LOS ANGELES, July 19, 2000 (PRIMEZONE) -- Occidental Petroleum Corporation (NYSE:OXY)announced today that its second quarter 2000 net income of $564 million ($1.53 per share) marks the best quarter in the company's history.
These results included an after-tax gain of approximately $300 million related to the previously announced sale of Occidental's 29.2 percent interest in Canadian Occidental Petroleum Ltd. (CanOxy) and an after-tax charge of approximately $80 million for the previously announced decision to exit several of Occidental's chemical intermediate businesses.
The 2000 second quarter net income compares to $9 million ($.02 per share) of net income reported for the second quarter of 1999. Earnings before special items were $343 million for the second quarter of 2000, compared with earnings before special items of $4 million for the second quarter of 1999. Sales of $3.1 billion for the second quarter of 2000 were nearly double the $1.6 billion reported for the same period in 1999.
In announcing the results, Dr. Ray R. Irani, chairman and chief executive officer, stated, "We not only recorded the highest quarterly earnings in our history, but we also had our best performance for a six month period. The key drivers behind this strong performance were robust oil and gas prices and improved chemical margins - along with higher oil production resulting from our acquisition of Altura Energy from BP Amoco and Shell and the purchase of the Long Beach
(THUMS) properties from Arco. These acquisitions, like the alliances we've formed in our commodity chemicals businesses, are part of a well-defined strategy we announced three years ago to strengthen the company by focusing on fewer, larger and more profitable core assets. The success of this strategy enables us to optimize the benefits of higher prices and margins in today's environment.
Moreover, since both the Altura and THUMS acquisitions did not close until the latter half of April, we did not get the benefit of their higher production for the entire quarter. We will see the full impact of these acquisitions in the third quarter.
In chemicals, we are enjoying increased margins in certain key businesses despite absorbing much higher energy and feedstock costs. The focus on large core assets in our key chemical product areas has created economies of scale resulting in greater operating efficiencies to help offset these higher costs.
We've also made significant progress in meeting the debt reduction targets we announced after the Altura acquisition. Our debt increased from $5.4 billion at year end 1999 to $6.6 billion in April of this year as a result of cash costs incurred in purchasing Altura. We made a commitment to reduce this debt by $1.7 billion by year end, and we've already achieved a reduction of $1.2 billion from asset sales and internal sources. In addition, we've reduced the $2.4 billion in non-recourse Altura debt by $125 million, and we are confident of reducing Altura debt by a further $175 million to hit our year-end Altura debt target of $2.1 billion. This will result in a total debt reduction of $2 billion this year. We plan to maintain our debt reduction initiatives into 2001."
Oil and Gas
Oil and gas divisional earnings were $557 million for the second quarter of 2000, compared with $166 million for the second quarter of 1999. The significant improvement in earnings is primarily the result of higher worldwide crude oil and natural gas prices and higher production volumes. The increase in domestic production volumes, resulting from the completed acquisitions of Altura Energy Ltd. and ARCO Long Beach Inc., (THUMS) more than offset the lower international production resulting from the sale of our producing assets in Peru.
Chemicals
Chemical divisional results before special items were $154 million for the second quarter of 2000, compared with $21 million for the second quarter of 1999. The improvement in earnings is due to higher margins and sales volumes for Polyvinyl Chloride resins, Ethylene Dichloride, Vinyl Chloride Monomer and Chlorine. Partially offsetting these increases were higher energy and feedstock costs.
Chemical results after special items for the second quarter of 2000 were $34 million compared with $33 million for the second quarter of 1999. The 2000 results include a $120 million pre-tax charge resulting from the decision to exit several of its chemical intermediate businesses. The 1999 results included a $12 million gain from the sale of a plant by an equity affiliate. Other
The second quarter of 2000 included a $493 million pre-tax gain related to the sale of Occidental's investment in CanOxy.
For the first six months of 2000, Occidental's net income was $835 million ($2.27 per share), compared with a net loss of $61 million ($.20 per share) for the first six months of 1999. The six months results before special items were net income of $607 million for 2000, compared with a loss before special items of $64 million for 1999. Sales were $5.6 billion for the six months of 2000, compared with $3.0 billion for the same period of 1999.
SUMMARY OF DIVISIONAL NET SALES AND EARNINGS
(Millions, except per-share amounts)
Second Quarter Six Months
Periods Ended June 30 2000 1999 2000 1999
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DIVISIONAL NET SALES
Oil and gas $ 2,122 $ 944 $ 3,649 $ 1,690
Chemical 1,006 703 1,987 1,301
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Net sales $ 3,128 $ 1,647 $ 5,636 $ 2,991
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DIVISIONAL EARNINGS
Oil and gas $ 557 $ 166 $ 951 $ 231
Chemical 34 33 177 45
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591 199 1,128 276
Unallocated Corporate Items
Interest expense, net (a) (104) (123) (203) (239)
Income taxes (b) (349) (27) (499) (24)
Permian preferred distributions (30) - (30) -
Trust preferred distributions
& other (16) (15) (33) (29)
Other 472 (22) 472 (29)
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Income (Loss) Before Extraordinary
Items And Effect Of Changes In
Accounting Principles 564 12 835 (45)
Extraordinary loss, net - (3) - (3)
Cumulative effect of changes in
accounting principles, net - - - (13)
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Net Income (Loss) 564 9 835 (61)
Effect of repurchase of Trust
Preferred Securities - - 1 -
Preferred dividends - (3) - (7)
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EARNINGS (LOSS) APPLICABLE
TO COMMON STOCK $ 564 $ 6 $ 836 $ (68)
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BASIC AND DILUTED EARNINGS (LOSS)
PER COMMON SHARE
Income (loss) before
extraordinary items and
effect of changes in
accounting principles $ 1.53 $ .03 $ 2.27 $ (.15)
Extraordinary loss, net - (.01) - (.01)
Cumulative effect of changes in
accounting principles, net - - - (.04)
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$ 1.53 $ .02 $ 2.27 $ (.20)
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AVERAGE BASIC COMMON SHARES
OUTSTANDING 368.8 348.4 368.5 348.1
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(a) The year 2000 includes $30 million interest income on notes receivable from Altura partners.
(b) Includes an offset for credits in lieu of U.S. federal income taxes allocated to the divisions. Divisional earnings have benefited from credits allocated by $2 million and $4 million at Oil and Gas and Chemical, respectively, in the second quarter of 2000 and by $31 million and $4 million at Oil and Gas and Chemical, respectively, in the second quarter of 1999.
SUMMARY OF OPERATING STATISTICS
Second Quarter _ Six Months
Periods Ended June 30 2000 1999 2000 1999
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NET OIL, GAS AND LIQUIDS
PRODUCTION PER DAY
United States
Crude oil and condensate
(thousands of barrels) 167 62 115 64
Natural gas liquids
(thousands of barrels) 25 9 16 9
Natural gas
(millions of cubic feet) 715 670 669 659
Other Western Hemisphere
Crude oil and condensate
(thousands of barrels) 62 110 57 106
Eastern Hemisphere
Crude oil and condensate
(thousands of barrels) 130 151 124 148
Natural gas
(millions of cubic feet) 51 54 51 53
Barrels of Oil Equivalent (MBOE) 512 453 432 446
CAPITAL EXPENDITURES (millions) $ 210 $ 131 $ 333 $ 263
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DEPRECIATION, DEPLETION AND
AMORTIZATION OF ASSETS (millions) $ 233 $ 203 $ 419 $ 400
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