In announcing the results, Stephen I. Chazen, President and Chief Executive Officer, said, "For the fourth consecutive quarter, we have delivered strong domestic oil production growth, with increases coming from both our Permian and California assets. Domestic oil production was 278,000 barrels per day for the second quarter of 2014. Excluding the effect from the Hugoton sale, domestic oil production increased 21,000 barrels per day from the second quarter of 2013 with our Permian Resources business growing its oil production by over 21 percent. For the first half of 2014, our cash flow from operations was $5.6 billion. Capital expenditures, net of contributions from partners, were $4.7 billion and we purchased approximately 16.6 million shares of our stock.”
QUARTERLY RESULTS
Oil and Gas
Domestic core earnings were $1.1 billion pre-tax or $679 million after-tax for the second quarter of 2014, compared to $1.0 billion pre-tax or $635 million after-tax for the second quarter of 2013. The current quarter domestic results reflected higher realized prices across all products and higher oil volumes, partially offset by higher operating costs and higher DD&A. The increase in operating costs was due to increased maintenance activities and higher costs for CO2, steam and power, which are influenced by crude oil and natural gas prices. International core earnings were $1.1 billion pre-tax or $576 million after-tax for the second quarter of 2014, compared to $1.2 billion pre-tax or $641 million after-tax for the second quarter of 2013. The current quarter international results reflected lower oil volumes, partially offset by higher oil prices and lower operating costs.
For the second quarter of 2014, total company average daily oil and gas production volumes, excluding the Hugoton production, averaged 736,000 barrels of oil equivalent (BOE), compared with 753,000 BOE in the second quarter of 2013. The sale of Hugoton assets closed on April 30, 2014. Hugoton production averaged 6,000 BOE per day and 19,000 BOE per day for the second quarter of 2014 and 2013, respectively. Domestic average daily production increased by 13,000 BOE to 464,000 BOE in the second quarter of 2014 compared to 451,000 BOE in the second quarter of 2013. Domestic average oil production increased by 21,000 barrels per day, primarily from California and Permian Resources. International average daily production decreased to 272,000 BOE in the second quarter of 2014 from 302,000 BOE in second quarter of 2013. The decrease primarily resulted from insurgent activities in Colombia, continued field and port strikes in Libya and lower cost recovery barrels in Iraq. Total company average daily sales volumes decreased to 735,000 BOE in the second quarter of 2014 from 745,000 BOE in the second quarter of 2013, mainly due to the timing of liftings.
Worldwide realized crude oil prices increased by 3 percent to $100.38 per barrel for the second quarter of 2014 compared with $97.91 per barrel for the second quarter of 2013 and improved slightly compared to the first quarter of 2014. Worldwide NGL prices increased by 10 percent to $42.82 per barrel in the second quarter of 2014, compared with $38.78 per barrel in the second quarter of 2013, but decreased by 7 percent compared with $46.05 in the first quarter of 2014. Domestic natural gas prices increased 12 percent in the second quarter of 2014 to $4.28 per MCF, compared with $3.82 in the second quarter of 2013, and fell by 6 percent compared with the first quarter of 2014.
Chemical
Chemical core earnings for the second quarter of 2014 were $133 million, compared to $144 million in the second quarter of 2013, excluding the $131 million gain on the sale of our investment in Carbocloro. The decrease in second quarter of 2014 earnings reflected lower caustic soda prices driven by new chlor-alkali capacity in the industry and higher natural gas costs, partially offset by higher vinyl margins resulting from improvement in the U.S. construction markets.
Midstream, Marketing and Other
Midstream core earnings were $219 million for the second quarter of 2014, compared with $48 million for the second quarter of 2013. The increase in earnings reflected improved marketing and trading performance.
Non-Core Items
The second quarter of 2014 included a net non-core income benefit of $27 million, which included a $341 million after-tax gain from the sale of Hugoton oil and gas assets, a $300 million after-tax charge for the impairment of certain non-producing domestic oil and gas acreage and on-going costs related to the California spin-off. The non-core items in the second quarter of 2013 provided a net income benefit of $46 million.
SIX-MONTH RESULTS
Net income for the first six months of 2014 was $2.8 billion ($3.58 per diluted share), compared with $2.7 billion ($3.32 per diluted share) for the same period in 2013. Core income for the first six months of 2014 was $2.8 billion ($3.54 per diluted share), compared with $2.6 billion ($3.27 per diluted share) for the same period in 2013.
Oil and Gas
Domestic core earnings were $2.1 billion pre-tax or $1.4 billion after-tax for the first six months of 2014, compared to $1.9 billion pre-tax or $1.2 billion after-tax for the first six months of 2013. The increase in domestic core earnings reflected higher realized prices across all products and higher oil volumes, partially offset by higher costs for CO2, steam and power and higher DD&A. International core earnings were $2.2 billion pre-tax or $1.1 billion after-tax for the first six months of 2014, compared to $2.2 billion pre-tax or $1.2 billion after-tax for the first six months of 2013. International core earnings reflected lower Middle East/North Africa volumes, partially offset by lower operating costs.
Oil and gas production volumes, excluding Hugoton production, for the first six months of 2014 averaged 731,000 BOE per day, compared with 749,000 BOE per day for the first six months of 2013. Domestic daily production averaged 460,000 BOE and 455,000 BOE for the first six months of 2014 and 2013, respectively. Average domestic oil production increased by 15,000 barrels per day in the first six months of 2014, compared to the first six months of 2013. Average international daily production volumes decreased to 271,000 BOE for the first six months of 2014 from 294,000 BOE for the first six months of 2013. The decrease was primarily due to insurgent activities in Colombia, continued field and port strikes in Libya and lower cost recovery barrels in Iraq. Total company daily sales volumes averaged 726,000 BOE in the first six months of 2014, compared with 736,000 BOE for 2013. Sales volumes were lower than production volumes due to the timing of liftings in Middle East/North Africa.
Worldwide realized crude oil prices rose by 2 percent to $99.70 per barrel for the first six months of 2014, compared with $97.99 per barrel for the first six months of 2013. Worldwide NGL prices increased by 12 percent to $44.43 per barrel for the first six months of 2014, compared with $39.52 per barrel for the first six months of 2013. Domestic gas prices increased by 29 percent to $4.43 per MCF for the first six months of 2014, compared to $3.44 per MCF for the first six months of 2013.
Chemical
Chemical core earnings were $269 million for the first six months of 2014, compared with $303 million for the same period of 2013, excluding the $131 million gain on the sale of our investment in Carbocloro. The lower earnings reflected lower caustic soda prices, driven by new chlor-alkali capacity in the industry and higher natural gas costs, partially offset by higher vinyl margins and volume improvements across most products.
Midstream, Marketing and Other
Midstream core earnings were $389 million for the first six months of 2014, compared with $263 million for the same period of 2013. The increase in earnings reflected improved marketing and trading performance.
Portions of this press release contain forward-looking statements and involve risks and uncertainties that could materially affect expected results of operations, liquidity, cash flows and business prospects. Actual results may differ from anticipated results, sometimes materially, and reported results should not be considered an indication of future performance. Factors that could cause results to differ include, but are not limited to: global commodity pricing fluctuations; supply and demand considerations for Occidental's products; higher-than-expected costs; the regulatory approval environment; reorganization or restructuring of Occidental's operations, including any delay of, or other negative developments affecting, the spin-off of California Resources Corporation; not successfully completing, or any material delay of, field developments, expansion projects, capital expenditures, efficiency projects, acquisitions or dispositions; lower-than-expected production from development projects or acquisitions; exploration risks; general economic slowdowns domestically or internationally; political conditions and events; liability under environmental regulations including remedial actions; litigation; disruption or interruption of production or manufacturing or facility damage due to accidents, chemical releases, labor unrest, weather, natural disasters, cyber attacks or insurgent activity; failure of risk management; changes in law or regulations; or changes in tax rates. Words such as “estimate,” “project,” “predict,” “will,” “would,” “should,” “could,” “may,” “might,” “anticipate,” “plan,” “intend,” “believe,” “expect,” “aim,” “goal,” “target,” “objective,” “likely” or similar expressions that convey the prospective nature of events or outcomes generally indicate forward-looking statements. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this release. Unless legally required, Occidental does not undertake any obligation to update any forward-looking statements, as a result of new information, future events or otherwise. Material risks that may affect Occidental's results of operations and financial position appear in Part I, Item 1A “Risk Factors” of the 2013 Form 10-K. Occidental posts or provides links to important information on its website at
SUMMARY OF SEGMENT NET SALES AND AFTER-TAX EARNINGS
Second Quarter
Six Months
($ millions, except per-share amounts)
2014
2013
2014
2013
SEGMENT NET SALES
Oil and Gas
$
4,807
$
4,721
$
9,483
$
9,161
Chemical
1,242
1,187
2,462
2,362
Midstream, Marketing and Other
530
269
965
722
Eliminations
(304
)
(215
)
(547
)
(411
)
Net Sales
$
6,275
$
5,962
$
12,363
$
11,834
SEGMENT EARNINGS - AFTER-TAX
Oil and Gas
Domestic
$
720
$
635
$
1,394
$
1,201
Foreign
576
641
1,128
1,177
Exploration
(36
)
(56
)
(68
)
(29
)
1,260
1,220
2,454
2,349
Chemical
84
172
170
271
Midstream, Marketing and Other (a)
160
46
278
192
1,504
1,438
2,902
2,812
Unallocated Corporate Items
Interest expense, net
(15
)
(29
)
(34
)
(59
)
Income taxes
73
84
153
160
Other
(130
)
(166
)
(202
)
(227
)
Income from Continuing Operations (a)
1,432
1,327
2,819
2,686
Discontinued operations, net
(1
)
(5
)
2
(9
)
NET INCOME (a)
$
1,431
$
1,322
$
2,821
$
2,677
BASIC EARNINGS PER COMMON SHARE
Income from continuing operations
$
1.83
$
1.65
$
3.58
$
3.33
Discontinued operations, net
-
(0.01
)
-
(0.01
)
$
1.83
$
1.64
$
3.58
$
3.32
DILUTED EARNINGS PER COMMON SHARE
Income from continuing operations
$
1.82
$
1.64
$
3.58
$
3.33
Discontinued operations, net
-
-
-
(0.01
)
$
1.82
$
1.64
$
3.58
$
3.32
AVERAGE COMMON SHARES OUTSTANDING
BASIC
782.6
804.9
786.9
804.8
DILUTED
782.9
805.4
787.3
805.3
(a) Net income and income from continuing operations represent amounts attributable to Common Stock, after deducting non-controlling interest of $3 million and $5 million for the second quarter and first six months of 2014, respectively. Midstream segment earnings are presented net of these non-controlling interest amounts.
Attachment 2
SUMMARY OF SEGMENT PRE-TAX EARNINGS
Second Quarter
Six Months
($ millions)
2014
2013
2014
2013
SEGMENT EARNINGS - PRE-TAX
Oil and Gas
Domestic
$
1,132
$
997
$
2,190
$
1,886
Foreign
1,096
1,173
2,188
2,246
Exploration
(46
)
(70
)
(92
)
(112
)
2,182
2,100
4,286
4,020
Chemical
133
275
269
434
Midstream, Marketing and Other (a)
219
48
389
263
2,534
2,423
4,944
4,717
Unallocated Corporate Items
Interest expense, net
(15
)
(29
)
(34
)
(59
)
Income taxes
(957
)
(901
)
(1,889
)
(1,745
)
Other
(130
)
(166
)
(202
)
(227
)
Income from Continuing Operations (a)
1,432
1,327
2,819
2,686
Discontinued operations, net
(1
)
(5
)
2
(9
)
NET INCOME (a)
$
1,431
$
1,322
$
2,821
$
2,677
(a) Net income and income from continuing operations represent amounts attributable to Common Stock, after deducting non-controlling interest of $3 million and $5 million for the second quarter and first six months of 2014, respectively. Midstream segment earnings are presented net of these non-controlling interest amounts.
Attachment 3
SIGNIFICANT TRANSACTIONS AND EVENTS AFFECTING EARNINGS
Occidental's results of operations often include the effects of significant transactions and events affecting earnings that vary widely and unpredictably in nature, timing and amount. Therefore, management uses a measure called "core results," which excludes those items. This non-GAAP measure is not meant to disassociate those items from management's performance, but rather is meant to provide useful information to investors interested in comparing Occidental's earnings performance between periods. Reported earnings are considered representative of management's performance over the long term. Core results is not considered to be an alternative to operating income reported in accordance with generally accepted accounting principles.
Second Quarter 2014
($ millions) PRE-TAX
Reported Income
Significant Items
Core Results
Oil and Gas
Domestic
$
1,132
$
(535
)
(a)
$
1,068
471
(b)
Foreign
1,096
1,096
Exploration
(46
)
(46
)
2,182
2,118
Chemical
133
133
Midstream, Marketing and Other
219
219
Corporate
Interest expense
(15
)
(15
)
Other
(130
)
17
(c)
(113
)
Taxes
(957
)
19
(938
)
Income from continuing operations
1,432
(28
)
1,404
Discontinued operations, net
(1
)
1
-
Net Income
$
1,431
$
(27
)
$
1,404
Second Quarter 2014
($ millions) AFTER-TAX
Reported Income
Significant Items
Core Results
Oil and Gas
Domestic
$
720
$
(341
)
(a)
$
679
300
(b)
Foreign
576
576
Exploration
(36
)
(36
)
1,260
1,219
Chemical
84
84
Midstream, Marketing and Other
160
160
Corporate
Interest expense
(15
)
(15
)
Other
(130
)
13
(c)
(117
)
Unallocated taxes
73
73
Income from continuing operations
1,432
(28
)
1,404
Discontinued operations, net
(1
)
1
-
Net Income
$
1,431
$
(27
)
$
1,404
Diluted Earnings Per Common Share
$
1.82
$
1.79
(a) Hugoton sale gain.
(b) Asset impairments.
(c) Spin-off and other costs.
Attachment 4
SIGNIFICANT TRANSACTIONS AND EVENTS AFFECTING EARNINGS
Second Quarter 2013
($ millions) PRE-TAX
Reported Income
Significant Items
Core Results
Oil and Gas
Domestic
$
997
$
997
Foreign
1,173
1,173
Exploration
(70
)
(70
)
2,100
2,100
Chemical
275
$
(131
)
(a)
144
Midstream, Marketing and Other
48
48
Corporate
Interest expense
(29
)
(29
)
Other
(166
)
55
(b)
(111
)
Taxes
(901
)
25
(876
)
Income from continuing operations
1,327
(51
)
1,276
Discontinued operations, net
(5
)
5
-
Net Income
$
1,322
$
(46
)
$
1,276
Second Quarter 2013
($ millions) AFTER-TAX
Reported Income
Significant Items
Core Results
Oil and Gas
Domestic
$
635
$
635
Foreign
641
641
Exploration
(56
)
(56
)
1,220
1,220
Chemical
172
$
(85
)
(a)
87
Midstream, Marketing and Other
46
46
Corporate
Interest expense
(29
)
(29
)
Other
(166
)
34
(b)
(132
)
Unallocated taxes
84
84
Income from continuing operations
1,327
(51
)
1,276
Discontinued operations, net
(5
)
5
-
Net Income
$
1,322
$
(46
)
$
1,276
Diluted Earnings Per Common Share
$
1.64
$
1.58
(a) Carbocloro sale gain.
(b) Employment charges related to post-employment benefits for the Company's former Chairman and termination of certain other employees and consulting arrangements.
Attachment 5
SIGNIFICANT TRANSACTIONS AND EVENTS AFFECTING EARNINGS
Six Months 2014
($ millions) PRE-TAX
Reported Income
Significant Items
Core Results
Oil and Gas
Domestic
$
2,190
$
(535
)
(a)
$
2,126
471
(b)
Foreign
2,188
2,188
Exploration
(92
)
(92
)
4,286
4,222
Chemical
269
269
Midstream, Marketing and Other
389
389
Corporate
Interest expense
(34
)
(34
)
Other
(202
)
17
(c)
(185
)
Taxes
(1,889
)
19
(1,870
)
Income from continuing operations
2,819
(28
)
2,791
Discontinued operations, net
2
(2
)
-
Net Income
$
2,821
$
(30
)
$
2,791
Six Months 2014
($ millions) AFTER-TAX
Reported Income
Significant Items
Core Results
Oil and Gas
Domestic
$
1,394
$
(341
)
(a)
$
1,353
300
(b)
Foreign
1,128
1,128
Exploration
(68
)
(68
)
2,454
2,413
Chemical
170
170
Midstream, Marketing and Other
278
278
Corporate
Interest expense
(34
)
(34
)
Other
(202
)
13
(c)
(189
)
Unallocated taxes
153
153
Income from continuing operations
2,819
(28
)
2,791
Discontinued operations, net
2
(2
)
-
Net Income
$
2,821
$
(30
)
$
2,791
Diluted Earnings Per Common Share
$
3.58
$
3.54
(a) Hugoton sale gain.
(b) Asset impairments.
(c) Spin-off and other costs.
Attachment 6
SIGNIFICANT TRANSACTIONS AND EVENTS AFFECTING EARNINGS
Six Months 2013
($ millions) PRE-TAX
Reported Income
Significant Items
Core Results
Oil and Gas
Domestic
$
1,886
$
1,886
Foreign
2,246
2,246
Exploration
(112
)
(112
)
4,020
4,020
Chemical
434
$
(131
)
(a)
303
Midstream, Marketing and Other
263
263
Corporate
Interest expense
(59
)
(59
)
Other
(227
)
55
(b)
(172
)
Taxes
(1,745
)
25
(1,720
)
Income from continuing operations
2,686
(51
)
$
2,635
Discontinued operations, net
(9
)
9
-
Net Income
$
2,677
$
(42
)
$
2,635
Six Months 2013
($ millions) AFTER-TAX
Reported Income
Significant Items
Core Results
Oil and Gas
Domestic
$
1,201
$
1,201
Foreign
1,177
1,177
Exploration
(29
)
(29
)
2,349
2,349
Chemical
271
$
(85
)
(a)
186
Midstream, Marketing and Other
192
192
Corporate
Interest expense
(59
)
(59
)
Other
(227
)
34
(b)
(193
)
Unallocated taxes
160
160
Income from continuing operations
2,686
(51
)
2,635
Discontinued operations, net
(9
)
9
-
Net Income
$
2,677
$
(42
)
$
2,635
Diluted Earnings Per Common Share
$
3.32
$
3.27
(a) Carbocloro sale gain.
(b) Employment charges related to post-employment benefits for the Company's former Chairman and termination of certain other employees and consulting arrangements.
Attachment 7
SUMMARY OF CAPITAL EXPENDITURES AND DD&A EXPENSE
Second Quarter
Six Months
($ millions)
2014
2013
2014
2013
CAPITAL EXPENDITURES (a)
$
2,658
$
2,210
$
4,927
$
4,280
DEPRECIATION, DEPLETION AND AMORTIZATION OF ASSETS
$
1,317
$
1,303
$
2,583
$
2,562
(a) Includes 100 percent of the capital for BridgeTex Pipeline, which is being consolidated in Oxy's financial statements. Our partner contributes its share of the capital. The Company's net capital expenditures after these reimbursements and inclusion of our contributions for the Chemical joint venture cracker were $2.5 billion and $2.2 billion for the second quarter of 2014 and 2013, respectively, and $4.7 billion and $4.2 billion for the six months ended June 30, 2014 and 2013, respectively.
Attachment 8
SUMMARY OF OPERATING STATISTICS - PRODUCTION
Second Quarter
Six Months
2014
2013
2014
2013
NET OIL, LIQUIDS AND GAS PRODUCTION PER DAY
United States
Oil (MBBL)
California
97
88
96
88
Permian Resources
40
33
38
34
Permian EOR
110
112
110
112
Midcontinent and Other
29
22
27
22
Total excluding Hugoton
276
255
271
256
Hugoton
2
6
4
6
Total
278
261
275
262
NGLs (MBBL)
California
18
21
18
20
Permian Resources
12
11
11
10
Permian EOR
29
28
29
29
Midcontinent and Other
12
14
14
15
Total excluding Hugoton
71
74
72
74
Hugoton
1
3
2
3
Total
72
77
74
77
Natural Gas (MMCF)
California
243
260
243
262
Permian Resources
120
121
117
126
Permian EOR
34
39
37
42
Midcontinent and Other
305
312
305
318
Total excluding Hugoton
702
732
702
748
Hugoton
16
60
35
60
Total
718
792
737
808
Latin America
Oil (MBBL) - Colombia
19
28
24
29
Natural Gas (MMCF) - Bolivia
12
13
12
13
Middle East / North Africa
Oil (MBBL)
Dolphin
7
7
6
6
Oman
70
67
68
66
Qatar
69
75
68
67
Other
28
44
27
45
Total
174
193
169
184
NGLs (MBBL)
Dolphin
7
7
7
7
Natural Gas (MMCF)
Dolphin
144
145
138
139
Oman
40
56
40
56
Other
236
232
234
238
Total
420
433
412
433
Barrels of Oil Equivalent excluding
Hugoton (MBOE)
736
753
731
749
Hugoton
6
19
12
19
Barrels of Oil Equivalent (MBOE)
742
772
743
768
Attachment 9
SUMMARY OF OPERATING STATISTICS - SALES
Second Quarter
Six Months
2014
2013
2014
2013
NET OIL, LIQUIDS AND GAS SALES PER DAY
United States
Oil (MBBL)
278
261
275
262
NGLs (MBBL)
72
77
74
77
Natural Gas (MMCF)
720
795
738
810
Latin America
Oil (MBBL) - Colombia
24
26
28
28
Natural Gas (MMCF) - Bolivia
12
13
12
13
Middle East / North Africa
Oil (MBBL)
Dolphin
7
7
6
6
Oman
71
63
68
68
Qatar
66
80
69
66
Other
24
36
17
32
Total
168
186
160
172
NGLs (MBBL)
Dolphin
7
7
7
7
Natural Gas (MMCF)
420
433
412
433
Barrels of Oil Equivalent excluding
Hugoton (MBOE)
735
745
726
736
Hugoton
6
19
12
19
Barrels of Oil Equivalent (MBOE)
741
764
738
755
Contact
Occidental Petroleum Corp. Melissa E. Schoeb (media) melissa_schoeb@oxy.com 713-366-5615 or Christopher M. Degner (investors) christopher_degner@oxy.com 212-603-8185