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Occidental Petroleum Announces 4th Quarter and 12 Months of 2012 Income

  • Q4 2012 record total company oil and gas production of 779,000 barrels of oil equivalent per day
  • Q4 2012 domestic daily oil and gas production of 475,000 barrels of oil equivalent, a record for the ninth consecutive quarter
  • Q4 2012 core earnings of $1.5 billion, or $1.83 per diluted share

LOS ANGELES--(BUSINESS WIRE)--Occidental Petroleum Corporation (NYSE:OXY) announced core income of $1.5 billion ($1.83 per diluted share) for the fourth quarter of 2012, compared with $1.6 billion ($2.02 per diluted share) for the fourth quarter of 2011. In the fourth quarter of 2012, we recorded after-tax charges of $1.1 billion or $1.41 per diluted share, almost all of which was related to the impairment of gas assets in the Midcontinent. Net income for the fourth quarter of 2012 after this charge was $336 million ($0.42 per diluted share), compared with $1.6 billion ($2.01 per diluted share) for the same period of 2011.

Core income was $5.8 billion ($7.09 per diluted share) for the year 2012, compared with $6.8 billion ($8.39 per diluted share) for 2011. Net income for the twelve months of 2012 was $4.6 billion ($5.67 per diluted share), compared with $6.8 billion ($8.32 per diluted share) for 2011.

In announcing the results, Stephen I. Chazen, President and Chief Executive Officer, said, "Our fourth quarter domestic production of 475,000 barrels of oil equivalent per day, of which 342,000 barrels per day was liquids, set a record for the ninth consecutive quarter. Our total company production for all of 2012 was 766,000 barrels of oil equivalent per day, which was 5 percent higher than 2011. Our domestic oil production grew by 11 percent for all of 2012 to 255,000 barrels per day from 230,000 barrels in 2011.

"Fourth quarter core income was $1.5 billion or $1.83 per diluted share. These results were $0.13 higher than the third quarter of 2012 as a result of higher liquids volumes, higher realized NGL and domestic gas prices and lower operating expenses. In the fourth quarter, our production costs were $1.04 a barrel lower than the third quarter, with improvements across most units. The reductions resulted from efficiencies achieved across most cost categories including savings in surface operations, reductions in the use of outside contractors, curtailment of uneconomic down-hole maintenance and workover activity, as well as related overhead. Our exit rate on a per barrel basis was well below the total year 2012 and below the fourth quarter 2011 levels. We generated cash flow from continuing operations before working capital changes of $12.1 billion for the twelve months of 2012 and invested $10.2 billion in capital expenditures."

QUARTERLY RESULTS

Oil and Gas

Oil and gas core earnings were $2.3 billion for the fourth quarter of 2012, compared with $2.5 billion for the fourth quarter of 2011. Lower 2012 earnings resulted from lower year-over-year prices across all products in the fourth quarter of 2012 and higher DD&A rates, partially offset by higher liquids volumes. After including the fourth quarter 2012 charges, which will be discussed in more detail on the earnings call, segment earnings were $522 million.

For the fourth quarter of 2012, daily oil and gas production volumes averaged 779,000 barrels of oil equivalent (BOE), compared with 748,000 BOE in the fourth quarter of 2011.

The fourth quarter 2012 production increase resulted from higher volumes of 26,000 BOE per day from domestic operations and 5,000 BOE per day from international production. The international increase included higher production in Iraq, Bahrain and Libya, partially offset by lower volumes from Dolphin, resulting from the full cost recovery of pre-startup capital, and in Yemen due to the Masila field contract expiration.

Daily sales volumes increased from 749,000 BOE in the fourth quarter of 2011 to 784,000 BOE in the fourth quarter of 2012.

Oxy’s realized price for worldwide crude oil was $96.19 per barrel for the fourth quarter of 2012, compared with $99.62 per barrel for the fourth quarter of 2011. The fourth quarter of 2012 realized oil price represents 109 percent of the average WTI and 87 percent of the average Brent price. Worldwide NGL prices were $45.08 per barrel in the fourth quarter of 2012, compared with $55.25 per barrel in the fourth quarter of 2011. Domestic gas prices decreased 14 percent from $3.59 per MCF in the fourth quarter of 2011 to $3.09 per MCF for the fourth quarter of 2012.

Fourth quarter 2012 realized prices were higher than third quarter 2012 prices for worldwide NGLs and domestic natural gas but were slightly lower for worldwide crude oil. On a sequential quarterly basis, prices increased 11 percent for NGLs and 25 percent for domestic natural gas and decreased less than 1 percent for worldwide crude oil.

Chemical

Chemical segment earnings for the fourth quarter of 2012 were $180 million, compared with $144 million in the fourth quarter of 2011. The increase was primarily the result of higher export volumes for caustic soda and vinyl chloride monomer and lower ethylene costs.

Midstream, Marketing and Other

Midstream segment earnings were $75 million for the fourth quarter of 2012, compared with $70 million for the fourth quarter of 2011.

TWELVE-MONTH RESULTS

Oil and Gas

Oil and gas core earnings were $8.8 billion for the twelve months of 2012, compared with $10.3 billion for the same period of 2011. The decrease in 2012 reflected lower NGL and natural gas prices, higher operating costs, exploration expense and DD&A rates, partially offset by higher oil prices and domestic volumes. Segment earnings, after including the fourth quarter charges, were $7.1 billion for 2012, compared with $10.2 billion for 2011.

Oil and gas production volumes for the twelve months were 766,000 BOE per day for 2012, compared with 733,000 BOE per day for the same period in 2011. Year-over-year, Oxy's domestic production increased by 9 percent, while total company production increased by 5 percent. Dolphin's full cost recovery of pre-startup capital, which reduced production, was the only operation where production sharing and similar contracts had an appreciable effect.

The twelve-month 2012 production increase resulted from 37,000 BOE per day in higher domestic volumes, partially offset by lower volumes in the Middle East/North Africa and Latin America.

Daily sales volumes were 764,000 BOE in the twelve months of 2012, compared with 731,000 BOE for the same period in 2011.

Oxy's realized prices improved for crude oil but declined for natural gas and NGLs on a year-over-year basis. Worldwide crude oil prices were $99.87 per barrel for the twelve months of 2012, compared with $97.92 per barrel for the twelve months of 2011. Worldwide NGL prices were $45.18 per barrel for the year 2012, compared with $55.53 per barrel for the year 2011. Domestic gas prices declined 35 percent, from $4.06 per MCF in the twelve months of 2011 to $2.62 per MCF in the twelve months of 2012.

Chemical

Chemical segment earnings were $720 million for the twelve months of 2012, compared with $861 million for the same period in 2011. The reduction was primarily a result of lower margins due to weaker economic conditions in Europe and Asia, and increased competitive activity from these regions. The calcium chloride and potassium hydroxide businesses were also negatively impacted by an extremely mild winter and drought conditions in the United States.

Midstream, Marketing and Other

Midstream segment earnings were $439 million for the twelve months of 2012, compared with $448 million for the same period in 2011.

About Oxy

Occidental Petroleum Corporation (OXY) is an international oil and gas exploration and production company with operations in the United States, Middle East/North Africa and Latin America regions. Oxy is one of the largest U.S. oil and gas companies, based on equity market capitalization. Oxy's wholly owned subsidiary OxyChem manufactures and markets chlor-alkali products and vinyls. Oxy is committed to safeguarding the environment, protecting the safety and health of employees and neighboring communities and upholding high standards of social responsibility in all of the company's worldwide operations.

Forward-Looking Statements

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. Factors that could cause results to differ materially include, but are not limited to: global commodity pricing fluctuations; supply and demand considerations for Occidental’s products; general domestic political and regulatory approval conditions; higher-than-expected costs; international political conditions; not successfully completing, or any material delay of, any development of new fields, expansion projects, capital expenditures, efficiency-improvement projects, acquisitions or dispositions; potential failure to achieve expected production from existing and future oil and gas development projects or acquisitions; exploration risks such as drilling unsuccessful wells; any changes in general economic conditions domestically or internationally; the ability to attract trained engineers; potential liability for remedial actions under existing or future environmental regulations and litigation; potential liability resulting from pending or future litigation; potential disruption or interruption of Occidental’s production or manufacturing or damage to facilities due to accidents, chemical releases, labor unrest, weather, natural disasters, political events 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 uncertainty of future 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 report. 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 1, Item 1A "Risk Factors" of the 2011 Form 10-K.

For further analysis of Occidental's quarterly performance, please visit the website: www.oxy.com

Attachment 1
                                     
SUMMARY OF SEGMENT NET SALES AND EARNINGS
                           
Fourth Quarter Twelve Months
($ millions, except per-share amounts)   2012     2011     2012     2011  
SEGMENT NET SALES
Oil and Gas $ 4,874 $ 4,784 $ 18,906 $ 18,419
Chemical 1,141 1,094 4,580 4,815
Midstream, Marketing and Other 355 338 1,399 1,447
Eliminations   (199 )   (182 )   (713 )   (742 )
 
Net Sales $ 6,171   $ 6,034   $ 24,172   $ 23,939  
 
SEGMENT EARNINGS
Oil and Gas (a) $ 522 $ 2,537 $ 7,095 $ 10,241
Chemical 180 144 720 861
Midstream, Marketing and Other   75     70     439     448  
777 2,751 8,254 11,550
 
Unallocated Corporate Items
Interest expense, net (b) (30 ) (25 ) (117 ) (284 )
Income taxes (c) (249 ) (949 ) (3,118 ) (4,201 )
Other   (134 )   (136 )   (384 )   (425 )
 
Income from Continuing Operations 364 1,641 4,635 6,640
Discontinued operations, net (d)   (28 )   (7 )   (37 )   131  
 
NET INCOME $ 336   $ 1,634   $ 4,598   $ 6,771  
 
BASIC EARNINGS PER COMMON SHARE
Income from continuing operations $ 0.45 $ 2.02 $ 5.72 $ 8.16
Discontinued operations, net   (0.03 )   (0.01 )   (0.05 )   0.16  
$ 0.42   $ 2.01   $ 5.67   $ 8.32  
 
DILUTED EARNINGS PER COMMON SHARE
Income from continuing operations $ 0.45 $ 2.02 $ 5.71 $ 8.16
Discontinued operations, net   (0.03 )   (0.01 )   (0.04 )   0.16  
$ 0.42   $ 2.01   $ 5.67   $ 8.32  
AVERAGE COMMON SHARES OUTSTANDING
BASIC 807.1 810.7 809.3 812.1
DILUTED   807.7     811.5     810.0     812.9  
 
(a) Oil and Gas - The fourth quarter and twelve months of 2012 include pre-tax charges of $1.7 billion related to the impairment of domestic gas assets and related items. The twelve months of 2011 include pre-tax charges of $35 million related to exploration write-offs in Libya and $29 million related to Colombia net worth tax. Also, included in the twelve months of 2011 results is a pre-tax gain for sale of an interest in a Colombia pipeline of $22 million.
(b) Unallocated Corporate Items - Interest Expense, net - The twelve months of 2011 include a pre-tax charge of $163 million related to the premium on debt extinguishment.
(c) Unallocated Corporate Items - Taxes - The twelve months of 2011 include a net $21 million charge for out-of-period state income taxes.
(d) Discontinued Operations, net - The twelve months of 2011 include a $144 million after-tax gain from the sale of the Argentine operations.
 
Attachment 2
                                     
SUMMARY OF CAPITAL EXPENDITURES AND DD&A EXPENSE
 
Fourth Quarter Twelve Months
($ millions)   2012     2011     2012     2011  
CAPITAL EXPENDITURES $ 2,510   $ 2,549   $ 10,226   $ 7,518  
 
DEPRECIATION, DEPLETION AND
AMORTIZATION OF ASSETS $ 1,191   $ 938   $ 4,511   $ 3,591  
 
 
 
 
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 in accordance with generally accepted accounting principles.
 
Fourth Quarter

 

Diluted

Diluted

($ millions, except per-share amounts)

  2012   EPS   2011  

EPS

TOTAL REPORTED EARNINGS $ 336   $ 0.42   $ 1,634   $ 2.01  
 
Oil and Gas
Segment Earnings $ 522 $ 2,537
Add:
Asset impairments and related items   1,731     -  
 
Segment Core Results   2,253     2,537  
 
Chemicals
Segment Earnings 180 144
Add:
No significant items affecting earnings   -     -  
 
Segment Core Results   180     144  
 
Midstream, Marketing and Other
Segment Earnings 75 70
Add:
No significant items affecting earnings   -     -  
 
Segment Core Results   75     70  
 
Total Segment Core Results   2,508     2,751  
 
Corporate
Corporate Results --
Non Segment * (441 ) (1,117 )
Add:
Litigation reserves 20 -
Tax effect of pre-tax adjustments (636 ) -
Discontinued operations, net **   28     7  
 
Corporate Core Results - Non Segment   (1,029 )   (1,110 )
 
TOTAL CORE RESULTS $ 1,479   $ 1.83   $ 1,641   $ 2.02  
 
* Interest expense, income taxes, G&A expense and other.
** Amounts shown after tax.
 
 
Attachment 4
                                     
SIGNIFICANT TRANSACTIONS AND EVENTS AFFECTING EARNINGS (continued)
 
Twelve Months

 

Diluted

Diluted

($ millions, except per-share amounts)

2012 EPS 2011

EPS

TOTAL REPORTED EARNINGS $ 4,598   $ 5.67   $ 6,771   $ 8.32  
 
Oil and Gas
Segment Earnings $ 7,095 $ 10,241
Add:
Asset impairments and related items 1,731 -
Libya exploration write-off - 35
Gain on sale of Colombia pipeline interest - (22 )
Foreign tax   -     29  
 
Segment Core Results   8,826     10,283  
 
Chemicals
Segment Earnings 720 861
Add:
No significant items affecting earnings   -     -  
 
Segment Core Results   720     861  
 
Midstream, Marketing and Other
Segment Earnings 439 448
Add:
No significant items affecting earnings   -     -  
 
Segment Core Results   439     448  
 
Total Segment Core Results   9,985     11,592  
 
Corporate
Corporate Results --
Non Segment * (3,656 ) (4,779 )
Add:
Litigation reserves 20 -
Premium on debt extinguishments - 163
State income tax charge - 33
Tax effect of pre-tax adjustments (636 ) (50 )
Discontinued operations, net **   37     (131 )
 
Corporate Core Results - Non Segment   (4,235 )   (4,764 )
 
TOTAL CORE RESULTS $ 5,750   $ 7.09   $ 6,828   $ 8.39  
 
* Interest expense, income taxes, G&A expense and other
** Amounts shown after tax.
 
 
 
Attachment 5
 
SUMMARY OF OPERATING STATISTICS - PRODUCTION
 
Fourth Quarter Twelve Months
    2012     2011     2012     2011  

NET OIL, GAS AND LIQUIDS PRODUCTION PER DAY

United States
Crude Oil (MBBL)
California 92 84 88 80
Permian 146 137 142 134
Midcontinent and Other   27     19     25     16  
Total 265 240 255 230
 
NGL (MBBL)
California 21 15 17 15
Permian 40 37 39 38
Midcontinent and Other   16     18     17     16  
Total 77 70 73 69
 
Natural Gas (MMCF)
California 242 276 256 260
Permian 162 167 155 157
Midcontinent and Other   396     390     410     365  
Total 800 833 821 782
 
Latin America
Crude Oil (MBBL) - Colombia 30 28 29 29
 
Natural Gas (MMCF) - Bolivia 12 14 13 15
 
Middle East / North Africa
Crude Oil (MBBL)
Bahrain 4 5 4 4
Dolphin 7 9 8 9
Oman 74 67 67 67
Qatar 71 76 71 73
Other   36     33     36     38  
Total 192 190 186 191
 
NGL (MBBL)
Dolphin 7 9 8 10
Other   -     -     1     -  
Total 7 9 9 10
 
Natural Gas (MMCF)
Bahrain 242 180 232 173
Dolphin 138 181 163 199
Oman   56     58     57     54  
Total 436 419 452 426
 
 
Barrels of Oil Equivalent (MBOE)   779     748     766     733  
 
 
Attachment 6
                                     
SUMMARY OF OPERATING STATISTICS - SALES
 
Fourth Quarter Twelve Months
    2012     2011     2012     2011  
NET OIL, GAS AND LIQUIDS SALES PER DAY
 
United States
Crude Oil (MBBL) 265 240 255 230
NGL (MBBL) 77 70 73 69
Natural Gas (MMCF) 800 833 819 782
 
Latin America
Crude Oil (MBBL) - Colombia 30 32 28 29
 
Natural Gas (MMCF) - Bolivia 12 14 13 15
 
Middle East / North Africa
Crude Oil (MBBL)
Bahrain 4 5 4 4
Dolphin 7 9 8 9
Oman 70 66 66 69
Qatar 75 75 71 73
Other   39     31     36     34  
Total 195 186 185 189
 
NGL (MBBL)
Dolphin 7 10 8 10
Other   2     -     1     -  
Total 9 10 9 10
 
Natural Gas (MMCF) 436 419 452 426
 
 
Barrels of Oil Equivalent (MBOE)   784     749     764     731  

Contacts

Occidental Petroleum Corporation
Melissa E. Schoeb (media)
310-443-6504
melissa_schoeb@oxy.com
or
Chris Stavros (investors)
212-603-8184
chris_stavros@oxy.com

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