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Occidental Petroleum Announces Third Quarter 2003 ResultsLOS ANGELES, Oct. 21, 2003 -- Occidental Petroleum Corporation (NYSE:OXY) announced net income for the third quarter 2003 of $446 million ($1.16 per share), compared with $402 million ($1.07 per share) for the third quarter 2002. In announcing the results, Dr. Ray R. Irani, chairman and chief executive officer, said, "Core earnings of $446 million, or $1.16 per share, were 43 percent higher than the $312 million, or $0.83 per share, the company earned in the third quarter of 2002. Higher oil and gas prices and a nine percent increase in production contributed to a 35 percent increase in oil and gas earnings over last year's third quarter. Core earnings of $1.25 billion, or $3.27 per share, for the first nine months of 2003 were 85 percent higher than the $676 million, or $1.80 per share, the company earned in the comparable period last year." Oil and Gas Oil and gas segment earnings were $660 million for the third quarter 2003, compared with $490 million for the third quarter 2002. The improvement in the third quarter 2003 earnings reflected higher worldwide crude oil and natural gas prices and increased crude oil sales volumes; partially offset by higher exploration expenses and operating costs. The increased crude oil production results largely from higher Ecuador production, reflecting the completion of the Oleoducto de Crudos Pesados Ltd. oil export pipeline, and Horn Mountain production, which came on line in the fourth quarter 2002. Chemicals Chemical core earnings were $61 million for the third quarter 2003, compared with $50 million for the third quarter 2002. The third quarter 2002 core earnings excluded a $164 million net of tax gain from the sale of the investment in Equistar. The third quarter 2003 results reflected higher sales prices in chlor-alkali, which were more than offset by higher energy and raw material costs. The third quarter 2002 core earnings included a $37 million pre-tax charge for the impairment of various operating assets. Nine Months Results For the first nine months of 2003, net income was $1.15 billion ($2.99 per share), compared with $667 million ($1.77 per share) for the first nine months of 2002. Core earnings for the first nine months of 2003 were $1.25 billion ($3.27 per share), compared with $676 million ($1.80 per share) for 2002. The debt to total capitalization ratio was 38 percent compared with 43 percent at the end of last year. See the attached schedules for a reconciliation of net income to core earnings for the third quarter and nine months. Statements in this presentation that contain words such as "will" or "expect," or otherwise relate to the future, are forward-looking and involve risks and uncertainties that could significantly affect expected results. Factors that could cause results to differ materially include, but are not limited to: global commodity pricing fluctuations, and supply/demand consideration, for oil, gas and chemicals; higher-than-expected costs; and not successfully completing (or any material delay in) any expansion, capital expenditure, acquisition, or disposition. Occidental disclaims any obligation to update any forward-looking statements.
SUMMARY OF SEGMENT NET SALES AND EARNINGS
($ millions, except per-share amounts)
Third Quarter Nine Months
---------------- ----------------
2003 2002 2003 2002
================================= ======= ======= ======= =======
SEGMENT NET SALES
Oil and gas $ 1,480 $ 1,224 $ 4,473 $ 3,347
Chemical 793 739 2,368 2,006
Other 46 - 115 -
------- ------- ------- -------
Net sales $ 2,319 $ 1,963 $ 6,956 $ 5,353
================================ ======= ======= ======= =======
SEGMENT EARNINGS
Oil and gas $ 660 $ 490 $ 2,024 $ 1,217
Chemical 61 214 139 217
------- ------- ------- -------
721 704 2,163 1,434
Unallocated Corporate Items
Interest expense, net (a)
Debt, net (59) (73) (236) (195)
Trust preferred
distributions
& other (12) (12) (34) (35)
Income taxes (b) (160) (105) (505) (250)
Other (c) (44) (38) (175) (114)
------- ------- ------- -------
Income from continuing
operations 446 476 1,213 840
Discontinued operations,
net -- (74) -- (78)
Cumulative effect of
changes in accounting
principles, net (d) -- -- (68) (95)
------- ------- ------- -------
NET INCOME $ 446 $ 402 $ 1,145 $ 667
======= ======= ======= =======
BASIC EARNINGS PER COMMON SHARE
Income from continuing
operations $ 1.16 $ 1.26 $ 3.17 $ 2.23
Discontinued operations,
net -- (0.19) -- (0.21)
Cumulative effect of
changes in accounting
principles, net -- -- (0.18) (0.25)
------- ------- ------- -------
$ 1.16 $ 1.07 $ 2.99 $ 1.77
======= ======= ======= =======
DILUTED EARNINGS PER COMMON SHARE
Income from continuing
operations $ 1.14 $ 1.25 $ 3.14 $ 2.22
Discontinued operations,
net -- (0.19) -- (0.21)
Cumulative effect of
changes in accounting
principles, net - - -- (0.18) (0.25)
------- ------- ------- -------
$ 1.14 $ 1.06 $ 2.96 $ 1.76
======= ======= ======= =======
AVERAGE BASIC COMMON SHARES
OUTSTANDING 385.5 376.8 382.6 375.7
============================ ======= ======= ======= =======
(a) The nine-months 2003 includes a $61 million interest charge to
repay a $450-million 6.4-percent senior-notes issue that had ten
years of remaining life, but was subject to remarketing on April
1, 2003. The nine months 2002 includes $22 million of interest
income on notes receivable from Altura partners. The partnership
exercised an option in May 2002 to redeem the sellers' remaining
partnership interests in exchange for the outstanding balance on
the notes.
(b) Excludes U.S. federal income tax charges and credits allocated to
the segments and foreign taxes. Oil and gas segment earnings
include a credit of $1 million in the third quarter of 2003 and a
charge of $3 million in the third quarter of 2002. Chemical
segment earnings include a $395 million credit in the third
quarter of 2002, almost entirely related to the sale of the
Equistar investment.
Oil and gas segment earnings for the nine-months 2003 and 2002
include charges of $6 million and $2 million, respectively.
Chemical segment earnings include credits of $403 million for the
nine months 2002.
(c) The nine-months 2002 includes $20 million of preferred
distributions to the Occidental Permian partners. This is
essentially offset by the interest income discussed in (a) above.
The partnership exercised an option in May 2002 to redeem the
sellers' remaining partnership interests in exchange for the
outstanding balance on the notes. The nine-months 2003 also
includes $42 million equity losses from investments in
unconsolidated subsidiaries, compared with $3 million losses for
the same period in 2002.
(d) Effective January 1, 2003, Occidental implemented SFAS No. 143 -
"Accounting For Asset Retirement Obligations." Adoption of this
new accounting standard resulted in a cumulative after-tax
reduction in net income of $50 million. Also effective January 1,
2003, Occidental implemented the rescission of EITF 98-10, which
precludes mark-to-market accounting for all energy-trading
contracts that are not derivatives and fair value accounting for
inventories purchased from third parties. Adoption of this
accounting change resulted in a cumulative after-tax reduction in
net income of $18 million. Effective January 1, 2002, Occidental
implemented SFAS No. 142 - "Goodwill and Other Intangible
Assets." Adoption of this new accounting standard resulted in a
cumulative after-tax reduction in net income of $95 million.
SUMMARY OF OPERATING STATISTICS
Third Quarter Nine Months
---------------- ----------------
2003 2002 2003 2002
=============================== ======= ======= ======= =======
NET OIL, GAS AND LIQUIDS
PRODUCTION PER DAY
United States
Crude oil and liquids (MBBL)
California 80 84 79 87
Permian 151 143 150 141
Horn Mountain 24 -- 19 --
Hugoton 4 3 4 3
------- ------- ------- -------
Total 259 230 252 231
Natural Gas (MMCF)
California 248 283 254 293
Hugoton 136 149 141 152
Permian 134 132 128 129
Horn Mountain 16 -- 12 --
------- ------- ------- -------
Total 534 564 535 574
Latin America
Crude oil (MBBL)
Colombia 31 38 35 39
Ecuador 27 13 20 13
------- ------- ------- -------
Total 58 51 55 52
Middle East and
Other Eastern Hemisphere
Crude oil (MBBL)
Oman 13 9 12 14
Pakistan 10 12 10 10
Qatar 44 44 47 43
Yemen 34 29 36 36
------- ------- ------- -------
Total 101 94 105 103
Natural Gas (MMCF)
Pakistan 71 74 74 58
Barrels of Oil Equivalent (MBOE)
Subtotal consolidated
subsidiaries 519 481 514 491
Other Interests
Colombia-minority interest (4) (5) (4) (5)
Russia-Occidental net interest 30 26 30 27
Yemen-Occidental net interest 1 - 1 -
------- ------- ------- -------
Total worldwide production 546 502 541 513
======= ======= ======= =======
CAPITAL EXPENDITURES
(millions) $ 360 $ 283 $ 1,151 $ 840
======= ======= ======= =======
DEPRECIATION, DEPLETION
AND AMORTIZATION OF
ASSETS (millions) $ 295 $ 245 $ 866 $ 759
======================= ======= ======= ======= =======
SIGNIFICANT TRANSACTIONS AND EVENTS AFFECTING EARNINGS Occidental's results of operations often include the effects of significant transactions and events affecting earnings that vary widely and unpredictably in nature, timing, and amount. Therefore, management uses a measure called "core earnings", which excludes those items. This non-GAAP measure is not meant to disassociate those items from management's performance, but rather is meant to provide useful information to investors interested in comparing Occidental's earnings performance between periods. Reported earnings are considered representative of management's performance over the long term. Core earnings is not considered to be an alternative to operating income in accordance with generally accepted accounting principles. The following table sets forth the core earnings and significant items affecting earnings for each operating segment and corporate:
Third Quarter
----------------------------------
($ millions) 2003 EPS 2002 EPS
=========================== ======= ======== ======== ========
TOTAL REPORTED EARNINGS $ 446 $ 1.16 $ 402 $ 1.07
======= ======== ======== ========
Oil and Gas
Segment Earnings $ 660 $ 490
No significant items
affecting earnings -- --
------- --------
Segment Core Earnings 660 490
------- --------
Chemicals
Segment Earnings 61 214
Less:
Sale of Equistar investment* -- 164
------- --------
Segment Core Earnings 61 50
------- --------
Corporate
Results (275) (302)
Less:
Discontinued operations, net* -- (74)
------- --------
TOTAL CORE EARNINGS $ 446 $ 1.16 $ 312 $ 0.83
================================ ======= ======== ======== ========
* These amounts are shown after tax.
SIGNIFICANT TRANSACTIONS AND EVENTS AFFECTING EARNINGS (continued)
Nine Months
----------------------------------
($ millions) 2003 EPS 2002 EPS
================================ ======= ======== ======== ========
TOTAL REPORTED EARNINGS $ 1,145 $ 2.99 $ 667 $ 1.77
======= ======== ======== ========
Oil and Gas
Segment Earnings $ 2,024 $ 1,217
No significant items
affecting earnings -- --
------- --------
Segment Core Earnings 2,024 1,217
------- --------
Chemicals
Segment Earnings 139 217
Less:
Sale of Equistar investment* -- 164
------- --------
Segment Core Earnings 139 53
------- --------
Corporate
Results (1,018) (767)
Less:
Debt repayment charge (61) --
Tax effect of pre-tax
adjustment 21 --
Discontinued operations, net* -- (78)
Changes in accounting
principles, net* (68) (95)
------- --------
TOTAL CORE EARNINGS $ l,253 $ 3.27 $ 676 $ 1.80
=========================== ======= ======== ======== ========
* These amounts are shown after tax.
ITEMS AFFECTING COMPARABILITY OF CORE EARNINGS BETWEEN PERIODS
Third Quarter Nine Months
($ millions) 2003 2002 2003 2002
=========================== ======= ======= ======= =======
PRE-TAX
INCOME / (EXPENSE)
Oil and Gas
Gain on sale of GOM assets (a) -- $ 7 $ 14 $ 7
Exploration asset write-offs -- -- -- (33)
Chemicals
Asset idling and impairments -- (37) (9) (37)
Equistar equity results -- 7 -- (33)
Reorganizations/severance -- -- (15) (14)
Corporate
Environmental remediation -- (8) (13) (8)
Equity earnings (6) (3) (42) (3)
(a) Net of tax.
CONTACT: Occidental Petroleum Corporation
Lawrence P. Meriage (media)
(310) 443-6562
Kenneth J. Huffman (investors)
(212) 603-8183
For further analysis of Occidental's quarterly performance,
please visit the website: www.oxy.com
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