographic price differentials due primarily to transportation cost and local supply-
demand factors.
41
FORWARD EXCHANGE AND INTEREST RATE CONTRACTS Occidental is engaged in both
oil and gas and chemical activities internationally. International oil and gas
transactions are mainly denominated in U.S. dollars; consequently, foreign
currency exposure is not deemed material. Many of Occidental's foreign oil and
gas operations and foreign chemical operations are located in countries whose
currencies generally depreciate against the U.S. dollar on a continuing basis.
An effective currency forward market does not exist for these countries;
therefore, Occidental attempts to manage its exposure primarily by balancing
monetary assets and liabilities and maintaining cash positions only at levels
necessary for operating purposes. Most foreign currency positions at December
31, 1996 are generally in a net liability position, effectively eliminating the
potentially unfavorable effects of devaluation. For those currencies that are in
a net asset position, Occidental maintains these positions at low levels so that
the exposure to currency devaluation is relatively insignificant. At December
31, 1996, Occidental had one foreign currency forward purchase exchange contract
totaling $38 million which hedged foreign currency denominated debt. This
contract matures in 2000.
From time to time, Occidental enters into interest rate swap agreements. In
November 1993, Occidental entered into interest rate swaps on newly issued
fixed-rate debt for notional amounts totaling $530 million. This converted
fixed-rate debt into variable-rate debt, based on the London Interbank Offered
Rate (LIBOR), with interest rates ranging from 6.5 percent to 6.7 percent at
December 31, 1996. These agreements mature at various dates from 1998 through
2000. Notional amounts do not represent cash flow. Credit risk exposure is
limited to the net interest differentials, which are reflected in interest
expense. The swap rate difference resulted in approximately $1 million and $5
million of additional interest expense in 1996 and 1995, respectively, and $6
million savings in interest expense for 1994, compared to what interest expense
would have been had the debt remained at fixed rates. The impact of the swaps on
the weighted average interest rates for all debt in 1996, 1995 and 1994 was not
significant.
FAIR VALUE OF FINANCIAL INSTRUMENTS Occidental values financial instruments
as required by Statement of Financial Accounting Standards (SFAS) No. 107. The
carrying amounts of cash and cash equivalents and short-term notes payable
approximate fair value because of the short maturity of those instruments.
Occidental estimates the fair value of its long-term debt based on the quoted
market prices for the same or similar issues or on the yields offered to
Occidental for debt of similar rating and similar remaining maturities. The
estimated fair value of Occidental's long-term debt at December 31, 1996 and
1995 was $4.968 billion and $5.478 billion, respectively, compared with a
carrying value of $4.511 billion and $4.819 billion, respectively. The fair
value of interest rate swaps is the amount at which they could be settled, based
on estimates obtained from dealers. Based on these estimates at December 31,
1996 and 1995, Occidental would be required to pay approximately $10 million and
$3 million, respectively, to terminate its interest rate swap agreements.
Occidental will continue its strategy of maintaining part of its debt on a
floating rate basis.
The carrying value of other on-balance sheet financial instruments
approximates fair value and the cost, if any, to terminate off-balance sheet
financial instruments is not significant.
NOTE 3 REORGANIZATION CHARGES
- --------------------------------------------------------------------------------
In the fourth quarter of 1995, Occidental recorded charges of $132 million,
included in other operating expenses, related to the reorganization of its
worldwide oil and gas operations and the reorganization of the operations of the
natural gas transmission division. This reorganization was part of Occidental's
efforts to consolidate operations and to increase management efficiency, asset
utilization and profitability.
NOTE 4 BUSINESS COMBINATIONS AND ASSET ACQUISITIONS AND DISPOSITIONS
- --------------------------------------------------------------------------------
In August 1996, Occidental acquired three specialty chemical producers in
separate transactions for approximately $149 million through the issuance of
5,512,355 shares of Occidental common stock, with a value of approximately $130
million, and the balance paid in cash. The acquisitions included Laurel
Industries, Inc., North America's largest producer of antimony oxide at its
LaPorte, Texas facility; Natural Gas Odorizing, Inc., the leading U.S. producer
of mercaptan-based warning agents for use in natural gas and propane from its
single plant in Baytown, Texas; and a plant in Augusta, Georgia, purchased from
Power Silicates Manufacturing, Inc., which produces sodium silicates for use in
soap and detergent formulating, paper manufacturing and silica-based catalysts.
These acquisitions have been accounted for by the purchase method. Accordingly,
the cost of each acquisition was allocated to the assets acquired, goodwill and
liabilities assumed based upon their estimated respective fair values.
In April 1996, Occidental completed its acquisition of a 64 percent equity
interest (on a fully-diluted basis) in INDSPEC Chemical Corporation (INDSPEC)
for approximately $92 million through the issuance of 3,346,421 shares of
Occidental common stock, with a value of approximately $87 million, and the
balance paid in cash. Under the terms of the agreement, INDSPEC's management and
employees have retained voting control of INDSPEC.
42
In April 1996, Occidental completed the sale of its subsidiary which
engaged in on-shore drilling and servicing of oil and gas wells for
approximately $32 million. Also in April 1996, certain assets of an
international phosphate fertilizer trading operation were sold for approximately
$20 million in interest-bearing notes. In July 1996, Occidental sold its royalty
interest in the Congo for $215 million to the Republic of the Congo.
In October 1995, Occidental sold its agricultural chemicals business.
During May 1995, Occidental sold its high-density polyethylene business.
Occidental also sold, pursuant to a Federal Trade Commission divestiture order,
its polyvinyl chloride (PVC) facilities at Addis, Louisiana and Burlington
South, New Jersey. In addition, Occidental sold certain Canadian oil and gas
assets, which were acquired as part of the purchase of Placid Oil Company
(Placid) in December 1994, and a portion of the oil and gas operation in
Pakistan. The combined cash proceeds from these asset dispositions were in
excess of $900 million.
During the second quarter of 1995, Occidental and Canadian Occidental
Petroleum Ltd. (CanadianOxy) formed partnerships into which they contributed
primarily sodium chlorate manufacturing facilities. Occidental retained a less-
than-twenty-percent direct interest in these partnerships accounted for on the
equity method.
In December 1994, Occidental acquired Placid for an aggregate purchase
price of approximately $250 million through the issuance of 3,606,484 shares of
$3.875 cumulative convertible voting preferred stock, with a value of $175
million, and the balance through the issuance of 3,835,941 shares of Occidental
common stock.
In March 1994, Occidental acquired interests in certain U.S. Gulf Coast oil
and gas properties from Agip Petroleum Co. Inc. for a purchase price of $161
million through the issuance of 5,150,602 shares of Occidental common stock and
$78 million in cash.
On a pro forma basis, these acquisitions would not have had a significant
effect on Occidental's consolidated results.
NOTE 5 EXTRAORDINARY GAIN(LOSS) AND ACCOUNTING CHANGES
- --------------------------------------------------------------------------------
The 1996 results included a net extraordinary loss of $30 million, which
resulted from the early extinguishment of all the then outstanding $955 million
principal amount of its 11.75% Senior Debentures.
In October 1996, the American Institute of Certified Public Accountants
(AICPA) issued Statement of Position No. 96-1--"Environmental Remediation
Liabilities" (SOP 96-1), which provides authoritative guidance on specific
accounting issues that are present in the recognition, measurement, display, and
disclosure of environmental remediation liabilities. Occidental will implement
SOP 96-1 effective January 1, 1997 and has not yet made a final determination of
its impact on the financial statements.
Beginning in 1994, Occidental revised the estimated average useful lives
used to compute depreciation for most of its chemical machinery and equipment
from 20 years to 25 years and for most of its natural gas transmission property
to a remaining life of 40 years. These revisions were made to more properly
reflect the current economic lives of the assets based on anticipated industry
conditions. The result was a reduction in net loss for the year ended December
31, 1994 of approximately $65 million, or approximately $.21 per share. Natural
gas transmission and chemical divisional earnings benefited by approximately $31
million and $34 million, respectively.
In December 1992, the Financial Accounting Standards Board issued SFAS No.
112--"Employers Accounting for Postemployment Benefits," which substantially
changed the existing method of accounting for employer benefits provided to
inactive or former employees after active employment but before retirement. This
statement requires that the cost of postemployment benefits (principally medical
benefits for inactive employees) be recognized in the financial statements
during employees' active working careers. Occidental's adoption of SFAS No. 112,
effective January 1, 1994, did not have a material impact on Occidental's
financial position or results of operations.
NOTE 6 INVENTORIES
- --------------------------------------------------------------------------------
Inventories of approximately $220 million and $225 million were valued
under the LIFO method at December 31, 1996 and 1995, respectively.
Inventories consisted of the following (in millions):
Balance at December 31, 1996 1995
==================================================== ========= =========
Raw materials $ 135 $ 116
Materials and supplies 184 180
Work in process 17 17
Finished goods 344 363
--------- ---------
680 676
LIFO reserve (47) (29)
--------- ---------
TOTAL $ 633 $ 647
==================================================== ========= =========
43
NOTE 7 LONG-TERM DEBT
- --------------------------------------------------------------------------------
Long-term debt consisted of the following (in millions):
Balance at December 31, 1996 1995
========================================================================================= ========= =========
OCCIDENTAL PETROLEUM CORPORATION
11.75% senior debentures due 2011, called March 15, 1996 at 104.838 $ -- $ 955
11.125% senior debentures due 2019, callable June 1, 1999 at 105.563 144 144
10.125% senior debentures due 2009 276 276
9.25% senior debentures due 2019, putable August 1, 2004 at par 300 300
10.125% senior notes due 2001 330 330
9.625% senior notes due 1999, called July 1, 1996 at par -- 300
9.1% to 9.75% medium-term notes due 1997 through 2001 99 99
8.5% medium-term notes due 2004, callable September 15, 1999 at par 250 250
11.125% senior notes due 2010 150 150
Floating rate senior notes due 1999, called November 4, 1996 at par -- 150
8.5% senior notes due 2001 150 150
8.75% medium-term notes due 2023 100 100
6.49375% to 11% medium-term notes due 1997 through 2000 294 294
6.04% to 8.34% medium-term notes due 1997 through 2008 285 292
5.76% to 6.41% medium-term notes due 1998 through 2000 601 601
10.42% senior notes due 2003, callable December 1, 1998 at par 50 50
5.55% to 7.1% commercial paper 567 --
5.66% to 6.94% revolving credits 80 --
7.3% to 8.8% retail medium-term notes due 1997 through 2004, callable at various dates 139 167
--------- ---------
3,815 4,608
--------- ---------
OXY USA Inc.
7% debentures due 2011, callable anytime at par 274 274
7.2% unsecured notes due 2020 (Note 16) 7 7
6.625% debentures due 1998 through 1999, callable anytime at par (Note 16) 55 55
6.125% debentures due 1997 (Note 16) 15 15
5.7% to 7.8% unsecured notes due 1997 through 2007 56 58
--------- ---------
407 409
--------- ---------
OTHER SUBSIDIARY DEBT
3.1597% to 12.5% unsecured notes due 1997 through 2030 432 382
6% to 14.5% secured notes due 1997 through 2011 10 57
--------- ---------
442 439
--------- ---------
4,664 5,456
Less:
Unamortized discount, net (148) (147)
Current maturities (5) (490)
--------- ---------
TOTAL $ 4,511 $ 4,819
========================================================================================= ========= =========
At December 31, 1996, $961 million of notes due in 1997 were classified as
noncurrent since it is management's intention to refinance this amount on a
long-term basis, initially utilizing available lines of bank credit with
maturities extending to 1999 and 2000.
At December 31, 1996, minimum principal payments on long-term debt,
including sinking fund requirements, subsequent to December 31, 1997 aggregated
$4.659 billion, of which $367 million is due in 1998, $1.216 billion in 1999,
$501 million in 2000, $515 million in 2001, $77 million in 2002 and $1.983
billion thereafter. Unamortized discount is generally being amortized to
interest expense on the effective interest method over the lives of the related
issues.
44
At December 31, 1996, under the most restrictive covenants of certain
financing agreements, the capacity for the payment of cash dividends and other
distributions on, and for acquisitions of, Occidental's capital stock was
approximately $2.4 billion, assuming that such dividends, distributions and
acquisitions were made without incurring additional borrowings.
At December 31, 1996, Occidental had available lines of committed bank
credit of approximately $2.0 billion. Bank fees on committed lines of credit
ranged from 0.125 percent to 0.1875 percent.
NOTE 8 ADVANCE SALE OF CRUDE OIL
- --------------------------------------------------------------------------------
In December 1995, Occidental entered into a transaction with Clark USA,
Inc. (Clark) under which Occidental agreed to deliver approximately 17.7 million
barrels of West Texas Intermediate (WTI)-equivalent oil over a six-year period.
In exchange, Occidental received $100 million in cash and approximately 5.5
million shares of Clark common stock. As a result of this transaction,
Occidental owns approximately 19 percent of Clark accounted for on the cost
method. Occidental has accounted for the consideration received in the
transaction as deferred revenue, which is being amortized into revenue as WTI-
equivalent oil is produced and delivered during the term of the agreement.
Reserves dedicated to the transaction are excluded from the estimate of proved
oil and gas reserves (see Supplemental Oil and Gas Information). At December 31,
1996, 15.5 million barrels remain to be delivered.
NOTE 9 LEASE COMMITMENTS
- --------------------------------------------------------------------------------
The present value of net minimum lease payments, net of the current
portion, totaled $237 million and $259 million at December 31, 1996 and 1995,
respectively. These amounts are included in Other liabilities.
Operating and capital lease agreements frequently include renewal and/or
purchase options and require Occidental to pay for utilities, taxes, insurance
and maintenance expense.
At December 31, 1996, future net minimum lease payments for capital and
operating leases (excluding oil and gas and other mineral leases) were the
following (in millions):
CAPITAL OPERATING
=================================================================== ========= =========
1997 $ 42 $ 121
1998 17 77
1999 17 67
2000 212 58
2001 49 59
Thereafter 1 322
--------- ---------
TOTAL MINIMUM LEASE PAYMENTS 338 $ 704
=========
Less:
Executory costs (5)
Imputed interest (74)
Current portion (22)
---------
PRESENT VALUE OF NET MINIMUM LEASE PAYMENTS, NET OF CURRENT PORTION $ 237
=================================================================== =========
Rental expense for operating leases, net of immaterial sublease rental, was
$128 million in 1996, $141 million in 1995 and $163 million in 1994.
Included in the 1996 and 1995 property, plant and equipment accounts were
$429 million and $442 million, respectively, of property leased under capital
leases and $144 million and $137 million, respectively, of related accumulated
amortization.
45
NOTE 10 LAWSUITS, CLAIMS AND RELATED MATTERS
- --------------------------------------------------------------------------------
Occidental and certain of its subsidiaries have been named in a substantial
number of governmental proceedings as defendants or potentially responsible
parties under the Comprehensive Environmental Response, Compensation and
Liability Act (CERCLA) and corresponding state acts. These proceedings seek
funding, remediation and, in some cases, compensation for alleged property
damage, punitive damages and civil penalties, aggregating substantial amounts.
Occidental is usually one of many companies in these proceedings, and has to
date been successful in sharing response costs with other financially sound
companies. Occidental has accrued reserves at the most likely cost to be
incurred in those proceedings where it is probable that Occidental will incur
remediation costs which can be reasonably estimated. As to those proceedings for
which Occidental does not have sufficient information to determine a range of
liability, Occidental does have sufficient information on which to base the
opinion below.
It is impossible at this time to determine the ultimate legal liabilities
that may arise from various lawsuits, claims and proceedings, including
environmental proceedings described above, pending against Occidental and its
subsidiaries, some of which may involve substantial amounts. However, in
management's opinion, after taking into account reserves, none of such pending
lawsuits, claims and proceedings should have a material adverse effect upon
Occidental's consolidated financial position or results of operations in any
given year.
NOTE 11 OTHER COMMITMENTS AND CONTINGENCIES
- --------------------------------------------------------------------------------
At December 31, 1996, commitments for major capital expenditures during
1997 and thereafter were approximately $358 million.
Occidental has entered into agreements providing for future payments to
secure terminal and pipeline capacity, drilling services, electrical power,
steam and certain chemical raw materials. At December 31, 1996, the net present
value of the fixed and determinable portion of the obligations under these
agreements aggregated $185 million, which was payable as follows (in millions):
1997--$30, 1998--$30, 1999--$24, 2000--$21, 2001--$20 and 2002 through 2014--
$60. Payments under these agreements, including any variable component, were
$209 million in 1996, $190 million in 1995 and $188 million in 1994.
Occidental has certain other commitments under contracts, guarantees and
joint ventures, and certain other contingent liabilities. Additionally,
Occidental agreed to participate in the development of certain natural gas
reserves and construction of a liquefied natural gas plant in Malaysia. In
management's opinion, none of such commitments and contingencies discussed above
should have a material adverse effect upon Occidental's consolidated financial
position or results of operations in any given year.
NOTE 12 DOMESTIC AND FOREIGN INCOME AND OTHER TAXES
- --------------------------------------------------------------------------------
The domestic and foreign components of income(loss) before extraordinary
items and domestic and foreign income and other taxes were as follows (in
millions):
For the years ended December 31, Domestic Foreign Total
=========================================== ========= ========= =========
1996 $ 550 $ 602 $ 1,152
========= ========= =========
1995 $ 425 $ 488 $ 913
========= ========= =========
1994 $ (46) $ 153 $ 107
=========================================== ========= ========= =========
46
The provisions(credits) for domestic and foreign income and other taxes
consisted of the following (in millions):
U.S. State
For the years ended December 31, Federal and Local Foreign Total
====================================== ========= ========= ========= =========
1996
Current $ 168 $ 26 $ 257 $ 451
Deferred -- 2 1 3
--------- --------- --------- ---------
$ 168 $ 28 $ 258 $ 454
====================================== ========= ========= ========= =========
1995
Current $ 152 $ 57 $ 175 $ 384
Deferred 50 (24) (8) 18
--------- --------- --------- ---------
$ 202 $ 33 $ 167 $ 402
====================================== ========= ========= ========= =========
1994
Current $ 3 $ 18 $ 96 $ 117
Deferred 18 4 4 26
--------- --------- --------- ---------
$ 21 $ 22 $ 100 $ 143
====================================== ========= ========= ========= =========
The following is a reconciliation, stated as a percentage of pretax income,
of the U.S. statutory federal income tax rate to Occidental's effective tax rate
on income(loss) before extraordinary items:
For the years ended December 31, 1996 1995 1994
===================================================== ========= ========= =========
U.S. federal statutory tax rate 35% 35% 35%
Operations outside the United States(a) 12 11 65
State taxes, net of federal benefit 2 5 13
State tax benefit from operating loss carryforwards -- (3) --
Reserves not previously benefited -- (5) --
Nondeductible depreciation and other expenses 1 1 11
Reduction in deferred tax asset valuation allowance (9) -- --
Other (2) -- 10
--------- --------- ---------
Tax rate provided by Occidental 39% 44% 134%
===================================================== ========= ========= =========
(a) Included in these figures is the impact of not providing U.S. taxes on the unremitted
earnings of certain foreign subsidiaries. The effect of this is to reduce the U.S.
federal tax rate by approximately 5 percent in 1996 and 4 percent in 1995.
47
The tax effects of temporary differences and carryforwards resulting in
deferred income taxes at December 31, 1996 and 1995 were as follows (in
millions):
1996 1995
-------------------------- --------------------------
Deferred Deferred Deferred Deferred
Tax Tax Tax Tax
Items resulting in temporary differences and carryforwards Assets Liabilities Assets Liabilities
=========================================================== =========== =========== =========== ===========
Property, plant and equipment differences $ 207 $ 3,567 $ 178 $ 3,616
Discontinued operation loss accruals 160 -- 167 --
Environmental reserves 224 -- 244 --
Postretirement benefit accruals 200 -- 207 --
State income taxes 143 -- 140 --
Tax credit carryforwards 200 -- 292 --
All other 598 341 795 503
----------- ----------- ----------- -----------
Subtotal 1,732 3,908 2,023 4,119
Valuation allowance (85) -- (189) --
----------- ----------- ----------- -----------
Total deferred taxes $ 1,647 $ 3,908 $ 1,834 $ 4,119
=========================================================== =========== =========== =========== ===========
Included in total deferred tax assets was a current portion aggregating
$300 million and $335 million as of December 31, 1996 and 1995, respectively,
that was reported in Prepaid expenses and other. The valuation allowance
decreased primarily due to the realization of benefits from operating loss and
credit carryforwards in the United States and Peru.
A deferred tax liability of approximately $120 million at December 31, 1996
has not been recognized for temporary differences related to Occidental's
investment in certain foreign subsidiaries primarily as a result of unremitted
earnings of consolidated subsidiaries, as it is Occidental's intention,
generally, to reinvest such earnings permanently.
The pension liability adjustments recorded directly to retained earnings
were net of an income tax charge of $6 million in 1996 and $9 million in 1995,
and an income tax benefit of $6 million in 1994.
The foreign currency translation adjustment credited directly to retained
earnings was net of an income tax benefit of $2 million in 1996, and an income
tax charge of $10 million in 1995.
The extraordinary loss that resulted from the early extinguishment of
high-coupon debt was reduced by an income tax benefit of $16 million in 1996.
At December 31, 1996, Occidental had, for U.S. federal income tax return
purposes, an alternative minimum tax credit carryforward of $200 million
available to reduce future income taxes. The alternative minimum tax credit
carryforward does not expire.
Occidental is subject to audit by taxing authorities for varying periods in
various tax jurisdictions. Management believes that any required adjustments to
Occidental's tax liabilities will not have a material adverse impact on its
financial position or results of operations.
NOTE 13 NONREDEEMABLE PREFERRED STOCK, ESOP PREFERRED STOCK AND COMMON STOCK
- --------------------------------------------------------------------------------
The following is an analysis of nonredeemable preferred stock and common
stock (shares in thousands):
Nonredeemable Common
Preferred Stock Stock
============================================ =============== =========
BALANCE, DECEMBER 31, 1993 11,500 305,603
Issued 14,995 11,300
Options exercised and other, net -- (50)
- -------------------------------------------- --------------- ---------
BALANCE, DECEMBER 31, 1994 26,495 316,853
Issued -- 1,523
Options exercised and other, net -- 335
- -------------------------------------------- --------------- ---------
BALANCE, DECEMBER 31, 1995 26,495 318,711
Issued -- 10,145
Options exercised and other, net (2) 372
- -------------------------------------------- --------------- ---------
BALANCE, DECEMBER 31, 1996 26,493 329,228
============================================ =============== =========
48
NONREDEEMABLE PREFERRED STOCK Occidental has authorized 50,000,000 shares of
preferred stock with a par value of $1.00 per share. In February 1994,
Occidental issued 11,388,340 shares of $3.00 cumulative CXY-indexed convertible
preferred stock in a public offering for net proceeds of approximately $557
million. The shares are convertible into Occidental common stock in accordance
with a conversion formula that is indexed to the market price of the common
shares of CanadianOxy. The shares of CXY-indexed convertible preferred stock are
redeemable on or after January 1, 1999, in whole or in part, at the option of
Occidental, at a redemption price of $51.50 per share declining ratably to
$50.00 per share on or after January 1, 2004, in each case plus accumulated and
unpaid dividends to the redemption date. As of December 31, 1996, the aggregate
number of shares of Occidental common stock issuable upon conversion of all of
the issued and outstanding shares of the CXY-indexed convertible preferred stock
was 28,068,277, based on the Conversion Ratio then in effect of 2.465.
In December 1994, Occidental issued 3,606,484 shares of $3.875 cumulative
convertible voting preferred stock in connection with the Placid acquisition. In
February 1993, Occidental issued 11,500,000 shares of $3.875 cumulative
convertible preferred stock. The shares of both series are redeemable on or
after February 18, 1998, in whole or in part, at the option of Occidental, at a
redemption price of $51.9375 per share declining ratably to $50.00 per share on
or after February 18, 2003, in each case plus accumulated and unpaid dividends
to the redemption date. Each series of $3.875 preferred stock is convertible at
the option of the holder into common stock of Occidental at a conversion price
of $22.76 per share, subject to adjustment in certain events.
All stock purchase rights (rights) issued pursuant to a 1986 stockholders'
rights plan expired in 1996. The rights would have been exercisable only if a
person or group either acquired a beneficial ownership of 20 percent or more of
Occidental's common stock or commenced a tender or exchange offer that would
have resulted in ownership of 30 percent or more.
ESOP PREFERRED STOCK In November 1996, Occidental established the MidCon
Corp. Employee Stock Ownership Plan (MidCon ESOP) for the benefit of employees
of MidCon. Pursuant to the MidCon ESOP, Occidental has issued 1,400,000 shares
of its cumulative MidCon-indexed convertible preferred stock (CMIC Preferred
Stock) to the MidCon Corp. ESOP Trust. The CMIC Preferred Stock is convertible
into Occidental common stock based on the value of MidCon, which remains a
wholly-owned subsidiary of Occidental. The MidCon ESOP paid for the CMIC
Preferred Stock with a $1.4 billion 30-year promissory note (ESOP Note), with
interest at 7.9 percent per annum, guaranteed by MidCon. Generally, the shares
held by the MidCon ESOP are released and allocated to participant accounts based
on the proportion of the payment on the note for the respective period compared
to the total remaining payments due on the note. Dividends on the CMIC Preferred
Stock are payable at an annual rate of $21 per share, when and as declared by
Occidental's Board of Directors. It is anticipated that MidCon will make
discretionary annual contributions to the MidCon ESOP which, together with the
annual dividends, will be used to repay the ESOP Note.
The MidCon ESOP is subject to the provisions of AICPA Statement of Position
No. 93-6 (SOP 93-6) which requires that compensation expense be measured based
on the fair value of the shares committed to be released. In addition, SOP 93-6
requires that dividends paid on allocated ESOP shares are reported as a charge
to retained earnings, and only shares that are allocated and committed to be
released are considered outstanding in the calculation of earnings per share.
Dividends of $3.3 million on unearned shares and cash contributions of $9.2
million from MidCon were received by the MidCon ESOP and were used for debt
service on the ESOP Note in 1996. Compensation expense related to the MidCon
ESOP recognized during 1996 totaled $217,000. The MidCon ESOP has 6,151
allocated shares outstanding at December 31, 1996.
49
STOCK INCENTIVE PLANS
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS Options to purchase common stock
of Occidental have been granted to officers and employees under stock option
plans adopted in 1978, 1987 and 1995. During 1996, options for 957,715 shares
became exercisable, and options for 3,589,365 shares were exercisable at
December 31, 1996 at a weighted-average exercise price of $21.631. These options
vest over three years with a maximum term of ten years and one month. At
December 31, 1996, options with stock appreciation rights (SAR) for 992,667
shares were outstanding, all of which options for shares were exercisable.
The following is a summary of stock option transactions during 1996, 1995
and 1994 (shares in thousands, except per-share amounts):
1996 1995 1994
--------------------------- --------------------------- ---------------------------
Weighted Weighted Weighted
Average Average Average
Shares Exercise Price Shares Exercise Price Shares Exercise Price
====================== ========= ============== ========= ============== ========= ==============
BEGINNING BALANCE 5,481 $ 22.263 5,098 $ 22.121 4,556 $ 23.272
Granted or issued 1,335 $ 24.375 1,127 $ 23.125 905 $ 17.827
Exercised (483) $ 21.276 (431) $ 19.230 (52) $ 18.905
Canceled or expired (381) $ 24.958 (313) $ 27.222 (311) $ 27.021
--------- --------- ---------
ENDING BALANCE 5,952 $ 22.637 5,481 $ 22.263 5,098 $ 22.121
========= ========= =========
OPTIONS EXERCISABLE
AT YEAR END 3,589 3,517 3,374
====================== ========= ========= =========
For options outstanding at December 31, 1996 the exercise prices were
between $17.75 and $29.625 and the weighted average remaining contractual life
was 7 years.
RESTRICTED STOCK AWARDS Occidental has a stock incentive plan whereby a
limited number of executives may be awarded Occidental restricted common stock
at the par value of $.20 per share, with such shares vesting after four years
(five years for awards issued prior to December 1995) or earlier under certain
conditions. The related expense is amortized over the vesting period. In 1996,
171,649 shares were awarded at a weighted-average grant-date value of $21.431
per share; 21,339 shares were awarded in 1995, at a weighted-average grant-date
value of $20.875 per share.
PERFORMANCE STOCK AWARDS Certain performance stock awards were made to senior
executive officers in January 1996 pursuant to the 1995 Incentive Stock Plan.
The number of shares of common stock to be received, under these awards, by such
officers at the end of the performance period will depend on the attainment of
performance objectives based on a peer company comparison of total stockholder
return for such period. Dependent on the Company's ranking among its peers, the
grantees will receive shares of common stock in an amount ranging from 0 percent
to 175 percent of the Target Share Award (as such amount is defined in the
grant). The shares vest over four years with a maximum term of four years. In
1996, 101,630 shares were awarded at a weighted-average grant-date value of
$21.375 per share.
Under the 1995 Stock Incentive Plan a total of approximately 10,000,000
shares may be awarded. At December 31, 1996, 8,370,382 shares were available for
the granting of all future awards under these plans, of which a maximum of
4,705,382 shares were available to issue restricted and performance stock
awards.
Occidental accounts for these plans under Accounting Principles Board
Opinion No. 25. Had the compensation expense for these plans been determined in
accordance with Statement of Financial Accounting Standards No. 123--"Accounting
for Stock Based Compensation" (SFAS No. 123), Occidental's pro forma net income
would have been $666 million in 1996 and $510 million in 1995. Primary and fully
diluted earnings per share would not have changed. The SFAS No. 123 method of
accounting has not been applied to options granted prior to January 1, 1995,
therefore the resulting pro forma compensation expense may not be representative
of that to be expected in future years. The fair value of each option grant, for
pro forma calculation purposes, is estimated using the Black-Scholes option-
pricing model with the following weighted-average assumptions used for grants in
1996 and 1995, respectively: dividend yield of 4.20 percent and 4.32 percent;
expected volatility of 23.92 percent and 24.19 percent; risk-free rate of return
6.79 percent and 6.93 percent; and expected lives of 5 and 7 years.
1996 RESTRICTED STOCK PLAN FOR NON-EMPLOYEE DIRECTORS Under the 1996
Restricted Stock Plan for Non-Employee Directors, each non-employee Director of
the Company will receive awards of restricted common stock each year as
additional compensation for his or her services as a member of the Board of
Directors. A maximum of 50,000 shares of common stock may be awarded under the
Directors Plan and 3,250 shares of common stock were awarded during 1996. At
December 31, 1996, 46,750 shares of common stock were available for the granting
of future awards.
50
NOTE 14 RETIREMENT PLANS AND POSTRETIREMENT BENEFITS
- --------------------------------------------------------------------------------
Occidental has various defined contribution retirement plans for its
salaried, domestic union and nonunion hourly, and certain foreign national
employees that provide for periodic contributions by Occidental based on plan-
specific criteria, such as base pay, age level and/or employee contributions.
Occidental contributed and expensed $66 million, $71 million and $70 million
under the provisions of these plans for 1996, 1995 and 1994, respectively.
Occidental's retirement and postretirement defined benefit plans are
accrued based on various assumptions and discount rates, as described below. The
actuarial assumptions used could change in the near term as a result of changes
in expected future trends and other factors which, depending on the nature of
the changes, could cause increases or decreases in the liabilities accrued.
Pension costs for Occidental's defined benefit pension plans, determined by
independent actuarial valuations, are funded by payments to trust funds, which
are administered by independent trustees. The components of the net pension cost
for 1996, 1995 and 1994 were as follows (in millions):
For the years ended December 31, 1996 1995 1994
================================================ ========= ========= =========
Service cost--benefits earned during the period $ 9 $ 9 $ 8
Interest cost on projected benefit obligation 23 23 21
Actual return on plan assets (31) (43) 1
Net amortization and deferral 21 32 (10)
Curtailments and settlements 1 12 --
--------- --------- ---------
Net pension cost $ 23 $ 33 $ 20
================================================ ========= ========= =========
In 1996, 1995 and 1994, Occidental recorded adjustments to retained
earnings of credits of $8 million and $16 million and a charge of $10 million,
respectively, to reflect the net-of-tax difference between the additional
liability required under pension accounting provisions and the corresponding
intangible asset.
The following table sets forth the defined benefit plans' funded status and
amounts recognized in Occidental's consolidated balance sheets at December 31,
1996 and 1995 (in millions):
1996 1995
------------------------------ ------------------------------
Assets Exceed Accumulated Assets Exceed Accumulated
Accumulated Benefits Accumulated Benefits
Balance at December 31, Benefits Exceed Assets Benefits Exceed Assets
===================================================== ============= ============= ============= =============
PRESENT VALUE OF THE ESTIMATED PENSION BENEFITS TO
BE PAID IN THE FUTURE
Vested benefits $ 75 $ 208 $ 35 $ 230
Nonvested benefits 4 11 4 11
------------ ------------ ------------ ------------
Accumulated benefit obligations 79 219 39 241
Effect of projected future salary increases(a) 12 9 15 6
------------ ------------ ------------ ------------
Total projected benefit obligations 91 228 54 247
Plan assets at fair value 95 169 50 179
------------ ------------ ------------ ------------
PROJECTED BENEFIT OBLIGATION IN EXCESS OF(LESS THAN)
PLAN ASSETS $ (4) $ 59 $ 4 $ 68
===================================================== ============ ============ ============ ============
Projected benefit obligation in excess of(less than)
plan assets $ (4) $ 59 $ 4 $ 68
Unrecognized net asset(obligation) 1 (8) (4) (4)
Unrecognized prior service(cost) benefit -- (9) -- (7)
Unrecognized net gain(loss) (4) (25) 2 (46)
Additional minimum liability(b) -- 39 -- 55
------------ ------------ ------------ ------------
PENSION LIABILITY(ASSET) $ (7) $ 56 $ 2 $ 66
===================================================== ============ ============ ============ ============
(a) The effect of salary increases related primarily to international salary-based plans.
(b) A related amount up to the limit allowable under SFAS No. 87--"Employers' Accounting for Pensions" has been included
in other assets. Amounts exceeding such limits have been charged to retained earnings.
The discount rate used in determining the actuarial present value of the
projected benefit obligations was 7.5 percent in 1996 and 1995. The rate of
increase in future compensation levels used in determining the actuarial present
value of the projected benefit obligations was between 4.5 percent and 5.5
percent in 1996 and 1995. The expected long-term rate of return on assets was 8
percent in 1996 and 1995.
Occidental provides medical, dental and life insurance for certain active,
retired and disabled employees and their eligible dependents. Beginning in 1993,
certain salaried participants pay for all medical cost increases in excess of
increases in the Consumer Price Index (CPI). The benefits generally are funded
by Occidental as the benefits are paid during the year. The cost of providing
these benefits is based on claims filed and insurance premiums paid for the
period. The total benefits costs were approximately $103 million in 1996, $93
million in 1995 and $124 million in 1994. The 1996, 1995 and 1994 costs included
$43 million, $23 million and $54 million, respectively, for postretirement
costs, as discussed below.
51
Effective January 1, 1992, Occidental adopted SFAS No. 106--"Employers'
Accounting for Postretirement Benefits Other Than Pensions." This statement
required that the cost of postretirement benefits other than pensions, which are
primarily for health care, be accrued as a form of deferred compensation earned
during the period that employees render service, rather than the previously
permitted practice of accounting for such costs as claims were paid. Occidental
elected immediate recognition of the net obligation at January 1, 1992.
The postretirement benefit obligation as of December 31, 1996 and 1995 was
determined by application of the terms of medical, dental and life insurance
plans, including the effect of established maximums on covered costs, together
with relevant actuarial assumptions and health care cost trend rates projected
at a CPI increase of 3 percent and 4 percent in 1996 and 1995, respectively
(except for union employees). For union employees, the health care cost trend
rates were projected at annual rates ranging ratably from 9 percent in 1996 to 6
percent through the year 2002 and level thereafter. The effect of a 1 percent
annual increase in these assumed cost trend rates would increase the accumulated
postretirement benefit obligation by approximately $14 million in 1996; the
annual service and interest costs would not be materially affected. The weighted
average discount rate used in determining the accumulated postretirement benefit
obligation as of December 31, 1996 and 1995 was 7.5 percent. Occidental's
funding policy generally is to pay claims as they come due. However in 1996 and
1995, MidCon prefunded certain postretirement benefits associated with its
regulated operations. Related assets are invested in short-term securities.
The following table sets forth the postretirement plans' combined status,
reconciled with the amounts included in the consolidated balance sheets at
December 31, 1996 and 1995 (in millions):
Balance at December 31, 1996 1995
=================================================== ========= =========
Accumulated postretirement benefit obligation
Retirees $ 319 $ 379
Fully eligible active plan participants 63 59
Other active plan participants 85 101
--------- ---------
Total accumulated postretirement benefit obligation 467 539
Plan assets at fair value 34 26
--------- ---------
Unfunded status 433 513
Unrecognized prior service cost (5) (5)
Unrecognized net gain(loss) 78 (1)
--------- ---------
Accrued postretirement benefit cost $ 506 $ 507
=================================================== ========= =========
Net periodic postretirement benefit cost for 1996, 1995 and 1994 included
the following components (in millions):
For the years ended December 31, 1996 1995 1994
=============================================================== ========= ========= =========
Service cost--benefits attributed to service during the period $ 7 $ 8 $ 9
Interest cost on accumulated postretirement benefit obligation 37 41 42
Actual return on plan assets (1) (1) (1)
Net amortization and deferral -- 1 4
Curtailments and settlements -- (26) --
--------- --------- ---------
Net periodic postretirement benefit cost $ 43 $ 23 $ 54
=============================================================== ========= ========= =========
NOTE 15 INVESTMENTS
- --------------------------------------------------------------------------------
Investments in companies, other than oil and gas exploration and production
companies, in which Occidental has a voting stock interest of at least 20
percent, but not more than 50 percent, and certain partnerships are accounted
for on the equity method. At December 31, 1996, Occidental's equity investments
consisted primarily of joint-interest pipelines, including a pipeline in the
Dutch sector of the North Sea, an investment of approximately 30 percent in the
common shares of CanadianOxy and various chemical partnerships and joint
ventures. Equity investments paid dividends of $62 million, $51 million and $45
million to Occidental in 1996, 1995 and 1994, respectively. Cumulative
undistributed earnings since acquisition, in the amount of $205 million, of 50-
percent-or-less-owned companies have been accounted for by Occidental under the
equity method. At December 31, 1996 and 1995, Occidental's investment in equity
investees exceeded the historical underlying equity in net assets by
approximately $258 million and $203 million, respectively, which is being
amortized into income over periods not exceeding 40 years. The aggregate market
value of the investment in CanadianOxy, based on the quoted market price for
CanadianOxy common shares, was $644 million at December 31, 1996, compared with
an aggregate book value of $251 million.
Occidental and its subsidiaries' purchases from certain equity method
pipeline ventures and chemical partnerships were $191 million, $202 million and
$202 million in 1996, 1995 and 1994, respectively. Occidental and its
subsidiaries' sales to certain equity method pipeline ventures and chemical
partnerships were $246 million, $265 million and $225 million, in 1996, 1995 and
1994, respectively.
52
The following table presents Occidental's proportional interest in the
summarized financial information of its equity method investments (in millions):
For the years ended December 31, 1996 1995 1994
================================ ========= ========= =========
Revenues $ 884 $ 806 $ 684
Costs and expenses 801 694 611
--------- --------- ---------
Net income $ 83 $ 112 $ 73
================================ ========= ========= =========
Balance at December 31, 1996 1995
================================ ========= =========
Current assets $ 287 $ 246
Noncurrent assets $ 1,206 $ 979
Current liabilities $ 184 $ 168
Noncurrent liabilities $ 707 $ 524
Stockholders' equity $ 602 $ 533
- -------------------------------- --------- ---------
Investments also include certain cost method investments, in which
Occidental owns less than 20 percent of the voting stock. At December 31, 1996,
these investments consisted primarily of the shares in Clark (see Note 8).
NOTE 16 SUMMARIZED FINANCIAL INFORMATION OF WHOLLY-OWNED SUBSIDIARY
- --------------------------------------------------------------------------------
Occidental has guaranteed the payments of principal of, and interest on,
certain publicly traded debt securities of its subsidiary, OXY USA.
The following table presents summarized financial information for OXY USA
(in millions):
For the years ended December 31, 1996 1995 1994
================================ ========= ========= =========
Revenues $ 982 $ 709 $ 748
Costs and expenses 882 778 749
--------- --------- ---------
Net income(loss) $ 100 $ (69) $ (1)
================================ ========= ========= =========
Balance at December 31, 1996 1995
================================ ========= =========
Current assets $ 183 $ 206
Intercompany receivable $ 428 $ 323
Noncurrent assets $ 2,028 $ 2,057
Current liabilities $ 277 $ 244
Interest bearing note to parent $ 105 $ 121
Noncurrent liabilities $ 1,221 $ 1,283
Stockholders' equity $ 1,036 $ 938
================================ ========= =========
NOTE 17 INDUSTRY SEGMENTS AND GEOGRAPHIC AREAS
- --------------------------------------------------------------------------------
Occidental conducts its continuing operations through three industry
segments: oil and gas, natural gas transmission and chemical. The oil and gas
segment explores for, develops, produces and markets crude oil and natural gas
domestically and internationally. The natural gas transmission segment engages
in interstate and intrastate natural gas transmission and marketing through an
extensive network of pipelines. The chemical segment manufactures and markets,
domestically and internationally, a variety of basic chemicals, petrochemicals,
polymers and plastics and specialty chemicals.
Earnings of industry segments and geographic areas exclude interest income,
interest expense, unallocated corporate expenses, discontinued operations,
extraordinary items and income from equity investments, but include gains from
dispositions of segment and geographic area assets (see Note 4). Intersegment
sales and transfers between geographic areas are made at prices approximating
current market values and are not significant.
Foreign income and other taxes and certain state taxes are included in
segment earnings on the basis of operating results. U.S. federal income taxes
are not allocated to segments except for amounts in lieu thereof that represent
the tax effect of operating charges or credits resulting from purchase
accounting adjustments which arise due to the implementation in 1992 of SFAS No.
109.
Identifiable assets are those assets used in the operations of the
segments. Corporate assets consist of cash, short-term investments, certain
corporate receivables and other assets.
53
INDUSTRY SEGMENTS
In millions
Natural Gas
Oil and Gas Transmission Chemical Corporate Total
=================================================== ============ ============ ============ ============ ============
YEAR ENDED DECEMBER 31, 1996
TOTAL REVENUES $ 3,695 $ 2,575 $ 4,484 $ 144 $ 10,898
============ ============ ============ ============ ============
Pretax operating profit(loss)(a,b) $ 739 $ 302 $ 683 $ (572) $ 1,152
Income taxes (259) (6) (15) (174) (454)
Extraordinary gain(loss) -- -- -- (30) (30)
------------ ------------ ------------ ------------ ------------
NET INCOME(LOSS) $ 480(c) $ 296 $ 668(d) $ (776)(e)$ 668
============ ============ ============ ============ ============
Property, plant and equipment additions, net(f) $ 651 $ 147 $ 262 $ 14 $ 1,074
============ ============ ============ ============ ============
Depreciation, depletion and amortization $ 493 $ 184 $ 236 $ 8 $ 921
============ ============ ============ ============ ============
TOTAL ASSETS $ 4,402 $ 7,305 $ 5,429 $ 498 $ 17,634
=================================================== ============ ============ ============ ============ ============
YEAR ENDED DECEMBER 31, 1995
TOTAL REVENUES $ 3,043 $ 2,049 $ 5,410 $ 192 $ 10,694
============ ============ ============ ============ ============
Pretax operating profit(loss)(a,b) $ 211 $ 218 $ 1,107 $ (623) $ 913
Income taxes (166) (5) (27) (204) (402)
------------ ------------ ------------ ------------ ------------
NET INCOME(LOSS) $ 45(g) $ 213(h) $ 1,080(i) $ (827) $ 511
============ ============ ============ ============ ============
Property, plant and equipment additions, net(f) $ 480 $ 150 $ 243 $ 11 $ 884
============ ============ ============ ============ ============
Depreciation, depletion and amortization $ 451 $ 200 $ 262 $ 9 $ 922
============ ============ ============ ============ ============
TOTAL ASSETS $ 4,594 $ 7,037 $ 5,181 $ 1,003 $ 17,815
=================================================== ============ ============ ============ ============ ============
YEAR ENDED DECEMBER 31, 1994
TOTAL REVENUES $ 2,494 $ 2,135 $ 4,681 $ 106 $ 9,416
============ ============ ============ ============ ============
Pretax operating profit(loss)(a,b) $ 128 $ 281 $ 368 $ (670) $ 107
Income taxes (101) (5) (18) (19) (143)
------------ ------------ ------------ ------------ ------------
NET INCOME(LOSS) $ 27(j) $ 276(k) $ 350(l) $ (689)(m)$ (36)
============ ============ ============ ============ ============
Property, plant and equipment additions, net(f) $ 789 $ 93 $ 190 $ 2 $ 1,074
============ ============ ============ ============ ============
Depreciation, depletion and amortization $ 396 $ 198 $ 278 $ 10 $ 882
============ ============ ============ ============ ============
TOTAL ASSETS $ 4,488 $ 7,119 $ 5,935 $ 447 $ 17,989
=================================================== ============ ============ ============ ============ ============
(a) Research and development costs were $16 million in 1996, $21 million in 1995 and $22 million in 1994.
(b) Divisional earnings include charges and credits in lieu of U.S. federal income taxes. In 1996, the amounts allocated to the
divisions were credits of $15 million, $48 million and $26 million at oil and gas, natural gas transmission and chemical,
respectively. In 1995, the amounts allocated to the divisions were credits of $16 million, $48 million and $27 million at oil
and gas, natural gas transmission and chemical, respectively. In 1994, a credit of $18 million, a net credit of $41 million
and a credit of $32 million were allocated to oil and gas, natural gas transmission and chemical, respectively.
(c) Includes a charge of $105 million for the write-down of investment in the Republic of Komi.
(d) Includes a pretax gain of $170 million related to favorable litigation settlements and a charge of $75 million for additional
environmental reserves, and the related state tax effects.
(e) Includes a $100 million reduction in the deferred tax asset valuation allowance.
(f) Excludes acquisitions of other businesses of $58 million in chemical in 1996 and $11 million and $257 million in oil and gas
in 1995 and 1994, respectively. Includes capitalized interest of $9 million in 1996, $10 million in 1995 and $5 million in
1994.
(g) Includes charges of $109 million for settlement of litigation and $95 million for reorganization costs.
(h) Includes a charge of $37 million for reorganization costs.
(i) Includes a pretax gain of $40 million from the sale of a PVC facility at Addis, Louisiana.
(j) Includes a $45 million charge for environmental and litigation matters, a charge of $11 million for the impairment of oil and
gas properties and a $12 million charge for a voluntary retirement program and severance and related costs, partially offset
by a $16 million gain resulting from the sale of the remaining interest in its producing operations in Argentina and a $15
million benefit resulting from the reversal of reserves no longer needed for anticipated liabilities related to the sale of
the U.K. North Sea interests.
(k) Includes a benefit of $13 million from a reduction of LIFO gas storage inventory and a net benefit of $12 million from the
reduction of the contract impairment reserve.
(l) Includes a $55 million charge for litigation matters, charges of $48 million for expenses related to the curtailment and
closure of certain plant operations and an $11 million unfavorable impact related to an explosion at the Taft plant and
charges for start-up costs related to the Swift Creek chemical plant.
(m) Includes a net benefit of $7 million resulting from the reversal of reserves no longer required and the adoption of SFAS No.
112--"Employers' Accounting for Postemployment Benefits."
54
GEOGRAPHIC AREAS(a,b)
In millions
Other Eastern
United Western Hemisphere
States Hemisphere and Other Corporate Total
========================================== ========= ========== ========== ========= =========
YEAR ENDED DECEMBER 31, 1996
TOTAL REVENUES $ 8,954(c) $ 769 $ 1,031 $ 144 $ 10,898
========= ========== ========== ========= =========
Geographic earnings(loss) before taxes $ 1,224 $ 260 $ 240 $ (572) $ 1,152
Income taxes (21) (90) (169) (174) (454)
Extraordinary gain(loss) -- -- -- (30) (30)
--------- ---------- ---------- --------- ---------
NET INCOME(LOSS) $ 1,203 $ 170 $ 71 $ (776) $ 668
========= ========== ========== ========= =========
TOTAL ASSETS $ 14,870 $ 897 $ 1,369 $ 498 $ 17,634
========================================== ========= ========== ========== ========= =========
YEAR ENDED DECEMBER 31, 1995
TOTAL REVENUES $ 9,034(c) $ 672 $ 796 $ 192 $ 10,694
========= ========== ========== ========= =========
Geographic earnings(loss) before taxes $ 1,131 $ 182 $ 223 $ (623) $ 913
Income taxes (29) (56) (113) (204) (402)
--------- ---------- ---------- --------- ---------
NET INCOME(LOSS) $ 1,102 $ 126 $ 110 $ (827) $ 511
========= ========== ========== ========= =========
TOTAL ASSETS $ 14,483 $ 783 $ 1,546 $ 1,003 $ 17,815
========================================== ========= ========== ========== ========= =========
YEAR ENDED DECEMBER 31, 1994
TOTAL REVENUES $ 8,263(c) $ 626 $ 421 $ 106 $ 9,416
========= ========== ========== ========= =========
Geographic earnings(loss) before taxes $ 665 $ 167 $ (55) $ (670) $ 107
Income taxes (20) (65) (39) (19) (143)
--------- ---------- ---------- --------- ---------
NET INCOME(LOSS) $ 645 $ 102 $ (94) $ (689) $ (36)
========= ========== ========== ========= =========
TOTAL ASSETS $ 15,335 $ 708 $ 1,499 $ 447 $ 17,989
========================================== ========= ========== ========== ========= =========
(a) Included in the consolidated balance sheets were liabilities of approximately $254 million, $285 million
and $249 million at December 31, 1996, 1995 and 1994, respectively, which pertained to operations based
outside the United States and Canada.
(b) Investments in foreign countries are subject to the actions of those countries, which could significantly
affect Occidental's operations and investments in those countries.
(c) Includes export sales, consisting of chemical products, of approximately $673 million, $1.039 billion and
$756 million in 1996, 1995 and 1994, respectively.
55
NOTE 18 COSTS AND RESULTS OF OIL AND GAS PRODUCING ACTIVITIES
- --------------------------------------------------------------------------------
Capitalized costs relating to oil and gas producing activities and related
accumulated depreciation, depletion and amortization, which include impairments,
were as follows (in millions):
Other Eastern
United Western Hemisphere Total
States Hemisphere and Other Worldwide
======================================================== ========= ========== ========== =========
DECEMBER 31, 1996
Proved properties $ 4,695 $ 1,891 $ 1,274 $ 7,860
Unproved properties 64 33 97 194
--------- ---------- ---------- ---------
TOTAL PROPERTY COSTS(a) 4,759 1,924 1,371 8,054
Support facilities 11 125 54 190
--------- ---------- ---------- ---------
TOTAL CAPITALIZED COSTS 4,770 2,049 1,425 8,244
Accumulated depreciation, depletion and amortization
and valuation provisions (2,760) (1,554) (522) (4,836)
--------- ---------- ---------- ---------
NET CAPITALIZED COSTS $ 2,010 $ 495 $ 903 $ 3,408
========= ========== ========== =========
Share of equity investees' net capitalized costs(b) $ 76 $ 80 $ 152 $ 308
======================================================== ========= ========== ========== =========
DECEMBER 31, 1995
Proved properties $ 4,614 $ 1,754 $ 1,224 $ 7,592
Unproved properties 78 36 184 298
--------- ---------- ---------- ---------
TOTAL PROPERTY COSTS(a) 4,692 1,790 1,408 7,890
Support facilities 21 119 50 190
--------- ---------- ---------- ---------
TOTAL CAPITALIZED COSTS 4,713 1,909 1,458 8,080
Accumulated depreciation, depletion and amortization
and valuation provisions (2,680) (1,474) (381) (4,535)
--------- ---------- ---------- ---------
NET CAPITALIZED COSTS $ 2,033 $ 435 $ 1,077 $ 3,545
========= ========== ========== =========
Share of equity investees' net capitalized costs(b) $ 68 $ 66 $ 164 $ 298
======================================================== ========= ========== ========== =========
DECEMBER 31, 1994
Proved properties $ 4,566 $ 1,645 $ 1,239 $ 7,450
Unproved properties 96 19 99 214
--------- ---------- ---------- ---------
TOTAL PROPERTY COSTS(a) 4,662 1,664 1,338 7,664
Support facilities 22 127 51 200
--------- ---------- ---------- ---------
TOTAL CAPITALIZED COSTS 4,684 1,791 1,389 7,864
Accumulated depreciation, depletion and amortization
and valuation provisions (2,559) (1,410) (339) (4,308)
--------- ---------- ---------- ---------
NET CAPITALIZED COSTS $ 2,125 $ 381 $ 1,050 $ 3,556
========= ========== ========== =========
Share of equity investees' net capitalized costs(b) $ 56 $ 61 $ 206 $ 323
======================================================== ========= ========== ========== =========
(a) Includes costs related to leases, exploration costs, lease and well equipment, pipelines and terminals, gas
plants and other equipment.
(b) Excludes amounts applicable to synthetic fuels.
56
Costs incurred relating to oil and gas producing activities, whether
capitalized or expensed, were as follows (in millions):
Other Eastern
United Western Hemisphere Total
States Hemisphere and Other Worldwide
================================ ========= ========== ========== =========
DECEMBER 31, 1996
Acquisition of properties
Proved $ 8 $ -- $ 28 $ 36
Unproved 9 -- -- 9
Exploration costs 30 55 80 165
Development costs 212 118 244 574
--------- ---------- ---------- ---------
$ 259 $ 173 $ 352 $ 784
========= ========== ========== =========
Share of equity investees' costs $ 35 $ 36 $ 54 $ 125
================================ ========= ========== ========== =========
DECEMBER 31, 1995
Acquisition of properties
Proved $ 4 $ -- $ 55 $ 59
Unproved 7 -- 4 11
Exploration costs 29 34 70 133
Development costs 173 110 118 401
--------- ---------- ---------- ---------
$ 213 $ 144 $ 247 $ 604
========= ========== ========== =========
Share of equity investees' costs $ 28 $ 23 $ 25 $ 76
================================ ========= ========== ========== =========
DECEMBER 31, 1994
Acquisition of properties
Proved $ 268 $ -- $ 252 $ 520
Unproved 24 -- 47 71
Exploration costs 31 20 102 153
Development costs 167 85 99 351
--------- ---------- ---------- ---------
$ 490(a) $ 105 $ 500(a) $ 1,095
========= ========== ========== =========
Share of equity investees' costs $ 14 $ 14 $ 27 $ 55
================================ ========= ========== ========== =========
(a) Amounts exclude the deferred tax effects of $22 million and $21 million in the
United States and Eastern Hemisphere and Other, respectively, related to the
Placid acquisition.
57
The results of operations of Occidental's oil and gas producing activities,
which exclude oil trading activities and items such as asset dispositions,
corporate overhead and interest, were as follows (in millions):
Other Eastern
United Western Hemisphere Total
States Hemisphere(a) and Other Worldwide
======================================================================== ========= ========== ========== =========
FOR THE YEAR ENDED DECEMBER 31, 1996
Revenues $ 906 $ 571 $ 912(b) $ 2,389
Production costs 241 157 184 582
Exploration expenses 25 28 67 120
Other operating expenses 49 51 124 224
Other expense--write-down of investment in Komi -- -- 105 105
Depreciation, depletion and amortization and valuation provisions 234(c) 83 164 481
--------- ---------- ---------- ---------
PRETAX INCOME(LOSS) 357 252 268 877
Income tax expense(benefit)(d) 81 89 169(b) 339
--------- ---------- ---------- ---------
RESULTS OF OPERATIONS $ 276 $ 163 $ 99 $ 538
========= ========== ========== =========
Share of equity investees' results of operations $ 8 $ 3 $ 25 $ 36
======================================================================= ========= ========== ========== =========
FOR THE YEAR ENDED DECEMBER 31, 1995
Revenues $ 702 $ 467 $ 679(b) $ 1,848
Production costs 238 157 141 536
Exploration expenses 22 30 54 106
Other operating expenses 51 67 118 236
Depreciation, depletion and amortization and valuation provisions 249(c) 69 128 446
--------- ---------- ---------- ---------
PRETAX INCOME(LOSS) 142 144 238 524
Income tax expense(benefit)(d) 16 52 113(b) 181
--------- ---------- ---------- ---------
RESULTS OF OPERATIONS(e) $ 126 $ 92 $ 125 $ 343
========= ========== ========== =========
Share of equity investees' results of operations $ 6 $ 1 $ 25 $ 32
======================================================================= ========= ========== ========== =========
FOR THE YEAR ENDED DECEMBER 31, 1994
Revenues $ 724 $ 422 $ 326(b) $ 1,472
Production costs 249 165 86 500
Exploration expenses 20 17 90 127
Other operating expenses 60 78 83 221
Depreciation, depletion and amortization and valuation provisions 220(c) 61 102 383
--------- ---------- ---------- ---------
PRETAX INCOME(LOSS) 175 101 (35) 241
Income tax expense(benefit)(d) -- 62 39(b) 101
--------- ---------- ---------- ---------
RESULTS OF OPERATIONS(e) $ 175 $ 39 $ (74) $ 140
========= ========== ========== =========
Share of equity investees' results of operations $ 4 $ 7 $ 17 $ 28
======================================================================= ========= ========== ========== =========
(a) Includes amounts applicable to operating interests in which Occidental receives an agreed-upon fee per barrel of crude oil
produced.
(b) Revenues and income tax expense include taxes owed by Occidental but paid by governmental entities on its behalf.
(c) Includes a credit of $15 million, $16 million and $18 million in 1996, 1995 and 1994, respectively, under the method of
allocating amounts in lieu of taxes.
(d) U.S. federal income taxes reflect expense allocations related to oil and gas activities, including allocated interest and
corporate overhead. Foreign income taxes were included in geographic areas on the basis of operating results.
(e) The 1995 and 1994 amounts have been restated as a result of cost reclassifications to be on a consistent basis with 1996.
The new presentation reflects the current cost structure of the oil and gas producing activities of the Company.
58
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Stockholders and Board of Directors, Occidental Petroleum Corporation:
We have audited the accompanying consolidated balance sheets of OCCIDENTAL
PETROLEUM CORPORATION (a Delaware corporation) and consolidated subsidiaries as
of December 31, 1996 and 1995, and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the three years in
the period ended December 31, 1996 (included on pages 33 through 59). These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Occidental Petroleum
Corporation and consolidated subsidiaries as of December 31, 1996 and 1995, and
the results of their operations and their cash flows for each of the three years
in the period ended December 31, 1996, in conformity with generally accepted
accounting principles.
Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Los Angeles, California
January 31, 1997
60
1996 QUARTERLY FINANCIAL DATA (Unaudited) Occidental Petroleum Corporation
In millions, except per-share amounts and Subsidiaries
Three months ended MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 TOTAL YEAR
====================================== ============ ============ ============ ============ ============
Divisional net sales
Oil and gas $ 754 $ 878 $ 1,148 $ 900 $ 3,680
Natural gas transmission 702 521 554 797 2,574
Chemical 1,068 1,058 1,084 1,097 4,307
Other (2) -- -- (2) (4)
------------ ------------ ------------ ------------ ------------
Net sales $ 2,522 $ 2,457 $ 2,786 $ 2,792 $ 10,557
============ ============ ============ ============ ============
Gross profit $ 648 $ 623 $ 624 $ 728 $ 2,623
============ ============ ============ ============ ============
Divisional earnings
Oil and gas $ 161 $ 144 $ 20 $ 155 $ 480
Natural gas transmission 121 51 49 75 296
Chemical 118 212 228 110 668
------------ ------------ ------------ ------------ ------------
400 407 297 340 1,444
Unallocated corporate items
Interest expense, net (130) (112) (107) (102) (451)
Income taxes (99) (112) 7 (59) (263)
Other (7) (2) (3) (20) (32)
------------ ------------ ------------ ------------ ------------
Income before extraordinary items 164 181 194 159 698
Extraordinary gain(loss), net (30) -- -- -- (30)
------------ ------------ ------------ ------------ ------------
Net income(loss) $ 134 $ 181(a) $ 194(b) $ 159 $ 668
============ ============ ============ ============ ============
Primary earnings per common share
Income before extraordinary items $ .44 $ .49 $ .53 $ .41 $ 1.86
Extraordinary gain(loss), net (.09) -- -- -- (.09)
------------ ------------ ------------ ------------ ------------
Primary earnings(loss) per common share $ .35 $ .49 $ .53 $ .41 $ 1.77
============ ============ ============ ============ ============
Fully diluted earnings per common share
Income before extraordinary items $ .43 $ .47 $ .50 $ .40 $ 1.81
Extraordinary gain(loss), net (.09) -- -- -- (.08)
------------ ------------ ------------ ------------ ------------
Fully diluted earnings(loss) per
common share $ .34 $ .47 $ .50 $ .40 $ 1.73
============ ============ ============ ============ ============
Dividends per common share $ .25 $ .25 $ .25 $ .25 $ 1.00
============ ============ ============ ============ ============
Market price per common share
High $ 27 $ 27 1/4 $ 25 7/8 $ 25 5/8
Low $ 20 1/8 $ 24 1/4 $ 21 1/2 $ 20 1/2
====================================== ============ ============ ============ ============
(a) Includes a $130 million benefit related to a favorable litigation settlement, and a charge of $75 million for
additional environmental reserves relating to various existing sites, and the related state tax effects in the
chemical division.
(b) Includes a charge of $105 million for the write-down of an investment in an oil and gas project in the Republic of
Komi, a $40 million benefit related to a favorable litigation settlement in the chemical division and a $100 million
benefit for a reduction in the deferred tax asset valuation allowance.
61
1995 QUARTERLY FINANCIAL DATA (Unaudited) Occidental Petroleum Corporation
In millions, except per-share amounts and Subsidiaries
Three months ended March 31 June 30 September 30 December 31 Total Year
====================================== ============ ============ ============ ============ ============
Divisional net sales
Oil and gas $ 705 $ 756 $ 779 $ 778 $ 3,018
Natural gas transmission 538 468 454 578 2,038
Chemical 1,472 1,456 1,325 1,117 5,370
Other (1) (1) (1) -- (3)
------------ ------------ ------------ ------------ ------------
Net sales $ 2,714 $ 2,679 $ 2,557 $ 2,473 $ 10,423
============ ============ ============ ============ ============
Gross profit $ 687 $ 724 $ 594 $ 555 $ 2,560
============ ============ ============ ============ ============
Divisional earnings
Oil and gas $ 60 $ (30) $ 46 $ (31) $ 45
Natural gas transmission 75 62 54 22 213
Chemical 307 354 252 167 1,080
------------ ------------ ------------ ------------ ------------
442 386 352 158 1,338
Unallocated corporate items
Interest expense, net (144) (133) (133) (130) (540)
Income taxes (125) (73) (83) (14) (295)
Other 5 7 3 (7) 8
------------ ------------ ------------ ------------ ------------
Income before extraordinary items 178 187 139 7 511
Extraordinary gain(loss), net -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Net income(loss) $ 178 $ 187(a) $ 139 $ 7(b) $ 511
============ ============ ============ ============ ============
Primary earnings per common share
Income before extraordinary items $ .49 $ .51 $ .36 $ (.05) $ 1.31
Extraordinary gain(loss), net -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Primary earnings(loss) per common share $ .49 $ .51 $ .36 $ (.05) $ 1.31
============ ============ ============ ============ ============
Fully diluted earnings per common share
Income before extraordinary items $ .47 $ .49 $ .36 $ (.05) $ 1.30
Extraordinary gain(loss), net -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Fully diluted earnings(loss) per
common share $ .47 $ .49 $ .36 $ (.05) $ 1.30
============ ============ ============ ============ ============
Dividends per common share $ .25 $ .25 $ .25 $ .25 $ 1.00
============ ============ ============ ============ ============
Market price per common share
High $ 22 $ 24 3/8 $ 23 7/8 $ 23 1/2
Low $ 18 $ 21 1/4 $ 21 1/8 $ 20 1/8
====================================== ============ ============ ============ ============
(a) Includes charges of $109 million for settlement of litigation in the oil and gas division, partially offset by a
pretax gain of $40 million from the sale of Occidental's PVC facility at Addis, Louisiana.
(b) Includes reorganization charges of $132 million, of which $95 million was recorded in the oil and gas division and
$37 million recorded in the natural gas transmission division.
62
SUPPLEMENTAL OIL AND GAS INFORMATION (Unaudited)
The following tables set forth Occidental's net interests in quantities of
proved developed and undeveloped reserves of crude oil, condensate and natural
gas and changes in such quantities. Crude oil reserves (in millions of barrels)
include condensate. The reserves are stated after applicable royalties.
Estimates of reserves have been made by Occidental engineers. These estimates
include reserves in which Occidental holds an economic interest under service
contracts and other arrangements.
RESERVES
Oil in millions of barrels, natural gas in billions of cubic feet
Other Eastern
United Western Hemisphere Total
States Hemisphere and Other Worldwide
---------------- ---------------- ---------------- ----------------
Oil Gas Oil(a) Gas Oil Gas Oil Gas
=================================================== ====== ====== ====== ====== ====== ====== ====== ======
PROVED DEVELOPED AND UNDEVELOPED RESERVES
BALANCE AT DECEMBER 31, 1993 195 1,980 395 3 203 153 793 2,136
Revisions of previous estimates 3 (5) 68 -- 21 -- 92 (5)
Improved recovery 10 2 -- -- 5 -- 15 2
Extensions and discoveries 10 78 22 -- 18 27 50 105
Purchases of proved reserves 22 154 -- -- 56 193 78 347
Sales of proved reserves -- (3) (23) (3) -- -- (23) (6)
Production (22) (227) (44) -- (21) (19) (87) (246)
- --------------------------------------------------- ------ ------ ------ ------ ------ ------ ------ ------
BALANCE AT DECEMBER 31, 1994 218 1,979 418 -- 282 354 918 2,333
Revisions of previous estimates 6 25 14 -- 51 (14) 71 11
Improved recovery 6 6 24 -- 12 -- 42 6
Extensions and discoveries 5 35 8 -- 12 373 25 408
Purchases of proved reserves -- 4 -- -- -- 9 -- 13
Sales of proved reserves (16)(b) (5) -- -- (9)(b) (37) (25) (42)
Production (23) (223) (47) -- (31) (46) (101) (269)
- --------------------------------------------------- ------ ------ ------ ------ ------ ------ ------ ------
BALANCE AT DECEMBER 31, 1995 196 1,821 417 -- 317 639 930 2,460
Revisions of previous estimates 11 26 (19) -- 77 200 69 226
Improved recovery 1 -- -- -- 18 -- 19 --
Extensions and discoveries 16 105 3 -- 11 40 30 145
Purchases of proved reserves 1 18 -- -- -- 3 1 21
Sales of proved reserves (1) (6) -- -- (46) -- (47) (6)
Production (21) (220) (47) -- (37) (42) (105) (262)
- --------------------------------------------------- ------ ------ ------ ------ ------ ------ ------ ------
BALANCE AT DECEMBER 31, 1996 203 1,744 354 -- 340 840 897 2,584
=================================================== ====== ====== ====== ====== ====== ====== ====== ======
PROPORTIONAL INTEREST IN EQUITY INVESTEES' RESERVES
December 31, 1993 4 35 11 90 29 58 44 183
====== ====== ====== ====== ====== ====== ====== ======
December 31, 1994 5 32 11 84 25 46 41 162
====== ====== ====== ====== ====== ====== ====== ======
December 31, 1995 5 36 12 81 21 39 38 156
====== ====== ====== ====== ====== ====== ====== ======
DECEMBER 31, 1996 5 47 14 77 20 30 39 154
=================================================== ====== ====== ====== ====== ====== ====== ====== ======
See footnotes on following page.
63
RESERVES continued
Oil in millions of barrels, natural gas in billions of cubic feet
Other Eastern
United Western Hemisphere Total
States Hemisphere and Other Worldwide
---------------- ---------------- ---------------- ----------------
Oil Gas Oil(a) Gas Oil Gas Oil Gas
=================================================== ====== ====== ====== ====== ====== ====== ====== ======
PROVED DEVELOPED RESERVES
December 31, 1993 155 1,792 300 3 103 56 558 1,851
====== ====== ====== ====== ====== ====== ====== ======
December 31, 1994 169 1,851 258 -- 173 264 600 2,115
====== ====== ====== ====== ====== ====== ====== ======
December 31, 1995 149 1,747 283 -- 195 235 627 1,982
====== ====== ====== ====== ====== ====== ====== ======
DECEMBER 31, 1996 153 1,677 260 -- 213 205 626 1,882
=================================================== ====== ====== ====== ====== ====== ====== ====== ======
PROPORTIONAL INTEREST IN EQUITY INVESTEES' RESERVES
December 31, 1993 4 27 6 83 27 54 37 164
====== ====== ====== ====== ====== ====== ====== ======
December 31, 1994 4 27 7 77 24 38 35 142
====== ====== ====== ====== ====== ====== ====== ======
December 31, 1995 5 30 10 75 16 31 31 136
====== ====== ====== ====== ====== ====== ====== ======
DECEMBER 31, 1996 4 41 13 69 15 25 32 135
=================================================== ====== ====== ====== ====== ====== ====== ====== ======
(a) Portions of these reserves are being produced pursuant to exclusive service contracts.
(b) Includes approximately 14 million and 6 million barrels of oil (which approximate 17.7 million barrels of WTI-equivalent oil)
in the United States and Eastern Hemisphere and Other, respectively, associated with the advance sale of crude oil (see
Note 8).
STANDARDIZED MEASURE, INCLUDING YEAR-TO-YEAR CHANGES THEREIN, OF DISCOUNTED
FUTURE NET CASH FLOWS For purposes of the following disclosures, estimates
were made of quantities of proved reserves and the periods during which they are
expected to be produced. Future cash flows were computed by applying year-end
prices to Occidental's share of estimated annual future production from proved
oil and gas reserves, net of royalties. Future development and production costs
were computed by applying year-end costs to be incurred in producing and further
developing the proved reserves. Future income tax expenses were computed by
applying, generally, year-end statutory tax rates (adjusted for permanent
differences, tax credits and allowances) to the estimated net future pretax cash
flows. The discount was computed by application of a 10 percent discount factor.
The calculations assumed the continuation of existing economic, operating and
contractual conditions at each of December 31, 1996, 1995 and 1994. However,
such arbitrary assumptions have not necessarily proven to be the case in the
past. Other assumptions of equal validity would give rise to substantially
different results.
64
STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS
In millions
Other Eastern
United Western Hemisphere Total
States Hemisphere(a) and Other Worldwide
=================================================== ========== ========== ========== ==========
AT DECEMBER 31, 1996
Future cash flows $ 8,887 $ 4,642 $ 8,399 $ 21,928
Future costs
Production costs and other operating expenses (3,296) (1,853) (3,139) (8,288)
Development costs(b) (514) (289) (1,184) (1,987)
---------- ---------- ---------- ----------
FUTURE NET CASH FLOWS BEFORE INCOME TAXES 5,077 2,500 4,076 11,653
Future income tax expense (1,646) (875) (457) (2,978)
---------- ---------- ---------- ----------
FUTURE NET CASH FLOWS 3,431 1,625 3,619 8,675
Ten percent discount factor (1,462) (555) (1,418) (3,435)
---------- ---------- ---------- ----------
STANDARDIZED MEASURE 1,969 1,070 2,201 5,240
Share of equity investees' standardized measure 117 104 234 455
---------- ---------- ---------- ----------
$ 2,086 $ 1,174 $ 2,435 $ 5,695
=================================================== ========== ========== ========== ==========
AT DECEMBER 31, 1995
Future cash flows $ 6,110 $ 4,206 $ 5,639 $ 15,955
Future costs
Production costs and other operating expenses (2,479) (1,824) (2,303) (6,606)
Development costs(b) (496) (269) (689) (1,454)
---------- ---------- ---------- ----------
FUTURE NET CASH FLOWS BEFORE INCOME TAXES 3,135 2,113 2,647 7,895
Future income tax expense (916) (655) (234) (1,805)
---------- ---------- ---------- ----------
FUTURE NET CASH FLOWS 2,219 1,458 2,413 6,090
Ten percent discount factor (979) (564) (957) (2,500)
---------- ---------- ---------- ----------
STANDARDIZED MEASURE 1,240 894 1,456 3,590
Share of equity investees' standardized measure 76 53 239 368
---------- ---------- ---------- ----------
$ 1,316 $ 947 $ 1,695 $ 3,958
=================================================== ========== ========== ========== ==========
AT DECEMBER 31, 1994
Future cash flows $ 6,333 $ 3,769 $ 4,253 $ 14,355
Future costs
Production costs and other operating expenses (2,557) (1,830) (1,748) (6,135)
Development costs(b) (560) (321) (169) (1,050)
---------- ---------- ---------- ----------
FUTURE NET CASH FLOWS BEFORE INCOME TAXES 3,216 1,618 2,336 7,170
Future income tax expense (928) (517) (138) (1,583)
---------- ---------- ---------- ----------
FUTURE NET CASH FLOWS 2,288 1,101 2,198 5,587
Ten percent discount factor (1,004) (448) (833) (2,285)
---------- ---------- ---------- ----------
STANDARDIZED MEASURE 1,284 653 1,365 3,302
Share of equity investees' standardized measure 49 47 258 354
---------- ---------- ---------- ----------
$ 1,333 $ 700 $ 1,623 $ 3,656
=================================================== ========== ========== ========== ==========
(a) Includes amounts applicable to operating interests in which Occidental receives an agreed-upon fee per
barrel of crude oil produced.
(b) Includes dismantlement and abandonment costs.
65
CHANGES IN THE STANDARDIZED MEASURE OF DISCOUNTED FUTURE
NET CASH FLOWS FROM PROVED RESERVE QUANTITIES
In millions
For the years ended December 31, 1996 1995 1994
================================================================================= ========= ========= =========
BEGINNING OF YEAR $ 3,590 $ 3,302 $ 2,216
--------- --------- ---------
Sales and transfers of oil and gas produced, net of production costs and other
operating expenses (1,640) (1,169) (764)
Net change in prices received per barrel, net of production costs and other
operating expenses 2,604 672 477
Extensions, discoveries and improved recovery, net of future production and
development costs 576 170 215
Change in estimated future development costs (620) (110) (163)
Revisions of quantity estimates 863 394 246
Development costs incurred during the period 573 401 328
Accretion of discount 305 369 260
Net change in income taxes (655) (195) (108)
Purchases and sales of reserves in place, net (403) (247) 599
Changes in production rates and other 47 3 (4)
--------- --------- ---------
NET CHANGE 1,650 288 1,086
--------- --------- ---------
END OF YEAR $ 5,240 $ 3,590 $ 3,302
================================================================================= ========= ========= =========
The information set forth below does not include information with respect
to operations of equity investees.
The following table sets forth, for each of the three years in the period
ended December 31, 1996, Occidental's approximate average sales prices and
average production costs of oil and gas. Production costs are the costs incurred
in lifting the oil and gas to the surface and include gathering, treating,
primary processing, field storage, property taxes and insurance on proved
properties, but do not include depreciation, depletion and amortization,
royalties, income taxes, interest, general and administrative and other
expenses.
AVERAGE SALES PRICES AND AVERAGE PRODUCTION COSTS OF OIL AND GAS
Other Eastern
United Western Hemisphere
For the years ended December 31, States Hemisphere(a,b) and Other(a)
================================================== ========== ========== ==========
1996
Oil
Average sales price ($/bbl.) $ 18.98 $ 12.65 $ 17.66
Gas
Average sales price ($/Mcf) $ 2.11 $ -- $ 2.23
Average oil and gas production cost ($/bbl.)(c) $ 4.04 $ 3.34 $ 4.09
- -------------------------------------------------- ---------- ---------- ----------
1995
Oil
Average sales price ($/bbl.) $ 15.61 $ 10.62 $ 14.47
Gas
Average sales price ($/Mcf) $ 1.51 $ -- $ 2.07
Average oil and gas production cost ($/bbl.)(c) $ 3.96 $ 3.34 $ 3.65
- -------------------------------------------------- ---------- ---------- ----------
1994
Oil
Average sales price ($/bbl.) $ 14.21 $ 10.19 $ 12.08
Gas
Average sales price ($/Mcf) $ 1.85 $ 1.72 $ 1.15
Average oil and gas production cost ($/bbl.)(c) $ 4.16 $ 3.75 $ 3.56
- -------------------------------------------------- ---------- ---------- ----------
(a) Sales prices are calculated before royalties with respect to certain of Occidental's interests.
(b) Sales prices include fees received under service contracts.
(c) Natural gas volumes have been converted to equivalent barrels based on energy content of six Mcf
of gas to one barrel of oil.
66
The following table sets forth, for each of the three years in the period
ended December 31, 1996, Occidental's net productive and dry exploratory and
development wells drilled.
NET PRODUCTIVE AND DRY EXPLORATORY AND DEVELOPMENT WELLS DRILLED
Other Eastern
United Western Hemisphere Total
For the years ended December 31, States Hemisphere and Other Worldwide
==================================== ========= ========== ========== =========
1996
Oil-- Exploratory -- 2.8 3.6 6.4
Development 61.6 23.2 18.4 103.2
Gas-- Exploratory 2.6 -- 2.0 4.6
Development 103.2 -- 1.7 104.9
Dry-- Exploratory 5.5 2.5 6.2 14.2
Development 15.6 0.5 2.1 18.2
- ------------------------------------ --------- ---------- ---------- ---------
1995
Oil-- Exploratory 1.4 0.7 2.0 4.1
Development 79.3 20.6 26.8 126.7
Gas-- Exploratory 9.0 -- 1.7 10.7
Development 90.1 -- 4.7 94.8
Dry-- Exploratory 5.5 2.7 7.9 16.1
Development 14.5 0.4 -- 14.9
- ------------------------------------ --------- ---------- ---------- ---------
1994
Oil-- Exploratory 1.5 -- 3.0 4.5
Development 139.6 10.8 58.6 209.0
Gas-- Exploratory 0.6 -- 1.0 1.6
Development 104.7 -- 1.0 105.7
Dry-- Exploratory 3.2 -- 12.5 15.7
Development 19.5 0.9 0.6 21.0
- ------------------------------------ --------- ---------- ---------- ---------
The following table sets forth, as of December 31, 1996, Occidental's
productive oil and gas wells (both producing wells and wells capable of
production). The numbers in parentheses indicate the number of wells with
multiple completions.
PRODUCTIVE OIL AND GAS WELLS
Other Eastern
United Western Hemisphere Total
Wells at December 31, 1996 States Hemisphere and Other Worldwide
==================================== =========== ========== ========== ============
Oil-- Gross(a) 9,592 (268) 382 (-) 778 (21) 10,752 (289)
Net(b) 5,280 (61) 265 (-) 402 (21) 5,947 (82)
Gas-- Gross(a) 3,970 (184) -- (-) 113 (-) 4,083 (184)
Net(b) 2,551 (43) -- (-) 36 (-) 2,587 (43)
- ------------------------------------ ----------- ---------- ---------- ------------
(a) The total number of wells in which interests are owned or which are
operated under service contracts.
(b) The sum of fractional interests.
The following table sets forth, as of December 31, 1996, Occidental's
participation in exploratory and development wells being drilled.
PARTICIPATION IN EXPLORATORY AND DEVELOPMENT WELLS BEING DRILLED
Other Eastern
United Western Hemisphere Total
Wells at December 31, 1996 States Hemisphere and Other Worldwide
========================================== ========= ========== ========== =========
Exploratory and development wells-- Gross 59 3 18 80
Net 43 3 7 53
- ------------------------------------------ --------- ---------- ---------- ---------
At December 31, 1996, Occidental was participating in 102 pressure
maintenance and waterflood projects in the United States, 1 in Latin America, 27
in the Middle East and 6 in Russia.
67
The following table sets forth, as of December 31, 1996, Occidental's
holdings of developed and undeveloped oil and gas acreage.
OIL AND GAS ACREAGE
Other Eastern
United Western Hemisphere Total
Thousands of acres States Hemisphere and Other Worldwide
==================================== ========= ========== ========== =========
Developed(a)-- Gross(b) 2,288 135 11,379 13,802
Net(c) 1,535 126 5,457 7,118
- ------------------------------------ --------- ---------- ---------- ---------
Undeveloped(d)-- Gross(b) 1,521 9,162 35,587 46,270
Net(c) 806 7,084 21,110 29,000
- ------------------------------------ --------- ---------- ---------- ---------
(a) Acres spaced or assigned to productive wells.
(b) Total acres in which interests are held.
(c) Sum of the fractional interests owned, based on working interests or shares
of production, if under production-sharing agreements.
(d) Acres on which wells have not been drilled or completed to a point that
would permit the production of commercial quantities of oil and gas,
regardless of whether the acreage contains proved reserves.
The following table sets forth, for each of the three years in the period
ended December 31, 1996, Occidental's domestic oil and gas production.
OIL AND NATURAL GAS PRODUCTION--DOMESTIC
Oil Production Natural Gas Production
Thousands of barrels per day Millions of cubic feet per day
----------------------------------- -----------------------------------
1996 1995 1994 1996 1995 1994
================== ========= ========= ========= ========= ========= =========
California 2 5 5 -- -- --
Gulf of Mexico 10 11 11 154 157 180
Kansas 6 6 7 186 193 194
Louisiana 6 7 3 43 39 23
Mississippi 1 1 -- 3 4 5
New Mexico 3 3 3 24 22 20
Oklahoma 4 5 5 52 57 60
Texas 21 21 22 126 128 131
Wyoming -- -- -- 9 8 5
Other States 4 5 3 4 4 2
--------- --------- --------- --------- --------- ---------
TOTAL 57 64 59 601 612 620
================== ========= ========= ========= ========= ========= =========
The following table sets forth, for each of the three years in the period
ended December 31, 1996, Occidental's international oil and gas production.
OIL AND NATURAL GAS PRODUCTION--INTERNATIONAL
Oil Production Natural Gas Production
Thousands of barrels per day Millions of cubic feet per day
----------------------------------- -----------------------------------
1996 1995 1994 1996 1995 1994
================== ========= ========= ========= ========= ========= =========
Argentina -- -- 4 -- -- 1
Colombia 29 30 28 -- -- --
Congo 4 9 2 -- -- --
Ecuador 18 20 18 -- -- --
Netherlands -- -- -- 72 78 --
Oman 13 12 12 -- -- --
Pakistan 6 6 7 43 49 52
Peru 54 58 61 -- -- --
Qatar 38 20 3 -- -- --
Russia 25 23 21 -- -- --
Venezuela 27 21 8 -- -- --
Yemen 15 15 14 -- -- --
--------- --------- --------- --------- --------- ---------
TOTAL 229 214 178 115 127 53
================== ========= ========= ========= ========= ========= =========
68