Company Quick10K Filing
Quick10K
Occidental Petroleum
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$56.33 748 $42,140
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-07-10 Officers, Regulation FD, Exhibits
8-K 2019-05-10 Shareholder Vote
8-K 2019-05-10 Enter Agreement, Other Events, Exhibits
8-K 2019-05-06 Enter Agreement, Amend Bylaw, Other Events, Exhibits
8-K 2019-05-05 Earnings, Other Events, Exhibits
8-K 2019-05-03 Enter Agreement, Sale of Shares, Shareholder Rights, Other Events, Exhibits
8-K 2019-04-24 Other Events, Exhibits
8-K 2019-02-12 Earnings, Exhibits
8-K 2019-01-07 Regulation FD
8-K 2018-11-05 Earnings, Exhibits
8-K 2018-08-08 Earnings, Exhibits
8-K 2018-05-04 Officers, Shareholder Vote, Exhibits
8-K 2018-02-28 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2018-02-13 Earnings, Exhibits
MU Micron Technology 43,460
MTDR Matador Resources 2,320
LBRT Liberty Oilfield Services 1,770
MCRN Milacron Holdings 987
FORR Forrester Research 913
IGI Imagistics 229
FSBC FSB Bancorp 34
FAMI Farmmi 27
PRSS CafePress 0
VSYM View Systems 0
OXY 2019-03-31
Part I Financial Information
Item 1. Financial Statements (Unaudited)
Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3.Quantitative and Qualitative Disclosures About Market Risk
Item 4.Controls and Procedures
Part II Other Information
Item 1.Legal Proceedings
Item 1A. Risk Factors
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits
EX-10.1 oxyexhibit10133119.htm
EX-31.1 oxyexhibit31110q33119.htm
EX-31.2 oxyexhibit31210q33119.htm
EX-32.1 oxyexhibit32110q33119.htm

Occidental Petroleum Earnings 2019-03-31

OXY 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 oxyform10q33119.htm 10-Q Document
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended March 31, 2019
OR
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from ___________ to ___________
 
Commission file number 1-9210
_____________________
OCCIDENTAL PETROLEUM CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
 
95-4035997
(I.R.S. Employer
Identification No.)
5 Greenway Plaza, Suite 110
Houston, Texas 77046
(Address of principal executive offices) (Zip Code)
 
(713) 215-7000
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
þ Yes   o No
   
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
þ Yes   o No
  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. (See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act):
  
Large Accelerated Filer        þ    Accelerated Filer        o    Non-Accelerated Filer     o
Smaller Reporting Company    o    Emerging Growth Company    o
  
If an Emerging Growth Company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    o
  
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    
o Yes   þ No
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $0.20 par value
OXY
New York Stock Exchange
9 ¼% Senior Debentures due 2019
OXY 19A
New York Stock Exchange


Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
 
Class
 
Outstanding at March 31, 2019
 
 
Common stock $.20 par value
 
747,877,859
 




OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES


TABLE OF CONTENTS



 
 
 
 
PAGE
 
 
 
 
 
Part I
Financial Information
 
 
 
 
 
 
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
March 31, 2019 and December 31, 2018
 
 
 
 
 
 
 
 
 
 
 
Three months ended March 31, 2019, and 2018
 
 
 
 
 
 
 
 
 
 
 
Three months ended March 31, 2019, and 2018
 
 
 
 
 
 
 
 
 
 
 
Three months ended March 31, 2019, and 2018
 
 
 
 
 
 
 
 
 
 
 
Three months ended March 31, 2019, and 2018
7
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
 
 
 
 
 
 
 
Item 3.
 
 
 
 
 
 
Item 4.
 
 
 
 
 
Part II
Other Information
 
 
 
 
 
 
 
Item 1.
 
 
 
 
 
 
Item 1A.
 
 
 
 
 
 
Item 2.
 
 
 
 
 
 
Item 6.


1



PART I    FINANCIAL INFORMATION
 

Item 1.
Financial Statements (unaudited)

OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
MARCH 31, 2019, AND DECEMBER 31, 2018
(Amounts in millions)

 
 
2019
 
2018
 
 
 
 
 
 
 
ASSETS
 
 
 
 
 
 
 
 
 
 
 
CURRENT ASSETS
 
 
 
 
 
Cash and cash equivalents
 
$
1,752

 
$
3,033

 
Trade receivables, net
 
5,310

 
4,893

 
Inventories
 
1,484

 
1,260

 
Other current assets
 
724

 
746

 
Total current assets
 
9,270

 
9,932

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
INVESTMENTS IN UNCONSOLIDATED ENTITIES
 
1,725

 
1,680

 
 
 
 
 
 
 
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation, depletion and amortization of $43,913 at March 31, 2019, and $42,983 at December 31, 2018
 
31,900

 
31,437

 
 
 
 
 
 
 
OPERATING LEASE ASSETS
 
684

 

 
 
 
 
 
 
 
LONG-TERM RECEIVABLES AND OTHER ASSETS, NET
 
801

 
805

 
 
 
 
 
 
 
TOTAL ASSETS
 
$
44,380

 
$
43,854

 
 
 
 
 
 
 
The accompanying notes are an integral part of these consolidated condensed financial statements.
 


2



OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
MARCH 31, 2019, AND DECEMBER 31, 2018
(Amounts in millions except share amounts)

 
 
2019
 
2018
 
 
 
 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
CURRENT LIABILITIES
 
 
 
 
 
Current maturities of long-term debt
 
$
116

 
$
116

 
Current lease liabilities
 
240

 

 
Accounts payable
 
5,261

 
4,885

 
Accrued liabilities
 
1,920

 
2,411

 
Total current liabilities
 
7,537

 
7,412

 
 
 
 
 
 
 
LONG-TERM DEBT, NET
 
10,203

 
10,201

 
 
 
 
 
 
 
DEFERRED CREDITS AND OTHER LIABILITIES
 
 
 
 
 
Deferred domestic and foreign income taxes, net
 
918

 
907

 
Asset retirement obligations
 
1,430

 
1,424

 
Pension and postretirement obligations
 
816

 
809

 
Environmental remediation reserves
 
755

 
762

 
Lease liabilities
 
465

 

 
Other
 
1,020

 
1,009

 
 
 
5,404

 
4,911

 
STOCKHOLDERS' EQUITY
 
 
 
 
 
Common stock, at par value (896,293,910 shares at March 31, 2019, and 895,115,637 shares at December 31, 2018)
 
179

 
179

 
Treasury stock (148,416,051 shares at March 31, 2019, and 145,726,051 shares at December 31, 2018)
 
(10,653
)
 
(10,473
)
 
Additional paid-in capital
 
8,083

 
8,046

 
Retained earnings
 
23,795

 
23,750

 
Accumulated other comprehensive loss
 
(168
)
 
(172
)
 
Total stockholders’ equity
 
21,236

 
21,330

 
 
 
 
 
 
 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
 
$
44,380

 
$
43,854

 
 
 
 
 
 
 
The accompanying notes are an integral part of these consolidated condensed financial statements.
 

3



OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2019, AND 2018
(Amounts in millions, except per-share amounts)

 
 
2019
 
2018
 
 
 
 
 
REVENUES AND OTHER INCOME
 
 
 
 
Net sales
 
$
4,004

 
$
3,763

Interest, dividends and other income
 
78

 
29

Gain on sale of assets, net
 
7

 
33

 
 
4,089

 
3,825

COSTS AND OTHER DEDUCTIONS
 
 
 
 
Cost of sales
 
1,345

 
1,350

Purchased commodities
 
365

 
13

Selling, general and administrative expenses
 
140

 
130

Other operating and non-operating expenses
 
238

 
177

Taxes other than on income
 
111

 
108

Depreciation, depletion and amortization
 
973

 
921

Asset impairments and related items
 

 
30

Exploration expense
 
36

 
15

Interest and debt expense, net
 
98

 
97

 
 
3,306

 
2,841

 
 
 
 
 
Income before income taxes and other items
 
783

 
984

Provision for domestic and foreign income taxes
 
(225
)
 
(339
)
Income from equity investments
 
73

 
63

NET INCOME
 
631

 
708

 
 
 
 
 
BASIC EARNINGS PER COMMON SHARE
 
$
0.84

 
$
0.92

 
 
 
 
 
DILUTED EARNINGS PER COMMON SHARE
 
$
0.84

 
$
0.92

 
 
 
 
 
The accompanying notes are an integral part of these consolidated condensed financial statements.


4



OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2019, AND 2018
(Amounts in millions)

 
 
2019
 
2018
 
 
 
 
 
Net income
 
$
631

 
$
708

Other comprehensive income (loss) items:
 
 
 
 
Foreign currency translation gains
 

 
1

Unrealized gains (losses) on derivatives (a)
 
2

 
(3
)
Pension and postretirement gains (b)
 
2

 
4

Reclassification of realized losses on derivatives (c)
 

 
2

Other comprehensive income, net of tax
 
4

 
4

Comprehensive income
 
$
635

 
$
712


(a)
Net of tax of zero and $1 for the three months ended March 31, 2019, and 2018, respectively.
(b)
Net of tax of $(1) and $(1) for the three months ended March 31, 2019, and 2018, respectively.
(c)
Net of tax of zero and $(1) for the three months ended March 31, 2019, and 2018, respectively.

The accompanying notes are an integral part of these consolidated condensed financial statements.

5



OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2019, AND 2018
(Amounts in millions)

 
 
2019
 
2018
 
 
 
 
 
 
 
CASH FLOW FROM OPERATING ACTIVITIES
 
 
 
 
 
Net income
 
$
631

 
$
708

 
Adjustments to reconcile net income to net cash provided by
operating activities:
 
 
 
 
 
Depreciation, depletion and amortization of assets
 
973

 
921

 
Deferred income tax provision
 
10

 
94

 
Other noncash charges (benefits) to income
 
225

 
(23
)
 
Asset impairments and related items
 

 
30

 
Gain on sale of assets, net
 
(7
)
 
(33
)
 
Changes in operating assets and liabilities, net
 
(884
)
 
(688
)
 
Net cash provided by operating activities
 
948

 
1,009

 
 
 
 
 
 
 
CASH FLOW FROM INVESTING ACTIVITIES
 
 
 
 
 
Capital expenditures
 
(1,259
)
 
(1,032
)
 
Change in capital accrual
 
(51
)
 
(45
)
 
Payments for purchases of assets and businesses
 
(69
)
 
(177
)
 
Sales of assets, net
 
16

 
275

 
Equity investments and other, net
 
(52
)
 
8

 
Net cash used by investing activities
 
(1,415
)
 
(971
)
 
 
 
 
 
 
 
CASH FLOW FROM FINANCING ACTIVITIES
 
 
 
 
 
Proceeds from long-term debt, net
 

 
978

 
Payments of long-term debt
 

 
(500
)
 
Proceeds from issuance of common stock
 
16

 
10

 
Purchase of treasury stock
 
(237
)
 

 
Cash dividends paid
 
(591
)
 
(592
)
 
Other financing, net
 
(2
)
 

 
Net cash used by financing activities
 
(814
)
 
(104
)
 
 
 
 
 
 
 
Decrease in cash and cash equivalents
 
(1,281
)
 
(66
)
 
Cash and cash equivalents — beginning of period
 
3,033

 
1,672

 
Cash and cash equivalents — end of period
 
$
1,752

 
$
1,606

 
The accompanying notes are an integral part of these consolidated condensed financial statements.
 



6



OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2019, AND 2018
(Amounts in millions)

 
 
Common Stock
 
Treasury Stock
 
Additional Paid-in Capital
 
Retained Earnings
 
Accumulated Other Comprehensive loss
 
Total Equity
Balance, December 31, 2017
 
$
179

 
$
(9,168
)
 
$
7,884

 
$
21,935

 
$
(258
)
 
$
20,572

Net income
 

 

 

 
708

 

 
708

Other comprehensive income, net of tax
 

 

 

 

 
4

 
4

Dividends on common stock, $0.77 per share
 

 

 

 
(594
)
 

 
(594
)
Issuance of common stock, net
 

 

 
32

 

 

 
32

Reclassification of stranded tax effects
 

 

 

 
58

 
(58
)
 

Balance, March 31, 2018
 
$
179

 
$
(9,168
)
 
$
7,916

 
$
22,107

 
$
(312
)
 
$
20,722

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common Stock
 
Treasury Stock
 
Additional Paid-in Capital
 
Retained Earnings
 
Accumulated Other Comprehensive loss
 
Total Equity
Balance, December 31, 2018
 
$
179

 
$
(10,473
)
 
$
8,046

 
$
23,750

 
$
(172
)
 
$
21,330

Net income
 

 

 

 
631

 

 
631

Other comprehensive income, net of tax
 

 

 

 

 
4

 
4

Dividends on common stock, $0.78 per share
 

 

 

 
(586
)
 

 
(586
)
Issuance of common stock, net
 

 

 
37

 

 

 
37

Purchases of treasury stock
 

 
(180
)
 

 

 

 
(180
)
Balance, March 31, 2019
 
$
179

 
$
(10,653
)
 
$
8,083

 
$
23,795

 
$
(168
)
 
$
21,236

 
 
 
 
 
 
 
 
 
 
 
 
 
The accompanying notes are an integral part of these consolidated condensed financial statements.



7



OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2019

1. General

In these unaudited, consolidated, condensed financial statements, "Occidental" means Occidental Petroleum Corporation, a Delaware corporation (OPC), or OPC and one or more entities in which it owns a controlling interest (subsidiaries). Occidental has made its disclosures in accordance with United States generally accepted accounting principles (GAAP) as they apply to interim reporting, and condensed or omitted, as permitted by the Securities and Exchange Commission’s rules and regulations, certain information and disclosures normally included in consolidated financial statements and the notes. These unaudited consolidated condensed financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto in Occidental’s Annual Report on Form 10-K for the year ended December 31, 2018.

In the opinion of Occidental’s management, the accompanying unaudited consolidated condensed financial statements contain all adjustments (consisting of normal recurring adjustments) necessary to fairly present Occidental’s consolidated financial position as of March 31, 2019 and December 31, 2018, and the consolidated statements of operations, comprehensive income, cash flows and stockholders' equity for the three months ended March 31, 2019, and 2018. Certain data in the financial statements and notes for prior periods have been reclassified to conform to the current presentation. The income and cash flows for the periods ended March 31, 2019, and 2018, are not necessarily indicative of the income or cash flows to be expected for the full year.

2. Accounting and Disclosure Changes

In January 2019, Occidental adopted the new lease standard Topic 842 - Leases (ASC 842). The new standard requires Occidental to recognize most leases, including operating leases, on the balance sheet. The new rules require lessees to recognize a right-of-use asset (ROU) and lease liability for all leases with lease terms of more than 12 months. Occidental adopted the standard using the modified retrospective approach, including adopting several optional practical expedients. Occidental has developed and implemented an internal software solution to support the identification, documentation, tracking, accounting and supplemental reporting of leases under ASC 842. Continued enhancements to the software solution through 2019 are expected to ensure manual processes are streamlined while maintaining control functionality surrounding completeness in population and reporting. See Note 13, Leases.

3. Revenue Recognition

Revenue from customers is recognized when obligations under the terms of a contract with our customers are satisfied; this generally occurs with the delivery of oil, gas, natural gas liquids (NGL), chemicals or services such as transportation. Occidental does not typically receive payment in advance of satisfying its obligations under the terms of its sales contracts with customers; therefore, liabilities related to such payment are immaterial to Occidental. As of March 31, 2019, trade receivables, net, of $5.3 billion represent rights to payment for which Occidental has satisfied its obligations under a contract and its right to payment is conditioned only on the passage of time.

The following table shows a reconciliation of revenue from customers to total net sales (in millions):
For the three months ended March 31,
 
2019
 
2018
 
 
 
 
 
Revenue from customers
 
$
3,435

 
$
3,694

All other revenues (a)
 
569

 
69

Total net sales
 
$
4,004

 
$
3,763

(a) Includes net marketing margin and chemical exchange contracts.


8



The following table presents Occidental's revenue from customers by segment, product and geographical area. The oil and gas segment typically sells its oil, gas and NGL at the lease or concession area. Chemical revenues are shown by geographic area based on the location of the sale. Excluding net marketing revenue, Midstream revenues are shown by the location of sale (in millions):

For the three months ended March 31, 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue by Product
 
United States
 
Middle East
 
Latin America
 
Other International
 
Eliminations
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
Oil and Gas Segment
 
 
 
 
 
 
 
 
 
 
 
 
Oil
 
$
1,205

 
$
758

 
$
135

 
$

 
$

 
$
2,098

NGL
 
78

 
65

 

 

 

 
143

Gas
 
47

 
79

 
4

 

 

 
130

Other
 
(21
)
 
1

 

 

 

 
(20
)
Segment Total
 
$
1,309

 
$
903

 
$
139

 
$

 
$

 
$
2,351

 
 
 
 
 
 
 
 
 
 
 
 
 
Chemical Segment
 
$
993

 
$

 
$
43

 
$
19

 
$

 
$
1,055

 
 
 
 
 
 
 
 
 
 
 
 
 
Midstream Segment
 
 
 
 
 
 
 
 
 
 
 
 
Gas Processing
 
105

 
102

 

 

 

 
207

Power and Other
 
44

 

 

 

 

 
44

Segment Total
 
$
149

 
$
102

 
$

 
$

 
$

 
$
251

 
 
 
 
 
 
 
 
 
 
 
 
 
Eliminations
 
$

 
$

 
$

 
$

 
$
(222
)
 
$
(222
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated
 
$
2,451

 
$
1,005

 
$
182

 
$
19

 
$
(222
)
 
$
3,435

For the three months ended March 31, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue by Product
 
United States
 
Middle East
 
Latin America
 
Other International
 
Eliminations
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
Oil and Gas Segment
 
 
 
 
 
 
 
 
 
 
 
 
Oil
 
$
1,247

 
$
773

 
$
170

 
$

 
$

 
$
2,190

NGL
 
89

 
51

 

 

 

 
140

Gas
 
52

 
65

 
4

 

 

 
121

Other
 
3

 

 

 

 

 
3

Segment Total
 
$
1,391

 
$
889

 
$
174

 
$

 
$

 
$
2,454

 
 
 
 
 
 
 
 
 
 
 
 
 
Chemical Segment
 
$
1,049

 
$

 
$
52

 
$
21

 
$

 
$
1,122

 
 
 
 
 
 
 
 
 
 
 
 
 
Midstream Segment
 
 
 
 
 
 
 
 
 
 
 
 
Gas Processing
 
137

 
96

 

 

 

 
233

Pipelines
 
94

 

 

 

 

 
94

Power and Other
 
25

 

 

 

 

 
25

Segment Total
 
$
256

 
$
96

 
$

 
$

 
$

 
$
352

 
 
 
 
 
 
 
 
 
 
 
 
 
Eliminations
 
$

 
$

 
$

 
$

 
$
(234
)
 
$
(234
)
 
 
 
 
 
 
 
 
 
 

 
 
Consolidated
 
$
2,696

 
$
985

 
$
226

 
$
21

 
$
(234
)
 
$
3,694


4. Supplemental Cash Flow Information

Occidental paid foreign and domestic state income taxes of $222 million and $227 million during the three months ended March 31, 2019, and 2018, respectively. No federal income tax payments were made during the three months ended March 31, 2019, and 2018. Interest paid totaled $114 million and $97 million during the three months ended March 31, 2019, and 2018, respectively. Occidental acquired property and equipment of $94 million under build-to-suit leases during the three months ended March 31, 2019.


9



5. Inventories

Finished goods primarily represents crude oil, which is carried at lower of weighted average cost or market value, and caustic soda and chlorine, which are valued under the last-in, first-out (LIFO) method. Inventories as of March 31, 2019, and December 31, 2018, consisted of the following (in millions):
 
 
2019
 
2018
 
 
 
 
 
 
 
Raw materials
 
$
71

 
$
74

 
Materials and supplies
 
470

 
445

 
Finished goods
 
990

 
788

 
 
 
1,531

 
1,307

 
Revaluation to LIFO
 
(47
)
 
(47
)
 
Total
 
$
1,484

 
$
1,260

 

6. Environmental Liabilities and Expenditures

Occidental’s operations are subject to stringent federal, state, local and international laws and regulations related to improving or maintaining environmental quality. The laws that require or address environmental remediation, including the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) and similar federal, state, local and international laws, may apply retroactively and regardless of fault, the legality of the original activities or the current ownership or control of sites. OPC or certain of its subsidiaries participate in or actively monitor a range of remedial activities and government or private proceedings under these laws with respect to alleged past practices at operating, closed and third-party sites. Remedial activities may include one or more of the following: investigation involving sampling, modeling, risk assessment or monitoring; cleanup measures including removal, treatment or disposal; or operation and maintenance of remedial systems. The environmental proceedings seek funding or performance of remediation and, in some cases, compensation for alleged property damage, punitive damages, civil penalties, injunctive relief and government oversight costs.

As of March 31, 2019, Occidental participated in or monitored remedial activities or proceedings at 146 sites. The following table presents Occidental’s current and non-current environmental remediation reserves as of March 31, 2019, the current portion of which is included in accrued liabilities ($120 million) and the remainder in deferred credits and other liabilities - environmental remediation reserves ($755 million). The reserves are grouped as environmental remediation sites listed or proposed for listing by the United States Environmental Protection Agency (EPA) on the CERCLA National Priorities List (NPL) sites and three categories of non-NPL sites — third-party sites, Occidental-operated sites and closed or non-operated Occidental sites.
 
 
Number of Sites
 
Reserve Balance
(in millions)
 
 
 
 
 
 
 
NPL sites
 
35

 
$
458

 
Third-party sites
 
68

 
170

 
Occidental-operated sites
 
14

 
114

 
Closed or non-operated Occidental sites
 
29

 
133

 
Total
 
146

 
$
875

 

As of March 31, 2019, Occidental’s environmental reserves exceeded $10 million each at 16 of the 146 sites described above, and 91 of the sites had reserves from $0 to $1 million each. Based on current estimates, Occidental expects to expend funds corresponding to approximately 40 percent of the environmental reserves at the sites described above over the next three to four years and the balance at these sites over the subsequent 10 or more years. Occidental believes its range of reasonably possible additional losses beyond those liabilities recorded for environmental remediation at these sites could be up to $1.1 billion. The status of Occidental's involvement with the sites and related significant assumptions, including those sites indemnified by Maxus Energy Corporation (Maxus), has not changed materially since December 31, 2018.


10



Maxus Environmental Sites

When Occidental acquired Diamond Shamrock Chemicals Company (DSCC) in 1986, Maxus, a subsidiary of YPF S.A. (YPF), agreed to indemnify Occidental for a number of environmental sites, including the Diamond Alkali Superfund Site (Site) along a portion of the Passaic River. On September 17, 2016, Maxus and several affiliated companies filed for Chapter 11 bankruptcy in Federal District Court in the State of Delaware. Prior to filing for bankruptcy, Maxus defended and indemnified Occidental in connection with clean-up and other costs associated with the sites subject to the indemnity, including the Site.

In March 2016, the EPA issued a Record of Decision (ROD) specifying remedial actions required for the lower 8.3 miles of the Lower Passaic River. The ROD does not address any potential remedial action for the upper nine miles of the Lower Passaic River or Newark Bay. During the third quarter of 2016, and following Maxus’s bankruptcy filing, Occidental and the EPA entered into an Administrative Order on Consent (AOC) to complete the design of the proposed clean-up plan outlined in the ROD at an estimated cost of $165 million. The EPA announced that it will pursue similar agreements with other potentially responsible parties.

Occidental has accrued a reserve relating to its estimated allocable share of the costs to perform the design and the remediation called for in the AOC and the ROD, as well as for certain other Maxus-indemnified sites. Occidental's accrued estimated environmental reserve does not consider any recoveries for indemnified costs. Occidental’s ultimate share of this liability may be higher or lower than the reserved amount, and is subject to final design plans and the resolution of Occidental's allocable share with other potentially responsible parties. Occidental continues to evaluate the costs to be incurred to comply with the AOC, the ROD and to perform remediation at other Maxus-indemnified sites in light of the Maxus bankruptcy and the share of ultimate liability of other potentially responsible parties. In June 2018, Occidental filed a complaint under CERCLA in Federal District Court in the State of New Jersey against numerous potentially responsible parties for reimbursement of amounts incurred or to be incurred to comply with the AOC, the ROD or to perform other remediation activities at the Site.

In June 2017, the court overseeing the Maxus bankruptcy approved a Plan of Liquidation (Plan) to liquidate Maxus and create a trust to pursue claims against YPF, Repsol and others to satisfy claims by Occidental and other creditors for past and future cleanup and other costs. In July 2017, the court-approved Plan became final and the trust became effective. Among other responsibilities, the trust will pursue claims against YPF, Repsol and others and distribute assets to Maxus' creditors in accordance with the trust agreement and Plan. In June 2018, the trust filed its complaint against YPF and Repsol in Delaware bankruptcy court asserting claims based upon, among other things, fraudulent transfer and alter ego. On February 15, 2019, the bankruptcy court denied Repsol's and YPF's motions to dismiss the complaint.

7. Lawsuits, Claims, Commitments and Contingencies

Legal Matters

Occidental or certain of its subsidiaries are involved, in the normal course of business, in lawsuits, claims and other legal proceedings that seek, among other things, compensation for alleged personal injury, breach of contract, property damage or other losses, punitive damages, civil penalties, or injunctive or declaratory relief. Occidental or certain of its subsidiaries also are involved in proceedings under CERCLA and similar federal, state, local and foreign environmental laws. These environmental proceedings seek funding or performance of remediation and, in some cases, compensation for alleged property damage, punitive damages, civil penalties and injunctive relief. Usually Occidental or such subsidiaries are among many companies in these environmental proceedings and have to date been successful in sharing response costs with other financially sound companies. Further, some lawsuits, claims and legal proceedings involve acquired or disposed assets with respect to which a third party or Occidental retains liability or indemnifies the other party for conditions that existed prior to the transaction.

In accordance with applicable accounting guidance, Occidental accrues reserves for outstanding lawsuits, claims and proceedings when it is probable that a liability has been incurred and the liability can be reasonably estimated. In Note 6, Environmental Liabilities and Expenditures, Occidental has disclosed its reserve balances for environmental remediation matters that satisfy this criteria. Reserve balances for matters, other than environmental remediation, that satisfy this criteria as of March 31, 2019, and December 31, 2018, were not material to Occidental’s consolidated balance sheets.

11




In 2016, Occidental received payments from the Republic of Ecuador of approximately $1.0 billion pursuant to a November 2015 arbitration award for Ecuador’s 2006 expropriation of Occidental's Participation Contract for Block 15. The awarded amount represented a recovery of 60 percent of the value of Block 15. In 2017, Andes Petroleum Ecuador Ltd. (Andes) filed a demand for arbitration, claiming it is entitled to a 40 percent share of the judgment amount obtained by Occidental. Occidental contends that Andes is not entitled to any of the amounts paid under the 2015 arbitration award because Occidental’s recovery was limited to Occidental’s own 60 percent economic interest in the block. The merits hearing is scheduled for May 2020. Occidental intends to vigorously defend against this claim in arbitration.

The ultimate outcome and impact of outstanding lawsuits, claims and proceedings on Occidental cannot be predicted. Management believes that the resolution of these matters will not, individually or in the aggregate, have a material adverse effect on Occidental's consolidated balance sheet. If unfavorable outcomes of these matters were to occur, future results of operations or cash flows for any particular quarterly or annual period could be materially adversely affected. Occidental’s estimates are based on information known about the legal matters and its experience in contesting, litigating and settling similar matters. Occidental reassesses the probability and estimability of contingent losses as new information becomes available.

Tax Matters

During the course of its operations, Occidental is subject to audit by tax authorities for varying periods in various federal, state, local and foreign tax jurisdictions. Taxable years through 2016 for United States federal income tax purposes have been audited by the United States Internal Revenue Service (IRS) pursuant to its Compliance Assurance Program and subsequent taxable years are currently under review. Taxable years through 2009 have been audited for state income tax purposes. While a single foreign tax jurisdiction is open for 2002 and subsequent years, all other significant audit matters in foreign jurisdictions have been resolved through 2010. During the course of tax audits, disputes have arisen and other disputes may arise as to facts and matters of law. Occidental believes that the resolution of outstanding tax matters would not have a material adverse effect on its consolidated financial position or results of operations.

Indemnities to Third Parties

Occidental, its subsidiaries, or both, have indemnified various parties against specified liabilities those parties might incur in the future in connection with purchases and other transactions that they have entered into with Occidental. These indemnities usually are contingent upon the other party incurring liabilities that reach specified thresholds. As of March 31, 2019, Occidental is not aware of circumstances that it believes would reasonably be expected to lead to indemnity claims that would result in payments materially in excess of reserves.

8. Retirement and Postretirement Benefit Plans

The following table sets forth the components of the net periodic benefit costs for Occidental’s defined benefit plans for the three months ended March 31, 2019, and 2018 (in millions):
Three months ended March 31
 
2019
 
2018
Net Periodic Benefit Costs
 
Pension Benefit
 
Postretirement Benefit
 
Pension Benefit
 
Postretirement Benefit
 
 
 
 
 
 
 
 
 
Service cost
 
$
1

 
$
6

 
$
2

 
$
6

Interest cost
 
4

 
8

 
4

 
9

Expected return on plan assets
 
(5
)
 

 
(6
)
 

Recognized actuarial loss
 
2

 
2

 
1

 
4

Recognized prior service cost
 

 
(2
)
 

 

Total
 
$
2

 
$
14

 
$
1

 
$
19


Occidental contributed approximately $1 million to the defined benefit pension plans in the three months ended March 31, 2019, and 2018.


12



9. Fair Value Measurements

Occidental has categorized its assets and liabilities that are measured at fair value in a three-level fair value hierarchy, based on the inputs to the valuation techniques: Level 1 — using quoted prices in active markets for the assets or liabilities; Level 2 — using observable inputs other than quoted prices for the assets or liabilities; and Level 3 — using unobservable inputs. Transfers between levels, if any, are recognized at the end of each reporting period.

The following tables provide fair value measurement information for such assets and liabilities that are measured on a recurring basis as of March 31, 2019, and December 31, 2018 (in millions):
Fair Value Measurements at March 31, 2019:
 
 
 
 
 
 
Embedded derivatives
 
Level 1
 
Level 2
 
Level 3
 
Netting and
Collateral
 
Total Fair
Value
 
 
 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
 
 
Accrued liabilities
 
$

 
$
38

 
$

 
$

 
$
38

Deferred credits and other liabilities - other
 
$

 
$
74

 
$

 
$

 
$
74

 
 
 
 
 
 
 
Fair Value Measurements at December 31, 2018:
 
 
 
 
 
 
Embedded derivatives
 
Level 1
 
Level 2
 
Level 3
 
Netting and
Collateral
 
Total Fair
Value
 
 
 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
 
 
Accrued liabilities
 
$

 
$
66

 
$

 
$

 
$
66

Deferred credits and other liabilities - other
 
$

 
$
116

 
$

 
$

 
$
116


Fair Values — Nonrecurring

During the three months ended March 31, 2019, Occidental did not have any assets or liabilities measured at fair value on a nonrecurring basis. During 2018, Occidental recognized pre-tax impairment and related charges of $416 million primarily related to Qatar Idd El Shargi North Dome (ISND) and Idd El Shargi South Dome proved properties and inventory. The fair value of the proved properties was measured based on the income approach, which incorporated a number of assumptions involving expectations of future cash flows. These assumptions included estimates of future product prices, which Occidental based on forward price curves, estimates of oil and gas reserves, estimates of future expected operating and capital costs and a risk-adjusted discount rate of 10 percent. These inputs are categorized as Level 3 in the fair value hierarchy. As the end of the contract period for ISND approaches, significant changes to estimated future cash flows could result in additional impairment charges.
 
Other Financial Instruments

The carrying amounts of cash and cash equivalents and other on-balance-sheet financial instruments, other than long-term, fixed-rate debt, approximate fair value. The cost, if any, to terminate Occidental's off-balance-sheet financial instruments is not significant. Occidental estimates the fair value of fixed-rate debt based on the quoted market prices for those instruments or on quoted market yields for similarly rated debt instruments, taking into account such instruments’ maturities. The estimated fair value of Occidental’s debt as of March 31, 2019, and December 31, 2018, was $10.8 billion and $10.3 billion, respectively. The remaining principal payments, less the discount on long-term debt, aggregated approximately $10.4 billion as of March 31, 2019, and December 31, 2018.

10. Derivatives

Occidental uses a variety of derivative financial instruments and physical contracts, including those designated as cash flow hedges, to manage its exposure to commodity price fluctuations, transportation commitments and to fix margins on the future sale of stored volumes of oil and natural gas. Where Occidental buys product for its own consumption or sells its production to a defined customer, Occidental may elect normal purchases and normal sales

13



exclusions. Occidental usually applies cash flow hedge accounting treatment to derivative financial instruments to lock in margins on the forecasted sales of its natural gas storage volumes, and at times for other strategies to lock in margins. Occidental also enters into derivative financial instruments for speculative or trading purposes; however, the results of any transactions are immaterial to the marketing portfolio.

The financial instruments not designated as hedges will impact Occidental's earnings through mark-to-market until the offsetting future physical commodity is delivered. Physical inventory is carried at lower of cost or market on the balance sheet. A substantial majority of Occidental's physical derivative contracts are index-based and carry no mark-to-market value in earnings. Net gains and losses associated with derivative instruments not designated as hedging instruments are recognized currently in net sales. Net gains and losses attributable to derivative instruments subject to hedge accounting reside in accumulated other comprehensive loss and are reclassified to earnings as the transactions to which the derivatives relate are recognized in earnings.

Credit Risk

The majority of Occidental's counterparty credit risk is related to the physical delivery of energy commodities to its customers and their inability to meet their settlement commitments. Occidental manages credit risk by selecting counterparties that it believes to be financially strong, by entering into netting arrangements with counterparties and by requiring collateral or other credit risk mitigants, as appropriate. Occidental actively evaluates the creditworthiness of its counterparties, assigns appropriate credit limits and monitors credit exposures against those assigned limits. Occidental also enters into future contracts through regulated exchanges with select clearinghouses and brokers, which are subject to minimal credit risk as a significant portion of these transactions settle on a daily margin basis.

Certain of Occidental's over-the-counter derivative instruments contain credit-risk-contingent features, primarily tied to credit ratings for Occidental or its counterparties, which may affect the amount of collateral that each would need to post. Occidental believes that if it had received a one-notch reduction in its credit ratings, it would not have resulted in a material change in its collateral-posting requirements as of March 31, 2019, and December 31, 2018.

Cash Flow Hedges

Occidental’s marketing operations store natural gas purchased from third parties at Occidental’s leased storage facilities. Derivative instruments are used to fix margins on the future sales of the stored volumes. As of March 31, 2019, Occidental had approximately 1 billion cubic feet (Bcf) of natural gas held in storage with no cash flow hedges currently associated with the stored volumes. As of December 31, 2018, Occidental had approximately 5 Bcf of natural gas held in storage, and had cash flow hedges for the forecast sales, to be settled by physical delivery, of approximately 4 Bcf of stored natural gas. The amount of cash flow hedges, including the ineffective portion, was immaterial for the three months ended March 31, 2019, and the year ended December 31, 2018.

Derivatives Not Designated as Hedging Instruments

Forward unrealized instruments that are derivatives not designated as hedging instruments are required to be recorded on the income statement and balance sheet at fair value. The fair value represents an unrealized gain or loss between executed sales prices and market prices at the end of the period. The fair value does not reflect the realized or cash value of the instrument. Substantially all of the fair value of Occidental's derivative instruments not designated as hedges are used to manage its exposure to commodity price fluctuations and settle within three months at a weighted average contract price of $60.04 per barrel and $2.36 per thousand cubic feet (Mcf) for crude oil and natural gas, respectively, at March 31, 2019. The remaining fair value of derivative instruments not designated as hedges was immaterial. The weighted average contract price was $58.81 per barrel and $3.18 per Mcf for crude oil and natural gas, respectively, at December 31, 2018.

14



The following table summarizes the amounts reported in net sales related to the outstanding commodity derivatives not designated as hedging instruments as of March 31, 2019, and December 31, 2018.
(in millions, except Long/(Short) volumes)
 
2019
 
2018
 
 
 
 
 
Unrealized gain (loss) on derivatives not designated as hedges
 
 
 
 
Crude Oil Commodity Contracts
 
$
(63
)
 
$
184

Natural Gas Commodity Contracts
 
$
3

 
$
5

Outstanding net volumes on derivatives not designated as hedges
 
 
 
 
Crude Oil Commodity Contracts
 
 
 
 
Volume (MMBL)
 
56

 
61

Natural Gas Commodity Contracts
 
 
 
 
Volume (Bcf)
 
(162
)
 
(142
)

Fair Value of Derivatives

The following tables present the gross and net fair values of Occidental’s outstanding derivatives:
As of March 31, 2019
 
Fair Value Measurements Using
 
Netting (b)
 
Total Fair Value
(in millions)
 
Balance Sheet Location
 
Level 1
 
Level 2
 
Level 3
 
 
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
Derivatives not designated as hedges (a)
 
 
 
 
 
 
 
 
 
 
Commodity Contracts
Other current assets
 
1,077

 
48

 

 
(1,099
)
 
26

Long-term receivables and other assets, net
 
19

 
8

 

 
(19
)
 
8

Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
Derivatives not designated as hedges (a)
 
 
 
 
 
 
 
 
 
 
Commodity Contracts
Accrued liabilities
 
1,136

 
54

 

 
(1,099
)
 
91

Deferred credits and other liabilities - other
 
20

 
2

 

 
(19
)
 
3

(a)
Fair values are presented at gross amounts, including when the derivatives are subject to master netting arrangements, and presented on a net basis in the consolidated condensed balance sheets.
(b)
These amounts do not include collateral. As of March 31, 2019, no collateral received has been netted against derivative assets and collateral paid of $66 million has been netted against derivative liabilities. Occidental had $94 million of initial margin deposited with brokers as of March 31, 2019. Initial margin is included in other current assets in the consolidated condensed balance sheets and has not been reflected in these derivative fair-value tables.

As of December 31, 2018
 
Fair Value Measurements Using
 
Netting (b)
 
Total Fair Value
 (in millions)
 
Balance Sheet Location
 
Level 1
 
Level 2
 
Level 3
 
 
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
Derivatives not designated as hedges (a)
 
 
 
 
 
 
 
 
 
 
Commodity Contracts
 
Other current assets
 
2,531

 
110

 

 
(2,392
)
 
249

 
Long-term receivables and other assets, net
 
5

 
9

 

 
(6
)
 
8

Liabilities:
 
 
 
 
 
 
 
 
 
 
Cash-flow hedges(a)
 
 
 
 
 
 
 
 
 
 
Commodity contracts
 
Accrued liabilities
 

 
2

 

 

 
2

 
 
 
 
 
 
 
 
 
 
Derivatives not designated as hedges (a)
 
 
 
 
 
 
 
 
 
 
Commodity contracts
 
Accrued liabilities
 
2,357

 
101

 

 
(2,392
)
 
66

 
Deferred credits and other liabilities - other
 
6

 
2

 

 
(6
)
 
2

 
(a)
Fair values are presented at gross amounts, including when the derivatives are subject to master netting arrangements and presented on a net basis in the consolidated condensed balance sheets.
(b)
These amounts do not include collateral. As of December 31, 2018, $45 million collateral received has been netted against derivative assets and collateral paid of $1 million has been netted against derivative liabilities. Occidental had $178 million of initial margin deposited with brokers as of December 31, 2018. Initial margin is included in other current assets in the consolidated condensed balance sheets and has not been reflected in these derivative fair-value tables.

15



11. Industry Segments

Occidental conducts its operations through three segments: (1) oil and gas; (2) chemical; and (3) midstream and marketing. The oil and gas segment explores for, develops and produces oil and condensate, NGL and natural gas. The chemical segment mainly manufactures and markets basic chemicals and vinyls. The midstream and marketing segment purchases, markets, gathers, processes, transports and stores oil, condensate, NGL, natural gas, carbon dioxide (CO2) and power. It also trades around its assets, including transportation and storage capacity. Additionally, the midstream and marketing segment invests in entities that conduct similar activities.

Results of industry segments generally exclude income taxes, interest income, interest expense, environmental remediation expenses, unallocated corporate expenses and discontinued operations, but include gains and losses from dispositions of segment assets and income from the segments' equity investments. Intersegment sales eliminate upon consolidation and are generally made at prices approximating those that the selling entity would be able to obtain in third-party transactions. The following tables present Occidental’s industry segments (in millions):
 
 
Oil
 
 
 
Midstream
 
Corporate
 
 
 
 
and
 
 
 
and
 
and
 
 
 
 
Gas
 
Chemical
 
Marketing
 
Eliminations
 
Total
Three months ended March 31, 2019
 
 
 
 
 
 
 
 
 
 
Net sales
 
$
2,351

 
$
1,059

 
$
816

 
$
(222
)
 
$
4,004

Pre-tax operating profit (loss)
 
$
484

 
$
265

 
$
279

 
$
(172
)
(a) 
$
856

Income taxes
 

 

 

 
(225
)
(b) 
(225
)
Net income (loss)
 
$
484

 
$
265

 
$
279

 
$
(397
)
 
$
631

 
 
 
 
 
 
 
 
 
 
 
Three months ended March 31, 2018
 
 
 
 
 
 
 
 
 
 
Net sales
 
$
2,454

 
$
1,154

 
$
389

 
$
(234
)
 
$
3,763

Pre-tax operating profit (loss)
 
$
750

 
$
298

 
$
179

 
$
(180
)
(a) 
$
1,047

Income taxes
 

 

 

 
(339
)
(b) 
(339
)
Net income (loss)
 
$
750

 
$
298

 
$
179

 
$
(519
)
 
$
708

 
(a) Includes unallocated net interest expense, administration expense, environmental remediation and other items.
(b) Includes all foreign and domestic income taxes.

12. Earnings Per Share

The following table presents the calculation of basic and diluted EPS for the three months ended March 31, 2019, and 2018 (in millions, except per-share amounts):
 
 
2019
 
2018
Basic EPS
 
 
 
 
Net Income
 
$
631

 
$
708

Less: Net income allocated to participating securities
 
(3
)
 
(3
)
Net Income, net of participating securities
 
628

 
705

 
 
 
 
 
Weighted average number of basic shares
 
748.9

 
765.6

Basic EPS
 
$
0.84

 
$
0.92

Diluted EPS
 
 
 
 
Net income, net of participating securities
 
$
628

 
$
705

Weighted average number of basic shares
 
748.9

 
765.6

Dilutive effect of potentially dilutive securities
 
1.6

 
1.4

Total diluted weighted average common shares
 
750.5

 
767.0

Diluted EPS
 
$
0.84

 
$
0.92



16



13. Leases

On January 1, 2019, Occidental adopted ASC 842 using the modified retrospective approach, which provided a method for recording existing leases at adoption and did not require restatement of prior year amounts and disclosures which continue to be reflected in accordance with ASC 840. Occidental elected certain practical expedients including:

Leases that commenced before the effective date carried forward their historical lease classification.
Existing or expired land easements as of December 31, 2018 were not reassessed to determine whether or not they contained a lease.
Leases with a lease term of twelve months or less from lease commencement date are considered short-term leases and not recorded on the balance sheet; however, the lease expenditures recognized are captured and reported as incurred.
For asset classes, except long-term drilling rigs, Occidental elected to account for the lease and non-lease components as a single lease component as the non-lease portions were not significant to separate in determining the lease liability. For drilling rigs considered long-term in nature, Occidental bifurcated the lease and non-lease components using relative fair value as a stand-alone selling price between the asset rental and the services obtained.

ASC 842 requires lessees to recognize an ROU asset and lease liability for all long-term leases. An ROU asset represents Occidental’s right to use an underlying asset for the lease term and the associated lease liability represents the discounted obligation of future minimum lease payments. Occidental identifies leases through its accounts payable and contract monitoring process. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. The ROU assets include the discounted obligation in addition to any upfront payments or costs incurred during the contract execution of the lease. Except for leases with explicitly defined contract terms, Occidental utilizes judgment to assess likelihood of renewals, terminations and purchase options, in order to determine the lease term. Occidental uses the incremental borrowing rate at commencement date to determine the present value of lease payments. The incremental borrowing rate equates to the rate of interest that Occidental would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. Certain leases include variable lease payments which are over and above the minimum lease liability used to derive the ROU asset and lease liability and are based on the underlying asset’s operations. These variable lease costs are reported in the lease cost classification table below.

Recognition, measurement and presentation of expenses and cash flows arising from a lease will depend on classification as a finance or operating lease. The criteria for distinguishing between finance and operating leases are substantially similar to criteria under ASC 840. Adoption of ASC 842 resulted in recording of net lease assets and lease liabilities of $772 million, respectively, as of January 1, 2019. There was no material impact to net income, cash flows or stockholders’ equity.

Nature of Leases

Occidental’s operating lease agreements include leases for oil and gas exploration and development equipment,
including drilling rigs, compressors and other field equipment, which are recorded gross on the balance sheet and in the lease cost disclosures below. Actual expenditures are netted against joint interest recoveries on the income statement through the normal joint interest billing process. Occidental’s leases also include pipelines and other transportation equipment, rail cars, power plants, machinery, terminals, storage facilities, land, easements and residential and office space, which typically are not associated with joint interest recoveries.

17




The following table presents Occidental's lease balances and their location on the balance sheet at March 31, 2019 (in millions):
 
 
Balance sheet location
 
2019
Assets:
 
 
 
 
Operating
 
Operating lease assets
 
$
684

Finance
 
Property, plant, and equipment, net
 
23

Total leased assets
 
 
 
$
707

 
 
 
 
 
Liabilities:
 
 
 
 
Current
 
 
 
 
Operating
 
Current lease liabilities
 
$
229

Finance
 
Current lease liabilities
 
11

Non-current
 
 
 
 
Operating
 
Deferred credits and other liabilities - Lease liabilities
 
453

Finance
 
Deferred credits and other liabilities - Lease liabilities
 
12

Total lease liabilities
 
 
 
$
705


At March 31, 2019, Occidental's leases matured on the following schedule (in millions):
 
 
Operating
 
Finance
 
 
 
 
Leases (a)
 
Leases (b)
 
Total
Remainder of 2019
 
$
166

 
$
9

 
$
175

2020
 
167

 
12

 
179

2021
 
110

 
1

 
111

2022
 
78

 
1

 
79

2023
 
53

 
1

 
54

Thereafter
 
170

 

 
170

Total lease payments
 
744

 
24

 
768

Less: Interest
 
(62
)
 
(1
)
 
(63
)
Present value of lease liabilities
 
$
682

 
$
23

 
$
705

(a) The weighted average remaining lease term is 5.7 years and the weighted average discount rate is 3.12%.
(b) The weighted average remaining lease term is 2.5 years and the weighted average discount rate is 2.95%.

At December 31, 2018, future undiscounted net minimum fixed lease payments for non-cancellable operating leases, prepared in accordance with accounting standards prior to the adoption of ASC 842, were as follows (in millions):
 
 
Amount
2019
 
$
186

2020
 
147

2021
 
96

2022
 
68

2023
 
49

Thereafter
 
158

Total minimum lease payments
 
$
704



18



The following tables present Occidental's total lease cost and classifications as well as cash paid for amounts included in the measurement of operating lease liabilities. Lease costs and amounts paid associated with finance leases were immaterial for the three months ended March 31, 2019 (in millions):
Lease cost classification(a,b)
 
 
Property, plant and equipment, net
 
$
91

Cost of sales
 
77

Selling, general and administrative expenses
 
16

 
 
 
Total
 
$
184

 
 
 
Cash paid on operating leases(b)
 
 
Cash flow from operating activities
 
$
48

Cash flow from investing activities
 
$
19

(a) Includes short-term lease costs of $86 million and variable lease costs of $31 million.
(b) Amounts reflected are gross before joint interest recoveries.






19



Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

In this report, “Occidental” means Occidental Petroleum Corporation (OPC), or OPC and one or more entities in which it owns a controlling interest (subsidiaries). Portions of this report contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, and they include, but are not limited to; any projections of earnings, revenue or other financial items or future financial position; any statements of the plans, strategies and objectives of management for future operations or business strategy; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing. 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 are generally indicative of 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.

Although Occidental believes that the expectations reflected in any of our forward-looking statements are reasonable, actual results may differ from anticipated results, sometimes materially. Factors that could cause results to differ from those projected or assumed in any forward-looking statement 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; not successfully completing, or any material delay of, field developments, expansion projects, capital expenditures, efficiency projects, acquisitions or dispositions; uncertainties about the estimated quantities of oil and natural gas reserves; lower-than-expected production from development projects or acquisitions; exploration risks; disruptions to, capacity constraints in, or other limitations on the pipeline systems that deliver our oil and natural gas and other processing and transportation considerations; general economic slowdowns domestically or internationally; difficult and adverse conditions in the domestic and global capital and credit markets; the impact of potential changes in our credit ratings; 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; reorganization or restructuring of Occidental’s operations; changes in tax rates; and the ability to generate cash to fund operations and repay indebtedness.

Such factors also include the ultimate outcome of any possible transaction between Occidental and Anadarko Petroleum Corporation (Anadarko), including the possibility that Anadarko will reject the proposed transaction with Occidental or that the terms of any definitive agreement will be materially different from those described herein; uncertainties as to whether Anadarko will cooperate with Occidental regarding the proposed transaction; Occidental’s ability to consummate the proposed transaction with Anadarko or the proposed transaction with Total S.A. (Total); the conditions to the completion of the proposed transactions, including the receipt of Anadarko stockholder approval for the proposed transaction between Occidental and Anadarko; that the regulatory approvals required for the proposed transactions may not be obtained on the terms expected or on the anticipated schedule or at all; Occidental’s ability to finance the proposed transaction with Anadarko, including completion of any contemplated equity investment; Occidental’s indebtedness, including the substantial indebtedness Occidental expects to incur in connection with the proposed transaction with Anadarko and the need to generate sufficient cash flows to service and repay such debt; Occidental’s ability to meet expectations regarding the timing, completion and accounting and tax treatments of the transaction contemplated by the binding agreement with Total; Occidental’s ability to meet expectations regarding the timing, completion and accounting and tax treatments of the proposed transaction with Anadarko; the possibility that Occidental may be unable to achieve expected synergies and operating efficiencies within the expected time-frames or at all and to successfully integrate Anadarko’s operations with those of Occidental; that such integration may be more difficult, time-consuming or costly than expected; that operating costs, customer loss and business disruption (including, without limitation, difficulties in maintaining relationships with employees, customers or suppliers) may be greater than expected following the proposed transaction or the public announcement of the proposed transaction; the retention of certain key employees of Anadarko may be difficult; that Anadarko and Occidental are subject to intense competition and increased competition is expected in the future; general economic conditions that are less favorable than expected.


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Additional information concerning these and other factors can be found in Occidental’s filings with the Securities and Exchange Commission, including Occidental’s Annual Report on Form 10-K for the year ended December 31, 2018 (the 2018 Form 10-K), Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

Recent Events
 
On April 24, 2019, Occidental delivered a letter to the Board of Directors of Anadarko Petroleum Corporation (Anadarko) setting forth the terms of a proposal by Occidental to acquire Anadarko for $76.00 per share, based on Occidental’s closing price on April 23, in which Anadarko stockholders would receive $38.00 in cash and 0.6094 shares of Occidental common stock for each share of Anadarko common stock. On April 29, 2019, Anadarko announced that its Board of Directors had determined that the proposal from Occidental could reasonably be expected to result in a superior proposal under its existing merger agreement and that it would engage with Occidental. On May 5, Occidental delivered a second letter to the Board of Directors of Anadarko setting forth the terms of a revised proposal by Occidental to acquire Anadarko for $76.00 per share, based on Occidental’s closing price on May 3, in which Anadarko stockholders would receive $59.00 in cash and 0.2934 shares of Occidental common stock for each share of Anadarko common stock.

On April 30, 2019, Occidental announced that, in connection with the financing of Occidental’s proposal to acquire Anadarko, Berkshire Hathaway Inc. (Berkshire) had committed to invest a total of $10 billion in Occidental, contingent upon Occidental entering into and completing its proposed acquisition of Anadarko.

Occidental has also executed financing commitments from Citigroup Global Markets Inc., Bank of America, N.A. and Merrill Lynch, Pierce, Fenner & Smith Incorporated to fund the cash portion of the consideration of the proposed acquisition.

On May 5, Occidental announced that it had entered into a Memorandum of Understanding with Total S.A. (Total), pursuant to which Occidental has agreed that in the event Occidental enters into and consummates the proposed acquisition of Anadarko, Occidental will sell to Total all of the assets, liabilities, businesses and operations of Anadarko in Algeria, Ghana, Mozambique and South Africa for $8.8 billion, on a cash-free, debt-free basis.

There can be no assurance that the foregoing transactions will be completed on the terms contemplated or proposed or at all. See “MD&A - Liquidity and Capital Resources” and “Risk Factors” in Part II Item 1A of this Form 10-Q for more information.

Consolidated Results of Operations
 
Occidental reported net income of $631 million for the first quarter of 2019 on net sales of $4.0 billion, compared to net income of $708 million on net sales of $3.8 billion for the first quarter of 2018. Diluted earnings per share was $0.84 for the first quarter of 2019 compared to $0.92 for the first quarter of 2018.

The decrease in net income for the three months ended March 31, 2019, compared to the same period in 2018, reflected lower crude oil, NGL and domestic natural gas prices and lower realized caustic soda prices, partially offset by higher marketing margins from improved crude oil spreads in the midstream and marketing segment, higher crude oil volumes and lower depletion, depreciation and amortization (DD&A) rates.

Selected Statements of Operations Items

Net sales increased for the three months ended March 31, 2019, compared to the same period in 2018, as a result of higher marketing margins in the midstream and marketing segment and higher domestic crude oil sales volumes, partially offset by lower realized crude oil, NGL and domestic natural gas prices and lower realized caustic soda prices in the chemical segment.

Cost of sales decreased for the three months ended March 31, 2019, compared to the same period in 2018, mainly due to non-cash changes in the fair value of a long-term carbon dioxide (CO2) purchase contract, partially offset by higher production costs for surface operations and maintenance due to increased activity in the Permian Basin. Purchased commodities for the three months ended March 31, 2019 mainly reflected Occidental's third-party crude purchases used to fill excess domestic takeaway capacity in the midstream and marketing segment. DD&A expense increased for the three months ended March 31, 2019, compared to the same period in 2018, primarily due to higher

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domestic crude oil production partially offset by lower DD&A rates. The decrease in the domestic and foreign income tax provision for the three months ended March 31, 2019, compared to the same period in 2018, reflected lower pre-tax operating income and net operating loss carryforward benefits.

Selected Analysis of Financial Position
 
See “Liquidity and Capital Resources” for a discussion about the changes in cash and cash equivalents.
 
The increase in trade receivables, net, at March 31, 2019, compared to December 31, 2018, was primarily due to higher crude oil prices at the end of the quarter ended March 31, 2019. The increase in inventories at March 31, 2019, compared to December 31, 2018, was due to the first quarter replenishment of storage inventory that was sold in the fourth quarter of 2018. The increase in investments in unconsolidated entities at March 31, 2019, compared to December 31, 2018 is primarily due to capital contributions to equity investments.

The increase in property, plant and equipment, net at March 31, 2019, compared to December 31, 2018, is due to capital expenditures of $1.3 billion and oil and gas property acquisitions of $52 million, which were partially offset by DD&A of $955 million.

The increase in accounts payable at March 31, 2019, compared to December 31, 2018, is primarily the result of higher crude oil purchases and prices. The decrease in accrued liabilities at March 31, 2019, compared to December 31, 2018, mainly reflected payments related to incentive compensation and ad valorem taxes in the first quarter of 2019, mark-to-market decreases on derivative financial instruments and the settlement of treasury share repurchases. The increase in the deferred domestic and foreign income tax liability at March 31, 2019, compared to December 31, 2018, was due to the utilization of federal tax credit carryforwards partially offset by the deferred tax asset established for foreign net operating loss carryforwards.

The decrease in stockholders' equity was primarily due to the repurchase of treasury shares, which was partially offset by an excess of net income over dividends paid. Dividends per share were $0.78 and $0.77 in the first quarters of 2019 and 2018, respectively.


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Segment Operations
 
Occidental conducts its operations through three segments: (1) oil and gas; (2) chemical; and (3) midstream and marketing. The oil and gas segment explores for, develops and produces oil and condensate, NGL and natural gas. The chemical segment mainly manufactures and markets basic chemicals and vinyls. The midstream and marketing segment purchases, markets, gathers, processes, transports and stores oil, condensate, NGL, natural gas, CO2 and power. It also trades around its assets, including transportation and storage capacity. Additionally, the midstream and marketing segment invests in entities that conduct similar activities. The following table sets forth the sales and earnings of each operating segment and corporate items for the three months ended March 31, 2019, and 2018 (in millions):
 
 
Three months ended March 31
 
 
2019
 
2018
Net Sales (a)
 
 
 
 
Oil and Gas
 
$
2,351

 
$
2,454

Chemical
 
1,059

 
1,154

Midstream and Marketing
 
816

 
389

Eliminations
 
(222
)
 
(234
)
 
 
$
4,004

 
$
3,763

Segment Results
 
 
 
 
Oil and Gas
 
$
484

 
$
750

Chemical
 
265

 
298

Midstream and Marketing
 
279

 
179

 
 
1,028


1,227

Unallocated Corporate Items
 
 
 
 
Interest expense, net
 
(83
)
 
(92
)
Income tax provision
 
(225
)
 
(339
)
Other expense, net
 
(89
)
 
(88
)
Net Income
 
$
631

 
$
708

(a) Intersegment sales eliminate upon consolidation and are generally made at prices approximating those that the selling entity would be able to obtain in third-party transactions.

Significant Transactions and Events Affecting Earnings

There were no significant transactions or events that varied widely or unpredictably in nature, timing or amount, affecting Occidental’s earnings for the three months ended March 31, 2019, and 2018.

Worldwide Effective Tax Rate

The following table sets forth the calculation of the worldwide effective tax rate for net income for the three months ended March 31, 2019, and 2018 (in millions):
 
 
Three months ended March 31
 
 
2019
 
2018
 
 
 
 
 
Pre-tax Income
 
$
856

 
$
1,047

Income tax provision
 
 
 
 
Federal and state
 
74

 
95

Foreign
 
151

 
244

Total
 
225


339

Net Income
 
$
631

 
$
708

Worldwide effective tax rate
 
26
%
 
32
%


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Oil and Gas Segment
 
Oil and gas segment earnings were $484 million for the first quarter of 2019, compared with segment earnings of $750 million for the first quarter of 2018. The decrease in earnings primarily reflected lower realized crude oil, NGL and natural gas prices. Both average WTI and Brent oil prices decreased by 13 percent and 5 percent, respectively, in the three months ended March 31, 2019, compared to the same period in 2018. The decrease was partially offset by higher crude oil sales volumes and lower DD&A rates.

The following tables set forth the total production and sales volumes for oil, NGL and natural gas per day for the three months ended March 31, 2019, and 2018. The differences between the production and sales volumes per day are generally due to the timing of shipments at Occidental’s international locations, where the product is loaded onto tankers.
 
 
Three months ended March 31
Production Volumes per Day
 
2019
 
2018
Oil (MBBL)
 
 
 
 
United States
 
277

 
228

Middle East
 
140

 
139

Latin America
 
32

 
32

NGL (MBBL)
 
 
 
 
United States
 
79

 
59

Middle East
 
34

 
26

Natural Gas (MMCF)