<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
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 90024
LOS ANGELES, CALIFORNIA (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (310) 208-8800
---------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
- -------------------------------------- --------------------------------------
9 5/8% Senior Notes due 1999 New York Stock Exchange
10 1/8% Senior Notes due 2001 New York Stock Exchange
10 1/8% Senior Debentures due 2009 New York Stock Exchange
11 1/8% Senior Debentures due 2019 New York Stock Exchange
9 1/4% Senior Debentures due 2019 New York Stock Exchange
$3.00 Cumulative CXY-Indexed New York Stock Exchange
Convertible Preferred Stock
Common Stock New York Stock Exchange,
Pacific Stock Exchange
Rights New York Stock Exchange,
Pacific Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
Indicate by check mark whether the registrant (l) 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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. /X/
---------------------
At February 29, 1996, the aggregate market value of the voting stock held by
nonaffiliates of the registrant was approximately $7.4 billion, based on the New
York Stock Exchange composite tape closing price on February 29, 1996.
At February 29, 1996, there were 319,187,618 shares of Common Stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Annual Report for the year ended December 31,
1995, are incorporated by reference into Parts I and II. Portions of the
registrant's definitive Proxy Statement filed in connection with its April 26,
1996, Annual Meeting of Stockholders are incorporated by reference into Part
III.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
PART I
ITEMS 1 AND 2 Business and Properties............................................... 1
General....................................................................... 1
Oil and Gas Operations........................................................ 1
Natural Gas Transmission Operations........................................... 7
Chemical Operations........................................................... 11
Capital Expenditures.......................................................... 14
Employees..................................................................... 15
Environmental Regulation...................................................... 15
ITEM 3 Legal Proceedings............................................................ 15
Environmental Proceedings..................................................... 16
ITEM 4 Submission of Matters to a Vote of Security Holders.......................... 17
Executive Officers of the Registrant.......................................... 17
PART II
ITEM 5 Market for Registrant's Common Equity and Related Stockholder Matters........ 18
ITEM 6 Selected Financial Data...................................................... 18
ITEM 7 Management's Discussion and Analysis of Financial Condition and Results of
Operations......................................................................... 18
ITEM 8 Financial Statements and Supplementary Data.................................. 19
ITEM 9 Changes in and Disagreements With Accountants on Accounting and Financial
Disclosure......................................................................... 22
PART III
ITEM 10 Directors and Executive Officers of the Registrant.......................... 22
ITEM 11 Executive Compensation...................................................... 22
ITEM 12 Security Ownership of Certain Beneficial Owners and Management.............. 22
ITEM 13 Certain Relationships and Related Transactions.............................. 22
PART IV
ITEM 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K............. 22
</TABLE>
(i)
<PAGE>
PART I
ITEMS 1 AND 2 BUSINESS AND PROPERTIES
GENERAL
Occidental Petroleum Corporation, a Delaware corporation ("Occidental"),
explores for, develops, produces and markets crude oil and natural gas; engages
in interstate and intrastate natural gas transmission and marketing; and
manufactures and markets a variety of basic chemicals, petrochemicals and
polymers and plastics. Occidental conducts its principal operations through
three subsidiaries: Occidental Oil and Gas Corporation, MidCon Corp. and
Occidental Chemical Corporation. Occidental's executive offices are located at
10889 Wilshire Boulevard, Los Angeles, California 90024; telephone (310)
208-8800.
Occidental was organized in April 1986 and, as the result of a
reorganization effective May 21, 1986, became the successor to a California
corporation of the same name organized in 1920. As used herein, the term
"Occidental" refers to Occidental alone or together with one or more of its
subsidiaries.
Occidental's principal businesses constitute three industry segments, the
operations of which are described below. For information with respect to the
revenues, net income and assets of Occidental's industry segments and of its
operations in various geographic areas for each of the three years in the period
ended December 31, 1995, see Note 17 to the Consolidated Financial Statements of
Occidental ("Consolidated Financial Statements"), which are included in
Occidental's 1995 Annual Report ("1995 Annual Report") and are incorporated by
reference in Item 8 of this report, and the information appearing under the
caption "Management's Discussion and Analysis," which is included in the 1995
Annual Report and is incorporated by reference in Item 7 of this report.
Throughout this report, portions of the 1995 Annual Report are incorporated by
reference. These portions of the 1995 Annual Report are included as Exhibit 13
to this report.
OIL AND GAS OPERATIONS
EXPLORATION AND PRODUCTION
GENERAL Through Occidental Oil and Gas Corporation and its subsidiaries,
and its approximate 30 percent equity interest in Canadian Occidental Petroleum
Ltd. ("CanadianOxy"), Occidental produces or participates in the production of
crude oil, condensate and natural gas in the United States, Canada, Colombia,
the Congo, Ecuador, the Dutch and United Kingdom sectors of the North Sea, Oman,
Pakistan, Peru, Qatar, Russia, Venezuela and Yemen. Occidental is continuing its
development programs for certain existing fields in certain of these countries
and also is conducting exploration activities in several of these countries as
well as in other countries.
<TABLE>
<CAPTION>
COMPARATIVE OIL AND GAS RESERVES AND PRODUCTION
(Oil in millions of barrels; natural gas in billions of cubic feet)
1995 1994 1993
-------------------------- -------------------------- --------------------------
OIL GAS TOTAL* OIL GAS TOTAL* OIL GAS TOTAL*
------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
International Reserves 734 639 841 700 354 759 598 156 624
U.S. Reserves 196 1,821 521 218 1,979 571 195 1,980 549
------ ------ ------ ------ ------ ------ ------ ------ ------
Total 930 2,460 1,362 918 2,333 1,330 793 2,136 1,173
====== ====== ====== ====== ====== ====== ====== ====== ======
International Production 78 46 86 65 19 68 58 19 61
U.S. Production 23 223 62 22 227 63 21 219 60
------ ------ ------ ------ ------ ------ ------ ------ ------
Total 101 269 148 87 246 131 79 238 121
====== ====== ====== ====== ====== ====== ====== ====== ======
- --------------------------
* Gas volumes have been converted to equivalent barrels based on energy content.
</TABLE>
1
<PAGE>
In 1995, Occidental again added more oil to its reserves than it produced,
continuing its record of total reserve increases. Occidental's consolidated
worldwide net proved developed and undeveloped reserves of crude oil (not
including those of CanadianOxy) were 930 million barrels at year-end 1995,
compared with 918 million barrels at year-end 1994. Domestic reserves of crude
oil were 196 million barrels at year-end 1995, compared with 218 million barrels
at year-end 1994, while international crude oil reserves increased to 734
million barrels from 700 million barrels at year-end 1994. Worldwide net crude
oil reserve additions of 138 million barrels, mainly in Peru, Venezuela and
Qatar, more than replaced Occidental's worldwide production of 101 million
barrels. The calculation of net reserve additions does not take into account
sales of reserves. Worldwide net proved developed and undeveloped reserves of
natural gas were approximately 2.5 trillion cubic feet ("Tcf") at year-end 1995,
with 1.8 Tcf attributable to domestic operations. Worldwide net proved developed
and undeveloped natural gas reserves were about 2.3 Tcf in the previous year.
Discoveries of substantial quantities of gas and oil in the Philippines are not
reflected in Occidental's proved reserves. Similarly, only a portion of the gas
and condensate reserves in Malaysia has been reflected in proved reserves.
Occidental's crude oil reserves include condensate and natural gas liquids,
except for the United States, where crude oil reserves include only condensate.
In addition, natural gas reserves in the United States are presented on a
wet-gas basis (including leasehold natural gas liquids reserves), whereas
natural gas reserves in other locations exclude natural gas liquids. Estimates
of reserves have been made by Occidental engineers. These estimates include
reserves in which Occidental holds an economic interest under service contracts
and other arrangements. The reserves are stated after applicable royalties. See
the information incorporated under the caption "Supplemental Oil and Gas
Information" incorporated by reference in Item 8 of this report.
Net daily worldwide oil production grew by 17 percent to an average of
278,000 barrels per day in 1995, and net worldwide natural gas production rose
by 10 percent to an average of 739 million cubic feet ("MMcf") per day.
International operations accounted for 77 percent of Occidental's oil
production, while 83 percent of gas production came from the United States. On
an oil equivalent basis, Occidental produced 408,000 net barrels per day in 1995
from operations in 12 countries, including the United States.
As a producer of crude oil and natural gas, Occidental competes with
numerous other producers, as well as with nonpetroleum energy producers. Crude
oil and natural gas are commodities that are sensitive to prevailing conditions
of supply and demand and generally are sold at posted or contract prices. Among
the methods that Occidental uses to compete are the acquisition of foreign
contract exploration blocks in areas with known oil and gas deposits and the
cost-efficient development and exploitation of its worldwide oil and gas
reserves. Specific strategies include the buying or selling of proved reserves
and flexible and responsive marketing techniques, particularly for natural gas.
Occidental is also pursuing opportunities to increase production through
enhanced oil recovery projects, similar to those in Qatar and Venezuela, focused
exploration and strategic acquisitions.
Occidental's domestic oil and gas operations are affected by political
developments and by federal, state and local laws and regulations relating to,
among other things, increases in taxes and royalties, production limits and
environmental matters. All sectors of the natural gas industry continued during
1995 to adjust their marketing activities under the provisions of a series of
orders adopted by the Federal Energy Regulatory Commission ("FERC") in 1992
("Order 636"). Order 636 was implemented to improve the competitive structure of
the natural gas industry and at the same time maintain adequate and reliable
service. Both FERC and state regulatory agencies have continued to modify the
scope of the regulation of the transportation services framework put into effect
by Order 636 with a series of Orders issued in 1994 that will tend to deregulate
the gathering systems of interstate pipelines and their affiliates. These
activities are not expected to have a significant impact on Occidental's
domestic oil and gas production operations.
In December 1995, Occidental entered into a transaction with Clark USA, Inc.
("Clark") under which Occidental agreed to deliver approximately 17.7 million
barrels of West Texas Intermediate crude ("WTI")-equivalent oil over the next
six years. In exchange, Occidental received $100 million in cash and
approximately 5.5 million shares of Clark common stock. As a result of the
transaction, Occidental owns approximately 19 percent of Clark. Occidental has
accounted for the consideration received in the transaction as deferred revenue
which is being amortized into revenue as WTI-equivalent oil is produced
2
<PAGE>
and delivered during the term of the agreement. Reserves dedicated to the
transaction are excluded from the estimate of proved oil and gas reserves (see
the information incorporated under the caption "Supplemental Oil and Gas
Information" incorporated by reference in Item 8 of this report).
Portions of Occidental's oil and gas assets are located in countries outside
North America, some of which may be considered politically and economically
unstable. These assets and the related operations are subject to the risk of
actions by governmental authorities and insurgent groups. Occidental attempts to
conduct its financial affairs so as to protect against such risks and would
expect to receive compensation in the event of nationalization. At December 31,
1995, the carrying value of Occidental's oil and gas assets in countries outside
North America aggregated approximately $2.038 billion, or approximately 11
percent of Occidental's total assets at that date. Approximately $635 million of
such assets was located in the Middle East, and $563 million of such assets was
located in Latin America. Substantially all of the remainder were located in the
Dutch sector of the North Sea, West Africa and Russia.
UNITED STATES Occidental produces crude oil and natural gas, principally in
Texas, the Gulf of Mexico, Kansas, Oklahoma, Louisiana, New Mexico, California,
Mississippi and Alaska.
Net daily domestic production of crude oil averaged approximately 64,000
barrels in 1995, compared with 59,000 barrels in 1994. Net daily domestic
production of natural gas averaged 612 MMcf in 1995, compared with 620 MMcf in
1994.
Occidental's average price for domestic crude oil was $15.61 per barrel in
1995, compared with $14.21 in the previous year. The average natural gas price
in 1995 was $1.51 per thousand cubic feet ("Mcf"), compared with $1.85 per Mcf
during 1994.
The purchase on December 29, 1994 of Placid Oil Company ("Placid") added in
1994 proven domestic reserves of 20.1 million barrels of oil equivalent. During
1995, Occidental personnel assumed operations of Placid's domestic properties
which are primarily located in central Louisiana. Placid participated in 16
development wells during 1995, of which 15 were successful. Occidental's net
daily domestic production for 1995 increased by 4,200 barrels of crude oil and
21.1 MMcf of natural gas as a result of the Placid acquisition.
Occidental's largest concentration of gas reserves and production is the
Hugoton area encompassing portions of Kansas, Oklahoma and Texas, where it
produced an average of more than 218 MMcf of gas per day or approximately
one-third of the domestic total. Occidental has approximately 1.1 Tcf of gas
reserves and 5.7 million barrels of oil reserves in the Hugoton area and has
continued development in this region by drilling approximately 50 infill wells
and adding 29 producing wells through exploration of deeper levels in 1995.
In central Oklahoma, Occidental's continued carbon dioxide ("CO2") strategy
during 1995 resulted in reserve additions of 1.7 million barrels. Extension
wells drilled in the area resulted in adding reserves of 200,000 barrels of oil
and 1.7 billion cubic feet ("Bcf") of gas. Occidental plans to begin CO2
injection into the S.E. Bradley A Unit in mid-1996.
Twenty wells were drilled in the Milne Point field in Alaska during 1995.
These wells resulted in reserve additions of 4.8 million barrels of oil. Another
15 wells were also drilled, which resulted in the reclassification of 1.8
million barrels from proved undeveloped to proved developed.
Occidental continued to develop its interest in the deep, high pressure
Austin Chalk play in the Masters Creek Field in Rapides Parish, Louisiana. In
December, the Murray A-1, a 14,700 foot total vertical depth dual lateral
horizontal well, was completed. The well was successfully tested at 3,200
barrels of oil and 10 MMcf of gas per day and will be brought on production in
early 1996. This paves the way for further development of Occidental's interests
in the 36,000 acre leasehold. Additionally, Occidental participated in the
Labokay exploration located seven miles west of the Masters Creek properties.
Occidental has a 50 percent working interest in the extension.
Occidental has an agreement to make available to certain parties, in
connection with a legal settlement, up to 49,500 million British thermal units
("MMBtu") of natural gas per day through 2010 at prices related
3
<PAGE>
to market. Occidental also has an agreement to supply fuel gas at market prices
to a CITGO Petroleum Corporation ("CITGO") refinery until 2003 to the extent
that CITGO does not obtain such gas from other sources.
Additionally, Occidental has an agreement to supply CITGO, at CITGO's
option, with a majority of its domestic lease crude oil production through
August 31, 1998. During 1995, Occidental sold CITGO approximately 38,000 barrels
of oil per day under this agreement.
Occidental has various agreements to supply certain gas marketing companies
with 70,900 MMBtu of natural gas per day for 1996 and with volumes ranging from
69,400 down to 1,900 MMBtu per day from 1997 through 2003. Prices under the
different agreements are based on energy equivalent crude oil prices, market-
sensitive prices or contract prices, some with a yearly escalation provision.
Occidental also has agreements with various public utility companies to provide
approximately 40,000 MMBtu of natural gas per day through 1997 and approximately
19,100 MMBtu per day in 1998. The public utility agreements provide for market-
sensitive prices. In addition, Occidental has entered into several other sales
contracts of one year or more to industrial customers with a total volume of
15,700 MMBtu of natural gas per day in 1996, decreasing to 2,400 MMBtu per day
by 1998.
CANADA Occidental owns an approximate 30 percent interest in CanadianOxy,
which is accounted for as an equity investment. See Note 15 to the Consolidated
Financial Statements.
CanadianOxy produces crude oil, natural gas, natural gas liquids and sulfur
in Canada, principally in the Province of Alberta; owns a 7.23 percent interest
in Syncrude Canada Ltd., which produces synthetic crude oil from the tar sands
of Northern Alberta; has interests in producing oil and gas leases onshore and
offshore in the United States and in the United Kingdom sector of the North Sea
and Yemen; engages in exploration activities in Canada, the United States,
Yemen, Indonesia, Romania, Pakistan, Kazakstan, Colombia and Vietnam; and
participates with Occidental in certain of its operations in Peru and Ecuador.
CanadianOxy also conducts chemical operations in Canada and the United States.
At December 31, 1995, Occidental's proportional interest in CanadianOxy's
worldwide net proved developed and undeveloped reserves aggregated approximately
38 million barrels of crude oil, condensate and natural gas liquids, 156 Bcf of
natural gas and 48 million barrels of synthetic crude oil recoverable from tar
sands.
COLOMBIA Occidental conducts exploration and production operations in
Colombia under four contracts with Ecopetrol, the Colombian national oil
company. These contracts cover the producing Cano Limon area in the Llanos
region of northeastern Colombia, one exploration area in the Llanos fold belt,
one exploration area in the Bogota basin and one exploration area in the
Magdalena Valley. Occidental's interest in these contracts is through its 75
percent ownership of the stock of a subsidiary that owns the company conducting
operations in Colombia. After giving effect to a government royalty,
Occidental's net share of existing production is 15 percent from the contract
covering the Llanos area.
All of Occidental's share of production is exported through a trans-Andean
pipeline system that carries crude oil to an export terminal at Covenas.
Occidental has an 18.75 percent net ownership interest in the pipeline and
marine terminal. The pipeline is subject to periodic attacks by insurgent
groups, which from time to time disrupt the flow of oil.
Gross production from Occidental's Cano Limon area averaged approximately
197,000 barrels per day in 1995, compared with 189,000 barrels per day in 1994.
CONGO In April 1993, Occidental signed an agreement with the Republic of
the Congo (the "Congo") providing for the purchase of a share of the
government's entitlement to oil from certain offshore properties. The agreement
was subsequently amended to substitute the government's entitlement from fields
either currently producing or scheduled for development to replace undeveloped
areas included in the initial agreement. Occidental began receiving revenue from
the entitlement oil in 1994. In 1995, the
4
<PAGE>
Congolese government approved production-sharing contracts for two offshore
exploration blocks in the Congo's major producing area. Occidental's net
production in the Congo was approximately 9,000 barrels per day in 1995.
ECUADOR Occidental operates the 494,000-acre Block 15, in the Oriente
Basin, under a risk-service contract. Five oil fields were discovered between
1985 and 1992 and production started in May 1993 from three fields. Drilling
will continue until the fields are fully developed. Gross production was 23,800
barrels per day in 1995 and Occidental's net production was approximately 20,200
barrels per day.
In late 1995, Occidental and the government of Ecuador reached agreement on
amending the Block 15 contract. In exchange for an additional exploration work
program and a fixed percentage royalty on production from newly discovered
fields, Occidental will receive an increased share of profits from production
from any new discoveries. Also, the contract term for new discoveries will be
extended for at least seven years.
Occidental has an 85 percent interest in the parent of the company that
holds title to the block. CanadianOxy owns the remaining 15 percent.
NORTH SEA Through the purchase of a subsidiary of Placid named Placid
International Oil Ltd., now Occidental Netherlands, Inc., as part of the Placid
acquisition in December 1994, Occidental acquired interests in seven
gas-producing licenses and four exploration licenses in the Dutch sector of the
North Sea. Also acquired was a 38.6 percent interest in a 110-mile gas pipeline
system that services the area. Net production for 1995 was approximately 78 MMcf
of gas per day.
OMAN Occidental is the operator, with a 65 percent working interest, of the
Suneinah Block, which contains the Safah field, the Al Barakah field and the
Wadi Latham field. Occidental's net share of production from the block in 1995
averaged approximately 12,000 barrels per day of crude oil, compared with 12,300
barrels per day in 1994.
PAKISTAN In April 1995, Occidental sold the subsidiary company that owned
Occidental's interests in the Dhurnal and Bhangali oil and gas fields and the
Ratana gas field located in northern Pakistan.
In southern Pakistan, Occidental has a 30 percent working interest in the
Badin Block, which in 1995 produced a net share of 6,000 barrels of oil per day
and 49 MMcf of gas per day, compared to 4,700 barrels of oil per day and 43 MMcf
of gas per day in 1994. Exploration of the block resulted in five oil and gas
discoveries that will help maintain production at current rates.
In addition, Occidental holds exploration rights for a 356,000-acre block in
northern Pakistan for two contiguous blocks in the Central Indus gas basin
totaling 2.9 million acres and for four other blocks totaling 5.2 million acres.
PERU Occidental conducts exploration and production activities under three
separate service contracts with the Peruvian government. Two of these contracts
cover continuing operations in the northern jungle and in the northern coastal
area of Talara and provide for Occidental to receive, as compensation for its
services, fees, based on barrels of production, that vary with the value of a
"basket" of international oils. All production is delivered to Perupetro, the
Peruvian national oil company. Occidental has a 100 percent interest in the
jungle contract and a 63 percent interest in the Talara contract. The contract
for Talara, signed in 1978, expired in July 1995, but was renewed for one year.
The third contract, in which Occidental owns a 35 percent working interest, is
for an exploration block adjacent to the northern jungle block.
Gross production from the northern jungle block averaged approximately
55,000 barrels per day in 1995, compared with 58,000 barrels per day in 1994.
Occidental's net production in Peru amounted to approximately 58,000 barrels per
day in 1995, compared to 61,000 barrels per day in 1994.
QATAR In October 1994, a unified agreement was approved authorizing
Occidental to implement a development plan to increase production and reserves
from the Idd el Shargi North Dome field.
Under a production sharing agreement, Occidental is the operator of the
field and will complete development of the field's three main reservoirs using
horizontally drilled wells in conjunction with pressure
5
<PAGE>
maintenance by both water injection and gas injection to effect a high recovery
from the reservoir. Production increased from the initial base rate of 20,000
barrels per day to approximately 67,000 barrels per day at the end of 1995.
RUSSIA In 1992, Occidental and AAOT Chernogorneft Enterprise began
operation of a fifty percent owned joint venture company, Vanyoganneft, which
was formed to increase oil recovery and production from the Vanyogan and Ayogan
oil fields and to sell the oil to foreign markets. The two oil fields are
located 40 miles northeast of the city of Nizhnevartovsk in the western Siberian
oil basin. Through well workovers, new development wells and the use of electric
submersible pumps, production was increased by more than 8,000 barrels per day
and reached 50,000 gross barrels per day at year-end 1993. The Russian
government mandated the cessation of joint venture exports at the beginning of
1994, which caused Occidental to slow investment substantially and to reduce
expatriate staff. As a result, Occidental reduced repair work and new drilling.
Exports of crude oil resumed in the fourth quarter of 1994 and continued through
1995. During 1995, gross production averaged 46,900 barrels per day. Occidental
expects to continue to export a significant amount of its production in 1996.
In 1992, Occidental was awarded the 1.5-million-acre Block 15 in the Russian
Federation's Komi Republic. A joint venture, Parmaneft, was established between
Occidental, which owns a 75 percent interest, and Ukhtaneftegasgeologica to
explore for oil and gas and develop discoveries within the block. During the
exploration phase, Occidental is paying 100 percent of the costs. South
Terekheveiskaya Parmaneft-1, the joint venture's first exploratory well drilled
in 1993, tested high-gravity oil at a rate of approximately 6,400 barrels per
day. The block contains a number of other prospects that may contain oil
reserves. In addition to Block 15, Parmaneft acquired rights under subsurface
licenses for two undeveloped Russian fields several miles southeast of Block 15.
VENEZUELA In November 1993, Occidental executed a 20-year operating
services agreement with Maraven, an affiliate of the Venezuelan national oil
company, to increase oil production and reserves from existing fields in the
968,000-acre unit located just west of Lake Maracaibo. A three-year work program
began in February 1994 that includes the workover and repair of existing wells,
the drilling of new wells, the installation of high-rate pumping equipment in
all wells and the expansion of existing production facilities to accommodate
increased production. Occidental achieved further production increases in 1995
with production averaging 20,900 barrels per day for 1995, and 25,800 barrels
per day for the month of December 1995. At Lake Maracaibo Occidental is the
operator, with a 100 percent working interest, and it will receive, as
compensation for its services, fees based on barrels of production that vary
with the values of a "basket" of international oils, inflation and accumulated
production.
YEMEN In 1991, Occidental acquired an 18 percent working interest in the
6.8-million-acre Masila Block, where CanadianOxy, the operator, with a 52
percent working interest, has made 12 oil discoveries. Construction of
production gathering and treating facilities, a 90-mile pipeline system and an
offshore export terminal on the Gulf of Aden were completed in November 1993.
Production started in July 1993. Occidental's net share under a
production-sharing contract was 15,200 barrels per day in 1995. Drilling will
continue until the fields are fully developed. Occidental also has a 100 percent
working interest in a production sharing contract in a central Yemen exploration
block.
OTHER INTERNATIONAL EXPLORATION In 1992, a substantial gas and oil
discovery was made in the Malampaya prospect on Block SC-38 offshore northwest
Palawan Island in the Philippines. Appraisal wells confirmed that the 1989
Camago discovery by Occidental and the Malampaya discovery contain sufficient
recoverable gas for a commercial project. Occidental and its partner, Shell
Philippines Exploration Corporation, the operator, are formulating plans with
the Philippine government to develop and market the gas. Occidental has a 50
percent working interest.
In East Malaysia, Occidental has made significant gas discoveries offshore
Sarawak. In 1995, agreements were executed with its partners for the
commercialization of these discoveries. A joint venture company will be owned by
Occidental and its partners, PETRONAS, the Malaysian national oil company, Shell
Gas B.V. and Nippon Oil Company to construct the country's third liquefied
natural gas (LNG) plant. Feedstock for the plant will initially come from the
Jintan discovery containing recoverable gas estimated at
6
<PAGE>
2.9 Tcf. Occidental is the operator, with a 37.5 percent interest in the gas
discoveries. Occidental will also have a 10 percent interest in the new LNG
plant. Development of the Jintan field is scheduled to commence with the
detailed upstream facility design in 1996. The estimated start-up date of the
LNG plant is the year 2001.
In addition, Occidental acquired new exploration blocks in Albania,
Argentina, Bangladesh, The Republic of the Congo, Hungary, Ireland, the
Netherlands, New Zealand, Papua New Guinea and Pakistan. During 1996,
exploration activities are planned in these areas as well as on previously
acquired blocks in Albania, Colombia, Gabon, Indonesia, Malaysia, the
Philippines, Vietnam, Yemen and Russia.
SPECIAL ITEMS IN 1995 Financial results for 1995 include charges of $109.0
million for the settlement of litigation and $95.0 million for a major
reorganization of Occidental's worldwide oil and gas operations, consolidating
operations management at the division's headquarters in Bakersfield, California.
The reorganization charge recorded had no cash impact in 1995.
RESERVES, PRODUCTION AND RELATED INFORMATION
Reference is made to Note 18 to the Consolidated Financial Statements and
the information incorporated under the caption "Supplemental Oil and Gas
Information" incorporated by reference in Item 8 of this report for information
with respect to Occidental's oil and gas reserves, the production from and other
changes in such reserves, the discounted present value of estimated future net
cash flows therefrom, certain costs and other financial and statistical
information regarding Occidental's oil and gas exploration and production
operations. Estimates of reserves have been made by Occidental engineers and
include reserves under which Occidental holds an economic interest under service
contracts and other arrangements. The definitions used are in accordance with
applicable Securities and Exchange Commission regulations. Accordingly, unless
otherwise stated, all references to reserves are made on a net basis. In 1995,
Occidental reported to the U.S. Department of Energy (the "DOE") on Form EIA-28
the same proved oil and gas reserves at December 31, 1994, as are set forth for
that date in the information incorporated under the caption "Supplemental Oil
and Gas Information" contained in Occidental's 1994 Annual Report.
NATURAL GAS TRANSMISSION OPERATIONS
GENERAL
Through MidCon Corp. ("MidCon"), Occidental engages in interstate and
intrastate natural gas transmission and marketing. MidCon's subsidiaries
purchase, transport, store, produce and process gas and sell gas to utilities,
municipalities and industrial and commercial users.
The principal subsidiaries of MidCon are: Natural Gas Pipeline Company of
America ("Natural"), which owns a major interstate pipeline transmission system;
MidCon Texas Pipeline Corp. ("MidCon Texas"), which, together with its
subsidiaries, owns and operates intrastate pipeline systems in Texas; and MidCon
Gas Services Corp. ("MidCon Gas"), which engages in the production, purchase and
sale of gas and arranges for the transportation and storage of such gas. MidCon
Exploration Company ("MidCon Exploration") owns 50 percent interests in federal
oil and gas leases for two blocks in the Garden Banks area, offshore Louisiana.
Other subsidiaries of MidCon process natural gas. Through subsidiaries, MidCon
also owns interests in several gas pipeline joint ventures.
MidCon's interstate pipeline operations are subject to extensive regulation
by the FERC. The FERC regulates, among other things, rates and charges for
transportation and storage of gas in interstate commerce, the construction and
operation of interstate pipeline facilities and the accounts and records of
interstate pipelines. Certain of MidCon Texas' rates and other aspects of its
business are subject to regulation by the Texas Railroad Commission.
Order 636 was adopted by the FERC to address certain marketing advantages
purportedly enjoyed by interstate pipelines over other resellers of gas. Order
636 includes requirements that interstate pipelines no longer provide a
"bundled" service that uses their gas transportation and storage facilities as
part of marketing gas to sales customers. As a consequence, Natural eliminated
its traditional gas sales service to customers effective December 1, 1993.
7
<PAGE>
When Natural discontinued merchant service it no longer needed gas supplies
to meet sales requirements. Natural has eliminated most of its gas supply
contracts through termination or buyout. Of the contracts that remain, Natural's
obligations have been resolved in a number of ways in order to minimize gas
supply realignment ("GSR") costs. Natural reached settlement agreements
providing for recovery of a significant amount of its GSR costs. Under these
settlements, which have been approved by the FERC, Natural, through monthly
demand charge billings, recovers GSR costs allocated to these customers over a
48-month period that commenced in December 1993. The FERC has also permitted
Natural to implement a tariff mechanism to recover additional portions of its
GSR costs in rates charged to transportation customers that were not party to
the settlements.
SPECIAL ITEMS IN 1995 MidCon reorganized its operations near the end of
1995 to expedite design of products and services to meet changing customer
needs, maximize return on assets, enhance operating efficiencies and reduce
costs. This reorganization, which eliminated approximately 400 employee
positions, resulted in a charge of $37 million and had no cash impact in 1995.
PROPERTIES
Natural's principal facilities consist of two major interconnected
transmission pipelines terminating in the Chicago metropolitan area. One line,
which extends from the west Texas and New Mexico producing areas, includes
approximately 7,100 miles of main pipeline and various small-diameter lines. The
other line extends from the Gulf Coast areas of Texas and Louisiana and
comprises approximately 4,900 miles of main pipeline and various small-diameter
lines. These two main pipelines are connected at points in Texas and Oklahoma by
Natural's 240-mile Amarillo/Gulf Coast ("A/G") Pipeline. A 105-mile pipeline
runs from the Arkoma Basin gas-producing area of eastern Oklahoma to the A/G
Pipeline.
Nine underground storage fields are operated in four states to provide
services to Natural's customers and to support pipeline deliveries during the
winter, when space heating demand is higher.
MidCon Texas owns and operates an intrastate pipeline system, located
primarily in the Texas Gulf Coast area. The system includes approximately 2,500
miles of pipelines, supply lines, sales laterals and related facilities. A
subsidiary of MidCon Texas owns a separate Texas intrastate pipeline system (the
"Palo Duro System") that includes approximately 400 miles of pipeline and
related facilities. The Palo Duro System is leased to a nonaffiliate. MidCon
Texas operates a gas storage facility in south Texas that it leases from a
partnership in which a subsidiary of MidCon Texas owns an interest.
MARKETS, SALES, TRANSPORTATION, STORAGE, PRODUCTION AND PROCESSING
The location of MidCon's pipelines provides access to large market areas, to
most other major pipeline systems and to nearly all major North American
producing areas. This permits delivery of natural gas directly or by
displacement to pipeline systems serving most of the United States.
Deliveries of gas by MidCon's pipelines include volumes sold by the
pipelines and their marketing affiliates and volumes owned by others which are
transported. The following table sets forth in Bcf the gas volumes sold to, or
transported for, nonaffiliates by Natural, MidCon Texas and MidCon Gas for each
of the last three calendar years:
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Natural
Sales -- -- 240
Transportation 1,318 1,318 1,408
MidCon Texas
Sales 238 198 211
Transportation 215 215 201
MidCon Gas
Sales 410 351 211
</TABLE>
8
<PAGE>
Sales volumes shown in the foregoing table for MidCon Texas include sales
deliveries by a marketing affiliate to nonaffiliates. The table does not include
gas transported by Natural for affiliates for sale to nonaffiliates of
approximately 221 Bcf in 1995, 220 Bcf in 1994, and 151 Bcf in 1993. The table
also does not show volumes of gas that have been auctioned by Natural following
the termination of its traditional gas sales service on December 1, 1993.
As a result of the elimination of sales service by Natural, transportation
and storage have become the cornerstones of Natural's business. Much of
Natural's former sales service was replaced by a combined transportation and
storage service. Customers purchasing this service pay monthly demand charges
irrespective of gas volumes actually transported and stored, and commodity
charges based upon actual gas volumes transported and actual gas volumes
injected into, and withdrawn from, storage. In addition, Natural is authorized
to assess separate monthly demand charges to these customers to recover a
portion of the GSR costs.
Natural's service agreements with its major customers for the combined
transportation and storage services initiated in response to Order 636
terminated on December 1, 1995. Replacement contracts for new services, which
included new combined transportation and storage service options, were entered
with those customers, but several were renewed at reduced service levels and
reduced rates. More than 85 percent of Natural's pipeline capacity to Chicago
remains subscribed for firm transportation service. A new resource management
group has been charged with developing innovative utilization strategies to
optimize the value of the remaining capacity. Natural filed on June 1, 1995, a
general rate case with the FERC to allow Natural to institute tariff changes to
reflect these new transportation and storage services and to approve rates for
these new services. By orders issued by the FERC, these new rates became
effective on December 1, 1995, subject to certain modifications. Among the
issues in the rate case is the allocation of Natural's costs in light of the
overall reductions in service levels by major customers. The combined effect of
the new rate case and the new customer contracts could reduce Natural's revenues
in 1996, but this will depend on market conditions and the success of Natural's
effort to optimize the value of its uncommitted capacity.
Pursuant to transportation agreements and FERC tariff provisions, Natural
offers both firm transportation service and interruptible transportation
service. Under Natural's tariff, transportation customers pay a commodity charge
for volumes actually transported, based upon the geographical location, the time
of year and the distance of the transportation provided. Firm transportation
customers pay reservation charges each month, irrespective of volumes actually
transported. In addition, as in the case of the combined service described
above, Natural is authorized to assess separate monthly demand charges to firm
transportation customers to recover a portion of the GSR costs.
Natural also provides firm and interruptible gas storage service pursuant to
storage agreements and FERC-approved tariffs. Storage customers pay a commodity
charge for actual volumes injected and withdrawn and, in many cases, a monthly
charge based upon volumes of gas stored. Firm storage customers pay a separate
monthly demand charge irrespective of actual volumes stored.
In 1995, Natural transported about 68 percent of the natural gas delivered
into its principal market, the Chicago metropolitan area. The Chicago area
deliveries were primarily to three major gas distribution utility companies.
Natural's transportation competitors in the Chicago metropolitan area
consist of other interstate pipelines that own facilities in the vicinity,
Natural faces the prospect of increased competition in this market as other
pipelines consider expansion projects to increase their capability to serve the
Chicago area. Increased volumes of gas produced in western Canada are being
targeted for the Midwest and Eastern markets. In October 1995, Natural filed
with the FERC to expand its existing system from Harper, Iowa to Chicago. This
expansion, plus existing capacity, will accommodate more than 500 million cubic
feet per day of new gas supplies to be delivered through a proposed expansion of
Northern Border Pipeline, a nonaffiliated system that transports gas originating
in western Canada. Northern Border's expansion program also includes a new line
from Harper to the Chicago area, and both plans are pending before the
9
<PAGE>
FERC. Natural is opposing the proposed rate structure for the Northern Border
proposal and also arguing that, from an environmental position, the Northern
Border proposal is less favorable than Natural's proposed expansion.
Natural also furnishes transportation service for others to and from many
other locations on its pipeline system and, in recent years, has increased
transportation deliveries to markets outside the Chicago metropolitan area.
Competition for such service may be provided by one or more other pipelines,
depending upon the nature of the transportation service required. Transportation
rates, service options and available pipeline capacity and, in some cases, the
availability of, and rates for, storage services are the key factors in
determining Natural's ability to compete for particular transportation business.
Early in 1996, the Trailblazer pipeline system began assessing potential
shipper interest for an expansion of that line. Trailblazer runs from eastern
Colorado to eastern Nebraska and transports gas produced in the Rocky Mountains.
Natural is the operator of the joint-venture pipeline, with an indirect
one-third ownership interest. Trailblazer moved nearly 180 billion cubic feet of
gas in 1995, a record for the 13-year-old line, reflecting the changes in the
U.S. gas flow from west to east.
MidCon Texas and its subsidiaries make sales principally to customers
located in the Houston-Beaumont and Port Arthur areas of Texas and provide
transportation service within the state of Texas. Intense competition exists
among numerous suppliers for sales of gas to customers in MidCon Texas' sales
markets. Price is the primary competitive factor. At most locations on its
system, MidCon Texas faces competition from other pipelines for gas
transportation business. Transportation rates and available pipeline capacity
are generally the key factors in determining MidCon Texas' ability to compete
for particular transportation business.
The rates for MidCon Texas' city-gate sales are subject to regulation by the
Texas Railroad Commission. Other sales and transportation rates are determined
by prevailing market conditions and are largely unregulated. Transportation
service is provided by MidCon Texas on both a firm and an interruptible basis.
MidCon Gas makes sales of gas nationwide to local distribution companies and
commercial and industrial end users. These sales arrangements frequently include
peaking and swing services that MidCon Gas is able to provide through its
management of contractual rights for transportation and storage capacity from
MidCon's pipeline subsidiaries and other pipeline companies. Sales prices
received by MidCon Gas are established by negotiation. MidCon Gas also offers a
variety of fuel management services to utilities and other large volume gas
users.
During 1995, MidCon subsidiaries sold approximately 160 million gallons of
natural gas liquids obtained through gas processing operations. In November
1994, MidCon Exploration made an oil and gas discovery in the Garden Banks area,
offshore Louisiana, that tested at a daily rate of approximately 10,500 barrels
of oil and 11.9 MMcf of gas. MidCon Exploration owns a 50 percent interest in
the well and in a contiguous Garden Banks block, which also contains proved
reserves. In November 1995, a production platform was installed on the
contiguous block that will support development of both blocks. Production of oil
and gas from both blocks will commence in the second quarter of 1996.
Through other subsidiaries, MidCon is exploring opportunities in domestic
and foreign emerging energy markets such as wholesale electric power brokering
and independent electric power generation.
GAS SUPPLY
As a part of its service restructuring pursuant to Order 636, Natural
reduced substantially the amount of gas supplies it has under contracts expiring
over the next several years.
MidCon Texas purchases its gas supplies from producers and, to a lesser
extent, from other pipeline companies or their subsidiaries. MidCon Gas
purchases gas supplies from Natural at auction and from producers and other gas
marketers. MidCon Gas also obtains supplies from its own production and
maintains inventories of gas supplies in storage facilities of its affiliates
and other pipeline companies.
10
<PAGE>
PIPELINE VENTURES
Through subsidiaries, MidCon owns interests of 20 to 50 percent in three
pipeline ventures that operate approximately 530 miles of pipeline in the Gulf
of Mexico and interests, of varying percentages, in approximately 260 miles of
jointly owned supply laterals that also operate in the Gulf of Mexico. The
ventures transport gas onshore from producers in the offshore Louisiana and
Texas areas for various customers. Other subsidiaries of MidCon own interests of
18 and 33 1/3 percent, respectively, in two onshore pipeline ventures. These
ventures operate approximately 520 miles of pipelines in Wyoming, Colorado and
Nebraska.
CHEMICAL OPERATIONS
GENERAL
Occidental conducts its chemical operations through Occidental Chemical
Corporation and its various subsidiaries and affiliates (collectively,
"OxyChem"). OxyChem manufactures and markets a variety of basic chemicals,
petrochemicals and polymers and plastics.
A substantial portion of OxyChem's products are principally commodity in
nature, I.E., they are equivalent to products manufactured by others that are
generally available in the marketplace and are produced and sold in large
volumes, primarily to industrial customers for use as raw materials. Many of
OxyChem's manufacturing operations are integrated, and many of its products are
both sold to others and further processed by OxyChem into other chemical
products.
OxyChem has been expanding and further integrating its industrial chemical
business through acquisitions and expansions of existing facilities. Effective
May 1, 1995, OxyChem combined its sodium chlorate operations with CanadianOxy's
sodium chlorate and chlor-alkali operations. CanadianOxy has an 85 percent
interest in the partnerships and is the managing partner and OxyChem has a 15
percent interest in the partnerships. The combined operations are carried out
under the name of CXY Chemicals.
OxyChem also has added capacity at several of its facilities over the past
few years through "debottlenecking" projects, which expand or modify portions of
existing facilities that had previously limited production, thus adding
incremental capacity at a relatively low cost.
In March 1995, OxyChem established a specialty business organization as a
separate group of OxyChem. The operations of the new group comprise the
following: Durez phenolic resins and molding compounds, specialty products
consisting of chemical intermediates and performance chemicals, sodium
silicates, chromium chemicals, designed products, and ACL pool chemicals
(formally chlorinated isocyanurates). Each of these operations has been
organized to provide much greater flexibility and support in dealing within its
competitive environments, while allowing it to benchmark its business against
its competition.
In 1995, OxyChem divested a number of businesses outside its core areas; the
proceeds of the divestitures were applied to Occidental's debt-reduction
program. In May 1995, OxyChem completed the sale of its high-density
polyethylene business, including plants, related inventories, and the Alathon
trademarks, to Lyondell Petrochemical Company for approximately $400 million.
The sale eliminated a major capital expenditure for a new ethylene plant which
would have been necessary to supply this business. In October 1995, OxyChem
completed the sale of its agricultural chemical business to the Potash
Corporation of Saskatchewan Inc. for approximately $284 million. In 1995,
OxyChem completed the sale, pursuant to a Federal Trade Commission divestiture
order, of its polyvinyl chloride ("PVC") facilities at Addis, Louisiana, to
Borden Chemicals and Plastics for $104 million, and Burlington South, New
Jersey, to Ozite Corporation for $27 million.
OxyChem also made the strategic decision to close certain declining
businesses. OxyChem discontinued operations at its North Tonawanda, New York
Durez facility to avoid continuing losses at the plant arising from a declining
market for phenolic molding compounds. OxyChem also discontinued operations at
its Oxnard, California sodium silicates plant to enhance production efficiencies
at its five remaining silicate plants.
11
<PAGE>
OxyChem has also taken steps to expand its specialty business in 1995. In
November 1995, OxyChem agreed to acquire a 64 percent equity interest in INDSPEC
Chemical Corporation ("INDSPEC") for Occidental common stock then valued at $85
million. INDSPEC is the largest producer of resorcinol in the world and the sole
commercial producer of resorcinol in the United States. Resorcinol is a chemical
used primarily as a bonding and stiffening agent in the manufacture of tires and
tread rubber. In addition, resorcinol is used in the manufacture of high
performance wood adhesives, ultraviolet light stabilizers, sunscreens,
dyestuffs, pharmaceuticals, agrichemicals, carbonless paper and fire retardant
plastic additives. Under the terms of the agreement, INDSPEC's management and
employees will retain voting control of the company. This transaction is
expected to close in 1996.
In December 1995, OxyChem announced a 450-million-pounds-per-year expansion
at its Pasadena, Texas PVC plant. This expansion will add incremental capacity
at a relatively low cost. The $80 million project is scheduled to begin
operations in the fourth quarter of 1997 and will increase total production
capacity at the site to 1.8 billion pounds per year. The capacity expansion is
expected to reestablish OxyChem as the second-largest supplier of PVC resin to
the U.S. merchant market.
In February 1996, OxyChem announced a realignment of its global business
into four business units: Basic Chemicals; Specialty Business; Petrochemicals;
and Polymers and Plastics. The realignment will result in employment reductions
of at least 450 persons. The costs associated with the realignment are not
expected to have a material impact on the 1996 results of operations.
OxyChem's operations are affected by cyclical factors in the general
economic environment and by specific chemical industry conditions. The chemical
industry in the United States was characterized in 1995 by higher sales prices
and margins for many chemical products, including those manufactured by OxyChem.
The integration strategy adopted by OxyChem permitted it to maintain relatively
high operating rates in 1995, with similar operating rates expected to continue
for 1996.
OxyChem's operations also have been affected by environmental regulation and
associated costs. See the information appearing under the caption "Environmental
Regulation" in this report.
12
<PAGE>
PRINCIPAL PRODUCTS
OxyChem produces the following chemical products:
<TABLE>
<CAPTION>
Principal Products Major Uses
------------------------------- ------------------------------------
<S> <C> <C>
Basic Chemicals Chlor-alkali chemicals
Chlorine..................... PVC, chemical manufacturing, pulp
and paper production, water
treatment
Caustic soda................. Chemical manufacturing, pulp and
paper production, cleaning
products
Potassium chemicals (including
potassium hydroxide)......... Glass, fertilizers, cleaning
products, rubber
Ethylene dichloride............ Raw material for vinyl chloride
monomer
------------------------------- ------------------------------------
Specialty Business Sodium silicates............... Soaps and detergents, catalysts,
paint pigments
Chrome chemicals............... Metal and wood treatments, leather
tanning
ACL pool chemicals (chlorinated
isocyanurates)............... Swimming pool sanitation, household
and industrial disinfecting and
sanitizing products
Proprietary chemicals
(chemical intermediates
derived principally from
fluorine, chlorine and
sulfur)...................... Agricultural, pharmaceutical,
plastics, metal plating, aerospace
and food-service applications
Phenolic resins/molding
compounds.................... Automotive brake pistons, adhesives,
carbonless copy paper, pot and pan
handles
------------------------------- ------------------------------------
Petrochemicals Ethylene....................... Raw material for production of
polyethylene, vinyl chloride
monomer, ethylene glycols and
other ethylene oxide derivatives
Benzene........................ Raw material for production of
styrene, phenolic polymers and nylon
Propylene...................... Raw material for the production of
polypropylene and acrylonitrile
Ethylene glycols and other
ethylene oxide derivatives... Polyester products, antifreeze,
brake fluids
------------------------------- ------------------------------------
Polymers and
Plastics Vinyl chloride monomer......... Raw material for polyvinyl chloride
Polyvinyl chloride............. Calendering and film, pipe, wire
insulation, flooring, footwear,
bottles, siding, home construction
products
------------------------------- ------------------------------------
</TABLE>
Based in part on statistics in chemical industry publications, Occidental
believes that during 1995 it was the largest U.S. merchant marketer of chlorine
and caustic soda; including OxyMar (OxyChem's joint venture with Marubeni) the
second-largest producer of vinyl chloride monomer; the third-largest producer of
PVC resins; the largest producer of chrome chemicals; the second-largest
producer of sodium silicates;
13
<PAGE>
including its PD Glycol joint venture with DuPont, the third-largest producer of
ethylene glycols; the seventh-largest producer of ethylene; and the largest
supplier to the DOT-3 brake fluids aftermarket in the United States.
Additionally, Occidental believes it was the world's largest producer of
potassium hydroxide, phenolic molding compounds and chlorinated isocyanurate
products and the world's largest marketer of ethylene dichloride.
RAW MATERIALS
Nearly all raw materials utilized in OxyChem's operations that are not
produced by OxyChem or acquired from affiliates are readily available from a
variety of sources. Most of OxyChem's key raw materials purchases are made
through short- and long-term contracts. OxyChem is not dependent on any single
nonaffiliated supplier for a material amount of its raw material or energy
requirements, subject to establishing alternative means of transportation or
delivery in the event of the termination of arrangements with existing
suppliers.
PATENTS, TRADEMARKS AND PROCESSES
OxyChem owns and licenses a large number of patents and trademarks and uses
a variety of processes in connection with its operations, some of which are
proprietary and some of which are licensed. OxyChem does not regard its business
as being materially dependent on any single patent or trademark it owns or
licenses or any process it uses.
SALES AND MARKETING
OxyChem's products are sold primarily to industrial users or distributors
located in the United States, largely by its own sales force. OxyChem sells its
products principally at current market or current market-related prices through
short- and long-term sales agreements. Except for sales in the export market,
OxyChem generally does not use spot markets to sell products. No significant
portion of OxyChem's business is dependent on a single customer. In general,
OxyChem does not manufacture its products against a backlog of firm orders;
production is geared primarily to the level of incoming orders and to
projections of future demand.
COMPETITION
The chemical business is very competitive. Since most of OxyChem's products
are commodity in nature, they compete primarily on the basis of price, quality
characteristics and timely delivery. Because OxyChem's products generally do not
occupy proprietary positions, OxyChem endeavors to be an efficient, low-cost
producer through the employment of modern, high-yield plants, equipment and
technology. OxyChem's size and the number and location of its plants also
produce competitive advantages, principally in its ability to meet customer
specifications and delivery requirements.
PROPERTIES
OxyChem, which is headquartered in Dallas, Texas, operates 29 chemical
product manufacturing facilities in the United States. Many of the larger
facilities are located in the Gulf Coast areas of Texas and Louisiana. In
addition, OxyChem operates 13 chemical product manufacturing facilities in eight
foreign countries, with the most significant foreign plants being in Brazil. A
number of additional facilities process, blend and store the chemical products.
OxyChem uses an extensive fleet of barges and railroad cars and owns and
operates a pipeline network of over 950 miles along the Gulf Coast of Texas for
the transportation of ethylene, propylene and feedstocks.
All of OxyChem's manufacturing facilities are owned or leased on a long-term
basis.
CAPITAL EXPENDITURES
Occidental's oil and gas operations, based on depletable resources, are
capital intensive, involving large-scale expenditures. In particular, in the
search for and development of new reserves, long lead times are often required.
In addition, Occidental's other businesses require capital expenditures in order
to remain competitive and to comply with safety and environmental laws.
Occidental's capital expenditures for its ongoing businesses totaled
approximately $979 million in 1995 and $1.1 billion in 1994 and 1993, exclusive
of the non-cash consideration for acquisitions. The 1995 amount included capital
expenditures aggregating
14
<PAGE>
$575 million for oil and gas, $243 million for chemical and $150 million for
natural gas transmission. Occidental's total capital expenditures, exclusive of
acquisitions, if any, for 1996 are expected to approximate $1.0 billion, the
majority of which is for oil and gas operations.
EMPLOYEES
Occidental and its subsidiaries employed a total of 17,280 persons at
December 31, 1995, of whom 12,380 were located in the United States. 6,320 were
employed in oil and gas operations, 2,170 in natural gas transmission operations
and 8,250 in chemical operations. An additional 540 persons were employed at
corporate headquarters. Approximately 1,500 U.S.-based employees are represented
by labor unions.
Occidental has a long-standing policy to ensure that fair and equal
employment opportunities are extended to all persons without regard to race,
religion, color, sex, age, national origin, handicap or veteran status.
Occidental is committed to vigorous, good-faith enforcement of this policy.
Occidental maintains numerous affirmative action programs which are in effect at
company locations.
ENVIRONMENTAL REGULATION
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 are also subject
to environmental protection laws. Applicable U.S. laws include the Comprehensive
Environmental Response, Compensation and Liability Act, as amended by the
Superfund Amendments and Reauthorization Act, the Resource Conservation and
Recovery Act, as amended by the Hazardous and Solid Waste Amendments and similar
state environmental laws. The laws which require or address environmental
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. Also, Occidental and
certain of its subsidiaries have been involved in a substantial number of
governmental and private proceedings involving historical practices at various
sites, including, in some instances, having been named as defendants, as
potentially responsible parties ("PRPs"), or as both defendants and PRPs under
the federal Superfund law. These proceedings seek remediation, funding for
remediation, or both, and, in some cases, compensation for alleged personal
injury or property damage, punitive damages and civil penalties, aggregating
substantial amounts.
Occidental has accrued reserves for its environmental liabilities. As of
December 31, 1995 and 1994, Occidental had environmental reserves of
approximately $582 million and $635 million, respectively. Occidental provided
additional reserves of approximately $22 million in 1995, $5 million in 1994 and
$18 million in 1993 for costs associated with expected remediation efforts at a
number of sites. The 1995 amount related primarily to the chemical division. The
1994 and 1993 amounts related primarily to the oil and gas division.
Occidental's estimated operating expenses in 1995 relating to compliance
with environmental laws and regulations governing ongoing operations were
approximately $111 million, compared with $114 million in 1994 and $110 million
in 1993. The 1995 amount included $63 million in the chemical division, $41
million in the oil and gas division and $7 million in the natural gas
transmission division. In addition, estimated capital expenditures for
environmental compliance were $74 million in 1995, compared with $67 million in
1994 and $83 million in 1993. The 1995 amount included $43 million in the oil
and gas division, $27 million in the chemical division and $4 million in the
natural gas transmission division. Occidental presently estimates that
divisional capital expenditures for environmental compliance (including
environmental control facilities) will be in the range of $80-85 million for
each of 1996 and 1997.
ITEM 3 LEGAL PROCEEDINGS
There is incorporated by reference herein the information regarding
lawsuits, claims and related matters in Note 10 to the Consolidated Financial
Statements.
In December 1995, OxyChem and the U.S. Department of Justice reached a
tentative settlement of claims brought by the U.S. Government ("U.S.") in the
U.S. District Court for the Western District of New
15
<PAGE>
York against OxyChem for remediation costs incurred by the U.S., plus interest,
at a former chemical waste landfill. A consent order, which has received court
approval, requires OxyChem to pay the U.S. approximately $129 million, plus
interest, over a four-year period.
In August 1995, Occidental announced the settlement of the 1979-81 crude oil
tier-trading administrative proceedings brought by the U.S. Department of Energy
(the "DOE") against Cities Service (now OXY USA Inc.). In these proceedings, the
DOE had sought approximately $254 million, plus accrued interest totaling
approximately $870 million as of December 31, 1994. Under the terms of the
settlement, OXY USA paid $100 million to the DOE in September 1995 and will make
five additional annual payments of $35 million, plus interest.
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 for the 10th
Circuit affirmed the subsequent judgment and OXY USA has petitioned the U.S.
Supreme Court for a writ of certiorari. A stay of mandate exists pending a
decision by the U.S. Supreme Court.
ENVIRONMENTAL PROCEEDINGS
In January 1993, the U.S. Environmental Protection Agency (the "EPA")
advised OxyChem that the chlor-alkali facility at Taft, Louisiana had violated
certain federal air emission standards for asbestos used in manufacturing
operations. OxyChem provided certain information to the EPA concerning OxyChem's
compliance with the asbestos standards at the Taft facility. No further
enforcement action was taken until September 1995 when the U.S. Department of
Justice, at the EPA's request, offered OxyChem the opportunity to settle civil
penalties for an amount in excess of $100,000 with respect to alleged
violations. OxyChem has denied most of the allegations and is in the midst of
settlement negotiations. On February 16, 1996 the U. S. Department of Justice
filed an action in Federal Court in New Orleans seeking to recover civil
penalties for the alleged violations. OxyChem has not filed its answer to the
government's complaint which has not formally been served on OxyChem.
OxyChem is contesting alleged violations of the West Virginia Hazardous
Waste Management Regulations regarding its closed facility located in Belle,
West Virginia and penalties sought by the state of West Virginia Division of
Environmental Protection in an amount in excess of $100,000.
16
<PAGE>
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of Occidental's security holders during
the fourth quarter of 1995.
EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
<CAPTION>
AGE AT
FEBRUARY 29, POSITIONS WITH OCCIDENTAL AND SUBSIDIARIES AND FIVE-YEAR
NAME 1996 EMPLOYMENT HISTORY
- ---------------------------- ------------ ----------------------------------------------------------------------
<S> <C> <C>
Dr. Ray R. Irani 61 Chairman and Chief Executive Officer since 1990; President since 1984;
1984-1990, Chief Operating Officer; Director since 1984; 1983-January
1991, Chief Executive Officer of Occidental Chemical Corporation
("Occidental Chemical"); Chairman of the Board of CanadianOxy since
1986; member of Executive Committee.
Dr. Dale R. Laurance 50 Executive Vice President and Senior Operating Officer since 1990;
1984-1990, Executive Vice President--Operations; Director since 1990;
member of Executive Committee.
Stephen I. Chazen 49 Executive Vice President--Corporate Development since 1994; 1990-1994,
Managing Director, Merrill Lynch & Co. Incorporated.
Donald P. de Brier 55 Executive Vice President, General Counsel and Secretary since 1993;
1989-1993, General Counsel and member of the Management Committee of
BP Exploration and Production Company.
Richard W. Hallock 51 Executive Vice President--Human Resources since 1994; 1993-1994,
Director, Worldwide Total Compensation of IBM; 1990-1993, various
other human resources positions with IBM.
J. Roger Hirl 64 Executive Vice President since 1984; Director since 1988; President
and Chief Executive Officer of Occidental Chemical since 1991;
1983-1991, President and Chief Operating Officer of Occidental
Chemical.
Anthony R. Leach 56 Executive Vice President and Chief Financial Officer since 1991;
1984-1991, Vice President and Controller.
David R. Martin 64 Executive Vice President since 1983; President and Chief Executive
Officer of Occidental Oil and Gas Corporation since 1993; 1986-1993,
President and Chief Operating Officer of Occidental Oil and Gas;
Chairman of the Board of Occidental International Exploration and
Production Company since 1993; 1984-1993, President of Occidental
International Exploration and Production Company.
John F. Riordan 60 Executive Vice President since 1991; Director since 1991; President
and Chief Executive Officer of MidCon Corp. since 1990; 1988-1990,
President and Chief Operating Officer of MidCon Corp.
Howard Collins 52 Vice President--Public Relations since 1993; 1986-1993,
Director--Public Relations.
Samuel P. Dominick, Jr. 55 Vice President and Controller since 1991; 1990-1991, Assistant
Controller--Internal Audit; 1985-1990, Director of Internal Audit.
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
AGE AT
FEBRUARY 29, POSITIONS WITH OCCIDENTAL AND SUBSIDIARIES AND FIVE-YEAR
NAME 1996 EMPLOYMENT HISTORY
- ---------------------------- ------------ ----------------------------------------------------------------------
<S> <C> <C>
Fred J. Gruberth 62 Vice President and Treasurer since 1992; 1978-1992, Senior Assistant
Treasurer.
Kenneth J. Huffman 51 Vice President--Investor Relations since 1991; 1989-1991, Vice
President--Finance, American Exploration Company.
Robert M. McGee 49 Vice President since 1994; President of Occidental International
Corporation since 1991; 1981-1991, Senior Executive Vice President of
Occidental International Corporation.
John W. Morgan 42 Vice President--Operations since 1991; 1984-1991, Director--
Operations.
S.A. Smith 51 Vice President since 1984; Executive Vice President--Worldwide Finance
and Administration and Chief Financial Officer of Occidental Oil and
Gas Corporation since 1994; 1986-1994, Vice President--Financial
Planning and Analysis.
Richard A. Swan 48 Vice President--Health, Environment and Safety since 1995; 1991-1995,
Director--Investor Relations.
James B. Taylor 57 Vice President since 1994; Executive Vice President--Worldwide
Exploration and New Ventures of Occidental Oil and Gas Corporation
since 1994; Executive Vice President--Corporate Development since
1993; 1990-1993, Executive Vice President and Chief Operating Officer
of CanadianOxy.
Aurmond A. Watkins, Jr. 53 Vice President--Tax since 1991; 1986-1991, Director--Taxes.
</TABLE>
The current term of office of each Executive Officer will expire at the
April 26, 1996, organizational meeting of the Occidental Board of Directors or
at such time as his or her successor shall be elected.
PART II
ITEM 5 MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
There is hereby incorporated by reference the quarterly financial data
appearing under the caption "Quarterly Financial Data" and the information
appearing under the caption "Management's Discussion and Analysis--Liquidity and
Capital Resources" in the 1995 Annual Report, relevant portions of which 1995
Annual Report are filed as Exhibit 13 to this report. Occidental's common stock
was held by approximately 118,614 stockholders of record at year-end 1995, with
an estimated 192,000 additional stockholders whose shares were held for them in
street name or nominee accounts. The common stock is listed and traded
principally on the New York and Pacific stock exchanges and also is listed on
various foreign exchanges identified in the 1995 Annual Report. The quarterly
financial data on pages 61 and 62 of the 1995 Annual Report sets forth the range
of trading prices for the common stock as reported on the New York Stock
Exchange's composite tape.
ITEM 6 SELECTED FINANCIAL DATA
There is hereby incorporated by reference the information appearing under
the caption "Five-Year Summary of Selected Financial Data" in the 1995 Annual
Report.
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
There is hereby incorporated by reference the information appearing under
the caption "Management's Discussion and Analysis" in the 1995 Annual Report.
18
<PAGE>
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
INDEX TO FINANCIAL STATEMENTS AND RELATED INFORMATION
PAGES
----------------------------
ANNUAL REPORT FORM 10-K
------------- -------------
<S> <C> <C>
Financial Statements and Supplementary Data (pages 21 through 58 and pages 60 through
68 of Occidental's 1995 Annual Report incorporated herein by reference): --
Consolidated Statements of Operations............................................... 33 --
Consolidated Balance Sheets......................................................... 34-35 --
Consolidated Statements of Nonredeemable Preferred Stock, Common Stock and Other
Stockholders' Equity............................................................... 36 --
Consolidated Statements of Cash Flows............................................... 37 --
Notes to Consolidated Financial Statements.......................................... 38-58, 60 --
Report of Independent Public Accountants............................................ 60 --
Quarterly Financial Data............................................................ 61-62 --
Supplemental Oil and Gas Information................................................ 63-68 --
Report of Independent Public Accountants.............................................. -- 20
Financial Statement Schedule:
II Valuation and Qualifying Accounts for the years ended December 31, 1995, 1994
and 1993........................................................................ -- 21
</TABLE>
19
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors, Occidental Petroleum Corporation:
We have audited, in accordance with generally accepted auditing standards,
the consolidated financial statements included in Occidental Petroleum
Corporation's Annual Report for the year ended December 31, 1995, incorporated
by reference in this Annual Report on Form 10-K, and have issued our report
thereon dated February 22, 1996. Our audit was made for the purpose of forming
an opinion on those statements taken as a whole. The financial statement
schedule listed in the Index to Financial Statements and Related Information is
the responsibility of the Company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and regulations
under the Securities Exchange Act of 1934 and is not a required part of the
basic financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Los Angeles, California
February 22, 1996
20
<PAGE>
<TABLE>
<CAPTION>
OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
(In millions)
ADDITIONS
----------------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING OF COSTS AND OTHER END OF
PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
- ---------------------------------------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
1995
Allowance for doubtful accounts $ 17 $ 8 $ 1 $ (7) $ 19
========= ========= ========= ========= =========
Environmental $ 635 $ 22 $ 18 $ (93)(a) $ 582
Contract impairment 141 -- -- (60)(a) 81
Foreign and other taxes, litigation
and other reserves 1,002 140 50 (223)(a) 969
--------- --------- --------- --------- ---------
$ 1,778 $ 162 $ 68 $ (376) $ 1,632(b)
- ---------------------------------------- ========= ========= ========= ========= =========
1994
Allowance for doubtful accounts $ 13 $ 6 $ -- $ (2) $ 17
========= ========= ========= ========= =========
Environmental $ 742 $ 5 $ 50 $ (162)(a) $ 635
Contract impairment 165 -- -- (24)(c) 141
Foreign and other taxes, litigation
and other reserves 818 190 84 (90)(a) 1,002
--------- --------- --------- --------- ---------
$ 1,725 $ 195 $ 134 $ (276) $ 1,778(b)
- ---------------------------------------- ========= ========= ========= ========= =========
1993
Allowance for doubtful accounts $ 22 $ 3 $ 3 $ (15) $ 13
========= ========= ========= ========= =========
Environmental $ 808 $ 18 $ 8 $ (92)(a) $ 742
Contract impairment 494 -- -- (329)(c) 165
Foreign and other taxes, litigation
and other reserves 1,347 7 149 (685)(d) 818
--------- --------- --------- --------- ---------
$ 2,649 $ 25 $ 157 $ (1,106) $ 1,725(b)
- ---------------------------------------- ========= ========= ========= ========= =========
(a) Primarily represents payments.
(b) Of these amounts, $228 million, $197 million and $184 million in 1995, 1994
and 1993, respectively, is classified as current.
(c) Primarily represents the reduction of the reserve to reflect a decrease in
the net exposure under disadvantageous gas purchase contracts, the
elimination of certain potential claims, the successful resolution of
litigation, settlements or other changes in the expected outcome of matters
covered by the reserve.
(d) Primarily represents reversal of reserves no longer required.
</TABLE>
21
<PAGE>
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
Not applicable.
PART III
ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
There is hereby incorporated by reference the information regarding
Occidental's directors appearing under the caption "Election of Directors" in
Occidental's definitive proxy statement filed in connection with its April 26,
1996, Annual Meeting of Stockholders (the "1996 Proxy Statement"). See also the
list of Occidental's executive officers and related information under "Executive
Officers of the Registrant" in Part I hereof.
ITEM 11 EXECUTIVE COMPENSATION
There is hereby incorporated by reference the information appearing under
the captions "Executive Compensation" (excluding, however, the information
appearing under the subcaptions "Report of the Compensation Committee" and
"Performance Graphs") and "Election of Directors--Information Regarding the
Board of Directors and Its Committees" in the 1996 Proxy Statement.
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
There is hereby incorporated by reference the information with respect to
security ownership appearing under the caption "Security Ownership of Certain
Beneficial Owners and Management" in the 1996 Proxy Statement.
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There is hereby incorporated by reference the information appearing under
the caption "Election of Directors--Compensation Committee Interlocks and
Insider Participation" in the 1996 Proxy Statement.
PART IV
ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) AND (2). FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
Reference is made to the Index to Financial Statements and Related
Information under Item 8 in Part II hereof, where these documents are
listed.
(a) (3). EXHIBITS
<TABLE>
<S> <C>
3.(i)* Restated Certificate of Incorporation of Occidental, together with
all certificates amendatory thereof filed with the Secretary of
State of Delaware through December 23, 1994 (filed as Exhibit 3.(i)
to the Annual Report on Form 10-K of Occidental for the fiscal year
ended December 31, 1994, File No. 1-9210).
3.(ii)* By-laws of Occidental, as amended through December 15, 1994 (filed
as Exhibit 3.(ii) to the Annual Report on Form 10-K of Occidental
for the fiscal year ended December 31, 1994, File No. 1-9210).
4.1* Occidental Petroleum Corporation Credit Agreement, dated as of
October 20, 1994 (filed as Exhibit 4 to the Quarterly Report on Form
10-Q of Occidental for the quarterly period ended September 30,
1994, File No. 1-9210).
4.2 Instruments defining the rights of holders of other long-term debt
of Occidental and its subsidiaries are not being filed since the
total amount of securities authorized under each of such instruments
does not exceed 10 percent of the total assets of Occidental and its
subsidiaries on a consolidated basis. Occidental agrees to furnish a
copy of any such instrument to the Commission upon request.
- --------------------------
* Incorporated herein by reference.
</TABLE>
22
<PAGE>
<TABLE>
<S> <C>
All of the Exhibits numbered 10.1 to 10.33 are management contracts
and compensatory plans required to be identified specifically as
responsive to Item 601(b)(10)(iii)(A) of Regulation S-K pursuant to
Item 14(c) of Form 10-K.
10.1 Employment Agreement, dated January 1, 1996, between Occidental and
David R. Martin.
10.2* Consultation Agreement, dated December 16, 1974, between Occidental
Petroleum Corporation, a California corporation, and Arthur Groman
(filed as Exhibit 10.3 to the Annual Report on Form 10-K of
Occidental for the fiscal year ended December 31, 1987, File No.
1-9210).
10.3* Employment Agreement, dated as of May 14, 1992, between Occidental
and J. Roger Hirl (filed as Exhibit 10.2 to the Quarterly Report on
Form 10-Q of Occidental for the quarterly period ended June 30,
1992, File No. 1-9210).
10.4* Employment Agreement, dated November 16, 1991, between Occidental
and Dr. Ray R. Irani (filed as Exhibit 10.5 to the Annual Report on
Form 10-K of Occidental for the fiscal year ended December 31, 1991,
File No. 1-9210).
10.5* Employment Agreement, dated September 16, 1993, between Occidental
and Dr. Dale R. Laurance (filed as Exhibit 10.7 to the Annual Report
on Form 10-K of Occidental for the fiscal year ended December 31,
1993, File No. 1-9210).
10.6* Employment Agreement, dated as of May 14, 1992, between Occidental
and John F. Riordan (filed as Exhibit 10.4 to the Quarterly Report
on Form 10-Q of Occidental for the quarterly period ended June 30,
1992, File No. 1-9210).
10.7* Termination of Consulting Agreement and Release, dated November 11,
1993, between OXY USA Inc. and George O. Nolley (filed as Exhibit
10.9 to the Annual Report on Form 10-K of Occidental for the fiscal
year ended December 31, 1993, File No. 1-9210).
10.8* Form of Indemnification Agreement between Occidental and each of its
directors (filed as Exhibit B to Occidental's Proxy Statement for
its May 21, 1987, Annual Meeting of Stockholders, File No. 1-9210).
10.9* Occidental Petroleum Corporation Split Dollar Life Insurance Program
and Related Documents (filed as Exhibit 10.2 to the Quarterly Report
on Form 10-Q of Occidental for the quarterly period ended September
30, 1994, File No. 1-9210).
10.10* Occidental Petroleum Insured Medical Plan, as amended and restated
effective April 29, 1994, amending and restating the Occidental
Petroleum Corporation Executive Medical Plan (As Amended and
Restated Effective April 1, 1993) (filed as Exhibit 10 to the
Quarterly Report on Form 10-Q of Occidental for the quarterly period
ending March 31, 1994, File No. 1-9210).
10.11* Occidental Petroleum Corporation 1978 Stock Option Plan (as amended
and restated effective May 21, 1987) (filed as Exhibit 28(a) to
Occidental's Registration Statement on Form S-8, File No. 33-14662).
10.12* Form of Nonqualified Stock Option Grant under Occidental Petroleum
Corporation 1978 Stock Option Plan (filed as Exhibit 10.19 to the
Registration Statement on Form 8-B, dated June 26, 1986, of
Occidental, File No. 1-9210).
10.13* Form of Incentive Stock Option Grant under Occidental Petroleum
Corporation 1978 Stock Option Plan (filed as Exhibit 10.20 to the
Registration Statement on Form 8-B, dated June 26, 1986, of
Occidental, File No. 1-9210).
10.14* Occidental Petroleum Corporation 1987 Stock Option Plan, as amended
through April 29, 1992 (filed as Exhibit 10.1 to the Quarterly
Report on Form 10-Q of Occidental for the quarterly period ended
March 31, 1992, File No. 1-9210).
- --------------------------
* Incorporated herein by reference.
</TABLE>
23
<PAGE>
<TABLE>
<S> <C>
10.15* Form of Nonqualified Stock Option Agreement under Occidental
Petroleum Corporation 1987 Stock Option Plan (filed as Exhibit 10.2
to the Quarterly Report on Form 10-Q of Occidental for the quarterly
period ended March 31, 1992, File No. 1-9210).
10.16* Form of Nonqualified Stock Option Agreement, with Stock Appreciation
Right, under Occidental Petroleum Corporation 1987 Stock Option Plan
(filed as Exhibit 10.3 to the Quarterly Report on Form 10-Q of
Occidental for the quarterly period ended March 31, 1992, File No.
1-9210).
10.17* Form of Incentive Stock Option Agreement under Occidental Petroleum
Corporation 1987 Stock Option Plan (filed as Exhibit 10.4 to the
Quarterly Report on Form 10-Q of Occidental for the quarterly period
ended March 31, 1992, File No. 1-9210).
10.18* Form of Incentive Stock Option Agreement, with Stock Appreciation
Right, under Occidental Petroleum Corporation 1987 Stock Option Plan
(filed as Exhibit 10.5 to the Quarterly Report on Form 10-Q of
Occidental for the quarterly period ended March 31, 1992, File No.
1-9210).
10.19* Occidental Petroleum Corporation 1977 Executive Long-Term Incentive
Stock Purchase Plan, as amended through December 10, 1992 (filed as
Exhibit 10.20 to the Annual Report on Form 10-K of Occidental for
the fiscal year ended December 31, 1992, File No. 1-9210).
10.20* Form of award letter utilized under Occidental Petroleum Corporation
1977 Executive Long-Term Incentive Stock Purchase Plan (filed as
Exhibit 10.21 to the Annual Report on Form 10-K of Occidental for
the fiscal year ended December 31, 1992, File No. 1-9210).
10.21* Occidental Petroleum Corporation Incentive Compensation Plan,
effective as of October 28, 1991 (filed as Exhibit 10.2 to the
Quarterly Report on Form 10-Q of Occidental for the quarterly period
ended September 30, 1991, File No. 1-9210).
10.22* Occidental Petroleum Corporation 1988 Deferred Compensation Plan (as
amended and restated effective as of January 1, 1994) (filed as
Exhibit 10.1 to the Quarterly Report on Form 10-Q of Occidental for
the quarterly period ended September 30, 1994, File No. 1-9210).
10.23* Memorandum, dated February 8, 1990, regarding MidCon Corp. Financial
Counseling Program (filed as Exhibit 10.29 to the Annual Report on
Form 10-K of Occidental for the fiscal year ended December 31, 1989,
File No. 1-9210).
10.24 Occidental Petroleum Corporation Senior Executive Deferred
Compensation Plan (effective as of January 1, 1986, as amended and
restated effective as of January 1, 1996).
10.25 Occidental Petroleum Corporation Senior Executive Supplemental Life
Insurance Plan (effective as of January 1, 1986, as amended and
restated effective as of January 1, 1996).
10.26 Occidental Petroleum Corporation Senior Executive Supplemental
Retirement Plan (effective as of January 1, 1986, as amended and
restated effective as of January 1, 1996).
10.27 Occidental Petroleum Corporation Senior Executive Survivor Benefit
Plan (effective as of January 1, 1986, as amended and restated
effective as of January 1, 1996).
10.28* Occidental Petroleum Corporation 1995 Incentive Stock Plan,
effective April 29, 1995 (filed as Exhibit 99.1 to Occidental's
Registration Statement on Form S-8, File No. 33-64719).
10.29* Form of Incentive Stock Option Agreement under Occidental Petroleum
Corporation 1995 Incentive Stock Plan (filed as Exhibit 99.2 to
Occidental's Registration Statement on Form S-8, File No. 33-64719).
10.30* Form of Nonqualified Stock Option Agreement under Occidental
Petroleum Corporation 1995 Incentive Stock Plan (filed as Exhibit
99.3 to Occidental's Registration Statement on Form S-8, File No.
33-64719).
- --------------------------
* Incorporated herein by reference.
</TABLE>
24
<PAGE>
<TABLE>
<S> <C>
10.31* Form of Stock Appreciation Rights Agreement under Occidental
Petroleum Corporation 1995 Incentive Stock Plan (filed as Exhibit
99.4 to the Registration Statement on Form S-8, File No. 33-64719).
10.32* Form of Restricted Stock Agreement under Occidental Petroleum
Corporation 1995 Incentive Stock Plan (filed as Exhibit 99.5 to the
Registration Statement on Form S-8, File No. 33-64719).
10.33* Form of Performance Stock Agreement under Occidental Petroleum
Corporation 1995 Incentive Stock Plan (filed as Exhibit 99.6 to the
Registration Statement on Form S-8, File No. 33-64719).
11 Statement regarding computation of earnings per common and common
equivalent share and fully diluted earnings per share for the three
years ended December 31, 1995.
12 Statement regarding computation of total enterprise ratios of
earnings to fixed charges for the five years ended December 31,
1995.
13 Pages 21 through 58 and pages 60 through 68 of Occidental's Annual
Report for the fiscal year ended December 31, 1995, which are
incorporated by reference in Parts I and II of this Annual Report on
Form 10-K.
21 List of subsidiaries of Occidental at December 31, 1995.
23 Consent of Independent Public Accountants.
27 Financial data schedule of Occidental for the fiscal year ended
December 31, 1995 (included only in the copy of this report filed
electronically with the Securities and Exchange Commission).
- --------------------------
* Incorporated herein by reference.
</TABLE>
25
<PAGE>
(b) REPORTS ON FORM 8-K
During the fourth quarter of 1995, Occidental filed the following Current
Reports on Form 8-K:
1. Current Report on Form 8-K dated October 18, 1995 (date of earliest
event reported), filed on October 19, 1995, for the purpose of reporting, under
Item 5, Occidental's results of operations for the third quarter ended September
30, 1995.
2. Current Report on Form 8-K dated October 25, 1995 (date of earliest
event reported), filed on November 3, 1995, for the purpose of reporting, under
Item 5, Occidental's reorganization of its oil and gas division.
3. Current Report on Form 8-K dated December 21, 1995 (date of earliest
event reported), filed on December 27, 1995, for the purpose of reporting, under
Item 5, Occidental's settlement of certain Love Canal litigation.
During the first quarter of 1996 to the date hereof, Occidental filed the
following Current Report on Form 8-K:
1. Current Report on Form 8-K dated January 24, 1996 (date of earliest
event reported), filed on January 25, 1996, for the purpose of reporting, under
Item 5, Occidental's results of operations for the fourth quarter and fiscal
year ended December 31, 1995.
26
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
March 27, 1996 By: Ray R. Irani
-----------------------------------
Ray R. Irani
Chairman of the Board of Directors,
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- -------------------------------------------- ------------------------- --------------
<S> <C> <C>
Ray R. Irani Chairman of the Board of March 27, 1996
- ------------------------------------------- Directors, President and
Ray R. Irani Chief Executive Officer
Anthony R. Leach Executive Vice President March 27, 1996
- ------------------------------------------- and Chief Financial
Anthony R. Leach Officer
Samuel P. Dominick, Jr. Vice President and March 27, 1996
- ------------------------------------------- Controller (Chief
Samuel P. Dominick, Jr. Accounting Officer)
Albert Gore Director March 27, 1996
- -------------------------------------------
Albert Gore
Arthur Groman Director March 27, 1996
- -------------------------------------------
Arthur Groman
J. Roger Hirl Director March 27, 1996
- -------------------------------------------
J. Roger Hirl
John W. Kluge Director March 27, 1996
- -------------------------------------------
John W. Kluge
Dale R. Laurance Director March 27, 1996
- -------------------------------------------
Dale R. Laurance
</TABLE>
27
<PAGE>
<TABLE>
<S> <C> <C>
Irvin W. Maloney Director March 27, 1996
- -------------------------------------------
Irvin W. Maloney
George O. Nolley Director March 27, 1996
- -------------------------------------------
George O. Nolley
John F. Riordan Director March 27, 1996
- -------------------------------------------
John F. Riordan
Rodolfo Segovia Director March 27, 1996
- -------------------------------------------
Rodolfo Segovia
Aziz D. Syriani Director March 27, 1996
- -------------------------------------------
Aziz D. Syriani
Rosemary Tomich Director March 27, 1996
- -------------------------------------------
Rosemary Tomich
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
EXHIBIT
- -------
(a)(3). EXHIBITS
<S> <C>
3.(i)* Restated Certificate of Incorporation of Occidental, together with all certificates
amendatory thereof filed with the Secretary of State of Delaware through December
23, 1994 (filed as Exhibit 3.(i) to the Annual Report on Form 10-K of Occidental
for the fiscal year ended December 31, 1994, File No. 1-9210).
3.(ii)* By-laws of Occidental, as amended through December 15, 1994 (filed as Exhibit
3.(ii) to the Annual Report on Form 10-K of Occidental for the fiscal year ended
December 31, 1994, File No. 1-9210).
4.1* Occidental Petroleum Corporation Credit Agreement, dated as of October 20, 1994
(filed as Exhibit 4 to the Quarterly Report on Form 10-Q of Occidental for the
quarterly period ended September 30, 1994, File No. 1-9210).
4.2 Instruments defining the rights of holders of other long-term debt of Occidental
and its subsidiaries are not being filed since the total amount of securities
authorized under each of such instruments does not exceed 10 percent of the total
assets of Occidental and its subsidiaries on a consolidated basis. Occidental
agrees to furnish a copy of any such instrument to the Commission upon request.
All of the Exhibits numbered 10.1 to 10.33 are management contracts and
compensatory plans required to be identified specifically as responsive to Item
601(b)(10)(iii)(A) of Regulation S-K pursuant to Item 14(c) of Form 10-K.
10.1 Employment Agreement, dated January 1, 1996, between Occidental and David R.
Martin.
10.2* Consultation Agreement, dated December 16, 1974, between Occidental Petroleum
Corporation, a California corporation, and Arthur Groman (filed as Exhibit 10.3 to
the Annual Report on Form 10-K of Occidental for the fiscal year ended December 31,
1987, File No. 1-9210).
10.3* Employment Agreement, dated as of May 14, 1992, between Occidental and J. Roger
Hirl (filed as Exhibit 10.2 to the Quarterly Report on Form 10-Q of Occidental for
the quarterly period ended June 30, 1992, File No. 1-9210).
10.4* Employment Agreement, dated November 16, 1991, between Occidental and Dr. Ray R.
Irani (filed as Exhibit 10.5 to the Annual Report on Form 10-K of Occidental for
the fiscal year ended December 31, 1991, File No. 1-9210).
10.5* Employment Agreement, dated September 16, 1993, between Occidental and Dr. Dale R.
Laurance (filed as Exhibit 10.7 to the Annual Report on Form 10-K of Occidental for
the fiscal year ended December 31, 1993, File No. 1-9210).
- --------------------------
* Incorporated herein by reference.
</TABLE>
29
<PAGE>
<TABLE>
<S> <C>
10.6* Employment Agreement, dated as of May 14, 1992, between Occidental and John F.
Riordan (filed as Exhibit 10.4 to the Quarterly Report on Form 10-Q of Occidental
for the quarterly period ended June 30, 1992, File No. 1-9210).
10.7* Termination of Consulting Agreement and Release, dated November 11, 1993, between
OXY USA Inc. and George O. Nolley (filed as Exhibit 10.9 to the Annual Report on
Form 10-K of Occidental for the fiscal year ended December 31, 1993, File No.
1-9210).
10.8* Form of Indemnification Agreement between Occidental and each of its directors
(filed as Exhibit B to Occidental's Proxy Statement for its May 21, 1987, Annual
Meeting of Stockholders, File No. 1-9210).
10.9* Occidental Petroleum Corporation Split Dollar Life Insurance Program and Related
Documents (filed as Exhibit 10.2 to the Quarterly Report on Form 10-Q of Occidental
for the quarterly period ended September 30, 1994, File No. 1-9210).
10.10* Occidental Petroleum Insured Medical Plan, as amended and restated effective April
29, 1994, amending and restating the Occidental Petroleum Corporation Executive
Medical Plan (As Amended and Restated Effective April 1, 1993) (filed as Exhibit 10
to the Quarterly Report on Form 10-Q of Occidental for the quarterly period ending
March 31, 1994, File No. 1-9210).
10.11* Occidental Petroleum Corporation 1978 Stock Option Plan (as amended and restated
effective May 21, 1987) (filed as Exhibit 28(a) to Occidental's Registration
Statement on Form S-8, File No. 33-14662).
10.12* Form of Nonqualified Stock Option Grant under Occidental Petroleum Corporation 1978
Stock Option Plan (filed as Exhibit 10.19 to the Registration Statement on Form
8-B, dated June 26, 1986, of Occidental, File No. 1-9210).
10.13* Form of Incentive Stock Option Grant under Occidental Petroleum Corporation 1978
Stock Option Plan (filed as Exhibit 10.20 to the Registration Statement on Form
8-B, dated June 26, 1986, of Occidental, File No. 1-9210).
10.14* Occidental Petroleum Corporation 1987 Stock Option Plan, as amended through April
29, 1992 (filed as Exhibit 10.1 to the Quarterly Report on Form 10-Q of Occidental
for the quarterly period ended March 31, 1992, File No. 1-9210).
10.15* Form of Nonqualified Stock Option Agreement under Occidental Petroleum Corporation
1987 Stock Option Plan (filed as Exhibit 10.2 to the Quarterly Report on Form 10-Q
of Occidental for the quarterly period ended March 31, 1992, File No. 1-9210).
10.16* Form of Nonqualified Stock Option Agreement, with Stock Appreciation Right, under
Occidental Petroleum Corporation 1987 Stock Option Plan (filed as Exhibit 10.3 to
the Quarterly Report on Form 10-Q of Occidental for the quarterly period ended
March 31, 1992, File No. 1-9210).
10.17* Form of Incentive Stock Option Agreement under Occidental Petroleum Corporation
1987 Stock Option Plan (filed as Exhibit 10.4 to the Quarterly Report on Form 10-Q
of Occidental for the quarterly period ended March 31, 1992, File No. 1-9210).
- --------------------------
* Incorporated herein by reference.
</TABLE>
30
<PAGE>
<TABLE>
<S> <C>
10.18* Form of Incentive Stock Option Agreement, with Stock Appreciation Right, under
Occidental Petroleum Corporation 1987 Stock Option Plan (filed as Exhibit 10.5 to
the Quarterly Report on Form 10-Q of Occidental for the quarterly period ended
March 31, 1992, File No. 1-9210).
10.19* Occidental Petroleum Corporation 1977 Executive Long-Term Incentive Stock Purchase
Plan, as amended through December 10, 1992 (filed as Exhibit 10.20 to the Annual
Report on Form 10-K of Occidental for the fiscal year ended December 31, 1992, File
No. 1-9210).
10.20* Form of award letter utilized under Occidental Petroleum Corporation 1977 Executive
Long-Term Incentive Stock Purchase Plan (filed as Exhibit 10.21 to the Annual
Report on Form 10-K of Occidental for the fiscal year ended December 31, 1992, File
No. 1-9210).
10.21* Occidental Petroleum Corporation Incentive Compensation Plan, effective as of
October 28, 1991 (filed as Exhibit 10.2 to the Quarterly Report on Form 10-Q of
Occidental for the quarterly period ended September 30, 1991, File No. 1-9210).
10.22* Occidental Petroleum Corporation 1988 Deferred Compensation Plan (as amended and
restated effective as of January 1, 1994) (filed as Exhibit 10.1 to the Quarterly
Report on Form 10-Q of Occidental for the quarterly period ended September 30,
1994, File No. 1-9210).
10.23* Memorandum, dated February 8, 1990, regarding MidCon Corp. Financial Counseling
Program (filed as Exhibit 10.29 to the Annual Report on Form 10-K of Occidental for
the fiscal year ended December 31, 1989, File No. 1-9210).
10.24 Occidental Petroleum Corporation Senior Executive Deferred Compensation Plan
(effective as of January 1, 1986, as amended and restated effective as of January
1, 1996).
10.25 Occidental Petroleum Corporation Senior Executive Supplemental Life Insurance Plan
(effective as of January 1, 1986, as amended and restated effective as of January
1, 1996).
10.26 Occidental Petroleum Corporation Senior Executive Supplemental Retirement Plan
(effective as of January 1, 1986, as amended and restated effective as of January
1, 1996).
10.27 Occidental Petroleum Corporation Senior Executive Survivor Benefit Plan (effective
as of January 1, 1986, as amended and restated effective as of January 1, 1996).
10.28* Occidental Petroleum Corporation 1995 Incentive Stock Plan, effective April 29,
1995 (filed as Exhibit 99.1 to Occidental's Registration Statement on Form S-8,
File No. 33-64719).
10.29* Form of Incentive Stock Option Agreement under Occidental Petroleum Corporation
1995 Incentive Stock Plan (filed as Exhibit 99.2 to Occidental's Registration
Statement on Form S-8, File No. 33-64719).
10.30* Form of Nonqualified Stock Option Agreement under Occidental Petroleum Corporation
1995 Incentive Stock Plan (filed as Exhibit 99.3 to Occidental's Registration
Statement on Form S-8, File No. 33-64719).
10.31* Form of Stock Appreciation Rights Agreement under Occidental Petroleum Corporation
1995 Incentive Stock Plan (filed as Exhibit 99.4 to the Registration Statement on
Form S-8, File No. 33-64719).
- --------------------------
* Incorporated herein by reference.
</TABLE>
31
<PAGE>
<TABLE>
<S> <C>
10.32* Form of Restricted Stock Agreement under Occidental Petroleum Corporation 1995
Incentive Stock Plan (filed as Exhibit 99.5 to the Registration Statement on Form
S-8, File No. 33-64719).
10.33* Form of Performance Stock Agreement under Occidental Petroleum Corporation 1995
Incentive Stock Plan (filed as Exhibit 99.6 to the Registration Statement on Form
S-8, File No. 33-64719).
11 Statement regarding computation of earnings per common and common equivalent share
and fully diluted earnings per share for the three years ended December 31, 1995.
12 Statement regarding computation of total enterprise ratios of earnings to fixed
charges for the five years ended December 31, 1995.
13 Pages 21 through 58 and pages 60 through 68 of Occidental's Annual Report for the
fiscal year ended December 31, 1995, which are incorporated by reference in Parts I
and II of this Annual Report on Form 10-K.
21 List of subsidiaries of Occidental at December 31, 1995.
23 Consent of Independent Public Accountants.
27 Financial data schedule of Occidental for the fiscal year ended December 31, 1995
(included only in the copy of this report filed electronically with the Securities
and Exchange Commission).
- --------------------------
* Incorporated herein by reference.
</TABLE>
32
EMPLOYMENT AGREEMENT
This Employment Agreement is made this 1st day of
January, 1996, by and between OCCIDENTAL PETROLEUM
CORPORATION, a Delaware corporation (hereinafter
referred to as "EMPLOYER"), and DAVID R. MARTIN
(hereinafter referred to as "EMPLOYEE").
WITNESSETH:
WHEREAS, Employee has been rendering services to
Employer pursuant to an Agreement dated May 1, 1993;
and
WHEREAS, the parties now desire to provide for a
continuation of Employee's employment by Employer, and
to specify the rights and obligations of the parties
during such continued employment;
NOW, THEREFORE, in consideration of the mutual
covenants and agreements herein, Employer and Employee
hereby agree to continue such employment upon the
following terms and conditions:
1. Duties. Employee shall perform the duties of
President and Chief Executive Officer of Occidental Oil
and Gas Corporation, or shall serve in such other
capacity and with such other duties for Employer or any
of the subsidiaries of Employer or any corporation
affiliated with Employer (any such subsidiary or
affiliated corporation thereafter to be deemed Employer
under this Agreement), and in such geographical
locations as Employer shall hereafter from time to time
prescribe.
<PAGE>
2. Term of Employment. The term of employment
shall be for a period of five (5) years, commencing on
January 1, 1996, unless terminated prior thereto in
accordance with the provisions of Paragraph 6 of this
Agreement.
3. Compensation. For the services to be
performed hereunder, Employee shall be compensated by
Employer at the rate of not less than Five Hundred
Sixty-five Thousand Dollars ($565,000) per year payable
semi-monthly.
4. Participation in Benefit Programs. During
the term of this Agreement, Employee shall be entitled
to participate in all employee benefit programs
generally applicable to employees of Employer adopted
by Employer from time to time, as well as in Employer's
Incentive Compensation Plan and Employer's 1977 Long-
Term Incentive Stock Purchase Plan.
5. Exclusivity of Services. Employee agrees to
devote his full-time exclusive services (except for
personal investments, which shall be nominal) to
Employer, and he agrees to make no new oil or gas
personal investments during the term of this Agreement
without the prior written consent of Employer.
6. Early Termination.
(a) Cause. Employer may terminate this
Agreement for cause at any time, by written notice to
Employee, if Employee shall:
(1) willfully breach this Agreement;
(2) refuse to carry out any lawful
order of Employer; or
(3) act in a disloyal manner inimical
to Employer.
(b) Incapacity. If during the term of this
Agreement Employee is materially incapacitated from
2
<PAGE>
fully performing his duties pursuant to this Agreement
by reason of illness, disability or other incapacity,
or by reason of any statute, law, ordinance,
regulation, order, judgment or decree, Employer may
terminate this Agreement by written notice to Employee,
but only in the event that such conditions shall
aggregate not less than one hundred eighty (180) days
during any one contract year of the term of employment.
In the event Employee shall (i) continue to be
incapacitated subsequent to termination for incapacity
pursuant to this paragraph 6(b), and (ii) be a
participant in and shall qualify for benefits under
Employer's Long-Term Disability Plan ("LTD"), then, and
in such event, Employer will continue to compensate
Employee, for so long as Employee remains eligible to
receive LTD benefits, in an amount equal to the
difference between 60% of Employee's annual
compensation as set forth in paragraph 3 hereof and
$120,000, which is the maximum annual benefit under the
LTD, payable monthly on a prorated basis.
(c) Without Cause. Either party may
terminate this Agreement without cause by written
notice to the other at any time; such termination to be
effective upon the expiration of a period of two years
(the "Notice Period") from the date of such notice.
Employer may also terminate this Agreement without
cause at any time (including a time during the Notice
Period), by written notice to Employee, such
termination to be effective immediately or on such
later date as may be specified in said notice; provided
however, that, in such event, Employer shall (in lieu
of two years' notice and continued employment) pay
Employee at his then current basic salary rate, on a
3
<PAGE>
semi-monthly basis, for a period after such termination
equivalent to the shorter of:
(1) two years;
(2) the remainder of the Notice Period
(in the event of termination during
the Notice Period); or
(3) the remaining term of this
Agreement.
Provided further, however, that while
Employee is being compensated in accordance with the
provisions of this Agreement, Employee shall not accept
employment with, or act as a consultant for, or perform
services for any person, firm or corporation directly
or indirectly engaged in any business competitive with
Employer without the prior written consent of Employer.
In the event Employer compensates Employee in lieu
of such two years' notice and continued employment, all
remuneration or wages earned during such period by
Employee, either as an employee, independent contractor
or consultant to any person, firm or corporation other
than Employer, shall be a setoff to Employer's duty of
compensation to Employee.
If the compensation period shall expire prior to
December 31, 2000, then Employee's employment shall
continue (as a consultant to Employer) for an
additional period until December 31, 2000, during which
additional period Employee will receive a salary at the
annual rate of $20,000 payable semi-monthly. During
both the Compensation Period and the additional period
referred to herein (i) any award(s) to Employee
pursuant to Employer's Executive Long-Term Incentive
Stock Purchase Plan shall continue to vest in the same
manner and in the same amounts as such award(s) would
4
<PAGE>
have vested if Employee had continued as a full-time
employee.
7. Place of Employment. The parties presently
contemplate that Employee's principal place of
employment, during the term of this Agreement, will be
located in Bakersfield, California. However, Employer
at any time may request Employee to relocate his place
of employment and residence to the Los Angeles area,
or to some other location in the continental United
States. If Employer should request such relocation,
the move shall be made on mutually acceptable terms;
and, in such event, Employee shall be given the full
benefits of Employer's executive relocation policy,
including protection against loss in connection with
the sale of Employee's residence in Bakersfield.
If Employer should request such relocation and
Employee elects not to relocate, Employee may
terminate his employment under this Agreement upon
reasonable written notice thereof, effective upon
the date specified in said notice; and, in such event,
Employer shall compensate Employee, at the rate and
in the manner provided in paragraph 3 above, for a
period after such termination equivalent to the
shorter of:
(1) two years; or
(2) the remaining term of this
Agreement.
8. Confidential Information. Employee agrees
that he will not divulge to any person, nor use to the
detriment of Employer or any of its affiliates or
subsidiaries, nor use in any business or process of
manufacture competitive with or similar to any bus-
iness or process of manufacture of Employer or any of
its affiliates or subsidiaries, at any time during em-
ployment by Employer or thereafter, any trade secrets
5
<PAGE>
or confidential information obtained during the course
of his employment with Employer, without first
obtaining the written permission of Employer.
Employee agrees that, at the time of leaving the
employ of Employer, he will deliver to Employer and
not keep or deliver to anyone else any and all notes,
notebooks, memoranda, documents and, in general, any
and all material relating to Employer's business.
9. Modification. This Agreement contains all
the terms and conditions agreed upon by the parties
hereto, and no other agreements, oral or otherwise,
regarding the subject matter of this Agreement shall
be deemed to exist or bind either of the parties
hereto. This Agreement cannot be modified except by a
writing signed by both parties. This Agreement super-
sedes and replaces any and all prior employment agree-
ments between the parties, all of which are hereby
terminated.
10. Assignment. This Agreement shall be binding
upon Employee, his heirs, executors and assigns and
upon Employer, its successors and assigns.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have
executed this Agreement the day and year first above
written.
OCCIDENTAL PETROLEUM CORPORATION
By R. R. Irani
-------------------------------
Dr. Ray R. Irani
Title: Chairman and Chief Executive
Officer
Employee: D. R. Martin
--------------------------
David R. Martin
7
OCCIDENTAL PETROLEUM CORPORATION
SENIOR EXECUTIVE
DEFERRED COMPENSATION PLAN
__________________________________
(EFFECTIVE AS OF JANUARY 1, 1986,
AS AMENDED AND RESTATED EFFECTIVE AS OF JANUARY 1, 1996)
<PAGE>
TABLE OF CONTENTS
Article Section Page
- ------- ------- ----
I PURPOSE.........................................1
II DEFINITIONS AND CERTAIN PROVISIONS..............1
III ADMINISTRATION OF THE PLAN......................4
IV PARTICIPATION
4.1 Election to Participate....................4
4.2 Deferral Accounts..........................6
4.3 Interest...................................6
4.4 Valuation of Accounts......................6
4.5 Savings Plan Augmentation Contribution.....6
4.6 Statement of Accounts......................7
V BENEFITS
5.1 Retirement Benefit.........................7
5.2 Termination Benefit........................8
5.3 Disability.................................8
5.4 Survivor Benefits..........................8
5.5 Immediate Payment on Termination of Event..9
5.6 Small Benefit..............................9
5.7 Withholding; Unemployment Taxes............9
5.8 Lump Sum Payment with Penalty..............9
VI BENEFICIARY DESIGNATION........................10
VII AMENDMENT AND TERMINATION OF PLAN
7.1 Amendment.................................10
7.2 Termination...............................10
VIII MISCELLANEOUS
8.1 Unsecured General Creditor................11
8.2 Nonassignability..........................11
8.3 Employment Not Guaranteed.................11
8.4 Protective Provisions.....................11
8.5 Obligations to Company....................12
8.6 Gender, Singular & Plural.................12
8.7 Captions..................................12
8.8 Validity..................................12
8.9 Notice....................................12
8.10 Applicable Law............................12
sr-plans\def-comp i
<PAGE>
OCCIDENTAL PETROLEUM CORPORATION
SENIOR EXECUTIVE
DEFERRED COMPENSATION PLAN
(Effective as of January 1, 1986,
as Amended and Restated Effective as of January 1, 1996)
ARTICLE I. PURPOSE
This Senior Executive Deferred Compensation Plan (the
"Plan") is designed to replace the Occidental Petroleum
Corporation Deferred Incentive Compensation Program for
senior executives.
ARTICLE II. DEFINITIONS AND CERTAIN PROVISIONS
Affiliate. "Affiliate" means any corporation which is
controlled by or under common control with Occidental
Petroleum Corporation.
Annual Base Salary. "Annual Base Salary" means a
Participant's annual fixed salary, excluding Bonus, all
severance allowances, forms of incentive compensation, any
Savings Plan or qualified plan contributions made by the
Company or benefits, retainers, insurance premiums or
benefits, reimbursements, and all other payments, prior to
reduction for any deferral of base salary under this Plan or
the Company's 1988 Deferred Compensation Plan, Savings Plan
or any other qualified or non-qualified deferred
compensation plan or agreement.
Beneficiary. "Beneficiary" means the person or persons
designated as such in accordance with Article VI.
Benefit Deferral Period. "Benefit Deferral Period"
means that period of one (1) or four (4) Plan Years as
determined pursuant to Section 4.1 over which a Participant
defers a portion of such Participant's Direct Cash
Compensation with respect to a Benefit Unit.
Benefit Unit. "Benefit Unit" means a unit enrolled in
by a Participant pursuant to Article IV providing the
benefits described in Article V.
Bonus "Bonus" means that bonus paid to a Participant
during the Plan Year in question prior to reduction for any
deferral under the Plan.
Committee. "Committee" means the administrative
committee appointed to administer the Plan pursuant to
Article III.
sr-plans\def-comp
<PAGE>
Company. "Company" means Occidental Petroleum
Corporation, or any successor thereto, and any Affiliates.
Company Management. "Company Management" means the
Chairman of the Board, Chief Executive Officer and President
or Executive Vice President of Human Resources.
Declared Rate. "Declared Rate" with respect to any
Plan Year means Moody's Long Term Corporate Bond Index--
Monthly Average Corporates as published by Moody's
Investor's Service, Inc. (or any successor thereto) for the
month of July before the Plan Year in question, or, if such
average is no longer published, a substantially similar
average selected by the Committee.
Deferral Account. "Deferral Account" means the account
maintained on the books of account of the Company for each
Benefit Unit.
Deferral Amount. "Deferral Amount" means with respect
to each Benefit Unit an amount by which a Participant's
Direct Cash Compensation is reduced during the Benefit
Deferral Period.
Direct Cash Compensation. "Direct Cash Compensation"
means for any Plan Year the Participant's Annual Base Salary
and Bonus paid in the Plan Year, but before reduction
pursuant to this Plan.
Disability. "Disability" means a condition that
qualifies as a disability under the Company's Retirement
Plan and which has continued for more than six (6) months
and has been approved by the Committee.
Eligible Employee. "Eligible Employee" means each
senior executive or managerial employee of the Company who
is selected by Company Management to participate in the
Plan.
Enrollment Agreement. "Enrollment Agreement" means the
written agreement entered into by the Company and an
Eligible Employee pursuant to which the Eligible Employee
becomes a Participant in the Plan. In the sole discretion
of the Company, authorization forms filed by any Participant
by which the Participant makes the elections provided for by
this Plan may be treated as a completed and fully executed
Enrollment Agreement for all purposes under the Plan.
Participant. "Participant" means an Eligible Employee
who has filed a completed and executed Enrollment Agreement
with the Committee and is participating in the Plan in
accordance with the provisions of Article IV.
Plan Year. "Plan Year" means the calendar year
beginning January 1 and ending December 31.
sr-plans\def-comp 2
<PAGE>
Retirement. "Retirement" means with respect to any
Benefit Unit termination of a Participant's employment with
the Company for reasons other than death after the
Participant attains age 55 with five (5) Years of Service
and after completion of the Total Deferral Amount with
respect to such Benefit Unit. If a Participant dies after
becoming eligible for Retirement, a survivor benefit will be
payable pursuant to Section 5.4(b).
Retirement Benefit. "Retirement Benefit" means with
respect to each Benefit Unit the payment to a Participant or
Beneficiary of the Participant's Deferral Account following
Retirement pursuant to Article V.
Retirement Plan. "Retirement Plan" means the
OCCIDENTAL PETROLEUM CORPORATION RETIREMENT PLAN effective
June 1, 1983 and as amended from time to time thereafter.
Savings Plan. "Savings Plan" means the OCCIDENTAL
PETROLEUM CORPORATION SAVINGS PLAN, as amended from time to
time.
Savings Plan Augmentation Account. "Savings Plan
Augmentation Account" means the account maintained on the
books of account of the Company to reflect Savings Plan
augmentation contributions made by the Company pursuant to
Section 4.5.
Service. "Service" means the period of time during
which an employment relationship exists between a
Participant and the Company, including the period of time
such relationship existed prior to the time when the
employee in question became a Participant.
Termination Benefit. "Termination Benefit" means with
respect to each Benefit Unit the payment to a Participant or
Beneficiary of the Participant's Deferral Account other than
on account of death, Disability or Retirement pursuant to
Article V.
Termination Event. "Termination Event" means:
(a) the dissolution or liquidation of the
Company;
(b) the reorganization, merger or consolidation
of the Company with one or more corporations as a result of
which the Common Stock of the Company is exchanged for or
converted into cash or property or securities not issued by
the Company, unless the reorganization, merger or
consolidation shall have been affirmatively recommended to
the Company's stockholders by a majority of the members of
the Company's Board of Directors;
(c) the acquisition of substantially all of the
property or of more than thirty-five percent (35%) of the
voting power of the Company by any person or entity;
(d) the occurrence of any circumstance having the
effect that directors who were nominated for election as
directors by the Nominating Committee of the
sr-plans\def-comp 3
<PAGE>
Company's Board of Directors shall cease to constitute
a majority of the authorized number of directors of the
Company;
(e) the dissemination to the stockholders of the
Company of a proxy statement seeking stockholder approval of
a Terminating Event of the type described in (b) above; or
(f) the publication or dissemination of an
announcement of an action intended to result in a
Terminating Event of the type described in (c) or (d) above.
Total Deferral Amount. "Total Deferral Amount" means
with respect to each Benefit Unit the total cumulative
amount by which a Participant's Direct Cash Compensation
must be reduced over the Benefit Deferral Period.
Years of Service. "Years of Service" means the number
of full years credited to a Participant under the Retirement
Plan for vesting purposes.
1988 Deferred Compensation Plan. "1988 Deferred
Compensation Plan" means the OCCIDENTAL PETROLEUM
CORPORATION 1988 DEFERRED COMPENSATION PLAN, as amended from
time to time.
ARTICLE III. ADMINISTRATION OF THE PLAN
An administrative committee shall be appointed by the
Company's Chief Executive Officer to administer the Plan and
establish, adopt, or revise such rules and regulations as
the Committee may deem necessary or advisable for the
administration of the Plan and to interpret the provisions
of the Plan, and, except as otherwise indicated herein, any
such interpretations shall be conclusive. All decisions of
the Committee shall be by vote of at least two of the
Committee members and shall be final.
Members of the Committee shall be eligible to
participate in the Plan while serving as members of the
Committee, but a member of the Committee shall not vote or
act upon any matter which relates solely to such member's
interest in the Plan as a Participant.
ARTICLE IV. PARTICIPATION
4.1 Election to Participate. Any Eligible Employee
may enroll in a Benefit Unit under the Plan effective as of
the first day of a Plan Year by filing a completed and fully
executed Enrollment Agreement with the Committee prior to
the beginning of such Plan Year. Pursuant to said
Enrollment Agreement, the Eligible Employee shall
irrevocably designate a dollar amount (the "Total Deferral
Amount") by which the Direct Cash Compensation of such
Participant would be reduced over one (1) or four (4) Plan
sr-plans\def-comp 4
<PAGE>
Years following execution of the Enrollment Agreement
(the "Benefit Deferral Period"), provided, however, that:
(a) Minimum Deferral. The Total Deferral Amount
for any Benefit Unit shall not be less than (i) Five
Thousand U.S. Dollars (U.S. $5,000.00) for a one (1) year
Benefit Deferral Period or (ii) Ten Thousand U.S. Dollars
(U.S. $10,000.00) for a four (4) year Benefit Deferral
Period.
(b) Maximum Deferral. The Total Deferral Amount
shall not be more than (i) fifty percent (50%) of the
Participant's Annual Base Salary for 1985 for a one (1) year
Benefit Deferral Period or (ii) two hundred percent (200%)
of the Participant's Annual Base Salary for 1985 for a four
(4) year Benefit Deferral Period.
(c) Reduction in Direct Cash Compensation.
(i) In General. Except as otherwise
provided in this Section 4.1, the Direct Cash Compensation
of the Participant for each of the Plan Years in the Benefit
Deferral Period shall be reduced by the amount specified in
the Enrollment Agreement (including any authorization form)
applicable to such Plan Year. Such reduction shall be made
from the Participant's Annual Base Salary and/or Bonus for
each Plan Year as designated in the Enrollment Agreement
(including any authorization form), provided that in any
Plan Year when the Participant's Bonus is less than the
reduction for such Plan Year, the remaining amount shall be
taken from the Participant's Annual Base Salary for such
Plan Year.
(ii) Accelerated Reduction. A Participant
may elect in a written notice with the consent of the
Committee to increase the amount of the reduction of Direct
Cash Compensation otherwise provided for by the Enrollment
Agreement for any of the Plan Years remaining in the Benefit
Deferral Period, provided, however that any such increase in
the reduction of Direct Cash Compensation for any remaining
Plan Years in the Benefit Deferral Period shall not increase
the Total Deferral Amount, but shall act to shorten the
length of the Benefit Deferral Period.
(d) Maximum Reduction in Direct Cash
Compensation. A Participant may not elect a Total Deferral
Amount or an increase in reduction of Direct Cash
Compensation pursuant to Section 4.1(c)(ii), or any
combination of the two, that would cause the aggregate total
reduction in Direct Cash Compensation in any Plan Year to
exceed one hundred percent (100%) of the Participant's
Annual Base Salary for 1985. In the event that a
Participant elects a Total Deferral Amount or increase in
reduction of Direct Cash Compensation that would violate the
limitation described in this paragraph (d), the election
shall be valid except that the Total Deferral Amount or
increase in reduction of Direct Cash Compensation so elected
shall automatically be reduced to comply with such
limitation, whichever is most appropriate in the sole
discretion of the Committee.
sr-plans\def-comp 5
<PAGE>
For purposes of the Plan, a Participant shall be
considered to be enrolled in a Benefit Unit in the Plan and
entitled to Survivor Benefits pursuant to Section 5.4 in the
event of death only as of and after the first day of the
Benefit Deferral Period with respect to such Benefit Unit.
4.2 Deferral Accounts. The Committee shall establish
and maintain a separate Deferral Account for each of a
Participant's Benefit Units. A Deferral Amount shall be
credited by the Company to the Participant's Deferral
Account no later than the first day of the month following
the month in which the Participant's Direct Cash
Compensation would otherwise have been paid. Such Deferral
Account shall be debited by the amount of any payments made
by the Company to the Participant or the Participant's
Beneficiary.
4.3 Interest. Each Deferral Account of a Participant
who qualifies for Disability or for Retirement, or who dies
while employed by the Company, shall be deemed to bear
interest, compounded annually, from the date such Deferral
Account was established through the date of the
Participant's death or complete distribution of the Deferral
Account, whichever occurs earlier, on the balance from month-
to-month in such Deferral Account at a rate equal to the sum
of (i) the Declared Rate plus (ii) three percent (3%) per
annum. Each Deferral Account of a Participant who
terminates employment with the Company other than on account
of Disability, Retirement or death shall be deemed to bear
interest, compounded annually, from the date such Deferral
Account was established through the date of complete
distribution of the Deferral Account on the balance from
month-to-month in such Deferral Account at a rate equal to
the sum of (i) the Declared Rate plus (ii) three percent
(3%) per annum.
4.4 Valuation of Accounts. The value of a Deferral
Account as of any date shall equal the amounts theretofore
credited to such account less any payments debited to such
account plus the interest deemed to be earned on such
account in accordance with Section 4.3 through the end of
the preceding month.
4.5 Savings Plan Augmentation Contribution. For each
Plan Year in a Benefit Deferral Period, the Company shall
credit to the Savings Plan Augmentation Account of any
Participant an amount equal to the amount by which the
contribution that would otherwise have been made by the
Company to the Savings Plan for such Plan Year is reduced by
reason of the reduction in the Participant's Direct Cash
Compensation for such Plan Year under this Plan. The
Savings Plan augmentation contribution shall be credited to
the Savings Plan Augmentation Account for each Plan Year at
the same time as the Company contribution for such Plan Year
is made to the Savings Plan. A Participant's interest in
any credit to his or her Savings Plan Augmentation Account
and earnings thereon shall vest at the same rate and at the
same time as would have been the case had such contribution
been made to the Savings Plan. Interest will be credited on
a Savings Plan Augmentation Account at the same rate and in
the same manner as if it were a Deferral Account in
accordance with Section 4.3.
sr-plans\def-comp 6
<PAGE>
Upon death, Disability, Retirement or other
termination of employment, the Company shall pay to the
Participant an amount equal to the value of the
Participant's Savings Plan Augmentation Account in one lump
sum payment.
4.6 Statement of Accounts. The Committee shall submit
to each Participant, within 120 days after the close of each
Plan Year, a statement in such form as the Committee deems
desirable setting forth the balance standing to the credit
of each Participant in each of his Deferral Accounts and his
Savings Plan Augmentation Account.
ARTICLE V. BENEFITS
5.1 Retirement Benefit. Upon Retirement with respect
to a Benefit Unit, the Company shall pay to the Participant
with respect to such Benefit Unit an annual amount for
fifteen (15) years beginning in the year following his
Retirement, the sum of which payments shall equal (a) the
value as of Retirement of the Deferral Account for such
Benefit Unit determined under Section 4.4 plus (b) the
interest that will accrue on the unpaid balance in such
Deferral Account during such fifteen (15) year period
pursuant to Section 4.3 ("Retirement Benefit"). For each
year after the initial Retirement Benefit payment is made,
the annual Retirement Benefit payment shall be redetermined
based upon the then value of the Deferral Account, plus the
interest that will accrue pursuant to Section 4.3 for the
remaining period of annual payments. A Participant may
instead irrevocably elect in the Enrollment Agreement for
any Benefit Unit to have the Retirement Benefit for such
Benefit Unit paid to him in either five (5), ten (10) or
twenty (20) annual payments or in a single lump sum payment.
The amount of any such annual payments shall be calculated
in accordance with the principles stated in the preceding
sentences.
The Committee, in its sole discretion, may permit
a Participant to change his election as to the form of
payment of his Retirement Benefit upon written petition of
the Participant. In order to be effective, a Participant's
election (or modification or revocation of a prior election)
of the form of payment of his Retirement Benefit must be
made not later than 12 months before the Participant's
Retirement, unless otherwise permitted by the Committee.
Subject to the foregoing limitation, a Participant may make
such election (or revoke a prior election and make a new
election) at any time. Any election (or modification or
revocation of a prior election) which is made later than 12
months prior to the Participant's Retirement will be
considered void and shall have no force or effect, except as
otherwise determined by the Committee.
5.2 Termination Benefit. If a Participant shall cease
to be an employee of the Company for any reason other than
death, Disability or Retirement with respect to a Benefit
Unit, the Company shall pay to the Participant in one lump
sum an amount (the "Termination Benefit") equal to the value
of the Deferral Account for such Benefit Unit based on
crediting interest in accordance with Section 4.3, and such
Participant and his Beneficiary shall be entitled to no
further benefits under this Plan with respect to such
sr-plans\def-comp 7
<PAGE>
Benefit Unit, provided, however, at the sole discretion
of the Committee, no lump sum shall be payable and, instead,
the Company shall pay to the Participant an annual amount
each year for a period not to exceed three years beginning
in the year following his termination of employment, the sum
of which payments shall equal (a) the value as of the date
of termination of employment of the Deferral Account for
such Benefit Unit plus (b) the interest that will accrue on
the unpaid balance from month-to-month in such Deferral
Account during such period at the Declared Rate, compounded
annually. Upon termination of employment the Participant
shall immediately cease to be eligible for any benefits
under the Plan other than the Termination Benefit. No other
benefits shall be payable to either the Participant or any
Beneficiary of such Participant.
5.3 Disability. If a Participant shall cease to be an
employee of the Company prior to Retirement due to a
Disability which continues for more than six (6) months, the
Company shall pay to the Participant in one lump sum an
amount equal to the value of the Deferral Account for each
Benefit Unit in which the Participant is enrolled based on
crediting interest on the balance from month-to-month in
such Deferral Account at a rate equal to the sum of (i) the
Declared Rate plus (ii) three percent (3%) per annum,
compounded annually. Upon such payment the Participant
shall immediately cease to be eligible for any other
benefits under the Plan, and no other benefits shall be
payable to either the Participant or any Beneficiary of such
Participant.
5.4 Survivor Benefits.
(a) If a Participant dies while employed with the
Company prior to becoming eligible for Retirement with
respect to a Benefit Unit, the Company will pay to the
Participant's Beneficiary with respect to such Benefit Unit
an annual benefit for the greater of:
(i) ten (10) years, or
(ii) until the Participant would otherwise
have attained age 65,
equal to twenty-five percent (25%) of the
Total Deferral Amount with respect to such Benefit Unit.
However, if the Committee determines that a distribution of
the Participant's Deferral Account with respect to such
Benefit Unit would produce a greater benefit, such Deferral
Account balance shall be paid to the Participant's
Beneficiary in equal annual installments over the same
period as specified above based on crediting interest on the
balance from month-to-month in such Deferral Account at a
rate equal to eight percent (8%) per annum, compounded
annually. In comparing the present values of these
benefits, the Committee shall use in each case eight percent
(8%) as the discount factor.
(b) If a Participant dies after becoming eligible
for Retirement or after the commencement of payment of
Retirement Benefits with respect to any Benefit Unit, the
Company will pay to the Participant's Beneficiary the
remaining installments of the
sr-plans\def-comp 8
<PAGE>
Retirement Benefits which would have been payable to
the Participant with respect to such Benefit Unit for the
balance of the payment period elected by the Participant.
In addition, if a spouse who was married to
the Participant for at least one (1) year prior to his death
survives beyond the completion of payments of his Deferral
Account balance with respect to any Benefit Unit, the
Company shall make a lump sum payment to such spouse in an
amount equal to ten percent (10%) of the value of the
Deferral Account balance with respect to such Benefit Unit
valued as of the date of the earlier of the Participant's
Retirement or death. Such lump sum payment shall be made to
the spouse following completion of the payments of the
Deferral Account balance for the Benefit Unit to which it
relates, or following the Participant's death, if later. No
lump sum payment shall be made to any other Beneficiary with
respect to a Benefit Unit if the Participant's spouse does
not survive beyond completion of the payments of the
Deferral Account balance with respect to such Benefit Unit.
5.5 Immediate Payment on Termination Event. Upon
petition of a Participant within sixty (60) days after any
Termination Event or such other period as the Committee may
permit, the Committee, in its sole discretion, may have all
of the Participant's Deferral Accounts paid to him
immediately in a lump sum as a Termination Benefit pursuant
to Section 5.2, irrespective of whether the Participant
terminates or continues employment with the Company. After
such payment the Participant and his Beneficiary shall be
entitled to no further benefits under the Plan.
5.6 Small Benefit. In the event that the Committee
determines in its sole discretion that the amount of any
benefit is too small to make it administratively convenient
to pay such benefit over time, the Committee may pay the
benefit in a lump sum.
5.7 Withholding; Unemployment Taxes. To the extent
required by the law in effect at the time payments are made,
the Company shall withhold from payments made hereunder the
minimum taxes required to be withheld by the Federal or any
state or local government.
5.8 Lump Sum Payment With Penalty. Notwithstanding
any other provisions of the Plan, a Participant or a
Beneficiary of a deceased Participant may elect at any time
to receive an immediate lump sum payment of all or part of
the vested balance of his Deferral Account, reduced by a
penalty, which shall be forfeited to the Company, equal to
ten percent (10%) of the amount withdrawn from such Deferral
Account, in lieu of payments in accordance with the form
previously elected by the Participant.
ARTICLE VI. BENEFICIARY DESIGNATION
Each Participant shall have the right, at any time, to
designate any person or persons as the Beneficiary to whom
payment under this Plan shall be made in the event of the
Participant's death prior to complete distribution to the
Participant of the benefits due under the Plan. Each
Beneficiary designation shall become effective only when
filed in
sr-plans\def-comp 9
<PAGE>
writing with the Committee during the Participant's
lifetime on a form prescribed by the Committee. The filing
of a new Beneficiary designation form will cancel any
inconsistent Beneficiary designation previously filed.
If a Participant fails to designate a Beneficiary as
provided above, or if all designated Beneficiaries
predecease the Participant or die prior to complete
distribution of the Participant's benefits, such benefits
shall be paid in accordance with the Participant's
Beneficiary designation under the Company's Retirement Plan,
and if there is no such valid Beneficiary designation, to
the Participant's then surviving spouse, or, if none, to the
Participant's estate, until directed otherwise by the court
that has jurisdiction over the assets belonging to the
Participant's probate estate.
ARTICLE VII. AMENDMENT AND TERMINATION OF PLAN
7.1 Amendment. The Board of Directors of the Company
may at any time amend the Plan in whole or in part for any
reason, including but not limited to tax, accounting or
insurance changes, which may result in termination of the
Plan for future deferrals, provided, however, that no
amendment shall be effective to decrease the benefits under
the Plan payable to any Participant which have accrued prior
to the date of such amendment. Written notice of any
material amendment shall be given to each Participant then
participating in the Plan.
7.2 Termination.
(a) Company's Right to Terminate. The Board of
Directors of the Company may at any time terminate the Plan,
if in the Board's judgment, the continuance of the Plan
would not be in the Company's best interest due to tax,
accounting, insurance or other effects thereof, or potential
payouts thereunder, provided, however, that the Company may
only terminate this Plan with respect to any particular
Participant if it terminates the Plan with respect to all
similarly situated Participants.
(b) Payments Upon Termination. Upon any
termination of the Plan under this Section 7.2, the Board
shall determine the date or dates of Plan distributions to
the Participants, which date or dates shall not be later
than the date or dates on which the Participants or their
Beneficiaries and spouses would otherwise receive benefits
hereunder, and the Participants will be deemed to have
terminated their participation in all Benefit Units under
the Plan as of the dates determined by the Board. Direct
Cash Compensation shall prospectively cease to be deferred
as of the date determined by the Board, and the Company
shall pay all Participants the value of each of the
Participant's Deferral Accounts, determined as if each
Participant had terminated employment on the dates
determined by the Board and thereby become eligible for the
lump sum Termination Benefit under Section 5.2 above.
sr-plans\def-comp 10
<PAGE>
ARTICLE VIII. MISCELLANEOUS
8.1 Unsecured General Creditor. The rights of a
Participant, spouse of a Participant, Beneficiary, or their
heirs, successors, and assigns, as relates to any Company
promises hereunder, shall not be secured by any specific
assets of the Company, nor shall any assets of the Company
be designated as attributable or allocated to the
satisfaction of such promises.
8.2 Nonassignability. Neither a Participant nor any
other person shall have any right to commute, sell, assign,
transfer, pledge, anticipate, mortgage or otherwise
encumber, hypothecate or convey in advance of actual receipt
the amounts, if any, payable hereunder, or any part thereof,
or interest therein which are, and all rights to which are,
expressly declared to be unassignable and non-transferable.
No part of the amounts payable shall, prior to actual
payment, be subject to seizure or sequestration for the
payment of any debts, judgments, alimony or separate
maintenance owed by a Participant or any other person, nor
be transferable by operation of law in the event of a
Participant's or any other person's bankruptcy or
insolvency.
8.3 Employment Not Guaranteed. Nothing contained in
this Plan nor any action taken hereunder shall be construed
as a contract of employment or as giving any Participant any
right to be retained in the employ of the Company.
Accordingly, subject to the terms of any written employment
agreement to the contrary, the Company shall have the right
to terminate or change the terms of employment of a
Participant at any time and for any reason whatsoever, with
or without cause.
8.4 Protective Provisions. Each Participant shall
cooperate with the Company by furnishing any and all
information requested by the Company in order to facilitate
the payment of benefits hereunder, taking such physical
examinations as the Company may deem necessary and taking
such other relevant action as may be requested by the
Company. If a Participant refuses to so cooperate, the
Company shall have no further obligation to the Participant
under the Plan, other than payment to such Participant of
the cumulative reductions in Direct Cash Compensation
theretofore made pursuant to this Plan with respect to each
Benefit Unit hereunder. If a Participant commits suicide
during the first two years of the Benefit Deferral Period
for any Benefit Unit, or if the Participant makes any
material misstatement of information or nondisclosure of
medical history, then no benefits with respect to such
Benefit Unit will be payable hereunder to such Participant
or his Beneficiary, other than payment to such Participant
of the cumulative reductions in Direct Cash Compensation
theretofore made pursuant to this Plan, provided, that in
the Company's sole discretion, benefits may be payable in an
amount reduced to compensate the Company for any loss, cost,
damage or expense suffered or incurred by the Company as a
result in any way of misstatement or nondisclosure.
8.5 Obligations to Company. If a Participant becomes
entitled to a distribution of benefits under the Plan, and
if at such time the Participant has outstanding any debt,
obligation, or other liability representing an amount owing
to the Company,
sr-plans\def-comp 11
<PAGE>
then the Company may offset such amount owed to it
against the amount of benefits otherwise distributable.
Such determination shall be made by the Committee.
8.6 Gender, Singular & Plural. All pronouns and any
variations thereof shall be deemed to refer to the masculine
or feminine as the identity of the person or persons may
require. As the context may require, the singular may be
read as the plural and the plural as the singular.
8.7 Captions. The captions of the articles, sections,
and paragraphs of the Plan are for convenience only and
shall not control or affect the meaning or construction of
any of its provisions.
8.8 Validity. In the event any provision of this Plan
is held invalid, void, or unenforceable, the same shall not
affect, in any respect whatsoever, the validity of any other
provision of this Plan.
8.9 Notice. Any notice or filing required or
permitted to be given to the Committee under the Plan shall
be sufficient if in writing and hand delivered, or sent by
registered or certified mail, to the principal office of the
Company, directed to the attention of the Executive Vice
President - Human Resources of the Company. Such notice
shall be deemed given as to the date of delivery or, if
delivery is made by mail, as of the date shown on the
postmark on the receipt for registration or certification.
8.10 Applicable Law. The Plan shall be governed and
construed in accordance with the laws of the State of
California.
This amended and restated Plan shall be effective as of
January 1, 1996, and shall supersede and replace the prior
Plan which was originally effective on January 1, 1986, and
was amended effective as of January 1, 1989.
sr-plans\def-comp 12
<PAGE>
Executed on February 29, 1996, in the City and County
of Los Angeles, State of California.
OCCIDENTAL PETROLEUM CORPORATION
By: Richard W. Hallock
--------------------------
Richard W. Hallock
Executive Vice President -
Human Resources
sr-plans\def-comp 13
OCCIDENTAL PETROLEUM CORPORATION
SENIOR EXECUTIVE
SUPPLEMENTAL LIFE INSURANCE PLAN
________________________________
(EFFECTIVE AS OF JANUARY 1, 1986,
AS AMENDED AND RESTATED EFFECTIVE AS OF JANUARY 1, 1996)
<PAGE>
TABLE OF CONTENTS
Page
----
A. PURPOSE..................................................1
B. ERISA PLAN...............................................1
C. PARTICIPATION
1. Selection by Company Management.......................1
2. Election Not to Participate...........................1
3. Insurability..........................................2
4. Addition and Removal of Participants..................2
D. ASSIGNMENT...............................................2
E. INSURANCE BENEFITS WHILE EMPLOYED
1. Amount of Insurance...................................2
2. Executive's Cash Surrender Value While Employed.......2
3. Payment of Premiums...................................3
4. Policy Ownership......................................3
5. Policy Loans..........................................3
F. INSURANCE BENEFITS AFTER APPROVED RETIREMENT
1. Amount of Insurance...................................4
2. Cash Surrender Value..................................4
3. Policy Loans..........................................5
G. NO INSURANCE BENEFITS AFTER TERMINATION OF
EMPLOYMENT OTHER THAN ON APPROVED RETIREMENT.............5
H. OPTION TO PURCHASE POLICY UPON OCCURRENCE
OF CERTAIN EVENTS
1. Option to Purchase Policy from Company................6
2. Events Which Give Executive Right to Purchase Policy..6
I. WITHHOLDING..............................................6
J. ADMINISTRATION OF THE PLAN
1. In General............................................6
2. Elections and Notices.................................7
K. AMENDMENT OR TERMINATION OF THE PLAN.....................7
L. BENEFICIARY DESIGNATION..................................7
sr-plans\sup-life i
<PAGE>
Page
----
M. DEFINITIONS..............................................8
N. MISCELLANEOUS
1. Employment Not Guaranteed.............................9
2. Protective Provisions.................................9
3. Gender, Singular or Plural............................9
4. Captions.............................................10
5. Validity.............................................10
6. Notice...............................................10
7. Applicable Law.......................................10
8. Notice to Insurance Company..........................10
sr-plans\sup-life ii
<PAGE>
OCCIDENTAL PETROLEUM CORPORATION
SENIOR EXECUTIVE
SUPPLEMENTAL LIFE INSURANCE PLAN
(Effective as of January 1, 1986,
as Amended and Restated Effective as of January 1, 1996)
A. PURPOSE
This Plan is a contributory life insurance program to
enable senior executives to purchase additional life
insurance coverage.
B. ERISA PLAN
This Plan is covered by Title I of ERISA as a welfare
benefit plan. The Company is the "named fiduciary" of the
Plan.
C. PARTICIPATION
1. Selection by Company Management
-------------------------------
Any senior executive or managerial employee who is
selected for participation by Company Management shall
become a Participant as of the later of January 1, 1986, or
the first day of the month following the month in which his
participation is approved by Company Management.
Participation in the Plan shall be limited to those
Executives of the Company who are selected by Company
Management. The Company and Executive shall enter into an
Insurance Agreement to evidence the Executive's
participation in the Plan.
2. Election Not to Participate
---------------------------
An Executive may elect not to participate in this
Plan at any time; such election shall be in writing, and
shall become effective upon its receipt by the
Administrator. No compensation or benefits in lieu of this
Plan shall be paid to an Executive who elects not to
participate. An election not to participate shall be
irrevocable unless otherwise determined by the
Administrator.
An Executive's failure to pay when due any premium
which he is required to pay under the terms of this Plan,
unless paid within 30 days after written notice thereof from
the Administrator, shall be deemed to be an election by the
Executive not to participate further in this Plan. The
Company may elect, within 90 days after receiving notice of
the occurrence of any such event, to purchase the
Executive's ownership interest in the policy or policies on
the life of the Executive for an amount equal to the
sr-plans\sup-life
<PAGE>
Executive's cash surrender value with respect to the policy
or policies as provided in Sections E,2 or F,2.
3. Insurability
------------
Executives selected by Company Management are not
automatically entitled to the insurance benefits provided
under this Plan. Each Executive must satisfy the
requirements for insurability of the insurer selected by the
Company before he becomes covered by insurance under this
Plan.
4. Addition and Removal of Participants
------------------------------------
Company Management may, at its discretion and at
any time, designate additional Executives to participate in
the Plan and remove Executives from participation in the
Plan. When an Executive ceases participation, he shall be
treated, solely for purposes of this Plan, as if he had
terminated his employment with the Company for reasons other
than Approved Retirement, under Section G.
D. ASSIGNMENT
The Executive may assign to one or more individuals or
trustees all or any part of his right, title, claim,
interest, benefit and all other incidents of ownership which
he may have in any life insurance under this Plan. Such
assignee shall then have all rights and obligations which
have been assigned and otherwise are the Executive's under
this Plan. In the event that there has been such an
assignment, the term Executive shall mean the Executive's
assignee (or any subsequent assignee) as the context
requires, in connection with ownership, actions, elections,
or other events concerning life insurance on the Executive.
E. INSURANCE BENEFITS WHILE EMPLOYED
1. Amount of Insurance
-------------------
The amount of insurance provided under this Plan
on the life of each Executive while he is employed by the
Company shall be determined from the schedule of annual
rates set forth in Exhibit "A" hereto based on the
Executive's age at the time of his entry into the Plan.
This amount of insurance for each Executive shall be set
forth in his Insurance Agreement. The Executive shall have
the incidents of ownership in such insurance provided in
Section E,4.
2. Executive's Cash Surrender Value While Employed
-----------------------------------------------
While the Executive is employed by the Company, he
shall have an interest in the cash surrender value with
respect to insurance under this Plan in an amount not less
than the aggregate premiums paid by the Executive for
insurance under this Plan credited with interest, compounded
annually, at the Declared Rate.
sr-plans\sup-life 2
<PAGE>
3. Payment of Premiums
-------------------
The Executive shall pay the premiums for the
amount of insurance provided to him under this Plan at the
rates set forth in Exhibit "A" hereto. The Company reserves
the right to amend Exhibit "A" to revise the rates for this
insurance coverage. The Executive's premium payment shall
be made annually or more frequently on demand by the
Company. The Company shall pay the balance of the premiums
for insurance under this Plan.
4. Policy Ownership
----------------
To provide the insurance benefits under this Plan,
the Company shall acquire one or more permanent insurance
policies on the life of each participating Executive who
satisfies the insurer's requirements for insurability. The
ownership of each policy shall be divided between the
Company and the Executive. The Executive shall possess all
incidents of ownership in the death benefits under the
policy or policies in an amount equal to the amount of the
death benefits provided to the Executive under this Plan,
and the Company shall possess all other incidents of
ownership in the death benefits under the policy or
policies. The Executive shall have the right to designate
the beneficiary to whom death benefits are payable under
each insurance policy, to the extent of his ownership of the
death benefit under the policy; the remainder of any death
benefits shall be payable to the Company or its designated
beneficiary, unless the Company claims a lesser amount.
5. Policy Loans
------------
The rights of the Executive and the Company to
borrow from any policy or policies under this Plan while the
Executive is employed by the Company shall be as follows:
a. The Executive shall have no right to borrow
from any policy while he is employed by the Company, except
that the Executive may borrow any amount not in excess of
the total cash surrender value of any policy at any time
when he has the right to purchase the policy pursuant to
Section H,2 or is permitted to borrow under Section E,5,e.
b. The Company shall not be permitted to borrow
from any policy during four of the first seven years after
such policy is placed in force.
c. The Company shall have the right to borrow
from any policy an amount equal to the Company's premium on
such policy during three of the first seven years after such
policy is placed in force.
d. At any time after the seventh anniversary
date of any policy, the Company shall have the annual right
to borrow an amount equal to the Company's annual premium on
such policy plus an amount equal to the Company's after-tax
cost of the
sr-plans\sup-life 3
<PAGE>
annual interest charges for loans on such policy ("Interest
Loans"). The annual amount of Interest Loan shall be an
amount equal to (A) the total interest on loans on such
policy that is payable for the year in question multiplied
times (B) the number one minus the Company's top marginal
combined federal and state income tax brackets, giving
effect to any federal tax deduction allowable for the state
income taxes payable by the Company ("Combined Bracket").
For example, in the event state taxes continue to be
deductible for federal income tax purposes, the formula for
calculating the Combined Bracket in a given policy year
would be the sum of (C) the Company's top marginal federal
rate for that year plus (D) the product of multiplying the
Company's top marginal state rate for that year times the
result of subtracting the Company's top marginal federal
rate for that year from one. However, in the event a
federal tax deduction is not allowed for state income taxes
paid by the Company, the Combined Bracket in such a policy
year would be the sum of the Company's top marginal federal
rate for said year plus the Company's top marginal state
rate for that year. The annual determination of the amount
of Interest Loan shall be made in the Company tax year that
follows the year of the interest payment in question
immediately after the Company's federal and state tax
returns for the prior year have been prepared and filed.
e. The Company and Executive may borrow such
additional amounts from any policy as the Company and
Executive may hereafter agree upon.
F. INSURANCE BENEFITS AFTER APPROVED RETIREMENT
1. Amount of Insurance
-------------------
If the Executive retires pursuant to an Approved
Retirement, his minimum cash surrender value under Section
E,2 shall be applied to provide a paid up death benefit
based on the insurance company's net single premium rate for
such coverage. However, an Executive who has made premium
payments for less than five years at the time of his
Approved Retirement will be required to continue to make
premium payments at the rate in effect prior to his Approved
Retirement for the balance of such five year period and will
continue to have the amount of insurance provided under
Section E,1 during such period.
The Executive shall have an option to elect to
continue to have the amount of insurance provided under
Section E,1 after his Approved Retirement by continuation of
the premium payments under such terms as the Administrator
may determine in its sole discretion.
The remaining aggregate death benefits under the
insurance policy or policies on the life of the Executive
shall be retained by the Company.
2. Cash Surrender Value
--------------------
On the Executive's Approved Retirement, the
Company shall retain the insurance purchased on the life of
the Executive. The Executive shall continue to have an
sr-plans\sup-life 4
<PAGE>
ownership interest in the cash surrender value (net of
outstanding policy loans) of the policy or policies on the
life of the Executive which are retained by the Company of
not less than the aggregate premiums paid by the Executive
for insurance under this Plan credited with interest,
compounded annually, at the Declared Rate.
3. Policy Loans
------------
The rights of the Executive and the Company to
borrow from any policy or policies under this Plan after an
Executive's Approved Retirement shall be as follows:
a. The Executive shall have no right to borrow
from any policy, except that the Executive may borrow any
amount not in excess of the total cash surrender value of
any policy at any time when he has the right to purchase the
policy pursuant to Section H,2 or is permitted to borrow
under Section E,5,e.
b. The Company shall continue to have the rights
and be subject to the restrictions with respect to policy
loans contained in Section E,5,b, c, d and e.
c. The Company shall be permitted to borrow
additional amounts from any policy on the life of the
Executive, once every three years, commencing three years
after the Executive's Approved Retirement and every three
years thereafter, not to exceed 25% of the total gross cash
value available in the policy at the time of any such loan.
d. The Company shall also be permitted to borrow
any excess of the cash surrender value under any policy over
the minimum cash surrender value which is owned by the
Executive under Section F,2 at any time after it has paid
all amounts owed to the Executive which are described in
Section H,2,d.
G. NO INSURANCE BENEFITS AFTER TERMINATION OF EMPLOYMENT
OTHER THAN ON APPROVED RETIREMENT
If an Executive terminates his employment with the
Company for reasons other than an Approved Retirement, his
insurance benefits under this Plan shall cease. The
Executive shall transfer to the Company the portion of the
policy or policies on his life which he owns under this
Plan, effective as of his termination of employment. In
exchange, the Executive shall receive from the Company, not
later than 90 days after receipt by the Administrator of
executed documents properly evidencing such transfer, cash
equal to the minimum cash surrender value (if any) provided
for the Executive in Section E,2. A termination of
employment on account of Disability shall be treated in the
same manner as any other termination of employment.
sr-plans\sup-life 5
<PAGE>
H. OPTION TO PURCHASE POLICY UPON OCCURRENCE OF CERTAIN
EVENTS
1. Option to Purchase Policy from Company
--------------------------------------
The Executive may elect, in writing at any time
after receiving notice of the occurrence of any event
specified in Section H,2, to purchase from the Company any
or all of the insurance policies on his life which are held
by the Company under this Plan. The purchase price shall be
equal to the aggregate premiums paid by the Company (net of
outstanding loans).
2.Events Which Give Executive Right to Purchase Policy
----------------------------------------------------
The Executive shall be entitled to purchase any or
all of the insurance policies on his life which are held by
the Company under this Plan pursuant to Section H,1 upon the
occurrence of any of the following events, unless such event
is corrected by the Company not later than 10 days following
its receipt of the Executive's written notice electing to
purchase any such policies:
(a) the Company's failure to pay when due any
premium which it is required to pay under the terms of this
Plan;
(b) the Company's failure to pay when due any
interest charge which is attributable to its loans under the
insurance policies;
(c) the Company's attempt to surrender or cancel
the insurance policy or policies; or
(d) the Company's failure to pay when due any
amounts owed to the Executive that arise by virtue of the
Executive's employment with the Company, other than medical
disability, death and other welfare benefits.
I. WITHHOLDING
The Executive and any beneficiary shall make
appropriate arrangements with the Company for the
satisfaction of any federal, state or local income tax
withholding requirements and Social Security or other
employee tax requirements applicable to the provision of
benefits under this Plan. If no other arrangements are
made, the Company may provide, at its discretion, for such
withholding and tax payments as may be required.
J. ADMINISTRATION OF THE PLAN
1. In General
----------
An administrative committee shall be appointed by
the Company's Chief Executive Officer as the Administrator
to administer the Plan and establish, adopt, or revise such
rules and regulations as the administrative committee may
deem necessary or
sr-plans\sup-life 6
<PAGE>
advisable for the administration of the Plan and to
interpret the provisions of the Plan, and, except as
otherwise indicated herein, any such interpretations shall
be conclusive. All decisions of the administrative committee
shall be by vote of at least two of the committee members
and shall be final. Members of the administrative committee
shall be eligible to participate in the Plan while serving
as members of the administrative committee, but a member of
the administrative committee shall not vote or act upon any
matter which relates solely to such member's interest in the
Plan as a participant.
2. Elections and Notices
---------------------
All elections and notices made by any Executive
under this Plan shall be in writing and filed with the
Administrator.
K. AMENDMENT OR TERMINATION OF THE PLAN
The Company may at any time amend, alter, modify or
terminate the Plan. Such action shall not affect the right
of any Executive existing before the action; however, the
Company is not obligated to continue any benefit, any
insurance or any insurance policy after such action.
Notwithstanding the foregoing or any other provision of this
Plan, the Company may not in any manner act to reduce the
Executive's interest (other than in death benefits) in any
insurance policy under this Plan or change the Executive's
right to purchase any insurance policy or the events which
give the Executive the right to purchase such policy, as
specified in Section H,1 and 2, unless the Executive
consents thereto in writing.
L. BENEFICIARY DESIGNATION
The Executive shall have the right, at any time, to
designate any person or persons as the beneficiary to whom
payment under this Plan shall be made in the event of the
Executive's death. Each beneficiary designation shall
become effective only when filed in writing with the
Administrator during the Executive's lifetime on a form
prescribed by the Administrator. The filing of a new
beneficiary designation form will cancel any inconsistent
beneficiary designation previously filed.
If an Executive fails to designate a beneficiary as
provided above, or if all designated beneficiaries
predecease the Executive, the Executive's death benefits
shall be paid in accordance with the Executive's beneficiary
designation under the Company's Retirement Plan, and if
there is no such valid beneficiary designation, to the
Executive's then surviving spouse, or, if none, to the
Executive's estate, until directed otherwise by the court
that has jurisdiction over the assets belonging to the
Executive's probate estate.
sr-plans\sup-life 7
<PAGE>
M. DEFINITIONS
For the purposes of the Plan, the following terms shall
have the meanings indicated:
1. "Administrator" means the administrative committee
specified in Section J.
2. "Affiliate" means any corporation which is
controlled by or under common control with Occidental
Petroleum Corporation.
3. "Approved Retirement" means any termination of
employment with the Company after attainment of age 55 and
completion of five (5) Years of Service.
4. "Beneficiary" means the person or persons
designated as such in accordance with Section L.
5. "Board" means the Board of Directors of Occidental
Petroleum Corporation.
6. "Company" means Occidental Petroleum Corporation,
or any successor thereto, and any Affiliates.
7. "Company Management" means the Chairman of the
Board, Chief Executive Officer and President or Executive
Vice President of Human Resources.
8. "Declared Rate" means with respect to any Plan
Year Moody's Long Term Corporate Bond Index--Monthly Average
Corporates as published by Moody's Investor's Service, Inc.
(or any successor thereto) for the month of July before the
Plan Year in question, or, if such average is no longer
published, a substantially similar average selected by the
Administrator.
9. "Disability" means a condition that qualifies as a
disability under the Company's Retirement Plan and which has
continued for more than six (6) months and has been approved
by the Administrator.
10. "ERISA" means the Employee Retirement Income
Security Act of 1974, as amended.
11. "Executive" means a senior executive of the
Company selected by Company Management to participate in
this Plan pursuant to Section C.
12. "Insurance Agreement" means the insurance
agreement entered into by the Company and an Executive to
evidence the Executive's participation in this Plan.
13. "Plan Year" means the calendar year beginning
January 1 and ending December 31.
sr-plans\sup-life 8
<PAGE>
14. "Retirement Plan" means the OCCIDENTAL PETROLEUM
CORPORATION RETIREMENT PLAN effective June 1, 1983 and as
amended from time to time thereafter.
15. "Service" means the period of time during which
an employment relationship exists between an Executive and
the Company, including the period of time such relationship
existed prior to the time when the Executive became a
participant in this Plan.
16. "Years of Service" means the number of f ull
years credited to an Executive under the Retirement Plan
for vesting purposes.
N. MISCELLANEOUS
1. Employment Not Guaranteed
-------------------------
Nothing contained in this Plan nor any action
taken hereunder shall be construed as a contract of
employment or as giving any Executive any right to be
retained in the employ of the Company. Accordingly, subject
to the terms of any written employment agreement to the
contrary, the Company shall have the right to terminate or
change the terms of employment of an Executive at any time
and for any reason whatsoever, with or without cause.
2. Protective Provisions
---------------------
Each Executive shall cooperate with the Company by
furnishing any and all information requested by the Company
in order to facilitate the payment of benefits hereunder,
taking such physical examinations as the Company may deem
necessary and taking such other relevant action as may be
requested by the Company. If an Executive refuses to so
cooperate, the Company shall have no further obligation to
the Executive under the Plan. If an Executive commits
suicide during the first two years following his
participation in the Plan, or if an Executive makes any
material misstatement of information or nondisclosure of
medical history, then no benefits will be payable hereunder
to such Executive or his beneficiary, provided, that in the
Company's sole discretion, benefits may be payable in an
amount reduced to compensate the Company for any loss, cost,
damage or expense suffered or incurred by the Company as a
result in any way of such misstatement or nondisclosure.
3. Gender, Singular & Plural
-------------------------
All pronouns and any variations thereof shall be
deemed to refer to the masculine or feminine as the identity
of the person or persons may require. As the context may
require, the singular may be read as the plural and the
plural as the singular.
sr-plans\sup-life 9
<PAGE>
4. Captions
--------
The captions of the articles, sections, and
paragraphs of the Plan are for convenience only and shall
not control or affect the meaning or construction of any of
its provisions.
5. Validity
--------
In the event any provision of this Plan is held
invalid, void, or unenforceable, the same shall not affect,
in any respect whatsoever, the validity of any other
provision of this Plan.
6. Notice
------
Any notice or filing required or permitted to be
given to the Administrator under the Plan shall be
sufficient if in writing and hand delivered, or sent by
registered or certified mail, to the principal office of the
Company, directed to the attention of the President of the
Company. Such notice shall be deemed given as to the date
of delivery or, if delivery is made by mail, as of the date
shown on the postmark on the receipt for registration or
certification.
7. Applicable Law
--------------
The Plan shall be governed and construed in
accordance with the laws of the State of California.
8. Notice to Insurance Company
---------------------------
The Company shall be responsible for notifying the
insurance company which issues any policy or policies under
this Plan of any changes in the ownership rights and
interests of the Executive and the Company and of any
changes in their respective beneficiaries to receive death
benefits under the Plan, and the insurance company shall be
entitled to rely upon such notification received from the
Company.
This amended and restated Plan shall be effective as of
January 1, 1996, and shall supersede and replace the prior
Plan which was originally effective on January 1, 1986, and
was amended effective as of January 1, 1989.
Executed on February 29, 1996, in the City and County
of Los Angeles, State of California.
OCCIDENTAL PETROLEUM CORPORATION
By: Richard W. Hallock
--------------------------
Richard W. Hallock
Executive Vice President -
Human Resources
sr-plans\sup-life 10
<PAGE>
EXHIBIT A
TO
OCCIDENTAL PETROLEUM CORPORATION
SENIOR EXECUTIVE SUPPLEMENTAL LIFE INSURANCE PLAN
(Effective as of January 1, 1986)
ANNUAL RATES PER $1,000 OF INSURANCE ON LIFE OF EXECUTIVE
---------------------------------------------------------
Age at Entry Premium Paid
of Executive By Executive
------------ ------------
Under 30 $ 41.44
30-34 $ 44.93
35-39 $ 55.97
40-44 $ 70.53
45-49 $ 89.01
50-54 $113.36
55-59 $143.18
60 and over $181.21
sr-plans\sup-life
OCCIDENTAL PETROLEUM CORPORATION
SENIOR EXECUTIVE
SUPPLEMENTAL RETIREMENT PLAN
_________________________________
(EFFECTIVE AS OF JANUARY 1, 1986,
AS AMENDED AND RESTATED EFFECTIVE AS OF JANUARY 1, 1996)
<PAGE>
TABLE OF CONTENTS
Article Section Page
- ------- ------- ----
1 PURPOSE AND APPLICATION
1.1 Purpose of the Plan.........................1
1.2 Application of Plan.........................1
2 DEFINITIONS
2.1 Definitions.................................1
2.2 Gender and Number...........................3
3 ELIGIBILITY AND PARTICIPATION
3.1 Participation...............................3
4 BENEFITS
4.1 Allocations Relating to Retirement Plan.....3
4.2 Allocation Adjustments Relating to Retirement
Plan..........................................3
4.3 Allocations Relating to Savings Plan........3
4.4 Contract Payments...........................3
4.5 Maintenance of Accounts.....................4
4.6 Vesting and Forfeiture......................5
4.7 Payment.....................................5
4.8 Death.......................................6
4.9 Withholding; Unemployment Taxes.............6
4.10 Lump Sum Payment with Penalty...............6
5 ADMINISTRATION
5.1 Administrative Committee.....................6
5.2 Uniform Rules................................6
5.3 Notice of Address............................7
5.4 Records......................................7
6 AMENDMENT AND TERMINATION
6.1 Amendment and Termination....................7
6.2 Reorganization of Employer...................7
6.3 Protected Benefits...........................7
7 GENERAL PROVISIONS
7.1 Nonassignability.............................7
7.2 Employment Rights............................8
7.3 Illegality of Particular Provision...........8
7.4 Applicable Laws..............................8
8 BENEFICIARY DESIGNATION
8.1 Designation of Beneficiary...................8
sr-plans\sup-ret i
<PAGE>
OCCIDENTAL PETROLEUM CORPORATION
SENIOR EXECUTIVE
SUPPLEMENTAL RETIREMENT PLAN
(Effective as of January 1, 1986,
as Amended and Restated Effective as of January 1, 1996)
ARTICLE 1. PURPOSE AND APPLICATION
1.1 Purpose of the Plan. The OCCIDENTAL PETROLEUM
CORPORATION SENIOR EXECUTIVE SUPPLEMENTAL RETIREMENT PLAN
(the "Plan"), effective January 1, 1986, as amended and
restated effective as of January 1, 1996, is designed (i) to
provide benefits for certain eligible senior executives
which will compensate such senior executives for maximum
limits imposed by law upon contributions to qualified plans
and (ii) to insure that such senior executives will have
adequate retirement benefits. The Plan is intended to be
exempt from the participation, vesting, funding, and
fiduciary requirements of Title 1 of the Employee Retirement
Income Security Act of 1974 ("ERISA"), as an unfunded plan
maintained primarily for the purpose of providing deferred
compensation for a select group of management or highly
compensated employees. In addition, the Plan is intended,
in part, to be entirely exempt from Title I of ERISA as an
excess benefit plan as defined in ERISA.
1.2 Application of Plan. The terms of this Plan are
applicable to eligible executives to whom the Company has
commitments under this Plan on or after January 1, 1986.
ARTICLE 2. DEFINITIONS
2.1 Definitions. Whenever used in the Plan, the
following terms shall have the respective meanings set forth
below, unless a different meaning is required by the context
in which the word is used, and when the defined meaning is
intended, the term is capitalized:
(a) "Administrative Committee" means the
committee with authority to administer the Plan as provided
under section 5.1.
(b) "Affiliate" means any corporation which is
controlled by or under common control with the Company.
(c) "Beneficiary" means the persons designated
by the Participant in accordance with Article 8 to receive
benefits in the event of his death.
(d) "Board of Directors" means the Board of
Directors of the Company.
sr-plans\sup-ret
<PAGE>
(e) "Company" means Occidental Petroleum
Corporation, and any successor thereto.
(f) "Company Management" shall mean the Chairman
of the Board, Chief Executive Officer and President or
Executive Vice President of Human Resources.
(g) "Compensation" means the base salary of the
employee as stated in the payroll records of the Employer,
before reduction for any deferral of base salary pursuant to
the Senior Executive Deferred Compensation Plan, 1988
Deferred Compensation Plan or any other qualified or non-
qualified deferred compensation plan or agreement, excluding
any amounts paid for bonuses, income realized upon exercise
of stock options, and any other special pay which the
Employer pays to the employee during the year.
(h) "Employer" shall mean the Company and any
Affiliate which is designated by the Board of Directors and
which approves adoption of this Plan by appropriate
corporate action.
(i) "Participant" means a person designated by
Company Management to participate in the Plan.
(j) "Retire" and "Retirement" mean a
Participant's termination of employment after becoming
eligible for Retirement as defined in the Retirement Plan.
(k) "Retirement Plan" means the OCCIDENTAL
PETROLEUM CORPORATION RETIREMENT PLAN effective June 1,
1983, as amended from time to time thereafter.
(l) "Savings Plan" means the OCCIDENTAL PETROLEUM
CORPORATION SAVINGS PLAN, as amended from time to time.
(m) "Senior Executive Deferred Compensation Plan"
means the OCCIDENTAL PETROLEUM CORPORATION SENIOR EXECUTIVE
DEFERRED COMPENSATION PLAN, as amended from time to time.
(n) "Years of Service" means the number of full
years credited to a Participant under the Retirement Plan
for vesting purposes.
(o) "1988 Deferred Compensation Plan" means the
OCCIDENTAL PETROLEUM CORPORATION 1988 DEFERRED COMPENSATION
PLAN, as amended from time to time.
2.2 Gender and Number. Except when otherwise
indicated by the context, any masculine terminology used
herein shall also include the feminine, and the use of any
term herein in the singular may also include the plural.
sr-plans\sup-ret 2
<PAGE>
ARTICLE 3. ELIGIBILITY AND PARTICIPATION
3.1 Participation. Any senior executive or managerial
employee who is selected for participation by Company
Management shall become a Participant as of the later of
January 1, 1986, or the first day of the month following the
month in which his participation is approved by Company
Management.
ARTICLE 4. BENEFITS
4.1 Allocations Relating to Retirement Plan. A credit
shall be made as of the last day of each month to the
account of any Participant. The amount to be allocated
shall equal the sum which would be allocated to the account
of the Participant for the month under the Retirement Plan,
based on the Participant's compensation as defined in this
Plan, if the Participant were not subject to provisions that
withhold allocations until the end of the plan year.
4.2 Allocation Adjustments Relating to Retirement
Plan. For Participants covered under this Plan, allocations
under the Retirement Plan are made only at the end of the
Plan year, and only to the extent allowable under Internal
Revenue Code limitations. If an allocation is made to the
Account of a Participant under the Retirement Plan, then the
individual account of such Participant under this Plan shall
be reduced by an equivalent dollar amount. However,
earnings on monthly allocations under this Plan shall not be
adjusted or reduced.
4.3 Allocations Relating to Savings Plan. Effective
with the plan year beginning on January 1, 1989, a credit
shall be made as of the last day of the plan year to the
account of each Participant who, for that plan year of the
Savings Plan, makes the maximum deferral or contribution
permitted under Article 4 of the Savings Plan and is not
eligible to receive the maximum employer matching
contribution under section 5.1 of the Savings Plan due to
the limitations imposed by sections 401(a)(17) or 415 of the
Internal Revenue Code. The amount to be allocated under
this Plan shall equal the amount which cannot be allocated
to the account of the Participant under the Savings Plan for
the plan year on account of the limitations imposed under
the Internal Revenue Code, reduced by any such amount which
is credited on behalf of the Participant under any other
Company plan, including the 1988 Deferred Compensation Plan.
An additional amount equal to five percent (5%) of the
amount allocated to the Participant under the preceding
sentence shall be allocated to each Participant in lieu of
interest on such amount for the plan year.
4.4 Contract Payments. If a Participant has entered
into a contract with an Employer (other than as part of a
general deferred compensation plan) that promises deferred
compensation to the Participant, whether in the form of
allocations of deferrals to a book reserve account, or in
the form of monthly payments after separation from
sr-plans\sup-ret 3
<PAGE>
service, then such benefits will be paid under the
provisions of this Plan to the extent that these provisions
are not inconsistent with the Participant's contract.
If the Participant's contract requires that a book
reserve account be maintained, then allocations and
valuation increases, as well as benefit payments, shall be
made under this Plan, and shall be administered by the
Administrative Committee. Similarly, if the contract calls
for deferred payment, the value thereof shall be a liability
of this Plan, and the payment of benefits shall be
administered by the Administrative Committee.
The Committee shall have the power to determine
whether benefits required under a separate contract with a
Participant shall operate to reduce credits under
section 4.1 and the extent of any such reduction.
4.5 Maintenance of Accounts.
(a) The Employer shall establish and maintain, in
the name of each Participant, an individual account. As of
the end of each month, the Administrative Committee shall
adjust the balance, if any, of the Participant's account as
of the last day of the preceding month, by multiplying such
amount by a number equal to one plus (i) the decimal
equivalent of the percentage yield for the month on new
money invested under the Retirement Plan during the month
plus (ii) .082954% per month (which is equivalent to 1% on
an annual basis). The Administrative Committee, in its sole
discretion, may credit a higher rate of interest on the
account balances of Participants depending on the status of
a Participant, including but not limited to a Participant's
status as an active, retired or terminated employee.
(b) The Administrative Committee shall then add
to such account balance, as adjusted for earnings, if any,
during the month, the allocation to which the Participant is
entitled for the month under section 4.1. At the end of the
year, the Administrative Committee shall add to the account
balance the allocation to which the Participant is entitled
for the year under section 4.3.
(c) The individual account of each Participant
shall represent a liability, payable when due under this
Plan, out of the general assets of the Employer, or from the
assets of any trust, custodial account or escrow arrangement
which the Employer may establish for the purpose of assuring
availability of funds sufficient to pay benefits under this
Plan. The money and any other assets in any such trust or
account shall at all times remain the property of the
Employer, and neither this Plan nor any Participant shall
have any beneficial ownership interest in the assets
thereof. No property or assets of the Employer shall be
pledged, encumbered, or otherwise subjected to a lien or
security interest for payment of benefits hereunder.
Accounting for this Plan shall be based on generally
accepted accounting principles.
sr-plans\sup-ret 4
<PAGE>
4.6 Vesting and Forfeiture. All benefits under this
Plan shall be contingent and forfeitable and no Participant
shall have a vested interest in any benefit until one of the
events listed below occurs while he is still employed with
the Employer:
(a) he completes five years of Service;
(b) he attains age 60; or
(c) he dies, or retires or becomes disabled (as
the terms "retire" and "disabled" are defined in the
Retirement Plan).
A person who terminates employment with the
Employer for any reason prior to becoming vested hereunder
shall not receive a benefit, unless otherwise provided in a
contract with the Company.
4.7 Payment. Unless a Participant makes an election
under the following sentence, the amount accumulated in a
Participant's account shall be distributed in a single sum
as soon as practicable after the Participant (i) Retires or
terminates employment or (ii) attains age 55, whichever
occurs later. The Participant may make an irrevocable
election when he first becomes a Participant in this Plan to
receive the distribution payable under this section in a
single sum or 5, 10, 15 or 20 annual installments. In such
election the Participant may elect to have such
distributions commence either (a) in the year following his
retirement or termination of employment or commencing at age
55, if later, or (b) at a specified age between ages 55 and
70-1/2, or in the year following his retirement or
termination of employment, if later. A Participant who
becomes disabled for more than six months (as defined in the
Retirement Plan) may petition the Administrative Committee
for approval to receive the distribution payable under this
section in a single sum or installments at any time even
before the Participant attains age 55. If benefits are to
be paid in installments, the account will continue to be
adjusted in accordance with section 4.5(a) above until any
series of installments has been completed. The amount of
each annual installment shall equal the amount credited to
the account as of the beginning of the year in which the
installment is to be paid multiplied by 1 over the number of
installments (including the current one) which remain to be
paid. Each installment shall be paid during the first 90
days of the calendar year.
The Administrative Committee, in its sole
discretion, may permit a Participant to change his election
as to the form of payment upon written petition of the
Participant. In order to be effective, a Participant's
election (or modification or revocation of a prior election)
of the form of payment must be made not later than 12 months
before the Participant's Retirement or termination of
employment, unless otherwise permitted by the Administrative
Committee. Subject to the foregoing limitation, a
Participant may make such election (or revoke a prior
election and make a new election) at any time. Any election
(or modification or revocation of a prior election) which is
made later than 12 months prior to the Participant's
Retirement or termination of employment will be considered
void and shall have no force or effect, except as otherwise
determined by the Administrative Committee.
sr-plans\sup-ret 5
<PAGE>
4.8 Death. The account of a Participant who dies
while employed by an Employer shall be paid in a single sum
to the Participant's Beneficiary.
If a Participant dies after Retirement or
termination of employment, then his surviving Beneficiary
shall be paid the amount in the Participant's account in a
single sum.
The payment under this section will not apply if
such payment is made under an insurance policy or some other
plan or arrangement of the Company for senior executives.
4.9 Withholding; Unemployment Taxes. To the extent
required by the law in effect at the time payments are made,
the Company shall withhold from payments made hereunder the
minimum taxes required to be withheld by the Federal or any
state or local government.
4.10 Lump Sum Payment With Penalty. Notwithstanding
any other provisions of the Plan, a Participant who's
receiving payments under the Plan may elect at any time to
receive an immediate lump sum payment of all or part of the
vested balance of his account, reduced by a penalty, which
shall be forfeited to the Company, equal to ten percent
(10%) of the amount withdrawn from such account, in lieu of
payments in accordance with the form previously elected by
the Participant.
ARTICLE 5. ADMINISTRATION
5.1 Administrative Committee. This Plan shall be
administered by the committee appointed to administer the
Retirement Plan (the "Administrative Committee").
The interpretation and construction by the
Administrative Committee of any provisions of this Plan
shall be final unless otherwise determined by the Board of
Directors. Subject to the Board, the Administrative
Committee is authorized to interpret the Plan, to prescribe,
amend, and rescind rules and regulations relating to it, and
to make all other determinations necessary for its
administration.
Without limiting the generality of the foregoing,
the Administrative Committee shall have the authority to
calculate amounts allocable to Participants, and to maintain
and adjust accounts. The Administrative Committee shall
have authority to delegate responsibility for performance of
ministerial functions necessary for administration of the
Plan to such officers of the Employer, including
Participants, as the Administrative Committee shall in its
discretion deem appropriate.
5.2 Uniform Rules. In administering the Plan, the
Administrative Committee will apply uniform rules to all
Participants similarly situated.
sr-plans\sup-ret 6
<PAGE>
5.3 Notice of Address. Any payment to a Participant
or Beneficiary, at the last known post office address
submitted to the Employer, shall constitute a complete
acquittance and discharge of the Employer and any director
or officer with respect thereto. Neither the Employer nor
any director or officer shall have any duty or obligation to
search for or ascertain the whereabouts of any Participant
or his Beneficiary.
5.4 Records. The records of the Administrative
Committee with respect to the Plan shall be conclusive on
all Participants, all Beneficiaries, and all other persons
whomsoever.
ARTICLE 6. AMENDMENT AND TERMINATION
6.1 Amendment and Termination. The Company expects
the Plan to be permanent, but since future conditions
affecting the Company cannot be anticipated or foreseen, the
Company must necessarily and does hereby reserve the right
to amend, modify, or terminate the Plan at any time by
action of its Board of Directors, except that no amendment
shall reduce the dollar amount credited to a Participant's
account.
6.2 Reorganization of Employer. In the event of a
merger or consolidation of the Employer, or the transfer of
substantially all of the assets of the Employer to another
corporation, such continuing, resulting or transferee
corporation shall have the right to continue and carry on
the Plan and to assume all liabilities of the Employer
hereunder without obtaining the consent of any Participant
or Beneficiary. If such successor shall assume the
liabilities of the Employer hereunder, then the Employer
shall be relieved of all such liability, and no Participant
or Beneficiary shall have the right to assert any claim
against the Employer for benefits under or in connection
with this Plan.
6.3 Protected Benefits. If the Plan is terminated or
amended so as to prevent further earnings adjustments, or if
liabilities accrued hereunder up to the date of an event
specified in section 6.2 are not assumed by the successor to
the Employer, then the dollar amount in the account of each
Participant or Beneficiary (whether or not vested) shall be
paid in cash to such Participant or Beneficiary no less
rapidly than in three equal annual installments beginning
with the year in which the amendment or termination is
adopted.
ARTICLE 7. GENERAL PROVISIONS
7.1 Nonassignability. Neither a Participant nor any
other person shall have any right to commute, sell, assign,
transfer, pledge, anticipate, mortgage or otherwise
encumber, hypothecate or convey in advance of actual receipt
the amounts, if any, payable hereunder, or any part thereof,
or interest therein which are, and all rights to which are,
expressly declared to be unassignable and non-transferable.
No part of the amounts payable shall, prior to actual
payment, be subject to seizure or sequestration for the
payment of any debts, judgments, alimony or separate
maintenance owed by a
sr-plans\sup-ret 7
<PAGE>
Participant or any other person, nor be transferable by
operation of law in the event of a Participant's or any
other person's bankruptcy or insolvency.
7.2 Employment Rights. The establishment of the Plan
shall not be construed as conferring any legal rights upon
any Participant or any other person for a continuation of
employment, nor shall it interfere with the rights of the
Employer to discharge any person or treat him without regard
to the effect which such treatment might have upon him under
this Plan.
7.3 Illegality of Particular Provision. If any
particular provision of this Plan shall be found to be
illegal or unenforceable, such provision shall not affect
any other provision, but the Plan shall be construed in all
respects as if such invalid provision were omitted.
7.4 Applicable Laws. The Plan shall be governed by
and construed according to the laws of the State of
California.
ARTICLE 8. BENEFICIARY DESIGNATION
8.1 Designation of Beneficiary. Each Participant
shall have the right, at any time, to designate any person
or persons as the Beneficiary to whom payment under this
Plan shall be made in the event of the Participant's death
prior to complete distribution to the Participant of the
benefits due under the Plan. Each Beneficiary designation
shall become effective only when filed in writing with the
Administrative Committee during the Participant's lifetime
on a form prescribed by the Administrative Committee. The
filing of a new Beneficiary designation form will cancel any
inconsistent Beneficiary designation previously filed.
If a Participant fails to designate a Beneficiary
as provided above, or if all designated Beneficiaries
predecease the Participant or die prior to complete
distribution of the Participant's benefits, such benefits
shall be paid in accordance with the Participant's
Beneficiary designation under the Company's Retirement Plan,
and if there is no such valid Beneficiary designation, to
the Participant's then surviving spouse, or, if none, to the
Participant's estate, until directed otherwise by the court
that has jurisdiction over the assets belonging to the
Participant's probate estate.
This amended and restated Plan shall be effective as of
January 1, 1996, and shall supersede and replace the prior
Plan which was originally effective on January 1, 1986, and
was amended effective as of January 1, 1989.
sr-plans\sup-ret 8
<PAGE>
Executed on February 29, 1996, in the City and County
of Los Angeles, State of California.
OCCIDENTAL PETROLEUM CORPORATION
By: Richard W. Hallock
--------------------------
Richard W. Hallock
Executive Vice President -
Human Resources
sr-plans\sup-ret 9
OCCIDENTAL PETROLEUM CORPORATION
SENIOR EXECUTIVE
SURVIVOR BENEFIT PLAN
_______________________________
(EFFECTIVE AS OF JANUARY 1, 1986,
AS AMENDED AND RESTATED EFFECTIVE AS OF JANUARY 1, 1996)
<PAGE>
TABLE OF CONTENTS
Page
----
A. PURPOSE...................................................1
B. ERISA PLAN................................................1
C. PARTICIPATION
1. Selection by Company Management........................1
2. Election Not to Participate............................1
3. Insurability...........................................2
4. Addition and Removal of Participants...................2
5. Relation to Other Plans................................2
D. ASSIGNMENT................................................2
E. INSURANCE BENEFITS WHILE EMPLOYED
1. Amount of Insurance....................................2
2. Executive's Cash Surrender Value While Employed........3
3. Payment of Premiums....................................3
4. Policy Ownership.......................................3
5. Policy Loans...........................................3
F. INSURANCE BENEFITS AFTER APPROVED RETIREMENT
1. Amount of Insurance....................................4
2. Cash Surrender Value...................................5
3. Continuation of Policy.................................5
4. Policy Loans...........................................5
G. INSURANCE BENEFITS ON TERMINATION OF EMPLOYMENT
OTHER THAN ON APPROVED RETIREMENT
1. Transfer of Policy to the Company......................5
2. Optional Purchase of Insurance.........................6
H. OPTION TO PURCHASE POLICY UPON OCCURRENCE OF
CERTAIN EVENTS
1. Option to Purchase Policy from Company.................6
2. Events Which Give Executive Right to Purchase Policy...7
I. WITHHOLDING...............................................7
J. ADMINISTRATION OF THE PLAN
1. In General.............................................7
2. Elections and Notices..................................8
sr-plans\survivor i
<PAGE>
Page
----
K. AMENDMENT OR TERMINATION OF THE PLAN.....................8
L. BENEFICIARY DESIGNATION..................................8
M. DEFINITIONS..............................................8
N. MISCELLANEOUS
1. Employment Not Guaranteed............................10
2. Protective Provisions................................10
3. Gender, Singular or Plural...........................11
4. Captions.............................................11
5. Validity.............................................11
6. Notice...............................................11
7. Applicable Law.......................................11
8. Notice to Insurance Company..........................11
sr-plans\survivor ii
<PAGE>
OCCIDENTAL PETROLEUM CORPORATION
SENIOR EXECUTIVE
SURVIVOR BENEFIT PLAN
(Effective as of January 1, 1986,
as Amended and Restated Effective as of January 1, 1996)
A. PURPOSE
This Plan replaces a portion of the life insurance
coverage previously provided for senior executives under the
Occidental Petroleum Corporation Group Life Insurance Plan.
B. ERISA PLAN
This Plan is covered by Title I of ERISA as a welfare
benefit plan. The Company is the "named fiduciary" of the
Plan.
C. PARTICIPATION
1. Selection by Company Management
-------------------------------
Any senior executive or managerial employee who is
selected for participation by Company Management shall
become a Participant as of the later of January 1, 1986, or
the first day of the month following the month in which his
participation is approved by Company Management.
Participation in the Plan shall be limited to those
Executives of the Company who are selected by Company
Management. The Company and Executive shall enter into an
Insurance Agreement to evidence the Executive's
participation in the Plan.
2. Election Not to Participate
---------------------------
An Executive may elect not to participate in this
Plan at any time; such election shall be in writing, and
shall become effective upon its receipt by the
Administrator. No compensation or benefits in lieu of this
Plan shall be paid to an Executive who elects not to
participate. An election not to participate shall be
irrevocable unless otherwise determined by the
Administrator.
An Executive's failure to pay when due any premium
which he is required to pay under the terms of this Plan,
unless paid within 30 days after written notice thereof from
the Administrator, shall be deemed to be an election by the
Executive not to participate further in this Plan. The
Company may elect, within 90 days after receiving notice of
the occurrence of any such event, to purchase the
Executive's ownership interest
sr-plans\survivor
<PAGE>
in the policy or policies on the life of the Executive for
an amount equal to the Executive's cash surrender value with
respect to the policy or policies as provided in Sections
E,2 or F,2.
3. Insurability
------------
Executives selected by Company Management are not
automatically entitled to the insurance benefits provided
under this Plan. Each Executive must satisfy the
requirements for insurability of the insurer selected by the
Company before he becomes covered by insurance under this
Plan.
4. Addition and Removal of Participants
------------------------------------
Company Management may, at its discretion and at
any time, designate additional Executives to participate in
the Plan and remove Executives from participation in the
Plan. When an Executive ceases participation, he shall be
treated, solely for purposes of this Plan, as if he had
terminated his employment with the Company for reasons other
than Approved Retirement, under Section G.
5. Relation to Other Plans
-----------------------
If an Executive participates in this Plan, his
life insurance coverage under the Occidental Petroleum
Corporation Group Life Insurance Plan shall be limited to
non-contributory coverage of $50,000.
D. ASSIGNMENT
The Executive may assign to one or more individuals or
trustees all or any part of his right, title, claim,
interest, benefit and all other incidents of ownership which
he may have in any life insurance under this Plan. Such
assignee shall then have all rights and obligations which
have been assigned and otherwise are the Executive's under
this Plan. In the event that there has been such an
assignment, the term Executive shall mean the Executive's
assignee (or any subsequent assignee) as the context
requires, in connection with ownership, actions, elections,
or other events concerning life insurance on the Executive.
E. INSURANCE BENEFITS WHILE EMPLOYED
1. Amount of Insurance
-------------------
The amount of insurance provided under this Plan
on the life of each Executive while he is employed by the
Company shall be three times the highest Annual Base Salary
of the Executive minus $50,000. At its discretion and at
any time, however, the Board may specify a lower amount of
insurance for Executives. The Executive shall have the
incidents of ownership in such insurance provided in Section
E,4.
sr-plans\survivor 2
<PAGE>
2. Executive's Cash Surrender Value While Employed
-----------------------------------------------
While the Executive is employed by the Company, he
shall have an interest in the cash surrender value with
respect to insurance under this Plan in an amount not less
than the aggregate premiums paid by the Executive for
insurance under this Plan. However, an Executive who has
less than five (5) Years of Service when he terminates
employment with the Company shall not have any interest in
the cash surrender value with respect to any insurance under
this Plan.
3. Payment of Premiums
-------------------
The Executive shall pay the premiums for the
amount of insurance provided under this Plan on the life of
the Executive under Section E,1 at the rates set forth in
Exhibit "A" hereto. The Company reserves the right to amend
Exhibit "A" to revise the rates for this insurance coverage.
The Executive's premium payment shall be made annually or
more frequently on demand by the Company. The Company shall
pay the balance of the premiums for insurance under this
Plan.
4. Policy Ownership
----------------
To provide the insurance benefits under this Plan,
the Company shall acquire one or more permanent insurance
policies on the life of each participating Executive who
satisfies the insurer's requirements for insurability. The
ownership of each policy shall be divided between the
Company and the Executive. The Executive shall possess all
incidents of ownership in the death benefits under the
policy or policies in an amount equal to the amount of the
death benefits provided to the Executive under this Plan,
and the Company shall possess all other incidents of
ownership in the death benefits under the policy or
policies. The Executive shall have the right to designate
the beneficiary to whom death benefits are payable under
each insurance policy, to the extent of his ownership of the
death benefit under the policy; the remainder of any death
benefits shall be payable to the Company or its designated
beneficiary, unless the Company claims a lesser amount.
5. Policy Loans
------------
The rights of the Executive and the Company to
borrow from any policy or policies under this Plan while the
Executive is employed by the Company shall be as follows:
a. The Executive shall have no right to borrow
from any policy while he is employed by the Company, except
that the Executive may borrow any amount not in excess of
the total cash surrender value of any policy at any time
when he has the right to purchase the policy pursuant to
Section H,2 or is permitted to borrow under Section E,5,e.
sr-plans\survivor 3
<PAGE>
b. The Company shall not be permitted to borrow
from any policy during four of the first seven years after
such policy is placed in force.
c. The Company shall have the right to borrow
from any policy an amount equal to the Company's premium on
such policy during three of the first seven years after such
policy is placed in force.
d. At any time after the seventh anniversary
date of any policy, the Company shall have the annual right
to borrow an amount equal to the Company's annual premium on
such policy plus an amount equal to the Company's after-tax
cost of the annual interest charges for loans on such policy
("Interest Loans"). The annual amount of Interest Loan
shall be an amount equal to (A) the total interest on loans
on such policy that is payable for the year in question
multiplied times (B) the number one minus the Company's top
marginal combined federal and state income tax brackets,
giving effect to any federal tax deduction allowable for the
state income taxes payable by the Company ("Combined
Bracket"). For example, in the event state taxes continue
to be deductible for federal income tax purposes, the
formula for calculating the Combined Bracket in a given
policy year would be the sum of (C) the Company's top
marginal federal rate for that year plus (D) the product of
multiplying the Company's top marginal state rate for that
year times the result of subtracting the Company's top
marginal federal rate for that year from one. However, in
the event a federal tax deduction is not allowed for state
income taxes paid by the Company, the Combined Bracket in
such a policy year would be the sum of the Company's top
marginal federal rate for said year plus the Company's top
marginal state rate for that year. The annual determination
of the amount of Interest Loan shall be made in the Company
tax year that follows the year of the interest payment in
question immediately after the Company's federal and state
tax returns for the prior year have been prepared and filed.
e. The Company and Executive may borrow such
additional amounts from any policy as the Company and
Executive may hereafter agree upon.
F. INSURANCE BENEFITS AFTER APPROVED RETIREMENT
1. Amount of Insurance
-------------------
The amount of insurance provided under this Plan
on the life of each Executive who retires pursuant to an
Approved Retirement shall be the lesser of (i) one times his
highest Annual Base Salary or (ii) $1,000,000. An Executive
who has made premium payments for less than five years at
the time of his Approved Retirement will be required to
continue to make premium payments on this amount of
insurance for the balance of such five year period. The
remaining aggregate death benefits under the insurance
policy or policies on the life of the Executive shall be
retained by the Company.
sr-plans\survivor 4
<PAGE>
2. Cash Surrender Value
--------------------
On the Executive's Approved Retirement, the
Executive shall continue to have an ownership interest in
the cash surrender value (net of outstanding policy loans)
of the policy or policies on the life of the Executive of
not less than the aggregate premiums paid by the Executive
pursuant to Section E,3.
3. Continuation of Policy
----------------------
The life insurance coverage for the Executive will
continue after his Approved Retirement in the same form and
subject to the same terms and provisions of this Plan as if
he remained employed with the Company except that the total
amount of coverage for the Executive shall not exceed the
amount specified in Section F,1. The Company agrees to
maintain in force and pay the premiums on the policy or
policies, except for any premiums which the Executive is
required to pay under Section F,1.
4. Policy Loans
------------
The rights of the Executive and the Company to
borrow from any policy or policies under this Plan after an
Executive's Approved Retirement shall be as follows:
a. The Executive shall have no right to borrow
from any policy, except that the Executive may borrow any
amount not in excess of the total cash surrender value of
any policy at any time when he has the right to purchase the
policy pursuant to Section H,2 or is permitted to borrow
under Section E,5,e.
b. The Company shall continue to have the rights
and be subject to the restrictions with respect to policy
loans contained in Section E,5,b, c, d and e.
c. The Company shall be permitted to borrow
additional amounts from any policy on the life of the
Executive, once every three years, commencing three years
after the Executive's Approved Retirement and every three
years thereafter, not to exceed 25% of the total gross cash
value available in the policy at the time of any such loan.
d. The Company shall also be permitted to borrow
any excess of the cash surrender value under any policy over
the minimum cash surrender value which is owned by the
Executive under Section F,2 at any time after it has paid
all amounts owed to the Executive which are described in
Section H,2,d.
G. INSURANCE BENEFITS ON TERMINATION OF EMPLOYMENT OTHER
THAN ON APPROVED RETIREMENT
1. Transfer of Policy to the Company
---------------------------------
If an Executive terminates his employment with the
Company for reasons other than an Approved Retirement, the
Executive shall transfer to the Company the
sr-plans\survivor 5
<PAGE>
portion of the policy or policies on his life which he owns
under this Plan, effective as of his termination of
employment. In exchange, if the Executive has completed at
least five (5) Years of Service, he shall receive from the
Company, not later than 90 days after receipt by the
Administrator of executed documents properly evidencing such
transfer, cash equal to the minimum cash surrender value (if
any) provided for the Executive in Section E,2. A
termination of employment on account of Disability shall be
treated in the same manner as any other termination of
employment.
2. Optional Purchase of Insurance
------------------------------
An Executive who has completed at least five (5)
Years of Service when he terminates employment with the
Company may elect, in writing received by the Administrator
not later than 90 days after his termination of employment,
to acquire the existing insurance policy or policies on his
life with aggregate death benefits in an amount equal to the
lesser of (i) one times the highest Annual Base Salary of
the Executive minus $50,000 or (ii) $1,000,000. Such
insurance policy or policies shall not have any cash
surrender value when received by the Executive or may have
the minimum cash surrender value (if any) provided for the
Executive in Section E,2 in lieu of the cash payment to the
Executive pursuant to Section G,1. Such insurance policy or
policies shall require the continuation of premium payments
by the Executive at the rates established in the policy or
policies based on the Executive's age at the time of his
initial entry into the Plan.
An Executive who has less than five (5) Years of
Service when he terminates employment with the Company may
elect, in writing received by the Administrator not later
than 90 days after his termination of employment, to acquire
a new permanent insurance policy or policies on his life
issued at his attained age upon termination of employment
without providing evidence of insurability with aggregate
death benefits in an amount equal to the lesser of (i) one
times his highest Annual Base Salary minus $50,000 or (ii)
$1,000,000. Such insurance policy or policies shall not
have any cash surrender value. The Executive will be
required to make premium payments under such policy or
policies at the rates established by the insurance company
for newly issued policies based on the Executive's attained
age at the time of his termination of employment.
H. OPTION TO PURCHASE POLICY UPON OCCURRENCE OF CERTAIN
EVENTS
1. Option to Purchase Policy from Company
--------------------------------------
The Executive may elect, in writing at any time
after receiving notice of the occurrence of any event
specified in Section H,2, to purchase from the Company any
or all of the insurance policies on his life which are held
by the Company under this Plan. The purchase price shall be
equal to the aggregate premiums paid by the Company (net of
outstanding loans).
sr-plans\survivor 6
<PAGE>
2. Events Which Give Executive Right to Purchase Policy
----------------------------------------------------
The Executive shall be entitled to purchase any or
all of the insurance policies on his life which are held by
the Company under this Plan pursuant to Section H,1 upon the
occurrence of any of the following events, unless such event
is corrected by the Company not later than 10 days following
its receipt of the Executive's written notice electing to
purchase any such policies:
(a) the Company's failure to pay when due any
premium which it is required to pay under the terms of this
Plan;
(b) the Company's failure to pay when due any
interest charge which is attributable to its loans under the
insurance policies;
(c) the Company's attempt to surrender or cancel
the insurance policy or policies; or
(d) the Company's failure to pay when due any
amounts owed to the Executive that arise by virtue of the
Executive's employment with the Company, other than medical
disability, death and other welfare benefits.
I. WITHHOLDING
The Executive and any beneficiary shall make
appropriate arrangements with the Company for the
satisfaction of any federal, state or local income tax
withholding requirements and Social Security or other
employee tax requirements applicable to the provision of
benefits under this Plan. If no other arrangements are
made, the Company may provide, at its discretion, for such
withholding and tax payments as may be required.
J. ADMINISTRATION OF THE PLAN
1. In General
----------
An administrative committee shall be appointed by
the Company's Chief Executive Officer as the Administrator
to administer the Plan and establish, adopt, or revise such
rules and regulations as the administrative committee may
deem necessary or advisable for the administration of the
Plan and to interpret the provisions of the Plan, and,
except as otherwise indicated herein, any such
interpretations shall be conclusive. All decisions of the
administrative committee shall be by vote of at least two of
the committee members and shall be final. Members of the
administrative committee shall be eligible to participate in
the Plan while serving as members of the administrative
committee, but a member of the administrative committee
shall not vote or act upon any matter which relates solely
to such member's interest in the Plan as a participant.
sr-plans\survivor 7
<PAGE>
2. Elections and Notices
---------------------
All elections and notices made by any Executive
under this Plan shall be in writing and filed with the
Administrator.
K. AMENDMENT OR TERMINATION OF THE PLAN
The Company may at any time amend, alter, modify or
terminate the Plan. Such action shall not affect the right
of any Executive existing before the action; however, the
Company is not obligated to continue any benefit, any
insurance or any insurance policy after such action.
Notwithstanding the foregoing or any other provision of this
Plan, the Company may not in any manner act to reduce the
Executive's interest (other than in death benefits) in any
insurance policy under this Plan or change the Executive's
right to purchase any insurance policy or the events which
give the Executive the right to purchase such policy, as
specified in Section H,1 and 2, unless the Executive
consents thereto in writing.
L. BENEFICIARY DESIGNATION
The Executive shall have the right, at any time, to
designate any person or persons as the beneficiary to whom
payment under this Plan shall be made in the event of the
Executive's death. Each beneficiary designation shall
become effective only when filed in writing with the
Administrator during the Executive's lifetime on a form
prescribed by the Administrator. The filing of a new
beneficiary designation form will cancel any inconsistent
beneficiary designation previously filed.
If an Executive fails to designate a beneficiary as
provided above, or if all designated beneficiaries
predecease the Executive, the Executive's death benefits
shall be paid in accordance with the Executive's beneficiary
designation under the Company's Retirement Plan, and if
there is no such valid beneficiary designation, to the
Executive's then surviving spouse, or, if none, to the
Executive's estate, until directed otherwise by the court
that has jurisdiction over the assets belonging to the
Executive's probate estate.
M. DEFINITIONS
For the purposes of the Plan, the following terms shall
have the meanings indicated:
1. "Administrator" means the administrative committee
specified in Section J.
2. "Affiliate" means any corporation which is
controlled by or under common control with Occidental
Petroleum Corporation.
3. "Annual Base Salary" means an Executive's highest
annual fixed salary, excluding Bonus, all severance
allowances, forms of incentive compensation, any
sr-plans\survivor 8
<PAGE>
Savings Plan or qualified plan contributions made by the
Company or benefits, retainers, insurance premiums or
benefits, reimbursements, and all other payments, prior to
reduction for any deferrals of base salary under the
Company's Senior Executive Deferred Compensation Plan, 1988
Deferred Compensation Plan, Savings Plan or any other
qualified or non-qualified deferred compensation plan or
agreement.
4. "Approved Retirement" means any termination of
employment with the Company after attainment of age 55 and
completion of five (5) Years of Service.
5. "Beneficiary" means the person or persons
designated as such in accordance with Section L.
6. "Board" means the Board of Directors of Occidental
Petroleum Corporation.
7. "Bonus" means that bonus paid to an Executive
during the Year in question prior to reduction for any
deferral under the Company's Senior Executive Deferred
Compensation Plan, 1988 Deferred Compensation Plan, Savings
Plan or any other qualified or non-qualified deferred
compensation plan or agreement.
8. "Company" means Occidental Petroleum Corporation,
or any successor thereto, and any Affiliates.
9. "Company Management" means the Chairman of the
Board, Chief Executive Officer and President or Executive
Vice President of Human Resources.
10. "Disability" means a condition that qualifies as a
disability under the Company's Retirement Plan and which has
continued for more than six (6) months and has been approved
by the Administrator.
11. "ERISA" means the Employee Retirement Income
Security Act of 1974, as amended.
12. "Executive" means a senior executive of the
Company selected by Company Management to participate in
this Plan pursuant to Section C.
13. "Insurance Agreement" means the insurance
agreement entered into by the Company and an Executive to
evidence the Executive's participation in this Plan.
14. "Retirement Plan" means the OCCIDENTAL PETROLEUM
CORPORATION RETIREMENT PLAN effective June 1, 1983 and as
amended from time to time thereafter.
15. "Savings Plan" means the OCCIDENTAL PETROLEUM
CORPORATION SAVINGS PLAN, as amended from time to time.
sr-plans\survivor 9
<PAGE>
16. "Senior Executive Deferred Compensation Plan"
means the OCCIDENTAL PETROLEUM CORPORATION SENIOR EXECUTIVE
DEFERRED COMPENSATION PLAN effective January 1, 1986 and as
amended from time to time thereafter.
17. "Service" means the period of time during which an
employment relationship exists between an Executive and the
Company, including the period of time such relationship
existed prior to the time when the Executive became a
participant in this Plan.
18. "Years of Service" means the number of full years
credited to an Executive under the Retirement Plan for
vesting purposes.
19. "1988 Deferred Compensation Plan" means the
OCCIDENTAL PETROLEUM CORPORATION 1988 DEFERRED COMPENSATION
PLAN, as amended from time to time.
N. MISCELLANEOUS
1. Employment Not Guaranteed
-------------------------
Nothing contained in this Plan nor any action
taken hereunder shall be construed as a contract of
employment or as giving any Executive any right to be
retained in the employ of the Company. Accordingly, subject
to the terms of any written employment agreement to the
contrary, the Company shall have the right to terminate or
change the terms of employment of an Executive at any time
and for any reason whatsoever, with or without cause.
2. Protective Provisions
---------------------
Each Executive shall cooperate with the Company by
furnishing any and all information requested by the Company
in order to facilitate the payment of benefits hereunder,
taking such physical examinations as the Company may deem
necessary and taking such other relevant action as may be
requested by the Company. If an Executive refuses to so
cooperate, the Company shall have no further obligation to
the Executive under the Plan. If an Executive commits
suicide during the first two years following his
participation in the Plan, or if an Executive makes any
material misstatement of information or nondisclosure of
medical history, then no benefits will be payable hereunder
to such Executive or his beneficiary, provided, that in the
Company's sole discretion, benefits may be payable in an
amount reduced to compensate the Company for any loss, cost,
damage or expense suffered or incurred by the Company as a
result in any way of such misstatement or nondisclosure.
sr-plans\survivor 10
<PAGE>
3. Gender, Singular & Plural
-------------------------
All pronouns and any variations thereof shall be
deemed to refer to the masculine or feminine as the identity
of the person or persons may require. As the context may
require, the singular may be read as the plural and the
plural as the singular.
4. Captions
--------
The captions of the articles, sections, and
paragraphs of the Plan are for convenience only and shall
not control or affect the meaning or construction of any of
its provisions.
5. Validity
--------
In the event any provision of this Plan is held
invalid, void, or unenforceable, the same shall not affect,
in any respect whatsoever, the validity of any other
provision of this Plan.
6. Notice
------
Any notice or filing required or permitted to be
given to the Administrator under the Plan shall be
sufficient if in writing and hand delivered, or sent by
registered or certified mail, to the principal office of the
Company, directed to the attention of the President of the
Company. Such notice shall be deemed given as to the date
of delivery or, if delivery is made by mail, as of the date
shown on the postmark on the receipt for registration or
certification.
7. Applicable Law
--------------
The Plan shall be governed and construed in
accordance with the laws of the State of California.
8. Notice to Insurance Company
---------------------------
The Company shall be responsible for notifying the
insurance company which issues any policy or policies under
this Plan of any changes in the ownership rights and
interests of the Executive and the Company and of any
changes in their respective beneficiaries to receive death
benefits under the Plan, and the insurance company shall be
entitled to rely upon such notification received from the
Company.
This amended and restated Plan shall be effective as of
January 1, 1996, and shall supersede and replace the prior
Plan which was originally effective on January 1, 1986, and
was amended effective as of January 1, 1990.
sr-plans\survivor 11
<PAGE>
Executed on February 29, 1996, in the City and County
of Los Angeles, State of California.
OCCIDENTAL PETROLEUM CORPORATION
By: Richard W. Hallock
--------------------------
Richard W. Hallock
Executive Vice President -
Human Resources
sr-plans\survivor 12
<PAGE>
EXHIBIT A
TO
OCCIDENTAL PETROLEUM CORPORATION
SENIOR EXECUTIVE SURVIVOR BENEFIT PLAN
(Effective as of January 1, 1986)
ANNUAL RATES PER $1,000 OF INSURANCE ON LIFE OF EXECUTIVE
---------------------------------------------------------
Age at Entry Premium Paid
of Executive By Executive
------------ ------------
Under 30 $ .24
30-34 $ .27
35-39 $ .33
40-44 $ .51
45-49 $ .87
50-54 $1.44
55-59 $2.25
60 and over $3.51
sr-plans\survivor
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 11
OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(Amounts in thousands, except per-share amounts)
EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE 1995 1994 1993
- --------------------------------------------------------- --------- --------- ---------
<S> <C> <C> <C>
Applicable to common shares:
Income(loss) from continuing operations $ 418,260 $(111,256) $ 35,375
Discontinued operations, net -- -- 221,100
Extraordinary gain(loss), net -- (176) (12,328)
--------- --------- ---------
Earnings(loss) applicable to common stock $ 418,260 $(111,432) $ 244,147
========= ========= =========
Common shares outstanding at beginning of period 316,853 305,603 303,728
Issuance of common shares, weighted average 1,025 5,258 1,130
Conversions, weighted average options exercised and other 260 13 24
Repurchase of common shares (65) (68) (30)
Effect of assumed exercises
Dilutive effect of exercise of options outstanding and
other 158 30 46
--------- --------- ---------
Weighted average common stock and common stock
equivalents 318,231 310,836 304,898
========= ========= =========
Primary earnings per share:
Income(loss) from continuing operations $ 1.3143 $ (.3579) $ .1160
Discontinued operations, net -- -- .7252
Extraordinary gain(loss), net -- (.0006) (.0404)
--------- --------- ---------
Earnings(loss) per common and common equivalent
share $ 1.3143 $ (.3585) $ .8008
========= ========= =========
$ 1.31 $ (.36) $ .80
========= ========= =========
FULLY DILUTED EARNINGS PER SHARE
- ---------------------------------------------------------
Earnings(loss) applicable to common stock $ 418,260 $(111,432) $ 244,147
Dividends applicable to dilutive preferred stock:
$3.00 preferred stock(a) 34,165 -- --
--------- --------- ---------
$ 452,425 $(111,432) $ 244,147
========= ========= =========
Common shares outstanding at beginning of period 316,853 305,603 303,728
Issuance of common shares, weighted average 1,025 5,258 1,130
Conversions, weighted average options exercised and other 260 13 24
Repurchase of common shares (65) (68) (30)
Effect of assumed conversions and exercises
Dilutive effect of assumed conversion of preferred
stock:
$3.00 preferred stock(a) 30,566 -- --
Dilutive effect of exercise of options outstanding and
other 212 40 55
--------- --------- ---------
Total for computation of fully diluted earnings per share 348,851 310,846 304,907
========= ========= =========
Fully diluted earnings per share:
Income(loss) from continuing operations $ 1.2969 $ (.3579) $ .1160
Discontinued operations, net -- -- .7251
Extraordinary gain(loss), net -- (.0006) (.0404)
--------- --------- ---------
Fully diluted earnings(loss) per share $ 1.2969 $ (.3585) $ .8007
========= ========= =========
$ 1.30 $ (.36) $ .80
========= ========= =========
- --------------------------
(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
FOR THE FIVE YEARS ENDED DECEMBER 31, 1995
(Amounts in millions, except ratios)
1995 1994 1993 1992 1991
- ------------------------------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Income(loss) from continuing
operations(a) $ 478 $ (46) $ 80 $ 131 $ 374
------ ------ ------ ------ ------
Add:
Provision(benefit) for taxes on
income (other than foreign oil
and gas taxes) 244 50 204 114 343
Interest and debt expense(b) 592 594 601 666 880
Portion of lease rentals
representative of the interest
factor 48 55 53 56 57
Preferred dividends to minority
stockholders of subsidiaries(c) -- -- -- 7 11
------ ------ ------ ------ ------
884 699 858 843 1,291
------ ------ ------ ------ ------
Earnings(loss) before fixed charges $1,362 $ 653 $ 938 $ 974 $1,665
====== ====== ====== ====== ======
Fixed charges
Interest and debt expense
including capitalized
interest(b) $ 602 $ 599 $ 612 $ 685 $ 912
Portion of lease rentals
representative of the interest
factor 48 55 53 56 57
Preferred dividends to minority
stockholders of subsidiaries(c) -- -- -- 7 11
------ ------ ------ ------ ------
Total fixed charges $ 650 $ 654 $ 665 $ 748 $ 980
====== ====== ====== ====== ======
Ratio of earnings to fixed charges 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>
<PAGE>
<TABLE>
<CAPTION>
FIVE-YEAR SUMMARY OF SELECTED FINANCIAL DATA Occidental Petroleum Corporation
Dollar amounts in millions, except per-share amounts and Subsidiaries
For the years ended December 31, 1995 1994 1993 1992 1991
============================================== ========= ========= ========= ========= =========
<S> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS
Net sales and operating revenues $ 10,423 $ 9,236 $ 8,116 $ 8,494 $ 9,498
Income(loss) from continuing operations $ 511 $ (36) $ 74 $ 126 $ 372
Net income(loss) $ 511 $ (36) $ 283 $ (591) $ 460
Preferred dividend requirements $ 93 $ 76 $ 39 $ 3 $ 7
Earnings(loss) applicable to common stock $ 418 $ (112) $ 244 $ (594) $ 453
Earnings(loss) per common share from
continuing operations $ 1.31 $ (.36) $ .12 $ .41 $ 1.22
Primary earnings(loss) per common share $ 1.31 $ (.36) $ .80 $ (1.97) $ 1.52
Fully diluted earnings(loss) per share $ 1.30 $ (.36) $ .80 $ (1.97) $ 1.52
FINANCIAL POSITION
Total assets $ 17,815 $ 17,989 $ 17,123 $ 17,877 $ 15,763
Senior funded debt, net $ 4,819 $ 5,823 $ 5,728 $ 5,452 $ 5,478
Capital lease liabilities, net $ 259 $ 291 $ 319 $ 354 $ 379
Stockholders' equity $ 4,630 $ 4,457 $ 3,958 $ 3,440 $ 4,340
Common dividends declared per share $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
AVERAGE SHARES OUTSTANDING (THOUSANDS) 318,231 310,836 304,898 302,017 298,548
- ---------------------------------------------- --------- --------- --------- --------- ---------
See Management's Discussion and Analysis and the Notes to Consolidated Financial Statements for information
regarding accounting changes, asset dispositions and charges for reorganization, litigation matters,
environmental remediation and other costs and other special items affecting comparability.
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
1995 BUSINESS ENVIRONMENT Worldwide crude markets in 1995 experienced
moderate price increases on average versus those of a year earlier. The increase
of a little over $1 per barrel was accompanied by less volatility relative to a
year ago. This price growth and reduced volatility enhanced financial
performance throughout the industry.
While political unrest and instability in certain major oil producing
regions continue to have short-term market impact, good supply-and-demand
fundamentals had the most influence on price improvements. These fundamentals
were largely influenced by continuing economic growth, especially in the Far
East. In addition, OPEC production only moderately exceeded the
organization's existing quotas. Prices rose generally during the first half
of 1995 but dropped during the third quarter. In their late 1995 meeting,
OPEC decided to roll over the existing quotas of 24.5 million barrels of oil
per day. This, and the return to more normal demand for the 1995-96 winter
season, added to price gains throughout the fourth quarter. OPEC member
countries' production in excess of agreed quotas has not significantly
affected crude oil prices.
Of additional significance is the continuing strength in heavier
petroleum product markets such as fuel oil. This strength, coupled with
changing global crude oil supply qualities, has provided an even stronger
boost to heavier crude oil prices relative to the lighter, benchmark West
Texas Intermediate (WTI) and Brent crudes. Occidental's global crude oil
production portfolio, being moderately heavier than these benchmark crudes,
has benefited from this market development and should continue to do so as
long as the fundamentals remain unchanged.
Natural gas prices were relatively weak during the first half of 1995
due to a mild 1994-95 winter heating season and the resulting higher storage
inventories at the end of the season. Unusually warm weather during the
summer, however, caused an increase in demand for gas by electric utilities
and an increase in gas prices by late summer. Because of this high summer
demand, storage inventories nationwide were below year-ago levels at the
beginning of the 1995-96 winter heating season. These low storage
inventories, combined with unusually cold weather in November and December,
caused gas prices to increase significantly by year-end. The sharp increase
in winter demand also drove prices up in the first quarter of 1996. The
average gas price for 1996 consequently is expected to remain higher than
1995, bolstered in part by the need to raise low storage inventory levels.
Since trading in natural gas futures began in 1990, the volume of
natural gas traded on the NYMEX has grown to be approximately four times
greater than the actual amount of gas delivered to pipelines. This winter,
NYMEX natural gas futures attained an all-time high price and natural gas
price volatility was the greatest of all U.S.-traded commodities.
Although overall demand for natural gas has been increasing and is in
relative balance with supply, gas prices can be significantly affected by
short-term fundamentals such as weather, inventory levels, competing fuel
prices, availability of transport capacity and supply disruptions.
21
<PAGE>
The interstate natural gas pipeline industry completed its second year of
operation under Federal Energy Regulatory Commission (FERC) Order 636. As a
result, interstate pipelines no longer are marketers of natural gas but
instead provide transportation and storage services. The sale of natural gas
to local distribution companies and end users has shifted to producers and
nonregulated marketing companies, including interstate pipeline affiliates.
Local gas distribution and electric utility companies also are beginning to
face similar regulatory requirements, at both the federal and state level, to
unbundle their services. This is creating new opportunities for marketers of
both gas and electricity.
1995 marked a year of higher earnings for the U.S. chemical industry.
Strong demand growth in the first half of 1995 contributed to increases in
both prices and margins. Demand for OxyChem products increased due to the
strengthening of the U.S. and other economies and from strong recoveries in
such key and end-use markets as construction, automotive, pulp and paper, and
aluminum. A succession of caustic soda price increases in 1994 brought
chlor-alkali margins overall to historic highs in 1995. Prices for ethylene
and ethylene coproducts, such as propylene, continued to improve during the
first half of 1995 due to short supplies. Polyvinyl chloride (PVC) demand
continued to grow at strong rates in the first half of 1995, which was
reflected in improved selling prices.
During the last half of 1995, however, prices for PVC and petrochemical
products fell mainly due to a slowing of exports, primarily because China
reduced its purchases in the world market, resulting in reduced margins. It
is expected that demand will improve as China returns to the world market
during 1996. PVC and petrochemical prices are expected to stabilize in the
first half of 1996, with prices increasing in the second half of 1996.
1995 INCOME SUMMARY Occidental reported net income of $511 million ($1.31 per
share) in 1995, on net sales and operating revenues of $10.4 billion. Before the
after-tax effect of the special items listed below, earnings were $623 million.
Net income included pretax charges of $132 million for the previously announced
reorganizations of the oil and gas and natural gas transmission divisions and
$109 million for the settlement of litigation, partially offset by a gain of $40
million from the sale of Occidental's PVC facility at Addis, Louisiana.
DIVISIONAL OPERATIONS The following discussion of each of Occidental's three
operating divisions and corporate items should be read in conjunction with Note
17 to the Consolidated Financial Statements.
Divisional earnings exclude interest income, interest expense,
unallocated corporate expenses, discontinued operations, extraordinary items
and income from equity investments, but include gains from dispositions of
divisional assets.
Foreign income and other taxes and certain state taxes are included in
divisional earnings on the basis of operating results. U.S. federal income
taxes are not allocated to divisions except for amounts in lieu thereof that
represent the tax effect of operating charges or credits resulting from
purchase accounting adjustments which arise due to the implementation in 1992
of Statement of Financial Accounting Standards (SFAS) No. 109--"Accounting
for Income Taxes." Divisional earnings in 1995 benefited by $91 million from
credits allocated. This included credits of $16 million, $48 million and $27
million in oil and gas, natural gas transmission and chemical, respectively.
Divisional earnings in 1994 benefited by $91 million from net credits
allocated. This included credits of $18 million, $41 million and $32 million
in oil and gas, natural gas transmission and chemical, respectively.
Divisional earnings in 1993 benefited by $42 million from net credits
allocated. This included credits of $20 million and $38 million in oil and
gas and chemical, respectively, and a net charge of $16 million in natural
gas transmission.
The following table sets forth the sales and earnings of each operating
division and corporate items:
<TABLE>
<CAPTION>
DIVISIONAL OPERATIONS
In millions
Sales Earnings(Loss)
----------------------------------- -----------------------------------
For the years ended December 31, 1995 1994 1993 1995 1994 1993
=================================== ========= ========= ========= ========= ========= =========
<S> <C> <C> <C> <C> <C> <C>
Oil and gas $ 3,018 $ 2,451 $ 1,702 $ 45 $ 27 $ 278
Natural gas transmission 2,038 2,110 2,378 213 276 426
Chemical 5,370 4,677 4,042 1,080 350 173
Other (3) (2) (6) -- -- --
--------- --------- --------- --------- --------- ---------
$ 10,423 $ 9,236 $ 8,116 1,338 653 877
========= ========= =========
Unallocated corporate items
Interest expense, net (540) (564) (554)
Income taxes (295) (110) (186)
Other 8 (15) (63)
--------- --------- ---------
Income(loss) from continuing operations 511 (36) 74
Discontinued operations, net -- -- 221
Extraordinary gain(loss), net -- -- (12)
--------- --------- ---------
Net income(loss) $ 511 $ (36) $ 283
========================================================================= ========= ========= =========
</TABLE>
22
<PAGE>
OIL AND GAS
<TABLE>
<CAPTION>
1995 1994 1993
======================================== ========= ========= =========
<S> <C> <C> <C>
DIVISIONAL SALES (in millions) $ 3,018 $ 2,451 $ 1,702
DIVISIONAL EARNINGS (in millions) $ 45 $ 27 $ 278
AVERAGE SALES PRICES
CRUDE OIL PRICES (per barrel)
U.S. $ 15.61 $ 14.21 $ 15.54
Other Western Hemisphere $ 10.62 $ 10.19 $ 11.51
Eastern Hemisphere $ 14.47 $ 12.08 $ 11.41
GAS PRICES (per thousand cubic feet)
U.S. $ 1.51 $ 1.85 $ 1.98
Other Western Hemisphere $ -- $ 1.72 $ 1.80
Eastern Hemisphere $ 2.07 $ 1.15 $ 1.24
EXPENSED EXPLORATION(a) (in millions) $ 106 $ 127 $ 102
CAPITAL EXPENDITURES (in millions)
Development $ 373 $ 345 $ 451
Exploration $ 130 $ 147 $ 122
Acquisitions and other $ 72 $ 326 $ 275
- ---------------------------------------- --------- --------- ---------
(a) Includes amounts previously shown in exploration capital expenditures.
</TABLE>
Occidental emphasizes international operations through exploration for
and production of oil and gas and through enhanced oil recovery projects to
improve long-term cash flow and profitability. Occidental expects to increase
domestic reserves and production above current levels through a targeted
exploration program, producing property acquisitions that fit its
infrastructure and through improved field production efficiencies. Also,
Occidental continues to dispose of nonstrategic assets.
Occidental reorganized its worldwide oil and gas operations,
headquartered in Bakersfield, California, in the fourth quarter of 1995. This
change allows Occidental to redeploy its resources and sharpen its focus on
improving performance. The reorganization, for which a charge of $95 million
was recorded, is expected to result in annualized savings of $100 million.
The operating results of 1995, compared with 1994, reflected higher
worldwide crude oil production and prices, higher international natural gas
volumes and lower exploration costs, partially offset by lower domestic
natural gas prices. The change in sales for 1995, compared with 1994, largely
reflected higher worldwide crude oil production and prices and increased oil
trading activity. The operating results of 1994, compared with 1993,
reflected lower worldwide crude oil prices and domestic natural gas prices
and higher exploration costs, partially offset by higher international crude
oil and domestic natural gas volumes. The change in sales for 1994, compared
with 1993, largely reflected increased oil trading activity.
The 1995 results included charges of $95 million related to
reorganization costs and $109 million for settlement of litigation. The 1994
results reflected charges of $45 million for environmental and litigation
matters, $11 million for the impairment of oil and gas properties and $12
million for a voluntary retirement program and severance and related costs.
Also included in the 1994 results was the gain of $16 million from the sale
of Occidental's remaining interests in its producing operations in Argentina
and a $15 million benefit resulting from the reversal of reserves no longer
needed for anticipated liabilities related to the sale of Occidental's U.K.
North Sea interests. The 1993 results included a benefit of $85 million, net
of a federal tax charge of $45 million, resulting from the reversal of
foreign tax reserves following the settlement of tax matters with foreign
jurisdictions relating to the disposition of certain international oil and
gas assets in 1991. The 1993 results also included a gain of $30 million on
the sale of Occidental's equity interest in Trident NGL, Inc. (Trident), $25
million from a windfall profit tax refund and $5 million from a favorable
litigation settlement, partially offset by a $24 million charge for
environmental remediation and litigation matters.
NATURAL GAS TRANSMISSION
<TABLE>
<CAPTION>
1995 1994 1993
======================================== ========= ========= =========
<S> <C> <C> <C>
DIVISIONAL SALES (in millions) $ 2,038 $ 2,110 $ 2,378
DIVISIONAL EARNINGS (in millions) $ 213 $ 276 $ 426
THROUGHPUT (trillions of cubic feet)
Transportation 1.53 1.53 1.61
Sales .65 .55 .66
--------- --------- ---------
2.18 2.08 2.27
========= ========= =========
CAPITAL EXPENDITURES (in millions) $ 150 $ 93 $ 65
- ---------------------------------------- --------- --------- ---------
</TABLE>
In 1995, MidCon Corp.'s (MidCon) total throughput volume (excluding
transportation for affiliates) was 2.18 trillion cubic feet (Tcf),
approximately 5 percent higher than 1994 throughput of 2.08 Tcf.
Transportation volumes were equal, while sales volumes increased
approximately 18 percent from 1994. Divisional sales were lower in 1995 than
in 1994, which reflected the absence of revenues from sales of regulated gas
storage inventories, lower transportation margins and lower recoveries of gas
supply realignment costs.
MidCon reorganized its operations near the end of 1995 to expedite
design of products and services to meet changing customer needs, maximize
return on assets, enhance operating efficiencies and reduce costs. This
reorganization resulted in a charge of $37 million and is expected to result
in annualized savings of $50 million.
Overall revenues for 1994 were lower than 1993 due to lower sales
volumes at Natural Gas Pipeline Company of America (Natural); however,
significant volumes of gas were sold by the nonregulated subsidiary of
MidCon. Earnings declined in 1994, compared with 1993, reflecting changes in
rates charged by Natural following the implementation of Order 636 and the
settlement of a concurrent rate case. The lower sales volumes at Natural did
not result in an earnings decline since regulatory procedures implementing
Order 636 permitted margins from former sales service to be reallocated to
continuing transportation and gas storage services. Additionally, earnings
were lower in 1994, compared with 1993, resulting from lower reversals of
financial reserves for disadvantageous gas purchase contracts, partially
offset by lower depreciation expense in 1994. Total throughput volume
(excluding transportation for
23
<PAGE>
affiliates) decreased approximately 8 percent in 1994, compared with 1993.
Transportation volumes decreased slightly, while sales volumes decreased
approximately 17 percent.
The earnings decline in 1995, compared with 1994, reflected a charge for
reorganization costs in 1995 of $37 million and favorable special items in
1994. Excluding these special items, earnings for 1995 were approximately the
same as 1994. The 1994 results included the benefit of $13 million from a
reduction of LIFO gas storage inventory and the net benefit of $12 million
from the reduction of the contract impairment reserve. The 1993 results
included a net benefit of $154 million from the reduction of the contract
impairment reserve and an $8 million reversal of a tax-related reserve no
longer required.
CHEMICAL
<TABLE>
<CAPTION>
1995 1994 1993
======================================== ========= ========= =========
<S> <C> <C> <C>
DIVISIONAL SALES (in millions) $ 5,370 $ 4,677 $ 4,042
DIVISIONAL EARNINGS (in millions) $ 1,080 $ 350 $ 173
KEY PRODUCT INDEXES (1987 through
1990 average price = 1.0)
Chlorine 1.36 1.43 .69
Caustic soda 1.28 .54 .74
PVC resins 1.01 .93 .77
KEY PRODUCT VOLUMES
Chlorine (thousands of tons) 3,170 3,172 3,110
Caustic soda (thousands of tons) 3,275 3,471 3,240
PVC resins (millions of pounds) 1,724 1,920 1,913
CAPITAL EXPENDITURES (in millions)
Basic chemicals $ 121 $ 87 $ 55
Petrochemicals $ 43 $ 32 $ 32
Polymers and plastics $ 33 $ 34 $ 38
Specialty business $ 30 $ 23 $ 22
Other $ 16 $ 14 $ 19
- ---------------------------------------- --------- --------- ---------
</TABLE>
OxyChem's ongoing commitment to controlling costs and maintaining the
reliable operations of its manufacturing facilities continues to make
important contributions to earnings. Higher margins, resulting from improved
demand, significantly benefited earnings in 1995.
Earnings in 1995 improved significantly, compared with 1994, as prices
and margins increased for a number of OxyChem's key products, primarily PVC,
caustic soda and petrochemicals. Prices for PVC and petrochemical products
fell in the second half of 1995, but demand is expected to improve as 1996
progresses. Additionally, the 1995 results benefited from ongoing efforts to
manage costs and improve productivity. The higher earnings in 1994, compared
with 1993, reflected improved product prices and margins for PVC, chlorine
and petrochemicals. Additionally, the 1994 results benefited from lower
manufacturing and administrative costs and from lower depreciation expense.
The 1995 earnings included the pretax gain of $40 million related to the
sale of the PVC facility at Addis, Louisiana. The 1994 results reflected a
$55 million charge for litigation matters and charges of $48 million for
expenses related to the curtailment and closure of certain plant operations.
Also included in the 1994 results was an $11 million unfavorable impact
related to an explosion at the Taft plant and charges for start-up costs
related to the Swift Creek chemical plant. The 1993 results included a $16
million benefit resulting from the reversal of a plant closure reserve no
longer required.
CORPORATE
The improvement in unallocated corporate other items in 1995,
compared with 1994, primarily reflected the benefit of higher equity income
from unconsolidated chemical and oil and gas investments.
The 1994 amount included a net benefit of $7 million resulting from the
reversal of reserves no longer required and the adoption of SFAS No.
112--"Employers' Accounting for Postemployment Benefits" and also reflected
higher equity earnings, as compared with 1993, primarily from unconsolidated
chemical investments.
The 1993 amount included a onetime noncash charge of $55 million to
adjust net deferred tax liabilities following the enactment of tax
legislation in August 1993, partially offset by $13 million of interest
income related to the windfall profit tax refund discussed above.
REORGANIZATION CHARGES In the fourth quarter of 1995, Occidental recorded
pretax charges of $132 million related to the reorganization of its worldwide
oil and gas operations headquartered in Bakersfield, California and the
reorganization of the operations of the natural gas transmission division. The
charges recorded had no cash impact in 1995. Management expects that, after the
initial cash outlays for the reorganization program in 1996, the reorganization
will have a favorable impact on cash flow from operations.
DISCONTINUED OPERATIONS In July 1993, Occidental sold Island Creek Coal, Inc.
to CONSOL Inc. Following the closing of the sale, Occidental re-evaluated the
adequacy of the reserves recorded in the fourth quarter of 1992 related to the
decision to exit the coal business and reversed certain reserves no longer
deemed necessary. After recognizing the effect of the sale and the reversal of
reserves, an after-tax benefit of $221 million was included in discontinued
operations.
ACCOUNTING CHANGES Occidental periodically reviews the estimated economic
lives of its assets. Beginning in 1994, Occidental revised the estimated average
useful lives used to compute depreciation for most of its chemical machinery and
equipment from 20 years to 25 years and for most of its natural gas transmission
property to a remaining life of 40 years. These revisions were made to more
properly reflect the current economic lives of the assets based on anticipated
industry conditions. The result was a reduction in net loss for the year ended
December 31, 1994 of approximately $65 million, or approximately $.21 per share.
Natural gas transmission and chemical divisional earnings benefited by
approximately $31 million and $34 million, respectively.
24
<PAGE>
SFAS NO. 121 In March 1995, the Financial Accounting Standards Board issued
SFAS No. 121--"Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to Be Disposed Of." Occidental will implement SFAS No. 121 by the
first quarter of 1996. The provisions will require Occidental to review long-
lived assets for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. If it is determined
that an impairment loss has occurred based on expected future cash flows, then a
loss will be recognized in the income statement using a fair-value based model.
Based on preliminary reviews performed in 1995, which assumed that Occidental
will continue to operate, maintain and, where appropriate, expand its
businesses, Occidental's adoption of SFAS No. 121, effective January 1, 1996, is
not expected to have an impact on Occidental's consolidated financial position
or results of operations.
SFAS NO. 112 In December 1992, the Financial Accounting Standards Board
issued SFAS No. 112--"Employers' Accounting for Postemployment Benefits," which
substantially changed the existing method of accounting for employer benefits
provided to inactive or former employees after active employment but before
retirement. The statement requires that the cost of postemployment benefits
(principally medical benefits for inactive employees) be recognized in the
financial statements during employees' active working careers. Occidental's
adoption of SFAS No. 112, effective January 1, 1994, did not have a material
impact on Occidental's financial position or results of operations.
SPECIAL ITEMS Special items are infrequent transactions that may affect
comparability between years. The special items included in the 1995, 1994 and
1993 results are detailed below. For further information, see Note 17 to the
Consolidated Financial Statements and the discussion above.
SPECIAL ITEMS
<TABLE>
<CAPTION>
Benefit(Charge) In millions 1995 1994 1993
======================================== ========= ========= =========
<S> <C> <C> <C>
OIL AND GAS
Litigation settlement $ (109) $ -- $ 5
Reorganization (95) -- --
Gain on sale of producing
interests in Argentina -- 16 --
U.K. North Sea reserve
reversal -- 15 --
Environmental and litigation -- (45) (24)
Severance and voluntary
retirement program -- (12) --
Property impairments -- (11) --
Foreign tax reserve reversal(a) -- -- 85
Gain on sale of equity
interest in Trident -- -- 30
Windfall profit tax refund -- -- 25
- ---------------------------------------- --------- --------- ---------
NATURAL GAS TRANSMISSION
Reorganization (37) -- --
Contract impairment reserve
reversal(a) -- 12 154
Reduction of LIFO inventory -- 13 --
Tax reserve reversal -- -- 8
- ---------------------------------------- --------- --------- ---------
CHEMICAL
Gain on sale of PVC facility 40 -- --
Litigation reserves -- (55) --
Curtailment of operations
and plant closure -- (48) --
Plant explosion and start-up
costs -- (11) --
Plant closure reserve
reversal -- -- 16
- ---------------------------------------- --------- --------- ---------
CORPORATE
Reversal of reserves and
adoption of SFAS No. 112 -- 7 --
1993 federal tax rate change -- -- (55)
Interest portion of windfall
profit tax refund -- -- 13
Discontinued operations(a) -- -- 221
Extraordinary items(a) -- -- (12)
- ---------------------------------------- --------- --------- ---------
(a) These amounts are shown after-tax.
</TABLE>
CONSOLIDATED OPERATIONS--REVENUES
<TABLE>
<CAPTION>
SELECTED REVENUE ITEMS
In millions 1995 1994 1993
======================================== ========= ========= =========
<S> <C> <C> <C>
Net sales and operating
revenues $ 10,423 $ 9,236 $ 8,116
Interest, dividends and
other income $ 114 $ 92 $ 347
Income from equity
investments $ 112 $ 73 $ 27
- ---------------------------------------- --------- --------- ---------
</TABLE>
25
<PAGE>
The increase in sales in 1995, compared with 1994, primarily reflected
higher sales prices for most major chemical products, higher worldwide crude
oil production and prices, and increased oil trading activity. These
increases were partially offset by the impact of lower domestic natural gas
prices. The increase in sales in 1994, compared with 1993, primarily
reflected the effect of improved prices in PVC, chlorine and petrochemicals
businesses and increased oil trading activity.
The increase in interest, dividends and other income in 1995, compared
with 1994, reflected higher interest income resulting from the substantial
increase in invested cash balances. Included in the 1994 amount was the
benefit of $20 million from a pretax reduction of the contract impairment
reserve at MidCon, the Company's natural gas transmission division, and the
$15 million benefit resulting from the reversal of reserves no longer needed
for anticipated liabilities related to the sale of Occidental's U.K. North
Sea interests. Included in the 1993 amount was the benefit of a $246 million
pretax reduction of the contract impairment reserve at MidCon. Also included
in the 1993 results were the $5 million favorable litigation settlement and
the $25 million windfall profit tax refund, both recorded in the oil and gas
division, and $13 million of interest income related to this windfall profit
tax refund.
The increase in income from equity investments in 1995, compared with
1994 and 1993, primarily reflected higher earnings from certain
unconsolidated chemical and oil and gas investments.
CONSOLIDATED OPERATIONS--EXPENSES
<TABLE>
<CAPTION>
SELECTED EXPENSE ITEMS
In millions 1995 1994 1993
======================================== ========= ========= =========
<S> <C> <C> <C>
Cost of sales $ 6,980 $ 6,727 $ 5,972
Selling, general and adminis-
trative and other
operating expenses $ 1,194 $ 989 $ 782
Interest and debt expense, net $ 579 $ 584 $ 579
Provision for domestic and
foreign income and
other taxes $ 402 $ 143 $ 143
- ---------------------------------------- --------- --------- ---------
</TABLE>
The increase in cost of sales in 1995, compared with 1994 and 1993,
primarily reflected increased oil trading activity.
The increase in selling, general and administrative and other operating
expenses in 1995 from 1994 primarily reflected the charges for reorganization
costs and settlement of litigation. The increase in 1994, compared with 1993,
essentially reflected higher other operating expenses of $200 million and
lower foreign exchange gains of $15 million. The higher other operating
expenses included $96 million of litigation expense provisions, $48 million
for expenses related to curtailment and closure of certain chemical plant
operations, and higher other reserves.
Lower interest and debt expense in 1995 from 1994 primarily reflected
lower outstanding average debt levels in 1995, partially offset by increased
expense due to regulatory settlements and slightly higher rates.
The 1995 provision for domestic and foreign income and other taxes,
compared with 1994, reflected the substantial increase in divisional earnings
subject to U.S. income tax, primarily at domestic chemical operations. The
1994 provision for domestic and foreign income and other taxes, compared with
1993, reflected lower domestic taxes and increased foreign taxes resulting
from relatively more income subject to tax in various foreign jurisdictions
and the absence in 1994 of two 1993 special items, as discussed below. In
1994, income taxes exceeded pretax income primarily because of substantial
amounts of foreign income that were taxed individually in separate
jurisdictions, before the benefit of a U.S. tax deduction for interest and
corporate expenses. The 1993 provision reflected the $85 million reversal of
foreign tax reserves, partially offset by the $55 million charge to adjust
net deferred tax liabilities, as described above.
LIQUIDITY AND CAPITAL RESOURCES
<TABLE>
<CAPTION>
OPERATING ACTIVITIES
In millions 1995 1994 1993
========= ========= =========
<S> <C> <C> <C>
NET CASH PROVIDED $ 1,501 $ 760 $ 608
</TABLE>
The 1995 improvement in net cash provided by operating activities,
compared with 1994, reflected higher operating earnings in both the oil and
gas and chemical divisions and proceeds of $100 million from an advance sale
of crude oil, further discussed below. The 1994 improvement in net cash
provided by operating activities, compared with 1993, reflected higher
operating earnings, primarily in the chemical division. Cash provided by
operating activities in 1993 was adversely affected by the unfavorable
economic environment, resulting in lower sales prices and margins,
particularly in chemical operations.
Other noncash charges of $246 million in 1995 primarily reflected the
charges of $132 million for reorganization costs at the oil and gas and
natural gas transmission divisions. Other noncash charges of $175 million in
1994 primarily reflected the charges of $100 million for environmental and
litigation matters and $48 million for expenses related to the curtailment
and closure of certain chemical plant operations, partially offset by $22
million resulting from the reversal of reserves no longer needed and $20
million from the reduction of the contract impairment reserve. Other noncash
credits in 1993 primarily reflected the reductions of the contract impairment
reserve, discussed above. Each of the three years also included charges for
employee benefit plans and other items.
<TABLE>
<CAPTION>
INVESTING ACTIVITIES
In millions 1995 1994 1993
========= ========= =========
<S> <C> <C> <C>
NET CASH USED $ (136) $ (1,007) $ (876)
</TABLE>
Net cash used in investing activities included Occidental's capital
expenditure program as discussed below. The 1995 investing amount also
included substantial proceeds from sales of businesses and other assets.
26
<PAGE>
<TABLE>
<CAPTION>
CAPITAL EXPENDITURES In millions 1995 1994 1993
======================================== ========= ========= =========
<S> <C> <C> <C>
Oil and gas $ 575 $ 818 $ 848
Natural gas transmission 150 93 65
Chemical 243 190 166
Corporate and other 11 2 4
--------- --------- ---------
$ 979 $ 1,103 $ 1,083
======================================== ========= ========= =========
</TABLE>
The spending in the oil and gas business continues to be the major part
of Occidental's capital program underscoring Occidental's commitment to this
core business. Significant capital was also spent on chemical and natural gas
transmission to maintain and upgrade Occidental's businesses and to provide
for expansion when it is economically attractive to do so.
The 1994 capital expenditures included the cash portion of the purchase
price of certain U.S. Gulf Coast oil and gas properties acquired from Agip
Petroleum Co. Inc. (Agip) and payments under a production sharing agreement
for an enhanced oil recovery project in Qatar. The 1993 capital expenditures
included the purchase of a royalty interest in the Congo and the development
of oil discoveries in Yemen and Ecuador. Capital expenditures for 1996 are
estimated to be approximately the same as the 1995 capital program.
ADDITIONAL CASH FLOW INVESTING ACTIVITIES The 1995 operating lease buyouts
of $141 million included $71 million for the Swift Creek chemical plant. This
plant was part of the agricultural chemical products business sold in the fourth
quarter of 1995. The 1995 net proceeds from the sale of businesses and disposal
of property, plant and equipment reflected the proceeds from the sale of
Occidental's high-density polyethylene business (HDPE), its agricultural
chemicals business, its PVC facilities at Addis, Louisiana and Burlington South,
New Jersey, which were sold pursuant to a Federal Trade Commission divestiture
order, and a portion of Occidental's oil and gas operation in Pakistan.
The 1994 purchase of businesses reflected cash balances obtained as a
result of the acquisition of Placid Oil Company (Placid), which was
consummated through the issuance of Occidental common and preferred stock, as
described below.
The 1993 proceeds from the sale of businesses and disposal of property,
plant and equipment included the sale of Occidental's equity interest in
Trident for approximately $121 million and the disposition of the coal
business and other assets.
<TABLE>
<CAPTION>
FINANCING ACTIVITIES
In millions 1995 1994 1993
========= ========= =========
<S> <C> <C> <C>
NET CASH PROVIDED(USED) $ (974) $ 219 $ 340
</TABLE>
The significant change in 1995 financing activities, compared with 1994,
reflected repayment of debt using proceeds from asset sales and cash flow
from operations. In 1995, principal payments of senior funded debt and
capital lease liabilities, net of proceeds from borrowings, was $603 million.
Financing activities in 1994 provided net cash proceeds of approximately
$557 million from the February public offering of 11,388,340 shares of $3.00
cumulative CXY-indexed convertible preferred stock. Additionally, in 1994,
proceeds from borrowings, net of principal payments of senior funded debt and
capital lease liabilities, resulted in net cash provided of $26 million.
Financing activities in 1993 included net cash proceeds of $563 million from
the February issuance of 11,500,000 shares of $3.875 cumulative convertible
preferred stock. Also, proceeds from lower cost borrowings, net of payments
of capital lease liabilities and repayments of higher cost debt, resulted in
net cash provided in 1993 of $108 million.
Occidental paid preferred and common stock dividends of $406 million in
1995, $376 million in 1994 and $335 million in 1993. The increase in 1995 and
1994 primarily reflected the dividends on the preferred and common stocks
issued in connection with acquisitions and the preferred offerings, discussed
above.
Cash used by investing activities exceeded cash provided by operating
activities for the years ended December 31, 1994 and 1993. Occidental funded
this net cash use through borrowings and issuance of preferred stock.
Occidental has a centralized cash-management system that funds the
working capital and capital expenditure requirements of its various
subsidiaries. There are no provisions under existing debt agreements that
significantly restrict the ability to move funds among operating entities.
ANALYSIS OF FINANCIAL POSITION
The changes in the following components of Occidental's balance sheet are
discussed below:
<TABLE>
<CAPTION>
SELECTED BALANCE SHEET COMPONENTS
In millions 1995 1994
====================================================== ========= =========
<S> <C> <C>
Trade receivables $ 643 $ 735
Inventories $ 647 $ 748
Equity investments $ 927 $ 692
Property, plant and equipment, net $ 13,867 $ 14,502
Current maturities of senior funded debt
and capital lease liabilities $ 522 $ 69
Senior funded debt, net $ 4,819 $ 5,823
Other liabilities $ 3,089 $ 2,943
Stockholders' equity $ 4,630 $ 4,457
- ------------------------------------------------------ --------- ---------
</TABLE>
At December 31, 1995, Occidental had available $2.6 billion of committed
credit lines and draws on them, as needed, to maintain sufficient cash
balances for daily operating and other purposes.
Trade receivables and inventories reflected the absence of balances
relating to certain chemical assets which were sold during 1995.
Equity investments increased reflecting the receipt of Clark USA, Inc.
(Clark) common stock as partial consideration in exchange for Occidental's
obligation to deliver Clark 17.7 million barrels of WTI-equivalent oil over
the next six years.
Property, plant and equipment, net of accumulated depreciation, depletion
and amortization, decreased reflecting the sale of Occidental's HDPE
business, agricultural
27
<PAGE>
chemicals business, the PVC facilities and a portion of Occidental's oil and
gas operation in Pakistan, as discussed above, partially offset by capital
expenditures and operating lease buyouts.
Current maturities of senior funded debt and capital lease liabilities
increased reflecting the reclassification from long-term to short-term of the
net amount of debt to be repaid during 1996. For further discussion of the
debt to be repaid in 1996, see the Subsequent Events section below.
Senior funded debt, net of current maturities and unamortized discount,
decreased reflecting debt repayments including the application of cash flow
from operations together with the net proceeds from the asset dispositions,
described above, and the reclassification of debt to be repaid in 1996,
discussed below. At December 31, 1995, minimum principal payments on senior
funded debt, including sinking fund requirements, totaled $301 million in
1997, $375 million in 1998, $1.224 billion in 1999, $499 million in 2000,
$518 million in 2001 and $2.049 billion thereafter. However, Occidental has
the option to call certain issues of senior funded debt prior to their
maturity dates.
Other liabilities increased reflecting Occidental's obligation to deliver
17.7 million barrels of WTI-equivalent oil over the next six years, described
below, partially offset by payments and reclassifications.
The change in stockholders' equity primarily reflected net income and the
issuance of common stock to various employee benefit plans and the dividend
reinvestment plan, partially offset by dividends declared.
ACQUISITIONS AND COMMITMENTS In November 1995, Occidental agreed to acquire a
64 percent equity interest in INDSPEC Chemical Corporation (INDSPEC) for $85
million of Occidental common stock. Under the terms of the agreement, INDSPEC's
management and employees will retain voting control of the company. This
transaction is expected to close in 1996.
In December 1995, Occidental entered into a transaction with Clark under
which Occidental agreed to deliver approximately 17.7 million barrels of
WTI-equivalent oil over the next six years. In exchange, Occidental received
$100 million in cash and approximately 5.5 million shares of Clark common
stock. As a result of this transaction, Occidental owns approximately 19
percent of Clark. Occidental has accounted for the consideration received in
the transaction as deferred revenue which is being amortized into revenue as
WTI-equivalent oil is produced and delivered during the term of the agreement.
During the second quarter of 1995, Occidental and Canadian Occidental
Petroleum Ltd. formed partnerships into which they contributed primarily
sodium chlorate manufacturing facilities. Occidental retained a
less-than-twenty-percent direct interest in these partnerships accounted for
on the equity method. This transaction did not result in any gain or loss.
On December 29, 1994, Occidental acquired Placid for an aggregate
purchase price of approximately $250 million through the issuance of
3,606,484 shares of $3.875 cumulative convertible voting preferred stock,
with a value of $175 million, and the balance through the issuance of
3,835,941 shares of Occidental common stock. Placid has oil and gas
exploration and production properties primarily in the U.S. Gulf Coast and
the Netherlands. Placid also has an approximate 39 percent interest in a
major pipeline system in the Dutch sector of the North Sea, which includes
170 miles of main and feeder lines. The acquisition has been accounted for by
the purchase method. Accordingly, the cost of the acquisition was allocated
to the assets acquired and liabilities assumed based upon their estimated
respective fair values. The allocation of the purchase price was finalized
during 1995 upon completion of the asset valuations and resolution of the
preacquisition contingencies.
In addition, as previously mentioned, on March 31, 1994, Occidental
acquired interests in certain U.S. Gulf Coast oil and gas properties from
Agip for a purchase price of $161 million through the issuance of 5,150,602
shares of Occidental common stock and $78 million in cash.
Commitments at December 31, 1995 for major capital expenditures during
1996 and thereafter were approximately $382 million. Total capital
expenditures for 1996 are estimated to be approximately $1.0 billion, the
majority of which is for oil and gas. Occidental believes that, through
internally generated funds and financing activity, it will have sufficient
funds to continue its current capital spending programs.
SUBSEQUENT EVENTS On January 23, 1996, Occidental called for redemption on
March 15 all of the outstanding $955 million principal amount of its 11.75%
Senior Debentures due March 15, 2011, at a redemption price of 104.838% of the
principal amount, together with accrued interest. The redemption of these
debentures is in part being funded from cash accumulated in excess of ongoing
requirements. The payment of the call premium will be reflected as an
extraordinary loss in Occidental's 1996 first quarter results.
On February 13, 1996, Occidental announced a realignment of its chemical
operations. The realignment will result in staff reductions of approximately
450 people. The costs associated with the realignment are not expected to
have a material impact on the 1996 results of operations and the annualized
savings are expected to be approximately $100 million.
HEDGING ACTIVITIES Occidental periodically uses commodity futures contracts,
options and swaps to hedge the impact of oil and natural gas price fluctuations
and uses forward exchange contracts to hedge the risk associated with
fluctuations in foreign currency exchange rates. Occidental does not engage in
activities using highly complex or leveraged instruments. Gains and losses on
commodity futures contracts are deferred until recognized as an adjustment to
sales revenue or purchase costs when the related transaction being hedged is
finalized. Gains and losses on foreign currency forward exchange contracts that
hedge identifiable
28
<PAGE>
future commitments are deferred until recognized when the related item being
hedged is settled. All other contracts are recognized in periodic income.
In addition, the oil and gas division engages in oil and gas trading
activity through the use of futures contracts. The results are not
significant and are included in periodic income.
Many of Occidental's foreign oil and gas operations and foreign chemical
operations are located primarily in developing countries whose currencies
generally depreciate against the U.S. dollar on a continuing basis. An
effective currency forward market does not exist for these countries;
therefore, Occidental attempts to manage its exposure primarily by balancing
monetary assets and liabilities and maintaining cash positions only at levels
necessary for operating purposes. The major foreign currency positions at
December 31, 1995 are generally in a net liability position, effectively
eliminating the potentially unfavorable effects of devaluation.
Interest rate swaps are entered into as part of Occidental's overall
strategy to maintain part of its debt on a floating rate basis. From time to
time, Occidental enters into interest rate swaps on specific debt. In
November 1993, Occidental entered into interest rate swaps on newly issued
fixed-rate debt for notional amounts totaling $530 million, converting this
fixed-rate debt to floating-rate debt. The swap rate difference resulted in
approximately $5 million of additional interest expense in 1995 and $6
million and $1 million savings in interest expense for 1994 and 1993,
respectively, compared to what interest expense would have been had the debt
remained at fixed rates. The impact of the swaps on the weighted average
interest rates for all debt in 1995, 1994 and 1993 was not significant. The
fair value of interest rate swaps is the amount at which they could be
settled, based on estimates obtained from dealers. Based on these estimates
at December 31, 1995, Occidental would be required to pay approximately $3
million to terminate its interest rate swap agreements. Occidental will
continue its strategy of maintaining part of its debt on a floating rate
basis.
TAXES Deferred tax liabilities were $2.3 billion at December 31, 1995, net of
deferred tax assets of $1.8 billion. The current portion of the deferred tax
assets of $335 million is included in prepaid expenses and other. The net
deferred tax assets are expected to be realized through future operating income
and reversal of taxable temporary differences.
LAWSUITS, COMMITMENTS AND CONTINGENCIES Occidental and certain of its
subsidiaries are parties to various lawsuits, environmental and other
proceedings and claims that may involve substantial amounts. See Note 10 to the
Consolidated Financial Statements. Occidental also has commitments under
contracts, guarantees and joint ventures and certain other contingent
liabilities. See Note 11 to the Consolidated 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.
ENVIRONMENTAL EXPENDITURES 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. Environmental expenditures, related
to current operations, are factored into the overall business planning process.
Increasingly, these expenditures are considered less as incremental costs and
more as an integral part of production in manufacturing quality products
responsive to market demand.
ENVIRONMENTAL REMEDIATION
The laws which require or address environmental 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. Also, Occidental and certain of its subsidiaries have
been involved in a substantial number of governmental and private proceedings
involving historical practices at various sites including, in some instances,
having been named as defendants and/or as potentially responsible parties (PRPs)
under the federal Superfund law. These proceedings seek funding and/or
remediation and, in some cases, compensation for alleged personal injury or
property damage, punitive damages and civil penalties, aggregating substantial
amounts.
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 to be a relevant measure of exposure. Although the liability of a 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. Also, many of these sites are still under investigation by the
Environmental Protection Agency (EPA) or the state agencies. Prior to actual
cleanup, the parties involved assess site conditions and responsibility and
determine the appropriate remedy. The majority of remediation costs are incurred
after the parties obtain EPA or equivalent state agency approval to proceed. The
ultimate future cost of remediation of certain of the sites for which Occidental
has been notified that it has been identified as involved cannot be reasonably
determined at this time.
As of December 31, 1995, Occidental had been notified by the EPA or
equivalent state agencies or otherwise had become aware that it had been
identified as being involved at 284 Superfund or comparable state sites.
(This number does not include 57 sites where Occidental has been successful
in resolving its involvement.) The 284 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
29
<PAGE>
disputed. Of the remaining 202 sites, Occidental has had no communication or
activity with government agencies or other PRPs in three years at 33 sites, has
denied involvement at 31 sites and has yet to determine involvement in 20 sites.
With respect to the remaining 118 of these sites, Occidental is in various
stages of evaluation. For 107 of these sites, where environmental remediation
efforts are probable and the costs can be reasonably estimated, Occidental has
accrued reserves at the most likely cost to be incurred. The 107 sites include
40 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 11 of the 118 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 in the Lawsuits, Commitments and Contingencies
section. For management's opinion on lawsuits and proceedings and on other
environmental loss contingencies, see the Lawsuits, Commitments and
Contingencies section.
ENVIRONMENTAL COSTS
Occidental's costs, some of which may include estimates, relating to
compliance with environmental laws and regulations are shown below for each
division:
<TABLE>
<CAPTION>
In millions 1995 1994 1993
======================================== ========= ========= =========
<S> <C> <C> <C>
OPERATING EXPENSES
Oil and gas $ 41 $ 34 $ 34
Natural gas transmission 7 6 5
Chemical 63 74 71
--------- --------- ---------
$ 111 $ 114 $ 110
========= ========= =========
REMEDIATION EXPENSES
Oil and gas $ 3 $ 4 $ 17
Chemical 19 1 1
--------- --------- ---------
$ 22 $ 5 $ 18
========= ========= =========
CAPITAL EXPENDITURES
Oil and gas $ 43 $ 42 $ 47
Natural gas transmission 4 1 4
Chemical 27 24 32
--------- --------- ---------
$ 74 $ 67 $ 83
======================================== ========= ========= =========
</TABLE>
Operating expenses are incurred on a continuous basis. Remediation expenses
relate to existing conditions caused by past operations and do not contribute to
current or future revenue generation. Capital expenditures relate to longer
lived improvements in facilities and will fluctuate more year to year. Although
total costs may vary in any one year, over the long term divisional operating
and capital expenditures for environmental compliance generally are expected to
increase. As of December 31, 1995 and 1994, Occidental had environmental
reserves of approximately $582 million and $635 million, respectively.
FOREIGN INVESTMENTS Portions of Occidental's oil and gas assets are located
in countries outside North America, some of which may be considered politically
and economically unstable. These assets and the related operations are subject
to the risk of actions by governmental authorities and insurgent groups.
Occidental attempts to conduct its financial affairs so as to protect against
such risks and would expect to receive compensation in the event of
nationalization. At December 31, 1995, the carrying value of Occidental's oil
and gas assets in countries outside North America aggregated approximately
$2.038 billion, or approximately 11 percent of Occidental's total assets at that
date. Of such assets, approximately $635 million was located in the Middle East,
$563 million was located in Latin America, and substantially all of the
remainder were located in the Netherlands, West Africa and Russia.
1996 BUSINESS OUTLOOK
OIL AND NATURAL GAS INDUSTRY
The global nature of crude oil markets will continue to make them
susceptible to shifts caused by unpredictable changes in national and
international political events. Of chief significance among these is the
possibility of Iraq's return to the market. While such an occurrence might
create uncertainty in the market, it is difficult to predict when that will
occur or the extent of the impact on the market.
It is important that the competing claims on future supply between OPEC
and ever-increasing non-OPEC production be satisfactorily reconciled. Based
on OPEC's decision to roll over quotas at its last meeting in late 1995, a
balanced-market scenario currently appears to be the best prospect. Continued
supply stability within OPEC and other major producing areas, such as the
countries of the former Soviet Union, is expected. Oil and gas development in
the Caspian Sea region is noteworthy in the longer term. At the same time,
incremental production is entering world markets from non-OPEC producers. As
growth in demand is increasingly being met with non-OPEC supply, the
potential for tension with OPEC producers will continue as long as
substantial unused OPEC capacity exists, particularly in the Middle East.
The increasing role of commodity and other trading funds in energy
markets also might add somewhat to volatility as financial instruments
continue to play an increasingly important role in global energy markets.
This impact, while significant, should not overshadow basic industry
fundamentals over the course of a full calendar year.
Economic growth, mainly in newly developing countries and especially in
the Far East, will continue to increase worldwide energy demand. Globally,
natural gas is becoming more prominent in the growth plans of developing
countries. Natural gas as a feedstock in power generation is growing more
important in supporting large infrastructure projects that are perceived to
be key to economic growth.
30
<PAGE>
Power generation projects will continue to be undertaken as more countries
seek to expand the development of their natural gas resource base as a precursor
to economic growth. These projects are highly capital intensive, and developing
countries must compete aggressively to attract the large infusion of capital and
technology that private energy companies can provide. This will create
opportunities for energy development in countries which previously had
restricted foreign investment.
As private companies gear up for increased global competition,
organizational structures will continue to be streamlined to reduce costs and
enhance efficiencies. Occidental is focusing on improving both its
organizational and cost structures to enhance its competitiveness. Occidental
will continue its active global exploration program, seeking to maximize the
market potential of oil and pursuing the optimal value recognition of natural
gas projects. Occidental also will continue to build on its successes in
applying its engineering and technological skills to assist foreign
governments in maximizing production from their oil fields through enhanced
oil recovery projects.
NATURAL GAS TRANSMISSION INDUSTRY
Colder than normal weather in the Midwest and Eastern United States at the
beginning of 1996 caused gas prices in the Louisiana Gulf Coast to reach record
highs. Gas prices in other regions of the country, however, did not respond in
the same manner. This price disparity demonstrates the need for more pipeline
capacity to transport gas from supply-rich areas in Western regions to strongly
growing Eastern markets. MidCon's pipeline and storage assets are strategically
located to play a pivotal role in moving this gas from west to east, and MidCon
is pursuing projects that will accomplish this movement.
Increased volumes of gas produced in western Canada are being targeted
for the Midwest and Eastern markets. In October 1995, MidCon's regulated
pipeline, Natural, filed with the FERC to expand its existing system from
Harper, Iowa to Chicago. This expansion, plus existing capacity, will
accommodate more than 500 million cubic feet per day of new gas supplies to
be delivered through a proposed expansion of Northern Border Pipeline, a
nonaffiliated system that transports gas originating in western Canada.
Northern Border's expansion program also includes a new line from Harper to
the Chicago area, and both plans are pending before the FERC. Natural is
opposing the proposed rate structure for the Northern Border proposal and
also arguing that, from an environmental position, it is less favorable than
Natural's proposed expansion.
Early in 1996, the Trailblazer pipeline system began assessing potential
shipper interest for an expansion of that line. Trailblazer runs from eastern
Colorado to eastern Nebraska and transports gas produced in the Rocky Mountains.
Natural is the operator of the joint-venture pipeline, with a one-third
ownership interest. Trailblazer moved nearly 180 billion cubic feet of gas in
1995, a record for the 13-year-old line, reflecting the changes in the U.S. gas
flow from west to east.
On June 1, 1995, Natural filed with the FERC a new general rate case which
incorporates new services. By orders issued by the FERC, these new rates and
services became effective on December 1, 1995, subject to certain modifications.
Most of Natural's major customer contracts expired on December 1, 1995.
Negotiations of replacement contracts have been completed with those customers,
but several were renewed at reduced levels and reduced prices. More than 85
percent of Natural's capacity to Chicago remains under firm contract following
adoption of these new service agreements. A new resource management group has
been charged with developing innovative utilization strategies to optimize the
value of the remaining capacity. The combined effect of the new rate case and
the new customer contracts could reduce Natural's revenues in 1996, but this
will depend on market conditions and the success of Natural's effort to optimize
the value of uncommitted capacity.
As deregulation of the natural gas industry moves to local distribution
companies, many local utilities are relying less on premium, firm pipeline
transportation services and more on interruptible transportation and regional
storage availability to meet their supply needs. MidCon's unregulated marketing
entities are developing new products, such as portfolio management, to capture
these new market opportunities. Portfolio management includes gas purchasing,
transportation and storage to meet customers' current requirements, and selling
surplus gas and pipeline and storage capacity to third parties.
MidCon's intrastate pipeline, which is not regulated by the FERC, MidCon
Texas Pipeline (MidCon Texas), signed agreements in January 1996 with a south
Texas producer for the purchase and transportation of 274 billion cubic feet
of gas over a five-year period. The gas will come from production in Zapata
and Webb Counties near the U.S.-Mexico border. Arrangements include
construction of 68 miles of large-diameter pipeline to connect to MidCon
Texas' system.
Deregulation of the electric utility industry is moving ahead rapidly,
creating new opportunities for marketers. As a consequence, MidCon has formed a
power marketing operation and is exploring domestic market opportunities. New
energy development opportunities are opening, especially in Asia, Mexico and
South America. These opportunities are the result of increased privatization and
economic growth in these areas. MidCon is pursuing the development of these new
energy projects through its subsidiary, Occidental Energy Ventures.
One of Occidental's objectives is to maximize the value of its gas
discoveries through MidCon's international business development efforts.
CHEMICAL INDUSTRY
BASIC CHEMICALS In 1995, demand for chlorine and chlorine-related derivatives
continued to be strong. For caustic soda, overall demand remained strong after
its resurgence in 1994. This allowed the full impact of 1994 caustic soda price
increases to be realized, thereby providing improved margins.
31
<PAGE>
Markets that offer the strongest outlet for chlorine production include
ethylene dichloride (EDC), vinyl chloride monomer (VCM) and PVC. Although demand
for EDC, which is principally exported, declined in the second half of 1995,
chlorine consumption for VCM, as well as for other end uses, remained strong.
Chlorine prices remained stable throughout 1995. These market conditions are
expected to continue in 1996.
Due to strong demand, the chlorine and caustic soda industry operated
essentially at capacity in 1995. With no significant new capacity available, the
industry will be capacity-constrained for the third straight year.
Chlorine markets will continue to experience pressure from various
environmental groups and regulatory authorities seeking alternatives to, or
substitutes for, compounds containing chlorine. While demand has fallen in some
market segments, such as pulp and paper, demand from the PVC industry has more
than offset those reductions. Occidental believes that the overall market for
chlorine will remain strong, led by PVC demand.
Caustic soda and chlorine prices are expected to remain relatively stable
throughout 1996.
PETROCHEMICALS The primary petrochemicals--ethylene, propylene, butadiene and
benzene--are precursors to a wide variety of consumer and industrial products
that include fibers, tires and plastics. Petrochemicals account for 20 percent
of all chemical world trade, and global economic conditions have an immediate
effect on the domestic petrochemical industry. The cycles in the petrochemical
business are well documented and have been demonstrated by periods of high
profitability, such as in the late 1980s, followed by large capacity increases
and subsequent depressed margins as experienced in 1991 through 1993.
Margins for olefins, particularly ethylene, peaked in the first half of
1995 and began to decrease thereafter as the supply disruptions were
eliminated and the demand growth slowed to an overall rate of 3.5 percent in
1995. Higher inventories and slow demand growth led to a period of rapidly
decreasing prices (and margins) but these are expected to stabilize during
the first half of 1996 and improve during the second half.
Throughout 1994 and 1995, OxyChem petrochemical and derivatives plants
operated at capacity and are expected to do so throughout 1996. Demand is
anticipated to increase at a slightly higher rate than supply and prices are
expected to stabilize during the first half of the year. Ethylene margins are
expected to be supported by steady or improving prices for the coproducts of
ethylene. Propylene is expected to recover as a result of a 3.4 percent increase
in demand and new polypropylene capacity coming on line in 1996. Demand for
ethylene oxide and glycols is expected to continue expanding by 3 percent per
year in the United States and in excess of 5 percent globally. Benzene and
butadiene prices are expected to remain fairly flat.
POLYMERS AND PLASTICS Export prices, in particular, fell dramatically in
early summer 1995, primarily as China withdrew from the market. Domestic pricing
also eroded gradually during the second half of the year as supplies increased
due to reduction in export sales. Exports, however, remain an important market
for North American-produced PVC resin. Over the past decade, on average, 10
percent of annual North American production was sold as exports. This percentage
is expected to increase in future years as demand for PVC resin increases
significantly in the rapidly growing lesser-developed countries of the world.
With China importing at normal levels and overall economic growth remaining
strong in the Far East, PVC exports can be expected to increase. These factors
are expected to result in greater than a 6 percent growth in PVC demand in 1996.
OxyChem's PVC business is well balanced in all the major end-use markets
and supported by a completely integrated feedstock supply. OxyChem has
significant market share positions as a supplier in the following markets:
PVC pipe, vinyl siding, sheet vinyl flooring, vinyl floor tile, vinyl
electrical insulation and PVC window frames. OxyChem has announced a 450
million pound per year expansion of its PVC-producing capacity at its
Pasadena, Texas facility.
SPECIALTY BUSINESS GROUP The Specialty Business Group was formed in 1995 to
reemphasize OxyChem's leadership position in many smaller-volume chemical
markets. By their nature, these products are less cyclical and will provide a
more steady source of earnings. In chrome chemicals, OxyChem is the largest U.S.
producer. In chlorinated isocyanurates and phenolic molding compounds, OxyChem
is the second-largest producer in the United States. OxyChem is also a
recognized leader in chlorination technology and products.
These products serve a wide variety of end markets, from the automotive
and construction industries to the swimming pool, detergent and agricultural
industries.
Improvement in profitability is anticipated in 1996 as product line
extensions and additional volume in existing products are realized.
REPORT OF MANAGEMENT
The management of Occidental Petroleum Corporation is responsible for the
integrity of the financial data reported by Occidental and its subsidiaries.
Fulfilling this responsibility requires the preparation and presentation of
consolidated financial statements in accordance with generally accepted
accounting principles. Management uses internal accounting controls, corporate-
wide policies and procedures and judgment so that such statements reflect fairly
the consolidated financial position, results of operations and cash flows of
Occidental.
32
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS Occidental Petroleum Corporation
In millions, except per-share amounts and Subsidiaries
For the years ended December 31, 1995 1994 1993
=================================================================== ========= ========= =========
<S> <C> <C> <C>
REVENUES
Net sales and operating revenues
Oil and gas operations $ 3,018 $ 2,451 $ 1,702
Natural gas transmission operations 2,038 2,110 2,378
Chemical operations 5,370 4,677 4,042
Interdivisional sales elimination and other (3) (2) (6)
--------- --------- ---------
10,423 9,236 8,116
Interest, dividends and other income 114 92 347
Gains on disposition of assets, net (Note 4) 45 15 54
Income from equity investments (Note 15) 112 73 27
--------- --------- ---------
10,694 9,416 8,544
--------- --------- ---------
COSTS AND OTHER DEDUCTIONS
Cost of sales 6,980 6,727 5,972
Selling, general and administrative and other operating expenses 1,194 989 782
Depreciation, depletion and amortization of assets 922 882 892
Exploration expense 106 127 102
Interest and debt expense, net 579 584 579
--------- --------- ---------
9,781 9,309 8,327
--------- --------- ---------
INCOME(LOSS) FROM CONTINUING OPERATIONS BEFORE TAXES 913 107 217
Provision for domestic and foreign income and other taxes (Note 12) 402 143 143
--------- --------- ---------
INCOME(LOSS) FROM CONTINUING OPERATIONS 511 (36) 74
Discontinued operations, net (Note 4) -- -- 221
Extraordinary gain(loss), net (Note 5) -- -- (12)
--------- --------- ---------
NET INCOME(LOSS) $ 511 $ (36) $ 283
========= ========= =========
EARNINGS(LOSS) APPLICABLE TO COMMON STOCK $ 418 $ (112) $ 244
========= ========= =========
EARNINGS PER COMMON SHARE
Income(loss) from continuing operations $ 1.31 $ (.36) $ .12
Discontinued operations, net -- -- .72
Extraordinary gain(loss), net -- -- (.04)
--------- --------- ---------
PRIMARY EARNINGS(LOSS) PER COMMON SHARE (Note 1) $ 1.31 $ (.36) $ .80
========= ========= =========
FULLY DILUTED EARNINGS(LOSS) PER SHARE (Note 1) $ 1.30 $ (.36) $ .80
=================================================================== ========= ========= =========
The accompanying notes are an integral part of these financial statements.
33
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
In millions, except share amounts
Assets at December 31, 1995 1994
==================================================================== ========= =========
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents (Note 1) $ 520 $ 129
Trade receivables, net of reserves of $19 in 1995 and $17 in 1994 643 735
Receivables from joint ventures, partnerships and other 248 230
Inventories (Notes 1 and 6) 647 748
Prepaid expenses and other (Note 12) 461 416
--------- ---------
TOTAL CURRENT ASSETS 2,519 2,258
--------- ---------
LONG-TERM RECEIVABLES, NET 158 131
--------- ---------
EQUITY INVESTMENTS (Notes 1 and 15) 927 692
--------- ---------
PROPERTY, PLANT AND EQUIPMENT, AT COST (Notes 1, 4 and 9)
Oil and gas operations 8,377 8,180
Natural gas transmission operations 8,448 8,383
Chemical operations 5,672 6,621
Corporate and other 207 202
--------- ---------
22,704 23,386
Accumulated depreciation, depletion and amortization (8,837) (8,884)
--------- ---------
13,867 14,502
--------- ---------
OTHER ASSETS (Note 1) 344 406
--------- ---------
$ 17,815 $ 17,989
==================================================================== ========= =========
The accompanying notes are an integral part of these financial statements.
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
Occidental Petroleum Corporation
and Subsidiaries
Liabilities and Equity at December 31, 1995 1994
================================================================================= ========= =========
<S> <C> <C>
CURRENT LIABILITIES
Current maturities of senior funded debt and capital lease liabilities
(Notes 7 and 9) $ 522 $ 69
Notes payable (Note 1) 16 20
Accounts payable 859 847
Accrued liabilities (Note 1) 1,064 1,113
Dividends payable 104 99
Domestic and foreign income taxes (Note 12) 92 53
--------- ---------
TOTAL CURRENT LIABILITIES 2,657 2,201
--------- ---------
SENIOR FUNDED DEBT, NET OF CURRENT MATURITIES AND UNAMORTIZED DISCOUNT
(Notes 7 and 19) 4,819 5,823
--------- ---------
DEFERRED CREDITS AND OTHER LIABILITIES
Deferred and other domestic and foreign income taxes (Note 12) 2,620 2,565
Other (Notes 1, 8, 9 and 14) 3,089 2,943
--------- ---------
5,709 5,508
--------- ---------
CONTINGENT LIABILITIES AND COMMITMENTS (Notes 7, 9, 10, 11 and 12)
NONREDEEMABLE PREFERRED STOCK, COMMON STOCK AND OTHER STOCKHOLDERS' EQUITY
(Notes 7 and 13)
Nonredeemable preferred stock, $1.00 par value; authorized 50 million shares;
outstanding shares: 1995 and 1994--26,494,824; stated at liquidation value
of $50 per share 1,325 1,325
Common stock, $.20 par value; authorized 500 million shares; outstanding
shares: 1995--318,711,037 and 1994--316,852,545 64 63
Other stockholders' equity
Additional paid-in capital 4,631 5,004
Retained earnings(deficit) (1,402) (1,929)
Cumulative foreign currency translation adjustments (Note 1) 12 (6)
--------- ---------
4,630 4,457
--------- ---------
$ 17,815 $ 17,989
================================================================================= ========= =========
The accompanying notes are an integral part of these financial statements.
35
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF NONREDEEMABLE PREFERRED Occidental Petroleum Corporation
STOCK, COMMON STOCK AND OTHER STOCKHOLDERS' EQUITY and Subsidiaries
In millions
Other Stockholders' Equity
-----------------------------------------
Cumulative
Non- Additional Retained Foreign
redeemable Paid-in Earnings Currency
Preferred Common Capital (Deficit) Translation
Stock Stock (Notes 7 (Notes 7 Adjustments
(Note 13) (Note 13) and 13) and 13) (Note 1)
========================================== =========== =========== =========== =========== ===========
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1992 $ -- $ 61 $ 5,532 $ (2,152) $ (1)
Net income -- -- -- 283 --
Dividends on common stock -- -- (305) -- --
Dividends on preferred stock -- -- (38) -- --
Issuance of common stock -- -- 31 -- --
Issuance of preferred stock (Note 13) 575 -- (12) -- --
Pension liability adjustment (Note 14) -- -- -- (14) --
Exercises of options and other, net -- -- 4 -- (6)
- ------------------------------------------ ----------- ----------- ----------- ----------- -----------
BALANCE, DECEMBER 31, 1993 575 61 5,212 (1,883) (7)
Net loss -- -- -- (36) --
Dividends on common stock -- -- (311) -- --
Dividends on preferred stock -- -- (76) -- --
Issuance of common stock -- 2 193 -- --
Issuance of preferred stock (Note 13) 750 -- (17) -- --
Pension liability adjustment (Note 14) -- -- -- (10) --
Exercises of options and other, net -- -- 3 -- 1
- ------------------------------------------ ----------- ----------- ----------- ----------- -----------
BALANCE, DECEMBER 31, 1994 1,325 63 5,004 (1,929) (6)
Net income -- -- -- 511 --
Dividends on common stock -- -- (318) -- --
Dividends on preferred stock -- -- (93) -- --
Issuance of common stock -- 1 28 -- --
Pension liability adjustment (Note 14) -- -- -- 16 --
Exercises of options and other, net -- -- 10 -- 18
- ------------------------------------------ ----------- ----------- ----------- ----------- -----------
BALANCE, DECEMBER 31, 1995 $ 1,325 $ 64 $ 4,631 $ (1,402) $ 12
========================================== =========== =========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements.
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS Occidental Petroleum Corporation
In millions and Subsidiaries
For the years ended December 31, 1995 1994 1993
================================================================================= ========= ========= =========
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Income(loss) from continuing operations, after extraordinary gain(loss) $ 511 $ (36) $ 62
Adjustments to reconcile income to net cash provided by operating activities:
Extraordinary (gain)loss, net -- -- 12
Depreciation, depletion and amortization of assets 922 882 892
Amortization of debt discount and deferred financing costs 31 15 15
Deferred income tax provision 18 26 58
Other noncash charges(credits) to income 246 175 (287)
Gains on disposition of assets, net (45) (15) (54)
Income from equity investments (112) (73) (27)
Exploration expense 106 127 102
Changes in operating assets and liabilities:
Decrease(increase) in accounts and notes receivable 106 (240) 193
Decrease(increase) in inventories (68) 14 (48)
Increase in prepaid expenses and other assets (41) (59) (51)
Increase(decrease) in accounts payable and accrued liabilities (191) 156 36
Increase(decrease) in current domestic and foreign income taxes 48 16 (63)
Other operating, net (30) (228) (232)
--------- --------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,501 760 608
--------- --------- ---------
CASH FLOW FROM INVESTING ACTIVITIES
Capital expenditures (979) (1,103) (1,083)
Proceeds from disposal of property, plant and equipment, net (Note 4) 176 8 63
Buyout of operating leases (141) -- --
Purchase of businesses (7) 46 --
Sale of businesses, net (Note 4) 756 2 129
Equity investments, net 60 41 20
Other investing, net (1) (1) (5)
--------- --------- ---------
NET CASH USED BY INVESTING ACTIVITIES (136) (1,007) (876)
--------- --------- ---------
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from senior funded debt 322 621 806
Net proceeds from commercial paper and revolving credit agreements (528) (160) 424
Principal payments of senior funded debt and capital lease liabilities (397) (435) (1,122)
Proceeds from issuance of common stock 28 38 31
Proceeds from issuance of preferred stock (Note 13) -- 557 563
Payments of notes payable (5) (22) (22)
Cash dividends paid (406) (376) (335)
Other financing, net 12 (4) (5)
--------- --------- ---------
NET CASH PROVIDED(USED) BY FINANCING ACTIVITIES (974) 219 340
--------- --------- ---------
INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS 391 (28) 72
CASH AND CASH EQUIVALENTS--BEGINNING OF YEAR 129 157 85
--------- --------- ---------
CASH AND CASH EQUIVALENTS--END OF YEAR $ 520 $ 129 $ 157
================================================================================= ========= ========= =========
The accompanying notes are an integral part of these financial statements.
37
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS Occidental is a multinational organization whose
principal lines of business are oil and gas exploration and production, natural
gas transmission and chemicals. Oil and gas and natural gas transmission
comprise approximately 30 percent and 20 percent of sales, respectively, while
chemical represents approximately 50 percent of sales.
Internationally, Occidental has oil and gas production in 11 countries and
exploration projects in 25 countries. Domestically, Occidental has oil and gas
exploration and production in the Continental United States and the Gulf of
Mexico. In natural gas transmission, Occidental participates in every phase of
the industry: producing, processing, buying, selling, storing and transporting
natural gas. Occidental handles approximately 10 percent of the natural gas
consumed annually in the United States. In addition, Occidental is one of the
world's largest commodity chemical producers, with interests in basic chemicals,
petrochemicals and polymers and plastics.
PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the
accounts of Occidental Petroleum Corporation, all majority-owned subsidiaries
and Occidental's proportionate interests in oil and gas exploration and
production ventures (Occidental). All material intercompany accounts and
transactions have been eliminated. Investments in less than majority-owned
enterprises, including joint-interest pipelines, but excluding oil and gas
exploration and production ventures, are accounted for on the equity method (see
Note 15).
Certain financial statements, notes and supplementary data for prior years
have been changed to conform to the 1995 presentation.
RISKS AND UNCERTAINTIES The process of preparing consolidated financial
statements in conformity with generally accepted accounting principles requires
the use of estimates and assumptions regarding certain types of assets,
liabilities, revenues and expenses. Such estimates primarily relate to unsettled
transactions and events as of the date of the consolidated financial statements.
Accordingly, upon settlement, actual results may differ from estimated amounts,
generally not by material amounts. Management believes that these estimates and
assumptions provide a reasonable basis for the fair presentation of Occidental's
financial position and results of operations.
Included in the accompanying balance sheet is net property, plant and
equipment at a carrying value of $13.867 billion as of December 31, 1995. These
carrying values are based on Occidental's plans and intentions to continue to
operate, maintain and, where it is economically desirable, to expand its
businesses. If future economic conditions result in changes in management's
plans or intentions, the carrying values of the affected assets will be reviewed
again and any appropriate adjustments made.
Included in the accompanying consolidated balance sheet is a deferred tax
asset of $1.8 billion as of December 31, 1995, the noncurrent portion of which
is netted against deferred income tax liabilities. Realization of that asset is
dependent upon Occidental generating sufficient future taxable income.
Occidental expects to realize the recorded deferred tax asset through future
operating income and reversal of taxable temporary differences.
The accompanying consolidated balance sheet includes assets of $2.038
billion as of December 31, 1995 relating to Occidental's oil and gas operations
in countries outside North America. Some of these countries may be considered
politically and economically unstable. These assets and the related operations
are subject to the risk of actions by governmental authorities and insurgent
groups. Occidental attempts to conduct its financial affairs so as to protect
against such risks and would expect to receive compensation in the event of
nationalization.
Since Occidental's major products are commodities, significant changes in
the prices of oil and gas and chemical products could have a significant impact
on Occidental's results of operations for any particular year.
FOREIGN CURRENCY TRANSLATION The functional currency applicable to
Occidental's foreign oil and gas operations, except for operations in the Dutch
sector of the North Sea, is the U.S. dollar since cash flows are denominated
principally in U.S. dollars. Chemical operations in Latin America use the U.S.
dollar as the functional currency because of high inflation rates. The effect of
exchange-rate changes on transactions denominated in nonfunctional currencies
generated gains of approximately $1 million in 1995, $14 million in 1994 and $30
million in 1993, which in 1994 and 1993 were mainly attributable to the highly
inflationary economy of Brazil.
CASH AND CASH EQUIVALENTS Cash equivalents consist of highly liquid money-
market mutual funds and bank deposits with initial maturities of three months or
less. Cash equivalents totaled approximately $620 million and $180 million at
December 31, 1995 and 1994, respectively.
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.
38
<PAGE>
TRADE RECEIVABLES In 1992, Occidental entered into an agreement to sell,
under a revolving sale program, an undivided percentage ownership interest in a
designated pool of domestic trade receivables, with limited recourse. Under this
program, Occidental has retained the collection responsibility with respect to
the receivables sold. An interest in new receivables is sold as collections are
made from customers. As of December 31, 1995 and 1994, Occidental had received
cash proceeds totaling $500 million, all of which was received in 1993 and 1992.
Fees and expenses under this program are included in selling, general and
administrative and other operating expenses. During the years ended December 31,
1995, 1994 and 1993, the cost of this program amounted to approximately 6.3
percent, 4.8 percent and 3.7 percent, respectively, of the weighted average
amount of proceeds received.
INVENTORIES Product and raw material inventories, except certain domestic
chemicals, are stated at cost determined on the first-in, first-out (FIFO) and
average-cost methods and did not exceed market value. The remaining product and
raw material inventories are stated at cost using the last-in, first-out (LIFO)
method and also did not exceed market value. Inventories of materials and
supplies are valued at cost or less (see Note 6).
PROPERTY, PLANT AND EQUIPMENT Property additions and major renewals and
improvements are capitalized at cost. Interest costs incurred in connection with
major capital expenditures are capitalized and amortized over the lives of the
related assets (see Note 17). Depreciation of oil and gas producing properties
is determined principally by the unit-of-production method and is based on
estimated recoverable reserves. The unit-of-production method of depreciation,
based on estimated total productive life, also is used for certain chemical
plant and equipment. Depreciation of other plant and equipment, including
natural gas transmission facilities, has been provided primarily using the
straight-line method (see Note 5).
Oil and gas properties are accounted for using the successful-efforts
method. Costs of acquiring nonproducing acreage, costs of drilling successful
exploration wells and development costs are capitalized. Producing and
nonproducing properties are evaluated periodically and, if conditions warrant,
an impairment reserve is provided. Annually, a determination is made whether it
is probable that significant impairment of the carrying cost for individual
fields or groups of fields has occurred, considering a number of factors,
including profitability, political risk and Occidental's estimate of future oil
and gas prices. If impairment is believed probable, a further analysis is
performed using Occidental's estimate of future oil and gas prices to determine
the impairment to be recorded for specific properties. Additionally, worldwide
oil and gas properties are impaired when undiscounted future net cash flows,
based upon the then-current oil and gas prices with no future escalation, are
less than the capitalized cost of such properties on an aggregate basis. Annual
lease rentals and exploration costs, including geologic and geophysical costs
and exploratory dry-hole costs, are expensed as incurred.
In 1986, Occidental acquired, in a transaction accounted for as a purchase,
MidCon Corp. (MidCon), a natural gas transmission company whose interstate
pipeline subsidiary is subject to rate regulation by the Federal Energy
Regulatory Commission. Accordingly, MidCon defers or capitalizes certain costs
in property, plant and equipment, the recovery of which is subject to the rate-
regulatory process. With respect to the interstate natural gas transmission
subsidiary of MidCon, the allocated purchase price, less subsequent accumulated
depreciation, exceeded the amount subject to recovery through the rate-
regulatory process by $4.2 billion and $4.3 billion at December 31, 1995 and
1994, respectively. This excess amount as of December 31, 1995 is being
depreciated over a remaining period of 38 years.
OTHER ASSETS Other assets include tangible assets, certain of which are
amortized over the estimated periods to be benefited, and deferred financing
costs.
NOTES PAYABLE Notes payable at December 31, 1995 and 1994 consisted of short-
term notes due to financial institutions and other corporations. The weighted
average interest rate on short-term borrowings outstanding as of December 31,
1995 and 1994 was 6.0 percent and 7.6 percent, respectively.
ACCRUED LIABILITIES--CURRENT Accrued liabilities include the following (in
millions):
<TABLE>
<CAPTION>
Balance at December 31, 1995 1994
================================================== ========= =========
<S> <C> <C>
Accrued payroll, commissions and related expenses $ 229 $ 189
Accrued interest expense $ 134 $ 141
Regulatory rate refunds $ -- $ 128
- -------------------------------------------------- --------- ---------
</TABLE>
ENVIRONMENTAL COSTS Environmental expenditures that relate to current
operations are expensed or capitalized as appropriate. Expenditures that relate
to existing conditions caused by past operations and that do not contribute to
current or future revenue generation are expensed. Reserves for estimated costs
are recorded when environmental remedial efforts are probable and the costs can
be reasonably estimated. 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. The environmental reserves are based on management's estimate of
the most likely cost to be incurred and are reviewed periodically and adjusted
as additional or new information becomes available. Probable recoveries
39
<PAGE>
or reimbursements are recorded as an asset. The environmental reserves are
included in accrued liabilities and other noncurrent liabilities and amounted to
$138 million and $444 million, respectively, at December 31, 1995 and $113
million and $522 million, respectively, at December 31, 1994.
Environmental reserves are discounted only when the aggregate amount of the
estimated costs for a specific site and the timing of cash payments are reliably
determinable. As of December 31, 1995 and 1994, reserves that were recorded on a
discounted basis were not material.
DISMANTLEMENT, RESTORATION AND RECLAMATION COSTS The estimated future
abandonment costs of oil and gas properties and removal costs for offshore
production platforms, net of salvage value, are accrued over their operating
lives. Such costs are calculated at unit-of-production rates based upon
estimated proved recoverable reserves and are taken into account in determining
depreciation, depletion and amortization. For all other operations, appropriate
reserves are provided when a decision is made to dispose of a property, since
Occidental makes capital renewal expenditures on a continual basis while an
asset is in operation. Such reserves are included in accrued liabilities and
other noncurrent liabilities and amounted to $16 million and $222 million,
respectively, at December 31, 1995 and $18 million and $219 million,
respectively, at December 31, 1994.
HEDGING ACTIVITIES Occidental periodically uses commodity futures contracts,
options and swaps to hedge the impact of oil and natural gas price fluctuations
and uses forward exchange contracts to hedge the risk associated with
fluctuations in foreign currency exchange rates. Gains and losses on commodity
futures contracts are deferred until recognized as an adjustment to sales
revenue or purchase costs when the related transaction being hedged is
finalized. Gains and losses on foreign currency forward exchange contracts that
hedge identifiable future commitments are deferred until recognized when the
related item being hedged is settled. All other contracts are recognized in
periodic income. The cash flows from such contracts are included in operating
activities in the consolidated statements of cash flows.
Interest rate swaps are entered into on specific debt as part of
Occidental's overall strategy to maintain part of its debt on a floating rate
basis.
EARNINGS PER COMMON SHARE Primary earnings per common share was computed by
dividing net income, less preferred dividend requirements, by the weighted
average number of common shares outstanding and the dilutive effect of stock
options during each year: approximately 318 million in 1995, 311 million in 1994
and 305 million in 1993. The computation of fully diluted earnings per share
further assumes the dilutive effect of conversion of the preferred stocks.
SUPPLEMENTAL CASH FLOW INFORMATION Cash payments during the years 1995, 1994
and 1993 included federal, foreign and state income taxes of approximately $230
million, $133 million and $142 million, respectively. Interest paid (net of
interest capitalized) totaled approximately $538 million, $505 million and $531
million for the years 1995, 1994 and 1993, respectively. See Note 4 for detail
of noncash investing and financing activities regarding certain acquisitions in
1994.
- -------------------------------------------------------------------------------
NOTE 2 FINANCIAL INSTRUMENTS
COMMODITY FUTURES AND FORWARD CONTRACTS Occidental has three major business
segments, each of which has engaged, from time to time, in some form of
commodity derivative activity, generally limited to hedging arrangements. During
1995, only the oil and gas and natural gas transmission segments engaged in such
activities. The oil and gas division engages in oil and gas trading activity
through the use of futures contracts. The results are not significant and are
included in periodic income. The natural gas transmission business segment
(MidCon) uses commodity futures contracts, options and swaps to hedge the impact
of natural gas price fluctuations related to three major categories of business:
purchases for and sales from storage; fixed-price sales and purchase contracts;
and natural gas production.
STORAGE Storage activities consist of purchasing and injecting natural gas
into storage during low-price, low-demand periods (typically the months of April
through October) and withdrawing that gas for sale during high-price, high-
demand periods (typically the months of November through March). These periods
may vary depending primarily on weather conditions and competing fuel prices in
the market areas. MidCon uses derivatives to hedge the sales and purchase prices
related to its storage program mainly through futures contracts. The hedging
contracts used have terms of less than 18 months. Gains and losses on these
hedging contracts are deferred until recognized when the transactions being
hedged are finalized. A small number of options were sold against inventory
capacity or physical inventory with results included in periodic income.
FIXED-PRICE SALES AND PURCHASES Fixed-price gas sales and purchase contracts
vary by agreement. Hedges are placed nearly simultaneously with the consummation
of many of the sales-purchase agreements. Most agreements are for less than 18
months. The longest hedge agreement, with a remaining term of eight years,
involves a supply agreement for an electric generation facility where MidCon has
undertaken to supply gas at predetermined prices and has hedged such commitment.
40
<PAGE>
Gains and losses on these hedging contracts are deferred until recognized
when the transactions being hedged are finalized. New York Mercantile Exchange
(NYMEX), Kansas City Board of Trade (KCBT) (collectively, the Exchanges) and
over-the-counter (OTC) hedge instruments are utilized.
PRODUCTION The natural gas transmission division manages the hedging program
for annual gas production after royalties and severance taxes of approximately
13 Bcf. This gas is produced fairly evenly throughout the year. Depending on
MidCon's view of price volatility and current futures prices from the Exchanges,
portions of this production are hedged. Production past 18 months into the
future is not hedged. Gains and losses on these hedging contracts are deferred
until recognized when the transactions being hedged are finalized.
All hedging activity is matched to physical natural gas buying and selling
activity and is done with natural gas futures or derivative instruments. There
is essentially no discrepancy with regard to timing, i.e., hedges are placed for
the same month in which the price risk for the underlying physical movement is
anticipated to occur, based on analysis of sales and purchase contracts and
historical data. Hedges are removed upon consummation of the underlying physical
activity. All deferred gains or losses are then recognized. Because the
commodity covered by the Exchanges' natural gas futures contracts is
substantially the same commodity that MidCon buys and sells in the physical
market, no special correlation studies, other than monitoring the degree of
convergence between the futures and the cash markets, are deemed necessary.
Geographic basis risk (the difference in value of gas at the Exchanges' delivery
points versus the points of MidCon's transaction) is monitored and, where
appropriate, hedged using OTC instruments. Exchange-traded futures and options
are valued using settlement prices published by the Exchanges. OTC options are
valued using a standard option pricing model that requires published exchange
prices, market volatility per broker quotes and the time value of money. Swaps
are valued by comparing current broker quotes for price or basis with the
corresponding price or basis in the related swap agreement and then discounting
the result to present value.
Although futures and options traded on the Exchanges are included in the
table below, they are not financial instruments as defined in generally accepted
accounting principles (GAAP), since physical delivery of natural gas may be, and
occasionally is, made pursuant to these contracts. However, they are a major
part of MidCon's commodity risk management program.
The following table summarizes the types of hedges used and the related
financial information as of December 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
----------------------------------- -----------------------------------
Over-the- Over-the-
Notional volumes in Bcf Hedges of Exchanges(a) Counter(b) Total Exchanges(a) Counter(b) Total
========================== ========= ========= ========= ========= ========= ========= =========
<S> <C> <C> <C> <C> <C> <C> <C>
Price hedge
Futures Purchases 62 -- 62 -- -- --
Sales -- -- -- 97 -- 97
Swaps Purchases -- 8 8 -- 8 8
Basis hedge
Basis swaps(c) Purchases -- 9 9 -- 10 10
Sales -- 7 7 -- 19 19
- -------------------------- --------- --------- --------- --------- --------- --------- ---------
</TABLE>
<TABLE>
<CAPTION>
1995 1994
------------------------------------------------ ------------------------------------------------
Over-the- Book Fair Over-the- Book Fair
Dollars in millions Exchanges Counter Value Value Exchanges Counter Value Value
=========================== ========= ========= ========= ========= ========= ========= ========= =========
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Deferred net gains
Firm commitment/forecast
transactions $ 14 $ -- $ 4 $ --
Liabilities
Price swaps $ 2 $ 6 $ -- $ 4
Basis swaps $ 1 $ 2 $ -- $ 1
- --------------------------- --------- --------- --------- --------- --------- --------- --------- ---------
(a) Not financial instruments as defined in GAAP but included as they are a major part of the program.
(b) Excluding the eight-year swap agreement, the average weighted term is less than 12 months. Seventy percent of the notional
volumes are hedged with counterparties with a single A or better credit rating.
(c) Basis swaps are utilized to hedge the geographic price differentials due primarily to transportation cost and local supply-
demand factors.
41
</TABLE>
<PAGE>
FORWARD EXCHANGE AND INTEREST RATE CONTRACTS Occidental is engaged in both
oil and gas and chemical activities internationally. International oil and gas
transactions are mainly denominated in U.S. dollars; consequently, foreign
currency exposure is not deemed material. Many of Occidental's foreign oil and
gas operations and foreign chemical operations are located primarily in
developing countries whose currencies generally depreciate against the U.S.
dollar on a continuing basis. An effective currency forward market does not
exist for these countries; therefore, Occidental attempts to manage its exposure
primarily by balancing monetary assets and liabilities and maintaining cash
positions only at levels necessary for operating purposes. At December 31, 1995,
Occidental had foreign currency forward exchange contracts totaling $39 million
of purchases and $17 million of sales, which essentially hedged foreign currency
denominated debt and receivables. These contracts mature in 1996, except for one
purchase contract for $38 million which matures in 2000.
From time to time, Occidental enters into interest rate swap agreements. In
November 1993, Occidental entered into interest rate swaps on newly issued
fixed-rate debt for notional amounts totaling $530 million. This converted
fixed-rate debt into variable-rate debt, based on the London Interbank Offered
Rate (LIBOR), with interest rates ranging from 6.5 percent to 6.7 percent at
December 31, 1995. These agreements mature at various dates from 1998 through
2000. Notional amounts do not represent cash flow. Credit risk exposure is
limited to the net interest differentials, which are reflected in interest
expense. The swap rate difference resulted in approximately $5 million of
additional interest expense in 1995 and $6 million and $1 million savings in
interest expense for 1994 and 1993, respectively, compared to what interest
expense would have been had the debt remained at fixed rates. The impact of the
swaps on the weighted average interest rates for all debt in 1995, 1994 and 1993
was not significant.
FAIR VALUE OF FINANCIAL INSTRUMENTS Occidental values financial instruments
as required by Statement of Financial Accounting Standards (SFAS) No. 107. The
carrying amounts of cash and cash equivalents and short-term notes payable
approximate fair value because of the short maturity of those instruments.
Occidental estimates the fair value of its senior funded debt based on the
quoted market prices for the same or similar issues or on the yields offered to
Occidental for debt of similar rating and similar remaining maturities. The
estimated fair value of Occidental's senior funded debt at December 31, 1995 and
1994 was $5.478 billion and $6.059 billion, respectively, compared with a
carrying value of $4.819 billion and $5.823 billion, respectively. The fair
value of interest rate swaps is the amount at which they could be settled, based
on estimates obtained from dealers. Based on these estimates at December 31,
1995 and 1994, Occidental would be required to pay approximately $3 million and
$54 million, respectively, to terminate its interest rate swap agreements.
Occidental will continue its strategy of maintaining part of its debt on a
floating rate basis.
The carrying value of other on-balance sheet financial instruments
approximates fair value and the cost, if any, to terminate off-balance sheet
financial instruments is not significant.
- --------------------------------------------------------------------------------
NOTE 3 REORGANIZATION CHARGES
In the fourth quarter of 1995, Occidental recorded charges of $132 million,
included in other operating expenses, related to the reorganization of its
worldwide oil and gas operations headquartered in Bakersfield, California and
the reorganization of the operations of the natural gas transmission division.
This reorganization is part of Occidental's efforts to consolidate operations
and increase management efficiency, asset utilization and profitability. The
charges consist of $90 million in workforce reductions (1,050 employees), $24
million for lease abandonment costs and $18 million related to other items. The
majority of the cash costs associated with the reorganization are planned to be
paid during 1996. At December 31, 1995, the balance of the reorganization
reserves are included in accrued liabilities and other noncurrent liabilities
and amounted to approximately $92 million and $40 million, respectively.
- -------------------------------------------------------------------------------
NOTE 4 BUSINESS COMBINATIONS, DISCONTINUED OPERATIONS AND ASSET DISPOSITIONS
In October 1995, Occidental sold its agricultural chemicals business.
During May 1995, Occidental sold its high-density polyethylene business to
Lyondell Petrochemical Company. Occidental also sold, pursuant to a Federal
Trade Commission divestiture order, its polyvinyl chloride (PVC) facilities at
Addis, Louisiana and Burlington South, New Jersey. In addition, Occidental sold
certain Canadian oil and gas assets, which were acquired as part of the purchase
of Placid Oil Company (Placid) in December 1994, and a portion of the oil and
gas operation in Pakistan. The combined cash proceeds from these asset
dispositions were in excess of $900 million. On a pro forma basis, these
dispositions would not have had a significant effect on Occidental's
consolidated results for the year ended December 31, 1995.
During the second quarter of 1995, Occidental and Canadian Occidental
Petroleum Ltd. (CanadianOxy) formed partnerships into which they contributed
primarily sodium chlorate manufacturing facilities. Occidental retained a less-
than-twenty-percent direct interest in these partnerships accounted for on the
equity method. This transaction did not result in any gain or loss.
In 1995, the pretax gain of $45 million on dispositions of assets primarily
resulted from the sale of Occidental's PVC facility at Addis, Louisiana.
42
<PAGE>
In December 1994, Occidental acquired Placid for an aggregate purchase
price of approximately $250 million through the issuance of 3,606,484 shares of
$3.875 cumulative convertible voting preferred stock, with a value of $175
million, and the balance through the issuance of 3,835,941 shares of Occidental
common stock. Placid has oil and gas exploration and production properties
primarily in the U.S. Gulf Coast and the Netherlands. Placid also has an
approximate 39 percent interest in a major pipeline system in the Dutch sector
of the North Sea, which includes 170 miles of main and feeder lines. The
acquisition has been accounted for by the purchase method. Accordingly, the cost
of the acquisition was allocated to the assets acquired and liabilities assumed
based upon their estimated respective fair values. The allocation of the
purchase price was finalized during 1995 upon completion of the asset valuations
and resolution of the preacquisition contingencies.
In late March 1994, Occidental acquired interests in certain U.S. Gulf
Coast oil and gas properties from Agip Petroleum Co. Inc. for a purchase price
of $161 million through the issuance of 5,150,602 shares of Occidental common
stock and $78 million in cash.
On a pro forma basis, these acquisitions would not have had a significant
effect on Occidental's consolidated results for either of the two years in the
period ended December 31, 1994.
In 1994, the pretax gains of $15 million on dispositions of assets
primarily resulted from the sale of Occidental's remaining interests in its
producing operations in Argentina.
In July 1993, Occidental sold Island Creek Coal, Inc. to CONSOL Inc.
Following the closing of the sale, Occidental re-evaluated the adequacy of the
reserves recorded in the fourth quarter of 1992 related to the decision to exit
the coal business and reversed certain reserves no longer required. After
recognizing the effect of the sale and the reversal of reserves, an after-tax
benefit of $221 million was included in discontinued operations.
In 1993, the pretax gains of $54 million on dispositions of assets
primarily resulted from the sale of Occidental's equity interest in Trident NGL,
Inc. (Trident).
- -------------------------------------------------------------------------------
NOTE 5 EXTRAORDINARY GAIN(LOSS) AND ACCOUNTING CHANGES
The 1993 results included a net extraordinary loss of $12 million, which
resulted from the early extinguishment of debt.
Beginning in 1994, Occidental revised the estimated average useful lives
used to compute depreciation for most of its chemical machinery and equipment
from 20 years to 25 years and for most of its natural gas transmission property
to a remaining life of 40 years. These revisions were made to more properly
reflect the current economic lives of the assets based on anticipated industry
conditions. The result was a reduction in net loss for the year ended December
31, 1994 of approximately $65 million, or approximately $.21 per share. Natural
gas transmission and chemical divisional earnings benefited by approximately $31
million and $34 million, respectively.
In December 1992, the Financial Accounting Standards Board issued SFAS No.
112--"Employers' Accounting for Postemployment Benefits," which substantially
changed the existing method of accounting for employer benefits provided to
inactive or former employees after active employment but before retirement. This
statement requires that the cost of postemployment benefits (principally medical
benefits for inactive employees) be recognized in the financial statements
during employees' active working careers. Occidental's adoption of SFAS No. 112,
effective January 1, 1994, did not have a material impact on Occidental's
financial position or results of operations.
- --------------------------------------------------------------------------------
NOTE 6 INVENTORIES
Inventories of approximately $225 million and $241 million were valued
under the LIFO method at December 31, 1995 and 1994, respectively.
Inventories consisted of the following (in millions):
<TABLE>
<CAPTION>
Balance at December 31, 1995 1994
======================================== ========= =========
<S> <C> <C>
Raw materials $ 116 $ 135
Materials and supplies 180 201
Work in process 17 21
Finished goods 363 428
--------- ---------
676 785
LIFO reserve (29) (37)
--------- ---------
TOTAL $ 647 $ 748
======================================== ========= =========
</TABLE>
43
<PAGE>
Inventories as of December 31, 1995 reflected the absence of balances
relating to certain chemical assets which were sold during 1995. During 1994,
inventory quantities were reduced at natural gas transmission. These
reductions resulted in a liquidation of LIFO inventory quantities carried at
lower costs that prevailed in prior years. The effect of this liquidation was
to reduce cost of sales by $13 million for the year ended December 31, 1994.
- -------------------------------------------------------------------------------
NOTE 7 SENIOR FUNDED DEBT
Senior funded debt consisted of the following (in millions):
<TABLE>
<CAPTION>
Balance at December 31, 1995 1994
=========================================================================================== ========= =========
<S> <C> <C>
OCCIDENTAL PETROLEUM CORPORATION
11.75% senior debentures due 2011, callable March 15, 1996 at 104.838 (see Note 19) $ 955 $ 955
11.125% senior debentures due 2019, callable June 1, 1999 at 105.563 144 144
10.125% senior debentures due 2009 276 276
9.25% senior debentures due 2019, putable August 1, 2004 at par 300 300
10.75% senior notes due 1998, called May 1, 1995 at par -- 200
10.125% senior notes due 2001 330 330
9.625% senior notes due 1999, callable July 1, 1996 at par 300 300
9.1% to 9.75% medium-term notes due 1997 through 2001 99 124
8.5% medium-term notes due 2004, callable September 15, 1999 at par 250 250
11.125% senior notes due 2010 150 150
6.53125% floating rate senior notes due 1999 150 150
8.5% senior notes due 2001 150 150
8.75% medium-term notes due 2023 100 100
6.6375% to 11% medium-term notes due 1997 through 2000 294 294
5.67% to 8.34% medium-term notes due 1996 through 2008 292 359
5.76% to 6.41% medium-term notes due 1998 through 2000 601 601
5.98% to 6.5% commercial paper -- 430
10.42% senior notes due 2003, callable December 1, 1998 at par 50 50
7.3% to 8.8% retail medium-term notes due 1998 through 2004, callable at various dates 167 70
6.2% to 6.5% revolving credits -- 100
--------- ---------
4,608 5,333
--------- ---------
OXY USA INC.
7% debentures due 2011, callable anytime at par 274 274
7.2% unsecured notes due 2020 (Note 16) 7 7
6.625% debentures due 1998 through 1999, callable anytime at par (Note 16) 55 55
6.125% debentures due 1996 through 1997, callable anytime at par (Note 16) 15 15
5.7% to 7.8% unsecured notes due 2000 through 2007 58 59
--------- ---------
409 410
--------- ---------
OTHER SUBSIDIARY DEBT
3.75% to 12.5% unsecured notes due 1996 through 2030 382 158
6% to 14.5% secured notes due 1996 through 2011 57 124
--------- ---------
439 282
--------- ---------
5,456 6,025
Less:
Unamortized discount, net (147) (163)
Current maturities (490) (39)
--------- ---------
TOTAL $ 4,819 $ 5,823
=========================================================================================== ========= =========
</TABLE>
44
<PAGE>
At December 31, 1995, $495 million of notes due in 1996 were classified as
noncurrent since it is management's intention to refinance this amount on a
long-term basis, initially utilizing available lines of bank credit with
maturities extending to 1999 and 2000.
At December 31, 1995, minimum principal payments on senior funded debt,
including sinking fund requirements, subsequent to December 31, 1996 aggregated
$4.966 billion, of which $301 million is due in 1997, $375 million in 1998,
$1.224 billion in 1999, $499 million in 2000, $518 million in 2001 and $2.049
billion thereafter. Unamortized discount is generally being amortized to
interest expense on the effective interest method over the lives of the related
issues.
At December 31, 1995, under the most restrictive covenants of certain
financing agreements, the capacity for the payment of cash dividends and other
distributions on, and for acquisitions of, Occidental's capital stock was
approximately $2.0 billion, assuming that such dividends, distributions and
acquisitions were made without incurring additional borrowings.
At December 31, 1995, Occidental had available lines of committed bank
credit of approximately $2.6 billion. Bank fees on committed lines of credit
ranged from 0.125 percent to 0.1875 percent.
- -------------------------------------------------------------------------------
NOTE 8 ADVANCE SALE OF CRUDE OIL
In December 1995, Occidental entered into a transaction with Clark USA,
Inc. (Clark) under which Occidental agreed to deliver approximately 17.7 million
barrels of West Texas Intermediate (WTI)-equivalent oil over the next six years.
In exchange, Occidental received $100 million in cash and approximately 5.5
million shares of Clark common stock. As a result of this transaction,
Occidental owns approximately 19 percent of Clark accounted for on the cost
method. Occidental has accounted for the consideration received in the
transaction as deferred revenue, which is being amortized into revenue as WTI-
equivalent oil is produced and delivered during the term of the agreement.
Reserves dedicated to the transaction are excluded from the estimate of proved
oil and gas reserves (see Supplemental Oil and Gas Information).
- -------------------------------------------------------------------------------
NOTE 9 LEASE COMMITMENTS
The present value of net minimum lease payments, net of the current
portion, totaled $259 million and $291 million at December 31, 1995 and 1994,
respectively.
Operating and capital lease agreements frequently include renewal and/or
purchase options and require Occidental to pay for utilities, taxes, insurance
and maintenance expense.
At December 31, 1995, future net minimum lease payments for capital and
operating leases (excluding oil and gas and other mineral leases) were the
following (in millions):
<TABLE>
<CAPTION>
Capital Operating
=================================================================== ========= =========
<S> <C> <C>
1996 $ 50 $ 101
1997 220 76
1998 6 65
1999 6 59
2000 5 50
Thereafter 78 374
--------- ---------
TOTAL MINIMUM LEASE PAYMENTS 365 $ 725
=========
Less:
Executory costs (6)
Imputed interest (68)
Current portion (32)
---------
PRESENT VALUE OF NET MINIMUM LEASE PAYMENTS, NET OF CURRENT PORTION $ 259
=================================================================== =========
</TABLE>
Rental expense for operating leases, net of immaterial sublease rental, was
$141 million in 1995, $163 million in 1994 and $158 million in 1993.
Included in the 1995 and 1994 property, plant and equipment accounts were
$442 million and $465 million, respectively, of property leased under capital
leases and $137 million and $130 million, respectively, of related accumulated
amortization.
45
<PAGE>
- -------------------------------------------------------------------------------
NOTE 10 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 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 may 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.
- --------------------------------------------------------------------------------
NOTE 11 OTHER COMMITMENTS AND CONTINGENCIES
At December 31, 1995, commitments for major capital expenditures during
1996 and thereafter were approximately $382 million.
Occidental has entered into agreements providing for future payments to
secure terminal and pipeline capacity, drilling services, electrical power,
steam and certain chemical raw materials. At December 31, 1995, the net present
value of the fixed and determinable portion of the obligations under these
agreements aggregated $228 million, which was payable as follows (in millions):
1996--$31, 1997--$30, 1998--$29, 1999--$27, 2000--$25 and 2001 through 2014--
$86. Payments under these agreements, including any variable component, were
$190 million in 1995, $188 million in 1994 and $182 million in 1993.
Occidental has certain other commitments under contracts, guarantees and
joint ventures, and certain other contingent liabilities. Additionally,
Occidental agreed to participate in the development of certain natural gas
reserves and construction of a liquefied natural gas plant in Malaysia. 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.
- -------------------------------------------------------------------------------
NOTE 12 DOMESTIC AND FOREIGN INCOME AND OTHER TAXES
The domestic and foreign components of income(loss) from continuing
operations before domestic and foreign income and other taxes were as follows
(in millions):
<TABLE>
<CAPTION>
For the years ended December 31, Domestic Foreign Total
============================================= ========= ========= =========
<S> <C> <C> <C>
1995 $ 425 $ 488 $ 913
========= ========= =========
1994 $ (46) $ 153 $ 107
========= ========= =========
1993 $ 150 $ 67 $ 217
============================================= ========= ========= =========
</TABLE>
46
<PAGE>
The provisions(credits) for domestic and foreign income and other taxes
consisted of the following (in millions):
<TABLE>
<CAPTION>
U.S. State
For the years ended December 31, Federal and Local Foreign Total
======================================================= ========= ========= ========= =========
<S> <C> <C> <C> <C>
1995
Current $ 152 $ 57 $ 175 $ 384
Deferred 50 (24) (8) 18
--------- --------- --------- ---------
$ 202 $ 33 $ 167 $ 402
======================================================= ========= ========= ========= =========
1994
Current $ 3 $ 18 $ 96 $ 117
Deferred 18 4 4 26
--------- --------- --------- ---------
$ 21 $ 22 $ 100 $ 143
======================================================= ========= ========= ========= =========
1993
Current $ (27) $ 28 $ 84 $ 85
Deferred 144 1 (142) 3
Deferred tax charge due to federal income tax rate
change 55 -- -- 55
--------- --------- --------- ---------
$ 172 $ 29 $ (58) $ 143
======================================================= ========= ========= ========= =========
</TABLE>
The credit provision for foreign income tax in 1993 reflected the reversal
of $130 million of foreign tax reserves following the settlement of tax matters
with foreign jurisdictions relating to the disposition of certain international
oil and gas assets in 1991. Deferred U.S. federal income tax included a charge
of $45 million relative to this reversal.
The following is a reconciliation, stated as a percentage of pretax income,
of the U.S. statutory federal income tax rate to Occidental's effective tax rate
on income(loss) from continuing operations:
<TABLE>
<CAPTION>
For the years ended December 31, 1995 1994 1993
======================================================= ========= ========= =========
<S> <C> <C> <C>
U.S. federal statutory tax rate 35% 35% 35%
Operations outside the United States(a) 11 65 4
State taxes, net of federal benefit 5 13 8
State tax benefit from operating loss carryforwards (3) -- --
Reserves not previously benefited (5) -- --
Domestic income tax reserves no longer required -- -- (4)
Nondeductible depreciation and other expenses 1 11 3
Federal income tax rate change -- -- 25
Other -- 10 (5)
--------- --------- ---------
Tax rate provided by Occidental 44% 134% 66%
======================================================= ========= ========= =========
(a) Included in these figures is the impact of not providing U.S. taxes on the unremitted
earnings of certain foreign subsidiaries. The effect of this is to reduce the U.S.
federal tax rate by approximately 4 percent in 1995.
47
</TABLE>
<PAGE>
Occidental adopted SFAS No. 109--"Accounting for Income Taxes," as of
January 1, 1992. The tax effects of temporary differences and carryforwards
resulting in deferred income taxes at December 31, 1995 and 1994 were as follows
(in millions):
<TABLE>
<CAPTION>
1995 1994
-------------------------- --------------------------
Deferred Deferred Deferred Deferred
Tax Tax Tax Tax
Items resulting in temporary differences and carryforwards Assets Liabilities Assets Liabilities
========================================================== =========== =========== =========== ===========
<S> <C> <C> <C> <C>
Property, plant and equipment differences $ 178 $ 3,616 $ 180 $ 3,873
Contract impairment reserves 74 -- 102 --
Discontinued operation loss accruals 167 -- 176 --
Environmental reserves 244 -- 272 --
Postretirement benefit accruals 207 -- 214 --
State income taxes 140 -- 140 --
Net operating loss carryforwards -- -- 267 --
Tax credit carryforwards 292 -- 309 --
All other 721 503 594 457
----------- ----------- ----------- -----------
Subtotal 2,023 4,119 2,254 4,330
Valuation allowance (189) -- (204) --
----------- ----------- ----------- -----------
Total deferred taxes $ 1,834 $ 4,119 $ 2,050 $ 4,330
========================================================== =========== =========== =========== ===========
</TABLE>
Included in total deferred tax assets was a current portion aggregating
$335 million and $285 million as of December 31, 1995 and 1994, respectively,
that was reported in prepaid expenses and other.
A deferred tax liability of approximately $70 million at December 31, 1995
has not been recognized for temporary differences related to Occidental's
investment in certain foreign subsidiaries primarily as a result of unremitted
earnings of consolidated subsidiaries, as it is Occidental's intention,
generally, to reinvest such earnings permanently.
The pension liability adjustments recorded directly to retained earnings
were net of an income tax charge of $9 million in 1995 and income tax benefits
of $6 million and $8 million in 1994 and 1993, respectively.
The foreign currency translation adjustment credited directly to retained
earnings in 1995 was net of an income tax charge of $10 million.
Discontinued operations included an income tax expense of $123 million in
1993.
The extraordinary loss that resulted from the early extinguishment of debt
was reduced by an income tax benefit of $7 million in 1993.
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. Net
operating loss carryforwards existing at December 31, 1994 were utilized in
1995. 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 its
financial position or results of operations.
- --------------------------------------------------------------------------------
NOTE 13 NONREDEEMABLE PREFERRED STOCK AND COMMON STOCK
The following is an analysis of nonredeemable preferred stock and common
stock (shares in thousands):
<TABLE>
<CAPTION>
Nonredeemable Common
Preferred Stock Stock
================================================== =============== ============
<S> <C> <C>
BALANCE, DECEMBER 31, 1992 -- 303,728
Issued 11,500 1,906
Options exercised and other, net -- (31)
- -------------------------------------------------- ------------ ------------
BALANCE, DECEMBER 31, 1993 11,500 305,603
Issued 14,995 11,300
Options exercised and other, net -- (50)
- -------------------------------------------------- ------------ ------------
BALANCE, DECEMBER 31, 1994 26,495 316,853
Issued -- 1,523
Options exercised and other, net -- 335
- -------------------------------------------------- ------------ ------------
BALANCE, DECEMBER 31, 1995 26,495 318,711
================================================== ============ ============
</TABLE>
48
<PAGE>
Occidental has authorized 50,000,000 shares of preferred stock with a par
value of $1.00 per share. In February 1994, Occidental issued 11,388,340 shares
of $3.00 cumulative CXY-indexed convertible preferred stock in a public offering
for net proceeds of approximately $557 million. The shares are convertible into
Occidental common stock in accordance with a conversion formula that is indexed
to the market price of the common shares of CanadianOxy. In addition, the
shares, which are not subject to any sinking fund or mandatory redemption
requirements, have a liquidation preference of $50.00 per share, plus
accumulated and unpaid dividends. The shares of CXY-indexed convertible
preferred stock are redeemable on or after January 1, 1999, in whole or in part,
at the option of Occidental, at a redemption price of $51.50 per share declining
ratably to $50.00 per share on or after January 1, 2004, in each case plus
accumulated and unpaid dividends to the redemption date. Each holder of shares
of the CXY-indexed convertible preferred stock has the right, at such holder's
option, to convert the shares held, at any time, unless previously redeemed,
into a number of shares of Occidental common stock currently determined by
multiplying the Conversion Ratio by the aggregate number of shares being
converted by the holder. The Conversion Ratio is the product of (i) the Price
Ratio (as defined, generally the market price, calculated in a specified manner,
of one CanadianOxy common share over the market price, calculated in a specified
manner, of one share of Occidental common stock) and (ii) the Share Factor (as
defined, initially 1.766, subject to adjustment upon the occurrence of certain
events affecting the CanadianOxy common shares). As of December 31, 1995, the
aggregate number of shares of Occidental common stock issuable upon conversion
of all of the issued and outstanding shares of the CXY-indexed convertible
preferred stock was 30,566,305, based on the Conversion Ratio then in effect of
2.684. Dividends on the CXY-indexed convertible preferred stock at an annual
rate of $3.00 per share are cumulative and are payable quarterly in arrears,
when and as declared by Occidental's Board of Directors. Holders of the CXY-
indexed convertible preferred stock have no voting rights, except in certain
circumstances; however, holders of such series, voting separately as a class
with all other affected classes or series of preferred stock upon which like
voting rights have been conferred and are exercisable, are entitled to elect two
additional directors if the equivalent of six quarterly dividends on the CXY-
indexed convertible preferred stock are accumulated and unpaid.
In December 1994, Occidental issued 3,606,484 shares of $3.875 cumulative
convertible voting preferred stock in connection with the Placid acquisition. In
February 1993, Occidental issued 11,500,000 shares of $3.875 cumulative
convertible preferred stock. The shares of both series are redeemable on or
after February 18, 1998, in whole or in part, at the option of Occidental, at a
redemption price of $51.9375 per share declining ratably to $50.00 per share on
or after February 18, 2003, in each case plus accumulated and unpaid dividends
to the redemption date. Each series of $3.875 preferred stock has a liquidation
preference of $50.00 per share, plus accumulated and unpaid dividends, and is
convertible at the option of the holder into common stock of Occidental at a
conversion price of $22.76 per share, subject to adjustment in certain events.
Dividends on each series of the $3.875 preferred stock at an annual rate of
$3.875 per share are cumulative and are payable quarterly in arrears, when and
as declared by Occidental's Board of Directors. Holders of the $3.875 cumulative
convertible preferred stock have no voting rights, except in certain
circumstances. Holders of the $3.875 cumulative convertible voting preferred
stock, voting separately as a class with the Occidental common stock and all
other classes or series of preferred stock upon which like voting rights may be
conferred, have the right to vote for the election of directors and for all
other purposes. Holders of each series of $3.875 preferred stock, voting
separately as a class with all other affected classes or series of preferred
stock upon which like voting rights have been conferred and are exercisable, are
entitled to elect two additional directors if the equivalent of six quarterly
dividends on such series of $3.875 preferred stock are accumulated and unpaid.
In 1986, pursuant to a stockholders' rights plan, a dividend of one stock
purchase right (right) on each outstanding share of Occidental's common stock
was issued. Similar rights have been, and generally will be, issued in respect
of shares of common stock subsequently issued. Each right becomes exercisable,
upon the occurrence of certain events, for one one-hundredth of a share of
Series A junior participating preferred stock, par value $1.00 per share, at a
purchase price of $80.00 or, under certain circumstances, common stock or other
securities, cash or other assets having a then-current market price (as defined
and subject to adjustment) equal to twice such purchase price. The rights
currently are not exercisable and will be exercisable only if a person or group
either acquires beneficial ownership of 20 percent or more of Occidental's
common stock or commences a tender or exchange offer that would result in
ownership of 30 percent or more. The rights, which expire in October 1996, are
redeemable in whole, but not in part, at Occidental's option at any time for a
price of $.05 per right.
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS Options to purchase common stock
of Occidental have been granted to officers and employees under stock option
plans adopted in 1978, 1987 and 1995. During 1995, options for 882,008 shares
became exercisable, and options for 3,517,095 shares were exercisable at
December 31, 1995. At December 31, 1995, options for 1,244,332 shares were
outstanding with stock appreciation rights (SAR), all of which options for
shares were exercisable.
49
<PAGE>
The following is a summary of stock option transactions during 1995, 1994
and 1993 (shares in thousands, except per-share amounts):
<TABLE>
<CAPTION>
1995 1994 1993
------------------------------- ------------------------------- -------------------------------
Shares Price Range per Share Shares Price Range per Share Shares Price Range per Share
=================== ====== ===================== ====== ===================== ====== =====================
<S> <C> <C> <C> <C> <C> <C>
BEGINNING BALANCE 5,098 $ 17.750 -- $ 31.125 4,556 $ 18.500 -- $ 31.125 3,965 $ 18.500 -- $ 31.125
Granted or issued 1,127 $ 23.125 905 $ 17.750 -- $ 21.125 841 $ 22.000
Exercised (431) $ 17.750 -- $ 22.000 (52) $ 18.500 -- $ 19.875 (42) $ 18.500 -- $ 19.875
Canceled (313) $ 17.750 -- $ 30.625 (311) $ 18.500 -- $ 30.625 (208) $ 18.500 -- $ 31.125
------ --------------------- ------ --------------------- ------ ---------------------
ENDING BALANCE 5,481 $ 17.750 -- $ 31.125 5,098 $ 17.750 -- $ 31.125 4,556 $ 18.500 -- $ 31.125
====== ====== ======
RESERVED FOR GRANT
AT DECEMBER 31 9,979 4,142 4,911
=================== ====== ====== ======
</TABLE>
STOCK INCENTIVE PLAN Occidental has a stock incentive plan whereby a limited
number of executives may be awarded Occidental common stock at the par value of
$.20 per share, with such shares vesting after five years or earlier under
certain conditions. The related expense is amortized over the vesting period.
Under the plan, a total of approximately 2,731,280 shares may be awarded;
234,711 shares were awarded in 1995. Future restricted stock, performance stock,
stock options and stock options granted with SAR will be made from the 1995
Incentive Stock Plan. At December 31, 1995, 9,978,661 shares were available for
the granting of future awards.
- --------------------------------------------------------------------------------
NOTE 14 RETIREMENT PLANS AND POSTRETIREMENT BENEFITS
Occidental has various defined contribution retirement plans for its
salaried, domestic union and nonunion hourly, and certain foreign national
employees that provide for periodic contributions by Occidental based on plan-
specific criteria, such as base pay, age level and/or employee contributions.
Occidental contributed and expensed $71 million, $70 million and $61 million
under the provisions of these plans for 1995, 1994 and 1993, respectively.
Occidental's retirement and postretirement defined benefit plans are
accrued based on various assumptions and discount rates, as described below. The
actuarial assumptions used could change in the near term as a result of changes
in expected future trends and other factors which, depending on the nature of
the changes, could cause increases or decreases in the liabilities accrued.
Pension costs for Occidental's defined benefit pension plans, determined by
independent actuarial valuations, are funded by payments to trust funds, which
are administered by independent trustees. The components of the net pension cost
for 1995, 1994 and 1993 were as follows (in millions):
<TABLE>
<CAPTION>
For the years ended December 31, 1995 1994 1993
================================================== ========= ========= =========
<S> <C> <C> <C>
Service cost--benefits earned during the period $ 9 $ 8 $ 10
Interest cost on projected benefit obligation 23 21 20
Actual return on plan assets (43) 1 (8)
Net amortization and deferral 32 (10) (3)
Curtailments and settlements 12 -- 4
--------- --------- ---------
Net pension cost $ 33 $ 20 $ 23
================================================== ========= ========= =========
</TABLE>
In 1995, 1994 and 1993, Occidental recorded adjustments to retained
earnings of a credit of $16 million and charges of $10 million and $14
million, respectively, to reflect the net-of-tax difference between the
additional liability required under pension accounting provisions and the
corresponding intangible asset.
50
<PAGE>
The following table sets forth the defined benefit plans' funded status and
amounts recognized in Occidental's consolidated balance sheets at December 31,
1995 and 1994 (in millions):
<TABLE>
<CAPTION>
1995 1994
------------------------------ ------------------------------
Assets Exceed Accumulated Assets Exceed Accumulated
Accumulated Benefits Accumulated Benefits
Balance at December 31, Benefits Exceed Assets Benefits Exceed Assets
================================================== ============= ============= ============= =============
<S> <C> <C> <C> <C>
PRESENT VALUE OF THE ESTIMATED PENSION BENEFITS TO
BE PAID IN THE FUTURE
Vested benefits $ 35 $ 230 $ 10 $ 252
Nonvested benefits 4 11 -- 17
--------- --------- --------- ---------
Accumulated benefit obligations 39 241 10 269
Effect of projected future salary increases(a) 15 6 6 13
--------- --------- --------- ---------
Total projected benefit obligations 54 247 16 282
Plan assets at fair value 50 179 15 169
--------- --------- --------- ---------
PROJECTED BENEFIT OBLIGATION IN EXCESS OF
(LESS THAN) PLAN ASSETS $ 4 $ 68 $ 1 $ 113
========= ========= ========= =========
Projected benefit obligation in excess of(less than)
plan assets $ 4 $ 68 $ 1 $ 113
Unrecognized net asset(obligation) (4) (4) -- (13)
Unrecognized prior service (cost)benefit -- (7) -- (9)
Unrecognized net gain(loss) 2 (46) (1) (73)
Additional minimum liability(b) -- 55 -- 87
--------- --------- --------- ---------
PENSION LIABILITY(ASSET) $ 2 $ 66 $ -- $ 105
================================================== ========= ========= ========= =========
(a) The effect of salary increases related primarily to international salary-based plans.
(b) A related amount up to the limit allowable under SFAS No. 87--"Employers' Accounting for Pensions" has been
included in other assets. Amounts exceeding such limits have been charged to retained earnings.
</TABLE>
The discount rate used in determining the actuarial present value of the
projected benefit obligations was 7.5 percent in 1995 and 1994. The rate of
increase in future compensation levels used in determining the actuarial present
value of the projected benefit obligations was between 4.5 percent and 5.5
percent in 1995 and between 5 percent and 6 percent in 1994. The expected long-
term rate of return on assets was 8 percent in 1995 and 1994.
Occidental provides medical, dental and life insurance for certain active,
retired and disabled employees and their eligible dependents. Beginning in 1993,
certain salaried participants pay for all medical cost increases in excess of
increases in the Consumer Price Index (CPI). The benefits generally are funded
by Occidental as the benefits are paid during the year. The cost of providing
these benefits is based on claims filed and insurance premiums paid for the
period. The total benefits costs were approximately $93 million in 1995 and $124
million in 1994 and 1993. The 1995, 1994 and 1993 costs included $23 million,
$54 million and $50 million, respectively, for postretirement costs, as
discussed below.
Effective January 1, 1992, Occidental adopted SFAS No. 106--"Employers'
Accounting for Postretirement Benefits Other Than Pensions." This statement
required that the cost of postretirement benefits other than pensions, which are
primarily for health care, be accrued as a form of deferred compensation earned
during the period that employees render service, rather than the previously
permitted practice of accounting for such costs as claims were paid. Occidental
elected immediate recognition of the net obligation at January 1, 1992.
The postretirement benefit obligation as of December 31, 1995 and 1994 was
determined by application of the terms of medical, dental and life insurance
plans, including the effect of established maximums on covered costs, together
with relevant actuarial assumptions and health care cost trend rates projected
at a CPI increase of 4 percent (except for union employees). For union
employees, the health care cost trend rates were projected at annual rates
ranging ratably from 9.5 percent in 1995 to 6 percent through the year 2002 and
level thereafter. The effect of a 1 percent annual increase in these assumed
cost trend rates would increase the accumulated postretirement benefit
obligation by approximately $20 million in 1995; the annual service and interest
costs would not be materially affected. The weighted average discount rate used
in determining the accumulated postretirement benefit obligation as of December
31, 1995 and 1994 was 7.5 percent. Occidental's funding policy generally is to
pay claims as they come due. However in 1995 and 1994, MidCon prefunded certain
postretirement benefits associated with its regulated operations. Assets are
invested in short-term securities.
The following table sets forth the postretirement plans' combined status,
reconciled with the amounts included in the consolidated balance sheets at
December 31, 1995 and 1994 (in millions):
51
<PAGE>
<TABLE>
<CAPTION>
Balance at December 31, 1995 1994
=========================================================== ========= =========
<S> <C> <C>
Accumulated postretirement benefit obligation
Retirees $ 379 $ 374
Fully eligible active plan participants 59 73
Other active plan participants 101 127
--------- ---------
Total accumulated postretirement benefit obligation 539 574
Plan assets at fair value 26 15
--------- ---------
Unfunded status 513 559
Unrecognized prior service cost (5) (6)
Unrecognized net loss (1) (15)
--------- ---------
Accrued postretirement benefit cost $ 507 $ 538
=========================================================== ========= =========
</TABLE>
Net periodic postretirement benefit cost for 1995, 1994 and 1993 included
the following components (in millions):
<TABLE>
<CAPTION>
For the years ended December 31, 1995 1994 1993
================================================================= ========= ========= =========
<S> <C> <C> <C>
Service cost--benefits attributed to service during the period $ 8 $ 9 $ 8
Interest cost on accumulated postretirement benefit obligation 41 42 42
Actual return on plan assets (1) (1) --
Net amortization and deferral 1 4 --
Curtailments and settlements (26) -- --
--------- --------- ---------
Net periodic postretirement benefit cost $ 23 $ 54 $ 50
================================================================= ========= ========= =========
</TABLE>
- --------------------------------------------------------------------------------
NOTE 15 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 December 31, 1995, Occidental's equity
investments consisted primarily of joint-interest pipelines, including a
pipeline in the Dutch sector of the North Sea, an investment of approximately 30
percent in the common shares of CanadianOxy and various chemical partnerships.
In the second quarter of 1993, Occidental sold its 45 percent nonvoting interest
in Trident. The investment in Trident was in its preferred stock, and
accordingly, no equity earnings had been recorded. Equity investments paid
dividends of $51 million, $45 million and $33 million to Occidental in 1995,
1994 and 1993, respectively. Cumulative undistributed earnings since
acquisition, in the amount of $169 million, of 50-percent-or-less-owned
companies have been accounted for by Occidental under the equity method. At
December 31, 1995, Occidental's investment in equity investees exceeded the
historical underlying equity in net assets by approximately $203 million, which
is being amortized into income over periods not exceeding 40 years. The
aggregate market value of the investment in CanadianOxy, based on the quoted
market price for CanadianOxy common shares, was $659 million at December 31,
1995, compared with an aggregate book value of $216 million. Occidental and its
subsidiaries' purchases from, and sales to, certain equity method pipeline
ventures and chemical partnerships were $202 million and $265 million,
respectively, during the year ended December 31, 1995. Occidental and its
subsidiaries' purchases from, and sales to, certain equity method pipeline
ventures and chemical partnerships were $202 million and $225 million,
respectively, during the year ended December 31, 1994.
The following table presents Occidental's proportional interest in the
summarized financial information of its equity method investments (in millions):
<TABLE>
<CAPTION>
For the years ended December 31, 1995 1994 1993
============================================= ========= ========= =========
<S> <C> <C> <C>
Revenues $ 806 $ 684 $ 562
Costs and expenses 694 611 535
--------- --------- ---------
Net income $ 112 $ 73 $ 27
============================================= ========= ========= =========
Balance at December 31, 1995 1994
============================================= ========= =========
Current assets $ 246 $ 273
Noncurrent assets $ 979 $ 917
Current liabilities $ 168 $ 168
Noncurrent liabilities $ 524 $ 543
Stockholders' equity $ 533 $ 479
- --------------------------------------------- --------- ---------
</TABLE>
52
<PAGE>
Investments also include certain cost-method investments, in which
Occidental owns less than 20 percent of the voting stock. At December 31, 1995,
these investments consisted primarily of the shares in Clark (see Note 8).
- --------------------------------------------------------------------------------
NOTE 16 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.
The following table presents summarized financial information for OXY USA
(in millions):
<TABLE>
<CAPTION>
For the years ended December 31, 1995 1994 1993
======================================================= ========= ========= =========
<S> <C> <C> <C>
Revenues $ 709 $ 748 $ 874
Costs and expenses 778 749 790
--------- --------- ---------
Income(loss) before extraordinary gain(loss) (69) (1) 84
Extraordinary gain(loss), net -- -- (9)
--------- --------- ---------
Net income(loss) $ (69) $ (1) $ 75
======================================================= ========= ========= =========
Balance at December 31, 1995 1994
======================================================= ========= =========
Current assets $ 206 $ 113
Intercompany receivable $ 323 $ 246
Noncurrent assets $ 2,057 $ 2,069
Current liabilities $ 244 $ 167
Interest bearing note to parent $ 121 $ 137
Noncurrent liabilities $ 1,283 $ 1,114
Stockholders' equity $ 938 $ 1,010
- ------------------------------------------------------- --------- ---------
</TABLE>
- --------------------------------------------------------------------------------
NOTE 17 INDUSTRY SEGMENTS AND GEOGRAPHIC AREAS
Occidental conducts its continuing operations through three industry
segments: oil and gas, natural gas transmission and chemical. The oil and gas
segment explores for, develops, produces and markets crude oil and natural gas
domestically and internationally. The natural gas transmission segment engages
in interstate and intrastate natural gas transmission and marketing through an
extensive network of pipelines. The chemical segment manufactures and markets,
domestically and internationally, a variety of basic chemicals, petrochemicals,
and polymers and plastics.
Earnings of industry segments and geographic areas exclude interest income,
interest expense, unallocated corporate expenses, discontinued operations,
extraordinary items and income from equity investments, but include gains from
dispositions of segment and geographic area assets (see Note 4). Intersegment
sales and transfers between geographic areas are made at prices approximating
current market values and are not significant.
Foreign income and other taxes and certain state taxes are included in
segment earnings on the basis of operating results. U.S. federal income taxes
are not allocated to segments except for amounts in lieu thereof that represent
the tax effect of operating charges or credits resulting from purchase
accounting adjustments which arise due to the implementation in 1992 of SFAS No.
109.
Identifiable assets are those assets used in the operations of the
segments. Corporate assets consist of cash, short-term investments, certain
corporate receivables and other assets.
53
<PAGE>
<TABLE>
<CAPTION>
INDUSTRY SEGMENTS
In millions
Natural Gas
Oil and Gas Transmission Chemical Corporate Total
============================================== ============ ============ ============ ============ ============
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1995
TOTAL REVENUES $ 3,043 $ 2,049 $ 5,410 $ 192 $ 10,694
============ ============ ============ ============ ============
Pretax operating profit(loss)(a,b) $ 211 $ 218 $ 1,107 $ (623) $ 913
Income taxes (166) (5) (27) (204) (402)
------------ ------------ ------------ ------------ ------------
NET INCOME(LOSS) $ 45(c) $ 213(d) $ 1,080(e) $ (827) $ 511
============ ============ ============ ============ ============
Property, plant and equipment additions,
net(f) $ 480 $ 150 $ 243 $ 11 $ 884
============ ============ ============ ============ ============
Depreciation, depletion and amortization $ 451 $ 200 $ 262 $ 9 $ 922
============ ============ ============ ============ ============
TOTAL ASSETS $ 4,594 $ 7,037 $ 5,181 $ 1,003 $ 17,815
============================================== ============ ============ ============ ============ ============
YEAR ENDED DECEMBER 31, 1994
TOTAL REVENUES $ 2,494 $ 2,135 $ 4,681 $ 106 $ 9,416
============ ============ ============ ============ ============
Pretax operating profit(loss)(a,b) $ 128 $ 281 $ 368 $ (670) $ 107
Income taxes (101) (5) (18) (19) (143)
------------ ------------ ------------ ------------ ------------
NET INCOME(LOSS) $ 27(g) $ 276(h) $ 350(i) $ (689)(j) $ (36)
============ ============ ============ ============ ============
Property, plant and equipment additions,
net(f) $ 789 $ 93 $ 190 $ 2 $ 1,074
============ ============ ============ ============ ============
Depreciation, depletion and amortization $ 396 $ 198 $ 278 $ 10 $ 882
============ ============ ============ ============ ============
TOTAL ASSETS $ 4,488 $ 7,119 $ 5,935 $ 447 $ 17,989
============================================== ============ ============ ============ ============ ============
YEAR ENDED DECEMBER 31, 1993
TOTAL REVENUES $ 1,790 $ 2,619 $ 4,065 $ 70 $ 8,544
============ ============ ============ ============ ============
Pretax operating profit(loss)(a,b) $ 263 $ 429 $ 184 $ (659) $ 217
Income taxes 15 (3) (11) (144) (143)
Discontinued operations, net -- -- -- 221 221
Extraordinary gain(loss), net -- -- -- (12) (12)
------------ ------------ ------------ ------------ ------------
NET INCOME(LOSS) $ 278(k) $ 426(l) $ 173(m) $ (594)(n) $ 283
============ ============ ============ ============ ============
Property, plant and equipment additions,
net(f) $ 772 $ 65 $ 166 $ 4 $ 1,007
============ ============ ============ ============ ============
Depreciation, depletion and amortization $ 326 $ 247 $ 307 $ 12 $ 892
============ ============ ============ ============ ============
TOTAL ASSETS $ 3,554 $ 7,455 $ 5,780 $ 334 $ 17,123
============================================== ============ ============ ============ ============ ============
(a) Research and development costs were $21 million in 1995, $22 million in 1994 and $24 million in 1993.
(b) Divisional earnings include charges and credits in lieu of U.S. federal income taxes. In 1995, the amounts allocated to the
divisions were credits of $16 million, $48 million and $27 million at oil and gas, natural gas transmission and chemical,
respectively. In 1994, a credit of $18 million, a net credit of $41 million and a credit of $32 million were allocated to oil
and gas, natural gas transmission and chemical, respectively. In 1993, a credit of $20 million, a net charge of $16 million
and a credit of $38 million were allocated to oil and gas, natural gas transmission and chemical, respectively.
(c) Includes charges of $109 million for settlement of litigation and $95 million for reorganization costs.
(d) Includes charges of $37 million for reorganization costs.
(e) Includes a pretax gain of $40 million from the sale of Occidental's PVC facility at Addis, Louisiana.
(f) Excludes acquisitions of other businesses of $11 million and $257 million in oil and gas in 1995 and 1994, respectively.
Includes capitalized interest of $10 million in 1995, $5 million in 1994 and $11 million in 1993.
(g) Includes a $45 million charge for environmental and litigation matters, a charge of $11 million for the impairment of oil and
gas properties and a $12 million charge for a voluntary retirement program and severance and related costs, partially offset by
a $16 million gain resulting from the sale of Occidental's remaining interests in its producing operations in Argentina and a
$15 million benefit resulting from the reversal of reserves no longer needed for anticipated liabilities related to the sale of
Occidental's U.K. North Sea interests.
(h) Includes a benefit of $13 million from a reduction of LIFO gas storage inventory and a net benefit of $12 million from the
reduction of the contract impairment reserve.
(i) Includes a $55 million charge for litigation matters, charges of $48 million for expenses related to the curtailment and
closure of certain plant operations and an $11 million unfavorable impact related to an explosion at the Taft plant and charges
for start-up costs related to the Swift Creek chemical plant.
(j) Includes a net benefit of $7 million resulting from the reversal of reserves no longer required and the adoption of SFAS No.
112--"Employers' Accounting for Postemployment Benefits."
Footnotes continued on following page.
</TABLE>
54
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
(k) Includes a benefit of $85 million, net of a federal tax charge of $45 million, resulting from a reversal of foreign tax
reserves following the settlement of tax matters with foreign jurisdictions relating to the disposition of certain
international oil and gas assets in 1991, a gain of $30 million from the sale of Occidental's equity interest in Trident, $25
million from a windfall profit tax refund and $5 million from a favorable litigation settlement, partially offset by a
$24 million charge for environmental remediation and litigation matters.
(l) Includes the net benefit of a $154 million reduction of the contract impairment reserve and an $8 million reversal of a tax-
related reserve no longer required.
(m) Includes a $16 million benefit resulting from a reversal of a plant closure reserve no longer deemed necessary.
(n) Includes a onetime noncash charge of $55 million to adjust net deferred tax liabilities following the enactment of tax
legislation in August 1993, partially offset by $13 million of interest income related to a windfall profit tax refund.
</TABLE>
<TABLE>
<CAPTION>
GEOGRAPHIC AREAS(a,b)
In millions
Other Eastern
United Western Hemisphere
States Hemisphere and Other Corporate Total
======================================== ========== ========== ========== ========== ==========
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1995
TOTAL REVENUES $ 9,034(c) $ 672 $ 796 $ 192 $ 10,694
========== ========== ========== ========== ==========
Geographic earnings(loss) before taxes $ 1,131 $ 182 $ 223 $ (623) $ 913
Income taxes (29) (56) (113) (204) (402)
---------- ---------- ---------- ---------- ----------
NET INCOME(LOSS) $ 1,102 $ 126 $ 110 $ (827) $ 511
========== ========== ========== ========== ==========
TOTAL ASSETS $ 14,483 $ 783 $ 1,546 $ 1,003 $ 17,815
======================================== ========== ========== ========== ========== ==========
YEAR ENDED DECEMBER 31, 1994
TOTAL REVENUES $ 8,263(c) $ 626 $ 421 $ 106 $ 9,416
========== ========== ========== ========== ==========
Geographic earnings(loss) before taxes $ 665 $ 167 $ (55) $ (670) $ 107
Income taxes (20) (65) (39) (19) (143)
---------- ---------- ---------- ---------- ----------
NET INCOME(LOSS) $ 645 $ 102 $ (94) $ (689) $ (36)
========== ========== ========== ========== ==========
TOTAL ASSETS $ 15,335 $ 708 $ 1,499 $ 447 $ 17,989
======================================== ========== ========== ========== ========== ==========
YEAR ENDED DECEMBER 31, 1993
TOTAL REVENUES $ 7,516(c) $ 648 $ 310 $ 70 $ 8,544
========== ========== ========== ========== ==========
Geographic earnings(loss) before taxes $ 754 $ 210 $ (88) $ (659) $ 217
Income taxes 77 (55) (21) (144) (143)
Discontinued operations, net -- -- -- 221 221
Extraordinary gain(loss), net -- -- -- (12) (12)
---------- ---------- ---------- ---------- ----------
NET INCOME(LOSS) $ 831 $ 155 $ (109) $ (594) $ 283
========== ========== ========== ========== ==========
TOTAL ASSETS $ 15,167 $ 722 $ 900 $ 334 $ 17,123
======================================== ========== ========== ========== ========== ==========
(a) Included in the consolidated balance sheets were liabilities of approximately $285 million, $249 million
and $206 million at December 31, 1995, 1994 and 1993, respectively, which pertained to operations based
outside the United States and Canada.
(b) Investments in foreign countries are subject to the actions of those countries, which could significantly
affect Occidental's operations and investments in those countries.
(c) Includes export sales, consisting of chemical products, of approximately $1.039 billion, $756 million and
$628 million in 1995, 1994 and 1993, respectively.
55
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
NOTE 18 COSTS AND RESULTS OF OIL AND GAS PRODUCING ACTIVITIES
Capitalized costs relating to oil and gas producing activities and related
accumulated depreciation, depletion and amortization, which include impairments,
were as follows (in millions):
<TABLE>
<CAPTION>
Other Eastern
United Western Hemisphere Total
States Hemisphere and Other Worldwide
======================================================= ========== ========== ========== ==========
<S> <C> <C> <C> <C>
DECEMBER 31, 1995
Proved properties $ 4,614 $ 1,754 $ 1,224 $ 7,592
Unproved properties 78 36 184 298
---------- ---------- ---------- ----------
TOTAL PROPERTY COSTS(a) 4,692 1,790 1,408 7,890
Support facilities 21 119 50 190
---------- ---------- ---------- ----------
TOTAL CAPITALIZED COSTS 4,713 1,909 1,458 8,080
Accumulated depreciation, depletion and
amortization and valuation provisions (2,680) (1,474) (381) (4,535)
---------- ---------- ---------- ----------
NET CAPITALIZED COSTS $ 2,033 $ 435 $ 1,077 $ 3,545
========== ========== ========== ==========
Share of equity investees' net capitalized costs(b) $ 68 $ 66 $ 164 $ 298
======================================================= ========== ========== ========== ==========
DECEMBER 31, 1994
Proved properties $ 4,566 $ 1,645 $ 1,239 $ 7,450
Unproved properties 96 19 99 214
---------- ---------- ---------- ----------
TOTAL PROPERTY COSTS(a) 4,662 1,664 1,338 7,664
Support facilities 22 127 51 200
---------- ---------- ---------- ----------
TOTAL CAPITALIZED COSTS 4,684 1,791 1,389 7,864
Accumulated depreciation, depletion and
amortization and valuation provisions (2,559) (1,410) (339) (4,308)
---------- ---------- ---------- ----------
NET CAPITALIZED COSTS $ 2,125 $ 381 $ 1,050 $ 3,556
========== ========== ========== ==========
Share of equity investees' net capitalized costs(b) $ 56 $ 61 $ 206 $ 323
======================================================= ========== ========== ========== ==========
DECEMBER 31, 1993
Proved properties $ 4,159 $ 1,635 $ 792 $ 6,586
Unproved properties 85 16 120 221
---------- ---------- ---------- ----------
TOTAL PROPERTY COSTS(a) 4,244 1,651 912 6,807
Support facilities 20 148 37 205
---------- ---------- ---------- ----------
TOTAL CAPITALIZED COSTS 4,264 1,799 949 7,012
Accumulated depreciation, depletion and
amortization and valuation provisions (2,389) (1,407) (239) (4,035)
---------- ---------- ---------- ----------
NET CAPITALIZED COSTS $ 1,875 $ 392 $ 710 $ 2,977
========== ========== ========== ==========
Share of equity investees' net capitalized costs(b) $ 57 $ 66 $ 230 $ 353
======================================================= ========== ========== ========== ==========
(a) Includes leases, exploration costs, lease and well equipment, pipelines and terminals, gas plants and
other equipment.
(b) Excludes amounts applicable to synthetic fuels.
</TABLE>
56
<PAGE>
Costs incurred relating to oil and gas producing activities, whether
capitalized or expensed, were as follows (in millions):
<TABLE>
<CAPTION>
Other Eastern
United Western Hemisphere Total
States Hemisphere and Other Worldwide
========================================== ========== ========== ========== ==========
<S> <C> <C> <C> <C>
DECEMBER 31, 1995
Acquisition of properties
Proved $ 4 $ -- $ 55 $ 59
Unproved 7 -- 4 11
Exploration costs 29 34 70 133
Development costs 173 110 118 401
---------- ---------- ---------- ----------
$ 213 $ 144 $ 247 $ 604
========== ========== ========== ==========
Share of equity investees' costs $ 28 $ 23 $ 25 $ 76
========================================== ========== ========== ========== ==========
DECEMBER 31, 1994
Acquisition of properties
Proved $ 268 $ -- $ 252 $ 520
Unproved 24 -- 47 71
Exploration costs 31 20 102 153
Development costs 167 85 99 351
---------- ---------- ---------- ----------
$ 490(a) $ 105 $ 500(a) $ 1,095
========== ========== ========== ==========
Share of equity investees' costs $ 14 $ 14 $ 27 $ 55
========================================== ========== ========== ========== ==========
DECEMBER 31, 1993
Acquisition of properties
Proved $ 6 $ -- $ 198 $ 204
Unproved 5 -- 33 38
Exploration costs 19 16 87 122
Development costs 170 108 175 453
---------- ---------- ---------- ----------
$ 200 $ 124 $ 493 $ 817
========== ========== ========== ==========
Share of equity investees' costs $ 12 $ 11 $ 119 $ 142
========================================== ========== ========== ========== ==========
(a) Amounts exclude the deferred tax effects of $22 million and $21 million in the United States
and Eastern Hemisphere and Other, respectively, related to the Placid acquisition.
57
</TABLE>
<PAGE>
The results of operations of Occidental's oil and gas producing activities,
which exclude oil trading activities and items such as asset dispositions,
corporate overhead and interest, were as follows (in millions):
<TABLE>
<CAPTION>
Other Eastern
United Western Hemisphere Total
States Hemisphere(a) and Other Worldwide
=============================================================== ========== ========== ========== ==========
<S> <C> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31, 1995
Revenues
Sales $ 638 $ 467 $ 679(b) $ 1,784
Intercompany transfers 64 -- -- 64
---------- ---------- ---------- ----------
TOTAL 702 467 679 1,848
Production costs 250 157 141 548
Exploration expenses 22 30 54 106
Other operating expenses 26 82 148 256
Depreciation, depletion and amortization and valuation
provisions 249(c) 69 128 446
---------- ---------- ---------- ----------
PRETAX INCOME(LOSS) 155 129 208 492
Income tax expense(benefit)(d) 16 52 113(b) 181
---------- ---------- ---------- ----------
RESULTS OF OPERATIONS $ 139 $ 77 $ 95 $ 311
========== ========== ========== ==========
Share of equity investees' results of operations $ 6 $ 1 $ 25 $ 32
=============================================================== ========== ========== ========== ==========
FOR THE YEAR ENDED DECEMBER 31, 1994
Revenues
Sales $ 662 $ 422 $ 326(b) $ 1,410
Intercompany transfers 62 -- -- 62
---------- ---------- ---------- ----------
TOTAL 724 422 326 1,472
Production costs 263 165 86 514
Exploration expenses 20 17 90 127
Other operating expenses 28 93 113 234
Depreciation, depletion and amortization and valuation
provisions 220(c) 61 102 383
---------- ---------- ---------- ----------
PRETAX INCOME(LOSS) 193 86 (65) 214
Income tax expense(benefit)(d) -- 62 39(b) 101
---------- ---------- ---------- ----------
RESULTS OF OPERATIONS $ 193 $ 24 $ (104) $ 113
========== ========== ========== ==========
Share of equity investees' results of operations $ 4 $ 7 $ 17 $ 28
=============================================================== ========== ========== ========== ==========
FOR THE YEAR ENDED DECEMBER 31, 1993
Revenues
Sales $ 700 $ 454 $ 225(b) $ 1,379
Intercompany transfers 65 -- -- 65
---------- ---------- ---------- ----------
TOTAL 765 454 225 1,444
Production costs 267 155 77 499
Exploration expenses 18 16 68 102
Other operating expenses 25 91 105 221
Depreciation, depletion and amortization and valuation
provisions 210(c) 52 53 315
---------- ---------- ---------- ----------
PRETAX INCOME(LOSS) 245 140 (78) 307
Income tax expense(benefit)(d) (6) 57 21(b) 72
---------- ---------- ---------- ----------
RESULTS OF OPERATIONS $ 251 $ 83 $ (99) $ 235
========== ========== ========== ==========
Share of equity investees' results of operations $ 5 $ (1) $ (1) $ 3
=============================================================== ========== ========== ========== ==========
(a) Includes amounts applicable to operating interests in which Occidental receives an agreed-upon fee per barrel
of crude oil produced.
(b) Revenues and income tax expense include taxes owed by Occidental but paid by governmental entities on its behalf.
(c) Includes a credit of $16 million, $18 million and $20 million in 1995, 1994 and 1993, respectively, under the
method of allocating amounts in lieu of taxes.
(d) U.S. federal income taxes reflect expense allocations related to oil and gas activities, including allocated
interest and corporate overhead. Foreign income taxes were included in geographic areas on the basis of operating
results.
</TABLE>
58
<PAGE>
- --------------------------------------------------------------------------------
NOTE 19 SUBSEQUENT EVENTS
On January 23, 1996, Occidental called for redemption on March 15 all of
the outstanding $955 million principal amount of its 11.75% Senior Debentures
due March 15, 2011, at a redemption price of 104.838% of the principal amount,
together with accrued interest. The redemption of these debentures is in part
being funded from cash accumulated in excess of ongoing requirements. The
payment of the call premium will be reflected as an extraordinary loss in
Occidental's 1996 first quarter results.
In addition, Occidental agreed to acquire a 64 percent equity interest in
INDSPEC Chemical Corporation (INDSPEC) for $85 million of Occidental common
stock. Under the terms of the agreement, INDSPEC's management and employees will
retain voting control of the company. This transaction is expected to close in
1996.
On February 13, 1996, Occidental announced a realignment of its chemical
operations. The realignment will result in staff reductions of approximately 450
people. The costs associated with the realignment are not expected to have a
material impact on the 1996 results of operations.
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors, Occidental Petroleum Corporation:
We have audited the accompanying consolidated balance sheets of OCCIDENTAL
PETROLEUM CORPORATION (a Delaware corporation) and consolidated subsidiaries as
of December 31, 1995 and 1994, and the related consolidated statements of
operations, nonredeemable preferred stock, common stock and other stockholders'
equity and cash flows for each of the three years in the period ended December
31, 1995 (included on pages 33 through 60). These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Occidental Petroleum
Corporation and consolidated subsidiaries as of December 31, 1995 and 1994, and
the results of their operations and their cash flows for each of the three years
in the period ended December 31, 1995, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Los Angeles, California
February 22, 1996
60
<PAGE>
<TABLE>
<CAPTION>
1995 QUARTERLY FINANCIAL DATA (Unaudited) Occidental Petroleum Corporation
In millions, except per-share amounts and Subsidiaries
Three months ended March 31 June 30 September 30 December 31 Total Year
========================================= ============ ============ ============ ============ ============
<S> <C> <C> <C> <C> <C>
Divisional net sales
Oil and gas $ 705 $ 756 $ 779 $ 778 $ 3,018
Natural gas transmission 538 468 454 578 2,038
Chemical 1,472 1,456 1,325 1,117 5,370
Other (1) (1) (1) -- (3)
------------ ------------ ------------ ------------ ------------
Net sales $ 2,714 $ 2,679 $ 2,557 $ 2,473 $ 10,423
============ ============ ============ ============ ============
Gross profit $ 687 $ 724 $ 594 $ 555 $ 2,560
============ ============ ============ ============ ============
Divisional earnings
Oil and gas $ 60 $ (30) $ 46 $ (31) $ 45
Natural gas transmission 75 62 54 22 213
Chemical 307 354 252 167 1,080
------------ ------------ ------------ ------------ ------------
442 386 352 158 1,338
Unallocated corporate items
Interest expense, net (144) (133) (133) (130) (540)
Income taxes (125) (73) (83) (14) (295)
Other 5 7 3 (7) 8
------------ ------------ ------------ ------------ ------------
Net income(loss) $ 178 $ 187(a) $ 139 $ 7(b) $ 511
============ ============ ============ ============ ============
Primary earnings(loss) per common share $ .49 $ .51 $ .36 $ (.05) $ 1.31
============ ============ ============ ============ ============
Fully diluted earnings(loss) per share $ .47 $ .49 $ .36 $ (.05) $ 1.30
============ ============ ============ ============ ============
Dividend per common share $ .25 $ .25 $ .25 $ .25 $ 1.00
============ ============ ============ ============ ============
Market price per common share
High $ 22 $ 24 3/8 $ 23 7/8 $ 23 1/2
Low $ 18 $ 21 1/4 $ 21 1/8 $ 20 1/8
========================================= ============ ============ ============ ============
(a) Includes charges of $109 million for settlement of litigation in the oil and gas division, partially offset by a pretax
gain of $40 million from the sale of Occidental's PVC facility at Addis, Louisiana.
(b) Includes reorganization charges of $132 million, of which $95 million was recorded in the oil and gas division and
$37 million recorded in the natural gas transmission division.
61
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
1994 QUARTERLY FINANCIAL DATA (Unaudited) Occidental Petroleum Corporation
In millions, except per-share amounts and Subsidiaries
Three months ended March 31 June 30 September 30 December 31 Total Year
========================================= ============ ============ ============ ============ ============
<S> <C> <C> <C> <C> <C>
Divisional net sales
Oil and gas $ 484 $ 561 $ 741 $ 665 $ 2,451
Natural gas transmission 634 479 461 536 2,110
Chemical 989 1,122 1,202 1,364 4,677
Other (1) -- -- (1) (2)
------------ ------------ ------------ ------------ ------------
Net sales $ 2,106 $ 2,162 $ 2,404 $ 2,564 $ 9,236
============ ============ ============ ============ ============
Gross profit $ 293 $ 351 $ 465 $ 577 $ 1,686
============ ============ ============ ============ ============
Divisional earnings
Oil and gas $ 4 $ 25 $ 40 $ (42) $ 27
Natural gas transmission 76 54 53 93 276
Chemical 22 65 136 127 350
------------ ------------ ------------ ------------ ------------
102 144 229 178 653
Unallocated corporate items
Interest expense, net (143) (142) (136) (143) (564)
Income taxes 9 (14) (64) (41) (110)
Other (8) (7) (6) 6 (15)
------------ ------------ ------------ ------------ ------------
Net income(loss) $ (40)(a) $ (19)(b) $ 23(c) $ --(d) $ (36)
============ ============ ============ ============ ============
Primary earnings(loss) per common share $ (.19) $ (.12) $ .01 $ (.06) $ (.36)
============ ============ ============ ============ ============
Fully diluted earnings(loss) per share $ (.19) $ (.12) $ .01 $ (.06) $ (.36)
============ ============ ============ ============ ============
Dividend per common share $ .25 $ .25 $ .25 $ .25 $ 1.00
============ ============ ============ ============ ============
Market price per common share
High $ 19 1/8 $ 20 $ 22 3/8 $ 22
Low $ 16 1/8 $ 15 1/8 $ 18 3/4 $ 18 3/8
========================================= ============ ============ ============ ============
(a) Includes a $7 million charge for severance and related costs in the oil and gas division, a charge of $10 million resulting
from an adjustment to the rates MidCon charges its customers and an $11 million unfavorable impact related to an explosion at
the Taft plant and charges for start-up costs related to the Swift Creek chemical plant, partially offset by a net benefit of
$12 million from the reduction of the contract impairment reserve and a net benefit of $7 million resulting from the reversal
of reserves no longer required and the adoption of SFAS No. 112--"Employers' Accounting for Postemployment Benefits."
(b) Includes a benefit of $9 million from a reduction of LIFO gas storage inventory and a charge of $10 million resulting from an
adjustment to the rates MidCon charges its customers.
(c) Includes a $16 million gain resulting from the sale of Occidental's remaining interests in its producing operations in
Argentina and a charge of $18 million to provide for the closure of the Belle, West Virginia chemical plant.
(d) Includes a $45 million charge for environmental and litigation matters, a charge of $11 million for the impairment of
properties, a $5 million charge for a voluntary retirement program, all in the oil and gas division, a $55 million charge
for litigation matters and a charge of $30 million for expenses related to the curtailment of certain plant operations, both
in the chemical division, partially offset by a benefit of $20 million resulting from an adjustment to the rates MidCon
charges its customers, a benefit of $4 million from a reduction of LIFO gas storage inventory and a $15 million benefit
resulting from the reversal of reserves no longer needed for anticipated liabilities related to the sale of Occidental's
U.K. North Sea interests.
</TABLE>
62
<PAGE>
SUPPLEMENTAL OIL AND GAS INFORMATION (Unaudited)
The following tables set forth Occidental's net interests in quantities
of proved developed and undeveloped reserves of crude oil, condensate,
natural gas liquids and natural gas and changes in such quantities. Crude oil
reserves (in millions of barrels) include condensate and natural gas liquids,
except for the United States, where crude oil reserves include only
condensate. Natural gas reserves (in billions of cubic feet) in the United
States are presented on a wet-gas basis (including leasehold natural gas
liquids reserves), whereas natural gas reserves in other locations exclude
natural gas liquids. The reserves are stated after applicable royalties.
Estimates of reserves have been made by Occidental engineers. These estimates
include reserves in which Occidental holds an economic interest under service
contracts and other arrangements.
<TABLE>
<CAPTION>
RESERVES
Oil in millions of barrels, natural gas in billions of cubic feet
Other Eastern
United Western Hemisphere Total
States Hemisphere and Other Worldwide
------------------ ------------------ ------------------ ------------------
Oil Gas Oil(a) Gas Oil Gas Oil Gas
================================= ======= ======= ======= ======= ======= ======= ======= =======
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PROVED DEVELOPED AND UNDEVELOPED
RESERVES
BALANCE AT DECEMBER 31, 1992 190 2,127 374 4 135 121 699 2,252
Revisions of previous estimates 6 56 61 -- 31 -- 98 56
Improved recovery 17 6 -- -- 2 -- 19 6
Extensions and discoveries 6 160 (5) -- 32 51 33 211
Purchases of proved reserves 4 6 14 -- 20 -- 38 6
Sales of proved reserves (7) (156) (8) (1) -- -- (15) (157)
Production (21) (219) (41) -- (17) (19) (79) (238)
- --------------------------------- ------- ------- ------- ------- ------- ------- ------- -------
BALANCE AT DECEMBER 31, 1993 195 1,980 395 3 203 153 793 2,136
Revisions of previous estimates 3 (5) 68 -- 21 -- 92 (5)
Improved recovery 10 2 -- -- 5 -- 15 2
Extensions and discoveries 10 78 22 -- 18 27 50 105
Purchases of proved reserves 22 154 -- -- 56 193 78 347
Sales of proved reserves -- (3) (23) (3) -- -- (23) (6)
Production (22) (227) (44) -- (21) (19) (87) (246)
- --------------------------------- ------- ------- ------- ------- ------- ------- ------- -------
BALANCE AT DECEMBER 31, 1994 218 1,979 418 -- 282 354 918 2,333
Revisions of previous estimates 6 25 14 -- 51 (14) 71 11
Improved recovery 6 6 24 -- 12 -- 42 6
Extensions and discoveries 5 35 8 -- 12 373 25 408
Purchases of proved reserves -- 4 -- -- -- 9 -- 13
Sales of proved reserves (16)(b) (5) -- -- (9)(b) (37) (25) (42)
Production (23) (223) (47) -- (31) (46) (101) (269)
- --------------------------------- ------- ------- ------- ------- ------- ------- ------- -------
BALANCE AT DECEMBER 31, 1995 196 1,821 417 -- 317 639 930 2,460
================================= ======= ======= ======= ======= ======= ======= ======= =======
PROPORTIONAL INTEREST IN EQUITY
INVESTEES' RESERVES
December 31, 1992 5 33 9 88 25 61 39 182
======= ======= ======= ======= ======= ======= ======= =======
December 31, 1993 4 35 11 90 29 58 44 183
======= ======= ======= ======= ======= ======= ======= =======
December 31, 1994 5 32 11 84 25 46 41 162
======= ======= ======= ======= ======= ======= ======= =======
DECEMBER 31, 1995 5 36 12 81 21 39 38 156
================================= ======= ======= ======= ======= ======= ======= ======= =======
See footnotes on following page.
63
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RESERVES continued
Oil in millions of barrels, natural gas in billions of cubic feet
Other Eastern
United Western Hemisphere Total
States Hemisphere and Other Worldwide
------------------ ------------------ ------------------ ------------------
Oil Gas Oil(a) Gas Oil Gas Oil Gas
================================= ======= ======= ======= ======= ======= ======= ======= =======
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PROVED DEVELOPED RESERVES
December 31, 1992 154 1,880 274 4 48 52 476 1,936
======= ======= ======= ======= ======= ======= ======= =======
December 31, 1993 155 1,792 300 3 103 56 558 1,851
======= ======= ======= ======= ======= ======= ======= =======
December 31, 1994 169 1,851 258 -- 173 264 600 2,115
======= ======= ======= ======= ======= ======= ======= =======
DECEMBER 31, 1995 149 1,747 283 -- 195 235 627 1,982
================================= ======= ======= ======= ======= ======= ======= ======= =======
PROPORTIONAL INTEREST IN EQUITY
INVESTEES' RESERVES
December 31, 1992 4 25 5 82 1 25 10 132
======= ======= ======= ======= ======= ======= ======= =======
December 31, 1993 4 27 6 83 27 54 37 164
======= ======= ======= ======= ======= ======= ======= =======
December 31, 1994 4 27 7 77 24 38 35 142
======= ======= ======= ======= ======= ======= ======= =======
DECEMBER 31, 1995 5 30 10 75 16 31 31 136
================================= ======= ======= ======= ======= ======= ======= ======= =======
(a) Portions of these reserves are being produced pursuant to exclusive service contracts.
(b) Includes approximately 14 million and 6 million barrels of oil (which approximate 17.7 million barrels of
WTI-equivalent oil) in the United States and Eastern Hemisphere and Other, respectively, associated with the advance
sale of crude oil (see Note 8).
</TABLE>
STANDARDIZED MEASURE, INCLUDING YEAR-TO-YEAR CHANGES THEREIN, OF DISCOUNTED
FUTURE NET CASH FLOWS For purposes of the following disclosures, estimates
were made of quantities of proved reserves and the periods during which they are
expected to be produced. Future cash flows were computed by applying year-end
prices to Occidental's share of estimated annual future production from proved
oil and gas reserves, net of royalties. Future development and production costs
were computed by applying year-end costs to be incurred in producing and further
developing the proved reserves. Future income tax expenses were computed by
applying, generally, year-end statutory tax rates (adjusted for permanent
differences, tax credits and allowances) to the estimated net future pretax cash
flows. The discount was computed by application of a 10 percent discount factor.
The calculations assumed the continuation of existing economic, operating and
contractual conditions at each of December 31, 1995, 1994 and 1993. However,
such arbitrary assumptions have not necessarily proven to be the case in the
past. Other assumptions of equal validity would give rise to substantially
different results.
64
<PAGE>
<TABLE>
<CAPTION>
STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS
In millions
Other Eastern
United Western Hemisphere Total
States Hemisphere(a) and Other Worldwide
=================================================== ========== ========== ========== ==========
<S> <C> <C> <C> <C>
AT DECEMBER 31, 1995
Future cash flows $ 6,110 $ 4,206 $ 5,639 $ 15,955
Future costs
Production costs and other operating expenses (2,479) (1,824) (2,303) (6,606)
Development costs(b) (496) (269) (689) (1,454)
---------- ---------- ---------- ----------
FUTURE NET CASH FLOWS BEFORE INCOME TAXES 3,135 2,113 2,647 7,895
Future income tax expense (916) (655) (234) (1,805)
---------- ---------- ---------- ----------
FUTURE NET CASH FLOWS 2,219 1,458 2,413 6,090
Ten percent discount factor (979) (564) (957) (2,500)
---------- ---------- ---------- ----------
STANDARDIZED MEASURE 1,240 894 1,456 3,590
Share of equity investees' standardized measure 76 53 239 368
---------- ---------- ---------- ----------
$ 1,316 $ 947 $ 1,695 $ 3,958
=================================================== ========== ========== ========== ==========
AT DECEMBER 31, 1994
Future cash flows $ 6,333 $ 3,769 $ 4,253 $ 14,355
Future costs
Production costs and other operating expenses (2,557) (1,830) (1,748) (6,135)
Development costs(b) (560) (321) (169) (1,050)
---------- ---------- ---------- ----------
FUTURE NET CASH FLOWS BEFORE INCOME TAXES 3,216 1,618 2,336 7,170
Future income tax expense (928) (517) (138) (1,583)
---------- ---------- ---------- ----------
FUTURE NET CASH FLOWS 2,288 1,101 2,198 5,587
Ten percent discount factor (1,004) (448) (833) (2,285)
---------- ---------- ---------- ----------
STANDARDIZED MEASURE 1,284 653 1,365 3,302
Share of equity investees' standardized measure 49 47 258 354
---------- ---------- ---------- ----------
$ 1,333 $ 700 $ 1,623 $ 3,656
=================================================== ========== ========== ========== ==========
AT DECEMBER 31, 1993
Future cash flows $ 6,114 $ 3,320 $ 2,341 $ 11,775
Future costs
Production costs and other operating expenses (2,423) (1,919) (1,374) (5,716)
Development costs(b) (446) (241) (162) (849)
---------- ---------- ---------- ----------
FUTURE NET CASH FLOWS BEFORE INCOME TAXES 3,245 1,160 805 5,210
Future income tax expense (1,001) (338) (52) (1,391)
---------- ---------- ---------- ----------
FUTURE NET CASH FLOWS 2,244 822 753 3,819
Ten percent discount factor (1,049) (298) (256) (1,603)
---------- ---------- ---------- ----------
STANDARDIZED MEASURE 1,195 524 497 2,216
Share of equity investees' standardized measure 57 60 238 355
---------- ---------- ---------- ----------
$ 1,252 $ 584 $ 735 $ 2,571
=================================================== ========== ========== ========== ==========
(a) Includes amounts applicable to operating interests in which Occidental receives agreed-upon fees per
barrel of crude oil produced.
(b) Includes dismantlement and abandonment costs.
65
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CHANGES IN THE STANDARDIZED MEASURE OF DISCOUNTED FUTURE
NET CASH FLOWS FROM PROVED RESERVE QUANTITIES
In millions
For the years ended December 31, 1995 1994 1993
===================================================================================== ========= ========= =========
<S> <C> <C> <C>
BEGINNING OF YEAR $ 3,302 $ 2,216 $ 2,246
--------- --------- ---------
Sales and transfers of oil and gas produced, net of production costs and other
operating expenses (1,169) (764) (735)
Net change in prices received per barrel, net of production costs and other
operating expenses 672 477 (1,406)
Extensions, discoveries and improved recovery, net of future production and
development costs 170 215 535
Change in estimated future development costs (110) (163) 32
Revisions of quantity estimates 394 246 549
Development costs incurred during the period 401 328 446
Accretion of discount 369 260 317
Net change in income taxes (195) (108) 256
Purchases and sales of reserves in place, net (247) 599 (57)
Changes in production rates and other 3 (4) 33
--------- --------- ---------
NET CHANGE 288 1,086 (30)
--------- --------- ---------
END OF YEAR $ 3,590 $ 3,302 $ 2,216
===================================================================================== ========= ========= =========
</TABLE>
The information set forth below does not include information with respect
to operations of equity investees.
The following table sets forth, for each of the three years in the period
ended December 31, 1995, Occidental's approximate average sales prices and
average production costs of oil and gas. Production costs are the costs
incurred in lifting the oil and gas to the surface and include gathering,
treating, primary processing, field storage, property taxes and insurance on
proved properties, but do not include depreciation, depletion and
amortization, royalties, income taxes, interest, general and administrative
and other expenses.
<TABLE>
<CAPTION>
AVERAGE SALES PRICES AND AVERAGE PRODUCTION COSTS OF OIL AND GAS
Other Eastern
United Western Hemisphere
For the years ended December 31, States Hemisphere(a,b) and Other(a)
=============================================================================== ========== ========== ==========
<S> <C> <C> <C>
1995
Oil
Average sales price ($/bbl.) $ 15.61 $ 10.62 $ 14.47
Gas
Average sales price ($/Mcf) $ 1.51 $ -- $ 2.07
Average oil and gas production cost ($/bbl.)(c) $ 3.98 $ 3.34 $ 3.64
- ------------------------------------------------------------------------------- ---------- ---------- ----------
1994
Oil
Average sales price ($/bbl.) $ 14.21 $ 10.19 $ 12.08
Gas
Average sales price ($/Mcf) $ 1.85 $ 1.72 $ 1.15
Average oil and gas production cost ($/bbl.)(c) $ 4.20 $ 3.75 $ 3.56
- ------------------------------------------------------------------------------- ---------- ---------- ----------
1993
Oil
Average sales price ($/bbl.) $ 15.54 $ 11.51 $ 11.41
Gas
Average sales price ($/Mcf) $ 1.98 $ 1.80 $ 1.24
Average oil and gas production cost ($/bbl.)(c) $ 4.44 $ 3.78 $ 3.82
- ------------------------------------------------------------------------------- ---------- ---------- ----------
(a) Sales prices are calculated before royalties with respect to certain of Occidental's interests.
(b) Sales prices include fees received under service contracts.
(c) Gas volumes have been converted to equivalent barrels based on energy content.
</TABLE>
66
<PAGE>
The following table sets forth, for each of the three years in the period
ended December 31, 1995, Occidental's net productive and dry exploratory and
development wells drilled.
<TABLE>
<CAPTION>
NET PRODUCTIVE AND DRY EXPLORATORY AND DEVELOPMENT WELLS DRILLED
Other Eastern
United Western Hemisphere Total
For the years ended December 31, States Hemisphere and Other Worldwide
================================ ========== ========== ========== ==========
<S> <C> <C> <C> <C>
1995
Oil-- Exploratory 1.4 0.7 2.0 4.1
Development 79.3 20.6 26.8 126.7
Gas-- Exploratory 9.0 -- 1.7 10.7
Development 90.1 -- 4.7 94.8
Dry-- Exploratory 5.5 2.7 7.9 16.1
Development 14.5 0.4 -- 14.9
- -------------------------------- ---------- ---------- ---------- ----------
1994
Oil-- Exploratory 1.5 -- 3.0 4.5
Development 139.6 10.8 58.6 209.0
Gas-- Exploratory 0.6 -- 1.0 1.6
Development 104.7 -- 1.0 105.7
Dry-- Exploratory 3.2 -- 12.5 15.7
Development 19.5 0.9 0.6 21.0
- -------------------------------- ---------- ---------- ---------- ----------
1993
Oil-- Exploratory 1.0 -- 6.0 7.0
Development 113.2 17.6 25.2 156.0
Gas-- Exploratory 1.9 -- 1.1 3.0
Development 147.0 -- -- 147.0
Dry-- Exploratory 3.9 0.4 7.9 12.2
Development 15.6 -- 3.5 19.1
- -------------------------------- ---------- ---------- ---------- ----------
</TABLE>
The following table sets forth, as of December 31, 1995, Occidental's
productive oil and gas wells (both producing wells and wells capable of
production). The numbers in parentheses indicate the number of wells with
multiple completions.
<TABLE>
<CAPTION>
PRODUCTIVE OIL AND GAS WELLS
Other Eastern
United Western Hemisphere Total
Wells at December 31, 1995 States Hemisphere and Other Worldwide
================================ ========== ========== ========== ==========
<S> <C> <C> <C> <C>
Oil-- Gross(a) 9,680(137) 1,317 440(21) 11,437(158)
Net(b) 5,214 (94) 839 237(21) 6,290(115)
Gas-- Gross(a) 3,977 (96) -- 104 4,081 (96)
Net(b) 2,571 (61) -- 33 2,604 (61)
- -------------------------------- ---------- ---------- ---------- ----------
(a) The total number of wells in which interests are owned or which are operated under
service contracts.
(b) The sum of fractional interests.
</TABLE>
The following table sets forth, as of December 31, 1995, Occidental's
participation in exploratory and development wells being drilled.
<TABLE>
<CAPTION>
PARTICIPATION IN EXPLORATORY AND DEVELOPMENT WELLS BEING DRILLED
Other Eastern
United Western Hemisphere Total
Wells at December 31, 1995 States Hemisphere and Other Worldwide
==================================== ========== ========== ========== ==========
<S> <C> <C> <C> <C>
Exploratory and development wells
Gross 56 9 21 86
Net 23 9 8 40
- ------------------------------------ ---------- ---------- ---------- ----------
At December 31, 1995, Occidental was participating in 141 pressure
maintenance and waterflood projects in the United States, 11 in Latin America,
9 in the Middle East and 2 in Russia.
67
</TABLE>
<PAGE>
The following table sets forth, as of December 31, 1995, Occidental's holdings
of developed and undeveloped oil and gas acreage.
<TABLE>
<CAPTION>
OIL AND GAS ACREAGE
Other Eastern
United Western Hemisphere Total
Thousands of acres States Hemisphere and Other Worldwide
=============================== ========== ========== ========== ==========
<S> <C> <C> <C> <C>
Developed(a)-- Gross(b) 2,170 132 1,107 3,409
Net(c) 1,339 121 365 1,825
- ------------------------------- ---------- ---------- ---------- ----------
Undeveloped(d)-- Gross(b) 2,026 9,372 50,990 62,388
Net(c) 1,038 8,566 36,911 46,515
- ------------------------------- ---------- ---------- ---------- ----------
(a) Acres spaced or assigned to productive wells.
(b) Total acres in which interests are held.
(c) Sum of the fractional interests owned, based on working interests or shares
of production, if under production-sharing agreements.
(d) Acres on which wells have not been drilled or completed to a point that would
permit the production of commercial quantities of oil and gas, regardless of
whether the acreage contains proved reserves.
</TABLE>
The following tables set forth, for each of the three years in the
period ended December 31, 1995, Occidental's domestic oil and gas production.
<TABLE>
<CAPTION>
OIL AND NATURAL GAS PRODUCTION--DOMESTIC
Oil Production Natural Gas Production
Thousands of barrels per day Millions of cubic feet per day
----------------------------------- -----------------------------------
1995 1994 1993 1995 1994 1993
=============================== ========= ========= ========= ========= ========= =========
<S> <C> <C> <C> <C> <C> <C>
California 5 5 6 -- -- --
Gulf of Mexico 11 11 10 157 180 150
Kansas 6 7 7 193 194 182
Louisiana 7 3 2 39 23 19
Mississippi 1 -- 2 4 5 12
New Mexico 3 3 3 22 20 17
Oklahoma 5 5 5 57 60 62
Texas 21 22 21 128 131 141
Virginia -- -- -- -- -- 9
Wyoming -- -- -- 8 5 5
Other States 5 3 2 4 2 3
--------- --------- --------- --------- --------- ---------
TOTAL 64 59 58 612 620 600
=============================== ========= ========= ========= ========= ========= =========
</TABLE>
The following tables set forth, for each of the three years in the
period ended December 31, 1995, Occidental's international oil and gas
production.
<TABLE>
<CAPTION>
OIL AND NATURAL GAS PRODUCTION--INTERNATIONAL
Oil Production Natural Gas Production
Thousands of barrels per day Millions of cubic feet per day
----------------------------------- -----------------------------------
1995 1994 1993 1995 1994 1993
=============================== ========= ========= ========= ========= ========= =========
<S> <C> <C> <C> <C> <C> <C>
Argentina -- 4 9 -- 1 1
Colombia 30 28 30 -- -- --
Congo 9 2 -- -- -- --
Ecuador 20 18 10 -- -- --
Netherlands -- -- -- 78 -- --
Oman 12 12 11 -- -- --
Pakistan 6 7 8 49 52 51
Peru 58 61 63 -- -- --
Qatar 20 3 -- -- -- --
Russia 23 21 23 -- -- --
Venezuela 21 8 -- -- -- --
Yemen 15 14 4 -- -- --
--------- --------- --------- --------- --------- ---------
TOTAL 214 178 158 127 53 52
=============================== ========= ========= ========= ========= ========= =========
</TABLE>
68
<PAGE>
EXHIBIT 21
LIST OF SUBSIDIARIES
The following is a list of the Registrant and its subsidiaries at December
31, 1995, other than certain subsidiaries that did not in the aggregate
constitute a significant subsidiary. Unless otherwise indicated, 100 percent of
the voting securities of each subsidiary is owned by its immediate parent.
Multiple levels of subsidiary relationship are reflected by indentation.
<TABLE>
<CAPTION>
JURISDICTION OF
NAME INCORPORATION
- ---- ---------------
<S> <C>
Occidental Petroleum Corporation Delaware
MidCon Corp. Delaware
MidCon Gas Services Corp. Delaware
MidCon Exploration Company Illinois
MidCon Texas Gas Services Corp. Delaware
MidCon Texas Pipeline Corp. Delaware
MidCon NGL Corp. Delaware
Palo Duro Pipeline Company, Inc. Delaware
Natural Gas Pipeline Company of America Delaware
NGPL-Canyon Compression Co. Delaware
NGPL Offshore Company Delaware
NGPL-Trailblazer Inc. Delaware
Occidental Petroleum Investment Co. California
Glenn Springs Holdings, Inc. Delaware
Occidental Chemical Holding Corporation California
Occidental Chemical Europe, S.A. Belgium
Occidental Quimica do Brasil Ltda. Brazil
Vulcan Material Plastico S.A. Brazil
Oxy Chemical Corporation California
Occidental Chemical International, Inc. California
Oxychem (Canada), Inc. Canada
Oxy CH Corporation California
Occidental Chemical Corporation New York
B & D Cogen Funding Corp. Delaware
Interore Corporation Delaware
Occidental Chemical Chile S.A.I.(a) Chile
Occidental Tower Corporation Delaware
Oxy Petrochemicals Inc. Delaware
Oxy VCM Corporation Delaware
PDG Chemical Inc. Delaware
Occidental Oil and Gas Corporation California
Exeter Drilling Company Nevada
MidCon Exploration Company Delaware
Occidental Crude Sales, Inc. Delaware
Occidental Crude Sales, Inc. (International) Delaware
Occidental International Exploration and Production
Company California
Compania Occidental de Hidrocarburos, Inc. California
Occidental Congo, Inc. Delaware
Occidental of Oman, Inc. Liberia
Occidental of the Republic of Komi, Inc. Delaware
Occidental of Russia Ltd. Bermuda
Occidental Peninsula, Inc. Delaware
(Continued on next page)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
JURISDICTION OF
NAME INCORPORATION
- ---- ---------------
<S> <C>
Occidental Petroleum Corporation (Continued)
Occidental Petroleum Investment Co. (Continued)
Occidental Oil and Gas Corporation (Continued)
Occidental International Exploration and Production
Company (Continued)
Occidental Peruana, Inc. California
Occidental Petroleum (Malaysia) Ltd. Bermuda
Occidental Petroleum of Qatar Ltd. Bermuda
Occidental Petroleum (Pakistan), Inc. Delaware
Occidental Petroleum (South America), Inc.(b) Delaware
Occidental Exploration and Production Company California
Occidental Philippines, Inc. California
Repsol Occidental Corporation(c) Delaware
Occidental de Colombia, Inc. Delaware
OXY USA Inc. Delaware
Occidental Receivables, Inc. California
Opcal Insurance, Inc. Hawaii
Oxy Westwood Corporation California
Placid Oil Company Delaware
Occidental Netherlands, Inc. Delaware
- --------------------------
(a) One percent owned by D. S. Ventures, Inc., a wholly-owned subsidiary of
Occidental Chemical Corporation.
(b) A 15 percent voting interest was owned by another company at December 31,
1995.
(c) A 25 percent voting interest was owned by another company at December 31,
1995.
</TABLE>
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of (a) our report, dated February 22, 1996 appearing in Occidental
Petroleum Corporation's Annual Report for the year ended December 31, 1995, and
(b) our report, dated February 22, 1996, appearing in Occidental Petroleum
Corporation's Annual Report on Form 10-K for the year ended December 31, 1995,
into Occidental Petroleum Corporation's previously filed Registration Statements
Nos. 33-5487, 33-5490, 33-14662, 33-23798, 33-40054, 33-44791, 33-47636,
33-60492, 33-59395, 33-64719, 33-65129 and 333-285.
ARTHUR ANDERSEN LLP
Los Angeles, California
March 26, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD ENDED DECEMBER 31, 1995, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 520
<SECURITIES> 0
<RECEIVABLES> 662
<ALLOWANCES> 19
<INVENTORY> 647
<CURRENT-ASSETS> 2,519
<PP&E> 22,704
<DEPRECIATION> 8,837
<TOTAL-ASSETS> 17,815
<CURRENT-LIABILITIES> 2,657
<BONDS> 5,078
0
1,325
<COMMON> 64
<OTHER-SE> 3,241
<TOTAL-LIABILITY-AND-EQUITY> 17,815
<SALES> 10,423
<TOTAL-REVENUES> 10,694
<CGS> 6,980
<TOTAL-COSTS> 9,096
<OTHER-EXPENSES> 106
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 579
<INCOME-PRETAX> 801
<INCOME-TAX> 402
<INCOME-CONTINUING> 511
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 511
<EPS-PRIMARY> 1.31
<EPS-DILUTED> 1.30
</TABLE>
