LOS ANGELES, July 19, 2001 (PRIMEZONE) -- Occidental Petroleum Corporation (NYSE:OXY) announced earnings before special items for the second quarter 2001 of $466 million ($1.25 per share), up 34-percent from $343 million ($0.93 per share) for the same period a year ago.
In announcing the results, Dr. Ray R. Irani, chairman and chief executive officer, said, "Strong energy prices, particularly in California's natural gas market, resulted in outstanding earnings and cash flow for the second quarter and the first half of this year. The chemical segment returned to profitability in the second quarter after experiencing losses for the previous two quarters. During the first half of the year, Occidental's earnings before special items of $976 million, or $2.63 on a per share basis, were the highest in the history of the company for any six-month period. We have used our free cash flow to reduce debt by approximately $480 million during the first six months, raising the debt reduction total to nearly $3.3 billion from our pro-forma peak debt of $9.2 billion in April 2000. Our debt to capitalization ratio at the end of June was 51-percent. Over the past week we announced the sale of our interest in the Tangguh LNG project in Indonesia and the sale of the entity that leased a pipeline in Texas to our former MidCon subsidiary. These two transactions will provide an additional $750 million in after-tax net proceeds for debt reduction, which would increase our total debt reduction so far this year to $1.23 billion. We expect to have additional and significant debt reduction during the balance of this year, and debt reduction will remain a high priority next year."
Net income was $473 million ($1.27 per share), compared with $564 million ($1.53 per share) for the same period last year. The second quarter 2001 included a $7 million gain, net of tax, related to the sale of additional interests in the Gulf of Mexico. The second quarter 2000 included an after-tax gain of $300 million related to the sale of an investment in Canadian Occidental Petroleum Ltd. and an after-tax charge of approximately $79 million for the write-down of chemical intermediates businesses. Sales increased 19-percent to $3.8 billion in the second quarter of 2001, from $3.2 billion for the same period a year ago.
Debt Reduction
During the quarter, total debt was reduced by $244 million, lowering total debt at the end of the quarter to $5.9 billion and reducing the debt to capitalization ratio to 51-percent. Interest expense (including distributions on trust preferred securities but excluding interest income received on notes receivable from Occidental Permian partners) was $113 million for the second quarter of 2001, compared with $150 million for the second quarter of 2000. The decline is primarily a result of the significant debt reduction over the last twelve months.
If the Tangguh LNG and pipeline entity sales had occurred in the second quarter, total debt on a pro-forma basis would have been reduced to $5.1 billion, with an implied debt to capitalization ratio of 48-percent.
Oil and Gas
The oil and gas segment earnings before special items were $799 million for the second quarter 2001, compared with $557 million for the second quarter 2000. The improvement in earnings is primarily the result of higher domestic natural gas prices, partially offset by lower worldwide crude oil prices and lower crude oil volumes primarily in Colombia. The California gas market price premium remained strong in the second quarter 2001, resulting in an average domestic gas price of $8.55 per thousand cubic feet.
Oil and gas segment earnings for the second quarter 2001 were $806 million and included the $7 million gain, net of tax, discussed above.
Chemicals
The chemicals segment earnings before special items were $58 million for the second quarter 2001, compared with $154 million for the second quarter 2000. The decline in earnings before special items reflects lower sales prices for PVC, EDC and chlorine, lower earnings from equity affiliates and higher energy costs, partially offset by higher prices for caustic soda. The earnings in the second quarter 2001, compared with losses in the previous two quarters, reflect lower energy and feedstock costs and the results of aggressive overhead reduction efforts.
Chemical segment earnings also were $58 million for the second quarter 2001 compared to $34 million for the second quarter 2000 that included a $120 million pre-tax charge for the write-down of chemical intermediates businesses.
Six Months Results
For the first six months of 2001, Occidental's earnings before special items were $976 million ($2.63 per share), compared with $607 million ($1.65 per share) for the same period of 2000. Net income was $957 million ($2.58 per share) for the first six months of 2001, compared with $835 million ($2.27 per share) for the same period of 2000. Sales increased by approximately 43-percent to $8.3 billion for the first six months of 2001, from $5.8 billion for the same period of 2000.
Forward-looking statements and estimates regarding exploration and production activities, oil, gas and commodity chemical prices and their related earnings effects, and cost reductions, as well as pro-forma estimates in this release are based on assumptions concerning market, competitive, regulatory, environmental, operational and other conditions. Actual results could differ materially as a result of factors discussed in Occidental's Annual Report on Form 10-K.
SUMMARY OF SEGMENT NET SALES AND EARNINGS
(Millions, except per-share amounts)
Second Quarter Six Months
Periods Ended June 30 2001 2000 2001 2000
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SEGMENT NET SALES
Oil and gas $ 2,964 $ 2,128 $ 6,576 $ 3,662
Chemical 881 1,067 1,744 2,107
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Net sales $ 3,845 $ 3,195 $ 8,320 $ 5,769
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SEGMENT EARNINGS (LOSS)
Oil and gas $ 806 $ 557 $ 1,752 $ 951
Chemical 58 34 (21) 177
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864 591 1,731 1,128
Unallocated Corporate Items
Interest expense, net (a) (71) (104) (147) (203)
Income taxes (b) (249) (349) (424) (499)
Trust preferred distributions
& other (14) (16) (30) (33)
Other (c) (57) 442 (146) 442
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Income before extraordinary items
and effect of changes in
accounting principles 473 564 984 835
Extraordinary loss, net -- -- (3) --
Cumulative effect of changes
in accounting principles, net -- -- (24) --
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Net Income 473 564 957 835
Effect of repurchase of Trust
Preferred Securities -- -- -- 1
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EARNINGS APPLICABLE TO COMMON
STOCK $ 473 $ 564 $ 957 $ 836
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BASIC EARNINGS PER COMMON SHARE
Income before extraordinary
items and effect of changes
in accounting principles $ 1.27 $ 1.53 $ 2.65 $ 2.27
Extraordinary loss, net -- -- (.01) --
Cumulative effect of changes
in accounting principles, net -- -- (.06) --
------- ------- ------- -------
$ 1.27 $ 1.53 $ 2.58 $ 2.27
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DILUTED EARNINGS PER COMMON SHARE
Income before extraordinary
items and effect of changes
in accounting principles $ 1.26 $ 1.53 $ 2.64 $ 2.27
Extraordinary loss, net -- -- (.01) --
Cumulative effect of changes
in accounting principles, net -- -- (.06) --
------- ------- ------- -------
$ 1.26 $ 1.53 $ 2.57 $ 2.27
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AVERAGE BASIC COMMON SHARES
OUTSTANDING 372.0 368.8 371.1 368.5
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See footnotes on following page.
The second quarter and six months year-to-date 2001 include $28 million and $61 million, respectively, interest income on notes receivable from Occidental Permian partners. Comparable amounts for 2000 were $30 million for both the second quarter and six months year-to-date. Includes an offset for (charges)/credits in lieu of U.S. federal income taxes allocated to the divisions. Divisional earnings have been impacted by a ($3) million charge at Oil and Gas and an $18 million credit at Chemicals in the second quarter of 2001. The second quarter of 2000 had credits allocated to the divisions of $2 million and $4 million at Oil and Gas and Chemicals, respectively. The 2001 results include a ($4) million charge at Oil and Gas related to an asset sale and a $14 million credit at Chemicals related to asset sales. Additionally, the 2000 results include the tax related to the gain on the sale of Canadian Occidental Petroleum Ltd. in April 2000. The gain is reflected in Unallocated Corporate Items - Other. Includes preferred distributions to the Occidental Permian partners. The second quarter and six months year-to-date 2001 include $28 million and $62 million, respectively. The second quarter and six months year-to-date 2000 include $30 million. These amounts are essentially offset by the interest income discussed in (a) above. Additionally, the 2000 results include the pre-tax gain of $493 million related to the sale of the investment in Canadian Occidental Petroleum Ltd.
SUMMARY OF OPERATING STATISTICS
Second Quarter Six Months
Periods Ended June 30 2001 2000 2001 2000
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NET OIL, GAS AND LIQUIDS
PRODUCTION PER DAY
United States
Crude oil and liquids (MBBL)
California 72 76 72 63
Permian 137 114 136 64
US Other -- 2 -- 4
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Total 209 192 208 131
Natural Gas (MMCF)
California 298 298 307 301
Hugoton 163 164 165 165
Permian 146 105 147 78
US Other -- 113 -- 108
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Total 607 680 619 652
Latin America
Crude oil and condensate (MBBL)
Colombia -- 44 10 40
Ecuador 14 18 13 17
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Total 14 62 23 57
Eastern Hemisphere
Crude oil and condensate (MBBL)
Oman 10 10 10 10
Pakistan 8 5 7 5
Qatar 41 61 42 51
Russia 27 26 28 26
Yemen 32 28 34 32
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Total 118 130 121 124
Natural Gas (MMCF)
Pakistan 49 51 50 51
Barrels of Oil Equivalent (MBOE) 450 506 463 429
CAPITAL EXPENDITURES (millions) $ 309 $ 211 $ 547 $ 333
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DEPRECIATION, DEPLETION AND
AMORTIZATION OF ASSETS (millions) $ 237 $ 234 $ 482 $ 419
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