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Occidental Petroleum Announces Record 2004 ResultsLOS ANGELES, Jan. 24, 2005 -- Occidental Petroleum Corporation (NYSE:OXY) announced net income for the fourth quarter 2004 of $665 million ($1.67 per share), compared with $382 million ($0.99 per share) for the fourth quarter 2003. On January 5, 2005, Occidental issued a press release announcing that the comparability of fourth quarter 2004 earnings to prior quarters would be affected by a number of charges and a tax credit. These items have resulted in net charges totaling approximately $69 million ($0.17 per share). Record earnings of $2.491 billion ($6.30 per share) for the twelve months of 2004 were 58 percent higher than the $1.527 billion ($3.98 per share) the company earned in 2003. In announcing the results, Dr. Ray R. Irani, chairman and chief executive officer, said, "Our strong fourth quarter performance helped push net income for 2004 to a record high of nearly $2.5 billion, or $6.30 per share. Our success in increasing oil and natural gas production by 3.5 percent for the year to an average of 566,000 barrels of oil equivalent per day allowed us to maximize the benefits from robust oil and gas prices. In addition, our chemicals business had its best year since 1997. The strong performance of our business units allowed us to continue to strengthen our balance sheet by reducing our debt-to-capitalization ratio to 27 percent, the lowest in the company's history." Oil and Gas Oil and gas segment earnings were $977 million for the fourth quarter 2004, compared with $640 million for the fourth quarter 2003, an increase of 53 percent. The improvement in the fourth quarter 2004 earnings reflected higher worldwide crude oil and natural gas prices, partially offset by higher exploration expenses and higher operating costs. Oil and gas earnings of $3.544 billion for the twelve months were the highest in the company's history and were 33 percent higher than the $2.664 billion of 2003. Chemicals Chemical segment earnings were $130 million for the fourth quarter 2004 compared with $72 million for the fourth quarter 2003, an increase of 81 percent. The improvement in the fourth quarter 2004 was due to higher sales prices in all major products, partially offset by higher ethylene and energy costs. The fourth quarter 2004 also included the previously announced $12 million charge to write-off certain production facilities. Chemical earnings of $412 million for the twelve months 2004 were 87 percent higher than the $220 million of 2003. Earnings from an equity investment are based on a preliminary estimate of their earnings. See the attached schedules for a reconciliation of net income to core earnings for the fourth quarter and twelve months. Statements in this release that contain words such as "will", "expect" or "estimate", or otherwise relate to the future, are forward-looking and involve risks and uncertainties that could significantly affect expected results. Factors that could cause results to differ materially include, but are not limited to: global commodity pricing fluctuations and supply/demand considerations for oil, gas and chemicals; higher-than-expected costs; political risk; and not successfully completing (or any material delay in) any expansion, capital expenditure, acquisition, or disposition. Occidental disclaims any obligation to update any forward-looking statements.
SUMMARY OF SEGMENT NET SALES AND EARNINGS
Fourth Quarter Twelve Months
($ millions, except ---------------- ----------------
per-share amounts) 2004 2003 2004 2003
================================ ======= ======= ======= =======
SEGMENT NET SALES
Oil and gas $ 2,073 $ 1,530 $ 7,582 $ 6,003
Chemical 985 790 3,675 3,092
Other 24 30 111 145
------- ------- ------- -------
Net sales $ 3,082 $ 2,350 $11,368 $ 9,240
================================ ======= ======= ======= =======
SEGMENT EARNINGS
Oil and gas $ 977 $ 640 $ 3,544 $ 2,664
Chemical 130 72 412 220
------- ------- ------- -------
1,107 712 3,956 2,884
Unallocated Corporate Items
Interest expense, net (a)--
debt and trust preferred
distributions (53) (63) (240) (333)
Income taxes (b) (218) (157) (895) (666)
Other (139) (109) (292) (284)
------- ------- ------- -------
Income from continuing operations 697 383 2,529 1,601
Discontinued operations, net (c) (32) (1) (38) (6)
Cumulative effect of changes in
accounting principles, net -- -- -- (68)
------- ------- ------- -------
NET INCOME $ 665 $ 382 $ 2,491 $ 1,527
======= ======= ======= =======
BASIC EARNINGS PER COMMON SHARE
Income from continuing
operations $ 1.75 $ 0.99 $ 6.40 $ 4.17
Discontinued operations, net (0.08) -- (0.10) (0.01)
Cumulative effect of changes in
accounting principles, net -- -- -- (0.18)
------- ------- ------- -------
$ 1.67 $ 0.99 $ 6.30 $ 3.98
======= ======= ======= =======
DILUTED EARNINGS PER COMMON SHARE
Income from continuing
operations $ 1.72 $ 0.97 $ 6.31 $ 4.12
Discontinued operations, net (0.08) -- (0.10) (0.01)
Cumulative effect of changes in
accounting principles, net -- -- -- (0.18)
------- ------- ------- -------
$ 1.64 $ 0.97 $ 6.21 $ 3.93
======= ======= ======= =======
AVERAGE BASIC COMMON SHARES
OUTSTANDING 399.1 387.7 395.6 383.9
================================ ======= ======= ======= =======
See footnotes on following page.
(a) The fourth quarter 2004 includes a $1 million pre-tax interest charge to purchase in the open market and retire $32 million of Occidental's senior notes. The twelve months 2004 also includes $16 million pre-tax interest charges to redeem or repurchase various debt issues during the year. The twelve months 2003 includes a $61 million pre-tax interest charge to repay a $450 million 6.4 percent senior notes issue that had ten years of remaining life, but was subject to re-marketing on April 1, 2003. (b) The twelve months 2004 includes a $27 million credit related to a fourth quarter settlement and a $20 million credit related to a first quarter settlement of issues with the Internal Revenue Service. The twelve months 2004 also reflected a lower U.S. income tax rate resulting from the crediting of foreign income taxes. (c) The fourth quarter 2004 includes a $32 million, net of tax, charge reported as discontinued operations to reflect Occidental's decision to exit the specialty vinyls resins chemical business. Details of the charge are as follows:
Fourth Twelve
Quarter Months
------- -------
Pre-tax charge $ (51) $ (61)
Tax benefit 19 23
------- -------
$ (32) $ (38)
======= =======
SUMMARY OF CAPITAL EXPENDITURES AND DD&A EXPENSE
Fourth Quarter Twelve Months
---------------- ----------------
($ millions) 2004 2003 2004 2003
================================ ======= ======= ======= =======
CAPITAL EXPENDITURES $ 573 $ 449 $ 1,843 $ 1,600
======= ======= ======= =======
DEPRECIATION, DEPLETION
AND AMORTIZATION
OF ASSETS $ 333 $ 311 $ 1,303 $ 1,175
================================ ======= ======= ======= =======
SUMMARY OF OPERATING STATISTICS
Fourth Quarter Twelve Months
---------------- ----------------
2004 2003 2004 2003
================================ ======= ======= ======= =======
NET OIL, GAS AND LIQUIDS
PRODUCTION PER DAY
United States
Crude oil and liquids (MBBL)
California 81 82 78 81
Permian 152 152 154 150
Horn Mountain 13 25 19 21
Hugoton 3 4 3 4
------- ------- ------- -------
Total 249 263 254 256
Natural Gas (MMCF)
California 242 246 237 252
Hugoton 125 130 127 138
Permian 125 133 130 129
Horn Mountain 7 16 13 13
------- ------- ------- -------
Total 499 525 507 532
Latin America
Crude oil (MBBL)
Colombia 37 44 37 37
Ecuador 44 39 46 25
------- ------- ------- -------
Total 81 83 83 62
Middle East
Crude oil (MBBL)
Oman 13 12 13 12
Qatar 48 40 45 45
Yemen 30 33 32 35
------- ------- ------- -------
Total 91 85 90 92
Natural Gas (MMCF)
Oman 66 -- 55 --
Other Eastern Hemisphere
Crude oil (MBBL)
Pakistan 6 9 7 9
Natural Gas (MMCF)
Pakistan 79 72 75 74
Barrels of Oil Equivalent (MBOE)
Subtotal consolidated subsidiaries 534 540 540 520
Other Interests
Colombia-minority interest (5) (7) (4) (5)
Russia-Occidental net interest 27 30 29 30
Yemen-Occidental net interest 2 2 1 2
------- ------- ------- -------
Total Worldwide Production (MBOE) 558 565 566 547
================================ ======= ======= ======= =======
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:
Fourth Quarter
($ millions, except ----------------------------------
per-share amounts) 2004 EPS 2003 EPS
================================ ======= ======= ======= =======
TOTAL REPORTED EARNINGS $ 665 $ 1.67 $ 382 $ 0.99
======= ======= ======= =======
Oil and Gas
Segment Earnings $ 977 $ 640
No significant items
affecting earnings -- --
------- -------
Segment Core Earnings 977 640
------- -------
Chemicals
Segment Earnings 130 72
No significant items
affecting earnings -- --
------- -------
Segment Core Earnings 130 72
------- -------
Corporate
Results (442) (330)
Less:
IRS settlements 27 --
Discontinued operations, net* (32) (1)
------- -------
TOTAL CORE EARNINGS $ 670 $ 1.68 $ 383 $ 0.99
================================ ======= ======= ======= =======
* These amounts are shown after-tax.
SIGNIFICANT TRANSACTIONS AND EVENTS AFFECTING EARNINGS (continued)
Twelve Months
($ millions, except ----------------------------------
per-share amounts) 2004 EPS 2003 EPS
================================ ======= ======= ======= =======
TOTAL REPORTED EARNINGS $ 2,491 $ 6.30 $ 1,527 $ 3.98
======= ======= ======= =======
Oil and Gas
Segment Earnings $ 3,544 $ 2,664
No significant items
affecting earnings -- --
------- -------
Segment Core Earnings 3,544 2,664
------- -------
Chemicals
Segment Earnings 412 220
No significant items
affecting earnings -- --
------- -------
Segment Core Earnings 412 220
------- -------
Corporate
Results (1,465) (1,357)
Less:
6.4% senior note remarket fee -- (61)
Trust preferred redemption
charge (11) --
IRS settlements 47 --
Tax effect of pre-tax adjustments 4 21
Discontinued operations, net* (38) (6)
Changes in accounting
principles, net* -- (68)
------- -------
TOTAL CORE EARNINGS $ 2,489 $ 6.29 $ 1,641 $ 4.27
================================ ======= ======= ======= =======
* These amounts are shown after-tax.
ITEMS AFFECTING COMPARABILITY OF CORE EARNINGS BETWEEN PERIODS
Fourth Quarter Twelve Months
---------------- ----------------
($ millions) 2004 2003 2004 2003
================================ ======= ======= ======= =======
PRE-TAX
INCOME / (EXPENSE)
Oil and Gas
Insurance and litigation
reserves $ (6) $ -- $ (6) $ --
Property tax refund -- 38 -- 38
Gain on sale of GOM assets (a) -- -- -- 14
Chemicals
Production process write-off (12) -- (12) --
Insurance reserves (2) -- (2) --
Reorganizations/severance -- -- -- (15)
Chlorine derivatives asset
impairment -- -- -- (9)
Corporate
Environmental remediation (59) (50) (59) (63)
Equity earnings 9 (16) 22 (58)
Insurance and litigation
reserves (31) -- (31) --
Interest expense - early debt
extinguishments - 2004/
consolidation of variable
interest entity - 2003 (1) -- (6) 6
(a) Net of tax.
CONTACT:
Lawrence P. Meriage (media)
310-443-6562
Kenneth J. Huffman (investors)
212-603-8183
For further analysis of Occidental's performance,
please visit the website: www.oxy.com
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