OCCIDENTAL PETROLEUM CORP /DE/
10-Qs and 10-Ks
PROXIES
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
10-Q
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
June 30, 2024
OR
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission file number
1-9210
_____________________
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of
incorporation or organization) |
(I.R.S. Employer
Identification No.) |
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| (Address of principal executive offices) (Zip Code) | ||||||||||||||
(
713
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215-7000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
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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
☐
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
☐
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.
Smaller Reporting Company
☐
Emerging Growth Company
☐
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.
☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
☐
Yes
þ
No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
| Class | Outstanding as of July 31, 2024 | |||||||||||||
| Common Stock, $0.20 par value |
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| TABLE OF CONTENTS | PAGE | |||||||
| Part I - Financial Information | ||||||||
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Item 1.
Financial Statements (unaudited)
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Consolidated Condensed Balance Sheets —
June 30, 2024
and
December 31, 2023
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Consolidated Condensed Statements of Operations —
Three and six months ended June 30, 2024
and
2023
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Consolidated Condensed Statements of Comprehensive Income —
Three and six months ended June 30, 2024
and
2023
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Consolidated Condensed Statements of Cash Flows —
Six months ended June 30, 2024
and
2023
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Consolidated Condensed Statements of Equity —
Three and six months ended June 30, 2024
and
2023
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Note 3—Inventor
ies
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Note 5—Acquisitions
and Divestitures
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Note 10—
Earnings Per Share and Equity
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Item 4.
Controls and Procedures
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Item 1.
Legal Proceedings
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Item 1A.
Risk Factors
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Item 6.
Exhibits
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ABBREVIATIONS USED WITHIN THIS DOCUMENT
| $/Bbl | price per barrel | ||||
| Anadarko | Anadarko Petroleum Corporation and its consolidated subsidiaries | ||||
| Andes | Andes Petroleum Ecuador Ltd. | ||||
| AOC | Administrative Order on Consent | ||||
| Bcf | billions of cubic feet | ||||
| BlackRock | BlackRock Inc., which has formed a joint venture with Occidental on the construction of STRATOS | ||||
| Boe | barrels of oil equivalent | ||||
| CERCLA | Comprehensive Environmental Response, Compensation, and Liability Act | ||||
|
CO
2
|
carbon dioxide | ||||
| CrownRock Acquisition |
acquisition of all of the outstanding partnership interests of CrownRock, L.P. by Occidental
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| DASS | Diamond Alkali Superfund Site | ||||
| District Court | Federal District Court in the State of New Jersey | ||||
| DSCC | Diamond Shamrock Chemicals Company | ||||
| DOJ | U.S. Department of Justice | ||||
| EPA | U.S. Environmental Protection Agency | ||||
| EPS | earnings per share | ||||
| HLBV | Hypothetical Liquidation at Book Value | ||||
| LIFO | last-in, first-out | ||||
| Maxus | Maxus Energy Corporation | ||||
| Mbbl | thousands of barrels | ||||
| Mboe | thousands of barrels equivalent | ||||
| Mboe/d | thousands of barrels equivalent per day | ||||
| Mcf | thousands of cubic feet | ||||
| MMbbl | millions of barrels | ||||
| MMcf | millions of cubic feet | ||||
| NCI |
non-controlling interest
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| NGL | natural gas liquids | ||||
| NPL | National Priorities List | ||||
| Occidental | Occidental Petroleum Corporation, a Delaware corporation and one or more entities in which it owns a controlling interest (subsidiaries) | ||||
| OECD | Organization for Economic Cooperation and Development | ||||
| OPEC | Organization of the Petroleum Exporting Countries | ||||
| OU | Operable Unit | ||||
| OU4 UAO | Operable Unit 4 Unilateral Administrative Order | ||||
| OxyChem | Occidental Chemical Corporation | ||||
| PVC | polyvinyl chloride | ||||
| RCF | revolving credit facility | ||||
| ROD | Record of Decision | ||||
| VIE |
variable interest entity
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| WES | Western Midstream Partners, LP | ||||
| WES Operating | Western Midstream Operating, LP | ||||
| WTI | West Texas Intermediate | ||||
| Zero Coupons | Zero Coupon senior notes due 2036 | ||||
| 2023 Form 10-K | Occidental’s Annual Report on Form 10-K for the year ended December 31, 2023 | ||||
1
PART I FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
| Consolidated Condensed Balance Sheets | Occidental Petroleum Corporation and Subsidiaries | ||||
| millions | June 30, 2024 | December 31, 2023 | ||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash and cash equivalents | $ |
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$ |
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Trade receivables, net of reserves of
$
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| Inventories |
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| Other current assets |
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| Total current assets |
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| INVESTMENTS IN UNCONSOLIDATED ENTITIES |
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| PROPERTY, PLANT AND EQUIPMENT | ||||||||
| Oil and gas |
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| Chemical |
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| Midstream and marketing |
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| Corporate |
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| Gross property, plant and equipment |
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| Accumulated depreciation, depletion and amortization |
(
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(
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| Net property, plant and equipment |
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| OPERATING LEASE ASSETS |
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| OTHER LONG-TERM ASSETS |
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| TOTAL ASSETS | $ |
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$ |
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| The accompanying notes are an integral part of these Consolidated Condensed Financial Statements. | ||||||||
2
| Consolidated Condensed Balance Sheets | Occidental Petroleum Corporation and Subsidiaries | ||||
| millions, except share and per-share amounts | June 30, 2024 | December 31, 2023 | ||||||
| LIABILITIES AND EQUITY | ||||||||
| CURRENT LIABILITIES | ||||||||
| Current maturities of long-term debt | $ |
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$ |
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| Current operating lease liabilities |
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| Accounts payable |
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| Accrued liabilities |
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| Total current liabilities |
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| LONG-TERM DEBT, NET |
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| DEFERRED CREDITS AND OTHER LIABILITIES | ||||||||
| Deferred income taxes, net |
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| Asset retirement obligations |
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| Pension and postretirement obligations |
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| Environmental remediation liabilities |
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| Operating lease liabilities |
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| Other |
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| Total deferred credits and other liabilities |
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| EQUITY | ||||||||
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Preferred stock, at $
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Common stock, at $
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Treasury stock: 2024 —
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(
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(
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| Additional paid-in capital |
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| Retained earnings |
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| Accumulated other comprehensive income |
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| Total stockholders' equity |
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| Non-controlling interest |
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| Total equity |
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| TOTAL LIABILITIES AND EQUITY | $ |
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$ |
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The accompanying notes are an integral part of these Consolidated Condensed Financial Statements.
3
| Consolidated Condensed Statements of Operations | Occidental Petroleum Corporation and Subsidiaries | ||||
| Three months ended June 30, | Six months ended June 30, | |||||||||||||
| millions, except per-share amounts | 2024 | 2023 | 2024 | 2023 | ||||||||||
| REVENUES AND OTHER INCOME | ||||||||||||||
| Net sales | $ |
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$ |
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$ |
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$ |
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| Interest, dividends and other income |
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| Gains on sales of assets and other, net |
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| Total |
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| COSTS AND OTHER DEDUCTIONS | ||||||||||||||
| Oil and gas operating expense |
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| Transportation and gathering expense |
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| Chemical and midstream cost of sales |
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| Purchased commodities |
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| Selling, general and administrative expenses |
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| Other operating and non-operating expense |
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| Taxes other than on income |
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| Depreciation, depletion and amortization |
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| Asset impairments and other charges |
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| Acquisition-related costs |
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| Exploration expense |
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| Interest and debt expense, net |
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| Total |
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| Income before income taxes and other items |
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| OTHER ITEMS | ||||||||||||||
| Income from equity investments and other |
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| Total |
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| Income before income taxes |
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| Income tax expense |
(
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(
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(
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(
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| Income from continuing operations |
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| Discontinued operations, net of taxes |
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| NET INCOME |
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| Less: Net income attributable to noncontrolling interest |
(
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(
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| Less: Preferred stock dividends and redemption premiums |
(
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(
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(
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(
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| NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS | $ |
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$ |
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$ |
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$ |
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| PER COMMON SHARE | ||||||||||||||
| Income from continuing operations—basic | $ |
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$ |
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$ |
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$ |
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| Discontinued operations—basic | $ |
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$ |
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$ |
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$ |
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| Net income attributable to common stockholders—basic | $ |
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$ |
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$ |
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$ |
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| Income from continuing operations—diluted | $ |
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$ |
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$ |
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$ |
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| Discontinued operations—diluted | $ |
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$ |
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$ |
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$ |
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| Net income attributable to common stockholders—diluted | $ |
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$ |
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$ |
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$ |
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| The accompanying notes are an integral part of these Consolidated Condensed Financial Statements. | ||||||||||||||
4
| Consolidated Condensed Statements of Comprehensive Income | Occidental Petroleum Corporation and Subsidiaries | ||||
| Three months ended June 30, | Six months ended June 30, | |||||||||||||
| millions | 2024 | 2023 | 2024 | 2023 | ||||||||||
| Net income | $ |
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$ |
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$ |
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$ |
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| Other comprehensive income (loss) items: | ||||||||||||||
|
Gains (losses) on derivatives
(a)
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(
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(
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Pension and postretirement losses
(b)
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(
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(
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(
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(
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| Other |
(
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(
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(
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| Other comprehensive income, net of tax |
(
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(
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(
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| Comprehensive income |
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| Comprehensive income attributable to noncontrolling interest |
(
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(
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| Comprehensive income attributable to preferred and common stockholders | $ |
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$ |
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$ |
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$ |
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(a)
Net of tax expense of
zero
for the three and six months ended June 30, 2024 and 2023
.
(b)
Net of tax expense of $
4
million and $
1
million for the three months ended June 30, 2024 and 2023 and $
5
million and $
2
million for the six months ended June 30, 2024 and 2023
.
The accompanying notes are an integral part of these Consolidated Condensed Financial Statements.
5
| Consolidated Condensed Statements of Cash Flows | Occidental Petroleum Corporation and Subsidiaries | ||||
| Six months ended June 30, | ||||||||
| millions | 2024 | 2023 | ||||||
| CASH FLOW FROM OPERATING ACTIVITIES | ||||||||
| Net income | $ |
|
$ |
|
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| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Discontinued operations, net |
(
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| Depreciation, depletion and amortization of assets |
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| Deferred income tax provision (benefit) |
(
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| Asset impairments and other charges |
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| Gains on sales of assets, net |
(
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(
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| Noncash charges (benefits) to income and other |
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(
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| Changes in operating assets and liabilities: | ||||||||
| (Increase) decrease in receivables |
(
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| Increase in inventories |
(
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(
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| (Increase) decrease in other current assets |
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(
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| Increase (decrease) in accounts payable and accrued liabilities |
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(
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| Increase in current domestic and foreign income taxes |
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| Net cash provided by operating activities |
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| CASH FLOW FROM INVESTING ACTIVITIES | ||||||||
| Capital expenditures |
(
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(
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| Change in capital accrual |
(
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| Purchases of assets and equity investments, net |
(
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(
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| Proceeds from sales of businesses and assets, net |
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| Equity investments and other, net |
(
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(
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| Net cash used by investing activities |
(
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(
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| CASH FLOW FROM FINANCING ACTIVITIES | ||||||||
| Payments of long-term debt, net |
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(
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| Proceeds from issuance of common stock |
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| Redemption of preferred stock |
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(
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| Purchases of treasury stock |
(
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(
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| Cash dividends paid on common and preferred stock |
(
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(
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| Contribution from noncontrolling interest |
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| Other financing, net |
(
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(
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| Net cash used by financing activities |
(
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(
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| Increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents |
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(
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| Cash, cash equivalents, restricted cash and restricted cash equivalents — beginning of period |
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| Cash, cash equivalents, restricted cash and restricted cash equivalents — end of period | $ |
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$ |
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| The accompanying notes are an integral part of these Consolidated Condensed Financial Statements. | ||||||||
6
| Consolidated Condensed Statements of Equity | Occidental Petroleum Corporation and Subsidiaries | ||||
| Equity Attributable to Common Stock | |||||||||||||||||||||||
| millions, except per-share amounts | Preferred Stock | Common Stock | Treasury Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Total Equity | ||||||||||||||||
| Balance as of March 31, 2023 | $ |
|
$ |
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$ |
(
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$ |
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$ |
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$ |
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$ |
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| Net income | — | — | — | — |
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— |
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|
Other comprehensive loss, net
of tax |
— | — | — | — | — |
(
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(
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Dividends on common stock,
$
|
— | — | — | — |
(
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— |
(
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Dividends on preferred stock,
$
|
— | — | — | — |
(
|
— |
(
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|
Preferred stock redemption - face
value |
(
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— | — | — | — | — |
(
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Preferred stock redemption -
premium |
— | — | — | — |
(
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— |
(
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|
Preferred stock redemption value in
excess of carrying value |
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— | — | — |
(
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— |
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| Shareholder warrants exercised | — | — | — |
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— | — |
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| Options exercised | — | — | — |
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— | — |
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|
Issuance of common stock and
other, net of cancellations |
— | — | — |
|
— | — |
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||||||||||||||||
| Purchases of treasury stock | — | — |
(
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— | — | — |
(
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| Balance as of June 30, 2023 | $ |
|
$ |
|
$ |
(
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$ |
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$ |
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$ |
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$ |
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| Equity Attributable to Common Stock | ||||||||||||||||||||||||||
| millions, except per-share amounts | Preferred Stock | Common Stock | Treasury Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Income | Noncontrolling Interest | Total Equity | ||||||||||||||||||
| Balance as of March 31, 2024 | $ |
|
$ |
|
$ |
(
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||
| Net income | — | — | — | — |
|
— |
|
|
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|
Other comprehensive loss, net
of tax |
— | — | — | — | — |
(
|
— |
(
|
||||||||||||||||||
|
Dividends on common stock,
$
|
— | — | — | — |
(
|
— | — |
(
|
||||||||||||||||||
|
Dividends on preferred stock,
$
|
— | — | — | — |
(
|
— | — |
(
|
||||||||||||||||||
| Shareholder warrants exercised | — |
|
— |
|
— | — | — |
|
||||||||||||||||||
| Issuance of common stock and other, net of cancellations | — | — | — |
|
— | — | — |
|
||||||||||||||||||
| Purchase of treasury stock | — | — |
(
|
— | — | — | — |
(
|
||||||||||||||||||
| Noncontrolling interest contributions, net | — | — | — | — | — | — |
|
|
||||||||||||||||||
| Balance as of June 30, 2024 | $ |
|
$ |
|
$ |
(
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||
The accompanying notes are an integral part of these Consolidated Condensed Financial Statements.
7
| Consolidated Condensed Statements of Equity | Occidental Petroleum Corporation and Subsidiaries | ||||
| Equity Attributable to Common Stock | |||||||||||||||||||||||
| millions, except per-share amounts | Preferred Stock | Common Stock | Treasury Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Income | Total Equity | ||||||||||||||||
| Balance as of December 31, 2022 | $ |
|
$ |
|
$ |
(
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||
| Net income | — | — | — | — |
|
— |
|
||||||||||||||||
|
Other comprehensive income, net of
tax |
— | — | — | — | — |
|
|
||||||||||||||||
|
Dividends on common stock,
$
|
— | — | — | — |
(
|
— |
(
|
||||||||||||||||
|
Dividends on preferred stock,
$
|
— | — | — | — |
(
|
— |
(
|
||||||||||||||||
|
Preferred stock redemption - face
value |
(
|
— | — | — | — | — |
(
|
||||||||||||||||
|
Preferred stock redemption -
premium |
— | — | — | — |
(
|
— |
(
|
||||||||||||||||
|
Preferred stock redemption value in
excess of carrying value |
|
— | — | — |
(
|
— |
|
||||||||||||||||
| Shareholder warrants exercised | — | — | — |
|
— | — |
|
||||||||||||||||
| Options exercised | — | — | — |
|
— | — |
|
||||||||||||||||
|
Issuance of common stock and
other, net of cancellations |
— |
|
— |
|
— | — |
|
||||||||||||||||
| Purchases of treasury stock | — | — |
(
|
— | — | — |
(
|
||||||||||||||||
| Balance as of June 30, 2023 | $ |
|
$ |
|
$ |
(
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||
| Equity Attributable to Common Stock | ||||||||||||||||||||||||||
| millions, except per-share amounts | Preferred Stock | Common Stock | Treasury Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Income | Non-controlling Interests | Total Equity | ||||||||||||||||||
| Balance as of December 31, 2023 | $ |
|
$ |
|
$ |
(
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||
| Net income | — | — | — | — |
|
— |
|
|
||||||||||||||||||
| Other comprehensive loss, net of tax | — | — | — | — | — |
(
|
— |
(
|
||||||||||||||||||
|
Dividends on common stock,
$
|
— | — | — | — |
(
|
— | — |
(
|
||||||||||||||||||
|
Dividends on preferred stock,
$
|
— | — | — | — |
(
|
— | — |
(
|
||||||||||||||||||
| Shareholder warrants exercised | — |
|
— |
|
— | — | — |
|
||||||||||||||||||
|
Issuance of common stock and
other, net of cancellations |
— |
|
— |
|
— | — | — |
|
||||||||||||||||||
| Purchase of treasury stock | — | — |
(
|
— | — | — | — |
(
|
||||||||||||||||||
| Noncontrolling interest contributions | — | — | — | — | — | — |
|
|
||||||||||||||||||
| Balance as of June 30, 2024 | $ |
|
$ |
|
$ |
(
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||
The accompanying notes are an integral part of these Consolidated Condensed Financial Statements.
8
| Notes to Consolidated Condensed Financial Statements | Occidental Petroleum Corporation and Subsidiaries | ||||
| NOTE 1 - GENERAL | ||
NATURE OF OPERATIONS
Occidental conducts its operations through various subsidiaries and affiliates. Occidental has made its disclosures in accordance with United States generally accepted accounting principles as they apply to interim reporting, and condensed or omitted, as permitted by the rules and regulations of the U.S. Securities and Exchange Commission (the SEC), certain information and disclosures normally included in Consolidated Financial Statements and the notes thereto. These unaudited Consolidated Condensed Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and the notes thereto in the 2023 Form 10-K.
In the opinion of Occidental’s management, the accompanying unaudited Consolidated Condensed Financial Statements in this report reflect all adjustments (consisting of normal recurring adjustments) that are necessary to fairly present Occidental’s results of operations and cash flows for the six months ended June 30, 2024 and 2023 and Occidental’s financial position as of June 30, 2024 and December 31, 2023. The income and cash flows for the periods ended June 30, 2024 and 2023 are not necessarily indicative of the income or cash flows to be expected for the full year.
CASH EQUIVALENTS AND RESTRICTED CASH EQUIVALENTS
The following table provides a reconciliation of cash, cash equivalents, restricted cash and restricted cash equivalents as reported in the Consolidated Condensed Statements of Cash Flows as of June 30, 2024 and 2023:
| millions | 2024 | 2023 | ||||||
| Cash and cash equivalents | $ |
|
$ |
|
||||
| Restricted cash and restricted cash equivalents included in other current assets |
|
|
||||||
| Restricted cash and restricted cash equivalents included in other long-term assets, net |
|
|
||||||
| Cash, cash equivalents, restricted cash and restricted cash equivalents | $ |
|
$ |
|
||||
SUPPLEMENTAL CASH FLOW INFORMATION
The following table represents U.S. federal, state and international income taxes paid and interest paid during the six months ended June 30, 2024 and 2023, respectively:
| millions | 2024 | 2023 | ||||||
| Income tax payments | $ |
|
$ |
|
||||
| Income tax refunds received | $ |
|
$ |
|
||||
|
Interest paid
(a)
|
$ |
|
$ |
|
||||
(a)
Net of capitalized interest of $
67
million and $
42
million for the six months ended June 30, 2024 and 2023, respectively.
WES INVESTMENT
WES is a publicly traded limited partnership with its limited partner units traded on the NYSE under the ticker symbol "WES". As of June 30, 2024, Occidental owned all of the
2.3
% non-voting general partner interest,
48.7
% of the WES limited partner units, and a
2
% non-voting limited partner interest in WES Operating, a subsidiary of WES. As of June 30, 2024, Occidental's combined share of net income from WES and its subsidiaries was
50.9
%.
NON-CONTROLLING INTEREST
In 2023, Occidental and BlackRock formed a joint venture for the continued development of the first commercial scale direct air capture facility in Ector County, Texas. The joint venture is a VIE and Occidental consolidates the VIE as it is the primary beneficiary. BlackRock’s investment is accounted for as an NCI. Each party has committed to make additional investments towards the completion of the direct air capture facility, with BlackRock committed to invest up to $
550
million.
9
In addition, Occidental has entered into agreements with the joint venture related to project management, operations and maintenance and carbon removal offtake. Occidental may incur additional payments if certain construction and operational thresholds are not met.
Occidental may call the NCI on June 30, 2035 or earlier if the plant does not achieve commercial operations or ceases and permanently discontinues operations. Dividends from the joint venture will be distributed preferentially to the NCI up to a return threshold, then preferentially to Occidental thereafter. The NCI receives preferential distributions in liquidation.
| NOTE 2 - REVENUE | ||
The following table shows a reconciliation of revenue from customers to total net sales for the three and six months ended June 30, 2024 and 2023:
| Three months ended June 30, | Six months ended June 30, | |||||||||||||
| millions | 2024 | 2023 | 2024 | 2023 | ||||||||||
| Revenue from customers | $ |
|
$ |
|
$ |
|
$ |
|
||||||
|
All other revenues
(a)
|
|
|
(
|
|
||||||||||
| Net sales | $ |
|
$ |
|
$ |
|
$ |
|
||||||
(a)
Includes other revenues from the midstream and marketing segment and chemical segment.
10
DISAGGREGATION OF REVENUE FROM CONTRACTS WITH CUSTOMERS
The table below presents Occidental's revenue from customers by segment, product and geographical area. The oil and gas segment typically sells its oil, NGL and gas at the lease or concession area. Chemical segment revenues are shown by geographic area based on the location of the sale. Excluding net marketing revenue, midstream and marketing segment revenues are shown by the location of sale:
| millions | United States | International | Eliminations | Total | ||||||||||
| Three months ended June 30, 2024 | ||||||||||||||
| Oil and gas | ||||||||||||||
| Oil | $ |
|
$ |
|
$ |
|
$ |
|
||||||
| NGL |
|
|
|
|
||||||||||
| Gas |
|
|
|
|
||||||||||
| Other |
|
|
|
|
||||||||||
| Segment total | $ |
|
$ |
|
$ |
|
$ |
|
||||||
| Chemical | $ |
|
$ |
|
$ |
|
$ |
|
||||||
| Midstream and marketing | $ |
|
$ |
|
$ |
|
$ |
|
||||||
| Eliminations | $ |
|
$ |
|
$ |
(
|
$ |
(
|
||||||
| Consolidated | $ |
|
$ |
|
$ |
(
|
$ |
|
||||||
| millions | United States | International | Eliminations | Total | ||||||||||
| Three months ended June 30, 2023 | ||||||||||||||
| Oil and gas | ||||||||||||||
| Oil | $ |
|
$ |
|
$ |
|
$ |
|
||||||
| NGL |
|
|
|
|
||||||||||
| Gas |
|
|
|
|
||||||||||
| Other |
|
|
|
|
||||||||||
| Segment total | $ |
|
$ |
|
$ |
|
$ |
|
||||||
| Chemical | $ |
|
$ |
|
$ |
|
$ |
|
||||||
| Midstream and marketing | $ |
|
$ |
|
$ |
|
$ |
|
||||||
| Eliminations | $ |
|
$ |
|
$ |
(
|
$ |
(
|
||||||
| Consolidated | $ |
|
$ |
|
$ |
(
|
$ |
|
||||||
11
| millions | United States | International | Eliminations | Total | ||||||||||
| Six months ended June 30, 2024 | ||||||||||||||
| Oil and gas | ||||||||||||||
| Oil | $ |
|
$ |
|
$ |
|
$ |
|
||||||
| NGL |
|
|
|
|
||||||||||
| Gas |
|
|
|
|
||||||||||
| Other |
|
|
|
|
||||||||||
| Segment total | $ |
|
$ |
|
$ |
|
$ |
|
||||||
| Chemical | $ |
|
$ |
|
$ |
|
$ |
|
||||||
| Midstream and marketing | $ |
|
$ |
|
$ |
|
$ |
|
||||||
| Eliminations | $ |
|
$ |
|
$ |
(
|
$ |
(
|
||||||
| Consolidated | $ |
|
$ |
|
$ |
(
|
$ |
|
||||||
| millions | United States | International | Eliminations | Total | ||||||||||
| Six months ended June 30, 2023 | ||||||||||||||
| Oil and gas | ||||||||||||||
| Oil | $ |
|
$ |
|
$ |
|
$ |
|
||||||
| NGL |
|
|
|
|
||||||||||
| Gas |
|
|
|
|
||||||||||
| Other |
(
|
|
|
(
|
||||||||||
| Segment total | $ |
|
$ |
|
$ |
|
$ |
|
||||||
| Chemical | $ |
|
$ |
|
$ |
|
$ |
|
||||||
| Midstream and marketing | $ |
|
$ |
|
$ |
|
$ |
|
||||||
| Eliminations | $ |
|
$ |
|
$ |
(
|
$ |
(
|
||||||
| Consolidated | $ |
|
$ |
|
$ |
(
|
$ |
|
||||||
| NOTE 3 - INVENTORIES | ||
Finished goods primarily represent oil, which is carried at the lower of weighted-average cost or net realizable value, and caustic soda and chlorine, which are valued under the LIFO method.
As of June 30, 2024 and December 31, 2023, inventories consisted of the following:
| millions | June 30, 2024 | December 31, 2023 | ||||||
| Raw materials | $ |
|
$ |
|
||||
| Materials and supplies |
|
|
||||||
| Commodity inventory and finished goods |
|
|
||||||
|
|
|
|||||||
| Revaluation to LIFO |
(
|
(
|
||||||
|
Total
|
$ |
|
$ |
|
||||
12
| NOTE 4 - LONG-TERM DEBT | ||
As of June 30, 2024 and December 31, 2023, Occidental’s debt consisted of the following:
| millions | June 30, 2024 | December 31, 2023 | ||||||
|
|
$ |
|
$ |
|
||||
|
|
|
|
||||||
|
|
|
|
||||||
|
|
|
|
||||||
|
|
|
|
||||||
|
|
|
|
||||||
|
|
|
|
||||||
|
|
|
|
||||||
|
|
|
|
||||||
|
|
|
|
||||||
|
|
|
|
||||||
|
|
|
|
||||||
|
|
|
|
||||||
|
|
|
|
||||||
|
|
|
|
||||||
|
|
|
|
||||||
|
|
|
|
||||||
|
|
|
|
||||||
|
|
|
|
||||||
|
|
|
|
||||||
|
|
|
|
||||||
|
|
|
|
||||||
|
Variable rate bonds due 2030 (
|
|
|
||||||
|
|
|
|
||||||
|
|
|
|
||||||
|
|
|
|
||||||
|
|
|
|
||||||
|
|
|
|
||||||
|
|
|
|
||||||
| Zero Coupon senior notes due 2036 |
|
|
||||||
|
|
|
|
||||||
|
|
|
|
||||||
|
|
|
|
||||||
|
|
|
|
||||||
|
|
|
|
||||||
|
|
|
|
||||||
|
|
|
|
||||||
|
|
|
|
||||||
|
|
|
|
||||||
| (continued on next page) | ||||||||
13
| millions (continued) | 2024 | 2023 | ||||||
|
|
|
|
||||||
|
|
|
|
||||||
|
|
|
|
||||||
|
|
|
|
||||||
|
|
|
|
||||||
| Total borrowings at face value | $ |
|
$ |
|
||||
The following table summarizes Occidental's outstanding debt, including finance lease liabilities:
| millions | June 30, 2024 | December 31, 2023 | ||||||
| Total borrowings at face value | $ |
|
$ |
|
||||
| Adjustments to book value: | ||||||||
| Unamortized premium, net |
|
|
||||||
| Debt issuance costs |
(
|
(
|
||||||
| Net book value of debt | $ |
|
$ |
|
||||
| Long-term finance leases, included in Long-term debt |
|
|
||||||
| Current finance leases, included in Current maturities of long-term debt |
|
|
||||||
| Total debt and finance leases | $ |
|
$ |
|
||||
| Less: current maturities of financing leases |
(
|
(
|
||||||
| Less: current maturities of long-term debt |
(
|
(
|
||||||
| Long-term debt, net | $ |
|
$ |
|
||||
DEBT ACTIVITY
In February 2024, Occidental entered into a Third Amended and Restated Credit Agreement for the RCF extending the maturity date to June 30, 2028. In May 2024, Occidental amended the RCF to add an additional $
150
million commitment, increasing the borrowing capacity to $
4.15
billion.
In the first quarter of 2023, Occidental used cash on hand to repay $
22
million of its
8.750
% medium-term notes upon maturity.
As of June 30, 2024, Occidental had $
1.2
billion of debt maturities due in the next 12 months. Subsequent to June 30, 2024, in July 2024, Occidental repaid $
402
million of current maturities.
In July 2024, Occidental also amended and extended the maturity date of its existing receivables securitization facility to July 30, 2027. As of June 30, 2024, the facility had $
600
million of available borrowing capacity and
no
drawn amounts. The facility includes adjustments based on the same specified sustainability target thresholds as contained in the RCF.
In connection with the CrownRock Acquisition, Occidental issued $
9.7
billion in new debt in July 2024, consisting of $
4.7
billion in term loans and $
5
billion in unsecured notes.
The term loans and notes issued comprised the following tranches:
|
millions
|
Principal
|
||||
|
|
$ |
|
|||
|
|
|
||||
|
|
|
||||
|
|
|
||||
|
|
|
||||
|
|
|
||||
|
|
|
||||
|
Total borrowings
|
$ |
|
|||
14
FAIR VALUE OF DEBT
The estimated fair value of Occidental’s debt as of June 30, 2024 and December 31, 2023, substantially all of which was classified as Level 1, was approximately $
17.8
billion and $
18.0
billion, respectively.
|
NOTE 5 - ACQUISITIONS AND DIVESTITURES
|
||
CROWNROCK ACQUISITION
In December 2023, Occidental entered into an agreement to purchase CrownRock L.P. for total consideration of approximately $
12.4
billion, consisting of approximately $
9.4
billion of cash consideration (inclusive of certain working capital and other customary purchase price adjustments), approximately
29.6
million shares of common stock of Occidental, and the assumption of $
1.2
billion of existing debt of CrownRock. The acquisition closed August 1, 2024, adding to Occidental's oil and gas portfolio in the Permian Basin.
In connection with the CrownRock Acquisition, Occidental issued $
5.0
billion of new unsecured notes, a $
2.0
billion
364-day
term loan, and a $
2.7
billion
two-year
term loan.
The CrownRock Acquisition qualified as a business combination and was accounted for using the acquisition method of accounting.
The following table summarizes the cash and common stock components of the purchase price:
| in millions of dollars and shares | Total | ||||
|
Cash portion of purchase price
|
$ |
|
|||
| Closing Adjustments | |||||
| Net Working Capital and Other Purchase Price Adjustments |
|
||||
| Pre-closing dividends declared by Occidental | $ |
|
|||
| Total Cash Purchase Price | $ |
|
|||
|
Total shares of Occidental common stock issued
|
|
||||
|
Occidental common stock share price
|
$ |
|
|||
|
Stock portion of purchase price
|
$ |
|
|||
|
Total purchase price
|
$ |
|
|||
The following table sets forth the preliminary allocation of the acquisition consideration. Certain data necessary to complete the purchase price allocation is not yet available, and includes, but is not limited to, final appraisals of assets acquired and liabilities assumed. Occidental will finalize the purchase price allocation during the 12-month period following the acquisition date, during which time the value of the assets and liabilities may be revised as appropriate.
| in millions |
August 1, 2024
|
||||
| Fair value of assets acquired: | |||||
| Cash and cash equivalents | $ |
|
|||
| Trade receivables, net |
|
||||
| Other current assets |
|
||||
| Property, plant and equipment, Oil and gas |
|
||||
| Amount attributable to assets acquired | $ |
|
|||
| Fair value of liabilities acquired: | |||||
| Current maturities of long-term debt | $ |
|
|||
| Accounts payable |
|
||||
| Accrued liabilities |
|
||||
| Long-term debt |
|
||||
| Asset retirement obligations |
|
||||
| Amount attributable to liabilities acquired | $ |
|
|||
| Fair value of net assets acquired: | $ |
|
|||
15
The aggregate purchase price noted above was allocated to the major categories of assets and liabilities acquired based upon their preliminary estimated fair values at the date of the acquisition. The valuation of certain assets, including property, was based on preliminary appraisals. The majority of measurements of assets acquired and liabilities assumed were based on inputs that are not observable in the market and thus represent Level 3 inputs. The fair value of acquired properties and equipment was based on both available market data and a cost approach. Oil and natural gas properties were valued using either available market data based on the nature of the properties and their location or an income approach.
It is impractical to present unaudited pro-forma information as of June 30, 2024 because the required information is not yet available at the time of this filing.
DIVESTITURES
Subsequent Event
16
| NOTE 6 - DERIVATIVES | ||
OBJECTIVE AND STRATEGY
Occidental uses a variety of derivative financial instruments and physical contracts to manage its exposure to commodity price fluctuations and transportation commitments and to fix margins on the future sale of stored commodity volumes. Derivatives are carried at fair value and on a net basis when a legal right of offset exists with the same counterparty. Occidental may occasionally use a variety of derivative financial instruments to manage its exposure to foreign currency fluctuations and interest rate risks. Occidental also enters into derivative financial instruments for trading purposes.
Occidental may elect normal purchases and normal sales exclusions when physically delivered commodities are purchased or sold to a customer. Occidental occasionally 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, such as to lock in rates on debt issuances. The value of cash flow hedges was insignificant for all periods presented. As of June 30, 2024, Occidental’s marketing derivatives are not designated as hedges.
MARKETING DERIVATIVES
Occidental's marketing derivative instruments are short-duration physical and financial forward contracts. As of June 30, 2024, the weighted-average settlement price of these forward contracts was $
81.31
per barrel and $
2.10
per Mcf for crude oil and natural gas, respectively. The weighted-average settlement price was $
76.36
per barrel and $
2.62
per Mcf for crude oil and natural gas, respectively, as of December 31, 2023. Derivative instruments that are not designated as hedging instruments are required to be recorded on the balance sheet at fair value. Changes in fair value will impact Occidental’s earnings through mark-to-market adjustments until the physical commodity is delivered or the financial instrument is settled. Net gains and losses associated with marketing derivative instruments are recognized currently in net sales.
The following table summarizes net short volumes associated with the outstanding marketing commodity derivatives as of:
| long (short) | June 30, 2024 | December 31, 2023 | ||||||
| Oil commodity contracts | ||||||||
| Volume (MMbbl) |
(
|
(
|
||||||
| Natural gas commodity contracts | ||||||||
| Volume (Bcf) |
(
|
(
|
||||||
17
FAIR VALUE OF DERIVATIVES
The following tables present the fair values of Occidental’s outstanding derivatives. Fair values are presented at gross amounts below, including when the derivatives are subject to netting arrangements, and are presented on a net basis in the Consolidated Condensed Balance Sheets:
| millions | Fair Value Measurements Using |
Netting
(a)
|
Total Fair Value | ||||||||||||||
| Balance Sheet Classifications | Level 1 | Level 2 | Level 3 | ||||||||||||||
| June 30, 2024 | |||||||||||||||||
| Marketing Derivatives | |||||||||||||||||
| Other current assets | $ |
|
$ |
|
$ |
|
$ |
(
|
$ |
|
|||||||
| Other long-term assets |
|
|
|
|
|
||||||||||||
| Accrued liabilities |
(
|
(
|
|
|
(
|
||||||||||||
| Deferred credits and other liabilities - other |
|
|
|
|
|
||||||||||||
| December 31, 2023 | |||||||||||||||||
| Marketing Derivatives | |||||||||||||||||
| Other current assets | $ |
|
$ |
|
$ |
|
$ |
(
|
$ |
|
|||||||
| Other long-term assets |
|
|
|
(
|
|
||||||||||||
| Accrued liabilities |
(
|
(
|
|
|
(
|
||||||||||||
| Deferred credits and other liabilities - other |
(
|
(
|
|
|
(
|
||||||||||||
(a)
These amounts do not include collateral. Occidental netted $
1
million of collateral received with brokers against derivative assets and $
25
million of collateral deposited with brokers against derivatives liabilities as of June 30, 2024 and netted $
42
million of collateral received from brokers against derivative assets as of December 31, 2023.
GAINS AND LOSSES ON DERIVATIVES
The following table presents net losses related to Occidental's derivative instruments and the location on the Consolidated Condensed Statements of Operations.
| millions | Three months ended June 30, | Six months ended June 30, | ||||||||||||
| Income Statement Classification | 2024 | 2023 | 2024 | 2023 | ||||||||||
| Marketing Derivatives (included in Net sales) | $ |
(
|
$ |
(
|
$ |
(
|
$ |
(
|
||||||
CREDIT RISK
The majority of Occidental’s counterparty credit risk is related to the physical delivery of energy commodities to its customers and their potential 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 futures contracts through regulated exchanges with select clearinghouses and brokers, which are subject to minimal credit risk, if any.
18
| NOTE 7 - INCOME TAXES | ||
The following table summarizes components of income tax expense:
| Three months ended June 30, | Six months ended June 30, | |||||||||||||
| millions | 2024 | 2023 | 2024 | 2023 | ||||||||||
| Income before income taxes | $ |
|
$ |
|
$ |
|
$ |
|
||||||
| Current | ||||||||||||||
| Federal |
(
|
(
|
(
|
(
|
||||||||||
| State and Local |
(
|
(
|
(
|
(
|
||||||||||
| Foreign |
(
|
(
|
(
|
(
|
||||||||||
| Total current tax expense | $ |
(
|
$ |
(
|
$ |
(
|
$ |
(
|
||||||
| Deferred | ||||||||||||||
| Federal |
|
(
|
|
(
|
||||||||||
| State and Local |
(
|
(
|
|
(
|
||||||||||
| Foreign |
|
(
|
|
(
|
||||||||||
| Total deferred tax benefit (expense) | $ |
|
$ |
(
|
$ |
|
$ |
(
|
||||||
| Total income tax expense | $ |
(
|
$ |
(
|
$ |
(
|
$ |
(
|
||||||
| Income from continuing operations | $ |
|
$ |
|
$ |
|
$ |
|
||||||
| Worldwide effective tax rate |
|
% |
|
% |
|
% |
|
% | ||||||
The worldwide effective tax rates for the periods presented in the table above were primarily driven by Occidental's jurisdictional mix of income. U.S. income is taxed at a U.S. federal statutory rate of 21%, while international income is subject to tax at statutory rates as high as 55%.
INFLATION REDUCTION ACT AND PILLAR TWO
In August 2022, Congress passed the IRA that contains, among other provisions, a corporate book minimum tax on financial statement income, an excise tax on stock buybacks, a methane emissions charge and certain tax incentives related to climate change and clean energy. Occidental is currently evaluating the guidance and proposed regulations. The ultimate impact of the IRA to Occidental will depend on a number of factors including future commodity prices, interpretations and assumptions as well as additional regulatory guidance.
Approximately 140 countries have agreed to a statement in support of the OECD Pillar Two initiative that proposes a 15% global minimum tax on a jurisdiction-by-jurisdiction basis. A number of countries, including European Union member states, the United Kingdom, and Canada have enacted or are in the process of enacting legislation to be effective in 2024, with widespread implementation of a global minimum tax expected by 2025. As the legislation becomes effective in countries in which Occidental operates, its cash tax could increase, and its effective tax rate could be negatively impacted. Occidental will continue to monitor proposed legislation and guidance issued by both the OECD as well as the jurisdictions in which it operates to assess the impact on its tax position. We do not expect the provisions effective in 2024 to have a materially adverse impact on our results of operations, financial position or cash flows.
19
| NOTE 8 - ENVIRONMENTAL LIABILITIES AND EXPENDITURES | ||
Occidental and its subsidiaries and their respective operations are subject to stringent federal, regional, state, provincial, tribal, local and international laws and regulations related to improving or maintaining environmental quality. The laws that require or address environmental remediation, including CERCLA and similar federal, regional, state, provincial, tribal, 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. Occidental 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 Third-Party, Currently Operated, and Closed or Non-Operated Sites, which categories may include NPL Sites. Remedial activities may include one or more of the following: investigation involving sampling, modeling, risk assessment or monitoring; clean-up 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, natural resource damages, punitive damages, civil penalties, injunctive relief and government oversight costs.
ENVIRONMENTAL REMEDIATION
As of June 30, 2024, certain Occidental subsidiaries participated in or monitored remedial activities or proceedings at
158
sites.
The following table presents the current and non-current environmental remediation liabilities of such subsidiaries on a consolidated basis as of June 30, 2024. The current portion of $
131
million is included in
and the remainder of $
857
million is included in deferred credits and other liabilities - environmental remediation liabilities.
These environmental remediation sites are grouped into NPL Sites and the following
three
categories of non-NPL Sites—Third-Party Sites, Currently Operated Sites and Closed or Non-Operated Sites.
| millions, except number of sites | Number of Sites | Remediation Balance | ||||||
| NPL Sites |
|
$ |
|
|||||
| Third-Party Sites |
|
|
||||||
| Currently Operated Sites |
|
|
||||||
| Closed or Non-Operated Sites |
|
|
||||||
| Total |
|
$ |
|
|||||
As of June 30, 2024, environmental remediation liabilities of Occidental subsidiaries exceeded $
10
million each at
16
of the
158
sites described above, and
92
of the sites had liabilities from $
0
to $
1
million each. Based on current estimates, Occidental expects its subsidiaries to expend funds corresponding to approximately
45
% of the period-end remediation balance over the next
to
four years
with the remainder over the subsequent
10
or more years.
Occidental believes its range of reasonably possible additional losses of its subsidiaries beyond those amounts currently recorded for environmental remediation for the
158
environmental sites in the table above could be up to $
2.6
billion. The status of Occidental's involvement with the sites and related significant assumptions have not changed materially since December 31, 2023.
MAXUS ENVIRONMENTAL SITES
A significant portion of aggregate estimates of environmental remediation liabilities and reasonably possible additional losses described above relates to the former DSCC. When OxyChem acquired DSCC in 1986, Maxus agreed to indemnify OxyChem for a number of environmental sites, including the DASS. In June 2016, Maxus and several affiliated companies filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the District of Delaware. In 2023, OxyChem recovered the majority of its remaining claims for indemnified costs from the proceeds of litigation brought by the Maxus Liquidating Trust.
DIAMOND ALKALI SUPERFUND SITE
The EPA has organized the DASS into
four
Operable Units (OUs) for evaluating, selecting and implementing remediation under CERCLA. OxyChem’s current activities in each OU are summarized below, many of which are performed on OxyChem’s behalf by Glenn Springs Holdings, Inc.
OU1
– The Former Diamond Alkali Plant at 80-120 Lister Avenue in Newark: Maxus and its affiliates implemented an interim remedy of OU1 pursuant to a 1990 Consent Decree, for which OxyChem currently performs maintenance and monitoring. The EPA conducts periodic evaluations of the interim remedy for OU1.
OU2
– The Lower
8.3
Miles of the Lower Passaic River: In March 2016, the EPA issued a ROD specifying remedial actions required for OU2. During the third quarter of 2016, and following Maxus’s bankruptcy filing, OxyChem and the EPA
20
entered into an AOC to complete the design of the remedy selected in the ROD. At that time, the EPA sent notice letters to approximately
100
parties notifying them that they were potentially responsible to pay the costs to implement the remedy in OU2 and announced that it would pursue similar agreements with other potentially responsible parties. In June 2018, OxyChem filed a complaint under CERCLA in U.S. District Court for the District of New Jersey against numerous potentially responsible parties seeking contribution and cost recovery of amounts incurred or to be incurred to comply with the AOC and the OU2 ROD, or to perform other remediation activities related to the DASS (2018 Contribution Action). The District Court has not adjudicated OxyChem’s relative share of responsibility for those costs. The EPA has estimated the cost to remediate OU2 to be approximately $
1.4
billion.
OU3
– Newark Bay Study Area, including Newark Bay and Portions of the Hackensack River, Arthur Kill, and Kill van Kull: Maxus and its affiliates initiated a remedial investigation and feasibility study of OU3 pursuant to a 2004 AOC which was amended in 2010. OxyChem is currently performing feasibility study activities in OU3. In September 2022, the EPA listed the Lower Hackensack River (LHR) on the NPL, and this newly listed site comprises several existing NPL sites along a portion of that river that flows into OU3. In January 2024, EPA sent a general notice letter requesting that OxyChem and four other entities coordinate certain investigation activities at the LHR site.
OU4
– The
17
-mile Lower Passaic River Study Area, comprising OU2 and the Upper
9
Miles of the Lower Passaic River: In September 2021, the EPA issued a ROD selecting an interim remedy for the portion of OU4 that excludes OU2 and is located upstream from the Lister Avenue Plant site for which OxyChem inherited legal responsibility. The EPA has estimated the cost to remediate OU4 to be approximately $
440
million. At this time, OxyChem's role or responsibilities under the OU4 ROD, and those of other potentially responsible parties, have not been adjudicated. To provide continued, efficient remediation progress, in January 2022, OxyChem offered to design and implement the interim remedy for OU4 subject to certain conditions, including a condition that the EPA would not seek to bar OxyChem’s right to seek contribution or cost recovery from any other parties that are potentially responsible to pay for the OU4 interim remedy. In March 2022, the EPA sent a notice letter to OxyChem and other parties requesting good faith offers to implement the selected remedies at OU2 and OU4. OxyChem submitted a good faith offer in June 2022, reaffirming the offer to design the remedy for OU4 and offering to enter into additional sequential agreements to remediate OU2 and OU4, subject to similar conditions, including that the EPA not seek to bar OxyChem from pursuing contribution or cost recovery from other responsible parties. The EPA did not accept OxyChem's June 2022 offer. In March 2023, the EPA issued a Unilateral Administrative Order (OU4 UAO) in which it directed and ordered OxyChem to design the EPA’s selected interim remedy for OU4 and to provide approximately $
93
million in financial assurance to secure its performance. Subject to all its defenses, OxyChem is designing the interim remedy in compliance with the OU4 UAO. As a result of OxyChem incurring costs to implement the OU4 UAO, and the EPA's proposal described below to bar OxyChem's contribution claims against various parties, including those asserted in the 2018 Contribution Action, OxyChem filed a cost recovery action under CERCLA in March 2023 in the District Court against multiple parties (2023 Cost Recovery Action).
Natural Resource Trustees
– In addition to the activities of the EPA and OxyChem in the OUs described above, federal and state natural resource trustees are assessing natural resources in the Lower Passaic River and Greater Newark Bay to evaluate potential claims for natural resource damages.
ALDEN LEEDS LITIGATION
In December 2022, the EPA and the DOJ filed a proposed Consent Decree in the Alden Leeds litigation seeking court approval to settle with
85
parties for a total of $
150
million which OxyChem believes is based on an unauthorized, flawed and disproportionate allocation of responsibility, release the settling companies from liability to the United States for remediation costs in DASS OU2 and OU4 and bar OxyChem from pursuing contribution against those parties for remediation costs OxyChem had incurred or may incur in the future to design and implement the remedies in OU2 and OU4, including claims OxyChem asserted in the 2018 Contribution Action. The proposed settlement does not address the liability of entities that were excluded from the settlement for the DASS, including OU2, OU3, OU4 or natural resource damages, or the liability of any settling party with respect to OU3 or natural resource damages. The proposed settlement was subject to a public comment period that closed in March 2023. In January 2024, the DOJ filed a proposed Amended Consent Decree in which it excluded
three
companies from the proposed settlement, among other changes, and a motion to approve the Amended Consent Decree.
OxyChem believes the proposed settlement and Amended Consent Decree rely, improperly, on an allocation report prepared by an EPA contractor in which the contractor purported to assign a disproportionate share of the responsibility for remediation costs in OU2 and OU4 to OxyChem. OxyChem also believes that process was unreasonably limited in scope and unreliably based on voluntary reporting by the settling parties, instead of sworn evidence, publicly available sampling results and historical documents reflecting the operating history and disposal practices of the
82
parties that the EPA proposes to release in this settlement.
OxyChem intends to challenge vigorously the proposed settlement and Amended Consent Decree, as well as the allocation report and process upon which they are based, and to seek contribution and cost recovery from other potentially
21
responsible parties for remediation costs it has incurred or may incur at the DASS. OxyChem filed its response to the motion to approve the Amended Consent Decree on April 1, 2024, to which other parties filed replies in May 2024.
OxyChem does not know when the District Court will rule on the DOJ’s motion to approve the Amended Consent Decree. If the Amended Consent Decree is approved by the District Court and not overturned on appeal, then, notwithstanding OxyChem’s vigorous, good faith effort to contest the settlement proposed in the Alden Leeds litigation, the EPA could attempt to compel OxyChem to bear substantially all the estimated cost to design and implement the OU2 and OU4 remedies. Such a result could have a material adverse impact on OxyChem and Occidental’s consolidated results of operations in the period recorded.
While the remedies for OU2 and OU4 are expected to take over
ten years
to complete, the EPA may seek to require OxyChem to provide additional financial assurance. In the OU4 UAO, the EPA directed OxyChem to post financial assurance in the amount of approximately $
93
million. Subject to all defenses, OxyChem has complied with this directive. The amount of any additional financial assurance is not subject to estimation at this time. It is uncertain when or to what extent the EPA may take action to compel OxyChem to perform further remediation in OU2 or OU4 or the amount of financial assurance the EPA may attempt to require OxyChem to post. For further information on the Alden Leeds litigation, see
Note 9 - Lawsuits, Claims, Commitments and Contingencies
.
OTHER INFORMATION
For the DASS, OxyChem has accrued a reserve relating to its estimated allocable share of the costs to perform the maintenance and monitoring required in the OU1 Consent Decree, the design and implementation of remedies selected in the OU2 ROD and AOC and the OU4 ROD and OU4 UAO, and the remedial investigation and feasibility study required in OU3.
OxyChem’s accrued environmental remediation reserve does not reflect the potential for additional remediation costs or natural resource damages for the DASS that OxyChem believes are not reasonably estimable. OxyChem’s ultimate liability at the DASS may be higher or lower than the reserved amount and the reasonably possible additional losses, and is subject to final design plans, further action by the EPA and natural resource trustees, and the resolution of OxyChem's allocable share with other potentially responsible parties, among other factors.
OxyChem continues to evaluate the estimated costs currently recorded for remediation at the DASS as well as the range of reasonably possible additional losses beyond those amounts currently recorded. Given the complexity and extent of the remediation efforts, estimates of the remediation costs may increase or decrease over time as new information becomes available.
| NOTE 9 - 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, regional, state, provincial, tribal, local and international environmental laws. These environmental proceedings seek funding or performance of remediation and, in some cases, compensation for alleged property damage, natural resource damages, punitive damages, civil penalties, injunctive relief and government oversight costs. Usually Occidental or such subsidiaries are among many companies in these environmental proceedings and have to date been successful in sharing remediation 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 or its subsidiary retains liability or indemnifies the other party for conditions that existed prior to the transaction.
In accordance with applicable accounting guidance, Occidental or its subsidiaries accrue reserves for outstanding lawsuits, claims and proceedings when it is probable that a liability has been incurred and the liability can be reasonably estimated. Reserves for matters, other than for the arbitration award (disclosed below), tax matters or environmental remediation, that satisfy these criteria as of June 30, 2024 and 2023 were not material to Occidental’s Consolidated Condensed Balance Sheets.
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 will reassess the probability and estimability of contingent losses as new information becomes available.
22
ANDES ARBITRATION
As previously disclosed, on April 5, 2024, Andes and the Occidental entities named in the pending actions related to the Andes Arbitration executed a confidential final settlement in which the parties agreed to dismiss all pending legal actions. The settlement resulted in a gain of $
182
million, net of taxes, in discontinued operations.
ALDEN LEEDS AND OTHER LITIGATION
As described in
Note 8 – Environmental Liabilities and Expenditures
, OxyChem intends to challenge vigorously the proposed settlement and Amended Consent Decree in the Alden Leeds litigation, as well as the allocation report and process upon which they are based. In the 2018 Contribution Action and 2023 Cost Recovery Action, OxyChem also intends to defend and prosecute vigorously its right to seek contribution and cost recovery from all potentially responsible parties to pay remediation costs in the DASS and to seek a judicial allocation of responsibility under CERCLA. The 2018 Contribution Action and the 2023 Cost Recovery Action are currently stayed pending the outcome of the Alden Leeds litigation. As the Alden Leeds litigation is in its early stages, OxyChem is unable to estimate the timing of the District Court’s decision, its outcome, or the outcome of any appeals from the District Court’s decision.
TAX MATTERS AND DISPUTES
During the course of its operations, Occidental is subject to audit by tax authorities for varying periods in various federal, state, local and international tax jurisdictions. Tax years through 2021 for U.S. federal income tax purposes have been audited by the IRS pursuant to its Compliance Assurance Program and subsequent taxable years are currently under review. Tax years through 2018 have been audited for state income tax purposes. There are no outstanding significant audit matters in international jurisdictions. During the course of tax audits, disputes have arisen and other disputes may arise as to facts and matters of law.
For Anadarko, its taxable years through 2014 and tax year 2016 for U.S. federal tax purposes have been audited and closed by the IRS. Tax years 2015 and 2017 through 2019 have been audited by the IRS but remain open pending the outcome of the Tronox U.S. Tax Court litigation discussed below. Tax years through 2010 have been audited for state income tax purposes. There is one outstanding significant tax matter in an international jurisdiction related to a discontinued operation. As stated above, during the course of tax audits, disputes have arisen and other disputes may arise as to facts and matters of law.
Other than the dispute discussed below, Occidental believes that the resolution of these outstanding tax disputes would not have a material adverse effect on its consolidated financial position or results of operations.
Anadarko received an $
881
million tentative refund in 2016 related to its $
5.2
billion Tronox Adversary Proceeding settlement payment in 2015. In September 2018, Anadarko received a statutory notice of deficiency from the IRS disallowing the net operating loss carryback and rejecting Anadarko’s refund claim. As a result, Anadarko filed a petition with the U.S. Tax Court to dispute the disallowances in November 2018. Trial was held in May 2023.The parties filed post-trial briefs throughout 2023 and 2024. Closing arguments were held in May 2024. An opinion by the Tax Court could be issued at any time. If any tax liability is due as a result of the Tax Court’s opinion, it must be fully bonded or paid in full within 90 days of the entry of decision by the Tax Court. If an appeal is not pursued by Anadarko, any resulting tax deficiency will be assessed by the IRS and would be due within 30 days of receiving a formal notice of tax assessment.
In accordance with ASC 740’s guidance on the accounting for uncertain tax positions, Occidental has recorded no tax benefit on the tentative cash tax refund of $
881
million. Additionally, Occidental has recorded no tax benefit on approximately $
500
million of additional cash tax benefits realized from the utilization of tax attributes generated as a result of the deduction of the $
5.2
billion Tronox Adversary Proceeding settlement payment in 2015. As a result, should Occidental not ultimately prevail on the issue, there would be no additional tax expense recorded relative to this position for financial statement purposes other than future interest. However, in that event, as of June 30, 2024, Occidental would be required to repay approximately $
1.4
billion in federal taxes, $
28
million in state taxes and accrued interest of $
671
million. A
liability for the taxes and interest is included in deferred credits and other liabilities - other.
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 or its subsidiaries. These indemnities usually are contingent upon the other party incurring liabilities that reach specified thresholds. As of June 30, 2024, 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.
23
| NOTE 10 - EARNINGS PER SHARE AND EQUITY | ||
The following table presents the calculation of basic and diluted EPS attributable to common stockholders:
| Three months ended June 30, | Six months ended June 30, | |||||||||||||
| millions except per-share amounts | 2024 | 2023 | 2024 | 2023 | ||||||||||
| Income from continuing operations | $ |
|
$ |
|
$ |
|
$ |
|
||||||
|
Discontinued operations, net of taxes
(a)
|
|
|
|
|
||||||||||
| Net income | $ |
|
$ |
|
$ |
|
$ |
|
||||||
| Less: Income attributable to noncontrolling interest |
(
|
|
(
|
|
||||||||||
| Less: Preferred stock dividends and redemption premiums |
(
|
(
|
(
|
(
|
||||||||||
| Net income attributable to common stock | $ |
|
$ |
|
$ |
|
$ |
|
||||||
| Less: Net income allocated to participating securities |
(
|
(
|
(
|
(
|
||||||||||
| Net income, net of participating securities | $ |
|
$ |
|
$ |
|
$ |
|
||||||
| Weighted-average number of basic shares |
|
|
|
|
||||||||||
| Basic income per common share | $ |
|
$ |
|
$ |
|
$ |
|
||||||
| Net income attributable to common stock | $ |
|
$ |
|
$ |
|
$ |
|
||||||
| Less: Net income allocated to participating securities |
(
|
(
|
(
|
(
|
||||||||||
| Net income, net of participating securities | $ |
|
$ |
|
$ |
|
$ |
|
||||||
| Weighted-average number of basic shares |
|
|
|
|
||||||||||
| Dilutive securities |
|
|
|
|
||||||||||
| Dilutive effect of potentially dilutive securities |
|
|
|
|
||||||||||
| Diluted income per common share | $ |
|
$ |
|
$ |
|
$ |
|
||||||
For the three and six months ended June 30, 2024 and 2023, there were
no
Occidental common stock warrants nor options that were excluded from diluted shares.
The following table presents Occidental's common share activity, including exercises of warrants, and other transactions in Occidental's common stock in 2024:
| Period |
Exercise of Warrants
(a)
|
Other
(b)
|
Treasury Stock Purchases
(c)
|
Common Stock Outstanding
(d)
|
||||||||||
| December 31, 2023 |
|
|||||||||||||
| First Quarter 2024 |
|
|
|
|
||||||||||
| Second Quarter 2024 |
|
|
(
|
|
||||||||||
| Total |
|
|
(
|
|
||||||||||
(a)
Approximately $
487
million of cash was received in the first six months of 2024 from of the exercise of common stock warrants.
(b)
Consists of issuances from the 2015 long-term incentive plan, the OPC savings plan and the dividend reinvestment plan.
(c)
Included purchases of shares from the trustee of Occidental's defined contribution savings plan that are not part of publicly announced plans or programs.
(d)
As of June 30, 2024, Occidental has
77.3
million outstanding warrants with a strike of $
22.00
per share and
83.9
million of warrants with a strike of $
59.62
per share.
24
| NOTE 11 - SEGMENTS | ||
Occidental conducts its operations through
three
segments: (1) oil and gas; (2) chemical; and (3) midstream and marketing. Income taxes, interest income, interest expense, environmental remediation expenses and unallocated corporate expenses are included under corporate and eliminations. 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 table presents Occidental’s industry segments:
| millions |
Oil and gas
(a)
|
Chemical |
Midstream and marketing
(b)
|
Corporate and eliminations
(c)
|
Total | ||||||||||||
| Three months ended June 30, 2024 | |||||||||||||||||
| Net sales | $ |
|
$ |
|
$ |
|
$ |
(
|
$ |
|
|||||||
| Income (loss) before income taxes | $ |
|
$ |
|
$ |
|
$ |
(
|
$ |
|
|||||||
| Income tax expense |
|
|
|
(
|
(
|
||||||||||||
| Income (loss) from continuing operations | $ |
|
$ |
|
$ |
|
$ |
(
|
$ |
|
|||||||
| Three months ended June 30, 2023 | |||||||||||||||||
| Net sales | $ |
|
$ |
|
$ |
|
$ |
(
|
$ |
|
|||||||
| Income (loss) before income taxes | $ |
|
$ |
|
$ |
(
|
$ |
(
|
$ |
|
|||||||
| Income tax expense |
|
|
|
(
|
(
|
||||||||||||
| Income (loss) from continuing operations | $ |
|
$ |
|
$ |
(
|
$ |
(
|
$ |
|
|||||||
| millions |
Oil and gas
(a)
|
Chemical |
Midstream and marketing
(b)
|
Corporate and eliminations
(c)
|
Total | ||||||||||||
| Six months ended June 30, 2024 | |||||||||||||||||
| Net sales | $ |
|
$ |
|
$ |
|
$ |
(
|
$ |
|
|||||||
| Income (loss) before income taxes | $ |
|
$ |
|
$ |
|
$ |
(
|
$ |
|
|||||||
| Income tax expense |
|
|
|
(
|
(
|
||||||||||||
| Income (loss) from continuing operations | $ |
|
$ |
|
$ |
|
$ |
(
|
$ |
|
|||||||
| Six months ended June 30, 2023 | |||||||||||||||||
| Net sales | $ |
|
$ |
|
$ |
|
$ |
(
|
$ |
|
|||||||
| Income (loss) before income taxes | $ |
|
$ |
|
$ |
(
|
$ |
(
|
$ |
|
|||||||
| Income tax expense |
|
|
|
(
|
(
|
||||||||||||
| Income (loss) from continuing operations | $ |
|
$ |
|
$ |
(
|
$ |
(
|
$ |
|
|||||||
(a)
The three and six months ended June 30, 2024 included a $
10
million and $
54
million international legal settlement provision, respectively. The
three and six months ended June 30, 2023
included a $
180
million impairment related to undeveloped acreage in the northern non-core area of the Powder River Basin and a $
29
million impairment related to an equity method investment in the Black Butte Coal Company. The six months ended June 30, 2023 included a $
26
million litigation settlement gain.
(b)
The three and six months ended June 30, 2024 included $
35
million
and $
157
million of income from equity investments respectively, related to Occidental's share of WES's gains on asset divestitures. The three and six months ended June 30, 2024 also included $
5
million of net derivative gains and $
86
million of net derivative losses, respectively. The three and six months ended June 30, 2023 included $
48
million and $
40
million of net derivative gains, respectively.
25
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read together with the Consolidated Condensed Financial Statements and the notes to the Consolidated Condensed Financial Statements, which are included in this report in Part I, Item 1; the information set forth in Risk Factors under Part II, Item 1A; the Consolidated Financial Statements and the notes to the Consolidated Financial Statements, which are included in Part II, Item 8 of Occidental's 2023 Form 10-K; and the information set forth in Risk Factors under Part I, Item 1A of the 2023 Form 10-K.
| INDEX | PAGE | ||||
26
| CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS | ||
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, including, but not limited to: any projections of earnings, revenue or other financial items or future financial position or sources of financing; 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,” "commit," "advance," “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 an earlier date is specified. Unless legally required, Occidental does not undertake any obligation to update, modify or withdraw any forward-looking statements as a result of new information, future events or otherwise.
Actual outcomes or results may differ from anticipated results, sometimes materially. Forward-looking and other statements regarding Occidental's sustainability efforts and aspirations are not an indication that these statements are necessarily material to investors or require disclosure in Occidental's filings with the SEC. In addition, historical, current and forward-looking sustainability-related statements may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve and assumptions that are subject to change in the future, including future rulemaking. Factors that could cause results to differ from those projected or assumed in any forward-looking statement include, but are not limited to: general economic conditions, including slowdowns and recessions, domestically or internationally; Occidental’s indebtedness and other payment obligations, including the need to generate sufficient cash flows to fund operations; Occidental’s ability to successfully monetize select assets and repay or refinance debt and the impact of changes in Occidental’s credit ratings or future increases in interest rates; assumptions about energy markets; global and local commodity and commodity-futures pricing fluctuations and volatility; supply and demand considerations for, and the prices of, Occidental’s products and services; actions by OPEC and non-OPEC oil producing countries; results from operations and competitive conditions; future impairments of Occidental's proved and unproved oil and gas properties or equity investments, or write-downs of productive assets, causing charges to earnings; unexpected changes in costs; inflation, its impact on markets and economic activity and related monetary policy actions by governments in response to inflation; availability of capital resources, levels of capital expenditures and contractual obligations; the regulatory approval environment, including Occidental's ability to timely obtain or maintain permits or other government approvals, including those necessary for drilling and/or development projects; Occidental's ability to successfully complete, or any material delay of, field developments, expansion projects, capital expenditures, efficiency projects, acquisitions or divestitures; risks associated with acquisitions, mergers and joint ventures, such as difficulties integrating businesses, uncertainty associated with financial projections, projected synergies, restructuring, increased costs and adverse tax consequences; uncertainties and liabilities associated with acquired and divested properties and businesses; uncertainties about the estimated quantities of oil, NGL and natural gas reserves; lower-than-expected production from development projects or acquisitions; Occidental’s ability to realize the anticipated benefits from prior or future streamlining actions to reduce fixed costs, simplify or improve processes and improve Occidental’s competitiveness; exploration, drilling and other operational risks; disruptions to, capacity constraints in, or other limitations on the pipeline systems that deliver Occidental’s oil and natural gas and other processing and transportation considerations; volatility in the securities, capital or credit markets, including capital market disruptions and instability of financial institutions; government actions, war (including the Russia-Ukraine war and conflicts in the Middle East) and political conditions and events; health, safety and environmental (HSE) risks, costs and liability under existing or future federal, regional, state, provincial, tribal, local and international HSE laws, regulations and litigation (including related to climate change or remedial actions or assessments); legislative or regulatory changes, including changes relating to hydraulic fracturing or other oil and natural gas operations, retroactive royalty or production tax regimes and deep-water and onshore drilling and permitting regulations; Occidental's ability to recognize intended benefits from its business strategies and initiatives, such as Occidental's low-carbon ventures businesses or announced greenhouse gas emissions reduction targets or net-zero goals; potential liability resulting from pending or future litigation, government investigations and other proceedings; disruption or interruption of production or manufacturing or facility damage due to accidents, chemical releases, labor unrest, weather, power outages, natural disasters, cyber-attacks, terrorist acts or insurgent activity; the scope and duration of global or regional health pandemics or epidemics, and actions taken by government authorities and other third parties in connection therewith; the creditworthiness and performance of Occidental's counterparties, including financial institutions, operating partners and other parties; failure of risk management; Occidental’s ability to retain and hire key personnel; supply, transportation and labor constraints; reorganization or restructuring of Occidental’s operations; changes in state, federal or international tax rates; and actions by third parties that are beyond Occidental's control.
Additional information concerning these and other factors that may cause Occidental’s results of operations and financial position to differ from expectations can be found in Occidental’s other filings with the SEC, including Occidental’s Annual Report on Form 10-K for the year ended December 31, 2023, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.
27
| CURRENT BUSINESS OUTLOOK | ||
Occidental’s operations, financial condition, cash flows and levels of expenditures are highly dependent on oil prices and, to a lesser extent, NGL and natural gas prices, the Midland-to-Gulf-Coast oil spreads, chemical product prices and inflationary pressures in the macro-economic environment. The average WTI price per barrel for the three months ended June 30, 2024 was $80.56, compared
to $76.96 for the three months ended March 31, 2024 and $73.83 for the three months ended June 30, 2023. Changes in prices could result in adjustments in capital investment levels and how such capital is allocated, which could impact production volumes. It is expected that the price of oil will be volatile for the foreseeable future given the current geopolitical risks, evolving macro-economic environment that impacts energy demand, future actions by OPEC and non-OPEC oil producing countries, the Russia-Ukraine war and the conflicts in the Middle East, and the U.S. Government's management of the U.S. Strategic Petroleum Reserve. Seasonality is not a primary driver of changes in Occidental's consolidated quarterly earnings during the year.
Occidental works to manage inflation impacts by capitalizing on operational efficiencies, proactive contract management and working closely with vendors to secure the supply of critical materials. As of June 30, 2024, substantially all of Occidental's outstanding debt was fixed rate.
2024 PRIORITIES
Occidental’s capital and operational priorities for 2024 are intended to maximize cash flow through focused investments in short and medium-cycle projects to enhance current year and future cash flows. Occidental intends to utilize future operating cash flows to:
■
Maintain production base to preserve asset base integrity and longevity;
■
Deliver a sustainable and growing dividend;
■
Enhance its asset base with new investments in its cash-generative energy and chemical businesses as well as emerging low-carbon businesses;
■
Advance technologies and business solutions to help drive a sustainable low-carbon future;
■
Strengthen Occidental’s U.S. onshore portfolio with premier Permian Basin assets through the CrownRock Acquisition, which is expected to be immediately cash flow accretive;
■
Complete a $4.5 billion to $6 billion asset divestiture program within 18 months of closing the CrownRock Acquisition, and;
■
Apply the proceeds from asset divestitures to deleveraging until principal debt is below $15 billion.
During the first six months of 2024, Occidental generated cash flow from operations of $4.4 billion and incurred capital expenditures of $3.6 billion.
DEBT
As of June 30, 2024, Occidental’s long-term debt was rated Baa3 by Moody’s Investors Service, BBB- by Fitch Ratings and BB+ by Standard and Poor’s. Any downgrade in credit ratings could impact Occidental's ability to access capital markets and increase its cost of capital. In addition, Occidental or its subsidiaries may be requested, elect to provide or in some cases be required to provide collateral in the form of cash, letters of credit, surety bonds or other acceptable support as financial assurance of their performance and payment obligations under certain contractual arrangements, such as pipeline transportation contracts, oil and gas purchase contracts and certain derivative instruments; certain permits, including with respect to carbon capture, utilization and storage activities; and environmental remediation matters. In February 2024, Occidental entered into a Third Amended and Restated Credit Agreement for the RCF extending the maturity date to June 30, 2028, and in May 2024, Occidental amended the RCF to increase its borrowing capacity by an additional $150 million to $4.15 billion. No amounts were drawn under the facility as of June 30, 2024.
As of June 30, 2024, Occidental has $1.2 billion of debt maturities due in the next 12 months. Subsequent to June 30, 2024, in July 2024, Occidental repaid $402 million of current maturities and
amended and extended the maturity date of its existing receivables securitization facility to July 30, 2027
.
28
SHAREHOLDER RETURNS
During the six months ended June 30, 2024, Occidental declared dividends to common shareholders of $398 million or $0.44 per share.
CROWNROCK ACQUISITION
In December 2023, Occidental entered into an agreement to purchase CrownRock L.P. for total consideration of approximately $12.4 billion, consisting of approximately $9.4 billion of cash consideration (inclusive of certain working capital and other customary purchase price adjustments), approximately 29.6 million shares of common stock of Occidental, and the assumption of $1.2 billion of existing debt of CrownRock. The acquisition closed August 1, 2024, adding to Occidental's oil and gas portfolio in the Permian Basin.
In connection with the CrownRock Acquisition, Occidental issued new debt comprised of a combination of the 364-day and two-year term loans totaling $4.7 billion and senior unsecured notes totaling $5.0 billion in July 2024. Occidental's credit ratings were reaffirmed by credit agencies post bond offering launch. The term loans and notes issued comprised the following tranches:
|
millions
|
Principal
|
||||
|
364 day term loan due in 2025
|
$ | 2,000 | |||
|
2 year term loan due in 2026
|
2,700 | ||||
|
5.000% senior notes due in 2027
|
600 | ||||
|
5.200% senior notes due in 2029
|
1,200 | ||||
|
5.375% senior notes due in 2032
|
1,000 | ||||
|
5.550% senior notes due in 2034
|
1,200 | ||||
|
6.050% senior notes due in 2054
|
1,000 | ||||
|
Total borrowings
|
$ | 9,700 | |||
Additionally, Occidental plans to repay $868 million of CrownRock debt due in 2025 in August 2024. Occidental intends to repay at least $4.5 billion of debt within 12 months of closing the CrownRock Acquisition with proceeds from the divestiture program and excess cash flows.
DIVESTITURE PROGRAM
In the fourth quarter of 2023, Occidental announced a divestiture program between $4.5 billion and $6.0 billion in connection with the CrownRock Acquisition, which Occidental expects to complete within 18 months of closing the CrownRock Acquisition.
In July 2024, Occidental entered into an agreement to sell certain Delaware Basin assets in Texas and New Mexico for approximately $818 million. The sales proceeds will be used to repay debt. The transaction is expected to close in the third quarter of 2024, subject to customary closing conditions. As of the date of this filing, Occidental has closed or announced divestitures totaling $970 million in 2024.
29
| CONSOLIDATED RESULTS OF OPERATIONS AND ITEMS AFFECTING COMPARABILITY | ||
The following table sets forth earnings of each operating segment and corporate items:
| millions | Three months ended June 30, 2024 | % Change | Three months ended March 31, 2024 | ||||||||
| Net income | |||||||||||
|
Oil and gas
(a)
|
$ | 1,639 | 32 | % | $ | 1,238 | |||||
|
Chemical
(a)
|
296 | 17 | % | 254 | |||||||
|
Midstream and marketing
(a)
|
116 | 452 | % | (33) | |||||||
| Total | 2,051 | 41 | % | 1,459 | |||||||
|
Unallocated Corporate Items
(a)
|
|||||||||||
| Interest expense, net | (252) | 11 | % | (284) | |||||||
| Income tax expense | (465) | (53) | % | (304) | |||||||
| Other items, net | (164) | 1 | % | (165) | |||||||
| Income from continuing operations | 1,170 | 66 | % | 706 | |||||||
|
Discontinued operations, net of taxes
(a)
|
— | 182 | |||||||||
| Net income | 1,170 | 32 | % | 888 | |||||||
| Less: Net income attributable to noncontrolling interest | (8) | — | |||||||||
| Less: Preferred stock dividends and redemption premiums | (170) | — | % | (170) | |||||||
| Net income attributable to common stockholders | $ | 992 | 38 | % | $ | 718 | |||||
| Net income per share attributable to common stockholders - diluted | $ | 1.03 | 37 | % | $ | 0.75 | |||||
(a)
Refer to the Items Affecting Comparability table which sets forth items affecting Occidental's earnings that vary widely and unpredictably in nature, timing and amount.
| millions | Six months ended June 30, 2024 | % Change | Six months ended June 30, 2023 | ||||||||
| Net income | |||||||||||
|
Oil and gas
(a)
|
$ | 2,877 | 7 | % | $ | 2,699 | |||||
| Chemical | 550 | (39) | % | 908 | |||||||
|
Midstream and marketing
(a)
|
83 | 396 | % | (28) | |||||||
| Total | 3,510 | (2) | % | 3,579 | |||||||
|
Unallocated Corporate Items
(a)
|
|||||||||||
| Interest expense, net | (536) | (15) | % | (468) | |||||||
| Income tax expense | (769) | 18 | % | (938) | |||||||
| Other items, net | (329) | (558) | % | (50) | |||||||
| Income from continuing operations | 1,876 | (12) | % | 2,123 | |||||||
|
Discontinued operations, net of taxes
(a)
|
182 | — | |||||||||
| Net income | 2,058 | (3) | % | 2,123 | |||||||
| Less: Net income attributable to noncontrolling interest | (8) | — | |||||||||
| Less: Preferred stock dividends and redemption premiums | (340) | 36 | % | (535) | |||||||
| Net income attributable to common stockholders | $ | 1,710 | 8 | % | $ | 1,588 | |||||
| Net income per share attributable to common stockholders - diluted | $ | 1.78 | 9 | % | $ | 1.63 | |||||
(a)
Refer to the Items Affecting Comparability table which sets forth items affecting Occidental's earnings that vary widely and unpredictably in nature, timing and amount.
30
ITEMS AFFECTING COMPARABILITY
The following table sets forth items affecting the comparability of Occidental's earnings that vary widely and unpredictably in nature, timing and amount:
| Three months ended | Six months ended | |||||||||||||
| millions | June 30, 2024 | March 31, 2024 | June 30, 2024 | June 30, 2023 | ||||||||||
| Oil and gas | ||||||||||||||
| Legal settlements | $ | (10) | $ | (44) | $ | (54) | $ | 26 | ||||||
| Asset impairments | — | — | — | (209) | ||||||||||
| Total oil and gas | (10) | (44) | (54) | (183) | ||||||||||
| Chemical | ||||||||||||||
| Legal settlements | — | (6) | (6) | — | ||||||||||
| Total Chemical | — | (6) | (6) | — | ||||||||||
| Midstream and marketing | ||||||||||||||
|
Asset sale gain and other, net
(a)
|
35 | 122 | 157 | — | ||||||||||
| TerraLithium fair value gain | 27 | — | 27 | — | ||||||||||
|
Asset impairments and other charges
(a)
|
— | — | — | (26) | ||||||||||
|
Derivative gains (losses), net
(a)
|
5 | (91) | (86) | 40 | ||||||||||
| Total midstream and marketing | 67 | 31 | 98 | 14 | ||||||||||
| Corporate | ||||||||||||||
|
Acquisition-related costs
(b)
|
(29) | (56) | (85) | — | ||||||||||
| Maxus receivable | — | — | — | 260 | ||||||||||
| Total corporate | (29) | (56) | (85) | 260 | ||||||||||
| Income tax impact on items affecting comparability | (9) | 7 | (2) | (20) | ||||||||||
| Income tax impact on Algeria contract renewal | (20) | — | (20) | (68) | ||||||||||
| Income (loss) | (1) | (68) | (69) | 3 | ||||||||||
| Preferred redemption premiums | — | — | — | (145) | ||||||||||
| Discontinued operations, net of taxes | — | 182 | 182 | — | ||||||||||
| Total | $ | (1) | $ | 114 | $ | 113 | $ | (142) | ||||||
(a)
Included amounts from income from equity investments and other in the Consolidated Condensed Statement of Operations.
(b)
Included $15 million of financing costs and $14 million of transactions costs for the
three months ended June 30, 2024 and
$44 million of financing costs and $12 million of transaction costs for the
three months ended March 31, 2024
related to the CrownRock Acquisition.
Q2 2024 compared to Q1 2024
Excluding the impact of items affecting comparability, net income for the three months ended June 30, 2024, compared to the three months ended March 31, 2024, reflected higher domestic crude oil volumes and prices, partially offset by lower domestic gas prices in the oil and gas segment, and higher gas marketing income as a result of improved gas transportation spreads from the Permian to the Gulf Coast in the midstream and marketing segment.
YTD 2024 compared to YTD 2023
Excluding the impact of items affecting comparability, net income for the six months ended June 30, 2024, compared to the same period in 2023, reflected lower realized prices across most products in the chemical segment and lower domestic natural gas prices and crude oil volumes in the oil and gas segment, partially offset by higher product demand and favorable energy and ethylene prices in the chemical segment and higher domestic crude oil prices in the oil and gas segment.
31
SELECTED STATEMENTS OF OPERATIONS ITEMS
| Three months ended | Six months ended | |||||||||||||
| millions | June 30, 2024 | March 31, 2024 | June 30, 2024 | June 30, 2023 | ||||||||||
| Net sales | $ | 6,817 | $ | 5,975 | $ | 12,792 | $ | 13,927 | ||||||
| Interest, dividends and other income | $ | 34 | $ | 36 | $ | 70 | $ | 57 | ||||||
| Gains (losses) on sale of assets, net | $ | 28 | $ | (1) | $ | 27 | $ | 5 | ||||||
| Oil and gas operating expense | $ | 1,179 | $ | 1,161 | $ | 2,340 | $ | 2,211 | ||||||
| Transportation and gathering expense | $ | 405 | $ | 353 | $ | 758 | $ | 759 | ||||||
| Chemical and midstream cost of sales | $ | 821 | $ | 742 | $ | 1,563 | $ | 1,536 | ||||||
| Purchased commodities | $ | 89 | $ | 86 | $ | 175 | $ | 988 | ||||||
| Selling, general and administrative expenses | $ | 259 | $ | 259 | $ | 518 | $ | 518 | ||||||
| Other operating and non-operating expense | $ | 344 | $ | 410 | $ | 754 | $ | 318 | ||||||
| Taxes other than on income | $ | 265 | $ | 235 | $ | 500 | $ | 572 | ||||||
| Depreciation, depletion and amortization | $ | 1,775 | $ | 1,693 | $ | 3,468 | $ | 3,430 | ||||||
| Asset impairments and other charges | $ | — | $ | — | $ | — | $ | 209 | ||||||
| Acquisition-related costs | $ | 14 | $ | 12 | $ | 26 | $ | — | ||||||
| Exploration expense | $ | 83 | $ | 66 | $ | 149 | $ | 204 | ||||||
| Interest and debt expense, net | $ | 252 | $ | 284 | $ | 536 | $ | 468 | ||||||
| Income from equity investments and other | $ | 242 | $ | 301 | $ | 543 | $ | 285 | ||||||
| Income tax expense | $ | (465) | $ | (304) | $ | (769) | $ | (938) | ||||||
| Discontinued operations, net of taxes | $ | — | $ | 182 | $ | 182 | $ | — | ||||||
Q2 2024 compared to Q1 2024
Net sales increased for the three months ended June 30, 2024, compared to the three months ended March 31, 2024, primarily due to higher domestic crude oil prices and volumes in the oil and gas segment. The increase in volume was primarily due to production resuming in Eastern Gulf of Mexico in April 2024, which was previously shut-in due to a third-party outage. Net sales also improved because of improved gas transportation spreads from the Permian to the Gulf Coast in the midstream and marketing segment.
Income from discontinued operations, net of taxes for the three months ended March 31, 2024 resulted from a legal settlement related to the Andes Arbitration. For further information on the Andes Arbitration, see
Note 9 - Lawsuits, Claims, Commitments and Contingencies
.
YTD 2024 compared to YTD 2023
Net sales decreased for the six months ended June 30, 2024, compared to the same period in 2023, primarily due to the expiration of supply contracts in the midstream and marketing segment, which also decreased purchased commodities for the same periods, lower realized prices across most products in the chemical segment and lower domestic natural gas prices and lower domestic oil volumes in the oil and gas segment, due to a third-party shut-in in Eastern Gulf of Mexico that impacted production in 2024, partially offset by higher crude oil prices.
Purchased commodities decreased for the six months ended June 30, 2024, compared to the same period in 2023, due to lower volumes on third-party crude purchases as certain crude supply contracts expired in 2023 in the midstream and marketing segment.
Asset impairments and other charges for the six months ended June 30, 2023 included a pre-tax impairment of $180 million related to undeveloped acreage in the northern non-core area of the Powder River Basin and a $29 million impairment related to an equity method investment in the Black Butte Coal Company.
Other operating and non-operating expense increased for the six months ended June 30, 2024, compared to the same period in 2023, due to the $260 million remeasurement of the valuation allowance for the Maxus Liquidating Trust recorded in 2023 and higher legal settlement costs and increases in compensation costs in 2024.
Income from equity investments and other increased for the six months ended June 30, 2024, compared to the same period in 2023, primarily due to gains on sales of assets recognized by WES, an equity method investee.
32
I
ncome from discontinued operations, net of taxes for the six months ended June 30, 2024 resulted from a legal settlement related to the Andes Arbitration. For further information on the Andes Arbitration, see
Note 9 - Lawsuits, Claims, Commitments and Contingencies
.
| SEGMENT RESULTS OF OPERATIONS | ||
SEGMENT RESULTS OF OPERATIONS
Occidental’s principal businesses consist of three reporting segments: oil and gas, chemical and midstream and marketing. The oil and gas segment explores for, develops and produces oil and condensate, NGL and natural gas. The chemical segment is operated by our subsidiary Occidental Chemical Corporation (OxyChem), which mainly manufactures and markets basic chemicals and vinyls. The midstream and marketing segment purchases, markets, gathers, processes, transports and stores oil (which includes condensate), NGL, natural gas, CO
2
and power. It also optimizes its transportation and storage capacity and invests in entities that conduct similar activities such as WES.
The midstream and marketing segment also includes Occidental's low-carbon ventures businesses. Occidental's low-carbon ventures businesses seek to leverage Occidental’s legacy of carbon management expertise to develop carbon capture, utilization and storage projects, including the commercialization of direct air capture technology, invest in other low-carbon technologies intended to reduce greenhouse gas emissions from Occidental's operations and strategically partner with other industries to help reduce their emissions.
OIL AND GAS SEGMENT
The following table sets forth the average sales volumes per day for oil and NGL in Mbbl and for natural gas in MMcf:
| Three months ended | Six months ended | |||||||||||||
| June 30, 2024 | March 31, 2024 | June 30, 2024 | June 30, 2023 | |||||||||||
| Sales Volumes per Day | ||||||||||||||
| Oil (Mbbl) | ||||||||||||||
| United States | 553 | 487 | 520 | 535 | ||||||||||
| International | 104 | 109 | 106 | 108 | ||||||||||
| NGL (Mbbl) | ||||||||||||||
| United States | 249 | 242 | 246 | 247 | ||||||||||
| International | 39 | 38 | 38 | 32 | ||||||||||
| Natural Gas (MMcf) | ||||||||||||||
| United States | 1,371 | 1,284 | 1,326 | 1,317 | ||||||||||
| International | 518 | 511 | 519 | 458 | ||||||||||
|
Total Sales Volumes (Mboe)
(a)
|
1,260 | 1,175 | 1,218 | 1,218 | ||||||||||
(a)
Natural gas volumes have been converted to Boe based on energy content of six Mcf of gas to one barrel of oil. Conversion to Boe does not necessarily result in price equivalency.
33
The following table presents information about Occidental's average realized prices and index prices:
| Three months ended | Six months ended | |||||||||||||
| June 30, 2024 | March 31, 2024 | June 30, 2024 | June 30, 2023 | |||||||||||
| Average Realized Prices | ||||||||||||||
| Oil ($/Bbl) | ||||||||||||||
| United States | $ | 79.79 | $ | 75.54 | $ | 77.80 | $ | 73.17 | ||||||
| International | $ | 80.40 | $ | 78.29 | $ | 79.32 | $ | 77.60 | ||||||
| Total Worldwide | $ | 79.89 | $ | 76.04 | $ | 78.06 | $ | 73.91 | ||||||
| NGL ($/Bbl) | ||||||||||||||
| United States | $ | 20.19 | $ | 21.17 | $ | 20.67 | $ | 20.53 | ||||||
| International | $ | 28.11 | $ | 28.33 | $ | 28.22 | $ | 30.50 | ||||||
| Total Worldwide | $ | 21.23 | $ | 22.14 | $ | 21.68 | $ | 21.67 | ||||||
| Natural Gas ($/Mcf) | ||||||||||||||
| United States | $ | 0.54 | $ | 1.61 | $ | 1.06 | $ | 2.18 | ||||||
| International | $ | 1.91 | $ | 1.87 | $ | 1.89 | $ | 1.91 | ||||||
| Total Worldwide | $ | 0.92 | $ | 1.68 | $ | 1.29 | $ | 2.11 | ||||||
| Average Index Prices | ||||||||||||||
| WTI oil ($/Bbl) | $ | 80.56 | $ | 76.96 | $ | 78.76 | $ | 74.98 | ||||||
| Brent oil ($/Bbl) | $ | 84.95 | $ | 81.83 | $ | 83.39 | $ | 80.11 | ||||||
| NYMEX gas ($/Mcf) | $ | 1.99 | $ | 2.35 | $ | 2.17 | $ | 3.09 | ||||||
| Average Realized Prices as Percentage of Average Index Prices | ||||||||||||||
| Worldwide oil as a percentage of average WTI | 99 | % | 99 | % | 99 | % | 99 | % | ||||||
| Worldwide oil as a percentage of average Brent | 94 | % | 93 | % | 94 | % | 92 | % | ||||||
| Worldwide NGL as a percentage of average WTI | 26 | % | 29 | % | 28 | % | 29 | % | ||||||
| Domestic natural gas as a percentage of average NYMEX | 27 | % | 68 | % | 49 | % | 71 | % | ||||||
Q2 2024 compared to Q1 2024
Oil and gas segment earnings increased to $1.6 billion for the three months ended June 30, 2024, compared with segment earnings of $1.2 billion for the three months ended March 31, 2024. Excluding the impact of items affecting comparability, the increase in oil and gas segment results was primarily due to higher domestic crude oil volumes and lower depreciation, depletion and amortization rates, as Gulf of Mexico had overcome the extended third-party outage in mid-April, and higher domestic crude oil prices, partially offset by lower domestic gas prices and higher domestic lease operating and transportation expenses.
The increase in average daily sales volumes of 85 Mboe/d for the three months ended June 30, 2024, compared to the three months ended March 31, 2024, was primarily due to resumed production in Eastern Gulf of Mexico after a third party shut-in during the first quarter of 2024.
YTD 2024 compared to YTD 2023
Oil and gas segment earnings were $2.9 billion for the six months ended June 30, 2024, compared to $2.7 billion for the six months ended June 30, 2023. Excluding the impact of items affecting comparability, the increase in oil and gas segment results was primarily due to higher domestic crude oil prices, partially offset by lower domestic gas prices, lower domestic crude oil volumes, due to the third-party shut-in of production in Eastern Gulf of Mexico, and higher lease operating expenses.
34
Average daily sales volumes remained consistent for the six months ended June 30, 2024, compared to the same period in 2023. The decrease in average daily domestic sales volumes was primarily due to the third-party shut-in in the Eastern Gulf of Mexico, which impacted 2024 production. The domestic decrease was offset by an increase in average daily international sales volumes, which was primarily due to higher Al Hosn Gas production, as the Al Hosn Gas expansion project was completed in the three months ended June 30, 2023.
The following table presents an analysis of the impacts of changes in average realized prices and sales volumes with regard to Occidental's domestic and international oil and gas revenue:
| Increase (Decrease) Related to | ||||||||||||||
| millions |
Three months ended March 31, 2024
(b)
|
Price Realizations | Net Sales Volumes |
Three months ended June 30, 2024
(b)
|
||||||||||
| United States Revenue | ||||||||||||||
| Oil | $ | 3,349 | $ | 211 | $ | 451 | $ | 4,011 | ||||||
| NGL | 416 | (29) | 16 | 403 | ||||||||||
| Natural gas | 187 | (134) | 14 | 67 | ||||||||||
| Total | $ | 3,952 | $ | 48 | $ | 481 | $ | 4,481 | ||||||
| International Revenue | ||||||||||||||
|
Oil
(a)
|
$ | 772 | $ | 9 | $ | (20) | $ | 761 | ||||||
| NGL | 99 | — | (2) | 97 | ||||||||||
| Natural gas | 87 | — | 4 | 91 | ||||||||||
| Total | $ | 958 | $ | 9 | $ | (18) | $ | 949 | ||||||
| Increase (Decrease) Related to | ||||||||||||||
| millions |
Six months ended June 30, 2023
(b)
|
Price Realizations | Net Sales Volumes |
Six months ended June 30, 2024
(b)
|
||||||||||
| United States Revenue | ||||||||||||||
| Oil | $ | 7,096 | $ | 436 | $ | (172) | $ | 7,360 | ||||||
| NGL | 812 | 9 | (2) | 819 | ||||||||||
| Natural gas | 516 | (269) | 7 | 254 | ||||||||||
| Total | $ | 8,424 | $ | 176 | $ | (167) | $ | 8,433 | ||||||
| International Revenue | ||||||||||||||
|
Oil
(a)
|
$ | 1,513 | $ | 32 | $ | (12) | $ | 1,533 | ||||||
| NGL | 175 | (15) | 36 | 196 | ||||||||||
| Natural gas | 159 | (4) | 23 | 178 | ||||||||||
| Total | $ | 1,847 | $ | 13 | $ | 47 | $ | 1,907 | ||||||
(a)
Includes the impact of international production sharing contracts.
(b)
Excludes "other" oil and gas revenue. See
Note 2 - Revenue
in the notes to the Consolidated Condensed Financial Statements in Part I, Item 1 of this Form 10-Q for additional information regarding other revenue.
CHEMICAL SEGMENT
Q2 2024 compared to Q1 2024
Chemical segment earnings for the three months ended June 30, 2024 were $296 million, compared to $254 million for the three months ended March 31, 2024. The increase in segment earnings was primarily due to higher caustic soda and PVC prices as well as improved product demand, partially offset by higher ethylene costs.
YTD 2024 compared to YTD 2023
Chemical segment earnings for the six months ended June 30, 2024 were $550 million, compared to $908 million for the six months ended June 30, 2023. The decrease in segment earnings was due primarily to lower caustic soda realized prices, partially offset by improved product demand and lower ethylene and energy costs.
35
MIDSTREAM AND MARKETING SEGMENT
Q2 2024 compared to Q1 2024
Midstream and marketing segment earnings for the three months ended June 30, 2024 were $116 million, compared to segment losses of $33 million for the three months ended March 31, 2024. Excluding the impact of items affecting comparability, midstream and marketing first quarter results increased due to higher gas marketing income as a result of improved gas transportation spreads from the Permian to the Gulf Coast, and lower equity method investment losses in the low-carbon ventures business.
YTD 2024 compared to YTD 2023
Midstream and marketing segment earnings for the six months ended June 30, 2024 were $83 million, compared to segment losses of $28 million for the six months ended June 30, 2023. Excluding the impact of items affecting comparability, the increase in midstream and marketing results reflected higher equity method investment income from WES and higher crude sales margins due to the timing impact in the marketing business, partially offset by higher losses from equity method investees and higher expenses due to the increase in activities in the low-carbon ventures business.
| INCOME TAXES | ||
The
following table sets forth the calculation of the worldwide effective tax rate for income:
| Three months ended | Six months ended | |||||||||||||
| millions, except percentages | June 30, 2024 | March 31, 2024 | June 30, 2024 | June 30, 2023 | ||||||||||
| Income before income taxes | $ | 1,635 | $ | 1,010 | $ | 2,645 | $ | 3,061 | ||||||
| Income tax expense | ||||||||||||||
| Domestic - federal and state | (274) | (172) | (446) | (503) | ||||||||||
| International | (191) | (132) | (323) | (435) | ||||||||||
| Total income tax expense | (465) | (304) | (769) | (938) | ||||||||||
| Income from continuing operations | $ | 1,170 | $ | 706 | $ | 1,876 | $ | 2,123 | ||||||
| Worldwide effective tax rate | 28 | % | 30 | % | 29 | % | 31 | % | ||||||
Occidental estimates its annual effective income tax rate in recording its quarterly provision for income taxes in the various jurisdictions in which Occidental operates, adjusted for certain discrete items. Each quarter, Occidental updates these rates and records a cumulative adjustment to its income taxes by applying the rates to the pre-tax income excluding certain discrete items. Occidental’s quarterly estimate of its effective tax rates can vary significantly based on various forecasted items, including future commodity prices, capital expenditures, expenses for which tax benefits are not recognized and the geographic mix of pre-tax income and losses.
The worldwide effective tax rates for the periods presented in the table above are primarily driven by Occidental's jurisdictional mix of income. U.S. income is taxed at a U.S. federal statutory rate of 21%, while international income is subject to tax at statutory rates as high as 55%.
INFLATION REDUCTION ACT AND PILLAR TWO
For more information on the potential impacts to Occidental related to the IRA and Pillar Two initiative, see
Note 7 - Income Taxes
.
| LIQUIDITY AND CAPITAL RESOURCES | ||
SOURCES AND USES OF CASH
As of June 30, 2024, Occidental's sources of liquidity included
$1.8 billion
o
f cash and cash equivalents, $4.15 billion of borrowing capacity under its RCF, which matures on June 30, 2028, and up to $600 million of available borrowing capacity on its receivables securitization facility which matures in December 2024. These amounts exclude CrownRock Acquisition financing discussed below. There were no borrowings outstanding on Occidental's RCF or receivables securitization facility as of June 30, 2024.
Operating cash flow was $4.4 billion for the six months ended June 30, 2024, compared to $5.9 billion for the six months ended June 30, 2023. The decrease in operating cash flow from continuing operations was primarily due to an increase in the use of cash from changes in working capital, primarily due to timing of crude sales impacting volumes, and higher prices in the marketing business of the midstream and marketing segment.
36
Occidental’s net cash used by investing activities was $3.7 billion for the six months ended June 30, 2024, compared to $3.5 billion for the six months ended June 30, 2023. Capital expenditures, of which the majority were for the oil and gas segment, were approximately $3.6 billion for the six months ended June 30, 2024, compared to $3.1 billion for the six months ended June 30, 2023. The increase in capital spending for the six months ended June 30, 2024 represented increased activities in the domestic oil and gas segment, the continued construction of STRATOS, Occidental’s first large-scale DAC facility in Ector County, Texas, in the low-carbon business and the continued expansion and conversion activities of the chemical segment’s Battleground chlor-alkali plant to membrane technology.
Occidental’s net cash used by financing activities was $289 million for the six months ended June 30, 2024, compared to $2.9 billion for the six months ended June 30, 2023. Cash used in financing activities for the six months ended June 30, 2024 included cash dividends paid of $698 million, offset by proceeds from the issuance of common stock of $504 million, mainly related to the exercise of approximately 22.2 million warrants to purchase common stock with an exercise price of $22 per share of common stock, which yielded approximately $487 million in cash proceeds. Cash used in financing activities for the six months ended June 30, 2023 included treasury share repurchases of $1.2 billion, preferred stock redemptions of $982 million and cash dividends paid of $688 million.
Occidental’s Zero Coupons can be put to Occidental in October of each year, in whole or in part, for the then accreted value of the outstanding Zero Coupons. The Zero Coupons can next be put to Occidental in October 2024, which, if put in whole, would require a payment of approximately $362 million at such date. Occidental currently has the ability to meet this obligation and may use available capacity under the RCF and other committed facilities to satisfy the put should it be exercised.
As of June 30, 2024, and through the date of this filing, Occidental was in compliance with all covenants in its financing agreements. As of June 30, 2024, Occidental has debt maturities of $1.1 billion in 2024, $1.2 billion in 2025, $1.4 billion in 2026, $0.9 billion in 2027 and $13.3 billion thereafter. Occidental currently expects its cash on hand, operating cash flows and funds available from the RCF and other committed facilities to be sufficient to meet its near-term debt maturities, operating expenditures, capital expenditures and other obligations for the next 12 months from the date of this filing. The CrownRock Acquisition was funded with additional debt issuances as described in Current Business Outlook.
Occidental or its subsidiaries have provided financial assurances through a combination of cash, letters of credit and surety bonds. As of June 30, 2024, Occidental had not issued any letters of credit under the RCF or other committed facilities. For additional information, see Risk Factors in Part I, Item 1A of Occidental’s 2023 Form 10-K.
SHARE REPURCHASE PROGRAM
As of June 30, 2024, Occidental has approximately $1.2 billion remaining under its share repurchase program, which was authorized in 2023.
| ENVIRONMENTAL LIABILITIES AND EXPENDITURES | ||
Occidental’s operations are subject to stringent federal, regional, state, provincial, tribal, local and international laws and regulations related to improving or maintaining environmental quality. Occidental’s environmental compliance costs have generally increased over time and are expected to rise in the future. Occidental factors environmental expenditures for its operations as an integral part of its business planning process.
The laws that require or address environmental remediation, including CERCLA and similar federal, regional, state, provincial, tribal, 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. Occidental 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 Third-Party, Currently Operated, and Closed or Non-Operated Sites, which categories may include NPL 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, natural resource damages, punitive damages, civil penalties, injunctive relief and government oversight costs.
See
Note 8 - Environmental Liabilities and Expenditures
in the notes to the Consolidated Condensed Financial Statements in Part I, Item 1 of this Form 10-Q and the Environmental Liabilities and Expenditures section of Management’s Discussion and Analysis of Financial Condition and Results of Operations in the 2023 Form 10-K for additional information regarding Occidental’s environmental liabilities and expenditures.
| LAWSUITS, CLAIMS, COMMITMENTS AND CONTINGENCIES | ||
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. Occidental has disclosed its reserve balances for environmental
37
remediation matters and its estimated range of reasonably possible additional losses for such matters. See
Note 8 - Environmental Liabilities and Expenditures
and
Note 9 - Lawsuits, Claims, Commitments and Contingencies
in the notes to the Consolidated Condensed Financial Statements in Part I, Item 1 of this Form 10-Q for further information.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
For the three months ended June 30, 2024, there were no material changes in the information required to be provided under Item 305 of Regulation S-K included under Item 7A, Quantitative and Qualitative Disclosures About Market Risk in the 2023 Form 10-K.
Item 4. Controls and Procedures
Occidental's President and Chief Executive Officer and its Senior Vice President and Chief Financial Officer supervised and participated in Occidental's evaluation of the effectiveness of its disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based upon that evaluation, Occidental's President and Chief Executive Officer and Senior Vice President and Chief Financial Officer concluded that Occidental's disclosure controls and procedures were effective as of June 30, 2024.
There has been no change in Occidental’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the three months ended June 30, 2024 that has materially affected, or is reasonably likely to materially affect, Occidental’s internal control over financial reporting.
Part II Other Information
Item 1. Legal Proceedings
Occidental has elected to use a $1 million threshold for disclosing certain proceedings arising under federal, state or local environmental laws when a governmental authority is a party and potential monetary sanctions are involved. For information regarding legal proceedings, see
Note 9 - Lawsuits, Claims, Commitments and Contingencies
in the notes to the Consolidated Condensed Financial Statements in Part I, Item 1 of this Form 10-Q.
Item 1A. Risk Factors
There have been no material changes from the risk factors included under Part I, Item 1A of Occidental’s 2023 Form 10-K for the year ended December 31, 2023.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Occidental’s share repurchase activities for the six months ended June 30, 2024 were as follows:
| Period |
Total
Number
of Shares Purchased
(a)
|
Average Price Paid per Share |
Total Number of Shares Purchased as Part of Publicly Announced
Plans or Programs |
Maximum Value of Shares that May Yet Be Purchased Under the
Plans or Programs (millions)
(b)
|
||||||||||
| First Quarter 2024 | — | $ | — | — | ||||||||||
| April 1 - 30, 2024 | 130,424 | $ | 67.71 | — | ||||||||||
| May 1 - 31, 2024 | — | $ | — | — | ||||||||||
| June 1 - 30, 2024 | — | $ | — | — | ||||||||||
| Second Quarter 2024 | 130,424 | $ | 67.71 | — | ||||||||||
| Total 2024 | 130,424 | $ | 67.71 | — | $ | 1,223 | ||||||||
(a)
Includes purchases from the trustee of Occidental's defined contribution savings plan that are not part of publicly announced plans or programs.
(b)
Represents the value of shares remaining in Occidental's share repurchase plan. In February 2023, Occidental announced an authorization to repurchase up to $3.0 billion of Occidental's shares of common stock. The plan does not obligate Occidental to acquire any specific number of shares and may be discontinued at any time.
38
Item 5. Other Information
During the three months ended June 30, 2024, no director or Section 16 officer of Occidental
adopted
or
terminated
any Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements (in each case, as defined in Item 408(a) of Regulation S-K).
Item 6. Exhibits
|
10.1
#
*
|
|||||
|
10.2*
|
|||||
| 31.1* | |||||
| 31.2* | |||||
| 32.1** | |||||
| 101.INS* | Inline XBRL Instance Document. | ||||
| 101.SCH* | Inline XBRL Taxonomy Extension Schema Document. | ||||
| 101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | ||||
| 101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document. | ||||
| 101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | ||||
| 101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document. | ||||
| 104* | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). | ||||
#
Indicates a management contract or compensatory plan or arrangement.
* Filed herewith.
** Furnished herewith.
39
| SIGNATURES | ||
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| OCCIDENTAL PETROLEUM CORPORATION | ||||||||
| August 7, 2024 | /s/ Christopher O. Champion | |||||||
| Christopher O. Champion | ||||||||
| Vice President, Chief Accounting Officer and Controller | ||||||||
40
TABLE OF CONTENTS
Part I Financial InformationprintItem 1. Financial Statements (unaudited)printNote 1 - GeneralprintNote 2 - RevenueprintNote 3 - InventoriesprintNote 4 - Long-term DebtprintNote 5 - Acquisitions and DivestituresprintNote 6 - DerivativesprintNote 7 - Income TaxesprintNote 8 - Environmental Liabilities and ExpendituresprintNote 9 - Lawsuits, Claims, Commitments and ContingenciesprintNote 10 - Earnings Per Share and EquityprintNote 11 - SegmentsprintItem 2. Management S Discussion and Analysis Of Financial Condition and Results Of OperationsprintItem 3. Quantitative and Qualitative Disclosures About Market RiskprintItem 4. Controls and ProceduresprintPart II Other InformationprintItem 1. Legal ProceedingsprintItem 1A. Risk FactorsprintItem 2. Unregistered Sales Of Equity Securities and Use Of ProceedsprintItem 5. Other InformationprintItem 6. Exhibitsprint