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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission file number 1-9210
_____________________
OCCIDENTAL PETROLEUM CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 95-4035997
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10889 WILSHIRE BOULEVARD, LOS ANGELES, CALIFORNIA 90024
(Address of principal executive offices) (Zip Code)
(310) 208-8800
(Registrant's telephone number, including area code)
_____________________
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X 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 at June 30, 1996
--------------------------- ----------------------------
Common stock $.20 par value 323,015,109 shares
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OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
CONTENTS
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PAGE
<S> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets --
June 30, 1996 and December 31, 1995 2
Consolidated Condensed Statements of Operations --
Three and six months ended June 30, 1996 and 1995 4
Consolidated Condensed Statements of Cash Flows --
Six months ended June 30, 1996 and 1995 5
Notes to Consolidated Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
PART II OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 6. Exhibits and Reports on Form 8-K 15
</TABLE>
1
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PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
JUNE 30, 1996 AND DECEMBER 31, 1995
(Amounts in millions)
1996 1995
================================================================= ========= =========
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents (Note 5) $ 113 $ 520
Receivables, net 1,008 891
Inventories (Note 6) 573 647
Prepaid expenses and other 365 461
--------- ---------
Total current assets 2,059 2,519
LONG-TERM RECEIVABLES, net 139 158
EQUITY INVESTMENTS (Note 12) 1,024 927
PROPERTY, PLANT AND EQUIPMENT, at cost, net of
accumulated depreciation, depletion and amortization of $9,107
at June 30, 1996 and $8,837 at December 31, 1995 (Note 7) 13,891 13,867
OTHER ASSETS 379 344
--------- ---------
$ 17,492 $ 17,815
================================================================= ========= =========
The accompanying notes are an integral part of these financial statements.
</TABLE>
2
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<TABLE>
<CAPTION>
OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
JUNE 30, 1996 AND DECEMBER 31, 1995
(Amounts in millions)
1996 1995
========================================================================= ========= =========
<S> <C> <C>
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Current maturities of senior funded debt and capital lease liabilities $ 50 $ 522
Notes payable 92 16
Accounts payable 849 859
Accrued liabilities 1,065 1,168
Domestic and foreign income taxes 111 92
--------- ---------
Total current liabilities 2,167 2,657
--------- ---------
SENIOR FUNDED DEBT, net of current maturities and unamortized discount 4,806 4,819
--------- ---------
DEFERRED CREDITS AND OTHER LIABILITIES
Deferred and other domestic and foreign income taxes 2,655 2,620
Other 3,025 3,089
--------- ---------
5,680 5,709
--------- ---------
NONREDEEMABLE PREFERRED STOCK, COMMON STOCK AND
OTHER STOCKHOLDERS' EQUITY
Nonredeemable preferred stock, stated at liquidation value 1,325 1,325
Common stock, at par value 64 64
Other stockholders' equity
Additional paid-in capital 4,531 4,631
Retained earnings(deficit) (1,087) (1,402)
Cumulative foreign currency translation adjustments 6 12
--------- ---------
4,839 4,630
--------- ---------
$ 17,492 $ 17,815
========================================================================= ========= =========
The accompanying notes are an integral part of these financial statements.
</TABLE>
3
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<TABLE>
<CAPTION>
OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(Amounts in millions, except per-share amounts)
Three Months Ended Six Months Ended
June 30 June 30
---------------------- ----------------------
1996 1995 1996 1995
====================================================== ========= ========= ========= =========
<S> <C> <C> <C> <C>
REVENUES
Net sales and operating revenues
Oil and gas operations $ 878 $ 756 $ 1,632 $ 1,461
Natural gas transmission operations 521 468 1,223 1,006
Chemical operations 1,058 1,456 2,126 2,928
Other -- (1) (2) (2)
--------- --------- --------- ---------
2,457 2,679 4,979 5,393
Interest, dividends and other income 145 21 170 47
Gains on asset dispositions, net (1) 40 4 46
Income from equity investments (Note 12) 23 33 43 58
--------- --------- --------- ---------
2,624 2,773 5,196 5,544
--------- --------- --------- ---------
COSTS AND OTHER DEDUCTIONS
Cost of sales 1,834 1,950 3,708 3,973
Selling, general and administrative and other
operating expenses 229 353 457 596
Environmental remediation 82 5 88 11
Exploration expense 31 32 47 50
Interest and debt expense, net 120 140 260 289
--------- --------- --------- ---------
2,296 2,480 4,560 4,919
--------- --------- --------- ---------
Income(loss) before taxes 328 293 636 625
Provision for domestic and foreign income and
other taxes (Note 11) 147 106 291 260
--------- --------- --------- ---------
Income before extraordinary gain(loss), net 181 187 345 365
Extraordinary gain(loss), net (Note 3) -- -- (30) --
--------- --------- --------- ---------
NET INCOME(LOSS) 181 187 315 365
Preferred dividends (23) (23) (46) (46)
--------- --------- --------- ---------
EARNINGS(LOSS) APPLICABLE TO
COMMON STOCK $ 158 $ 164 $ 269 $ 319
========= ========= ========= =========
PRIMARY EARNINGS PER COMMON SHARE
Income before extraordinary gain(loss), net $ .49 $ .51 $ .93 $ 1.00
Extraordinary gain(loss), net -- -- (.09) --
--------- --------- --------- ---------
Primary earnings(loss) per common share $ .49 $ .51 $ .84 $ 1.00
========= ========= ========= =========
FULLY DILUTED EARNINGS PER COMMON SHARE
Income before extraordinary gain(loss), net $ .47 $ .49 $ .91 $ .96
Extraordinary gain(loss), net -- -- (.09) --
--------- --------- --------- ---------
Fully diluted earnings(loss) per common share $ .47 $ .49 $ .82 $ .96
========= ========= ========= =========
DIVIDENDS PER SHARE OF COMMON STOCK $ .25 $ .25 $ .50 $ .50
========= ========= ========= =========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 322.4 318.2 320.9 317.8
====================================================== ========= ========= ========= =========
The accompanying notes are an integral part of these financial statements.
</TABLE>
4
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<TABLE>
<CAPTION>
OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(Amounts in millions)
1996 1995
============================================================================== ========= =========
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net income(loss) $ 315 $ 365
Adjustments to reconcile income to net cash provided by operating activities
Extraordinary (gain)loss, net 30 --
Depreciation, depletion and amortization of assets 451 473
Deferred income tax provision 103 20
Other noncash charges to income 27 227
Gains on asset dispositions, net (4) (46)
Income from equity investments (43) (58)
Exploration expense 47 50
Changes in operating assets and liabilities (57) (272)
Other operating, net (123) (64)
--------- ---------
Net cash provided by operating activities 746 695
--------- ---------
CASH FLOW FROM INVESTING ACTIVITIES
Capital expenditures (508) (380)
Proceeds from disposal of property, plant and equipment, net 8 140
Buyout of operating leases -- (5)
Sale of businesses, net 24 473
Other investing, net (24) 44
--------- ---------
Net cash provided(used) by investing activities (500) 272
--------- ---------
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from senior funded debt 8 138
Net proceeds from commercial paper and revolving credit agreements 475 (528)
Payments on senior funded debt and capital lease liabilities (1,025) (216)
Proceeds from issuance of common stock 9 16
Proceeds(payments) of notes payable 77 1
Cash dividends paid (206) (200)
Other financing, net 9 8
--------- ---------
Net cash used by financing activities (653) (781)
--------- ---------
Increase(decrease) in cash and cash equivalents (407) 186
Cash and cash equivalents--beginning of period 520 129
--------- ---------
Cash and cash equivalents--end of period $ 113 $ 315
============================================================================== ========= =========
The accompanying notes are an integral part of these financial statements.
</TABLE>
5
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OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
June 30, 1996
1. General
The accompanying unaudited consolidated condensed financial statements have
been prepared by Occidental Petroleum Corporation (Occidental) pursuant to
the rules and regulations of the Securities and Exchange Commission. Certain
information and disclosures normally included in notes to consolidated
financial statements have been condensed or omitted pursuant to such rules
and regulations, but resultant disclosures are in accordance with generally
accepted accounting principles as they apply to interim reporting. The
consolidated condensed financial statements should be read in conjunction
with the consolidated financial statements and the notes thereto
incorporated by reference in Occidental's Annual Report on Form 10-K for the
year ended December 31, 1995 (1995 Form 10-K).
In the opinion of Occidental's management, the accompanying consolidated
condensed financial statements contain all adjustments (consisting only of
normal recurring adjustments) necessary to present fairly Occidental's
consolidated financial position as of June 30, 1996 and the consolidated
results of operations for the three and six months then ended and the
consolidated cash flows for the six months then ended. The results of
operations and cash flows for the periods ended June 30, 1996 are not
necessarily indicative of the results of operations or cash flows to be
expected for the full year.
Certain financial statements and notes for the prior year have been changed
to conform to the 1996 presentation.
Reference is made to Note 1 to the consolidated financial statements
incorporated by reference in the 1995 Form 10-K for a summary of significant
accounting policies.
2. Asset Acquisitions and Dispositions
In April 1996, Occidental completed the acquisition of a 64 percent equity
interest in INDSPEC Holding Corporation (INDSPEC) for approximately $87
million in common stock. Under the terms of the transaction, INDSPEC's
management and employees retained voting control of INDSPEC. Also in April,
Occidental completed the sale of its subsidiary which engages in on-shore
drilling and servicing of oil and gas wells for approximately $32 million.
In addition, certain assets of its international phosphate fertilizer
trading operations were sold for approximately $20 million. None of these
transactions resulted in a material gain or loss.
3. Extraordinary Gain(Loss)
The 1996 six month results included a net extraordinary loss of $30 million,
which resulted from the early retirement of high-coupon debt.
4. Supplemental Cash Flow Information
Cash payments during the six months ended June 30, 1996 and 1995 included
federal, foreign and state income taxes of approximately $91 million and
$129 million, respectively. Interest paid (net of interest capitalized)
totaled approximately $269 million and $282 million for the six month
periods ended June 30, 1996 and 1995, respectively.
6
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5. Cash and Cash Equivalents
Cash equivalents consist of highly liquid money-market mutual funds and bank
deposits with maturities of three months or less when purchased. Cash
equivalents totaled $161 million and $620 million at June 30, 1996 and
December 31, 1995, respectively. The reduction in cash equivalents reflected
the use of cash for the redemption of the 11.75% Senior Debentures in March
1996.
A cash-management system is utilized to minimize the cash balances required
for operations and to invest the surplus cash in liquid short-term money-
market instruments and/or to pay down short-term borrowings. This can result
in the balance of short-term money-market instruments temporarily exceeding
cash and cash equivalents.
6. Inventories
A portion of inventories is valued under the LIFO method. The valuation of
LIFO inventory for interim periods is based on management's estimates of
year-end inventory levels and costs. Inventories consist of the following
(in millions):
<TABLE>
<CAPTION>
Balance at June 30, 1996 December 31, 1995
======================= ============= =================
<S> <C> <C>
Raw materials $ 123 $ 116
Materials and supplies 192 180
Work in progress 15 17
Finished goods 290 363
--------- ---------
620 676
LIFO reserve (47) (29)
--------- ---------
Total $ 573 $ 647
========= =========
</TABLE>
7. Property, Plant and Equipment
Reference is made to the consolidated financial statements and Note 1
thereto incorporated by reference in the 1995 Form 10-K for a description of
investments in property, plant and equipment.
8. Retirement Plans and Postretirement Benefits
Reference is made to Note 14 to the consolidated financial statements
incorporated by reference in the 1995 Form 10-K for a description of the
retirement plans and postretirement benefits of Occidental and its
subsidiaries.
9. Lawsuits, Claims and Related Matters
Occidental and certain of its subsidiaries have been named in a substantial
number of governmental proceedings as defendants or potentially responsible
parties under the Comprehensive Environmental Response, Compensation and
Liability Act (CERCLA) and corresponding state acts. These proceedings seek
funding, remediation and, in some cases, compensation for alleged property
damage, punitive damages and civil penalties, aggregating substantial
amounts. Occidental is usually one of many companies in these proceedings,
and has to date been successful in sharing response costs with other
7
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financially sound companies. Occidental has accrued reserves at the most
likely cost to be incurred in those proceedings where it is probable that
Occidental will incur remediation costs which can be reasonably estimated.
As to those proceedings, for which Occidental does not have sufficient
information to determine a range of liability, Occidental does have
sufficient information on which to base the opinion below.
It is impossible at this time to determine the ultimate legal liabilities
that may arise from various lawsuits, claims and proceedings, including
environmental proceedings described above, pending against Occidental and
its subsidiaries, some of which involve substantial amounts. However, in
management's opinion, after taking into account reserves, none of such
pending lawsuits, claims and proceedings should have a material adverse
effect upon Occidental's consolidated financial position or results of
operations in any given year.
10. Other Commitments and Contingencies
Occidental has certain other commitments under contracts, guarantees and
joint ventures, as well as certain other contingent liabilities.
Additionally, Occidental has agreed to participate in the development of
certain natural gas reserves and construction of a liquefied natural gas
plant in Malaysia; however, Occidental has not yet entered into any material
development or construction contracts.
Reference is made to Note 11 to the consolidated financial statements
incorporated by reference in the 1995 Form 10-K for information concerning
Occidental's long-term purchase obligations for certain products and
services.
In management's opinion, none of such commitments and contingencies
discussed above should have a material adverse effect upon Occidental's
consolidated financial position or results of operations in any given year.
11. Income Taxes
The provision for taxes based on income for the 1996 and 1995 interim
periods was computed in accordance with Interpretation No. 18 of APB Opinion
No. 28 on reporting taxes for interim periods and was based on projections
of total year pretax income.
At December 31, 1995, Occidental had, for U.S. federal income tax return
purposes, a capital loss carryforward of approximately $21 million, a
business tax credit carryforward of $20 million and an alternative minimum
tax credit carryforward of $270 million available to reduce future income
taxes. To the extent not used, the capital loss carryforward expires in 2000
and the business tax credit expires in varying amounts during the years 2000
and 2001. The alternative minimum tax credit carryforward does not expire.
Occidental is subject to audit by taxing authorities for varying periods in
various tax jurisdictions. Management believes that any required adjustments
to Occidental's tax liabilities will not have a material adverse impact on
Occidental's financial position or results of operations in any given year.
12. Investments
Investments in companies in which Occidental has a voting stock interest of
at least 20 percent, but not more than 50 percent, and certain partnerships
are accounted for on the equity method. At June 30, 1996, Occidental's
equity investments consisted primarily of joint-interest pipelines,
including a pipeline
8
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in the Dutch sector of the North Sea, a 30 percent investment in the common
shares of Canadian Occidental Petroleum Ltd. and various chemical
partnerships. The following table presents Occidental's proportionate
interest in the summarized financial information of its equity method
investments (in millions):
<TABLE>
<CAPTION>
Periods Ended June 30
------------------------------------------------
Three Months Six Months
---------------------- ----------------------
1996 1995 1996 1995
========= ========= ========= =========
<S> <C> <C> <C> <C>
Revenues $ 228 $ 212 $ 420 $ 404
Costs and expenses 205 179 377 346
--------- --------- --------- ---------
Net income $ 23 $ 33 $ 43 $ 58
========= ========= ========= =========
</TABLE>
13. Summarized Financial Information of Wholly Owned Subsidiary
Occidental has guaranteed the payments of principal of, and interest on,
certain publicly traded debt securities of its subsidiary, OXY USA Inc. (OXY
USA). The following tables present summarized financial information for OXY
USA (in millions):
<TABLE>
<CAPTION>
Periods Ended June 30
------------------------------------------------
Three Months Six Months
---------------------- ----------------------
1996 1995 1996 1995
========= ========= ========= =========
<S> <C> <C> <C> <C>
Revenues $ 244 $ 186 $ 478 $ 362
Costs and expenses 217 168 428 358
--------- --------- --------- ---------
Net income $ 27 $ 18 $ 50 $ 4
========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
Balance at June 30, 1996 December 31, 1995
=============================== ============= =================
<S> <C> <C>
Current assets $ 140 $ 206
Intercompany receivable $ 435 $ 323
Noncurrent assets $ 2,038 $ 2,057
Current liabilities $ 231 $ 244
Interest bearing note to parent $ 113 $ 121
Noncurrent liabilities $ 1,282 $ 1,283
Stockholders' equity $ 987 $ 938
------------------------------- ------------- -----------------
</TABLE>
14. Subsequent Events
On July 1, 1996, Occidental redeemed all of its outstanding $300 million
principal amount of its 9.625% Senior Notes, which were due July 1, 1999, at
a redemption price of 100% of the principal amount. Also, on July 22, 1996,
Occidental announced that a judgment of $742 million had been entered in
favor of its OXY USA subsidiary against Chevron USA by the state district
court in Tulsa, Oklahoma. The unanimous verdict was for approximately $229
million in compensatory damages for breach of a 1982 merger agreement and
interest on these damages from 1982 to the date of judgment. Chevron
announced they will appeal the case. In addition, on July 30, 1996,
Occidental announced the sale of its royalty oil interests in the Congo for
$215 million to the Republic of the Congo. Occidental acquired the royalty
interest in 1993 and continues to hold exploration rights to two blocks in
the country. There will be no material gain or loss as a result of this
transaction.
9
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Occidental's net income for the first six months of 1996 totaled $315 million,
on net sales and operating revenues of $5.0 billion, compared with net income of
$365 million, on net sales and operating revenues of $5.4 billion, for the same
period of 1995. Occidental's net income for the second quarter of 1996 was $181
million, on net sales and operating revenues of $2.5 billion, compared with $187
million, on net sales and operating revenues of $2.7 billion, for the same
period of 1995. Primary earnings per common share were $.84 for the first six
months of 1996, compared with $1.00 for the same period of 1995. Primary
earnings per common share were $.49 for the second quarter of 1996, compared
with $.51 for the same period of 1995.
The decrease in net sales and operating revenues and net income for the second
quarter of 1996, compared with the same period of 1995, reflected the impact of
reduced chemical prices, primarily for petrochemicals and PVC resins, partially
offset by higher worldwide crude oil prices and higher domestic natural gas
prices.
Interest, dividends and other income for the six months of 1996 includes $130
million received for a litigation settlement related to Love Canal.
Income from equity investments decreased for the second quarter of 1996,
compared with the similar period of 1995. The decrease in 1996 primarily
reflected lower equity earnings from chemical investments.
The following table sets forth the sales and earnings of each operating division
and corporate items (in millions):
<TABLE>
<CAPTION>
Periods Ended June 30
------------------------------------------------
Three Months Six Months
---------------------- ----------------------
1996 1995 1996 1995
========= ========= ========= =========
<S> <C> <C> <C> <C>
DIVISIONAL NET SALES
Oil and gas $ 878 $ 756 $ 1,632 $ 1,461
Natural gas transmission 521 468 1,223 1,006
Chemical 1,058 1,456 2,126 2,928
Other -- (1) (2) (2)
--------- --------- --------- ---------
NET SALES $ 2,457 $ 2,679 $ 4,979 $ 5,393
========= ========= ========= =========
DIVISIONAL EARNINGS
Oil and gas $ 144 $ (30) $ 305 $ 30
Natural gas transmission 51 62 172 137
Chemical 212 354 330 661
--------- --------- --------- ---------
407 386 807 828
UNALLOCATED CORPORATE ITEMS
Interest expense, net (112) (133) (242) (277)
Income taxes, administration and other (114) (66) (220) (186)
--------- --------- --------- ---------
INCOME BEFORE EXTRAORDINARY GAIN(LOSS), NET 181 187 345 365
Extraordinary gain(loss), net -- -- (30) --
--------- --------- --------- ---------
NET INCOME $ 181 $ 187 $ 315 $ 365
========= ========= ========= =========
</TABLE>
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Selling, general and administrative and other operating expenses were $457
million for the first six months of 1996, compared with $596 million for the
same period of 1995. The 1995 amount included a second quarter charge of $109
million for settlement of litigation. Environmental remediation was $88 million
for the first six months of 1996, compared with $11 million for the same period
of 1995. The 1996 amount included a second quarter charge of $75 million for
additional environmental reserves.
Oil and gas earnings for the first six months of 1996 were $305 million,
compared with $30 million for the same period of 1995. Oil and gas earnings for
the second quarter of 1996 were $144 million, compared with earnings before
special items of $79 million for the second quarter of 1995. The 1995 results,
after a charge of $109 million for settlement of litigation, were a loss of $30
million. The increase in second quarter earnings in 1996, compared with 1995,
reflected higher worldwide crude oil prices and higher domestic natural gas
prices. Oil and gas prices are sensitive to complex factors, which are outside
the control of Occidental. Accordingly, Occidental is unable to predict with
certainty the direction, magnitude or impact of future trends in sales prices
for oil and gas.
Natural gas transmission earnings for the first six months of 1996 were $172
million, compared with $137 million for the same period of 1995. Natural gas
transmission earnings for the second quarter of 1996 were $51 million, compared
with $62 million for the same period of 1995. The decline in earnings for the
second quarter of 1996, compared with the same period of 1995, resulted
primarily from lower transport margins, partially offset by lower costs related
to the reorganization in late 1995.
Chemical earnings before special items for the first six months of 1996 were
$278 million, compared with $621 million for the same period of 1995. The 1996
results, after inclusion of $130 million related to a favorable litigation
settlement and a charge of $75 million for additional environmental reserves
relating to various existing sites, and the related state tax effects, were $330
million. Chemical earnings before special items for the second quarter of 1996
were $160 million, compared with earnings before special items of $314 million
for the second quarter of 1995. The 1996 second quarter results were $212
million after the previously mentioned items. The 1995 results, after inclusion
of a $40 million pretax gain related to the sale of assets, were $354 million.
The decline in second quarter 1996 earnings resulted primarily from decreased
profit margins in petrochemicals and PVC resins. The second quarter of 1996
also reflects the absence of sales and earnings of certain assets divested in
1995. Most of Occidental's chemical products are commodity in nature, the
prices of which are sensitive to a number of complex factors. Occidental is
unable to accurately forecast the trend of sales prices for its commodity
chemical products. However, PVC and certain petrochemical prices recently have
increased slightly, while others, particularly chlor-alkali, overall have
remained firm.
Divisional earnings include credits in lieu of U.S. federal income taxes. In
the first six months of 1996, divisional earnings benefited by $45 million from
credits allocated. This included credits of $8 million, $24 million and $13
million at oil and gas, natural gas transmission and chemical, respectively. Of
the total amount for the first six months of 1996, $23 million was recorded in
the second quarter of 1996 as a benefit to divisional earnings, of which $4
million, $12 million and $7 million was recorded at oil and gas, natural gas
transmission and chemical, respectively. In the first six months of 1995,
divisional earnings benefited by $46 million. The comparable amounts allocated
to the divisions were credits of $8 million, $24 million and $14 million at oil
and gas, natural gas transmission and chemical, respectively. Of the total
amount for the six months of 1995, $23 million was recorded in the second
quarter of 1995 as a benefit to divisional earnings, of which $4 million, $12
million and $7 million was recorded at oil and gas, natural gas transmission and
chemical, respectively.
Interest expense for the first six months of 1996 was $242 million, compared
with $277 million for the same period of 1995. Interest expense for the second
quarter of 1996 was $112 million, compared with $133 million for the second
quarter of 1995. The lower expense primarily reflected lower average interest
rates and lower average debt levels resulting primarily from the redemption on
March 15, 1996, of $955 million of 11.75% Senior Debentures.
11
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Occidental and certain of its subsidiaries are parties to various lawsuits,
environmental and other proceedings and claims, some of which involve
substantial amounts. See Note 9 to the consolidated condensed financial
statements. Occidental also has commitments under contracts, guarantees and
joint ventures and certain other contingent liabilities. See Note 10 to the
consolidated condensed financial statements. In management's opinion, after
taking into account reserves, none of these matters should have a material
adverse effect upon Occidental's consolidated financial position or results of
operations in any given year.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Occidental's net cash provided by operating activities was $746 million for the
first six months of 1996, compared with $695 million for the same period of
1995. The 1996 noncash charges included the previously mentioned $130 million
favorable litigation settlement, partially offset by the $75 million charge for
additional environmental reserves. The 1995 noncash charges included the
previously mentioned $109 million settlement of litigation. The 1996 and 1995
noncash charges also included employee benefit plans expense and various other
charges.
Occidental's net cash used by investing activities was $500 million for the
first six months of 1996, compared with cash provided of $272 million for the
same period of 1995. Capital expenditures were $508 million in 1996, including
$339 million in oil and gas, $69 million in natural gas transmission and $90
million in chemical. Capital expenditures were $380 million in 1995, including
$260 million in oil and gas, $41 million in natural gas transmission and $79
million in chemical. The increase in 1996 from 1995 reflected higher spending
in oil and gas, primarily in Peru, Qatar and Yemen. Net proceeds from the sale
of businesses and disposals of property, plant and equipment for the first six
months of 1996 totaled $32 million, which primarily reflected the proceeds from
the sale of its on-shore drilling and well servicing subsidiary. Net proceeds
from the sale of businesses and disposals of property, plant and equipment for
the first six months of 1995 totaled $613 million, which primarily reflected the
proceeds from the sale of Occidental's high density polyethylene business
(HDPE), its PVC facility at Addis, Louisiana and the sale of a portion of
Occidental's oil and gas operation in Pakistan.
Financing activities used net cash of $653 million in the first six months of
1996, compared with $781 million for the same period of 1995. The 1996 amount
reflected net cash used of $465 million to reduce short-term and long-term debt,
net of proceeds from borrowings, primarily for the redemption of the 11.75%
Senior Debentures, and the payment of dividends of $206 million. In 1995,
repayments of debt, net of proceeds from borrowings, resulted in net cash used
of $605 million to reduce long-term debt. Additionally, dividend payments were
$200 million.
For 1996, Occidental expects that cash generated from operations and asset sales
will be more than adequate to meet its operating requirements, capital spending
and dividend payments. Excess cash generated is expected to be applied to debt
and liability reduction. Occidental also has substantial borrowing capacity to
meet unanticipated cash requirements.
At June 30, 1996, Occidental's working capital was a negative $108 million,
compared with a negative $138 million at December 31, 1995. Available but
unused lines of committed bank credit totaled approximately $2.1 billion at June
30, 1996, compared with $2.6 billion at December 31, 1995.
Receivables at June 30, 1996 include the accrual for litigation settlements
previously mentioned.
Equity investments at June 30, 1996 include the interest in INDSPEC Holding
Corporation (INDSPEC) as discussed below.
Current maturities of senior funded debt and capital lease liabilities decreased
as a result of the redemption of the 11.75% Senior Debentures in March 1996.
12
<PAGE>
In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based
Compensation." As permitted by SFAS No. 123, Occidental will not recognize
compensation expense for stock-based compensation arrangements, but rather will
disclose in the notes to the financial statements the impact on annual net
income and earnings per share as if the fair value based compensation cost had
been recognized commencing in 1996.
In April 1996, Occidental completed the sale of its subsidiary which engages in
on-shore drilling and servicing of oil and gas wells for approximately $32
million. In addition, certain assets of its international phosphate fertilizer
trading operation were sold for approximately $20 million. Also in April,
Occidental completed the acquisition of a 64 percent equity interest in INDSPEC
for approximately $87 million in common stock. Under the terms of the
transaction, INDSPEC's management and employees retained voting control of
INDSPEC. None of these transactions resulted in a material gain or loss.
On July 1, 1996, Occidental redeemed all of its outstanding $300 million
principal amount of its 9.625% Senior Notes, which were due July 1, 1999, at a
redemption price of 100% of the principal amount. Also, on July 22, 1996,
Occidental announced that a judgment of $742 million had been entered in favor
of its OXY USA subsidiary against Chevron USA by the state district court in
Tulsa, Oklahoma. The unanimous verdict was for approximately $229 million in
compensatory damages for breach of a 1982 merger agreement and interest on these
damages from 1982 to the date of judgment. Chevron announced they will appeal
the case. In addition, on July 30, 1996, Occidental announced the sale of its
royalty oil interests in the Congo for $215 million to the Republic of the
Congo. Occidental acquired the royalty interest in 1993 and continues to hold
exploration rights to two blocks in the country. There will be no material gain
or loss as a result of this transaction.
ENVIRONMENTAL MATTERS
Occidental's operations in the United States are subject to increasingly
stringent federal, state and local laws and regulations relating to improving or
maintaining the quality of the environment. Foreign operations also are subject
to varied environmental protection laws. Costs associated with environmental
compliance have increased over time and are expected to continue to rise in the
future.
The laws which require or address remediation apply retroactively to previous
waste disposal practices. And, in many cases, the laws apply regardless of
fault, legality of the original activities or ownership or control of sites.
Occidental is currently participating in environmental assessments and cleanups
under these laws at federal Superfund sites, comparable state sites and other
remediation sites, including Occidental facilities and previously owned sites.
Occidental does not consider the number of Superfund and comparable state sites
at which it has been notified that it has been identified as being involved as a
relevant measure of exposure. Although the liability of a potentially
responsible party (PRP), and in many cases its equivalent under state law, is
joint and several, Occidental is usually one of many companies cited as a PRP at
these sites and has, to date, been successful in sharing cleanup costs with
other financially sound companies.
As of June 30, 1996, Occidental had been notified by the Environmental
Protection Agency (EPA) or equivalent state agencies or otherwise had become
aware that it had been identified as being involved at 290 Superfund or
comparable state sites. (This number does not include 61 sites where Occidental
has been successful in resolving its involvement.) The 290 sites include 80
former Diamond Shamrock Chemical sites as to which Maxus Energy Corporation has
retained all liability, and two sites at which the extent of such retained
liability is disputed. Of the remaining 208 sites, Occidental has had no
communication or activity with government agencies or other PRPs in four years
at 39 sites, has denied involvement at 30 sites and has yet to determine
involvement in 24 sites. With respect to the remaining 115 of these sites,
Occidental is in various stages of evaluation. For 105 of these sites, where
environmental remediation efforts are probable and
13
<PAGE>
the costs can be reasonably estimated, Occidental has accrued reserves at the
most likely cost to be incurred. The 105 sites include 38 sites as to which
present information indicates that it is probable that Occidental's aggregate
exposure is immaterial. In determining the reserves, Occidental uses the most
current information available, including similar past experiences, available
technology, regulations in effect, the timing of remediation and cost-sharing
arrangements. For the remaining 10 of the 115 sites being evaluated, Occidental
does not have sufficient information to determine a range of liability, but
Occidental does have sufficient information on which to base the opinion
expressed above under the caption "Results of Operations."
14
<PAGE>
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
GENERAL
There is incorporated by reference herein the information regarding legal
proceedings in Item 3 of Part I of Occidental's 1995 Annual Report on Form 10-K
and Note 9 to the consolidated condensed financial statements in Part I hereof.
In 1991, Continental Trend Resources obtained a jury verdict against OXY USA
Inc. ("OXY USA") in the U.S. District Court for the Western District of Oklahoma
for $269,000 in actual damages and $30,000,000 in punitive damages for tortious
interference with contract. In 1995, the U.S. Court of Appeals of the 10th
Circuit affirmed the subsequent judgment and OXY USA petitioned the U.S. Supreme
Court for a writ of certiorari. On May 28, 1996, the Supreme Court granted OXY
USA's petition, vacated the judgment and remanded the case to the Court of
Appeals for further consideration in light of its decision in BMW of North
------------
America v. Gore, 116 S.Ct. 1872 (1996).
- ---------------
ENVIRONMENTAL PROCEEDINGS
OxyChem has agreed with the U.S. Department of Justice and the U.S.
Environmental Protection Agency to settle an enforcement matter involving
alleged violations of Clean Air Act regulations for asbestos at its chlor-alkali
facility in Taft, Louisiana. The settlement terms call for OxyChem to pay civil
penalties of approximately $113,000 for alleged violations of recordkeeping,
monitoring and maintenance requirements in 1991 and 1992.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Form of Incentive Stock Option Agreement under Occidental
Petroleum Corporation 1995 Incentive Stock Plan (amends
Form previously filed as Exhibit 99.2 to Occidental's
Registration Statement on Form S-8, File No. 33-64719 and
incorporated by reference as Exhibit 10.29 to the Annual
Report on Form 10-K of Occidental for the fiscal year ended
December 31, 1995, File No. 1-9210)
10.2 Form of Nonqualified Stock Option Agreement under
Occidental Petroleum Corporation 1995 Incentive Stock Plan
(amends Form previously filed as Exhibit 99.3 to
Occidental's Registration Statement on Form S-8, File No.
33-64719 and incorporated by reference as Exhibit 10.30 to
the Annual Report on Form 10-K of Occidental for the fiscal
year ended December 31, 1995, File No. 1-9210)
11 Statement regarding the computation of earnings per share
for the three and six months ended June 30, 1996 and 1995
15
<PAGE>
12 Statement regarding the computation of total enterprise
ratios of earnings to fixed charges for the six months
ended June 30, 1996 and 1995 and the five years ended
December 31, 1995
27 Financial data schedule for the six month period ended June
30, 1996 (included only in the copy of this report filed
electronically with the Securities and Exchange Commission)
(b) Reports on Form 8-K
During the quarter ended June 30, 1996, Occidental filed the
following Current Reports on Form 8-K:
1. Current Report on Form 8-K dated April 17, 1996 (date of
earliest event reported), filed on April 19, 1996, for the
purpose of reporting, under Item 5, Occidental's results of
operations for the quarter ended March 31, 1996
2. Current Report on Form 8-K dated April 19, 1996 (date of
earliest event reported), filed on April 22, 1996, for the
purpose of reporting, among other things, under Item 5, the
price of Occidental's common stock determined for the
approximately 3.4 million shares to be issued in the
exchange offers for INDSPEC Holding Corporation
From June 30, 1996 to the date hereof, Occidental filed the
following Current Report on Form 8-K:
1. Current Report on Form 8-K dated July 22, 1996 (date of
earliest event reported), filed on July 23, 1996, for the
purpose of reporting, under Item 5, Occidental's results of
operations for the quarter ended June 30, 1996
16
<PAGE>
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
DATE: August 12, 1996 S. P. Dominick, Jr.
--------------------------------------------------
S. P. Dominick, Jr., Vice President and Controller
(Chief Accounting and Duly Authorized Officer)
17
<PAGE>
EXHIBIT INDEX
EXHIBITS
- --------
10.1 Form of Incentive Stock Option Agreement under Occidental Petroleum
Corporation 1995 Incentive Stock Plan (amends Form previously filed as
Exhibit 99.2 to Occidental's Registration Statement on Form S-8, File
No. 33-64719 and incorporated by reference as Exhibit 10.29 to the
Annual Report on Form 10-K of Occidental for the fiscal year ended
December 31, 1995, File No. 1-9210)
10.2 Form of Nonqualified Stock Option Agreement under Occidental Petroleum
Corporation 1995 Incentive Stock Plan (amends Form previously filed as
Exhibit 99.3 to Occidental's Registration Statement on Form S-8, File
No. 33-64719 and incorporated by reference as Exhibit 10.30 to the
Annual Report on Form 10-K of Occidental for the fiscal year ended
December 31, 1995, File No. 1-9210)
11 Statement regarding the computation of earnings per share for the
three and six months ended June 30, 1996 and 1995
12 Statement regarding the computation of total enterprise ratios of
earnings to fixed charges for the six months ended June 30, 1996 and
1995 and the five years ended December 31, 1995
27 Financial data schedule for the six month period ended June 30, 1996
(included only in the copy of this report filed electronically with
the Securities and Exchange Commission)
<PAGE>
EXHIBIT 10.1
OCCIDENTAL PETROLEUM CORPORATION
INCENTIVE STOCK OPTION AGREEMENT
Name of Optionee:
---------------------------------------------------------------
Date of Grant:
------------------------------------------------------------------
Number of Optioned Shares:
------------------------------------------------------
Option Price:
-------------------------------------------------------------------
Vesting Percentage: Percent
------------
AGREEMENT (the "Agreement") made as of the Date of Grant by and between
OCCIDENTAL PETROLEUM CORPORATION, a Delaware corporation (hereinafter called
"Occidental," and, collectively with its Subsidiaries, the "Company"), and
Optionee.
1. GRANT OF STOCK OPTION. Subject to and upon the terms, conditions,
and restrictions set forth in this Agreement and in the Occidental Petroleum
Corporation 1995 Incentive Stock Plan (the "Plan"), Occidental hereby grants to
the Optionee as of the Date of Grant a stock option (the "Option") to purchase
up to the number of Optioned Shares. The Option may be exercised from time to
time in accordance with the terms of this Agreement. The Option is intended to
be an "incentive stock option" within the meaning of that term under Section 422
of the Internal Revenue Code of 1986, as amended (the "Code"), or any successor
provision thereto; this Agreement shall be construed in a manner that will
enable this Option to be so qualified.
2. TERM OF OPTION. The term of the Option shall commence on the Date
of Grant and, unless earlier terminated in accordance with Section 6 hereof,
shall expire ten (10) years from the Date of Grant.
3. RIGHT TO EXERCISE. Subject to the expiration or earlier
termination of the Option, on each anniversary of the Date of Grant the number
of Optioned Shares equal to the Vesting Percentage multiplied by the initial
number of Optioned Shares specified in this Agreement shall become exercisable
on a cumulative basis until the Option is fully exercisable. To the extent the
Option is exercisable, it may be exercised in whole or in part.
4. OPTION NONTRANSFERABLE. The Option granted hereby shall be
neither transferable nor assignable by the Optionee other than by will or by the
laws of descent
<PAGE>
and distribution and may be exercised, during the lifetime of the Optionee, only
by the Optionee, or in the event of his or her legal incapacity, by his or her
guardian or legal representative acting on behalf of the Optionee in a fiduciary
capacity under state law and court supervision.
5. NOTICE OF EXERCISE; PAYMENT. To the extent then exercisable, the
Option shall be exercised by oral or written notice to Occidental stating the
number of Optioned Shares for which the Option is being exercised and the
intended manner of payment. Payment equal to the aggregate Option Price of the
Optioned Shares shall be: (a) in cash in the form of currency or check or other
cash equivalent acceptable to Occidental, (b) by actual or constructive transfer
to Occidental of nonforfeitable, nonrestricted shares of Common Stock that have
been owned by the Optionee for (i) more than one year prior to the date of
exercise and for more than two years from the date on which the option was
granted, if they were originally acquired by the Optionee pursuant to the
exercise of an incentive stock option, or (ii) more than six months prior to the
date of exercise, if they were originally acquired by the Optionee other than
pursuant to the exercise of an incentive stock option, or (c) by any combination
of the foregoing methods of payment. Nonforfeitable, nonrestricted shares of
Common Stock that are transferred by the Optionee in payment of all or any part
of the Option Price shall be valued on the basis of their Fair Market Value per
Share. The requirement of payment in cash shall be deemed satisfied if the
Optionee makes arrangements that are satisfactory to Occidental with a broker
that is a member of the National Association of Securities Dealers, Inc. to sell
a sufficient number of the shares of Common Stock, which are being purchased
pursuant to the exercise, so that the net proceeds of the sale transaction will
at least equal the amount of the aggregate Option Price, plus interest at the
"applicable Federal rate" within the meaning of that term under Section 1274 of
the Code, or any successor provision thereto, for the period from the date of
exercise to the date of payment, and pursuant to which the broker undertakes to
deliver to Occidental the amount of the aggregate Option Price not later than
the date on which the sale transaction will settle in the ordinary course of
business. The date of such notice shall be the exercise date. Any oral notice
of exercise shall be confirmed in writing to Occidental before the close of
business the same day.
6. TERMINATION OF AGREEMENT. The Agreement and the Option granted
hereby shall terminate automatically and without further notice on the earliest
of the following dates:
(a) Five years or the remaining term of the Option, whichever is
less, after the date the Optionee ceases to be an employee of the Company by
reason of the Optionee's (i) death, (ii) permanent disability or (iii)
retirement under a retirement plan of the Company at or after the earliest
voluntary retirement age provided for in such retirement plan or retirement at
an earlier age with the consent of the Board;
(b) Immediately upon the voluntary or involuntary resignation of
the Optionee other than in connection with retirement as provided in 6(a)(iii)
above; or
2
<PAGE>
(c) Ten years from the Date of Grant.
In the event that the Optionee commits an act that the Committee determines to
have been intentionally committed and materially inimical to the interests of
the Company, the Agreement shall terminate at the time of that determination
notwithstanding any other provision of this Agreement. This Agreement shall not
be exercisable for any number of Optioned Shares in excess of the number of
Optioned Shares for which this Agreement is then exercisable on the date of
termination of employment. For the purposes of this Agreement, the continuous
employment of the Optionee with the Company shall not be deemed to have been
interrupted, and the Optionee shall not be deemed to have ceased to be an
employee of the Company, by reason of the transfer of his or her employment
among the Company and its Subsidiaries or an approved leave of absence.
7. ACCELERATION OF OPTION. In the event of a Change of Control, the
Option granted hereby shall become immediately exercisable in full. For
purposes of this Agreement, "Change of Control" means the occurrence of any of
the following events:
(a) any "person," as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")
(other than the Company, any trustee or other fiduciary holding securities under
an employee benefit plan of the Company or any company owned, directly or
indirectly, by the stockholders of Occidental in substantially the same
proportions as their ownership of the Common Stock of Occidental), is or becomes
after the effective date of the Plan as provided in Section 16 of the Plan (the
"Effective Date") the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of Occidental (not
including in the securities beneficially owned by such person any securities
acquired directly from Occidental or its affiliates) representing 50 percent or
more of the combined voting power of Occidental's then-outstanding securities;
(b) during any period of two consecutive years (not including any
period prior to the Effective Date), individuals who at the beginning of such
period constitute the Board, and any new director (other than a director
designated by a person who has entered into an agreement with the Company to
effect a transaction described in clause (a), (c), or (d) of this definition)
whose election by the Board or nomination for election by Occidental's
stockholders was approved by a vote of at least two thirds (2/3) of the
directors then still in office who either were directors at the beginning of the
period or whose election or nomination for election was previously so approved,
cease for any reason to constitute at least a majority of the Board;
(c) the stockholders of Occidental approve a merger or
consolidation of Occidental with any other corporation, other than (i) a merger
or consolidation that would result in the voting securities of Occidental
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity), in combination with the ownership of any trustee or other
fiduciary holding securities under an employee benefit plan of the
3
<PAGE>
Company, at least 50 percent of the combined voting power of the voting
securities of Occidental or such surviving entity outstanding immediately after
such merger or consolidation or (ii) a merger or consolidation effected to
implement a recapitalization of the Company (or similar transaction) in which no
person acquires more than 50 percent of the combined voting power of
Occidental's then-outstanding securities; or
(d) the stockholders of Occidental approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition of all or
substantially all of the Company's assets;
provided, however, that prior to the occurrence of any of the events described
in clauses (a) through (d) above, the Board may determine that such event shall
not constitute a Change of Control for purposes of this Agreement.
8. NO EMPLOYMENT CONTRACT. Nothing contained in this Agreement shall
confer upon the Optionee any right with respect to continuance of employment by
the Company, nor limit or affect in any manner the right of the Company to
terminate the employment or adjust the compensation of the Optionee.
9. TAXES AND WITHHOLDING. If the Company shall be required to
withhold any federal, state, local or foreign tax in connection with the
exercise of the Option, the Optionee shall pay the tax or make provisions that
are satisfactory to the Company for the payment thereof. The Optionee may elect
to satisfy all or any part of any such withholding obligation by surrendering to
the Company a portion of the shares of Common Stock that are issued or
transferred to the Optionee upon the exercise of the Option, and the shares of
Common Stock so surrendered by the Optionee shall be credited against any such
withholding obligation at the Fair Market Value per Share of such shares on the
date of such surrender; provided, however, if the Optionee is subject to Section
16 of the Exchange Act, such election shall be made in accordance with Rule 16b-
3 and subject to approval by the Committee if such approval is then required by
Rule 16b-3.
10. COMPLIANCE WITH LAW. The Company shall make reasonable efforts
to comply with all applicable federal and state securities laws; provided,
however, notwithstanding any other provision of this Agreement, the Option shall
not be exercisable if the exercise thereof would result in a violation of any
such law.
11. ADJUSTMENTS. The Committee shall make such adjustments in the
Option Price and the number or kind of shares of stock covered by the Option
that the Committee may in good faith determine to be required in order to
prevent dilution or expansion of the Optionee's rights under this Agreement that
otherwise would result from (a) any stock dividend, stock split, combination of
shares, recapitalization or other change in the capital structure of the
Company, or (b) any merger, consolidation, spin-off, spin-out, split-off, split-
up, reorganization, partial or complete liquidation or other distribution of
assets, issuance of warrants or other rights to purchase securities, or any
other corporate
4
<PAGE>
transaction or event having an effect similar to any of the foregoing; provided,
however, that no adjustment may be made without the prior written consent of the
Optionee if the adjustment would constitute a "modification" within the meaning
of Section 424(h) of the Code or any successor provision thereto. In the event
of any such transaction or event, the Committee may provide in substitution for
all or any portion of the Optionee's rights under this Agreement such
alternative consideration as the Committee may in good faith determine to be
appropriate under the circumstances and may require the surrender of all rights
so replaced.
12. MANDATORY NOTICE OF DISQUALIFYING DISPOSITION. Without limiting
any other provision hereof, the Optionee hereby agrees that if the Optionee
disposes (whether by sale, exchange, gift or otherwise) of any of the Optioned
Shares within two (2) years of the Date of Grant or within one (1) year after
the transfer of such share or shares to the Optionee, the Optionee shall notify
Occidental of such disposition in writing within thirty (30) days from the date
of such disposition. Such written notice shall state the principal terms of
such disposition, including without limitation the date of such disposition and
the type and amount of the consideration received for such share or shares by
the Optionee in connection therewith.
13. RELATION TO OTHER BENEFITS. Any economic or other benefit to the
Optionee under this Agreement shall not be taken into account in determining any
benefits to which the Optionee may be entitled under any profit-sharing,
retirement or other benefit or compensation plan maintained by the Company and
shall not affect the amount of any life insurance coverage available to any
beneficiary under any life insurance plan covering employees of the Company.
14. AMENDMENTS. Any amendment to the Plan shall be deemed to be an
amendment to this Agreement to the extent that the amendment is applicable
hereto; provided, however, that no amendment shall adversely affect the rights
of the Optionee under this Agreement without the Optionee's consent.
15. SEVERABILITY. In the event that one or more of the provisions of
this Agreement shall be invalidated for any reason by a court of competent
jurisdiction, any provision so invalidated shall be deemed to be separable from
the other provisions hereof, and the remaining provisions hereof shall continue
to be valid and fully enforceable.
16. RELATION TO PLAN. This Agreement is subject to the terms and
conditions of the Plan. In the event of any inconsistent provisions between
this Agreement and the Plan, the Plan shall govern. Capitalized terms used
herein without definition shall have the meanings assigned to them in the Plan.
17. SUCCESSORS AND ASSIGNS. Without limiting Section 4 hereof, the
provisions of this Agreement shall inure to the benefit of, and be binding upon,
the successors, administrators, heirs, legal representatives and assigns of the
Optionee, and the successors and assigns of the Company.
5
<PAGE>
18. GOVERNING LAW. The interpretation, performance, and enforcement
of this Agreement shall be governed by the laws of the State of Delaware.
19. NOTICES. Any notice to the Company provided for herein shall be
given to its Secretary at 10889 Wilshire Boulevard, Los Angeles, California
90024, and any notice to the Optionee shall be addressed to said Optionee at his
or her address currently on file with the Company. Except as otherwise provided
herein, any written notice shall be deemed to be duly given if and when
delivered personally or deposited in the United States mail, first class
registered mail, postage and fees prepaid, and addressed as aforesaid. Any
party may change the address to which notices are to be given hereunder by
written notice to the other party as herein specified (provided that for this
purpose any mailed notice shall be deemed given on the third business day
following deposit on the same in the United States mail).
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed on its behalf by its duly authorized officer and Optionee has also
executed this Agreement in duplicate, as of the day and year first above
written.
OCCIDENTAL PETROLEUM CORPORATION
By:
--------------------------
-----------------------------
Optionee
6
<PAGE>
EXHIBIT 10.2
OCCIDENTAL PETROLEUM CORPORATION
NONQUALIFIED STOCK OPTION AGREEMENT
Name of Optionee:
---------------------------------------------------------------
Date of Grant:
------------------------------------------------------------------
Number of Optioned Shares:
------------------------------------------------------
Option Price:
-------------------------------------------------------------------
Vesting Percentage: Percent
-------------
AGREEMENT (the "Agreement") made as of the Date of Grant by and between
OCCIDENTAL PETROLEUM CORPORATION, a Delaware corporation (hereinafter called
"Occidental," and, collectively with its Subsidiaries, the "Company"), and
Optionee.
1. GRANT OF STOCK OPTION. Subject to and upon the terms, conditions,
and restrictions set forth in this Agreement and in the Occidental Petroleum
Corporation 1995 Incentive Stock Plan (the "Plan"), Occidental hereby grants to
the Optionee as of the Date of Grant a stock option (the "Option") to purchase
up to the number of Optioned Shares. The Option may be exercised from time to
time in accordance with the terms of this Agreement. The Option is intended to
be a nonqualified stock option and shall not be treated as an "incentive stock
option" within the meaning of that term under Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), or any successor provision
thereto.
2. TERM OF OPTION. The term of the Option shall commence on the Date
of Grant and, unless earlier terminated in accordance with Section 6 hereof,
shall expire ten (10) years from the Date of Grant.
3. RIGHT TO EXERCISE. Subject to the expiration or earlier
termination of the Option, on each anniversary of the Date of Grant the number
of Optioned Shares equal to the Vesting Percentage multiplied by the initial
number of Optioned Shares specified in this Agreement shall become exercisable
on a cumulative basis until the Option is fully exercisable. To the extent the
Option is exercisable, it may be exercised in whole or in part.
4. OPTION NONTRANSFERABLE. The Option granted hereby shall be
neither transferable nor assignable by the Optionee other than by will or by the
laws of descent
<PAGE>
and distribution and may be exercised, during the lifetime of the Optionee, only
by the Optionee, or in the event of his or her legal incapacity, by his or her
guardian or legal representative acting on behalf of the Optionee in a fiduciary
capacity under state law and court supervision.
5. NOTICE OF EXERCISE; PAYMENT. To the extent then exercisable, the
Option shall be exercised by oral or written notice to Occidental stating the
number of Optioned Shares for which the Option is being exercised and the
intended manner of payment. Payment equal to the aggregate Option Price of the
Optioned Shares shall be (a) in cash in the form of currency or check or other
cash equivalent acceptable to Occidental, (b) by actual or constructive transfer
to Occidental of nonforfeitable, nonrestricted shares of Common Stock that have
been owned by the Optionee for (i) more than one year prior to the date of
exercise and for more than two years from the date on which the option was
granted, if they were originally acquired by the Optionee pursuant to the
exercise of an incentive stock option, or (ii) more than six months prior to the
date of exercise, if they were originally acquired by the Optionee other than
pursuant to the exercise of an incentive stock option, or (c) by any combination
of the foregoing methods of payment. Nonforfeitable, nonrestricted shares of
Common Stock that are transferred by the Optionee in payment of all or any part
of the Option Price shall be valued on the basis of their Fair Market Value per
Share. The requirement of payment in cash shall be deemed satisfied if the
Optionee makes arrangements that are satisfactory to Occidental with a broker
that is a member of the National Association of Securities Dealers, Inc. to sell
a sufficient number of the shares of Common Stock, which are being purchased
pursuant to the exercise, so that the net proceeds of the sale transaction will
at least equal the amount of the aggregate Option Price, and pursuant to which
the broker undertakes to deliver to Occidental the amount of the aggregate
Option Price not later than the date on which the sale transaction will settle
in the ordinary course of business. The date of such notice shall be the
exercise date. Any oral notice of exercise shall be confirmed in writing to
Occidental before the close of business the same day.
6. TERMINATION OF AGREEMENT. The Agreement and the Option granted
hereby shall terminate automatically and without further notice on the earliest
of the following dates:
(a) Five years or the remaining term of the Option, whichever is
less, after the date the Optionee ceases to be an employee of the Company by
reason of the Optionee's (i) death, (ii) permanent disability or (iii)
retirement under a retirement plan of the Company at or after the earliest
voluntary retirement age provided for in such retirement plan or retirement at
an earlier age with the consent of the Board;
(b) Immediately upon the voluntary or involuntary resignation of
the Optionee other than in connection with retirement as provided in 6(a)(iii)
above; or
(c) Ten years from the Date of Grant.
2
<PAGE>
In the event that the Optionee commits an act that the Committee determines to
have been intentionally committed and materially inimical to the interests of
the Company, the Agreement shall terminate at the time of that determination
notwithstanding any other provision of this Agreement. This Agreement shall not
be exercisable for any number of Optioned Shares in excess of the number of
Optioned Shares for which this Agreement is then exercisable on the date of
termination of employment. For the purposes of this Agreement, the continuous
employment of the Optionee with the Company shall not be deemed to have been
interrupted, and the Optionee shall not be deemed to have ceased to be an
employee of the Company, by reason of the transfer of his or her employment
among the Company and its Subsidiaries or an approved leave of absence.
7. ACCELERATION OF OPTION. In the event of a Change of Control, the
Option granted hereby shall become immediately exercisable in full. For
purposes of this Agreement, "Change of Control" means the occurrence of any of
the following events:
(a) any "person," as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")
(other than the Company, any trustee or other fiduciary holding securities under
an employee benefit plan of the Company or any company owned, directly or
indirectly, by the stockholders of Occidental in substantially the same
proportions as their ownership of the Common Stock of Occidental), is or becomes
after the effective date of the Plan as provided in Section 16 of the Plan (the
"Effective Date") the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of Occidental (not
including in the securities beneficially owned by such person any securities
acquired directly from Occidental or its affiliates) representing 50 percent or
more of the combined voting power of Occidental's then-outstanding securities;
(b) during any period of two consecutive years (not including any
period prior to the Effective Date), individuals who at the beginning of such
period constitute the Board, and any new director (other than a director
designated by a person who has entered into an agreement with the Company to
effect a transaction described in clause (a), (c), or (d) of this definition)
whose election by the Board or nomination for election by Occidental's
stockholders was approved by a vote of at least two thirds (2/3) of the
directors then still in office who either were directors at the beginning of the
period or whose election or nomination for election was previously so approved,
cease for any reason to constitute at least a majority of the Board;
(c) the stockholders of Occidental approve a merger or
consolidation of Occidental with any other corporation, other than (i) a merger
or consolidation that would result in the voting securities of Occidental
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity), in combination with the ownership of any trustee or other
fiduciary holding securities under an employee benefit plan of the Company, at
least 50 percent of the combined voting power of the voting securities of
Occidental or such surviving entity outstanding immediately after such merger or
3
<PAGE>
consolidation or (ii) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no person
acquires more than 50 percent of the combined voting power of Occidental's then-
outstanding securities; or
(d) the stockholders of Occidental approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition of all or
substantially all of the Company's assets;
provided, however, that prior to the occurrence of any of the events described
in clauses (a) through (d) above, the Board may determine that such event shall
not constitute a Change of Control for purposes of this Agreement.
8. NO EMPLOYMENT CONTRACT. Nothing contained in this Agreement shall
confer upon the Optionee any right with respect to continuance of employment by
the Company, nor limit or affect in any manner the right of the Company to
terminate the employment or adjust the compensation of the Optionee.
9. TAXES AND WITHHOLDING. If the Company shall be required to
withhold any federal, state, local or foreign tax in connection with the
exercise of the Option, the Optionee shall pay the tax or make provisions that
are satisfactory to the Company for the payment thereof. The Optionee may elect
to satisfy all or any part of any such withholding obligation by surrendering to
the Company a portion of the shares of Common Stock that are issued or
transferred to the Optionee upon the exercise of the Option, and the shares of
Common Stock so surrendered by the Optionee shall be credited against any such
withholding obligation at the Fair Market Value per Share of such shares on the
date of such surrender; provided, however, if the Optionee is subject to Section
16 of the Exchange Act, such election shall be made in accordance with Rule 16b-
3 and subject to approval by the Committee if such approval is then required by
Rule 16b-3.
10. COMPLIANCE WITH LAW. The Company shall make reasonable efforts
to comply with all applicable federal and state securities laws; provided,
however, notwithstanding any other provision of this Agreement, the Option shall
not be exercisable if the exercise thereof would result in a violation of any
such law.
11. ADJUSTMENTS. The Committee shall make such adjustments in the
Option Price and the number or kind of shares of stock covered by the Option
that the Committee may in good faith determine to be required in order to
prevent dilution or expansion of the Optionee's rights under this Agreement that
otherwise would result from (a) any stock dividend, stock split, combination of
shares, recapitalization or other change in the capital structure of the
Company, or (b) any merger, consolidation, spin-off, spin-out, split-off, split-
up, reorganization, partial or complete liquidation or other distribution of
assets, issuance of warrants or other rights to purchase securities, or any
other corporate transaction or event having an effect similar to any of the
foregoing. In the event of any such transaction or event, the Committee may
provide in substitution for all or any
4
<PAGE>
portion of the Optionee's rights under this Agreement such alternative
consideration as the Committee may in good faith determine to be appropriate
under the circumstances and may require the surrender of all rights so replaced.
12. RELATION TO OTHER BENEFITS. Any economic or other benefit to the
Optionee under this Agreement shall not be taken into account in determining any
benefits to which the Optionee may be entitled under any profit-sharing,
retirement or other benefit or compensation plan maintained by the Company and
shall not affect the amount of any life insurance coverage available to any
beneficiary under any life insurance plan covering employees of the Company.
13. AMENDMENTS. Any amendment to the Plan shall be deemed to be an
amendment to this Agreement to the extent that the amendment is applicable
hereto; provided, however, that no amendment shall adversely affect the rights
of the Optionee under this Agreement without the Optionee's consent.
14. SEVERABILITY. In the event that one or more of the provisions of
this Agreement shall be invalidated for any reason by a court of competent
jurisdiction, any provision so invalidated shall be deemed to be separable from
the other provisions hereof, and the remaining provisions hereof shall continue
to be valid and fully enforceable.
15. RELATION TO PLAN. This Agreement is subject to the terms and
conditions of the Plan. In the event of any inconsistent provisions between
this Agreement and the Plan, the Plan shall govern. Capitalized terms used
herein without definition shall have the meanings assigned to them in the Plan.
16. SUCCESSORS AND ASSIGNS. Without limiting Section 4 hereof, the
provisions of this Agreement shall inure to the benefit of, and be binding upon,
the successors, administrators, heirs, legal representatives and assigns of the
Optionee, and the successors and assigns of the Company.
17. GOVERNING LAW. The interpretation, performance, and enforcement
of this Agreement shall be governed by the laws of the State of Delaware.
18. NOTICES. Any notice to the Company provided for herein shall be
given to its Secretary at 10889 Wilshire Boulevard, Los Angeles, California
90024, and any notice to the Optionee shall be addressed to said Optionee at his
or her address currently on file with the Company. Except as otherwise provided
herein, any written notice shall be deemed to be duly given if and when
delivered personally or deposited in the United States mail, first class
registered mail, postage and fees prepaid, and addressed as aforesaid. Any
party may change the address to which notices are to be given hereunder by
written notice to the other party as herein specified (provided that for this
purpose any mailed notice shall be deemed given on the third business day
following deposit on the same in the United States mail).
5
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed on its behalf by its duly authorized officer and Optionee has also
executed this Agreement in duplicate, as of the day and year first above
written.
OCCIDENTAL PETROLEUM CORPORATION
By:
--------------------------
-----------------------------
Optionee
6
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 11
OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(Amounts in thousands, except per-share amounts)
Three Months Ended Six Months Ended
June 30 June 30
EARNINGS PER COMMON AND COMMON ---------------------- ----------------------
EQUIVALENT SHARE 1996 1995 1996 1995
- -------------------------------------------------------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
Earnings(loss) applicable to common stock $ 158,285 $ 163,648 $ 268,739 $ 318,493
========= ========= ========= =========
Common shares outstanding at beginning of period 319,354 317,442 318,711 316,853
Issuance of common shares, weighted average 2,320 307 1,589 709
Conversions, weighted average options exercised and other 143 214 230 121
Repurchase/cancellation of common shares (5) -- (71) (52)
Effect of assumed exercises
Dilutive effect of exercise of options outstanding and other 542 267 395 142
--------- --------- --------- ---------
Weighted average common stock and common stock
equivalents 322,354 318,230 320,854 317,773
========= ========= ========= =========
Primary earnings per share:
Income before extraordinary gain(loss), net $ .49 $ .51 $ .93 $ 1.00
Extraordinary gain(loss), net -- -- (.09) --
--------- --------- --------- ---------
Earnings(loss) per common and common equivalent share $ .49 $ .51 $ .84 $ 1.00
========= ========= ========= =========
FULLY DILUTED EARNINGS PER SHARE
- --------------------------------------------------------------
Earnings(loss) applicable to common stock $ 158,285 $ 163,648 $ 268,739 $ 318,493
Dividends applicable to dilutive preferred stock:
$3.875 preferred stock(a) 14,634 14,634 -- 29,269
$3.00 preferred stock(a) 8,541 8,541 17,082 17,082
--------- --------- --------- ---------
$ 181,460 $ 186,823 $ 285,821 $ 364,844
========= ========= ========= =========
Common shares outstanding at beginning of period 319,354 317,442 318,711 316,853
Issuance of common shares, weighted average 2,320 307 1,589 709
Conversions, weighted average options exercised and other 143 214 230 121
Repurchase/cancellation of common shares (5) -- (71) (52)
Effect of assumed conversions and exercises
Dilutive effect of assumed conversion of preferred stock:
$3.875 preferred stock(a) 33,186 33,186 -- 33,186
$3.00 preferred stock(a) 27,070 28,118 27,070 28,118
Dilutive effect of exercise of options outstanding and other 543 267 523 241
--------- --------- --------- ---------
Total for computation of fully diluted earnings per share 382,611 379,534 348,052 379,176
========= ========= ========= =========
Fully diluted earnings per common share:
Income before extraordinary gain(loss), net $ .47 $ .49 $ .91 $ .96
Extraordinary gain(loss), net -- -- (.09) --
--------- --------- --------- ---------
Fully diluted earnings(loss) per common share $ .47 $ .49 $ .82 $ .96
========= ========= ========= =========
- -------------------------
(a) Convertible securities are not considered in the calculations if the effect of the conversion is anti-dilutive.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 12
OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
COMPUTATION OF TOTAL ENTERPRISE RATIOS OF EARNINGS TO FIXED CHARGES
(Amounts in millions, except ratios)
Six Months Ended
June 30 Year Ended December 31
---------------------- -------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
- --------------------------------------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Income(loss) from continuing
operations(a) $ 334 $ 380 $ 478 $ (46) $ 80 $ 131 $ 374
--------- --------- --------- --------- --------- --------- ---------
Add:
Provision(credit) for taxes on
income (other than foreign oil
and gas taxes) 181 187 244 50 204 114 343
Interest and debt expense(b) 266 295 592 594 601 666 880
Portion of lease rentals
representative of the interest
factor 21 27 48 55 53 56 57
Preferred dividends to minority
stockholders of subsidiaries(c) -- -- -- -- -- 7 11
--------- --------- --------- --------- --------- --------- ---------
468 509 884 699 858 843 1,291
--------- --------- --------- --------- --------- --------- ---------
Earnings before fixed charges $ 802 $ 889 $ 1,362 $ 653 $ 938 $ 974 $ 1,665
========= ========= ========= ========= ========= ========= =========
Fixed charges
Interest and debt expense
including capitalized interest(b) $ 270 $ 301 $ 602 $ 599 $ 612 $ 685 $ 912
Portion of lease rentals
representative of the interest
factor 21 27 48 55 53 56 57
Preferred dividends to minority
stockholders of subsidiaries(c) -- -- -- -- -- 7 11
--------- --------- --------- --------- --------- --------- ---------
Total fixed charges $ 291 $ 328 $ 650 $ 654 $ 665 $ 748 $ 980
========= ========= ========= ========= ========= ========= =========
Ratio of earnings to fixed charges 2.76 2.71 2.10 n/a(d) 1.41 1.30 1.70
- --------------------------------------- ========= ========= ========= ========= ========= ========= =========
(a) Includes (1) minority interest in net income of majority-owned subsidiaries having fixed charges and (2) income from
less-than-50-percent-owned equity investments adjusted to reflect only dividends received.
(b) Includes proportionate share of interest and debt expense of 50-percent-owned equity investments.
(c) Adjusted to a pretax basis.
(d) Not computed due to less than one-to-one coverage. Earnings were inadequate to cover fixed charges by $1 million.
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD ENDED
JUNE 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 113
<SECURITIES> 0
<RECEIVABLES> 653
<ALLOWANCES> 15
<INVENTORY> 573
<CURRENT-ASSETS> 2,059
<PP&E> 22,998
<DEPRECIATION> 9,107
<TOTAL-ASSETS> 17,492
<CURRENT-LIABILITIES> 2,167
<BONDS> 4,806
0
1,325
<COMMON> 64
<OTHER-SE> 3,450
<TOTAL-LIABILITY-AND-EQUITY> 17,492
<SALES> 4,979
<TOTAL-REVENUES> 5,196
<CGS> 3,708
<TOTAL-COSTS> 3,708
<OTHER-EXPENSES> 135
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 260
<INCOME-PRETAX> 593
<INCOME-TAX> 291
<INCOME-CONTINUING> 345
<DISCONTINUED> 0
<EXTRAORDINARY> (30)
<CHANGES> 0
<NET-INCOME> 315
<EPS-PRIMARY> .84
<EPS-DILUTED> .82
</TABLE>
