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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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, 1996
OR
[_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-9210
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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
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------- -----------------------------------------
<S> <C>
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
Convertible Preferred Stock New York Stock Exchange
Common Stock New York Stock Exchange,
Pacific Stock Exchange
</TABLE>
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 l5(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]
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At March 7, 1997, the aggregate market value of the voting stock held by
nonaffiliates of the registrant was approximately $8.5 billion, based on the
New York Stock Exchange composite tape closing price of $25.375 per share of
Common Stock (assuming conversion of all outstanding shares of Occidental's
$3.875 Cumulative Convertible Voting Preferred Stock, par value $1.00 per
share) on March 7, 1997. Shares of Common Stock held by each officer and
director have been excluded from this computation in that such persons may be
deemed to be affiliates. This determination of affiliate status is not
necessarily a conclusive determination for other purposes.
At March 7, 1997, there were 329,754,982 shares of Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Annual Report for the year ended December 31,
1996, are incorporated by reference into Parts I and II. Portions of the
registrant's definitive Proxy Statement filed in connection with its April 25,
1997, Annual Meeting of Stockholders are incorporated by reference into Part
III.
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TABLE OF CONTENTS
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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..................................................... 15
Employees................................................................ 15
Environmental Regulation................................................. 15
ITEM 3 Legal Proceedings................................................... 16
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 Mat-
ters...................................................................... 19
ITEM 6 Selected Financial Data............................................. 20
ITEM 7 Management's Discussion and Analysis of Financial Condition and Re-
sults of Operations....................................................... 20
ITEM 8 Financial Statements and Supplementary Data......................... 21
ITEM 9 Changes in and Disagreements With Accountants on Accounting and Fi-
nancial Disclosure........................................................ 24
PART III
ITEM 10 Directors and Executive Officers of the Registrant................. 24
ITEM 11 Executive Compensation............................................. 24
ITEM 12 Security Ownership of Certain Beneficial Owners and Management..... 24
ITEM 13 Certain Relationships and Related Transactions..................... 24
PART IV
ITEM 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K.... 24
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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,
polymers and plastics and specialty chemicals. 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, 1996, see Note 17 to the Consolidated Financial
Statements of Occidental ("Consolidated Financial Statements"), which are
included in Occidental's 1996 Annual Report ("1996 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 1996 Annual Report and is incorporated by reference in Item 7
of this report. Throughout this report, portions of the 1996 Annual Report are
incorporated by reference. These portions of the 1996 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,
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.
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COMPARATIVE OIL AND GAS RESERVES AND PRODUCTION
(Oil in millions of barrels; natural gas in billions of cubic feet)
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1996 1995 1994
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OIL GAS TOTAL* OIL GAS TOTAL* OIL GAS TOTAL*
--- ----- ------ --- ----- ------ --- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
International Reserves 694 840 834 734 639 841 700 354 759
U.S. Reserves 203 1,744 494 196 1,821 499 218 1,979 548
--- ----- ------ --- ----- ------ --- ----- ------
Total 897 2,584 1,328 930 2,460 1,340 918 2,333 1,307
=== ===== ====== === ===== ====== === ===== ======
International Production 84 42 91 78 46 86 65 19 68
U.S. Production 21 220 58 23 223 60 22 227 60
--- ----- ------ --- ----- ------ --- ----- ------
Total 105 262 149 101 269 146 87 246 128
=== ===== ====== === ===== ====== === ===== ======
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* Natural gas volumes have been converted to equivalent barrels based on
energy content of six Mcf of gas to one barrel of oil. 1995 and 1994 amounts
have been restated to reflect this methodology.
In 1996, Occidental added more oil to its reserves than it produced.
However, overall reserves decreased due to the sale of its interest in 46
million barrels of royalty oil, acquired by Occidental in 1993, to the Republic
of the Congo for $215 million. Occidental's consolidated worldwide net proved
developed and undeveloped reserves of crude oil (not including those of
CanadianOxy) were 897 million barrels at year-end 1996, compared with 930
million barrels at year-end 1995. Domestic reserves of crude oil were 203
million barrels at year-end 1996, compared with 196 million barrels at year-end
1995, while international crude oil reserves decreased to 694 million barrels
from 734 million barrels at year-end 1995. Worldwide net crude oil reserve
additions of 119 million barrels, mainly in the United States and Qatar, more
than replaced Occidental's worldwide production of 105 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 2.6 trillion cubic feet ("Tcf") at year-end 1996, with 1.7
Tcf attributable to domestic operations. Worldwide net proved developed and
undeveloped natural gas reserves were about 2.5 Tcf in the previous year.
Occidental's crude oil reserves include condensate. 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 under the caption "Reserves, Production and Related Information" and
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 averaged 286,000 barrels per day compared
to 278,000 barrels per day in 1995, and net worldwide natural gas production
averaged 716 million cubic feet ("MMcf") per day compared to 739 MMcf per day
in 1995. International operations accounted for 80 percent of Occidental's oil
production, while 84 percent of gas production came from the United States. On
an oil equivalent basis, Occidental produced 405,000 net barrels per day in
1996 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 production 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 has commenced the development process for its
recent gas discoveries in the Far East. Occidental is also pursuing
opportunities to increase production through enhanced oil recovery projects,
similar to those in Qatar and Venezuela, and focusing on oil and gas
exploration and strategic acquisitions.
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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.
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 a six-
year period. 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. Reserves dedicated to
the transaction were excluded from the estimate of proved oil and gas reserves
in 1995 and 1996 (see the information incorporated under the caption
"Supplemental Oil and Gas Information" incorporated by reference in Item 8 of
this report). Occidental delivered approximately 2.2 million barrels of WTI-
equivalent oil to Clark in 1996. At December 31, 1996, approximately 15.5
million barrels remain to be delivered.
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, 1996, the carrying value of Occidental's oil and gas assets in countries
outside North America aggregated approximately $1.924 billion, or
approximately 11 percent of Occidental's total assets at that date.
Approximately $722 million of such assets were located in the Middle East, and
$639 million of such assets were located in Latin America. Substantially all
of the remainder was located in the Netherlands (comprising in part the Dutch
sector of the North Sea) and the Far East.
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 57,300
barrels in 1996, compared with 64,000 barrels in 1995. The 1996 production is
net of approximately 6,000 barrels per day delivered to Clark. Net daily
domestic production of natural gas averaged 601 MMcf in 1996, compared with
612 MMcf in 1995.
Occidental's average sales price for domestic crude oil was $18.98 per
barrel in 1996, compared with $15.61 in the previous year. The average natural
gas sales price in 1996 was $2.11 per thousand cubic feet ("Mcf"), compared
with $1.51 per Mcf during 1995.
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 207 MMcf of gas per day or approximately one-
third of the domestic total. Occidental has approximately 933 billion cubic
feet ("Bcf") of gas reserves and 5.5 million barrels of oil reserves in the
Hugoton area. Occidental continued infill drilling in the Chase formation of
the Hugoton field in 1996. In this program Occidental drilled and completed 54
wells, and 21 wells were stimulated by fracturing the Chase formation.
Sixteen additional wells were drilled in the Milne Point field in Alaska
during 1996. These wells are expected to add up to 15,000 gross barrels of oil
per day to the unit's production in 1997 in which Occidental has an
approximate 8.8 percent interest.
Occidental continued to develop its interest in the deep, high-pressure
Austin Chalk area of the Masters Creek field in Rapides Parish, Louisiana. In
December 1995, the Murry 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 was brought on production in
early 1996. This paved the way for dual-lateral development of Occidental's
interests in Masters Creek where Occidental has initial gross production of
5,450 barrels of oil and 14.7 MMcf of gas per day. During 1996, Occidental
participated in nine successful development wells in the Masters Creek area,
where Occidental has in excess of 100,000 acres under lease.
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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 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 1996, Occidental sold CITGO approximately 38,000
barrels of oil per day under this agreement. Occidental is currently disputing
certain provisions of this agreement.
Occidental has various agreements to supply certain gas marketing companies
with 69,400 MMBtu of natural gas per day in 1997 and with volumes ranging from
69,400 MMBtu 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 18,100 MMBtu of natural gas per day in 1997,
decreasing to 2,600 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 (where CanadianOxy is operator and Occidental a
participant); engages in exploration activities in Canada, the United States,
Indonesia, Romania, Pakistan, Kazakstan, Nigeria, Colombia and Vietnam; and
participates with Occidental in its operations in Ecuador. CanadianOxy also
conducts chemical operations in Canada and the United States.
At December 31, 1996, Occidental's proportional interest in CanadianOxy's
worldwide net proved developed and undeveloped reserves aggregated
approximately 33 million barrels of crude oil, condensate and natural gas
liquids, 153 Bcf of natural gas and 46 million barrels of synthetic crude oil
recoverable from tar sands.
BANGLADESH In early 1995, Occidental signed production-sharing contracts to
explore a 3.4-million-acre area in the gas-producing northeastern region and
to appraise the Jalalabad discovery made in 1989. Seismic exploration of the
area is in progress and two exploratory wells will be drilled in 1997.
Appraisal and development of the Jalalabad gas discovery is expected to result
in gas production and sales before the end of 1998. A sale contract with
Petrobangla, the national oil company, for the initial delivery of 100 MMcf
per day of natural gas was signed in November 1996. Occidental has farmed-out
50 percent of its interest in this block to an affiliate of Unocal.
COLOMBIA Occidental conducts exploration and production operations in
Colombia under three 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
and one exploration area in the Bogota basin. 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.
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Gross production from Occidental's Cano Limon area declined to approximately
190,000 barrels per day in 1996, compared with 197,000 barrels per day in
1995.
CONGO In July 1996, Occidental sold its entire royalty interest in the
Republic of the Congo (the "Congo") to the Congo for approximately $215
million. Occidental's net royalty oil production for seven months of 1996 in
the Congo averaged approximately 6,000 barrels per day.
ECUADOR Occidental operates the 494,000-acre Block 15, in the Oriente Basin,
under a risk-service contract. Six oil fields were discovered from 1985 to
1992. Drilling will continue until the fields are fully developed. Gross
production was approximately 21,500 barrels per day in 1996 compared to gross
production of approximately 23,800 barrels per day in 1995. In late 1996,
Occidental drilled a successful exploratory well in the southeastern portion
of the block. Appraisal of the discovery is required to determine its
commercial potential. In January 1997, the Ecuadorean government initiated
discussions to convert Occidental's existing risk-service contract to a
participation type of agreement.
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 Placid International Oil Ltd. (now
Occidental Netherlands, Inc.) Occidental has interests in seven gas-producing
licenses and one exploration license 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 1996 was approximately 73 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 and six small fields along the
southern border of the block. Exploration and field development will continue
in 1997. Occidental's net share of production from the block in 1996 averaged
approximately 13,400 barrels per day of crude oil, compared with 12,000
barrels per day in 1995.
PAKISTAN In southern Pakistan, Occidental has a 30 percent working interest
in the Badin Block, which in 1996 produced a net share of 6,400 barrels of oil
per day and 43 MMcf of gas per day, compared to 6,000 barrels of oil per day
and 49 MMcf of gas per day in 1995. Exploration of the block resulted in two
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 and for two contiguous blocks in the Central Indus gas basin
totaling 2.9 million acres. Seismic exploration of the Northern Pakistan Salt
Range block has delineated several prospects, and drilling will occur in one
such prospect in 1997.
PERU Occidental conducts exploration and production activities under four
separate service contracts with the Peruvian government. One of these
contracts, in which Occidental retains all the interest, covers continuing
operations in the northern jungle and provides 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 owns a 65 percent interest and a 50 percent interest,
respectively, in two contiguous exploration blocks totalling 4.4 million
acres. The remaining contract in which Occidental has a 100 percent interest
covers a 2-million-acre block in the Hualluga Basin. The contract for the
Talara producing operation in Peru expired in July 1996 and was not renewed.
Gross production from the northern jungle block averaged approximately
52,300 barrels per day in 1996, compared with 55,000 barrels per day in 1995.
Occidental's net production in Peru amounted to approximately 53,700 barrels
per day in 1996, compared to 58,000 barrels per day in 1995.
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.
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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 maintenance by both
water injection and gas injection to effect a high recovery from the
reservoir. Average production increased from approximately 20,000 net barrels
per day for 1995 to approximately 38,000 net barrels per day for 1996. Proved
developed and undeveloped project reserves are presently estimated by
Occidental to be approximately 207 million barrels.
RUSSIA In 1992, Occidental and AAOT Chernogorneft Enterprise began operation
of a 50 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. During 1996, gross production averaged 50,800 barrels per day.
Approximately 27 percent of such oil was exported in 1996. Occidental expects
to continue exports of some of its oil production in 1997.
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. In 1996 Occidental results included a $105 million
charge, reflecting the write-down of its investment in Komi, although certain
drilling has continued to satisfy contractual obligations.
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 just west of Lake Maracaibo. Occidental is the operator, with a 100
percent interest, and receives, 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. A three-year work
program, completed in early 1997, included 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 1996, with production averaging 27,200 barrels per day for 1996,
compared to 20,900 barrels per day for 1995.
YEMEN In 1991, Occidental acquired an 18 percent working interest in the
310,000-acre Masila Block (although the block consisted at one time of 6.8
million acres, substantial territory was relinquished in 1995 and 1996), where
CanadianOxy, the operator, with a 52 percent working interest, has made 12 oil
discoveries. Production started in July 1993. Occidental's net share under a
production-sharing contract was 14,700 barrels per day compared to 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 Several of the projects listed below would
involve substantial expenditures and several years would be required to
complete project development.
In 1992, a substantial oil and gas 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 has a 50 percent working interest in this project. Occidental and its
partner, Shell Philippines Exploration Corporation, the operator, have signed a
memorandum of understanding with the National Power Corporation of the Republic
of the Philippines to investigate the repowering of an idle nuclear plant in
Bataan with natural gas.
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
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plant initially will come from the Jintan discovery containing recoverable gas
estimated at 2.9 Tcf. Occidental is the operator, with a 37.5 percent interest
in the gas discoveries. Occidental will have a 10 percent interest in the new
LNG plant. The partners began the detailed upstream facility design in 1996.
The estimated start-up date of the LNG plant is the year 2001.
In Indonesia, Occidental has a 22.9 percent interest in the Berau Block,
offshore Irian Jaya, where appraisal of five major natural gas discoveries by
ARCO, the operator, will continue into 1997 to determine if the natural gas
reserves are sufficient to justify construction of an LNG plant on Irian Jaya.
In addition, Occidental acquired new exploration blocks in Albania, Peru and
Papua New Guinea. During 1997, exploration activities are planned in these
areas as well as on previously acquired blocks in Albania, Bangladesh, China,
Colombia, Gabon, Hungary, Indonesia, Ireland, Oman, Pakistan, Papua New
Guinea, the Philippines and Russia.
Special Item in 1996
Financial results for 1996 included a charge of $105 million, reflecting the
write-down of Occidental's oil and gas exploration project in the Republic of
Komi in the former Soviet Union.
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, proved oil and gas reserves are those estimated
quantities of crude oil, natural gas, and natural gas liquids that geological
and engineering data demonstrate with reasonable certainty will be recoverable
in future years from known reservoirs under existing economic and operating
conditions. Proved developed oil and gas reserves are proved reserves that can
be expected to be recovered through existing wells with existing equipment and
operating methods. Unless otherwise stated, all references to reserves are
made on a net basis. On March 31, 1996, 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, 1995, as are set forth for that date in the
information incorporated under the caption "Supplemental Oil and Gas
Information" contained in Occidental's 1995 Annual Report.
NATURAL GAS TRANSMISSION OPERATIONS
General
Through MidCon Corp. ("MidCon"), Occidental engages in interstate and
intrastate natural gas transmission and marketing and electric power
marketing. MidCon's subsidiaries purchase, transport, store 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 Operator, Inc. ("MidCon Texas"), which operates
an intrastate pipeline system in Texas, now owned by other Occidental
subsidiaries (see "MidCon ESOP" below); MidCon Gas Services Corp. ("MidCon
Gas"), which engages in the purchase and sale of gas and arranges for the
transportation and storage of such gas; and MidCon Power Services Corp.
("MidCon Power"), which purchases electricity from electric utilities and
other electric power producers and marketers, resells electricity to wholesale
customers and arranges for the transmission of such power. Another
7
<PAGE>
subsidiary of MidCon processes natural gas. Through subsidiaries, MidCon also
owns interests in several gas pipeline joint ventures.
Natural is subject to extensive regulation by the Federal Energy Regulatory
Commission (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.
A series of orders (collectively, "Order 636") were adopted by the FERC in
1992 to address certain marketing advantages purportedly enjoyed by interstate
pipelines over other resellers of gas, mandates that interstate pipelines no
longer provide a "bundled" service using 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, and no longer needed gas supplies to meet sales
requirements. Thus, Natural incurred gas supply realignment ("GSR") costs in
order to terminate or otherwise resolve its obligations under its gas supply
contracts. Natural reached settlement agreements with former customers
providing for recovery of a significant amount of its GSR costs. Under these
settlements, which were approved by the FERC, Natural, through monthly demand
charge billings, recovers GSR costs allocated to these customers over a 48-
month period that began in December 1993. The FERC also permitted Natural to
implement a tariff mechanism to recover additional portions of its GSR costs
in rates charged to transportation customers that are not party to the
settlements.
MidCon ESOP
In November 1996, Occidental established the MidCon Corp. Employee Stock
Ownership Plan (the "MidCon ESOP") for the benefit of employees of MidCon.
Pursuant to the MidCon ESOP, Occidental has issued 1,400,000 shares of its
Cumulative MidCon-Indexed Convertible Preferred Stock (the "CMIC Preferred
Stock") to the MidCon Corp. ESOP Trust.
The CMIC Preferred Stock is designed to track the value of MidCon, which
remains a wholly-owned subsidiary of Occidental. The MidCon ESOP paid for the
CMIC Preferred Stock with a $1.4 billion 30-year promissory note (the "ESOP
Note") guaranteed by MidCon. Dividends on the CMIC Preferred Stock are payable
at an annual rate of $21 per share, when and as declared by Occidental's Board
of Directors. It is anticipated that MidCon will make annual contributions
from its operating cash flow to the MidCon ESOP which, together with the
annual dividends, will be used to repay the ESOP Note due to Occidental.
Properties
Natural's principal facilities consist of two major interconnected
transmission pipelines terminating in the Chicago metropolitan area. One line,
which extends from west Texas and New Mexico producing areas, includes
approximately 6,600 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 operates an intrastate pipeline system, located primarily in
the Texas Gulf Coast area, which it leases from an affiliate under a 30-year
lease. The system includes approximately 2,600 miles of pipelines, supply
lines, sales laterals and related facilities. A subsidiary of MidCon Gas owns
a separate Texas intrastate pipeline system (the "Palo Duro System") that
includes approximately 400 miles of pipeline and related
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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 Gas owns an interest.
Markets, Sales, Transportation, Storage 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 both 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>
1996 1995 1994
----- ----- -----
<S> <C> <C> <C>
Natural
Transportation 1,284 1,318 1,318
MidCon Texas
Sales 239 238 198
Transportation 271 215 215
MidCon Gas
Sales 460 410 351
</TABLE>
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 220 Bcf in 1996, 221 Bcf in 1995 and 220 Bcf in 1994. 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 consequence of Order 636, Natural's sales service agreements were
replaced in December 1993 principally with service agreements for combined
transportation and storage services provided to former customers. These
combined transportation and storage agreements, in turn, terminated on
December 1, 1995. Contracts for new services that included new combined
transportation and storage service options were entered with those customers,
but several were renewed at reduced service levels and reduced rates.
Customers purchasing this combined service pay monthly demand charges
irrespective of gas volumes actually transported and stored. In addition,
Natural is authorized to assess separate monthly demand charges to these
customers to recover a portion of Natural's GSR costs.
Approximately 85 percent of Natural's pipeline capacity to Chicago remains
subscribed for long-term firm transportation service. Natural was able to sell
on a short-term basis substantially all of the remaining unsubscribed capacity
during the 1995-96 and 1996-97 winter heating seasons.
In June 1995, Natural filed a general rate case with the FERC to allow
Natural to institute tariff changes to reflect the new transportation and
storage services it planned to institute in December 1995 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 potential adjustment upon final
resolution of issues in the rate case. In May 1996, Natural filed a settlement
with the FERC to resolve all rate case issues. Natural currently is engaged in
negotiations with one intervenor group in an effort to obtain unanimous
support for the proposed settlement.
Pursuant to transportation agreements and FERC tariff provisions, Natural
offers both firm transportation service and interruptible transportation
service. Under Natural's tariff, firm transportation customers pay reservation
charges each month, irrespective of volumes actually transported.
Interruptible transportation customers pay a monthly commodity charge based
upon actual volumes transported. Reservation and commodity
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<PAGE>
charges are both based upon geographical location, time of year and distance
of the transportation service provided. 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. Firm storage customers pay a
monthly demand charge irrespective of actual volumes stored. Interruptible
storage customers pay a monthly commodity charge based upon actual volumes of
gas stored.
Natural transports a substantial portion 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 increased competition in this market as other pipelines consider
expansion projects to increase their capability to serve the Chicago area. In
August 1996, Natural received preliminary approval, subject to environmental
review, from the FERC to expand its existing pipeline system from Harper,
Iowa, to Chicago. This expansion, plus existing capacity, would accommodate
more than 500 MMcf per day of new gas supplies to be delivered through a
proposed expansion of the system of Northern Border Pipeline Company
("Northern Border"), a competitor, that transports gas originating in western
Canada. Northern Border has also received preliminary approval, subject to
environmental review, from the FERC for its pipeline expansion as well as an
extension of its pipeline system from its existing terminus near Harper to the
Chicago area. Natural is opposed to the "rolled-in" rate structure proposed
for the Northern Border extension and also argues that, from an environmental
standpoint, the Northern Border extension is less favorable than a further
expansion of Natural's system. In December 1996, Alliance Pipeline L.P. filed
an application with the FERC for authority to construct a new pipeline from
the Saskatchewan/North Dakota border to the Chicago area. Natural has opposed
the application. If Northern Border builds its proposed extension into the
Chicago area, service may begin within two to three years. Natural expects to
mitigate any negative impact over time with additional market growth and
expansion of capacity to move volumes east.
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.
In 1996, Trailblazer Pipeline Company ("Trailblazer"), a partnership in
which a subsidiary of Natural owns a one-third interest, signed 10-year
agreements with six shippers for additional firm transportation service. To
accommodate these additional service requirements, Trailblazer has sought
approval from the FERC to install compression to increase pipeline capacity by
approximately 104 MMcf per day. The new compression facilities are anticipated
to be in service during the summer of 1997. Trailblazer's system runs from
eastern Colorado to eastern Nebraska and transports gas produced in the Rocky
Mountains. Natural is the operator of the pipeline. Trailblazer moved
approximately 194 Bcf of gas in 1996, a record for the 14-year old line.
In January 1997, Natural and a subsidiary of NIPSCO Industries, Inc.
completed construction of a 100-MMcf-per-day pipeline interconnection in the
Chicago metropolitan area between their respective pipeline systems. The
interconnection provides Natural an additional connection to pipelines serving
markets east of Chicago.
MidCon Texas makes sales principally to customers located in the Houston-
Beaumont and Port Arthur area of Texas and provides 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 transportation
business.
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<PAGE>
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.
In January 1996, MidCon Texas entered into agreements with a major south Texas
producer to purchase and transport 274 billion cubic feet of gas over a five-
year period. In August 1996, MidCon Texas completed construction of a 68-mile
pipeline to connect its existing pipeline system to these gas reserves.
MidCon Gas makes sales of gas to local distribution companies, other
marketing companies and large commercial and industrial end users. Sales
prices received by MidCon Gas are established by negotiation. MidCon Gas uses
gas futures contracts, options and swaps to hedge the impact of natural gas
price fluctuations. MidCon Gas also offers a variety of fuel management
services to utilities and other large volume gas users. During 1996, MidCon
Gas provided gas portfolio management services to four large local
distribution companies and to a large steel company. MidCon Gas has formed a
new marketing subsidiary, "mc2", to target gas sales to commercial and small
industrial customers. Initial product marketing begins in the Chicago and New
York City metropolitan areas in 1997.
MidCon was granted a permit by Mexico to construct approximately 100 miles
of pipeline from the United States to Monterrey, Mexico. This is the first
pipeline transportation permit since Mexico amended its Constitution to
provide for private ownership of gas pipelines and storage systems. When
built, this pipeline will deliver up to 270 MMcf per day of gas to local
distribution companies, industrial customers and electricity generators.
In 1996, MidCon Power sold approximately 600,000 megawatt hours of
electricity to wholesale customers. In 1997, MidCon Power anticipates
participating in several electric sales pilot programs initiated by various
state utility regulators as initial steps toward opening up retail electric
sales markets to competition.
During 1996, MidCon subsidiaries sold approximately 174 million gallons of
natural gas liquids obtained through gas processing operations.
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 maintains inventories of gas supplies in storage
facilities of its affiliates and other pipeline companies. It had
approximately 100 Bcf of working gas storage capacity available under various
arrangements at the beginning of the 1996-97 winter heating season.
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, polymers and plastics and specialty chemicals.
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<PAGE>
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. As a counterbalance to the commodity business, Occidental organized
the Specialty Business Group in 1995. The Specialty Business Group focuses on
smaller volume specialty and intermediate chemical markets where OxyChem's
product may be more readily differentiated and enjoy a particular market
niche. Demand for specialty chemical products is less cyclical than commodity
products and specialty products are expected to provide a more steady source
of earnings.
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 April 1996, OxyChem completed the acquisition of a 64 percent equity
interest (on a fully-diluted basis) in INDSPEC Holding Corporation, and,
indirectly, its sole operating subsidiary INDSPEC Chemical Corporation
("INDSPEC") for approximately $92 million, with $87 million in common stock
and the balance in cash. Under the terms of the transaction, INDSPEC's
management and employees have retained voting control of INDSPEC. INDSPEC is
the largest producer of resorcinol in the world and the sole commercial
producer 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 stabilizers, sunscreens, dyestuffs, pharmaceuticals,
agrichemicals, carbonless paper and fire retardant plastic additives.
Also in April 1996, OxyChem completed the sale of certain international
phosphate fertilizer trading operation assets. These assets were sold for
notes receivable of approximately $20 million and did not result in a material
gain or loss.
In August 1996, OxyChem acquired three specialty chemical units: Laurel
Industries, Inc.; Natural Gas Odorizing, Inc.; and a plant from Power Silicates
Manufacturing, Inc. ("Power Silicates"). These acquisitions were made in
separate transactions for approximately $149 million, through the issuance of
5,512,355 shares of Occidental common stock with a value of approximately $130
million, with the remainder paid in cash. Laurel Industries, Inc. was
acquired from private investors, and is North America's largest producer of
antimony oxide at its LaPorte, Texas, facility. Antimony oxide is used as a
polymerization catalyst in the manufacture of polyethylene terephthalate
resins and as a flame retardant in plastics, where it complements an OxyChem
flame retardant synergist, DechPlus(R). Natural Gas Odorizing, Inc. was
purchased from Helmerich & Payne, and is the leading U.S. producer of
mercaptan-based warning agents for use in natural gas and propane. The plant
is located in Baytown, Texas. In addition, a plant in Augusta, Georgia, was
purchased from Power Silicates, which produces sodium silicates for use in
soap and detergent formulating, paper manufacturing and silica-based catalysts
and will augment OxyChem's five existing silicates plants by its presence in
the growing southeast U.S. market.
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 1996 by lower
sales prices and higher feedstock and energy costs resulting in lower 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 1996, with similar operating rates expected to
continue for 1997.
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.
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<PAGE>
Principal Products
OxyChem produces the following chemical products:
<TABLE>
<CAPTION>
Principal Products Major Uses
------------------------------------ ------------------------------
<C> <S> <C>
Basic Chemicals Chlor-alkali chemicals
Chlorine.......................... Polyvinyl chloride, 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 Busi- Sodium silicates.................... Soaps and detergents,
nesses 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
Mercaptans.......................... Warning agents for natural gas
and propane and agricultural
chemicals
Antimony oxide...................... Flame retardant synergist and
catalysts
Resorcinol.......................... Tire manufacture, wood
adhesives and flame retardant
synergist
------------------------------------ ------------------------------
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
------------------------------------ ------------------------------
</TABLE>
(Table continued on next page)
13
<PAGE>
<TABLE>
<CAPTION>
Principal Products Major Uses
------------------------------------ -----------------------
<C> <C> <S>
Polymers and Plas- Vinyl chloride monomer.............. Raw material for
tics 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 1996: it was the largest United States merchant marketer
of chlorine and caustic soda; including OxyMar (OxyChem's joint venture with
Marubeni) the second-largest United States producer of vinyl chloride monomer;
the fourth-largest producer of PVC resins in North America (and will, upon
completion of the Pasadena PVC plant expansion in mid-1997, be the third
largest producer of PVC resins in the United States); the largest producer of
chrome chemicals and phenolic molding compounds; the second-largest producer
of sodium silicates; 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 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.
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<PAGE>
Properties
OxyChem, which is headquartered in Dallas, Texas, operates 32 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 11 chemical product manufacturing facilities in
seven 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.
Special Items in 1996
Chemical division earnings included the pretax gain of $170 million related
to favorable litigation settlements, and a charge of $75 million for
additional environmental reserves relating to various existing sites, and the
related state tax effects.
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 to remain competitive and to comply with safety and environmental
laws. Occidental's capital expenditures for its ongoing businesses totaled
approximately $1.2 billion in 1996, $979 million in 1995 and $1.1 billion in
1994, exclusive of the noncash consideration for acquisitions. The 1996 amount
included capital expenditures aggregating $762 million for oil and gas,
$262 million for chemical and $147 million for natural gas transmission.
Occidental's total capital expenditures, exclusive of acquisitions, if any,
for 1997 are expected to approximate $1.34 billion, with $900 million for oil
and gas, the majority of which is for international oil and gas operations.
EMPLOYEES
Occidental and its subsidiaries employed a total of 14,270 persons at
December 31, 1996, of whom 10,070 were located in the United States. 4,470
were employed in oil and gas operations, 1,730 in natural gas transmission
operations and 7,520 in chemical operations. An additional 550 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,
color, religion, ethnicity, gender, national origin, disability, age, sexual
orientation, veteran status or any other legally impermissible factor.
Occidental maintains numerous diversity and outreach 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 that 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
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<PAGE>
("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, 1996 and 1995, Occidental had environmental reserves of
approximately $566 million and $582 million, respectively. Occidental provided
additional reserves of approximately $100 million in 1996, $21 million in 1995
and $5 million in 1994 for costs associated with expected remediation efforts
at a number of sites. The 1996 and 1995 amounts related primarily to the
chemical division. The 1994 amount related primarily to the oil and gas
division.
Occidental's estimated operating expenses in 1996 relating to compliance
with environmental laws and regulations governing ongoing operations were
approximately $105 million, compared with $111 million in 1995 and $114
million in 1994. The 1996 amount included $59 million in the chemical
division, $41 million in the oil and gas division and $5 million in the
natural gas transmission division. In addition, capital expenditures for
environmental compliance were $89 million in 1996, compared with $74 million
in 1995 and $67 million in 1994. The 1996 amount included $54 million in the
oil and gas division, $27 million in the chemical division and $8 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 $90 million to $100
million for each of 1997 and 1998.
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.
On July 22, 1996, Occidental announced that a judgment of $742 million had
been entered in favor of its OXY USA Inc. ("OXY USA") subsidiary against
Chevron USA by the state district court in Tulsa, Oklahoma. The unanimous
verdict was for approximately $229 million in compensatory damages for breach
of a 1982 merger agreement and interest on these damages from 1982 to the date
of judgment. Interest has continued to accrue from July 19, 1996, in an amount
of approximately $6 million per month. Chevron has appealed the decision to the
Oklahoma Supreme Court, and, in connection with that appeal, has obtained an
appeal bond to secure payment of any final judgment and accrued interest as
required by Oklahoma law.
In 1991, Continental Trend Resources obtained a jury verdict against OXY USA
in the U.S. District Court for the Western District of Oklahoma for $269,000
in actual damages and $30 million in punitive damages for tortious
interference with contract. In 1995, the U.S. Court of Appeals for the 10th
Circuit affirmed the subsequent judgment. In 1996, the U.S. Supreme Court
granted OXY USA's petition for writ of certiorari, vacated the judgment and
remanded the action to the Court of Appeals for further consideration. In
November 1996, the Court of Appeals reduced the punitive damage award to $6
million and, alternatively, offered the plaintiffs a new trial on punitive
damages. The plaintiffs' motion for rehearing was denied and the plaintiffs
have sought a stay of mandate in order to petition the Supreme Court for a
writ of certiorari.
MidCon Gas Services Corp. ("MidCon Gas") purchases transportation and
storage services from pipeline companies to support its gas sales business. A
significant amount of these services are purchased from Natural Gas Pipeline
Company of America ("Natural"). In January 1997, Amoco Production Company and
Amoco Trading Corporation (collectively, "Amoco"), filed a complaint against
Natural before the FERC contending that Natural improperly had provided MidCon
Gas transportation service on preferential terms. Amoco has requested, among
other things, that the FERC require Natural to terminate the transportation
services it provides to MidCon Gas. Natural believes it has treated all
shippers, including Amoco, fairly and it will vigorously defend its actions.
ENVIRONMENTAL PROCEEDINGS
In 1992, Occidental Chemical Corporation ("OCC") submitted to the
Environmental Protection Agency ("EPA") its report under EPA's Toxic
Substances Control Act Section 8(e) Compliance Audit Program (the
16
<PAGE>
"Program"). Under the Program, numerous companies voluntarily submitted to the
EPA all studies meeting the EPA's thresholds for reporting information that
may indicate a substantial risk exists from any chemical that a company
manufactures, processes or distributes, and agreed to pay stipulated penalties
for previously unreported studies, with a maximum penalty of $1 million per
company. In 1996, OCC was assessed and paid a penalty of $869,000.
In September 1996, the EPA filed an administrative Complaint against Natural
Gas Odorizing, Inc., which was recently acquired by Occidental, alleging
failure to file during 1994 an Inventory Update Report under the Toxic
Substance Control Act regarding its facility in Baytown, Texas, and proposed a
civil penalty of $136,000. OCC is engaged in settlement discussions with the
EPA.
In October 1996, the West Virginia Division of Environmental Protection
filed a civil action in the Circuit Court, Kanawha County, West Virginia,
against OCC alleging violations of hazardous waste management regulations at
its Belle Plant, from October 1994 to September 1995. The Complaint seeks
civil penalties of up to $25,000 per violation per day and injunctive relief
requiring correction of the alleged violations. OCC is contesting the
allegations and proposed civil penalties.
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 1996.
EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
<CAPTION>
AGE AT
FEBRUARY 28, POSITIONS WITH OCCIDENTAL AND SUBSIDIARIES
NAME 1997 AND FIVE-YEAR EMPLOYMENT HISTORY
---- ------------ ------------------------------------------
<C> <C> <S>
Dr. Ray R. Irani 62 Chairman and Chief Executive Officer since
1990; President from 1984 to 1996; 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
1987; member of Executive Committee.
Dr. Dale R. Laurance 51 President since 1996; 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 50 Executive Vice President--Corporate
Development since 1994; 1990-1994, Managing
Director, Merrill Lynch & Co. Incorporated.
Donald P. de Brier 56 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 52 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 65 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 57 Executive Vice President and Chief Financial
Officer since 1991; 1984-1991, Vice
President and Controller.
John F. Riordan 61 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.
</TABLE>
(Table continued on next page)
17
<PAGE>
<TABLE>
<CAPTION>
AGE AT
FEBRUARY 28, POSITIONS WITH OCCIDENTAL AND SUBSIDIARIES
NAME 1997 AND FIVE-YEAR EMPLOYMENT HISTORY
---- ------------ ------------------------------------------
<C> <C> <S>
Howard Collins 53 Vice President--Public Relations since
1993; 1986-1993, Director--Public
Relations.
E. Leon Daniel 60 Vice President since 1996; Executive Vice
President--International EOR and
Engineering, Occidental Oil and Gas
Corporation since 1996; 1993-1996,
President of Oxy Engineering Services;
1987-1993, Executive Vice President--
Engineering, Drilling and Production--
International of Occidental Oil and Gas
Corporation and Occidental International
Exploration and Production Company.
Samuel P. Dominick, Jr. 56 Vice President and Controller since 1991;
1990-1991, Assistant Controller--Internal
Audit; 1985-1990, Director of Internal
Audit.
Fred J. Gruberth 63 Vice President and Treasurer since 1992;
1978-1992, Senior Assistant Treasurer.
Kenneth J. Huffman 52 Vice President--Investor Relations since
1991; 1989-1991, Vice President--Finance,
American Exploration Company.
John L. Hurst 57 Vice President since 1996; Executive Vice
President--Manufacturing and Engineering
of Occidental Chemical Corporation since
1996; 1988-1996, Executive Vice
President--Operations of Occidental
Chemical Corporation.
Robert M. McGee 50 Vice President since 1994; President of
Occidental International Corporation
since 1991; 1981-1991, Senior Executive
Vice President of Occidental
International Corporation.
John W. Morgan 43 Vice President--Operations since 1991;
1984-1991, Director--Operations.
S.A. Smith 52 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 49 Vice President--Health, Environment and
Safety since 1995; 1991-1995, Director--
Investor Relations.
Aurmond A. Watkins, Jr. 54 Vice President--Tax since 1991; 1986-
1991, Director--Taxes.
</TABLE>
The current term of office of each Executive Officer will expire at the
April 25, 1997, organizational meeting of the Occidental Board of Directors or
at such time as his or her successor shall be elected.
18
<PAGE>
PART II
ITEM 5 MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Trading Price Range and Dividends
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 1996 Annual Report, relevant portions of which
1996 Annual Report are filed as Exhibit 13 to this report. Occidental's common
stock was held by approximately 107,750 stockholders of record at year-end
1996, with an estimated 165,000 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 1996 Annual Report. The
quarterly financial data on pages 61 and 62 of the 1996 Annual Report sets
forth the range of trading prices for the common stock as reported on the New
York Stock Exchange's composite tape and quarterly dividend information.
The quarterly dividend rate for the common stock is $.25 per share. On
February 13, 1997, a dividend of $.25 per share was declared on the common
stock, payable on April 15, 1997 to stockholders of record on March 7, 1997.
Occidental is subject to certain financial covenants in instruments pertaining
to its long-term indebtedness which do not currently impose restrictions on
dividend policy. In 1992 Occidental entered into a settlement agreement with
certain private litigants which, among other things, imposed an obligation to
maintain the annual common stock dividend at no less than $1 per share through
1997, subject to the exercise by the Board of Directors of its fiduciary
obligations and the business judgment rule. Thus, the declaration of future
cash dividends is a business decision made by the Board of Directors from time
to time, and will depend on the foregoing considerations, earnings, financial
condition and other factors deemed relevant by the Board; however, Occidental
presently expects that dividends will continue to be paid.
Recent Sales of Unregistered Securities
During the previous three years commencing January 1, 1994, Occidental sold
the following securities which were not initially registered under the
Securities Act of 1933, as amended (the "Act").
(1) In March 1994, Occidental acquired interests in certain U.S. Gulf Coast
oil and gas properties from Agip Petroleum Co. Inc. ("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.
(2) In December 1994, Occidental acquired Placid Oil Company from certain
Hunt Family trusts (the "Trusts") 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, par value $1.00 per share (the
"Preferred Stock"), with a value of $175 million, and the balance through the
issuance of 3,835,941 shares of Occidental common stock.
All or a portion of the shares held of the Preferred Stock is convertible at
the option of the holder thereof into such number of whole shares of common
stock as is equal to the aggregate liquidation preference of shares of
Preferred Stock ($50 per share) surrendered for conversion divided by the
Conversion Price, initially $22.76, subject to adjustment as described in the
governing Certificate of Designations, Preferences and Rights and in
Occidental's Registration Statement on Form 8-B/A (Amendment No. 5) dated
November 1, 1995.
(3) In August 1996, Occidental acquired three specialty chemical units in
separate transactions for approximately $149 million through the issuance of
5,512,355 shares of Occidental common stock, with a value of approximately
$130 million, and the balance paid in cash. The acquisitions included Laurel
Industries, Inc. ("Laurel"), Natural Gas Odorizing, Inc. ("NGO"), and a plant
in Augusta, Georgia, purchased from Power Silicates Manufacturing, Inc. The
NGO shares were issued to its parent, Helmerich & Payne, Inc., while the
Laurel shares were issued to certain Laurel investors.
19
<PAGE>
(4) In November 1996, Occidental issued 1,400,000 shares of its Cumulative
MidCon-Indexed Convertible Preferred Stock, par value $1.00 per share, to the
MidCon Corp. ESOP Trust for $1,400,000 in cash and a promissory note in the
principal amount of $1,398,600,000. For terms of conversion, reference is made
to Occidental's Form 8-K dated November 20, 1996, and the governing
Certificate of Designations filed as an exhibit thereto.
The securities described in the paragraphs marked (1) through (4) above were
issued in reliance on the exemption from registration under Section 4(2) of
the Act, and the rules promulgated under the Act, as transactions not
involving a public offering. Each recipient of such securities stated that it
was its intent to acquire the securities for investment purposes. In each case
the recipient had access to Occidental's public financial information.
Appropriate restrictive legends were, in each case, affixed to the stock
certificates issued in each transaction. The shares of Occidental common stock
issued in the Agip, Laurel and NGO transactions were subsequently registered
for resale in secondary offering Registration Statements on Form S-3 filed
with the Securities and Exchange Commission. Demand registration rights
granted to the Trusts in the Placid transaction have been exercised with
respect to certain shares of Occidental's common stock issued in such
transaction.
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 1996 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 1996 Annual Report.
20
<PAGE>
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS AND RELATED INFORMATION
<TABLE>
<CAPTION>
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
1996 Annual Report incorporated herein by reference):
Consolidated Statements of Operations............... 33 --
Consolidated Balance Sheets......................... 34 --
Consolidated Statements of Stockholders' Equity..... 36 --
Consolidated Statements of Cash Flows............... 37 --
Notes to Consolidated Financial Statements.......... 38 --
Report of Independent Public Accountants............ 60 --
Quarterly Financial Data............................ 61 --
Supplemental Oil and Gas Information................ 63 --
Report of Independent Public Accountants.............. -- 22
Financial Statement Schedule:
II Valuation and Qualifying Accounts................ -- 23
</TABLE>
21
<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, 1996, incorporated
by reference in this Annual Report on Form 10-K, and have issued our report
thereon dated January 31, 1997. 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.
Los Angeles, California ARTHUR ANDERSEN LLP
January 31, 1997
22
<PAGE>
OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
(In millions)
<TABLE>
<CAPTION>
ADDITIONS
---------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER END OF
OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
- ------------------------ ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
1996
Allowance for doubtful
accounts $ 19 $ 12 $ -- $ (7) $ 24
====== ====== ====== ====== ======
Environmental $ 582 $ 100 $ 11 $ (127)(a) $ 566
Contract impairment 81 -- -- (36)(c) 45
Foreign and other
taxes, litigation and
other reserves 969 71 24 (101)(a) 963
------ ------ ------ ------ ------
$1,632 $ 171 $ 35 $ (264) $1,574
- ------------------------ ====== ====== ====== ====== ======
1995
Allowance for doubtful
accounts $ 17 $ 8 $ 1 $ (7) $ 19
====== ====== ====== ====== ======
Environmental $ 635 $ 21 $ 19 $ (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 $ 161 $ 69 $ (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)
- ------------------------ ====== ====== ====== ====== ======
(a) Primarily represents payments.
(b) Of these amounts, $209 million, $228 million and $197 million in 1996,
1995 and 1994, 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.
</TABLE>
23
<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 25,
1997, Annual Meeting of Stockholders (the "1997 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 1997 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 1997 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 1997 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>
<C> <S>
3.(i)* (a) 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).
(b) Certificate of Designation of the Cumulative MidCon-Indexed
Convertible Preferred Stock (par value $1.00 per share) of Occidental
Petroleum Corporation (filed as Exhibit 3.1 to Occidental's Current
Report on Form 8-K dated November 20, 1996, File No. 1-9210).
3.(ii)* Bylaws 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).
</TABLE>
- -------------------------------
* Incorporated herein by reference.
24
<PAGE>
<TABLE>
<C> <S>
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 10.42 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* 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).
10.2* 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).
10.3* 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).
10.4* 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).
10.5* 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).
10.6* 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).
10.7* 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).
10.8* 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).
10.9* 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).
10.10* 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).
10.11* 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).
</TABLE>
- -------------------------------
* Incorporated herein by reference.
25
<PAGE>
<TABLE>
<C> <S>
10.12* 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).
10.13* 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).
10.14* 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).
10.15* 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).
10.16* 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).
10.17* 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).
10.18* 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).
10.19* 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).
10.20* 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).
10.21* 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).
10.22* 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).
10.23* Occidental Petroleum Corporation Senior Executive Deferred Compensation
Plan (effective as of January 1, 1986, as amended and restated
effective as of January 1, 1996) (filed as Exhibit 10.24 to the Annual
Report on Form 10-K of Occidental for the fiscal year ended December
31, 1995, File No. 1-9210).
10.24* 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) (filed as Exhibit 10.25 to
the Annual Report on Form 10-K of Occidental for the fiscal year ended
December 31, 1995, File No. 1-9210).
10.25* Occidental Petroleum Corporation Senior Executive Supplemental
Retirement Plan (effective as of January 1, 1986, as amended and
restated effective as of January 1, 1996) (filed as Exhibit 10.26 to
the Annual Report on Form 10-K of Occidental for the fiscal year ended
December 31, 1995, File No. 1-9210).
</TABLE>
- -------------------------------
* Incorporated herein by reference.
26
<PAGE>
<TABLE>
<C> <S>
10.26* Occidental Petroleum Corporation Senior Executive Survivor Benefit Plan
(effective as of January 1, 1986, as amended and restated effective as
of January 1, 1996) (filed as Exhibit 10.27 to the Annual Report on
Form 10-K of Occidental for the fiscal year ended December 31, 1995,
File No. 1-9210).
10.27* 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).
10.28* 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).
10.29* 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).
10.30* 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).
10.31* 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).
10.32* 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).
10.33* Occidental Petroleum Corporation 1996 Restricted Stock Plan for Non-
Employee Directors, effective April 26, 1996 (filed as Exhibit 99.1 to
the Registration Statement on Form S-8, File No. 333-02901).
10.34* Form of Restricted Stock Option Assignment under Occidental Petroleum
Corporation 1996 Restricted Stock Plan for Non-Employee Directors
(filed as Exhibit 99.2 to the Registration Statement on Form S-8, File
No. 333-02901).
10.35* Form of Incentive Stock Option Agreement under Occidental Petroleum
Corporation 1995 Incentive Stock Plan (filed as Exhibit 10.1 to
Occidental's quarterly report on Form 10-Q for the fiscal quarter ended
June 30, 1996, File No. 1-9210, amends Form previously filed as Exhibit
99.2 to Occidental's Registration Statement on Form S-8, File No. 33-
64719 and incorporated by reference as Exhibit 10.29 to the Annual
Report on Form 10-K of Occidental for the fiscal year ended
December 31, 1995, File No. 1-9210).
10.36* Form of Nonqualified Stock Option Agreement under Occidental Petroleum
Corporation 1995 Incentive Stock Plan (filed as Exhibit 10.2 to
Occidental's quarterly report on Form 10-Q for the fiscal quarter ended
June 30, 1996, File No. 1-9210, amends Form previously filed as Exhibit
99.3 to Occidental's Registration Statement on Form S-8, File No. 33-
64719 and incorporates by reference as Exhibit 10.30 to the Annual
Report on Form 10-K of Occidental for the fiscal year ended
December 31, 1995, File No. 1-9210).
10.37* Agreement, dated September 9, 1996, between Occidental and David R.
Martin (filed as Exhibit 10.1 to Occidental's quarterly report on Form
10-Q for the fiscal quarter ended September 30, 1996, File No. 1-9210).
10.38* Occidental Petroleum Corporation 1988 Deferred Compensation Plan (as
amended and restated effective as of January 1, 1996) (filed as Exhibit
10.2 to Occidental's quarterly report on Form 10-Q for the fiscal
quarter ended September 30, 1996, File No. 1-9210).
10.39* MidCon Corp. Savings Plan (filed as Exhibit 99.1 to Occidental's
Registration Statement on Form S-8, File No. 333-17879).
10.40* Amendment No. 1 MidCon Corp. Savings Plan (filed as Exhibit 99.1 to
Occidental's Registration Statement on Form S-8, File No. 333-17879).
</TABLE>
- -------------------------------
* Incorporated herein by reference.
27
<PAGE>
<TABLE>
<C> <S>
10.41 MidCon Corp. Supplemental Retirement Plan (effective as of January 1,
1997).
10.42 Employment Agreement made as of the 3rd day of May, 1993, by and between
Occidental and Donald de Brier.
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, 1996.
12 Statement regarding computation of total enterprise ratios of earnings
to fixed charges for the five years ended December 31, 1996.
13 Pages 21 through 58 and pages 60 through 68 of Occidental's Annual
Report for the fiscal year ended December 31, 1996, 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, 1996.
23 Consent of Independent Public Accountants.
27 Financial data schedule of Occidental for the fiscal year ended December
31, 1996 (included only in the copy of this report filed electronically
with the Securities and Exchange Commission).
</TABLE>
- -------------------------------
* Incorporated herein by reference.
28
<PAGE>
(b) REPORTS ON FORM 8-K
During the fourth quarter of 1996, Occidental filed the following Current
Reports on Form 8-K:
1. Current Report on Form 8-K dated October 17, 1996 (date of earliest event
reported), filed on October 18, 1996, for the purpose of reporting, under Item
5, Occidental's results of operations for the third quarter ended September
30, 1996.
2. Current Report on Form 8-K dated November 20, 1996 (date of earliest
event reported), filed on November 21, 1996, for the purpose of reporting,
under Item 5, Occidental's implementation of the MidCon ESOP.
During the first quarter of 1997 to the date hereof, Occidental filed the
following Current Report on Form 8-K:
1. Current Report on Form 8-K dated January 23, 1997 (date of earliest event
reported), filed on January 24, 1997, for the purpose of reporting, under Item
5, Occidental's results of operations for the fourth quarter and fiscal year
ended December 31, 1996.
29
<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 19, 1997 By: Ray R. Irani
-----------------------------------
Ray R. Irani
Chairman of the Board of Directors
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 19, 1997
__________________________________ Directors and Chief
Ray R. Irani Executive Officer
Anthony R. Leach Executive Vice President March 19, 1997
__________________________________ and Chief Financial Officer
Anthony R. Leach
Samuel P. Dominick, Jr. Vice President and March 19, 1997
__________________________________ Controller (Chief
Samuel P. Dominick, Jr. Accounting Officer)
John S. Chalsty Director March 19, 1997
__________________________________
John S. Chalsty
Edward P. Djerejian Director March 19, 1997
__________________________________
Edward P. Djerejian
Albert Gore Director March 19, 1997
__________________________________
Albert Gore
Arthur Groman Director March 19, 1997
__________________________________
Arthur Groman
J. Roger Hirl Director March 19, 1997
__________________________________
J. Roger Hirl
John W. Kluge Director March 19, 1997
__________________________________
John W. Kluge
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
Dale R. Laurance Director March 19, 1997
__________________________________
Dale R. Laurance
Irvin W. Maloney Director March 19, 1997
__________________________________
Irvin W. Maloney
George O. Nolley Director March 19, 1997
__________________________________
George O. Nolley
John F. Riordan Director March 19, 1997
__________________________________
John F. Riordan
Rodolfo Segovia Director March 19, 1997
__________________________________
Rodolfo Segovia
Aziz D. Syriani Director March 19, 1997
__________________________________
Aziz D. Syriani
Rosemary Tomich Director March 19, 1997
__________________________________
Rosemary Tomich
</TABLE>
31
<PAGE>
INDEX TO EXHIBITS
EXHIBITS
(a) (3). EXHIBITS
<TABLE>
<C> <S>
3.(i)* (a) 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).
(b) Certificate of Designation of the Cumulative MidCon-Indexed
Convertible Preferred Stock (par value $1.00 per share) of Occidental
Petroleum Corporation (filed as Exhibit 3.1 to Occidental's Current
Report on Form 8-K dated November 20, 1996, 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 10.42 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* 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).
10.2* 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).
10.3* 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).
10.4* 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).
10.5* 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).
10.6* 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).
10.7* 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).
</TABLE>
- -------------------------------
* Incorporated herein by reference.
32
<PAGE>
<TABLE>
<C> <S>
10.8* 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).
10.9* 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).
10.10* 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).
10.11* 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).
10.12* 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).
10.13* 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).
10.14* 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).
10.15* Form of Nonqualified Stock Option Agreement, with Stock Appreciation
Rights, 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).
10.16* 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).
10.17* Form of Incentive Stock Option Agreement, with Stock Appreciation
Rights, 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).
10.18* 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).
10.19* 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).
10.20* 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).
10.21* 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).
</TABLE>
- -------------------------------
* Incorporated herein by reference.
33
<PAGE>
<TABLE>
<C> <S>
10.22* 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).
10.23* Occidental Petroleum Corporation Senior Executive Deferred Compensation
Plan (effective as of January 1, 1986, as amended and restated
effective as of January 1, 1996) (filed as Exhibit 10.24 to the Annual
Report on Form 10-K of Occidental for the fiscal year ended December
31, 1995, File No. 1-9210).
10.24* 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) (filed as Exhibit 10.25 to
the Annual Report on Form 10-K of Occidental for the fiscal year ended
December 31, 1995, File No. 1-9210).
10.25* Occidental Petroleum Corporation Senior Executive Supplemental
Retirement Plan (effective as of January 1, 1986, as amended and
restated effective as of January 1, 1996) (filed as Exhibit 10.26 to
the Annual Report on Form 10-K of Occidental for the fiscal year ended
December 31, 1995, File No. 1-9210).
10.26* Occidental Petroleum Corporation Senior Executive Survivor Benefit Plan
(effective as of January 1, 1986, as amended and restated effective as
of January 1, 1996) (filed as Exhibit 10.27 to the Annual Report on
Form 10-K of Occidental for the fiscal year ended December 31, 1995,
File No. 1-9210).
10.27* 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).
10.28* 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).
10.29* 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).
10.30* 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).
10.31* 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).
10.32* 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).
10.33* Occidental Petroleum Corporation 1996 Restricted Stock Plan for Non-
Employee Directors, effective April 26, 1996 (filed as Exhibit 99.1 to
the Registration Statement on Form S-8, File No. 333-02901).
10.34* Form of Restricted Stock Option Assignment under Occidental Petroleum
Corporation 1996 Restricted Stock Plan for Non-Employee Directors
(filed as Exhibit 99.2 to the Registration Statement on Form S-8, File
No. 333-02901).
10.35* Form of Incentive Stock Option Agreement under Occidental Petroleum
Corporation 1995 Incentive Stock Plan (filed as Exhibit 10.1 to
Occidental's quarterly report on Form 10-Q for the fiscal quarter ended
June 30, 1996, File No. 1-9210, amends Form previously filed as Exhibit
99.2 to Occidental's Registration Statement on Form S-8, File No. 33-
64719 and incorporated by reference as Exhibit 10.29 to the Annual
Report on Form 10-K of Occidental for the fiscal year ended
December 31, 1995, File No. 1-9210).
</TABLE>
- -------------------------------
* Incorporated herein by reference.
34
<PAGE>
<TABLE>
<C> <S>
10.36* Form of Nonqualified Stock Option Agreement under Occidental Petroleum
Corporation 1995 Incentive Stock Plan (filed as Exhibit 10.2 to
Occidental's quarterly report on Form 10-Q for the fiscal quarter ended
June 30, 1996, File No. 1-9210, amends Form previously filed as Exhibit
99.3 to Occidental's Registration Statement on Form S-8, File No. 33-
64719 and incorporates by reference as Exhibit 10.30 to the Annual
Report on Form 10-K of Occidental for the fiscal year ended
December 31, 1995, File No. 1-9210).
10.37* Agreement, dated September 9, 1996, between Occidental and David R.
Martin (filed as Exhibit 10.1 to Occidental's quarterly report on Form
10-Q for the fiscal quarter ended September 30, 1996, File No. 1-9210).
10.38* Occidental Petroleum Corporation 1988 Deferred Compensation Plan (as
amended and restated effective as of January 1, 1996) (filed as Exhibit
10.2 to Occidental's quarterly report on Form 10-Q for the fiscal
quarter ended September 30, 1996, File No. 1-9210).
10.39* MidCon Corp. Savings Plan (filed as Exhibit 99.1 to Occidental's
Registration Statement on Form S-8, File No. 333-17879).
10.40* Amendment No. 1 MidCon Corp. Savings Plan (filed as Exhibit 99.1 to
Occidental's Registration Statement on Form S-8, File No. 333-17879).
10.41 MidCon Corp. Supplemental Retirement Plan (effective as of January 1,
1997).
10.42 Employment Agreement made as of the 3rd day of May, 1993, by and
between Occidental and Donald de Brier.
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, 1996.
12 Statement regarding computation of total enterprise ratios of earnings
to fixed charges for the five years ended December 31, 1996.
13 Pages 21 through 58 and pages 60 through 68 of Occidental's Annual
Report for the fiscal year ended December 31, 1996, 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, 1996.
23 Consent of Independent Public Accountants.
27 Financial data schedule of Occidental for the fiscal year ended
December 31, 1996.
</TABLE>
- -------------------------------
* Incorporated herein by reference.
35
EXHIBIT 10.41
MIDCON CORP.
SUPPLEMENTAL RETIREMENT PLAN
Effective as of January 1, 1997
053.msw 11/13/96
<PAGE>
MIDCON CORP.
------------
SUPPLEMENTAL RETIREMENT PLAN
----------------------------
Effective as of January 1, 1997
TABLE OF CONTENTS
-----------------
Article Section Page
------- ------- ----
1 Establishment and Purpose
-------------------------
1.1 Establishment of Plan 1
1.2 Purpose of the Plan 1
1.3 Application of Plan 1
2 Definitions
-----------
2.1 Definitions 2
2.2 Gender and Number 4
3 Eligibility and Participation
-----------------------------
3.1 Participation 5
4 Benefits
--------
4.1 Allocations Relating to Retirement Plan, 6
Supplemental Benefit Plan and
Employee Stock Ownership Plan
4.2 Contributions Relating to Retirement Plan, 6
Supplemental Benefit Plan and
Employee Stock Ownership Plan
4.3 Allocations Relating to Savings Plan 7
4.4 Contributions Relating to Savings Plan 7
4.5 Maintenance of Accounts 8
4.6 Vesting and Forfeiture 9
4.7 Payment 9
4.8 Death 10
5 Administration
--------------
5.1 Administrative Committee 11
5.2 Uniform Rules 11
5.3 Notice of Address 11
5.4 Records 12
6 Amendment and Termination
-------------------------
6.1 Amendment and Termination 13
6.2 Reorganization of Employer 13
6.3 Protected Benefits 13
7 General Provisions
------------------
7.1 Nonassignability 14
7.2 Employment Rights 14
7.3 Illegality of Particular Provision 14
7.4 Applicable Laws 14
7.5 Transfers Involving Occidental Petroleum
Corporation Supplemental Retirement Plan 15
i
<PAGE>
MIDCON CORP.
------------
SUPPLEMENTAL RETIREMENT PLAN
----------------------------
Effective as of January 1, 1997
Article 1. Establishment and Purpose
-------------------------------------
1.1 Establishment of Plan. MidCon Corp. (the "Company")
---------------------
hereby establishes this Plan effective as of January 1, 1997,
which Plan shall be known as the MIDCON CORP. SUPPLEMENTAL
RETIREMENT PLAN (the "Plan"). 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.
1.2 Purpose of the Plan. It is the purpose of this Plan
-------------------
to provide eligible employees with benefits that will
compensate them for maximums imposed by law upon contributions
to qualified plans.
1.3 Application of Plan. The terms of this Plan are
-------------------
applicable to eligible employees employed by the Company on or
after January 1, 1997.
1
<PAGE>
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) "Beneficiary" means the persons designated
-------------
under the Retirement Plan by the Participant to
receive benefits in the event of his death.
(c) "Board of Directors" means the Board of
----------------------
Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986.
------
(e) "Company" means MidCon Corp., a Delaware
---------
corporation, and any successor thereto.
(f) "Compensation" means the base salary of the
--------------
employee as stated in the payroll records of the
Employer, 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, prior to reduction for any
deferral of base salary under the Company's Savings
Plan, 1988 Deferred Compensation Plan or any other
qualified or non-qualified deferred compensation
plan or agreement. In the case of a Participant who
became disabled prior to October 1, 1995 and who is
receiving benefits under the Long-Term Disability
Plan, Compensation shall be his base salary as
described above in effect at the time he became
disabled, as that term is defined in the Long-Term
Disability Plan.
2
<PAGE>
(g) "Employee Stock Ownership Plan" means the
-------------------------------------
MidCon Corp. Employee Stock Ownership Plan.
(h) "Employer" means (a) the Company, (b) each
----------
affiliate which is a subsidiary of the Company and
(c) any other affiliate or organizational unit which
(i) is designated as an Employer under the Plan by
the Board of Directors or by the Administrative
Committee with respect to all or a specified group
of employees of such organizational unit or
affiliate and (ii) adopts this Plan.
(i) "Long-Term Disability Plan" means the
----------------------------------
OCCIDENTAL PETROLEUM CORPORATION LONG-TERM
DISABILITY PLAN, as amended from time to time.
(j) "Participant" means a person meeting the
-------------
requirements set forth in Article 3 to participate
in the Plan.
(k) "Retirement Plan" means the MIDCON CORP.
-------------------
RETIREMENT PLAN, and as amended from time to time.
(l) "Savings Plan" means the MIDCON CORP. SAVINGS
--------------
PLAN, as amended from time to time.
(m) "Senior Executive Supplemental Retirement Plan"
----------------------------------------------------
means the OCCIDENTAL PETROLEUM CORPORATION SENIOR
EXECUTIVE SUPPLEMENTAL RETIREMENT PLAN, as amended
from time to time.
(n) "Subsidiary" means any corporation which is
------------
controlled by the Company.
(o) "Supplemental Benefit Plan" means the
----------------------------------
OCCIDENTAL PETROLEUM CORPORATION SUPPLEMENTAL
BENEFIT PLAN, as amended from time to time.
(p) "Years of Service" means the number of full
----------------------
years credited to a Participant under the Retirement
Plan for vesting purposes.
3
<PAGE>
(q) "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.
4
<PAGE>
Article 3. Eligibility and Participation
-----------------------------------------
3.1 Participation. Any employee (other than a
-------------
participant in the Senior Executive Supplemental Retirement
Plan) who is eligible to participate in the Savings Plan and
the Retirement Plan and who, for a given plan year of the
Savings Plan, would be ineligible 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) (which limits the amount of compensation which may
be taken into account) or 415 of the Code (assuming the second
paragraph of section 4.8 of the Retirement Plan is applicable
to the employee) shall become a Participant.
In addition, any employee (other than a Participant
in the Senior Executive Supplemental Retirement Plan) who
would be ineligible to receive the maximum employer matching
contribution under section 5.1 of the Savings Plan in a plan
year, due to the limitations described in the preceding
paragraph, on account of deferrals of base salary during the
year under the 1988 Deferred Compensation Plan (or any other
nonqualified pension benefit plan sponsored by the Company or
a Subsidiary in which the Participant participates) shall be a
Participant in this Plan for that plan year.
Notwithstanding anything contained herein, any
employee who is entitled to receive supplemental retirement
benefits upon his retirement pursuant to a written contract of
employment between himself and the Company shall be ineligible
to be a Participant effective upon the later of January 1,
1997 or January 1 of the year after the effective date of such
contractual provision.
5
<PAGE>
Article 4. Benefits
--------------------
4.1 Allocations Relating to Retirement Plan,
------------------------------------------------
Supplemental Benefit Plan and Employee Stock Ownership Plan.
- -------------------------------------------------------------
A credit shall be made as of the last day of each month to a
contingent account for each Participant. The amount to be
allocated shall equal the sum of (a) the amount which would be
allocated to the account of the Participant for the month
under the Retirement Plan, based on the Participant's
Compensation, if the Participant were not subject to
provisions that withhold allocations until the end of the plan
year, and (b), in the case of a Participant who is a
participant in the Supplemental Benefit Plan, the amount which
cannot be accrued under section 4.1 of the Supplemental
Benefit Plan during the month due to the limitations imposed
by section 401(a)(17) of the Code, and (c), in the case of a
Participant who is a participant in the Employee Stock
Ownership Plan, the value denominated in cash of the amount
which cannot be allocated under section 4.3 of the Employee
Stock Ownership Plan due to the limitations imposed by
sections 415 and 401(a)(17) of the Code.
4.2 Contributions Relating to Retirement Plan,
------------------------------------------------
Supplemental Benefit Plan and Employee Stock Ownership Plan.
- -------------------------------------------------------------
For Participants covered under this Plan, allocations under
the Retirement Plan are determined at the end of the plan
year, to the extent allowable under Code limitations. The
amounts contingently credited under section 4.1 during the
year to a Participant shall be reduced by the amount actually
allocated to his account under the Retirement Plan, and any
remaining amount shall be credited permanently to his account
under this Plan. At the end of each year, the Employer shall
contribute to a grantor trust or similar arrangement to fund
benefits hereunder an amount which shall equal such remaining
amounts permanently allocated to Participants hereunder. The
Employer shall also contribute
6
<PAGE>
and permanently credit to each Participant's account earnings
on contingent monthly allocations under section 4.1 for the
year as if such contingent allocations shared in earnings at
the rate and in the manner described in section 4.5.
Notwithstanding the foregoing, any earnings attributable to
the Retirement Plan previously credited to the account of a
Participant under the Plan during the current or any preceding
plan year shall be reallocated to the account of the
Participant under the Retirement Plan in any year when it is
permissible to do so under Code limitations.
4.3 Allocations Relating to Savings Plan. 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 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 Code, reduced by any such amount
which is credited on behalf of the Participant under any other
Company nonqualified pension benefit 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 Contributions Relating to Savings Plan. The amounts
--------------------------------------
allocated to a Participant under section 4.3 for a plan year
shall be credited permanently to his account under this Plan.
At the end of each year, the Employer shall contribute to a
grantor trust or similar arrangement to fund benefits
hereunder an amount which shall equal such amounts permanently
allocated to Participants hereunder.
7
<PAGE>
4.5 Maintenance of Accounts.
-----------------------
(a) The Employer shall establish and
maintain, in the name of each Participant, an
individual account which shall consist of all
amounts permanently credited to the
Participant. As of the end of each semimonthly
processing period, the Administrative Committee
shall increase or decrease the balance, if any,
of the Participant's individual account as of
the last day of the preceding semimonthly
processing period, by multiplying such amount
by a number equal to one plus .083% plus the
semimonthly yield on 5-Year Treasury Constant
Maturities for the semimonthly processing
period. As of December 31st of each year the
Administrative Committee shall then add to such
account balance, any permanent allocation to
which the Participant is entitled for such
year.
(b) 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 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
8
<PAGE>
benefits hereunder. Accounting for
this Plan shall be based on generally accepted
accounting principles.
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 becomes disabled (as 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.
4.7 Payment. Every Participant who terminates
-------
employment shall, if vested, have his account distributed to
him as soon as practicable following his termination of
employment under one of the following distribution options
elected by the Participant on a form prescribed by the
Administrative Committee:
(a) One lump sum payment; or
(b) Annual installment payments payable over 5, 10,
15, or 20 years commencing in the calendar year
following the calendar year in which he terminates
employment.
The election must be made by the Participant as soon
as practicable after his commencement of participation, but in
no event later than the end of the calendar year thereof. An
election form shall be provided to the Participant in non-
technical language and shall contain a general description of
the distribution options. If a Participant fails to make an
election by the close of the calendar year in which he
commenced participation, he will be
9
<PAGE>
deemed to have elected to receive his benefits in the form of
a lump sum payment pursuant to option (a) above.
If benefits are to be paid in installments pursuant
to option (b) above, the Participant's account will continue
to be adjusted until any series of installments has been
completed. The amount of each annual installment shall equal
the amount credited to the account as of January 31 of the
year in which the installment is to be paid multiplied by a
fraction, the numerator of which is 1 and the denominator of
which is the number of installments (including the current
one) which remain to be paid. Each installment shall be paid
on or before January 31 of the calendar year.
Notwithstanding anything else contained in this
section 4.7, no Participant who is eligible for Employer
provided long-term disability benefits and who became disabled
prior to October 1, 1995 shall be entitled to a distribution
of benefits hereunder prior to the time long-term disability
payments cease.
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 as soon as administratively possible
following the Participant's date of death. If a Participant
dies after termination of employment, then his surviving
Beneficiary shall be paid the amount in the Participant's
account in a single sum as soon as administratively possible
following the Participant's date of death.
10
<PAGE>
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.
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
11
<PAGE>
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.
12
<PAGE>
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 and any such
termination or amendment shall apply uniformly to all
Participants. The Administrative Committee in its discretion
may amend the Plan if it finds that such amendment does not
significantly increase or decrease benefits or costs.
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 in a single
sum on the last day of the second month following the month in
which the amendment or termination occurs.
13
<PAGE>
Article 7. General Provisions
------------------------------
7.1 Nonassignability. Benefits under the Plan are not
----------------
in any way subject to the debts or other obligations of the
persons entitled thereto and may not voluntarily or
involuntarily be sold, transferred, or assigned. Any
voluntary attempt to sell, anticipate, assign, or encumber
benefits under this Plan shall operate to cancel the benefit
or the balance of a Participant's account as of the date of
such attempt and to relieve the Employer from any future
liability to pay or distribute any benefit with respect to
such canceled amount.
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 Illinois.
14
<PAGE>
7.5 Transfers Involving Occidental Petroleum Corporation
----------------------------------------------------
Supplemental Retirement Plan. In the case of a Participant
- -----------------------------
who ceases to be eligible to participate due to his having
transferred to the employment of Occidental Petroleum
Corporation or any other affiliate which is not an Employer, a
transfer of the Participant's account shall be made to the
Participant's account in the Occidental Petroleum Corporation
Supplemental Retirement Plan (the "Occidental SRP"). Such
transfer shall be effected on a date to be established by the
Administrative Committee and the administrative committee of
the Occidental SRP, which date shall be no later than the end
of the plan year following the plan year in which such
transfer of employment occurs. The amount thus transferred
will be credited to the Participant's account in the
Occidental SRP in accordance with such procedures as may be
established by the Administrative Committee and the
administrative committee of the Occidental SRP, provided that
the Administrative Committee provides notice of such transfer
in advance to such Participant. Notwithstanding the above
language, no such transfer shall be made in the event that the
affiliate to which the Participant transfers employment is not
a participating employer in the Occidental SRP, or in the
event the Participant fails to meet the eligibility
requirements for participation in the Occidental SRP.
In the case of an employee who becomes eligible to
participate hereunder due to his having transferred from the
employment of Occidental Petroleum Corporation or any other
affiliate which is not an Employer and who has a balance in
the Occidental SRP, a transfer shall be made to such
employee's account under this Plan. Such transfer shall be
effected on a date to be established by the Administrative
Committee and the administrative
15
<PAGE>
committee of the Occidental SRP, which date shall be no later
than the end of the plan year following the plan year in which
such transfer of employment occurs. The amount thus
transferred will be credited to the Participant's account in
accordance with such procedures as may be established by the
Administrative Committee and the administrative committee of
the Occidental SRP, provided that the Administrative Committee
provides notice of such transfer in advance to such
Participant.
The provisions of this section 7.5 shall be
inapplicable in the event that Occidental Petroleum
Corporation ceases to be an Affiliate.
-----------
This amended and restated Plan shall be effective as
of January 1, 1997.
16
EXHIBIT 10.42
EMPLOYMENT AGREEMENT
--------------------
This Agreement is made as of the 3rd day of May, 1993
by and between Occidental Petroleum Corporation a Delaware
corporation (hereinafter referred to as "Employer") and Donald P.
de Brier (hereinafter referred to as "Employee").
WITNESSETH
----------
Employer hereby agrees to employ Employee, and Employee
agrees to perform services and to work for Employer, upon the
following terms and conditions:
1. Duties - Employee shall serve in the capacity of
Executive Vice President, Senior General Counsel and Corporate
Secretary 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 hereafter to be deemed Employer under
this Agreement).
In performing his duties, Employee agrees to observe
and follow the reasonable policies and procedures established by
the Employer, which are subject to change by the Employer from
time to time.
2. Term of Employment - The term of employment shall
be for a period of five (5) years (unless terminated prior
thereto in accordance with the provisions of this Agreement, or
unless extended by mutual agreement of the parties), commencing
on July 5, 1993, or such earlier date as Employee may specify.
In order to be valid, any such extension shall be in writing and
signed by the Chairman, President & Chief Executive Officer on
behalf of Employer.
3. Compensation - In consideration for his services
to be performed under this Agreement, Employee shall receive, in
addition to all other benefits provided in this Agreement, an
aggregate salary of no less than four hundred thousand dollars
($400,000) per year payable by Employer in equal semimonthly
installments or on such basis as is generally established for
principal executives of Employer from time to time.
4. Participation in Benefit Programs - During the
term of this Agreement, Employee shall be entitled to participate
in all benefit programs generally applicable to salaried
employees of employer in force or adopted by Employer from time
to time. Employee will be entitled to one country club
membership paid for by Employer provided that the Chairman,
<PAGE>
President & Chief Executive Officer of Employer has prior
approval on the selection of the specific club. Furthermore,
Employee will be required to participate in the tax preparation
program conducted by Arthur Andersen & Co.
5. Compensation Plans - Employee shall be:
(i) eligible to participate in Employer's Incentive Compensation
Plan according to its terms, and shall receive a bonus under such
Plan for the year 1993 of forty percent (40%) of his base salary
for 1993 or $160,000 (this bonus shall be payable in December
1993 or January 1994 in the discretion of the Company); (ii)
eligible to receive annual grants under Employer's 1987 Stock
Option Plan and shall receive an option grant of twenty thousand
(20,000) shares under such Plan after Employee's execution of
this Agreement and the commencement of services pursuant to this
Agreement, and (iii) a participant in Employer's 1977 Executive
Long-Term Incentive Stock Purchase Plan and shall receive a grant
of forty percent (40%) of Employee's base salary or $160,000 in
January, 1994 under such Plan. Employee's participation in each
of the foregoing Plans shall be in accordance with and subject to
all of the terms and conditions of such Plans.
6. Additional Payments - In order to compensate
Employee for losses he will incur in leaving his current
employment, Employer shall pay to Employee an aggregate of
$100,000, payable after Employee's execution of this Agreement
and immediately prior to the commencement of his services
pursuant to this Agreement in Los Angeles, California.
7. Exclusivity of Services - Employee agrees to
devote his full-time, exclusive services to Employer hereunder,
except for such time as Employee may require in connection with
his personal investments, which shall be minimal. However, it is
understood that Employee may provide occasional transitional
advice to British Petroleum with respect to matters in which he
was involved during his employment with British Petroleum.
8. Vacation - Employee shall be entitled to a total
of four (4) weeks vacation in each contract year. Employee
agrees to follow Employer's relevant policies and procedures for
scheduling and taking such vacations.
9. Termination -
a. Cause - Notwithstanding the term of this
Agreement, Employer may discharge Employee and terminate this
Agreement for material cause, upon written notice, in the event
that Employee (i) shall willfully breach this agreement, or (ii)
shall refuse to carry out any lawful order of Employer or act in
a disloyal manner inimical to Employer. In any such event,
Employer shall give Employee notice of such cause and Employee
shall have 30 days to cure such breach.
2
<PAGE>
b. Incapacity - If, during the term of this
Agreement, Employee is materially incapacitated from fully
performing his duties pursuant to this Agreement by reason of
illness, disability or other incapacity (unless incurred as a
direct result of his assignments hereunder) or by reason of any
statute, law, ordinance, regulation, order, judgment or decree,
Employer may terminate this Agreement without liability 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.
c. Without Cause - Either party may terminate
this Agreement without cause at any time, by giving the other
party not less than 24 months written notice of termination.
Employer may terminate the employment of Employee without cause
at any time (including a time during such notice period); and in
such event Employer shall compensate Employee (in lieu of said
notice and continued employment and, except for benefits
specified hereunder, in complete satisfaction of all of its
obligations under this Agreement) at his then current rate and in
the manner provided in Paragraph 3 above for a period after
termination equivalent to the shortest of: (i) twenty-four
months; (ii) the remainder of the 24 months notice period (in the
event of termination during said notice period); or (iii) until
the expiration of the term of this Agreement. In any event,
Employer's maximum liability for any breach of this Agreement,
including but not limited to, termination without cause and/or
notice shall be no more than twenty-four (24) months compensation
plus the benefits specified hereunder (or a lesser amount as
determined in accordance with subsection (ii) or (iii) of this
paragraph) at the rate set forth above.
During this period of compensation, Employee shall
continue to be eligible to (i) participate in all employee
benefit plans of Employer (except the short and long-term
disability plans unless Employee has already become eligible
under such plans), in which he is participating at the time of
the notice, and (ii) exercise all stock options previously
granted to Employee under Employer's 1987 Stock Option Plan,
which options are or become exercisable under the provisions of
such Plan as though he were still a full time employee. During
the period, 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 have vested if Employee had continued as a full
time employee. However, this employee benefits participation and
stock plan vesting will cease if Employee accepts a full time
position with another employer.
In the event Employer compensates Employee (in
lieu of said notice and continued employment) under the first
paragraph of 9(c) above for a period exceeding twelve months,
then in such event, all remuneration or wages earned during the
second twelve months of such period by Employee, either as
3
<PAGE>
employee, independent contractor or consultant to any person,
firm or corporation other than employer, shall be a set-off to
Employer's duty of compensation to Employee.
10. Initial Relocation - Employee's relocation from
London, United Kingdom to Los Angeles, California (including the
sale of Employee's existing residence in Shaker Heights, Ohio),
shall be covered by and subject to Employer's existing written
relocation policy. This will include the movement of household
goods both from England and Ohio, plus any additional relocation
benefits as approved by the Executive Vice President of Human
Resources. In order to assist Employee in obtaining a new
domicile in Los Angeles essentially equivalent to his current
domicile in Shaker Heights, Employer will reimburse Employee (on
or before June 30th and December 31st of each contract year) for
the difference between (x) his current housing costs in Shaker
Heights for mortgage payments, real estate taxes and home
insurance and (y) the amounts that Employee paid for those
housing costs in Los Angeles, subject to the following
limitations: no more than $35,000 for the first and second year
of Employee's Los Angeles home ownership, $26,250 for the third
such year, $17,500 for the fourth such year, $8,750 for the fifth
such year and nothing thereafter.
11. 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 competitive with or similar to any business of Employer
or any of its affiliates or subsidiaries, at any time during
employment by Employer or thereafter, any trade secrets 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.
12. Entire Agreement; Modification - This Agreement
constitutes the entire agreement of the parties relating to the
subject matter hereof, and supercedes all previous agreements,
arrangements, and understandings, whether express or implied,
relating to the subject matter hereof. No other agreements,
oral, implied 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.
13. Severability - If any provision of this Agreement
is illegal and unenforceable in whole or in part, the remainder
of this Agreement shall remain enforceable to the extent
permitted by law.
4
<PAGE>
14. Governing Law - This Agreement shall be construed
and enforced in accordance with the laws of the State of
California.
15. Assignment - This Agreement shall be binding upon
Employee, his heirs, executors and assigns and upon Employer, its
successors and assigns.
16. Sole Contract - Employee represents and warrants
to Employer that he is not barred by or subject to any
contractual or other obligation that would be violated by the
execution or performance of this Agreement.
17. No Waiver - The failure of a party to insist upon
strict adherence to any term of this Agreement on any occasion
shall not be considered a waiver nor deprive that party of the
right to insist upon adherence to that term or any other term of
this Agreement. Any waiver or amendment to this Agreement must
be in writing.
18. Withholdings - All compensation provided by
Employer under this Agreement is subject to any and all
withholding by Employer as required by applicable law.
19. Arbitration - Both parties agree that any and all
disputes that relate to the termination of this Agreement and/or
Employee's employment (including whether Employer had sufficient
cause for termination or the manner in which the termination is
effected) shall be submitted to binding arbitration and judgment
under the Commercial Arbitration Rules of the American
Arbitration Association. Should the arbitrator rule in
Employee's favor on any dispute, the maximum exclusive remedy
shall be that as set forth in Paragraph 9(c) above. The judgment
on the award may be entered in any court having jurisdiction.
The parties to any arbitration under this paragraph shall bear
the cost of the arbitration and the fee of the neutral arbitrator
in such manner as determined by the arbitrator.
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement the day and year first above written.
OCCIDENTAL PETROLEUM CORPORATION
By: R. R. IRANI
----------------------------
By: DONALD P. DE BRIER
----------------------------
Donald P. de Brier
5
<PAGE>
EXHIBIT 11
OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(Amounts in thousands, except per-share amounts)
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
- ---------------------------------------------------
Applicable to common shares:
Income(loss) before extraordinary items $ 605,120 $ 418,260 $(111,256)
Extraordinary gain(loss), net (29,836) -- (176)
--------- --------- ---------
Earnings(loss) applicable to common stock $ 575,284 $ 418,260 $(111,432)
========= ========= =========
Common shares outstanding at beginning of period 318,711 316,853 305,603
Issuance of common shares, weighted average 4,814 1,025 5,258
Conversions, weighted average options exercised and
other 351 260 13
Repurchase/cancellation of common shares (94) (65) (68)
Effect of assumed exercises
Dilutive effect of exercise of options
outstanding and other 363 158 30
--------- --------- ---------
Weighted average common stock and common stock
equivalents 324,145 318,231 310,836
========= ========= =========
Primary earnings per share:
Income(loss) before extraordinary items $ 1.86 $ 1.31 $ (.36)
Extraordinary gain(loss), net (.09) -- --
--------- --------- ---------
Earnings(loss) per common and common equivalent
share $ 1.77 $ 1.31 $ (.36)
========= ========= =========
FULLY DILUTED EARNINGS PER SHARE
- ---------------------------------------------------
Earnings(loss) applicable to common stock $ 575,284 $ 418,260 $(111,432)
Dividends applicable to dilutive preferred stock:
$3.875 preferred stock(a) 58,538 -- --
$3.00 preferred stock(a) 34,164 34,165 --
--------- --------- ---------
$ 667,986 $ 452,425 $(111,432)
========= ========= =========
Common shares outstanding at beginning of period 318,711 316,853 305,603
Issuance of common shares, weighted average 4,814 1,025 5,258
Conversions, weighted average options exercised and
other 351 260 13
Repurchase/cancellation of common shares (94) (65) (68)
Effect of assumed conversions
Dilutive effect of assumed conversion of
preferred stock:
$3.875 preferred stock(a) 33,186 -- --
$3.00 preferred stock(a) 28,068 30,566 --
Dilutive effect of exercise of options
outstanding and other 431 212 40
--------- --------- ---------
Total for computation of fully diluted earnings per
share 385,467 348,851 310,846
========= ========= =========
Fully diluted earnings per share:
Income(loss) before extraordinary items $ 1.81 $ 1.30 $ (.36)
Extraordinary gain(loss), net (.08) -- --
--------- --------- ---------
Fully diluted earnings(loss) per common share $ 1.73 $ 1.30 $ (.36)
========= ========= =========
- ------------------------------------------------------
(a) Convertible securities are not considered in the calculations if the effect
of the conversion is anti-dilutive.
</TABLE>
<PAGE>
EXHIBIT 12
OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
COMPUTATION OF TOTAL ENTERPRISE RATIOS OF EARNINGS TO FIXED CHARGES
FOR THE FIVE YEARS ENDED DECEMBER 31, 1996
(Amounts in millions, except ratios)
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
- ----------------------------------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Income(loss) from continuing
operations(a) $ 672 $ 478 $ (46) $ 80 $ 131
------ ------ ------ ------ ------
Add:
Provision(credit) for taxes on income
(other than foreign oil and gas
taxes) 212 244 50 204 114
Interest and debt expense(b) 494 592 594 601 666
Portion of lease rentals
representative of the interest
factor 43 48 55 53 56
Preferred dividends to minority
stockholders of subsidiaries(c) -- -- -- -- 7
------ ------ ------ ------ ------
749 884 699 858 843
------ ------ ------ ------ ------
Earnings(loss) before fixed charges $1,421 $1,362 $ 653 $ 938 $ 974
====== ====== ====== ====== ======
Fixed charges
Interest and debt expense including
capitalized interest(b) $ 506 $ 602 $ 599 $ 612 $ 685
Portion of lease rentals
representative of the interest
factor 43 48 55 53 56
Preferred dividends to minority
stockholders of subsidiaries(c) -- -- -- -- 7
------ ------ ------ ------ ------
Total fixed charges $ 549 $ 650 $ 654 $ 665 $ 748
====== ====== ====== ====== ======
Ratio of earnings to fixed charges 2.59 2.10 n/a(d) 1.41 1.30
- ----------------------------------------- ====== ====== ====== ====== ======
(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, 1996 1995 1994 1993 1992
==================================================== ========= ========= ========= ========= =========
<S> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS
Net sales and operating revenues $ 10,557 $ 10,423 $ 9,236 $ 8,116 $ 8,494
Income(loss) from continuing operations $ 698 $ 511 $ (36) $ 74 $ 126
Net income(loss) $ 668 $ 511 $ (36) $ 283 $ (591)
Preferred dividend requirements $ 93 $ 93 $ 76 $ 39 $ 3
Earnings(loss) applicable to common stock $ 575 $ 418 $ (112) $ 244 $ (594)
Earnings(loss) per common share from
continuing operations $ 1.86 $ 1.31 $ (.36) $ .12 $ .41
Primary earnings(loss) per common share $ 1.77 $ 1.31 $ (.36) $ .80 $ (1.97)
Fully diluted earnings(loss) per common share $ 1.73 $ 1.30 $ (.36) $ .80 $ (1.97)
FINANCIAL POSITION
Total assets $ 17,634 $ 17,815 $ 17,989 $ 17,123 $ 17,877
Long-term debt, net $ 4,511 $ 4,819 $ 5,823 $ 5,728 $ 5,452
Capital lease liabilities, net $ 237 $ 259 $ 291 $ 319 $ 354
Stockholders' equity $ 5,140 $ 4,630 $ 4,457 $ 3,958 $ 3,440
Dividends per common share $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
AVERAGE SHARES OUTSTANDING (thousands) 324,145 318,231 310,836 304,898 302,017
- ---------------------------------------------------- --------- --------- --------- --------- ---------
See Management's Discussion and Analysis and the Notes to Consolidated Financial Statements for information regarding
accounting changes, asset acquisitions and dispositions and charges for reorganization, litigation matters,
environmental remediation and other costs and other special items affecting comparability.
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
1996 BUSINESS ENVIRONMENT Global demand for energy continued to increase. The
United States economy expanded modestly, while certain developing nations
experienced robust growth. Harsh weather early in 1996 restricted the normal
seasonal increases in crude oil inventories. Sales of Iraqi crude oil under
United Nations Resolution 986, a psychological factor in the market all year,
did not materialize until December 1996. Expansion of non-OPEC production was
limited in 1996 and OPEC production remained sufficiently disciplined so that
excess crude oil supply did not appear in the market. The combination of
increased demand with controlled production and lower inventories provided
higher prices for the year as the benchmark grades, West Texas Intermediate
(WTI) and Brent, each averaged more than $3.50 per barrel above 1995 levels.
Volatility also increased as low inventories caused normal market messages to be
amplified and traders factored the "on-again, off-again" status of Iraqi crude
oil supply into their day-to-day market decisions. Producers, such as
Occidental, benefited from the demand for energy more than refiners as a
worldwide surplus of refining capacity continued to restrict refining margins.
As in 1995, the difference in the value of light crude oil compared to
heavy crude oil narrowed. Occidental continued to benefit from the change in
relative values since Occidental's worldwide crude oil production, on average,
is somewhat heavier than the benchmark grades.
Natural gas prices were significantly higher in 1996 than in 1995. The
1995-96 heating season had an extended period of cold weather. Heating
requirements increased demand, inventories were drawn down to low levels, and
prices increased. The cold weather was particularly severe in the eastern half
of the United States and transportation capacity from the western United States
and Canada to the eastern United States was limited. This caused high prices in
the Midwest and the East Coast compared to the rest of the country.
Summer demand, supported by economic growth and the need to restore
depleted inventories for the 1996-97 heating season, sustained relatively high
prices. As winter approached, storage inventories were below year-ago levels,
with producing area storage reduced the most.
Price volatility has encouraged trading in natural gas futures on the New
York Mercantile Exchange (NYMEX). The volume of futures trading is approximately
four times the actual amount of gas delivered to pipelines. This winter, NYMEX
natural gas futures attained another all-time high price and natural gas was
among the most volatile of U.S.-traded commodities.
With interstate natural gas pipelines operating under Federal Energy
Regulatory Commission (FERC) Order 636 for the third year, state and federal
regula-
21
<PAGE>
tors have focused their attention on the unbundling of services traditionally
provided by local gas distribution companies (LDCs) and electric utilities.
Producers and unregulated marketing companies are beginning to sell gas directly
to retail customers previously supplied by LDCs. Unbundling of electric service
at the retail level is currently under review. The transition to total
unbundling of gas and electric services is anticipated within five years. This
is creating new opportunities for marketers of both gas and electricity.
Consolidation of gas marketing organizations continued in 1996, including
combinations with organizations in the electric power sector. Such alliances are
driven by economies of scale and the need to expand service capabilities to
compete effectively in the U.S. economy.
Although 1996 earnings for the U.S. chemical industry were lower than 1995,
steady demand growth contributed to stability and to pricing and margins that
overall were not unfavorable. Demand for OxyChem products remained strong as the
United States and other economies continued to benefit from sustained health in
such key end-use markets as construction, automotive, pulp and paper, and
aluminum. While chlorine demand and prices remained strong throughout 1996, a
softening of prices began to occur in caustic soda during the last half of the
year as customer inventories of caustic soda grew in certain important sectors.
Prices for ethylene and ethylene co-products, such as propylene, continued
to improve during 1996 due to strong demand. However, ethylene margins were
lower due to increasing feedstock costs. Polyvinyl chloride (PVC) demand
continued to grow at strong rates during 1996, but increased industry capacity
and higher raw material costs resulted in reduced margins. Sales and income from
OxyChem's specialty business increased from 1995 due to the strong economy and
contributions of complementary businesses acquired in the third quarter.
1996 INCOME SUMMARY Occidental reported net income of $668 million ($1.77 per
share) in 1996, on net sales and operating revenues of $10.6 billion. Before the
after-tax effect of the special items listed below, earnings were $643 million
in 1996 and $623 million in 1995.
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, 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 1996 benefited by $89 million from credits
allocated of $15 million, $48 million and $26 million in oil and gas, natural
gas transmission and chemical, respectively. Divisional earnings in 1995
benefited by $91 million from credits allocated 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
of $18 million, $41 million and $32 million in oil and gas, natural gas
transmission and chemical, respectively.
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, 1996 1995 1994 1996 1995 1994
================================ ========= ========= ========= ========= ========= =========
<S> <C> <C> <C> <C> <C> <C>
Oil and gas $ 3,680 $ 3,018 $ 2,451 $ 480 $ 45 $ 27
Natural gas transmission 2,574 2,038 2,110 296 213 276
Chemical 4,307 5,370 4,677 668 1,080 350
Other (4) (3) (2) -- -- --
--------- --------- --------- --------- --------- ---------
$ 10,557 $ 10,423 $ 9,236 1,444 1,338 653
========= ========= =========
Unallocated corporate items
Interest expense, net (451) (540) (564)
Income taxes (263) (295) (110)
Other (32) 8 (15)
--------- --------- ---------
Income(loss) before extraordinary items 698 511 (36)
Extraordinary gain(loss), net (30) -- --
--------- --------- ---------
Net income(loss) $ 668 $ 511 $ (36)
======================================================================= ========= ========= =========
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
OIL AND GAS
1996 1995 1994
========================================== ========= ========= =========
<S> <C> <C> <C>
DIVISIONAL SALES (in millions) $ 3,680 $ 3,018 $ 2,451
DIVISIONAL EARNINGS (in millions) $ 480 $ 45 $ 27
AVERAGE SALES PRICES
CRUDE OIL PRICES (per barrel)
U.S. $ 18.98 $ 15.61 $ 14.21
Other Western Hemisphere $ 12.65 $ 10.62 $ 10.19
Eastern Hemisphere $ 17.66 $ 14.47 $ 12.08
GAS PRICES (per thousand cubic feet)
U.S. $ 2.11 $ 1.51 $ 1.85
Other Western Hemisphere $ -- $ -- $ 1.72
Eastern Hemisphere $ 2.23 $ 2.07 $ 1.15
EXPENSED EXPLORATION(a) (in millions) $ 120 $ 106 $ 127
CAPITAL EXPENDITURES (in millions)
Development $ 540 $ 373 $ 345
Exploration $ 164 $ 130 $ 147
Acquisitions and other $ 58 $ 72 $ 326
- ------------------------------------------ --------- --------- ---------
(a) Includes amounts previously shown in exploration capital expenditures.
</TABLE>
Occidental emphasizes international oil and gas exploration and production.
Occidental seeks long-term improvement in profitability and cash flow through a
combination of improved operations in existing fields, enhanced oil recovery
projects, high potential exploration and complementary property acquisitions.
Occidental reorganized its worldwide oil and gas operations in late 1995.
This change allowed Occidental to redeploy its resources, to reduce costs and to
sharpen its focus on improving performance.
The operating results of 1996, compared with 1995, reflected higher
worldwide crude oil prices, increased international oil production, higher
domestic natural gas prices and lower costs resulting from the reorganization,
partially offset by higher exploration costs. The change in sales for 1996,
compared with 1995, largely reflected higher worldwide crude oil production and
prices and increased oil trading revenue. The operating results of 1995,
compared with 1994, reflected higher worldwide crude oil production and prices,
and 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. Approximately one-
third of oil and gas sales for 1996, 1995 and 1994 were attributable to oil
trading activity. The results are not significant. Occidental participates in
oil trading to remain aware of the complexities affecting price volatility and
supply/demand fundamentals in order to optimize its long-term global oil
marketing.
The 1996 results included a $105 million charge for the write-down of
Occidental's investment in an oil and gas project in the Republic of Komi in the
former Soviet Union.
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.
<TABLE>
<CAPTION>
NATURAL GAS TRANSMISSION
1996 1995 1994
===================================== ========= ========= =========
<S> <C> <C> <C>
DIVISIONAL SALES (in millions) $ 2,574 $ 2,038 $ 2,110
DIVISIONAL EARNINGS (in millions) $ 296 $ 213 $ 276
THROUGHPUT (trillions of cubic feet)
Transportation 1.55 1.53 1.53
Sales .70 .65 .55
--------- --------- ---------
2.25 2.18 2.08
========= ========= =========
CAPITAL EXPENDITURES (in millions) $ 147 $ 150 $ 93
- ------------------------------------- --------- --------- ---------
</TABLE>
In 1996, MidCon Corp.'s (MidCon) total throughput volume (excluding
transportation for affiliates) was 2.25 trillion cubic feet (Tcf), approximately
3 percent higher than 1995 throughput of 2.18 Tcf. Sales volumes increased
approximately 8 percent from 1995, while transportation volumes were about
equal. Revenues were higher in 1996 than in 1995, due primarily to higher sales
prices and volumes.
MidCon completed a reorganization of its operations in early 1996.
Operations were structured to expedite design of products and services to meet
changing customer needs, to optimize utilization of storage and transport
capacity, and to reduce costs.
The increased earnings in 1996, compared with 1995, primarily reflected
higher gas sales margins, higher liquid prices and cost savings related to
MidCon's reorganization, partially offset by lower transportation margins
reflecting renegotiated customer contracts.
Excluding special items, earnings for 1995 were approximately the same as
1994. Special items included a 1995 charge for reorganization costs of $37
million, and 1994 favorable items of $13 million from a reduction of LIFO gas
storage inventory and $12 million from the reduction of the contract impairment
reserve.
<TABLE>
<CAPTION>
CHEMICAL
1996 1995 1994
===================================== ========= ========= =========
<S> <C> <C> <C>
DIVISIONAL SALES (in millions) $ 4,307 $ 5,370 $ 4,677
DIVISIONAL EARNINGS (in millions) $ 668 $ 1,080 $ 350
KEY PRODUCT INDEXES (1987 through
1990 average price = 1.0)
Chlorine 1.36 1.36 1.43
Caustic soda 1.16 1.28 .54
PVC resins .82 1.01 .93
KEY PRODUCT VOLUMES
Chlorine (thousands of tons) 3,254 3,170 3,172
Caustic soda (thousands of tons) 3,401 3,275 3,471
PVC resins (millions of pounds) 1,654 1,724 1,920
CAPITAL EXPENDITURES (in millions)
Basic chemicals $ 102 $ 121 $ 87
Petrochemicals $ 41 $ 43 $ 32
Polymers and plastics $ 75 $ 33 $ 34
Specialty businesses $ 39 $ 30 $ 23
Other $ 5 $ 16 $ 14
- ------------------------------------- --------- --------- ---------
</TABLE>
23
<PAGE>
OxyChem's ongoing commitment to controlling costs and maintaining the
reliable operation of its manufacturing facilities continues to benefit
earnings. However, lower margins, resulting from higher feedstock and raw
material costs and lower pricing, kept 1996 earnings below last year's record
earnings.
OxyChem completed a realignment of its operations in early 1996, whereby
each of the four business units became responsible for worldwide management of
its products and businesses. The realignment resulted in consolidation of
logistical operations, more efficient delivery of products and cost reductions.
Earnings in 1996 decreased, compared with 1995, mainly because margins
declined for a number of OxyChem's key products, primarily PVC, caustic soda and
petrochemicals resulting from lower sales prices, and increased feedstock costs.
After declining in 1995, chlorine prices strengthened throughout 1996 having
little year-to-year effect, while caustic pricing declined, especially for
exports. Prices for PVC in 1996 were also lower. The drop in revenue from 1995
resulted principally from the absence of revenue from divested assets.
Otherwise, sales volume increases mostly offset the impact on sales revenue of
lower prices. The 1996 results benefited from ongoing manufacturing and
administrative cost-improvement programs. The higher earnings in 1995, compared
with 1994, reflected significantly improved prices and margins for PVC, caustic
soda and petrochemicals.
The 1996 earnings included the pretax gain of $170 million related to
favorable litigation settlements, and a charge of $75 million for additional
environmental reserves relating to various existing sites, and the related state
tax effects. Included in the 1995 results was a $40 million pretax gain 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
now divested Swift Creek chemical plant.
CORPORATE The 1996 income tax amount included a benefit of approximately $100
million primarily from a reduction in the deferred tax asset valuation allowance
due to the realization of benefits from operating loss and credit carryforwards
in the United States and Peru.
The increased costs in unallocated corporate other items in 1996, compared
with 1995, primarily reflected lower equity income from unconsolidated chemical
investments and costs associated with the initial establishment of an Employee
Stock Ownership Plan at MidCon.
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."
MIDCON ESOP In November 1996, Occidental established the MidCon Corp.
Employee Stock Ownership Plan (MidCon ESOP) for the benefit of employees of
MidCon. Pursuant to the MidCon ESOP, Occidental has issued 1,400,000 shares of
its cumulative MidCon-indexed convertible preferred stock (the CMIC Preferred
Stock) to the MidCon Corp. ESOP Trust. The CMIC Preferred Stock is designed to
track the value of MidCon, which remains a wholly-owned subsidiary of
Occidental. The MidCon ESOP paid for the CMIC Preferred Stock with a $1.4
billion promissory note guaranteed by MidCon (the ESOP Note). Dividends on the
CMIC Preferred Stock are payable at an annual rate of $21 per share, when and as
declared by Occidental's Board of Directors. It is anticipated that MidCon will
make annual contributions from its operating cash flow to the MidCon ESOP which,
together with the annual dividends, will be used to repay the ESOP Note due to
Occidental.
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 and the reorganization of the operations of the natural
gas transmission division.
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.
STATEMENT OF POSITION NO. 96-1 In October 1996, the American Institute of
Certified Public Accountants (AICPA) issued Statement of Position No.
96-1--"Environmental Remediation Liabilities" (SOP 96-1), which provides
authoritative guidance on specific accounting issues that are present in the
recognition, measurement, display and disclosure of environmental remediation
liabilities. Occidental will implement SOP 96-1 effective January 1, 1997 and
has not yet made a final determination of its impact on the financial
statements.
SFAS NO. 125 In June 1996, the Financial Accounting Standards Board issued
SFAS No. 125--"Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities." The statement provides consistent standards for
distinguishing transfers of financial assets that are sales from transfers that
are secured borrowings. Occidental will implement SFAS No. 125 effective January
1, 1997. The adoption of the statement is not expected to have a material impact
on Occidental's financial position or results of operations.
24
<PAGE>
SFAS NO. 123 In October 1995, the Financial Accounting Standards Board issued
SFAS No. 123--"Accounting for Stock-Based Compensation." This statement defines,
among other things, a fair-value based method of accounting for options under an
employee stock option plan. However, it also allows an entity to continue to
account for such items using Accounting Principles Board (APB) Opinion No.
25--"Accounting for Stock Issued to Employees," under which no compensation
expense is recognized. Occidental elected this option, which alternatively
requires pro forma disclosures of net income and earnings per share, as if
compensation expense had been recognized. In accordance with SFAS No. 123,
Occidental will continue to use the accounting prescribed by APB Opinion No. 25.
Effective for the year ended December 31, 1996, the required pro forma
disclosures have been made as indicated above at Note 13 to the Consolidated
Financial Statements.
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." The statement requires a review of 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.
Occidental's adoption of SFAS No. 121, effective January 1, 1996, did not have a
material impact on Occidental's 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 1996, 1995 and
1994 results are detailed below. For further information, see Note 17 to the
Consolidated Financial Statements and the discussion above.
<TABLE>
<CAPTION>
SPECIAL ITEMS
Benefit(Charge) In millions 1996 1995 1994
========================================= ========= ========= =========
<S> <C> <C> <C>
OIL AND GAS
Write-down of investment in
oil and gas project in Komi $ (105) $ -- $ --
Litigation settlement -- (109) --
Reorganization -- (95) --
Gain on sale of producing
interests in Argentina -- -- 16
U.K. North Sea reserve
reversal -- -- 15
Environmental and litigation -- -- (45)
Severance and voluntary
retirement program -- -- (12)
Property impairments -- -- (11)
- ----------------------------------------- --------- --------- ---------
NATURAL GAS TRANSMISSION
Reorganization -- (37) --
Contract impairment reserve
reversal(a) -- -- 12
Reduction of LIFO inventory -- -- 13
- ----------------------------------------- --------- --------- ---------
CHEMICAL
Favorable litigation settlements 170 -- --
Environmental reserves (75) -- --
Gain on sale of PVC facility -- 40 --
Litigation reserves -- -- (55)
Curtailment of operations
and plant closure -- -- (48)
Plant explosion and
start-up costs -- -- (11)
- ----------------------------------------- --------- --------- ---------
CORPORATE
Tax reserve reversal 100 -- --
Extraordinary loss on debt
redemption(a) (30) -- --
Reversal of reserves and
adoption of SFAS No. 112 -- -- 7
- ----------------------------------------- --------- --------- ---------
(a) These amounts are shown after-tax.
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED OPERATIONS--REVENUES
SELECTED REVENUE ITEMS
In millions 1996 1995 1994
========================================= ========= ========= =========
<S> <C> <C> <C>
Net sales and operating
revenues $ 10,557 $ 10,423 $ 9,236
Interest, dividends and
other income $ 247 $ 114 $ 92
Income from equity
investments $ 83 $ 112 $ 73
- ----------------------------------------- --------- --------- ---------
</TABLE>
25
<PAGE>
The increase in sales in 1996, compared with 1995, primarily reflected
higher worldwide crude oil prices and production, increased oil trading
activity, and higher prices and volume for domestic natural gas. These increases
were partially offset by the absence of revenues from divested assets. 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 interest, dividends and other income in 1996, compared with
1995, was primarily attributed to the gain of $170 million related to favorable
litigation settlements. This was partially offset by decreased interest earnings
resulting from lower investment balances compared to 1995. 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, 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.
The decrease in income from equity investments in 1996, compared with 1995,
primarily reflected lower earnings from certain unconsolidated chemical
investments.
The increase in income from equity investments in 1995, compared with 1994,
primarily reflected higher earnings from certain unconsolidated chemical and oil
and gas investments.
<TABLE>
<CAPTION>
CONSOLIDATED OPERATIONS--EXPENSES
SELECTED EXPENSE ITEMS
In millions 1996 1995 1994
=============================== ========= ========= =========
<S> <C> <C> <C>
Cost of sales $ 7,037 $ 6,962 $ 6,726
Selling, general and adminis-
trative and other
operating expenses $ 1,084 $ 1,191 $ 985
Environmental remediation $ 100 $ 21 $ 5
Interest and debt expense, net $ 484 $ 579 $ 584
Provision for domestic and
foreign income and
other taxes $ 454 $ 402 $ 143
- ------------------------------- --------- --------- ---------
</TABLE>
Although the increase in cost of sales from 1995 to 1996 was small, it
reflected higher prices on oil traded and higher chemical feedstock costs,
largely offset by the absence of costs from divested assets.
The increase in cost of sales in 1995, compared with 1994, primarily
reflected increased oil trading activity.
Selling, general and administrative and other operating expenses in 1995
reflected the charges for reorganization costs and settlement of litigation.
Environmental remediation included a charge of $75 million in 1996, for
additional environmental reserves related to various existing sites.
Lower interest and debt expense in 1996 from 1995 primarily reflected lower
outstanding average debt levels and lower average interest rates in 1996.
The 1996 provision for domestic and foreign income and other taxes,
compared with 1995, reflected the increased divisional earnings and reduced
interest expense. In addition, income taxes for 1996 benefited by approximately
$100 million from a reduction in the deferred tax asset valuation allowance. 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. 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.
<TABLE>
<CAPTION>
LIQUIDITY AND CAPITAL RESOURCES
OPERATING ACTIVITIES
In millions 1996 1995 1994
========= ========= =========
<S> <C> <C> <C>
NET CASH PROVIDED $ 1,987 $ 1,501 $ 760
</TABLE>
The 1996 improvement in net cash provided by operating activities, compared
with 1995, reflected higher operating earnings in both the oil and gas and
natural gas transmission divisions, proceeds from litigation settlements and
proceeds from sale of an additional $100 million of receivables.
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.
Other noncash charges of $320 million in 1996 primarily reflected the $105
million charge for the write-down of Occidental's investment in Komi and
additional environmental reserves. 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. Each of the three
years also included charges for employee benefit plans and other items.
<TABLE>
<CAPTION>
INVESTING ACTIVITIES
In millions 1996 1995 1994
========= ========= =========
<S> <C> <C> <C>
NET CASH USED $ (979) $ (136) $ (1,007)
</TABLE>
Net cash used in investing activities included Occidental's capital
expenditure program as discussed below. The 1996 and 1995 investing amounts also
included proceeds from sales of businesses and other assets. The 1996 investing
amount also included the cost for replenishment of cushion gas in natural gas
reservoirs.
<TABLE>
<CAPTION>
CAPITAL EXPENDITURES In millions 1996 1995 1994
================================= ========= ========= =========
<S> <C> <C> <C>
Oil and gas $ 762 $ 575 $ 818
Natural gas transmission 147 150 93
Chemical 262 243 190
Corporate and other 14 11 2
--------- --------- ---------
$ 1,185 $ 979 $ 1,103
================================= ========= ========= =========
</TABLE>
26
<PAGE>
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.
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. and payments under a production sharing agreement for an
enhanced oil recovery project in Qatar. Capital expenditures for 1997 are
estimated to be approximately $1.3 billion, with most of the increase from 1996
allocated to oil and gas.
ADDITIONAL CASH FLOW INVESTING ACTIVITIES The 1996 proceeds from the sale of
businesses and disposals of property, plant and equipment included the sale of a
subsidiary which engaged in on-shore drilling and servicing of oil and gas wells
and the sale of Occidental's royalty interest in the Congo.
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, which was consummated through
the issuance of Occidental common and preferred stock.
<TABLE>
<CAPTION>
FINANCING ACTIVITIES
In millions 1996 1995 1994
========= ========= =========
<S> <C> <C> <C>
NET CASH PROVIDED(USED) $ (1,249) $ (974) $ 219
</TABLE>
The increase in 1996 cash used for financing activities, compared with
1995, reflected repayment of high coupon debt using proceeds from asset sales
that occurred in 1996 and 1995 and cash flow from operations. In 1996, payments
of long-term debt and capital lease liabilities and net proceeds from borrowings
totaled $867 million.
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, payments of long-term debt and capital lease liabilities
and net proceeds from borrowings totaled $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 payments of long-term debt and capital lease
liabilities, resulted in net cash provided of $26 million.
Occidental paid preferred and common stock dividends of $415 million in
1996, $406 million in 1995 and $376 million in 1994. The increases in 1996 and
1995 primarily reflected the dividends on the preferred and common stocks issued
in connection with acquisitions.
Cash used by investing activities exceeded cash provided by operating
activities for the year ended December 31, 1994. 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 1996 1995
=========================================== ========= =========
<S> <C> <C>
Prepaid expenses and other $ 407 $ 461
Equity investments $ 1,039 $ 927
Other assets $ 445 $ 344
Current maturities of long-term debt
and capital lease liabilities $ 27 $ 522
Accounts payable $ 1,023 $ 859
Accrued liabilities $ 1,185 $ 1,064
Long-term debt, net $ 4,511 $ 4,819
Stockholders' equity $ 5,140 $ 4,630
- ------------------------------------------- --------- ---------
</TABLE>
Prepaid expenses and other decreased reflecting the reduction of deferred
tax assets and prepaid insurance during 1996. Equity investments increased
primarily reflecting the acquisition of INDSPEC Chemical Corporation (INDSPEC).
Other assets increased primarily reflecting goodwill resulting from various
acquisitions during 1996.
Accounts payable and accrued liabilities increased primarily reflecting
significant increases in natural gas purchases. Current maturities of long-term
debt and capital lease liabilities decreased reflecting the repayment of debt
during 1996.
Long-term debt, net of current maturities and unamortized discount,
decreased reflecting debt repayments, using proceeds from asset sales and cash
flow from operations. At December 31, 1996, minimum principal payments on
long-term debt, including sinking fund requirements, totaled $367 million in
1998, $1.216 billion in 1999, $501 million in 2000, $515 million in 2001, $77
million in 2002 and $1.983 billion thereafter. However, Occidental has the
option to call certain issues of long-term debt prior to their maturity dates.
At December 31, 1996, Occidental had available approximately $2.0 billion
of committed credit lines and draws on them, as needed, to maintain sufficient
cash balances for daily operating and other purposes.
The increase in stockholders' equity primarily reflected net income and the
issuance of common stock for various acquisitions, to various employee benefit
plans, and for the dividend reinvestment plan, partially offset by dividends
declared.
ACQUISITIONS AND COMMITMENTS In August 1996, Occidental acquired three
specialty chemical producers in separate transactions for approximately $149
million through the issuance of 5,512,355 shares of Occidental common stock,
with a value of approximately $130 million, and the balance paid in cash. The
acquisitions included Laurel Industries, Inc., North America's largest producer
of antimony oxide at its LaPorte, Texas facility; Natural Gas Odorizing, Inc.,
the leading U.S. producer
27
<PAGE>
of mercaptan-based warning agents for use in natural gas and propane from its
single plant in Baytown, Texas; and a plant in Augusta, Georgia, purchased from
Power Silicates Manufacturing, Inc., which produces sodium silicates for use in
soap and detergent formulating, paper manufacturing and silica-based catalysts.
These acquisitions have been accounted for by the purchase method. Accordingly,
the cost of each acquisition was allocated to the assets acquired, goodwill and
liabilities assumed based upon their estimated respective fair values.
In April 1996, Occidental completed its acquisition of a 64 percent equity
interest (on a fully-diluted basis) in INDSPEC for approximately $92 million
through the issuance of 3,346,421 shares of Occidental common stock, with a
value of approximately $87 million, and the balance paid in cash. Under the
terms of the acquisition agreement, INDSPEC's management and employees have
retained voting control of INDSPEC.
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 WTI-equivalent oil over a six-year period. 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. At
December 31, 1996, approximately 15.5 million barrels remain to be delivered.
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.
Commitments at December 31, 1996 for major capital expenditures during 1997
and thereafter were approximately $358 million. Total capital expenditures for
1997 are estimated to be approximately $1.3 billion, the major portion 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.
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 complex or highly 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 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, primarily 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 in 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.
Additionally, almost all foreign oil and gas cash flows are denominated in U.S.
dollars. Most foreign currency positions at December 31, 1996 are generally in a
net liability position, effectively eliminating the potentially unfavorable
effects of devaluation. For those currencies that are in a net asset position,
Occidental maintains these positions at low levels so that the exposure to
currency devaluation is relatively insignificant.
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. Occidental
has outstanding interest rate swaps as of December 31, 1996 on 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 $1
million and $5 million of additional interest expense in 1996 and 1995,
respectively, and $6 million savings in interest expense for 1994, 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 1996,
1995 and 1994 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, 1996, Occidental would be required to
pay approximately $10 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, 1996, net of
deferred tax assets of $1.6 billion. The current portion of the deferred tax
assets of $300 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 stringent federal, state and local laws and regulations relating to
improving or maintaining the quality of the environment. Foreign operations also
are subject to environmental protection laws. Costs associated with
environmental compliance
28
<PAGE>
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. These expenditures are mainly considered 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, may be 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 equivalent 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, 1996, 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 267 Superfund or comparable state sites. (This
number does not include 71 sites where Occidental has been successful in
resolving its involvement.) The 267 sites include 81 former Diamond Shamrock
Chemical sites as to which Maxus Energy Corporation has retained all liability,
and 2 sites at which the extent of such retained liability is disputed. Of the
remaining 184 sites, Occidental has had no recent or significant communication
or activity with government agencies or other PRPs at 29 sites, has denied
involvement at 32 sites and has yet to determine involvement in 20 sites. With
respect to the remaining 103 of these sites, Occidental is in various stages of
evaluation. For 94 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 94 sites include 29 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 9 of the 103 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 1996 1995 1994
================================ ========= ========= =========
<S> <C> <C> <C>
OPERATING EXPENSES
Oil and gas $ 41 $ 41 $ 34
Natural gas transmission 5 7 6
Chemical 59 63 74
--------- --------- ---------
$ 105 $ 111 $ 114
========= ========= =========
REMEDIATION EXPENSES
Oil and gas $ -- $ 3 $ 4
Chemical 100 18 1
--------- --------- ---------
$ 100 $ 21 $ 5
========= ========= =========
CAPITAL EXPENDITURES
Oil and gas $ 54 $ 43 $ 42
Natural gas transmission 8 4 1
Chemical 27 27 24
--------- --------- ---------
$ 89 $ 74 $ 67
================================ ========= ========= =========
</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. 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,
1996 and 1995, Occidental had environmental reserves of approximately $566
million and $582 million, respectively. The net reduction reflects additional
provisions which are more than offset by payments for remediation programs and
settlement agreements.
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, 1996, the carrying value of Occidental's oil
and gas assets in countries outside North America aggregated
29
<PAGE>
approximately $1.924 billion, or approximately 11 percent of Occidental's total
assets at that date. Of such assets, approximately $722 million was located in
the Middle East, $639 million was located in Latin America, and substantially
all of the remainder were located in the Netherlands and the Far East.
1997 BUSINESS OUTLOOK
OIL AND NATURAL GAS INDUSTRY The petroleum industry is a highly competitive
global business subject to significant volatility due to numerous external
market forces. World oil demand for 1997 is expected to increase by over 2
percent or 1.5 million barrels a day, with the largest increase coming from
developing countries. Longer term, world GDP growth through 2001 should provide
the impetus for rising oil demand.
Oil prices will continue to be affected by short-term fundamentals such as
weather, inventory levels, competing fuel prices, availability of transport
capacity and supply conditions. Increases in crude oil supplies from non-OPEC
sources, Iraqi production allowed under United Nations supervision and a warmer
January and February 1997 have placed downward pressure on oil prices in the
first quarter of 1997. Another factor that directly influences crude oil prices
is OPEC members' compliance with production quotas. If world demand for oil
stabilizes or declines, non-compliance with production quotas by member
countries within OPEC will have a negative impact on prices. While fundamentals
are a deciding factor affecting crude oil price over the longer term, day to day
prices may be more volatile due to futures trading activity on the NYMEX. Such
volatility can be influenced by perceptions of world events, government
announcements, proposed legislation or other similar factors.
Debottlenecking of gas pipelines continues, which has increased supply and,
in turn, should reduce seasonal gas price disparities among U.S. geographic
regions. In early 1997, the overall gas supply has increased and the frequency
and magnitude of gas price spikes witnessed in 1996 were reduced. One of the
results of these developments was that average gas prices should be lower in the
first quarter than at year-end 1996.
In order to enhance its competitiveness in response to steadily increasing
global competition, Occidental continues its focus on improving both its
organizational and cost structures to increase efficiencies and improve
profitability. Increased efficiencies will help the Company increase output from
its production base.
Occidental's net worldwide oil production--which has risen by 48 percent
since 1992--is expected to increase by more than 20 percent over the next two
years principally from Qatar, Ecuador and the United States. Net worldwide gas
production is expected to rise at a more moderate pace through the end of the
century after which gas development projects now under way will result in a
sharp increase in production.
The Company's enhanced oil recovery (EOR) activities are expected to
provide a major impetus for its growth strategy in 1997 and beyond. Occidental
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 EOR projects. Approximately one-third of 1997 oil and
gas capital expenditures will be allocated to support worldwide EOR projects.
In addition, Occidental will continue its active global exploration program
to seek large oil and natural gas deposits and to optimize the value of large
natural gas projects in Malaysia, the Philippines and Indonesia. Occidental has
more than 30 active exploration projects in 21 foreign countries. During 1997,
Occidental expects to drill or participate in more than 40 wells worldwide, of
which approximately 80 percent will be international.
Work is moving ahead toward developing large natural gas discoveries in
Malaysia and the Philippines. In Malaysia, design work has begun for the
development of the Jintan field, which will provide initial feedstock for a new
liquefied natural gas facility. In the Philippines, Occidental and its partners
have signed a memorandum of understanding with the government to investigate the
repowering of an idle nuclear power plant in Bataan with natural gas. Fields
discovered by Occidental in Malaysia and with its partners in the Philippines
contain an estimated 7.6 trillion cubic feet of gross recoverable natural gas.
In Indonesia, Occidental has an interest in the Berau Block, where five
major natural gas discoveries have been made. Appraisal of the discoveries by
the operator will continue into 1997, but Occidental expects that the reserves
are sufficient to justify construction of a liquefied natural gas plant.
In northeastern Bangladesh, Occidental and Unocal, each with a 50 percent
interest, have rights to explore and develop a large gas discovery made by a
prior operator. In late 1996, Occidental, as operator, completed a gas sales and
purchase agreement. Appraisal of the Jalalabad gas field will begin in 1997,
with first production expected in 1998.
The Gulf of Mexico will be a focus of continued exploration and
development, while the expanding Austin Chalk operation in central Louisiana
will be a vehicle to increase domestic production. In addition, the Milne Point
operation in Alaska should contribute to the rise in domestic production.
NATURAL GAS TRANSMISSION INDUSTRY As deregulation of the natural gas industry
moves beyond the city gate, state regulators are implementing programs allowing
sales of gas by unregulated marketers directly to business and residential
customers. Deregulation has also increased the flexibility of the entire gas
pipeline infrastructure by providing incentives for relatively low-cost
interconnections and incremental pipeline extensions to relieve bottlenecks.
This increases the options available to LDCs for sources of gas. As a result,
LDCs are relying less on long-term contracts for pipeline transportation and gas
supply and more on the spot market and storage to meet their needs.
On December 1, 1995, most contracts held by Natural Gas Pipeline Company of
America (Natural), MidCon's regulated interstate pipeline company, with major
LDCs expired. Most of these contracts were renewed, but at reduced firm capacity
levels and prices, reflecting the change in LDC requirements. Natural was able
to sell, for the 1995-96 and 1996-97 winter heating seasons, substantially all
this released capacity. Also, on December 1, 1995, Natural implemented new
services and revised rates pursuant to a new rate case. Natural has filed a
settlement to resolve all rate case issues and is continuing discussions with
major parties in an effort to achieve full support for the settlement.
30
<PAGE>
During 1996, MidCon's nonregulated unit, MidCon Gas Services Corp. (MidCon
Gas), reported gas sales to third parties of 460 billion cubic feet (Bcf), an
increase of over 10 percent from the prior year. MidCon Gas continues to be one
of the largest nonregulated storage managers in the country, with approximately
100 Bcf of working gas capacity at the start of the 1996-97 heating season.
MidCon has implemented three key growth initiatives to capture
opportunities provided by changes in the marketplace. One initiative involves
new efforts to sell gas and electricity to commercial and small industrial
customers as a bundled energy service. A new marketing unit of MidCon, "mc2",
has been established to do this and initial product rollouts are taking place in
the Chicago and New York metropolitan areas in early 1997. MidCon's power
marketing business unit will participate in several electric power pilot
programs as a first step toward offering a combined gas and electric service.
Another growth initiative is to expand gas sales and portfolio management
services to LDCs, regional marketers and industrial companies on a national
basis. New markets will be entered by contracting for capacity on third-party
systems, obtaining term gas supply and offering portfolio management services.
Portfolio management integrates the customer's gas supply, transport and storage
into MidCon's asset pool and maximizes asset utilization to create shared cost
savings.
Pipeline and storage development is MidCon's third growth initiative.
Continued excess supply in Canada and the western United States, coupled with
the growing eastern markets, demonstrates the need for more pipeline capacity to
move gas eastward, for which MidCon's pipeline and storage assets are
strategically located. The Amarillo and Trailblazer pipeline expansions are
designed to support these efforts. Additionally, Natural and Crossroads Pipeline
Company, a subsidiary of NIPSCO Industries, Inc., completed construction in
January 1997 of a 100 million cubic feet (MMcf) per day interconnect between
their systems, providing Natural an additional connection to markets east of
Chicago.
In August 1996, Natural received preliminary FERC approval, subject to an
environmental review, to expand its Amarillo system from Harper, Iowa to
Chicago. This expansion, plus use of existing capacity, will accommodate more
than 500 MMcf per day of new gas supplies received from a proposed expansion of
Northern Border Pipeline, a non-affiliated system that transports gas
originating in western Canada. Northern Border also was granted preliminary FERC
permission, subject to an environmental review, for its expansion program that
includes a new line from Harper to the Chicago area. Natural is opposing the
extension of the Northern Border system.
If Northern Border builds its proposed extension into the Chicago area,
service may commence within two to three years. Natural expects to mitigate any
negative impact over time with additional market growth and expansion of
capacity to move volumes east.
Trailblazer Pipeline Company, in which Natural is a one-third partner,
signed 10-year agreements with six shippers for additional firm transport
service. Pending final FERC approval, Trailblazer will add compression to
increase its capacity by 104 MMcf per day. The new facilities are scheduled to
be placed in service during the summer of 1997.
MidCon Texas Pipeline (MidCon Texas), MidCon's intrastate pipeline
business, signed agreements in January 1996 with a major south Texas producer
for the purchase and transportation of 274 Bcf of gas over a five-year period.
The gas comes from production in Zapata and Webb counties near the U.S.-Mexico
border. Arrangements included construction of 68 miles of large-diameter
pipeline to connect to MidCon Texas' system. The pipeline was completed in
August 1996.
MidCon was granted a permit by Mexico to construct approximately 100 miles
of pipeline from the United States to Monterrey, Mexico. This is the first
pipeline transportation permit issued since Mexico amended its Constitution to
provide for private ownership of gas pipelines and storage systems. When built,
this pipeline will deliver up to 270 MMcf per day of gas to local distribution
companies, industrial customers and electricity generators.
CHEMICAL INDUSTRY
BASIC CHEMICALS In 1996, demand for chlorine and chlorine-related derivatives
continued to be strong. For caustic soda, overall demand remained strong through
the first three quarters of the year. The result was a year in which
chlor-alkali margins overall remained at historically high levels.
Markets that offer the strongest outlet for chlorine production include
ethylene dichloride (EDC), vinyl chloride monomer (VCM) and PVC. Demand for EDC,
which is principally exported, remained strong through 1996, as did chlorine
consumption for VCM and other end uses. These market conditions are expected to
continue in 1997.
Due to strong demand, the chlorine and caustic soda industry operated
essentially at capacity in 1996. Some new capacity will become available in
1997, primarily in the United States and Middle East; however, the industry is
expected to remain capacity-constrained during the 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 there has been less demand
for chlorine 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.
Overall, chlorine prices in 1996 were comparable with average 1995 prices.
Chlorine prices are expected to increase in 1997, while caustic soda prices will
remain under pressure until demand for caustic soda in key sectors, such as
alumina and automotive, returns to higher sustained levels.
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
approximately 20 percent of all chemical world trade, and changes in global
economic conditions have an immediate effect on the domestic petrochemical
industry. The cycles in the petrochemical business have been demonstrated by
periods of high profitability, as in the late 1980s, followed by large capacity
increases and subsequent depressed margins as experienced in 1991 through 1993.
31
<PAGE>
The profitability of petrochemical plants during 1996 was below
expectations due to higher than anticipated feedstock costs. Margins in the
first quarter were extremely low but began to increase as product prices were
raised and prices for feedstocks such as refined by-products and natural gas
liquids (NGL) fell. Profitability continued to increase through the third
quarter. However, earnings declined when feedstock prices advanced as cold
weather, coupled with low inventories of liquid and NGL feedstocks, drove
margins down in the fourth quarter. OxyChem has the flexibility in some of its
plants to operate on a wide variety of feedstocks. In particular, OxyChem was
able to shift away from NGLs in certain plants when they became uneconomical in
the fourth quarter. Margins are expected to improve in the second and third
quarters of 1997, but return to lower levels near the end of the year as several
major ethylene expansions come on-line.
Throughout 1995 and 1996, OxyChem petrochemical and derivatives plants
operated at capacity. Demand in 1997 is anticipated to increase slightly in
excess of the growth in GDP. Ethylene growth in 1996 was about 5 percent, or two
times GDP growth, while propylene demand growth was 3 percent. Ethylene was
driven by both higher domestic and export demand. Propylene demand was fueled by
a 9 percent increase in polypropylene production. Propylene supply and demand is
expected to be in balance for the next several years because the new furnaces
are heavily reliant on low propylene producing feedstock. Overall, OxyChem
expects a growth rate of approximately 4 percent in ethylene and propylene in
1997. Benzene prices were driven down by the onset of new manufacturing
processes. This new source of benzene, combined with flat styrene demand, kept
benzene in an oversupplied mode which is expected to continue for several years.
Demand for ethylene oxide and glycols is expected to expand by 3 percent per
year in the United States and in excess of 5 percent globally. OxyChem expanded
the Bayport facility by 25 percent in April 1996 in anticipation of a
strengthening market for ethylene glycol.
POLYMERS AND PLASTICS North American demand for PVC resin grew at a rate of
13 percent during 1996, led primarily by construction applications. Although
lower in absolute volumes, export sales continued at a rate close to 10 percent
of annual North American production. After recovering from declines during the
latter half of 1995, PVC resin prices improved in the first half of 1996 but
declined again in the second half of the year. This decline, combined with
substantial feedstock cost increases during the second half of the year,
resulted in poor PVC resin margins by year-end. This margin erosion during a
period of demand growth can be attributed primarily to substantial capacity
additions in both the domestic and world markets during 1996. Additional
industry capacity is expected in 1997 and 1998; however, North American and
global demand in 1997 is forecasted to grow at over 5 percent.
OxyChem's 450 million-pounds-per-year PVC expansion at Pasadena, Texas is
planned to start up in the second half of 1997. The 700 million-pounds-per-year
VCM expansion at a plant, owned equally by OxyChem and Marubeni Corporation of
Tokyo and managed by OxyChem, also is planned to come on stream in the second
half of 1997 and will provide the major raw material (VCM) for the Pasadena PVC
expansion.
OxyChem's PVC business continues to be well balanced in all major end-use
markets and is 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 also is well positioned in strategic
export markets in the Asian Pacific and Latin American regions.
SPECIALTY BUSINESSES The Specialty Business Group was formed in 1995 to
emphasize OxyChem's leadership position in many smaller-volume chemical markets.
Specialty chemical products are less cyclical than commodity chemicals and
provide a more steady source of earnings.
Four separate acquisitions were made in 1996. In April, Occidental
completed its acquisition of a 64 percent interest (on a fully-diluted basis) in
INDSPEC, the world's largest producer of resorcinol, which is primarily used as
a bonding and stiffening agent in the production of tires. In August, OxyChem
completed three other acquisitions--a sodium silicate plant in Augusta, Georgia,
which strengthens OxyChem's position as the second-largest producer in the
United States; Natural Gas Odorizing, a producer of warning agents for the
natural gas and propane markets; and Laurel Industries, North America's largest
producer of antimony oxide, a flame retardant synergist used in manufacturing
plastics complementing OxyChem's existing flame retardants.
Product line extensions and additional volume in existing products are
expected to improve profits in 1997. In addition, OxyChem will benefit from
full-year operations at its recent acquisitions.
OxyChem has targeted the Specialty Business Group for substantial growth in
the coming years by expanding volume in existing products, developing new
products and making acquisitions.
SAFE HARBOR STATEMENT REGARDING OUTLOOK AND OTHER FORWARD-LOOKING DATA
Portions of the Annual Report, including Management's Discussion and Analysis,
are forward-looking and involve risks and uncertainties that could significantly
affect expected results. Factors that could cause results to differ materially
include, but are not limited to: global commodity pricing fluctuations;
competitive pricing pressures; higher than expected costs including feedstocks;
the supply/demand considerations for Occidental's products; any general economic
recession domestically or internationally; and not successfully completing any
expansion, capital expenditure or acquisition.
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, 1996 1995 1994
====================================================================== ========= ========= =========
<S> <C> <C> <C>
REVENUES
Net sales and operating revenues
Oil and gas operations $ 3,680 $ 3,018 $ 2,451
Natural gas transmission operations 2,574 2,038 2,110
Chemical operations 4,307 5,370 4,677
Interdivisional sales elimination and other (4) (3) (2)
--------- --------- ---------
10,557 10,423 9,236
Interest, dividends and other income 247 114 92
Gains on disposition of assets, net (Note 4) 11 45 15
Income from equity investments (Note 15) 83 112 73
--------- --------- ---------
10,898 10,694 9,416
--------- --------- ---------
COSTS AND OTHER DEDUCTIONS
Cost of sales 7,037 6,962 6,726
Selling, general and administrative and other operating expenses 1,084 1,191 985
Depreciation, depletion and amortization of assets 921 922 882
Environmental remediation 100 21 5
Exploration expense 120 106 127
Interest and debt expense, net 484 579 584
--------- --------- ---------
9,746 9,781 9,309
--------- --------- ---------
INCOME(LOSS) BEFORE TAXES AND EXTRAORDINARY ITEMS 1,152 913 107
Provision for domestic and foreign income and other taxes (Note 12) 454 402 143
--------- --------- ---------
INCOME(LOSS) BEFORE EXTRAORDINARY ITEMS 698 511 (36)
Extraordinary gain(loss), net (Note 5) (30) -- --
--------- --------- ---------
NET INCOME(LOSS) $ 668 $ 511 $ (36)
========= ========= =========
EARNINGS(LOSS) APPLICABLE TO COMMON STOCK $ 575 $ 418 $ (112)
========= ========= =========
PRIMARY EARNINGS PER COMMON SHARE
Income(loss) before extraordinary items $ 1.86 $ 1.31 $ (.36)
Extraordinary gain(loss), net (.09) -- --
--------- --------- ---------
PRIMARY EARNINGS(LOSS) PER COMMON SHARE (Note 1) $ 1.77 $ 1.31 $ (.36)
========= ========= =========
FULLY DILUTED EARNINGS(LOSS) PER COMMON SHARE (Note 1) $ 1.73 $ 1.30 $ (.36)
====================================================================== ========= ========= =========
The accompanying notes are an integral part of these financial statements.
</TABLE>
33
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
In millions, except share amounts
Assets at December 31, 1996 1995
======================================================================= ========= =========
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents (Note 1) $ 279 $ 520
Trade receivables, net of reserves of $24 in 1996 and $19 in 1995 635 643
Receivables from joint ventures, partnerships and other 236 248
Inventories (Notes 1 and 6) 633 647
Prepaid expenses and other (Note 12) 407 461
--------- ---------
TOTAL CURRENT ASSETS 2,190 2,519
--------- ---------
LONG-TERM RECEIVABLES, NET 152 158
--------- ---------
EQUITY INVESTMENTS (Notes 1 and 15) 1,039 927
--------- ---------
PROPERTY, PLANT AND EQUIPMENT, AT COST (Notes 1, 4 and 9)
Oil and gas operations 8,443 8,377
Natural gas transmission operations 8,629 8,448
Chemical operations 5,893 5,672
Corporate and other 212 207
--------- ---------
23,177 22,704
Accumulated depreciation, depletion and amortization (9,369) (8,837)
--------- ---------
13,808 13,867
OTHER ASSETS (Note 1) 445 344
--------- ---------
$ 17,634 $ 17,815
======================================================================= ========= =========
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, 1996 1995
=================================================================================================== ========= =========
<S> <C> <C>
CURRENT LIABILITIES
Current maturities of long-term debt and capital lease liabilities (Notes 7 and 9) $ 27 $ 522
Notes payable (Note 1) 20 16
Accounts payable 1,023 859
Accrued liabilities (Note 1) 1,185 1,064
Dividends payable 106 104
Domestic and foreign income taxes (Note 12) 109 92
--------- ---------
TOTAL CURRENT LIABILITIES 2,470 2,657
--------- ---------
LONG-TERM DEBT, NET OF CURRENT MATURITIES AND UNAMORTIZED DISCOUNT (Note 7) 4,511 4,819
--------- ---------
DEFERRED CREDITS AND OTHER LIABILITIES
Deferred and other domestic and foreign income taxes (Note 12) 2,560 2,620
Other (Notes 1, 8, 9 and 14) 2,953 3,089
--------- ---------
5,513 5,709
--------- ---------
CONTINGENT LIABILITIES AND COMMITMENTS (Notes 7, 9, 10, 11 and 12)
STOCKHOLDERS' EQUITY (Notes 4, 7 and 13)
Nonredeemable preferred stock, $1.00 par value; authorized 50 million shares; outstanding shares:
1996--26,493,209 and 1995--26,494,824; stated at liquidation value of $50 per share 1,325 1,325
ESOP preferred stock, $1.00 par value; authorized and outstanding shares:
1996--1,400,000 1,400 --
Unearned ESOP shares (1,394) --
Common stock, $.20 par value; authorized 500 million shares; outstanding shares:
1996--329,227,688 and 1995--318,711,037 66 64
Additional paid-in capital 4,463 4,631
Retained earnings(deficit) (726) (1,402)
Cumulative foreign currency translation adjustments (Note 1) 6 12
--------- ---------
5,140 4,630
--------- ---------
$ 17,634 $ 17,815
=================================================================================================== ========= =========
The accompanying notes are an integral part of these financial statements.
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY Occidental Petroleum Corporation
In millions and Subsidiaries
Cumulative
Non- Additional Retained Foreign
redeemable ESOP Unearned Common Paid-in Earnings Currency
Preferred Preferred ESOP Stock Capital (Deficit) Translation
Stock Stock Shares (Notes 4 (Notes 7 (Notes 7 Adjustments
(Note 13) (Note 13) (Note 13) and 13) and 13) and 13) (Note 1)
================================== ========== ========= ========= ========= ========== ========= ===========
<S> <C> <C> <C> <C> <C> <C> <C>
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
Net income -- -- -- -- -- 668 --
Dividends on common stock -- -- -- -- (325) -- --
Dividends on preferred stock -- -- -- -- (93) -- --
Issuance of common stock -- -- -- 2 240 -- --
Issuance of preferred stock
(Note 13) -- 1,400 (1,394) -- (6) -- --
Pension liability adjustment
(Note 14) -- -- -- -- -- 8 --
Exercises of options and other,
net -- -- -- -- 16 -- (6)
- ---------------------------------- ---------- --------- --------- --------- ---------- --------- -----------
BALANCE, DECEMBER 31, 1996 $ 1,325 $ 1,400 $ (1,394) $ 66 $ 4,463 $ (726) $ 6
================================== ========== ========= ========= ========= ========== ========= ===========
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, 1996 1995 1994
=============================================================================== ========= ========= =========
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net income(loss) $ 668 $ 511 $ (36)
Adjustments to reconcile income to net cash provided by operating activities:
Extraordinary (gain)loss, net 30 -- --
Depreciation, depletion and amortization of assets 921 922 882
Amortization of debt discount and deferred financing costs 7 31 15
Deferred income tax provision 3 18 26
Other noncash charges(credits) to income 320 246 175
Gains on disposition of assets, net (11) (45) (15)
Income from equity investments (83) (112) (73)
Exploration expense 120 106 127
Changes in operating assets and liabilities:
Decrease(increase) in accounts and notes receivable 33 106 (240)
Decrease(increase) in inventories -- (68) 14
Increase in prepaid expenses and other assets (35) (41) (59)
Increase(decrease) in accounts payable and accrued liabilities 150 (191) 156
Increase(decrease) in current domestic and foreign income taxes 41 48 16
Other operating, net (177) (30) (228)
--------- --------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,987 1,501 760
--------- --------- ---------
CASH FLOW FROM INVESTING ACTIVITIES
Capital expenditures (1,185) (979) (1,103)
Proceeds from disposal of property, plant and equipment, net (Note 4) 233 176 8
Buyout of operating leases -- (141) --
Purchase of businesses (18) (7) 46
Sale of businesses, net (Note 4) 31 756 2
Equity investments, net 52 60 41
Other investing, net (92) (1) (1)
--------- --------- ---------
NET CASH USED BY INVESTING ACTIVITIES (979) (136) (1,007)
--------- --------- ---------
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from long-term debt 65 322 621
Net proceeds from commercial paper and revolving credit agreements 645 (528) (160)
Payments of long-term debt and capital lease liabilities (1,577) (397) (435)
Proceeds from issuance of common stock 25 28 38
Proceeds from issuance of preferred stock (Note 13) -- -- 557
Payments of notes payable (1) (5) (22)
Cash dividends paid (415) (406) (376)
Other financing, net 9 12 (4)
--------- --------- ---------
NET CASH PROVIDED(USED) BY FINANCING ACTIVITIES (1,249) (974) 219
--------- --------- ---------
INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS (241) 391 (28)
CASH AND CASH EQUIVALENTS--BEGINNING OF YEAR 520 129 157
--------- --------- ---------
CASH AND CASH EQUIVALENTS--END OF YEAR $ 279 $ 520 $ 129
=============================================================================== ========= ========= =========
The accompanying notes are an integral part of these financial statements.
</TABLE>
37
<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 35 percent and 25 percent of sales, respectively, while
chemical represents approximately 40 percent of sales.
Internationally, Occidental has oil and gas production in 10 countries and
exploration projects in 21 countries. Domestically, Occidental has oil and gas
exploration and production in the United States, including the Gulf of Mexico.
In natural gas transmission, Occidental processes, buys, sells, stores and
transports 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 subsidiaries where the Company
has majority ownership of voting stock 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 1996 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 $13.808 billion as of December 31, 1996. 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 $1.6 billion as of December 31, 1996, 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 $1.924
billion as of December 31, 1996 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, which
historically have been subject to high inflation rates, use the U.S. dollar as
the functional currency. The effect of exchange-rate changes on transactions
denominated in nonfunctional currencies generated a loss of approximately $3
million in 1996 and gains of approximately $1 million in 1995 and $14 million in
1994, which in 1994 was 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 $206 million and $620 million at
December 31, 1996 and 1995, respectively.
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 serves as the collection agent with respect to the
receivables sold. An interest in new receivables is sold as collections are made
from customers. As of December 31, 1996, Occidental had received cash proceeds
totaling $600 million, of which $100 million was received in the fourth quarter
of 1996 and the remainder 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, 1996, 1995 and 1994, the cost of
this program amounted to approximately 5.8 percent, 6.3 percent and 4.8 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
any impairment to be recorded for specific properties. 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 at both December 31, 1996 and 1995. This
excess amount as of December 31, 1996 is being depreciated over a remaining
period of 37 years.
OTHER ASSETS Other assets include tangible and intangible assets, certain of
which are amortized over the estimated periods to be benefited.
NOTES PAYABLE Notes payable at December 31, 1996 and 1995 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, 1996 and 1995 was 5.4 percent and 6.0 percent, respectively.
<TABLE>
<CAPTION>
ACCRUED LIABILITIES--CURRENT Accrued liabilities include the following (in millions):
Balance at December 31, 1996 1995
=================================================== ========= =========
<S> <C> <C>
Accrued payroll, commissions and related expenses $ 182 $ 229
Accrued interest expense $ 95 $ 134
- --------------------------------------------------- --------- ---------
</TABLE>
39
<PAGE>
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 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 $428 million, respectively, at December 31, 1996 and $138 million
and $444 million, respectively, at December 31, 1995.
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, 1996 and 1995, 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 $9 million and $215 million,
respectively, at December 31, 1996 and $16 million and $222 million,
respectively, at December 31, 1995.
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, from time to time, 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 324 million in 1996, 318 million in 1995
and 311 million in 1994. 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 1996, 1995
and 1994 included federal, foreign and state income taxes of approximately $273
million, $230 million and $133 million, respectively. Interest paid (net of
interest capitalized) totaled approximately $484 million, $546 million and $507
million for the years 1996, 1995 and 1994, respectively. See Note 4 for detail
of noncash investing and financing activities regarding certain acquisitions.
NOTE 2 FINANCIAL INSTRUMENTS
- --------------------------------------------------------------------------------
COMMODITY FUTURES AND FORWARD CONTRACTS Occidental's oil and gas and natural
gas transmission segments have, from time to time, engaged in some form of
commodity derivative activity, generally limited to hedging arrangements. The
oil and gas division engages in oil and gas trading activity primarily through
the use of futures contracts. The results are not significant and are included
in periodic income. MidCon uses commodity futures contracts, options and swaps
to hedge the impact of natural gas price fluctuations related to two major
categories of business: purchases for and sales from storage; and fixed-price
sales and purchase contracts.
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.
40
<PAGE>
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. All agreements are for less than 18
months.
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.
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, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
----------------------------------- ------------------------------------
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 32 -- 32 62 -- 62
Swaps Purchases -- -- -- -- 8 8
Sales -- 1 1 -- -- --
Options Purchases -- 2 2 -- -- --
Basis hedge
Basis swaps(c) Purchases -- 33 33 -- 9 9
Sales -- 34 34 -- 7 7
- -------------------------------- --------- --------- --------- --------- --------- --------- ---------
</TABLE>
<TABLE>
<CAPTION>
1996 1995
--------------------------------------------- ---------------------------------------------
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(losses)
Firm commitment/forecast
transactions $ (3) $ -- $ 14 $ --
Assets
Basis swaps $ -- $ 1 $ -- $ --
Liabilities
Price swaps $ -- $ -- $ 2 $ 6
Basis swaps $ -- $ -- $ 1 $ 2
- -------------------------------- --------- --------- --------- --------- --------- --------- --------- ---------
(a) Not financial instruments as defined in GAAP but included as they are a major part of the program.
(b) Excluding the nine-year swap agreement, which was terminated in 1996, the average weighted term is less than 12 months. Ninety
percent of the notional volumes are hedged with counterparties with a triple B 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.
</TABLE>
41
<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 in 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. Most foreign currency positions at December
31, 1996 are generally in a net liability position, effectively eliminating the
potentially unfavorable effects of devaluation. For those currencies that are in
a net asset position, Occidental maintains these positions at low levels so that
the exposure to currency devaluation is relatively insignificant. At December
31, 1996, Occidental had one foreign currency forward purchase exchange contract
totaling $38 million which hedged foreign currency denominated debt. This
contract 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, 1996. 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 $1 million and $5
million of additional interest expense in 1996 and 1995, respectively, and $6
million savings in interest expense for 1994, 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 1996, 1995 and 1994 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 long-term 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 long-term debt at December 31, 1996 and
1995 was $4.968 billion and $5.478 billion, respectively, compared with a
carrying value of $4.511 billion and $4.819 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,
1996 and 1995, Occidental would be required to pay approximately $10 million and
$3 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 and the reorganization of the operations of the
natural gas transmission division. This reorganization was part of Occidental's
efforts to consolidate operations and to increase management efficiency, asset
utilization and profitability.
NOTE 4 BUSINESS COMBINATIONS AND ASSET ACQUISITIONS AND DISPOSITIONS
- --------------------------------------------------------------------------------
In August 1996, Occidental acquired three specialty chemical producers in
separate transactions for approximately $149 million through the issuance of
5,512,355 shares of Occidental common stock, with a value of approximately $130
million, and the balance paid in cash. The acquisitions included Laurel
Industries, Inc., North America's largest producer of antimony oxide at its
LaPorte, Texas facility; Natural Gas Odorizing, Inc., the leading U.S. producer
of mercaptan-based warning agents for use in natural gas and propane from its
single plant in Baytown, Texas; and a plant in Augusta, Georgia, purchased from
Power Silicates Manufacturing, Inc., which produces sodium silicates for use in
soap and detergent formulating, paper manufacturing and silica-based catalysts.
These acquisitions have been accounted for by the purchase method. Accordingly,
the cost of each acquisition was allocated to the assets acquired, goodwill and
liabilities assumed based upon their estimated respective fair values.
In April 1996, Occidental completed its acquisition of a 64 percent equity
interest (on a fully-diluted basis) in INDSPEC Chemical Corporation (INDSPEC)
for approximately $92 million through the issuance of 3,346,421 shares of
Occidental common stock, with a value of approximately $87 million, and the
balance paid in cash. Under the terms of the agreement, INDSPEC's management and
employees have retained voting control of INDSPEC.
42
<PAGE>
In April 1996, Occidental completed the sale of its subsidiary which
engaged in on-shore drilling and servicing of oil and gas wells for
approximately $32 million. Also in April 1996, certain assets of an
international phosphate fertilizer trading operation were sold for approximately
$20 million in interest-bearing notes. In July 1996, Occidental sold its royalty
interest in the Congo for $215 million to the Republic of the Congo.
In October 1995, Occidental sold its agricultural chemicals business.
During May 1995, Occidental sold its high-density polyethylene business.
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.
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.
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.
In 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.
NOTE 5 EXTRAORDINARY GAIN(LOSS) AND ACCOUNTING CHANGES
- --------------------------------------------------------------------------------
The 1996 results included a net extraordinary loss of $30 million, which
resulted from the early extinguishment of all the then outstanding $955 million
principal amount of its 11.75% Senior Debentures.
In October 1996, the American Institute of Certified Public Accountants
(AICPA) issued Statement of Position No. 96-1--"Environmental Remediation
Liabilities" (SOP 96-1), which provides authoritative guidance on specific
accounting issues that are present in the recognition, measurement, display, and
disclosure of environmental remediation liabilities. Occidental will implement
SOP 96-1 effective January 1, 1997 and has not yet made a final determination of
its impact on the financial statements.
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 $220 million and $225 million were valued
under the LIFO method at December 31, 1996 and 1995, respectively.
Inventories consisted of the following (in millions):
<TABLE>
<CAPTION>
Balance at December 31, 1996 1995
==================================================== ========= =========
<S> <C> <C>
Raw materials $ 135 $ 116
Materials and supplies 184 180
Work in process 17 17
Finished goods 344 363
--------- ---------
680 676
LIFO reserve (47) (29)
--------- ---------
TOTAL $ 633 $ 647
==================================================== ========= =========
</TABLE>
43
<PAGE>
NOTE 7 LONG-TERM DEBT
- --------------------------------------------------------------------------------
Long-term debt consisted of the following (in millions):
<TABLE>
<CAPTION>
Balance at December 31, 1996 1995
========================================================================================= ========= =========
<S> <C> <C>
OCCIDENTAL PETROLEUM CORPORATION
11.75% senior debentures due 2011, called March 15, 1996 at 104.838 $ -- $ 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
10.125% senior notes due 2001 330 330
9.625% senior notes due 1999, called July 1, 1996 at par -- 300
9.1% to 9.75% medium-term notes due 1997 through 2001 99 99
8.5% medium-term notes due 2004, callable September 15, 1999 at par 250 250
11.125% senior notes due 2010 150 150
Floating rate senior notes due 1999, called November 4, 1996 at par -- 150
8.5% senior notes due 2001 150 150
8.75% medium-term notes due 2023 100 100
6.49375% to 11% medium-term notes due 1997 through 2000 294 294
6.04% to 8.34% medium-term notes due 1997 through 2008 285 292
5.76% to 6.41% medium-term notes due 1998 through 2000 601 601
10.42% senior notes due 2003, callable December 1, 1998 at par 50 50
5.55% to 7.1% commercial paper 567 --
5.66% to 6.94% revolving credits 80 --
7.3% to 8.8% retail medium-term notes due 1997 through 2004, callable at various dates 139 167
--------- ---------
3,815 4,608
--------- ---------
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 1997 (Note 16) 15 15
5.7% to 7.8% unsecured notes due 1997 through 2007 56 58
--------- ---------
407 409
--------- ---------
OTHER SUBSIDIARY DEBT
3.1597% to 12.5% unsecured notes due 1997 through 2030 432 382
6% to 14.5% secured notes due 1997 through 2011 10 57
--------- ---------
442 439
--------- ---------
4,664 5,456
Less:
Unamortized discount, net (148) (147)
Current maturities (5) (490)
--------- ---------
TOTAL $ 4,511 $ 4,819
========================================================================================= ========= =========
</TABLE>
At December 31, 1996, $961 million of notes due in 1997 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, 1996, minimum principal payments on long-term debt,
including sinking fund requirements, subsequent to December 31, 1997 aggregated
$4.659 billion, of which $367 million is due in 1998, $1.216 billion in 1999,
$501 million in 2000, $515 million in 2001, $77 million in 2002 and $1.983
billion thereafter. Unamortized discount is generally being amortized to
interest expense on the effective interest method over the lives of the related
issues.
44
<PAGE>
At December 31, 1996, 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 $2.4 billion, assuming that such dividends, distributions and
acquisitions were made without incurring additional borrowings.
At December 31, 1996, Occidental had available lines of committed bank
credit of approximately $2.0 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 a six-year period.
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). At December 31,
1996, 15.5 million barrels remain to be delivered.
NOTE 9 LEASE COMMITMENTS
- --------------------------------------------------------------------------------
The present value of net minimum lease payments, net of the current
portion, totaled $237 million and $259 million at December 31, 1996 and 1995,
respectively. These amounts are included in Other liabilities.
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, 1996, 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>
1997 $ 42 $ 121
1998 17 77
1999 17 67
2000 212 58
2001 49 59
Thereafter 1 322
--------- ---------
TOTAL MINIMUM LEASE PAYMENTS 338 $ 704
=========
Less:
Executory costs (5)
Imputed interest (74)
Current portion (22)
---------
PRESENT VALUE OF NET MINIMUM LEASE PAYMENTS, NET OF CURRENT PORTION $ 237
=================================================================== =========
</TABLE>
Rental expense for operating leases, net of immaterial sublease rental, was
$128 million in 1996, $141 million in 1995 and $163 million in 1994.
Included in the 1996 and 1995 property, plant and equipment accounts were
$429 million and $442 million, respectively, of property leased under capital
leases and $144 million and $137 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, 1996, commitments for major capital expenditures during
1997 and thereafter were approximately $358 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, 1996, the net present
value of the fixed and determinable portion of the obligations under these
agreements aggregated $185 million, which was payable as follows (in millions):
1997--$30, 1998--$30, 1999--$24, 2000--$21, 2001--$20 and 2002 through 2014--
$60. Payments under these agreements, including any variable component, were
$209 million in 1996, $190 million in 1995 and $188 million in 1994.
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) before extraordinary
items and 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>
1996 $ 550 $ 602 $ 1,152
========= ========= =========
1995 $ 425 $ 488 $ 913
========= ========= =========
1994 $ (46) $ 153 $ 107
=========================================== ========= ========= =========
</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>
1996
Current $ 168 $ 26 $ 257 $ 451
Deferred -- 2 1 3
--------- --------- --------- ---------
$ 168 $ 28 $ 258 $ 454
====================================== ========= ========= ========= =========
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
====================================== ========= ========= ========= =========
</TABLE>
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) before extraordinary items:
<TABLE>
<CAPTION>
For the years ended December 31, 1996 1995 1994
===================================================== ========= ========= =========
<S> <C> <C> <C>
U.S. federal statutory tax rate 35% 35% 35%
Operations outside the United States(a) 12 11 65
State taxes, net of federal benefit 2 5 13
State tax benefit from operating loss carryforwards -- (3) --
Reserves not previously benefited -- (5) --
Nondeductible depreciation and other expenses 1 1 11
Reduction in deferred tax asset valuation allowance (9) -- --
Other (2) -- 10
--------- --------- ---------
Tax rate provided by Occidental 39% 44% 134%
===================================================== ========= ========= =========
(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 5 percent in 1996 and 4 percent in 1995.
</TABLE>
47
<PAGE>
The tax effects of temporary differences and carryforwards resulting in
deferred income taxes at December 31, 1996 and 1995 were as follows (in
millions):
<TABLE>
<CAPTION>
1996 1995
-------------------------- --------------------------
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 $ 207 $ 3,567 $ 178 $ 3,616
Discontinued operation loss accruals 160 -- 167 --
Environmental reserves 224 -- 244 --
Postretirement benefit accruals 200 -- 207 --
State income taxes 143 -- 140 --
Tax credit carryforwards 200 -- 292 --
All other 598 341 795 503
----------- ----------- ----------- -----------
Subtotal 1,732 3,908 2,023 4,119
Valuation allowance (85) -- (189) --
----------- ----------- ----------- -----------
Total deferred taxes $ 1,647 $ 3,908 $ 1,834 $ 4,119
=========================================================== =========== =========== =========== ===========
</TABLE>
Included in total deferred tax assets was a current portion aggregating
$300 million and $335 million as of December 31, 1996 and 1995, respectively,
that was reported in Prepaid expenses and other. The valuation allowance
decreased primarily due to the realization of benefits from operating loss and
credit carryforwards in the United States and Peru.
A deferred tax liability of approximately $120 million at December 31, 1996
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 $6 million in 1996 and $9 million in 1995,
and an income tax benefit of $6 million in 1994.
The foreign currency translation adjustment credited directly to retained
earnings was net of an income tax benefit of $2 million in 1996, and an income
tax charge of $10 million in 1995.
The extraordinary loss that resulted from the early extinguishment of
high-coupon debt was reduced by an income tax benefit of $16 million in 1996.
At December 31, 1996, Occidental had, for U.S. federal income tax return
purposes, an alternative minimum tax credit carryforward of $200 million
available to reduce future income taxes. 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, ESOP 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, 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
Issued -- 10,145
Options exercised and other, net (2) 372
- -------------------------------------------- --------------- ---------
BALANCE, DECEMBER 31, 1996 26,493 329,228
============================================ =============== =========
</TABLE>
48
<PAGE>
NONREDEEMABLE PREFERRED STOCK 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. 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. As of December 31, 1996, 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 28,068,277, based on the Conversion Ratio then in effect of 2.465.
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 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.
All stock purchase rights (rights) issued pursuant to a 1986 stockholders'
rights plan expired in 1996. The rights would have been exercisable only if a
person or group either acquired a beneficial ownership of 20 percent or more of
Occidental's common stock or commenced a tender or exchange offer that would
have resulted in ownership of 30 percent or more.
ESOP PREFERRED STOCK In November 1996, Occidental established the MidCon
Corp. Employee Stock Ownership Plan (MidCon ESOP) for the benefit of employees
of MidCon. Pursuant to the MidCon ESOP, Occidental has issued 1,400,000 shares
of its cumulative MidCon-indexed convertible preferred stock (CMIC Preferred
Stock) to the MidCon Corp. ESOP Trust. The CMIC Preferred Stock is convertible
into Occidental common stock based on the value of MidCon, which remains a
wholly-owned subsidiary of Occidental. The MidCon ESOP paid for the CMIC
Preferred Stock with a $1.4 billion 30-year promissory note (ESOP Note), with
interest at 7.9 percent per annum, guaranteed by MidCon. Generally, the shares
held by the MidCon ESOP are released and allocated to participant accounts based
on the proportion of the payment on the note for the respective period compared
to the total remaining payments due on the note. Dividends on the CMIC Preferred
Stock are payable at an annual rate of $21 per share, when and as declared by
Occidental's Board of Directors. It is anticipated that MidCon will make
discretionary annual contributions to the MidCon ESOP which, together with the
annual dividends, will be used to repay the ESOP Note.
The MidCon ESOP is subject to the provisions of AICPA Statement of Position
No. 93-6 (SOP 93-6) which requires that compensation expense be measured based
on the fair value of the shares committed to be released. In addition, SOP 93-6
requires that dividends paid on allocated ESOP shares are reported as a charge
to retained earnings, and only shares that are allocated and committed to be
released are considered outstanding in the calculation of earnings per share.
Dividends of $3.3 million on unearned shares and cash contributions of $9.2
million from MidCon were received by the MidCon ESOP and were used for debt
service on the ESOP Note in 1996. Compensation expense related to the MidCon
ESOP recognized during 1996 totaled $217,000. The MidCon ESOP has 6,151
allocated shares outstanding at December 31, 1996.
49
<PAGE>
STOCK INCENTIVE PLANS
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 1996, options for 957,715 shares
became exercisable, and options for 3,589,365 shares were exercisable at
December 31, 1996 at a weighted-average exercise price of $21.631. These options
vest over three years with a maximum term of ten years and one month. At
December 31, 1996, options with stock appreciation rights (SAR) for 992,667
shares were outstanding, all of which options for shares were exercisable.
The following is a summary of stock option transactions during 1996, 1995
and 1994 (shares in thousands, except per-share amounts):
<TABLE>
<CAPTION>
1996 1995 1994
--------------------------- --------------------------- ---------------------------
Weighted Weighted Weighted
Average Average Average
Shares Exercise Price Shares Exercise Price Shares Exercise Price
====================== ========= ============== ========= ============== ========= ==============
<S> <C> <C> <C> <C> <C> <C>
BEGINNING BALANCE 5,481 $ 22.263 5,098 $ 22.121 4,556 $ 23.272
Granted or issued 1,335 $ 24.375 1,127 $ 23.125 905 $ 17.827
Exercised (483) $ 21.276 (431) $ 19.230 (52) $ 18.905
Canceled or expired (381) $ 24.958 (313) $ 27.222 (311) $ 27.021
--------- --------- ---------
ENDING BALANCE 5,952 $ 22.637 5,481 $ 22.263 5,098 $ 22.121
========= ========= =========
OPTIONS EXERCISABLE
AT YEAR END 3,589 3,517 3,374
====================== ========= ========= =========
</TABLE>
For options outstanding at December 31, 1996 the exercise prices were
between $17.75 and $29.625 and the weighted average remaining contractual life
was 7 years.
RESTRICTED STOCK AWARDS Occidental has a stock incentive plan whereby a
limited number of executives may be awarded Occidental restricted common stock
at the par value of $.20 per share, with such shares vesting after four years
(five years for awards issued prior to December 1995) or earlier under certain
conditions. The related expense is amortized over the vesting period. In 1996,
171,649 shares were awarded at a weighted-average grant-date value of $21.431
per share; 21,339 shares were awarded in 1995, at a weighted-average grant-date
value of $20.875 per share.
PERFORMANCE STOCK AWARDS Certain performance stock awards were made to senior
executive officers in January 1996 pursuant to the 1995 Incentive Stock Plan.
The number of shares of common stock to be received, under these awards, by such
officers at the end of the performance period will depend on the attainment of
performance objectives based on a peer company comparison of total stockholder
return for such period. Dependent on the Company's ranking among its peers, the
grantees will receive shares of common stock in an amount ranging from 0 percent
to 175 percent of the Target Share Award (as such amount is defined in the
grant). The shares vest over four years with a maximum term of four years. In
1996, 101,630 shares were awarded at a weighted-average grant-date value of
$21.375 per share.
Under the 1995 Stock Incentive Plan a total of approximately 10,000,000
shares may be awarded. At December 31, 1996, 8,370,382 shares were available for
the granting of all future awards under these plans, of which a maximum of
4,705,382 shares were available to issue restricted and performance stock
awards.
Occidental accounts for these plans under Accounting Principles Board
Opinion No. 25. Had the compensation expense for these plans been determined in
accordance with Statement of Financial Accounting Standards No. 123--"Accounting
for Stock Based Compensation" (SFAS No. 123), Occidental's pro forma net income
would have been $666 million in 1996 and $510 million in 1995. Primary and fully
diluted earnings per share would not have changed. The SFAS No. 123 method of
accounting has not been applied to options granted prior to January 1, 1995,
therefore the resulting pro forma compensation expense may not be representative
of that to be expected in future years. The fair value of each option grant, for
pro forma calculation purposes, is estimated using the Black-Scholes option-
pricing model with the following weighted-average assumptions used for grants in
1996 and 1995, respectively: dividend yield of 4.20 percent and 4.32 percent;
expected volatility of 23.92 percent and 24.19 percent; risk-free rate of return
6.79 percent and 6.93 percent; and expected lives of 5 and 7 years.
1996 RESTRICTED STOCK PLAN FOR NON-EMPLOYEE DIRECTORS Under the 1996
Restricted Stock Plan for Non-Employee Directors, each non-employee Director of
the Company will receive awards of restricted common stock each year as
additional compensation for his or her services as a member of the Board of
Directors. A maximum of 50,000 shares of common stock may be awarded under the
Directors Plan and 3,250 shares of common stock were awarded during 1996. At
December 31, 1996, 46,750 shares of common stock were available for the granting
of future awards.
50
<PAGE>
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 $66 million, $71 million and $70 million
under the provisions of these plans for 1996, 1995 and 1994, 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 1996, 1995 and 1994 were as follows (in millions):
<TABLE>
<CAPTION>
For the years ended December 31, 1996 1995 1994
================================================ ========= ========= =========
<S> <C> <C> <C>
Service cost--benefits earned during the period $ 9 $ 9 $ 8
Interest cost on projected benefit obligation 23 23 21
Actual return on plan assets (31) (43) 1
Net amortization and deferral 21 32 (10)
Curtailments and settlements 1 12 --
--------- --------- ---------
Net pension cost $ 23 $ 33 $ 20
================================================ ========= ========= =========
</TABLE>
In 1996, 1995 and 1994, Occidental recorded adjustments to retained
earnings of credits of $8 million and $16 million and a charge of $10 million,
respectively, to reflect the net-of-tax difference between the additional
liability required under pension accounting provisions and the corresponding
intangible asset.
The following table sets forth the defined benefit plans' funded status and
amounts recognized in Occidental's consolidated balance sheets at December 31,
1996 and 1995 (in millions):
<TABLE>
<CAPTION>
1996 1995
------------------------------ ------------------------------
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 $ 75 $ 208 $ 35 $ 230
Nonvested benefits 4 11 4 11
------------ ------------ ------------ ------------
Accumulated benefit obligations 79 219 39 241
Effect of projected future salary increases(a) 12 9 15 6
------------ ------------ ------------ ------------
Total projected benefit obligations 91 228 54 247
Plan assets at fair value 95 169 50 179
------------ ------------ ------------ ------------
PROJECTED BENEFIT OBLIGATION IN EXCESS OF(LESS THAN)
PLAN ASSETS $ (4) $ 59 $ 4 $ 68
===================================================== ============ ============ ============ ============
Projected benefit obligation in excess of(less than)
plan assets $ (4) $ 59 $ 4 $ 68
Unrecognized net asset(obligation) 1 (8) (4) (4)
Unrecognized prior service(cost) benefit -- (9) -- (7)
Unrecognized net gain(loss) (4) (25) 2 (46)
Additional minimum liability(b) -- 39 -- 55
------------ ------------ ------------ ------------
PENSION LIABILITY(ASSET) $ (7) $ 56 $ 2 $ 66
===================================================== ============ ============ ============ ============
(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 1996 and 1995. 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 1996 and 1995. The expected long-term rate of return on assets was 8
percent in 1996 and 1995.
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 $103 million in 1996, $93
million in 1995 and $124 million in 1994. The 1996, 1995 and 1994 costs included
$43 million, $23 million and $54 million, respectively, for postretirement
costs, as discussed below.
51
<PAGE>
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, 1996 and 1995 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 3 percent and 4 percent in 1996 and 1995, respectively
(except for union employees). For union employees, the health care cost trend
rates were projected at annual rates ranging ratably from 9 percent in 1996 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 $14 million in 1996; 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, 1996 and 1995 was 7.5 percent. Occidental's
funding policy generally is to pay claims as they come due. However in 1996 and
1995, MidCon prefunded certain postretirement benefits associated with its
regulated operations. Related 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, 1996 and 1995 (in millions):
<TABLE>
<CAPTION>
Balance at December 31, 1996 1995
=================================================== ========= =========
<S> <C> <C>
Accumulated postretirement benefit obligation
Retirees $ 319 $ 379
Fully eligible active plan participants 63 59
Other active plan participants 85 101
--------- ---------
Total accumulated postretirement benefit obligation 467 539
Plan assets at fair value 34 26
--------- ---------
Unfunded status 433 513
Unrecognized prior service cost (5) (5)
Unrecognized net gain(loss) 78 (1)
--------- ---------
Accrued postretirement benefit cost $ 506 $ 507
=================================================== ========= =========
</TABLE>
Net periodic postretirement benefit cost for 1996, 1995 and 1994 included
the following components (in millions):
<TABLE>
<CAPTION>
For the years ended December 31, 1996 1995 1994
=============================================================== ========= ========= =========
<S> <C> <C> <C>
Service cost--benefits attributed to service during the period $ 7 $ 8 $ 9
Interest cost on accumulated postretirement benefit obligation 37 41 42
Actual return on plan assets (1) (1) (1)
Net amortization and deferral -- 1 4
Curtailments and settlements -- (26) --
--------- --------- ---------
Net periodic postretirement benefit cost $ 43 $ 23 $ 54
=============================================================== ========= ========= =========
</TABLE>
NOTE 15 INVESTMENTS
- --------------------------------------------------------------------------------
Investments in companies, other than oil and gas exploration and production
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, 1996, 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 and joint
ventures. Equity investments paid dividends of $62 million, $51 million and $45
million to Occidental in 1996, 1995 and 1994, respectively. Cumulative
undistributed earnings since acquisition, in the amount of $205 million, of 50-
percent-or-less-owned companies have been accounted for by Occidental under the
equity method. At December 31, 1996 and 1995, Occidental's investment in equity
investees exceeded the historical underlying equity in net assets by
approximately $258 million and $203 million, respectively, 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 $644 million at December 31, 1996, compared with
an aggregate book value of $251 million.
Occidental and its subsidiaries' purchases from certain equity method
pipeline ventures and chemical partnerships were $191 million, $202 million and
$202 million in 1996, 1995 and 1994, respectively. Occidental and its
subsidiaries' sales to certain equity method pipeline ventures and chemical
partnerships were $246 million, $265 million and $225 million, in 1996, 1995 and
1994, respectively.
52
<PAGE>
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, 1996 1995 1994
================================ ========= ========= =========
<S> <C> <C> <C>
Revenues $ 884 $ 806 $ 684
Costs and expenses 801 694 611
--------- --------- ---------
Net income $ 83 $ 112 $ 73
================================ ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
Balance at December 31, 1996 1995
================================ ========= =========
<S> <C> <C>
Current assets $ 287 $ 246
Noncurrent assets $ 1,206 $ 979
Current liabilities $ 184 $ 168
Noncurrent liabilities $ 707 $ 524
Stockholders' equity $ 602 $ 533
- -------------------------------- --------- ---------
</TABLE>
Investments also include certain cost method investments, in which
Occidental owns less than 20 percent of the voting stock. At December 31, 1996,
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, 1996 1995 1994
================================ ========= ========= =========
<S> <C> <C> <C>
Revenues $ 982 $ 709 $ 748
Costs and expenses 882 778 749
--------- --------- ---------
Net income(loss) $ 100 $ (69) $ (1)
================================ ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
Balance at December 31, 1996 1995
================================ ========= =========
<S> <C> <C>
Current assets $ 183 $ 206
Intercompany receivable $ 428 $ 323
Noncurrent assets $ 2,028 $ 2,057
Current liabilities $ 277 $ 244
Interest bearing note to parent $ 105 $ 121
Noncurrent liabilities $ 1,221 $ 1,283
Stockholders' equity $ 1,036 $ 938
================================ ========= =========
</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,
polymers and plastics and specialty chemicals.
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, 1996
TOTAL REVENUES $ 3,695 $ 2,575 $ 4,484 $ 144 $ 10,898
============ ============ ============ ============ ============
Pretax operating profit(loss)(a,b) $ 739 $ 302 $ 683 $ (572) $ 1,152
Income taxes (259) (6) (15) (174) (454)
Extraordinary gain(loss) -- -- -- (30) (30)
------------ ------------ ------------ ------------ ------------
NET INCOME(LOSS) $ 480(c) $ 296 $ 668(d) $ (776)(e)$ 668
============ ============ ============ ============ ============
Property, plant and equipment additions, net(f) $ 651 $ 147 $ 262 $ 14 $ 1,074
============ ============ ============ ============ ============
Depreciation, depletion and amortization $ 493 $ 184 $ 236 $ 8 $ 921
============ ============ ============ ============ ============
TOTAL ASSETS $ 4,402 $ 7,305 $ 5,429 $ 498 $ 17,634
=================================================== ============ ============ ============ ============ ============
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(g) $ 213(h) $ 1,080(i) $ (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(j) $ 276(k) $ 350(l) $ (689)(m)$ (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
=================================================== ============ ============ ============ ============ ============
(a) Research and development costs were $16 million in 1996, $21 million in 1995 and $22 million in 1994.
(b) Divisional earnings include charges and credits in lieu of U.S. federal income taxes. In 1996, the amounts allocated to the
divisions were credits of $15 million, $48 million and $26 million at oil and gas, natural gas transmission and chemical,
respectively. 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.
(c) Includes a charge of $105 million for the write-down of investment in the Republic of Komi.
(d) Includes a pretax gain of $170 million related to favorable litigation settlements and a charge of $75 million for additional
environmental reserves, and the related state tax effects.
(e) Includes a $100 million reduction in the deferred tax asset valuation allowance.
(f) Excludes acquisitions of other businesses of $58 million in chemical in 1996 and $11 million and $257 million in oil and gas
in 1995 and 1994, respectively. Includes capitalized interest of $9 million in 1996, $10 million in 1995 and $5 million in
1994.
(g) Includes charges of $109 million for settlement of litigation and $95 million for reorganization costs.
(h) Includes a charge of $37 million for reorganization costs.
(i) Includes a pretax gain of $40 million from the sale of a PVC facility at Addis, Louisiana.
(j) 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 the remaining interest 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
the U.K. North Sea interests.
(k) 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.
(l) 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.
(m) 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."
</TABLE>
54
<PAGE>
<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, 1996
TOTAL REVENUES $ 8,954(c) $ 769 $ 1,031 $ 144 $ 10,898
========= ========== ========== ========= =========
Geographic earnings(loss) before taxes $ 1,224 $ 260 $ 240 $ (572) $ 1,152
Income taxes (21) (90) (169) (174) (454)
Extraordinary gain(loss) -- -- -- (30) (30)
--------- ---------- ---------- --------- ---------
NET INCOME(LOSS) $ 1,203 $ 170 $ 71 $ (776) $ 668
========= ========== ========== ========= =========
TOTAL ASSETS $ 14,870 $ 897 $ 1,369 $ 498 $ 17,634
========================================== ========= ========== ========== ========= =========
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
========================================== ========= ========== ========== ========= =========
(a) Included in the consolidated balance sheets were liabilities of approximately $254 million, $285 million
and $249 million at December 31, 1996, 1995 and 1994, 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 $673 million, $1.039 billion and
$756 million in 1996, 1995 and 1994, respectively.
</TABLE>
55
<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, 1996
Proved properties $ 4,695 $ 1,891 $ 1,274 $ 7,860
Unproved properties 64 33 97 194
--------- ---------- ---------- ---------
TOTAL PROPERTY COSTS(a) 4,759 1,924 1,371 8,054
Support facilities 11 125 54 190
--------- ---------- ---------- ---------
TOTAL CAPITALIZED COSTS 4,770 2,049 1,425 8,244
Accumulated depreciation, depletion and amortization
and valuation provisions (2,760) (1,554) (522) (4,836)
--------- ---------- ---------- ---------
NET CAPITALIZED COSTS $ 2,010 $ 495 $ 903 $ 3,408
========= ========== ========== =========
Share of equity investees' net capitalized costs(b) $ 76 $ 80 $ 152 $ 308
======================================================== ========= ========== ========== =========
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
======================================================== ========= ========== ========== =========
(a) Includes costs related to 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, 1996
Acquisition of properties
Proved $ 8 $ -- $ 28 $ 36
Unproved 9 -- -- 9
Exploration costs 30 55 80 165
Development costs 212 118 244 574
--------- ---------- ---------- ---------
$ 259 $ 173 $ 352 $ 784
========= ========== ========== =========
Share of equity investees' costs $ 35 $ 36 $ 54 $ 125
================================ ========= ========== ========== =========
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
================================ ========= ========== ========== =========
(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.
</TABLE>
57
<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, 1996
Revenues $ 906 $ 571 $ 912(b) $ 2,389
Production costs 241 157 184 582
Exploration expenses 25 28 67 120
Other operating expenses 49 51 124 224
Other expense--write-down of investment in Komi -- -- 105 105
Depreciation, depletion and amortization and valuation provisions 234(c) 83 164 481
--------- ---------- ---------- ---------
PRETAX INCOME(LOSS) 357 252 268 877
Income tax expense(benefit)(d) 81 89 169(b) 339
--------- ---------- ---------- ---------
RESULTS OF OPERATIONS $ 276 $ 163 $ 99 $ 538
========= ========== ========== =========
Share of equity investees' results of operations $ 8 $ 3 $ 25 $ 36
======================================================================= ========= ========== ========== =========
FOR THE YEAR ENDED DECEMBER 31, 1995
Revenues $ 702 $ 467 $ 679(b) $ 1,848
Production costs 238 157 141 536
Exploration expenses 22 30 54 106
Other operating expenses 51 67 118 236
Depreciation, depletion and amortization and valuation provisions 249(c) 69 128 446
--------- ---------- ---------- ---------
PRETAX INCOME(LOSS) 142 144 238 524
Income tax expense(benefit)(d) 16 52 113(b) 181
--------- ---------- ---------- ---------
RESULTS OF OPERATIONS(e) $ 126 $ 92 $ 125 $ 343
========= ========== ========== =========
Share of equity investees' results of operations $ 6 $ 1 $ 25 $ 32
======================================================================= ========= ========== ========== =========
FOR THE YEAR ENDED DECEMBER 31, 1994
Revenues $ 724 $ 422 $ 326(b) $ 1,472
Production costs 249 165 86 500
Exploration expenses 20 17 90 127
Other operating expenses 60 78 83 221
Depreciation, depletion and amortization and valuation provisions 220(c) 61 102 383
--------- ---------- ---------- ---------
PRETAX INCOME(LOSS) 175 101 (35) 241
Income tax expense(benefit)(d) -- 62 39(b) 101
--------- ---------- ---------- ---------
RESULTS OF OPERATIONS(e) $ 175 $ 39 $ (74) $ 140
========= ========== ========== =========
Share of equity investees' results of operations $ 4 $ 7 $ 17 $ 28
======================================================================= ========= ========== ========== =========
(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 $15 million, $16 million and $18 million in 1996, 1995 and 1994, 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.
(e) The 1995 and 1994 amounts have been restated as a result of cost reclassifications to be on a consistent basis with 1996.
The new presentation reflects the current cost structure of the oil and gas producing activities of the Company.
</TABLE>
58
<PAGE>
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, 1996 and 1995, and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the three years in
the period ended December 31, 1996 (included on pages 33 through 59). 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, 1996 and 1995, and
the results of their operations and their cash flows for each of the three years
in the period ended December 31, 1996, in conformity with generally accepted
accounting principles.
Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Los Angeles, California
January 31, 1997
60
<PAGE>
<TABLE>
<CAPTION>
1996 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 $ 754 $ 878 $ 1,148 $ 900 $ 3,680
Natural gas transmission 702 521 554 797 2,574
Chemical 1,068 1,058 1,084 1,097 4,307
Other (2) -- -- (2) (4)
------------ ------------ ------------ ------------ ------------
Net sales $ 2,522 $ 2,457 $ 2,786 $ 2,792 $ 10,557
============ ============ ============ ============ ============
Gross profit $ 648 $ 623 $ 624 $ 728 $ 2,623
============ ============ ============ ============ ============
Divisional earnings
Oil and gas $ 161 $ 144 $ 20 $ 155 $ 480
Natural gas transmission 121 51 49 75 296
Chemical 118 212 228 110 668
------------ ------------ ------------ ------------ ------------
400 407 297 340 1,444
Unallocated corporate items
Interest expense, net (130) (112) (107) (102) (451)
Income taxes (99) (112) 7 (59) (263)
Other (7) (2) (3) (20) (32)
------------ ------------ ------------ ------------ ------------
Income before extraordinary items 164 181 194 159 698
Extraordinary gain(loss), net (30) -- -- -- (30)
------------ ------------ ------------ ------------ ------------
Net income(loss) $ 134 $ 181(a) $ 194(b) $ 159 $ 668
============ ============ ============ ============ ============
Primary earnings per common share
Income before extraordinary items $ .44 $ .49 $ .53 $ .41 $ 1.86
Extraordinary gain(loss), net (.09) -- -- -- (.09)
------------ ------------ ------------ ------------ ------------
Primary earnings(loss) per common share $ .35 $ .49 $ .53 $ .41 $ 1.77
============ ============ ============ ============ ============
Fully diluted earnings per common share
Income before extraordinary items $ .43 $ .47 $ .50 $ .40 $ 1.81
Extraordinary gain(loss), net (.09) -- -- -- (.08)
------------ ------------ ------------ ------------ ------------
Fully diluted earnings(loss) per
common share $ .34 $ .47 $ .50 $ .40 $ 1.73
============ ============ ============ ============ ============
Dividends per common share $ .25 $ .25 $ .25 $ .25 $ 1.00
============ ============ ============ ============ ============
Market price per common share
High $ 27 $ 27 1/4 $ 25 7/8 $ 25 5/8
Low $ 20 1/8 $ 24 1/4 $ 21 1/2 $ 20 1/2
====================================== ============ ============ ============ ============
(a) Includes a $130 million benefit related to a favorable litigation settlement, and a charge of $75 million for
additional environmental reserves relating to various existing sites, and the related state tax effects in the
chemical division.
(b) Includes a charge of $105 million for the write-down of an investment in an oil and gas project in the Republic of
Komi, a $40 million benefit related to a favorable litigation settlement in the chemical division and a $100 million
benefit for a reduction in the deferred tax asset valuation allowance.
</TABLE>
61
<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
------------ ------------ ------------ ------------ ------------
Income before extraordinary items 178 187 139 7 511
Extraordinary gain(loss), net -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Net income(loss) $ 178 $ 187(a) $ 139 $ 7(b) $ 511
============ ============ ============ ============ ============
Primary earnings per common share
Income before extraordinary items $ .49 $ .51 $ .36 $ (.05) $ 1.31
Extraordinary gain(loss), net -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Primary earnings(loss) per common share $ .49 $ .51 $ .36 $ (.05) $ 1.31
============ ============ ============ ============ ============
Fully diluted earnings per common share
Income before extraordinary items $ .47 $ .49 $ .36 $ (.05) $ 1.30
Extraordinary gain(loss), net -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Fully diluted earnings(loss) per
common share $ .47 $ .49 $ .36 $ (.05) $ 1.30
============ ============ ============ ============ ============
Dividends 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.
</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 and natural
gas and changes in such quantities. Crude oil reserves (in millions of barrels)
include condensate. 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, 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
Revisions of previous estimates 11 26 (19) -- 77 200 69 226
Improved recovery 1 -- -- -- 18 -- 19 --
Extensions and discoveries 16 105 3 -- 11 40 30 145
Purchases of proved reserves 1 18 -- -- -- 3 1 21
Sales of proved reserves (1) (6) -- -- (46) -- (47) (6)
Production (21) (220) (47) -- (37) (42) (105) (262)
- --------------------------------------------------- ------ ------ ------ ------ ------ ------ ------ ------
BALANCE AT DECEMBER 31, 1996 203 1,744 354 -- 340 840 897 2,584
=================================================== ====== ====== ====== ====== ====== ====== ====== ======
PROPORTIONAL INTEREST IN EQUITY INVESTEES' RESERVES
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
====== ====== ====== ====== ====== ====== ====== ======
DECEMBER 31, 1996 5 47 14 77 20 30 39 154
=================================================== ====== ====== ====== ====== ====== ====== ====== ======
See footnotes on following page.
</TABLE>
63
<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, 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
====== ====== ====== ====== ====== ====== ====== ======
DECEMBER 31, 1996 153 1,677 260 -- 213 205 626 1,882
=================================================== ====== ====== ====== ====== ====== ====== ====== ======
PROPORTIONAL INTEREST IN EQUITY INVESTEES' RESERVES
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
====== ====== ====== ====== ====== ====== ====== ======
DECEMBER 31, 1996 4 41 13 69 15 25 32 135
=================================================== ====== ====== ====== ====== ====== ====== ====== ======
(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, 1996, 1995 and 1994. 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, 1996
Future cash flows $ 8,887 $ 4,642 $ 8,399 $ 21,928
Future costs
Production costs and other operating expenses (3,296) (1,853) (3,139) (8,288)
Development costs(b) (514) (289) (1,184) (1,987)
---------- ---------- ---------- ----------
FUTURE NET CASH FLOWS BEFORE INCOME TAXES 5,077 2,500 4,076 11,653
Future income tax expense (1,646) (875) (457) (2,978)
---------- ---------- ---------- ----------
FUTURE NET CASH FLOWS 3,431 1,625 3,619 8,675
Ten percent discount factor (1,462) (555) (1,418) (3,435)
---------- ---------- ---------- ----------
STANDARDIZED MEASURE 1,969 1,070 2,201 5,240
Share of equity investees' standardized measure 117 104 234 455
---------- ---------- ---------- ----------
$ 2,086 $ 1,174 $ 2,435 $ 5,695
=================================================== ========== ========== ========== ==========
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
=================================================== ========== ========== ========== ==========
(a) Includes amounts applicable to operating interests in which Occidental receives an agreed-upon fee per
barrel of crude oil produced.
(b) Includes dismantlement and abandonment costs.
</TABLE>
65
<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, 1996 1995 1994
================================================================================= ========= ========= =========
<S> <C> <C> <C>
BEGINNING OF YEAR $ 3,590 $ 3,302 $ 2,216
--------- --------- ---------
Sales and transfers of oil and gas produced, net of production costs and other
operating expenses (1,640) (1,169) (764)
Net change in prices received per barrel, net of production costs and other
operating expenses 2,604 672 477
Extensions, discoveries and improved recovery, net of future production and
development costs 576 170 215
Change in estimated future development costs (620) (110) (163)
Revisions of quantity estimates 863 394 246
Development costs incurred during the period 573 401 328
Accretion of discount 305 369 260
Net change in income taxes (655) (195) (108)
Purchases and sales of reserves in place, net (403) (247) 599
Changes in production rates and other 47 3 (4)
--------- --------- ---------
NET CHANGE 1,650 288 1,086
--------- --------- ---------
END OF YEAR $ 5,240 $ 3,590 $ 3,302
================================================================================= ========= ========= =========
</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, 1996, 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>
1996
Oil
Average sales price ($/bbl.) $ 18.98 $ 12.65 $ 17.66
Gas
Average sales price ($/Mcf) $ 2.11 $ -- $ 2.23
Average oil and gas production cost ($/bbl.)(c) $ 4.04 $ 3.34 $ 4.09
- -------------------------------------------------- ---------- ---------- ----------
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) $ 3.96 $ 3.34 $ 3.65
- -------------------------------------------------- ---------- ---------- ----------
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) $ 4.16 $ 3.75 $ 3.56
- -------------------------------------------------- ---------- ---------- ----------
(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) Natural gas volumes have been converted to equivalent barrels based on energy content of six Mcf
of gas to one barrel of oil.
</TABLE>
66
<PAGE>
The following table sets forth, for each of the three years in the period
ended December 31, 1996, 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>
1996
Oil-- Exploratory -- 2.8 3.6 6.4
Development 61.6 23.2 18.4 103.2
Gas-- Exploratory 2.6 -- 2.0 4.6
Development 103.2 -- 1.7 104.9
Dry-- Exploratory 5.5 2.5 6.2 14.2
Development 15.6 0.5 2.1 18.2
- ------------------------------------ --------- ---------- ---------- ---------
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
- ------------------------------------ --------- ---------- ---------- ---------
</TABLE>
The following table sets forth, as of December 31, 1996, 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, 1996 States Hemisphere and Other Worldwide
==================================== =========== ========== ========== ============
<S> <C> <C> <C> <C>
Oil-- Gross(a) 9,592 (268) 382 (-) 778 (21) 10,752 (289)
Net(b) 5,280 (61) 265 (-) 402 (21) 5,947 (82)
Gas-- Gross(a) 3,970 (184) -- (-) 113 (-) 4,083 (184)
Net(b) 2,551 (43) -- (-) 36 (-) 2,587 (43)
- ------------------------------------ ----------- ---------- ---------- ------------
(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, 1996, 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, 1996 States Hemisphere and Other Worldwide
========================================== ========= ========== ========== =========
<S> <C> <C> <C> <C>
Exploratory and development wells-- Gross 59 3 18 80
Net 43 3 7 53
- ------------------------------------------ --------- ---------- ---------- ---------
</TABLE>
At December 31, 1996, Occidental was participating in 102 pressure
maintenance and waterflood projects in the United States, 1 in Latin America, 27
in the Middle East and 6 in Russia.
67
<PAGE>
The following table sets forth, as of December 31, 1996, 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) 2,288 135 11,379 13,802
Net(c) 1,535 126 5,457 7,118
- ------------------------------------ --------- ---------- ---------- ---------
Undeveloped(d)-- Gross(b) 1,521 9,162 35,587 46,270
Net(c) 806 7,084 21,110 29,000
- ------------------------------------ --------- ---------- ---------- ---------
(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 table sets forth, for each of the three years in the period
ended December 31, 1996, 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
----------------------------------- -----------------------------------
1996 1995 1994 1996 1995 1994
================== ========= ========= ========= ========= ========= =========
<S> <C> <C> <C> <C> <C> <C>
California 2 5 5 -- -- --
Gulf of Mexico 10 11 11 154 157 180
Kansas 6 6 7 186 193 194
Louisiana 6 7 3 43 39 23
Mississippi 1 1 -- 3 4 5
New Mexico 3 3 3 24 22 20
Oklahoma 4 5 5 52 57 60
Texas 21 21 22 126 128 131
Wyoming -- -- -- 9 8 5
Other States 4 5 3 4 4 2
--------- --------- --------- --------- --------- ---------
TOTAL 57 64 59 601 612 620
================== ========= ========= ========= ========= ========= =========
</TABLE>
The following table sets forth, for each of the three years in the period
ended December 31, 1996, 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
----------------------------------- -----------------------------------
1996 1995 1994 1996 1995 1994
================== ========= ========= ========= ========= ========= =========
<S> <C> <C> <C> <C> <C> <C>
Argentina -- -- 4 -- -- 1
Colombia 29 30 28 -- -- --
Congo 4 9 2 -- -- --
Ecuador 18 20 18 -- -- --
Netherlands -- -- -- 72 78 --
Oman 13 12 12 -- -- --
Pakistan 6 6 7 43 49 52
Peru 54 58 61 -- -- --
Qatar 38 20 3 -- -- --
Russia 25 23 21 -- -- --
Venezuela 27 21 8 -- -- --
Yemen 15 15 14 -- -- --
--------- --------- --------- --------- --------- ---------
TOTAL 229 214 178 115 127 53
================== ========= ========= ========= ========= ========= =========
</TABLE>
68
<PAGE>
EXHIBIT 21
LIST OF SUBSIDIARIES
The following is a list of the Registrant's subsidiaries at December 31,
1996, other than certain subsidiaries that did not in the aggregate constitute
a significant subsidiary.
<TABLE>
<CAPTION>
JURISDICTION OF
NAME FORMATION
- ---- ---------------
<S> <C>
B & D Cogen Funding Corp. Delaware
Compania Occidental de Hidrocarburos, Inc. California
Glenn Springs Holdings, Inc. Delaware
Laurel Industries, Inc. Ohio
MC Exploration Corporation Delaware
MC Leasing, Inc. Delaware
MC Panhandle, Inc. Delaware
MidCon Corp. Delaware
MidCon Exploration Company Delaware
MidCon Gas Services Corp. Delaware
MidCon Texas Gas Limited, Inc. Delaware
MidCon Texas Pipeline, L.P. Delaware
MidCon Texas Pipeline Operator, Inc. Delaware
Natural Gas Odorizing, Inc. Oklahoma
Natural Gas Pipeline Company of America Delaware
NGPL Offshore Company Delaware
NGPL-Canyon Compression Co. Delaware
NGPL-Trailblazer Inc. Delaware
Occidental C.O.B. Partners Delaware
Occidental Chemical Chile S.A.I. Chile
Occidental Chemical Corporation New York
Occidental Chemical Europe, S.A. Belgium
Occidental Chemical Holding Corporation California
Occidental Chemical International, Inc. California
Occidental Crude Sales, Inc. Delaware
Occidental de Colombia, Inc. Delaware
Occidental Exploration and Production Company California
Occidental International Exploration and Production Company California
Occidental Netherlands, Inc. Delaware
Occidental of Oman, Inc. Liberia
Occidental of Russia Ltd. Bermuda
Occidental Oil and Gas Corporation California
Occidental Peninsula, Inc. Delaware
Occidental Peruana, Inc. California
Occidental Petroleum (Malaysia) Ltd. Bermuda
Occidental Petroleum (Pakistan), Inc. Delaware
Occidental Petroleum (South America), Inc. Delaware
Occidental Petroleum Investment Co. California
Occidental Petroleum of Qatar Ltd. Bermuda
Occidental Philippines, Inc. California
Occidental Quimica do Brasil Ltda. Brazil
Occidental Receivables, Inc. California
Occidental Tower Corporation Delaware
Oxy CH Corporation California
Oxy Chemical Corporation California
</TABLE>
(Continued on next page)
<PAGE>
<TABLE>
<CAPTION>
JURISDICTION OF
NAME FORMATION
- ---- ---------------
<S> <C>
Oxy Petrochemicals Inc. Delaware
OXY USA Inc. Delaware
Oxy VCM Corporation Delaware
Oxy Westwood Corporation California
Oxychem (Canada), Inc. Canada
Palo Duro Pipeline Company, Inc. Delaware
PDG Chemical Inc. Delaware
Placid Oil Company Delaware
Repsol Occidental Corporation Delaware
Vulcan Material Plastico S.A. Brazil
</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 January 31, 1997 appearing in Occidental
Petroleum Corporation's Annual Report for the year ended December 31, 1996,
and (b) our report, dated January 31, 1997, appearing in Occidental Petroleum
Corporation's Annual Report on Form 10-K for the year ended December 31, 1996,
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, 333-11725, 333-11897, 333-21019 and
333-17879.
Los Angeles, California ARTHUR ANDERSEN LLP
March 19, 1997
<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, 1996, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 279
<SECURITIES> 0
<RECEIVABLES> 659
<ALLOWANCES> 24
<INVENTORY> 633
<CURRENT-ASSETS> 2,190
<PP&E> 23,177
<DEPRECIATION> 9,369
<TOTAL-ASSETS> 17,634
<CURRENT-LIABILITIES> 2,470
<BONDS> 4,748
0
2,725
<COMMON> 66
<OTHER-SE> 2,349
<TOTAL-LIABILITY-AND-EQUITY> 17,634
<SALES> 10,557
<TOTAL-REVENUES> 10,898
<CGS> 7,037
<TOTAL-COSTS> 7,037
<OTHER-EXPENSES> 220
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 484
<INCOME-PRETAX> 1,069
<INCOME-TAX> 454
<INCOME-CONTINUING> 698
<DISCONTINUED> 0
<EXTRAORDINARY> (30)
<CHANGES> 0
<NET-INCOME> 668
<EPS-PRIMARY> 1.77
<EPS-DILUTED> 1.73
</TABLE>
