<PAGE> 1
PROSPECTUS SUPPLEMENT As filed pursuant to Rule 424(b)(5)
(TO PROSPECTUS DATED MARCH 26, 1998) under the Securities Act of 1933
Registration No. 33-59395
$900,000,000
OCCIDENTAL PETROLEUM CORPORATION
(LOGO)
$250,000,000 6.50% SENIOR NOTES DUE APRIL 1, 2005
$200,000,000 7.20% SENIOR DEBENTURES DUE APRIL 1, 2028
$450,000,000 6.40% SENIOR NOTES DUE APRIL 1, 2013,
MANDATORILY TENDERED ON APRIL 1, 2003
The $250,000,000 aggregate principal amount of 6.50% Senior Notes due April 1,
2005 (the "Seven-Year Notes"), the $200,000,000 aggregate principal amount of
7.20% Senior Debentures due April 1, 2028 (the "Thirty-Year Debentures" and,
together with the Seven-Year Notes, the "Senior Notes"), and the $450,000,000
aggregate principal amount of 6.40% Senior Notes due April 1, 2013, Mandatorily
Tendered on April 1, 2003 (the "Mandatorily Tendered Notes" and, together with
the Senior Notes, the "Notes") are being offered by Occidental Petroleum
Corporation ("Occidental"). Interest on the Notes is payable semiannually in
arrears on April 1 and October 1 of each year, beginning October 1, 1998. The
Senior Notes are not entitled to any mandatory redemption or sinking fund
payments. See "Description of the Notes; Senior Notes" herein. However, the
Senior Notes are redeemable at the option of the Company as set forth below.
(continued on inside front cover)
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT
RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
<TABLE>
<S> <C> <C> <C>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT(2) OCCIDENTAL(1)(3)(4)
Per Seven-Year Note 99.430% .625% 98.805%
Per Thirty-Year Debenture 99.779% .875% 98.904%
Per Mandatorily Tendered Note 99.893% .600% 102.063%
Total $897,651,500 $6,012,500 $904,104,000
</TABLE>
(1) Plus accrued interest from April 1, 1998.
(2) Occidental has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(3) Before deducting expenses payable by Occidental estimated at $600,000.
(4) Includes consideration for the Mandatorily Tendered Notes, which includes
consideration for the Remarketing Right.
The Notes are offered when, as and if accepted by the Underwriters named herein,
subject to prior sale or withdrawal, cancellation or modification of the offer
without notice, and subject to the approval of certain legal matters by counsel.
It is expected that delivery of the Notes will be made in book-entry form
through the book-entry facilities of the DTC on or about April 6, 1998 in New
York, New York.
The Managers for the Offering of the Senior Notes are:
Joint Lead Managers
J.P. MORGAN & CO. MERRILL LYNCH & CO.
------------------------
BANCAMERICA ROBERTSON STEPHENS
CHASE SECURITIES INC.
MORGAN STANLEY DEAN WITTER
The Managers for the Offering of the Mandatorily Tendered Notes are:
Joint Lead Managers
MERRILL LYNCH & CO. J.P. MORGAN & CO.
------------------------
BANCAMERICA ROBERTSON STEPHENS
CHASE SECURITIES INC.
MORGAN STANLEY DEAN WITTER
April 2, 1998
<PAGE> 2
(continued from front cover)
The Mandatorily Tendered Notes will be subject to mandatory tender by the
existing holders on April 1, 2003 (the "Remarketing Date") through either (i)
the election by the Remarketing Dealer (as defined below) to remarket the
Mandatorily Tendered Notes or (ii) in the event the Remarketing Dealer elects
not to remarket the Mandatorily Tendered Notes or for any reason fails to
remarket the Mandatorily Tendered Notes, the repurchase by Occidental of the
Mandatorily Tendered Notes. The "Remarketing Dealer" will be Merrill Lynch,
Pierce, Fenner & Smith Incorporated. If the Remarketing Dealer, or any successor
thereto or assignee thereof, elects to remarket the Mandatorily Tendered Notes,
the Remarketing Dealer will purchase the Mandatorily Tendered Notes from the
holders thereof on the Remarketing Date at 100% of the principal amount thereof
(accrued interest, if any, to the Remarketing Date being payable by Occidental
on such date to the holders of the Mandatorily Tendered Notes), and the interest
rate on the Mandatorily Tendered Notes will be reset by the Remarketing Dealer
effective on the Remarketing Date pursuant to the procedures set forth below
under "Description of the Notes; Tender of Mandatorily Tendered Notes;
Remarketing." In the event that the Remarketing Dealer elects not to remarket
the Mandatorily Tendered Notes or for any reason fails to purchase the
Mandatorily Tendered Notes on the Remarketing Date, Occidental will be required
to repurchase the Mandatorily Tendered Notes from the holders thereof on the
Remarketing Date at 100% of the principal amount thereof plus accrued interest,
if any. See "Description of Notes; Mandatorily Tendered Notes" herein.
The Notes of each series are redeemable, in whole or in part, at the option of
Occidental at any time with respect to the Senior Notes and after the
Remarketing Date with respect to the Mandatorily Tendered Notes at a redemption
price equal to the greater of (i) 100% of the principal amount of the Notes of
such series to be redeemed and (ii) an amount (determined by the Quotation Agent
(as defined herein)) equal to the sum of the present values of the remaining
scheduled payments of principal and interest on the Notes of such series to be
redeemed (not including any portion of such payments of interest accrued as of
the date of redemption) discounted to the date of redemption on a semiannual
basis (assuming a 360-day year consisting of twelve 30-day months) at the
Adjusted Treasury Rate (as defined herein) plus 15 basis points in the case of
the Seven-Year Notes and the Mandatorily Tendered Notes and 20 basis points in
the case of the Thirty-Year Debentures, plus, in each case, accrued interest
thereon to the date of redemption. See "Description of the Notes; Optional
Redemption."
Ownership of the Notes will be maintained in book-entry form by or through The
Depository Trust Company ("DTC"). Interests in the Notes will be shown on, and
transfer thereof will be effected only through, records maintained by DTC and
its participants. See "Description of Notes; Book-Entry System" herein.
------------------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE NOTES. SPECIFICALLY,
THE UNDERWRITERS MAY OVERALLOT IN CONNECTION WITH THIS OFFERING AND MAY BID FOR
AND PURCHASE NOTES IN THE OPEN MARKET. FOR A DESCRIPTION OF THESE ACTIVITIES,
SEE "UNDERWRITING."
------------------------
This Prospectus Supplement and the information incorporated by reference herein
contain various "forward-looking statements," within the meaning of Federal and
state securities laws, including those identified by the words "believes,"
"anticipates," "expects" and similar expressions. These forward-looking
statements reflect management's expectations and are based upon data available
at the time the statements were made; however, actual results are subject to
future events and uncertainties, which would materially impact actual
performance. Factors that can cause actual results to differ 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, acquisition or divestiture.
<PAGE> 3
OCCIDENTAL PETROLEUM CORPORATION
Occidental Petroleum Corporation, a Delaware corporation ("Occidental"),
explores for, develops, produces and markets crude oil and natural gas; and
manufactures and markets a variety of chlorovinyls (including basic chemicals
and polymers and plastics), specialty chemicals and petrochemicals. Occidental
conducts its principal operations through two subsidiaries: Occidental Oil and
Gas Corporation and Occidental Chemical Corporation.
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.
RECENT DEVELOPMENTS
Completion of MidCon Sale. Occidental completed the sale of all of the issued
and outstanding shares of common stock of MidCon Corp. ("MidCon"), its natural
gas transmission and marketing business, to K N Energy, Inc. ("K N Energy"), on
January 31, 1998.
Occidental sold the shares to K N Energy in return for a cash payment of $2.1
billion. After payment of the redemption price for the Cumulative MidCon-Indexed
Convertible Preferred Stock, par value $1.00 per share, ("CMIC Preferred
Stock"), taxes and certain other expenses of the sale, the estimated net cash
proceeds from the transaction were approximately $1.7 billion. Additionally, in
connection with the sale, K N Energy issued a fixed-rate interest bearing note
secured by letters of credit, payable January 4, 1999, to Occidental in the
initial principal amount of $1.4 billion, in exchange for a note previously
issued to Occidental by the MidCon Corp. ESOP Trust (the "Trust"). K N Energy
also assumed responsibility for certain Texas intrastate pipeline lease
obligations of MidCon to an Occidental subsidiary with a 29-year term and
average lease rentals of approximately $30 million per year.
Concurrently with the closing of the sale, Occidental effected the redemption of
all 1,400,000 issued and outstanding shares of Occidental's CMIC Preferred
Stock, which were issued to and held by the Trust.
As a result of these transactions, in the fourth quarter of 1997 Occidental
classified MidCon and its subsidiaries as a discontinued operation and recorded
an estimated after-tax charge against earnings of approximately $750 million.
Completion of Elk Hills Naval Petroleum Reserve Acquisition. In February 1998,
Occidental acquired the government's approximate 78 percent interest (the
"Interest") in the Elk Hills Naval Petroleum Reserve field in California ("Elk
Hills") for approximately $3.5 billion. Elk Hills is one of the 11 largest
fields in the lower 48 states and the acquisition of the Interest significantly
increases the quantity and quality of Occidental's domestic reserves. Occidental
expects to book initial proved reserves of approximately 300 million barrels of
oil and 665 billion cubic feet of natural gas from the Interest. Through the
application of improved drilling and field management techniques to develop
fully Occidental's share of the field, Elk Hills reserves net to Occidental are
expected ultimately to exceed such numbers. Production is expected to increase
as the field is developed. Gross crude oil production averaged approximately
54,500 barrels of oil per day in January 1998, with gas sales averaging 144
million cubic feet of gas per day after reinjection of 197 million cubic feet
("MMcf") of gas to maintain reservoir pressure. Corresponding natural gas
liquids production amounts to about 11,000 barrels per day. Gross crude oil
production is forecast, based on estimates prepared by Occidental's engineers
and geophysicists, to rise to 65,000 barrels of oil per day in 1998 and may rise
to more than 100,000 barrels per day in the year 2000, while gross natural gas
sales are expected to reach 380 MMcf per day in 1999. There can be no assurance,
however, that Occidental will actually achieve such production or sales levels.
Occidental is the operator of Elk Hills. Chevron remains the other unit interest
holder.
S-2
<PAGE> 4
New Oil Field in Qatar. Occidental was awarded a contract in late 1997 by the
Emirate of Qatar to perform enhanced oil recovery ("EOR") in Qatar's Idd el
Shargi South Dome field ("ISSD field"). Ultimate gross recovery is expected to
be up to 300 million barrels from this field using EOR techniques similar to
those being successfully employed by Occidental on the Idd el Shargi North Dome
field ("ISND field") pursuant to a contract awarded to Occidental in 1994.
Because of the proximity of the two fields, Occidental will operate the ISSD
field as a satellite of the ISND field.
Other Asset Sales. In February 1998, Occidental sold its entire interest in an
oil field development project in Venezuela to Union Texas Petroleum for
approximately $205 million in cash plus contingent payments of up to $90 million
over six years (not to exceed $15 million in any one year) based on future oil
prices. Occidental also has agreed to sell its natural gas properties in
Oklahoma and Kansas outside of the Hugoton field to ONEOK Resources Company for
approximately $135 million. In March 1998, Occidental agreed to sell the stock
of its MC Panhandle subsidiary, which owns certain natural gas interests in the
West Panhandle field in Texas to Chesapeake Energy Corporation for approximately
$105 million. Also in March, Occidental announced execution of a definitive
agreement to sell certain Oklahoma oil and gas properties to Anadarko Petroleum
Corporation for approximately $120 million. The transaction is scheduled to
close in April subject to satisfaction of certain customary closing conditions.
Other smaller packages of assets have been scheduled for disposition, and many
of such sales are pending, for a total of 12 scheduled domestic oil and gas
transactions.
Estimated average 1997 production attributable to the nonstrategic assets to be
sold and described above was approximately 46,000 barrels of oil per day
(including approximately 25,000 barrels per day attributable to the sale of
Occidental's Venezuela interest) and 140 MMcf of gas per day. Following these
nonstrategic asset sales and the acquisition of Elk Hills, it is expected that
Occidental's oil and gas production in the United States will increase
significantly. Accordingly, the description of United States production
information and description of properties set forth below concerns Occidental's
historic 1997 business.
Equistar. On March 20, 1998, Occidental, Lyondell Petrochemical Company
("Lyondell") and Millennium Chemicals Inc. ("Millennium") announced the signing
of a definitive master transaction agreement ("MTA") to expand the Equistar
Chemicals, LP limited partnership currently owned by subsidiaries of Lyondell
and Millennium ("Equistar") through the contribution of the ethylene, propylene,
ethylene oxide ("EO") and ethylene glycol ("EG") derivatives businesses of
Occidental (the "Petrochemicals Business"). The Petrochemicals Business includes
the following:
(i) Olefins plants at Corpus Christi and Chocolate Bayou, Texas, and
Lake Charles, Louisiana, producing 3.65 billion pounds per year of
ethylene;
(ii) EO and EG derivatives plant located at Bayport, Texas, together
with Occidental's 50 percent ownership of PD Glycol, a limited partnership
which operates EO/EG plants at Beaumont, Texas (PD Glycol is a 50/50 joint
venture with Du Pont);
(iii) A distribution system consisting of more than 950 miles of
ethylene/propylene pipelines in the U.S. Gulf Coast and two storage wells
in South Texas; and
(iv) $205 million of Occidental debt currently associated with these
businesses (the "Assumed Debt").
The addition of the Petrochemicals Business will make Equistar the
second-largest producer of ethylene in the world, with more than 11.4 billion
pounds of annual capacity.
Pursuant to the terms and conditions set forth in the MTA, at closing Occidental
will contribute the assets of the Petrochemicals Business to Equistar, subject
to the assumption by Equistar of certain liabilities of Occidental, including
the Assumed Debt. Following the closing of the transactions contemplated by the
MTA, which is expected to occur by mid-year 1998, Lyondell will own a 41 percent
interest in Equistar, and Millennium and Occidental will each own a 29.5 percent
interest. At
S-3
<PAGE> 5
closing, Equistar will borrow approximately $500 million of additional debt in
order to distribute cash of $420 million to Occidental and $75 million to
Millennium. The transaction also includes a long-term agreement for Equistar to
supply the ethylene requirements (up to 2.55 billion pounds per annum) for
Occidental's chlorovinyls business.
The investment in Equistar is subject to satisfaction of certain conditions
precedent, including: (i) expiration or early termination of all applicable
waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976;
(ii) approval by Occidental's Board of Directors; (iii) execution and delivery
of definitive agreements; and (iv) the implementation by Equistar of a larger
credit facility. No assurances can be given that the Equistar transaction will
be consummated or that, if consummated, the terms thereof will not materially
differ from the description set forth herein.
Preferred Stock Conversion. In February 1998, Occidental called for redemption
all 15,106,444 outstanding shares of its $3.875 voting and nonvoting Cumulative
Convertible Preferred Stock. All of such shares of the preferred stock were
converted into common stock on or prior to the redemption date, causing
Occidental to issue approximately 33 million additional shares of its common
stock. The conversion results in annual dividend savings to Occidental of
approximately $25 million, assuming annual dividends of $1 per share on
Occidental's common stock.
USE OF PROCEEDS
Occidental intends to use the net proceeds from the sale of the Notes (estimated
to be approximately $904 million) for general corporate purposes, primarily the
retirement of outstanding indebtedness.
S-4
<PAGE> 6
CAPITALIZATION
The following table sets forth the consolidated short-term debt and consolidated
capitalization of Occidental at December 31, 1997 (i) on a historical basis,
(ii) as adjusted to reflect the impact of the following transactions that
occurred subsequent to December 31, 1997: the use of the net cash proceeds from
the sale of MidCon to redeem the CMIC preferred stock and repay $1.7 billion of
long-term debt; the issuance of approximately $3.5 billion of commercial paper
in connection with the acquisition of the Elk Hills Interest; the conversion of
all the approximately 15.1 million outstanding shares of its $3.875 preferred
stock into approximately 33 million shares of Occidental common stock; the
repurchase through March 26, 1998 of approximately 9.0 million shares of common
stock under Occidental's common stock repurchase program and the issuance of
approximately $250 million of commercial paper in connection with such
repurchase; and the use of $200 million of the proceeds from the sale of
Occidental's interest in an oilfield development in Venezuela to repay long-term
debt and (iii) as further adjusted to reflect the sale of the Notes offered
hereby and the application of the estimated net proceeds therefrom to repay
commercial paper (which is classified as long-term debt). See "Recent
Developments" and "Historical Financial Information."
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-------------------------------------------
AS FURTHER
HISTORICAL AS ADJUSTED(1) ADJUSTED
---------- -------------- -----------
(IN MILLIONS)
(UNAUDITED)
<S> <C> <C> <C>
Short-term debt:
Current maturities of long-term debt and capital
lease liabilities $ 6 $ 6 $ 6
Notes payable to banks and other financial
institutions 35 35 35
------- ------- -------
Total short-term debt $ 41 $ 41 $ 41
======= ======= =======
Long-term debt, net of current maturities and
unamortized discount $ 4,925 $ 6,790 $ 5,890
Notes offered hereby -- -- 900
------- ------- -------
Capital lease liabilities, net of current portion 235 235 235
------- ------- -------
Minority equity in subsidiaries and partnerships 1 1 1
------- ------- -------
Stockholders' equity:
Nonredeemable preferred stock, $1.00 par value 1,125 370 370
CMIC preferred stock, $1.00 par value 1,400 -- --
Unearned ESOP shares (1,348) -- --
Common Stock, $.20 par value; authorized, 500 million
shares 68 72 72
Other stockholders' equity 3,041 3,596 3,596
------- ------- -------
Total stockholders' equity 4,286 4,038 4,038
------- ------- -------
Total capitalization $ 9,447 $11,064 $11,064
======= ======= =======
</TABLE>
- ---------------
(1) Does not give effect to the anticipated application by Occidental of the
proceeds from a note received from K N Energy in the original principal
amount of $1.4 billion, which matures on January 4, 1999.
S-5
<PAGE> 7
BUSINESS
Occidental's principal businesses constitute two industry segments, the
operations of which are described below. More complete information regarding
such businesses is set forth in Occidental's Annual Report on Form 10-K for the
year ended December 31, 1997 (the "1997 Form 10-K"), incorporated by reference
herein.
OIL AND GAS OPERATIONS
Exploration and Production. Through its subsidiaries, including Occidental Oil
and Gas Corporation, and its approximate 29 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 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.
COMPARATIVE OIL AND GAS RESERVES AND PRODUCTION
(OIL IN MILLIONS OF BARRELS; NATURAL GAS IN BILLIONS OF CUBIC FEET)
<TABLE>
<CAPTION>
--------------------------------------------------------------------
1997 1996 1995
OIL GAS TOTAL* OIL GAS TOTAL* OIL GAS TOTAL*
--- ----- ------ --- ----- ------ --- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
International Reserves 703 823 840 694 840 834 734 639 841
U.S. Reserves 197 1,635 470 203 1,744 494 196 1,821 499
--- ----- ----- --- ----- ----- --- ----- -----
Total 900 2,458 1,310 897 2,584 1,328 930 2,460 1,340
=== ===== ===== === ===== ===== === ===== =====
International Production 80 40 87 84 42 91 78 46 86
U.S. Production 21 218 57 21 220 58 23 223 60
--- ----- ----- --- ----- ----- --- ----- -----
Total 101 258 144 105 262 149 101 269 146
=== ===== ===== === ===== ===== === ===== =====
</TABLE>
- ---------------
* Natural gas volumes have been converted to equivalent barrels based on energy
content of six thousand cubic feet ("Mcf") of gas to one barrel of oil.
In 1997, Occidental added more oil to its reserves than it produced.
Occidental's consolidated worldwide net proved developed and undeveloped
reserves of crude oil (not including those of CanadianOxy) were 900 million
barrels at year-end 1997, compared with 897 million barrels at year-end 1996.
Domestic reserves of crude oil were 197 million barrels at year-end 1997,
compared with 203 million barrels at year-end 1996, while international crude
oil reserves increased to 703 million barrels from 694 million barrels at
year-end 1996. Worldwide net crude oil reserve additions of 106 million barrels,
with the single largest reserve additions in Qatar, more than replaced
Occidental's worldwide production of 101 million barrels. The calculation of net
reserve additions does not take into account sales of reserves. Worldwide net
proved developed and undeveloped reserves of natural gas were approximately 2.5
trillion cubic feet ("Tcf") at year-end 1997, with 1.6 Tcf attributable to
domestic operations. Worldwide net proved developed and undeveloped natural gas
reserves were about 2.6 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.
Net daily worldwide oil production averaged 277,000 barrels per day compared to
286,000 barrels per day in 1996, and net worldwide natural gas production
averaged 706 million cubic feet ("MMcf") per day compared to 716 MMcf per day in
1996. International operations accounted for approximately 79 percent of
Occidental's oil production, while approximately 84 percent of gas production
came from the United States. On an oil equivalent basis, Occidental produced
394,100 net barrels per day in 1997 from operations in 12 countries, including
the United States.
S-6
<PAGE> 8
With the acquisition of the Interest, Occidental expects to book initial proved
reserves of approximately 300 million barrels of oil and 665 billion cubic feet
of natural gas from the Interest. Through the application of improved drilling
and field management techniques to fully develop Occidental's share of the
field, Elk Hills reserves net to Occidental are expected to ultimately exceed
such numbers. Production is expected to increase as the field is developed.
Gross crude oil production averaged approximately 54,500 barrels of oil per day
in January 1998, with gas sales averaging 144 million cubic feet of gas per day
after reinjection of 197 million cubic feet of gas to maintain reservoir
pressure. Natural gas liquids production amounts to about 11,000 barrels per
day. Gross crude oil production is forecast, based on estimates prepared by
Occidental's engineers and geophysicists, to rise to 65,000 barrels of oil per
day in 1998 and may rise to more than 100,000 barrels per day in the year 2000,
while gross natural gas sales are expected to reach 380 million cubic feet per
day in 1999. There can be no assurance, however, that Occidental will actually
achieve such production or sales levels. Occidental is the operator of Elk
Hills. Chevron remains the other unit interest holder.
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 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 (i) enhanced oil recovery projects, similar to those in
Qatar, (ii) oil and gas exploration and (iii) strategic acquisitions.
Occidental's domestic oil and gas operations are affected by political
developments and by federal, state and local laws and regulations relating to,
among other things, increases in taxes and royalties, production limits and
environmental matters.
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,
1997, the carrying value of Occidental's oil and gas assets in countries outside
North America aggregated approximately $2.3 billion, or approximately 15 percent
of Occidental's total assets at that date. Approximately $950 million of such
assets were located in the Middle East, and approximately $700 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.
A summary of the principal geographic distribution of Occidental's oil and gas
assets is outlined below:
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 57,100 barrels
in 1997, compared with 57,300 barrels in 1996. The 1997 production is net of
approximately 5,200 barrels per day delivered under an advanced sale agreement
to Clark USA, Inc's assignee. Net daily domestic production of natural gas
averaged 596 MMcf in 1997, compared with 601 MMcf in 1996.
Occidental's average sales price for domestic crude oil was $18.72 per barrel in
1997, compared with $18.98 in the previous year. The average natural gas sales
price in 1997 was $2.39 per Mcf, compared with $2.11 per Mcf during 1996.
S-7
<PAGE> 9
Additionally, Occidental has an agreement to supply CITGO Petroleum Corporation
("CITGO"), at CITGO's option, with a majority of its domestic lease crude oil
production through August 31, 1998. During 1997, Occidental sold CITGO
approximately 38,000 barrels of oil per day under this agreement. Occidental is
currently disputing certain provisions of this agreement.
In February 1998, Occidental entered into a fifteen-year contract with Tosco
Corporation ("Tosco") through which Tosco will take the majority of Occidental's
interest in the current gross oil production of the Interest in Elk Hills of
approximately 54,500 barrels per day. Tosco will also take additional production
as it increases.
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 210 MMcf of gas per day or approximately one-third of the
domestic total. Occidental has approximately 862 billion cubic feet ("Bcf") of
gas reserves and 4.2 million barrels of oil reserves in the Hugoton area.
Occidental continued infill drilling and fracture-stimulation program in the
Chase formation of the Hugoton field in 1997.
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 refinery until
2003 to the extent that CITGO does not obtain such gas from other sources.
Occidental has various agreements to supply certain gas marketing companies with
69,400 MMBtu of natural gas per day in 1998 and with volumes ranging from 69,400
MMBtu down to 1,900 MMBtu per day from 1998 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.
Canada
Occidental owns an approximate 29 percent interest in CanadianOxy, which is
accounted for as an equity investment.
CanadianOxy produces crude oil, natural gas, natural gas liquids and sulfur in
Canada, principally in the provinces of Alberta and Saskatchewan; 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, Australia, Nigeria and Colombia; and participates with Occidental in
its operations in Ecuador. CanadianOxy also conducts chemical operations in
Canada and the United States (where CanadianOxy is the operator and Occidental a
participant), and is involved in crude oil and natural gas marketing activities,
primarily in North America.
At December 31, 1997, Occidental's proportional interest in CanadianOxy's
worldwide net proved developed and undeveloped reserves aggregated approximately
73 million barrels of crude oil, condensate and natural gas liquids, 238 Bcf of
natural gas and 45 million barrels of synthetic crude oil recoverable from tar
sands. This increase in reserves since last year reflects CanadianOxy's
acquisition of Wascana Energy, Inc. in April 1997.
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. Appraisal and development of the Jalalabad
gas discovery is expected to result in gas production and sales before the
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<PAGE> 10
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. Seismic exploration resulted in the definition of multiple
prospects, one of which is being drilled. The first exploratory well drilled in
mid-1997 blew out after encountering shallow, high-pressure gas. A replacement
well will be drilled in 1998. Additional seismic acquisition is underway to
determine the course of future exploration. Occidental is negotiating with
Petrobangla regarding the continuation of the exploration period for several
blocks. A drilling program has commenced appraisal and development of the
Jalalabad natural gas discovery, and it is expected that initial gas production
from this field will be delivered to Petrobangla in 1998.
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 operated by Ecopetrol, the state oil company, that carries crude
oil to an export terminal at Covenas. Occidental has an 18.75 percent net
ownership interest in the pipeline and marine terminal. The pipeline is subject
to periodic attacks by insurgent groups, which from time to time disrupt the
flow of oil. Gross production from Occidental's Cano Limon area declined to
approximately 160,000 barrels per day in 1997, compared with 190,000 barrels per
day in 1996. Part of the reduction is due to a natural decline, but there was an
increase in the frequency and severity of terrorist activity against the oil
pipeline during the past year which continues to restrict the pipeline's ability
to transport all of the oil that the field is capable of producing.
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. Due to
pipeline restrictions, gross production declined to approximately 17,100 barrels
per day in 1997 compared to gross production of approximately 21,500 barrels per
day in 1996. Development of the fields will continue in 1998 after completion of
a three-dimensional seismic program and expansion of the government-owned
pipeline system. After renegotiation of contract terms for the concession to
provide incentives for additional exploration over 97 percent of the acreage,
Occidental drilled the Eden-1, the first of four commitment wells, in the
southeast corner of the block in late 1996. The well tested from four zones at a
combined rate of 6,500 barrels per day of oil with an average gravity of 21
degrees API, and negotiations are under way with the Ecuador state oil company,
PetroEcuador, to develop the field in 1998. Occidental also completed
acquisition of two-dimensional seismic data to be used to delineate exploration
prospects in the eastern portion of the block.
Occidental has an 85 percent interest in the parent of the company that holds
title to Block 15. CanadianOxy owns the remaining 15 percent.
Netherlands North Sea
Occidental has interests in seven gas-producing licenses and one exploration
license in the Dutch sector of the North Sea, and a 38.6 percent interest in a
110-mile gas pipeline system that services the area. Net production for 1997 was
approximately 72 MMcf of gas per day.
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<PAGE> 11
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 1998.
Occidental's net share of production from the block in 1997 averaged
approximately 14,400 barrels per day of crude oil, compared with 13,400 barrels
per day in 1996.
A new contract area, Block 31, the Mountain Front Block, was awarded to
Occidental by the government in September 1997, and acquisition of
three-dimensional seismic is scheduled for 1998 to confirm prospects defined by
older seismic. Occidental has a 100 percent working interest in this area.
Pakistan
In southern Pakistan, Occidental has a 30 percent working interest in the three
Badin Blocks, which in 1997 produced a net share of 6,600 barrels of oil per day
and 38 MMcf of gas per day, compared to 6,400 barrels of oil per day and 43 MMcf
of gas per day in 1996. Recent exploration 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. One exploratory well was drilled
in 1997 and the block is being evaluated for further drilling. However, the
Central Indus gas basin blocks are under force majeure due to tribal unrest.
Peru
Occidental conducts exploration activities under four separate service contracts
with the Peruvian government. Occidental conducts production activities under
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. Net production from
the northern jungle block averaged approximately 49,500 barrels per day in 1997,
compared to 54,000 barrels per day in 1996.
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 70 percent interest covers a 2-million-acre
block in the Hualluga Basin of the Northern Jungle Region. In 1997 Occidental
was awarded a 100 percent interest in the 859,000-acre Offshore Block Z-3 along
the northern coast of Peru.
Qatar
In October 1994, a unified agreement was approved authorizing Occidental to
implement a development plan to increase production and reserves from the ISND.
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 gross production increased from approximately 38,000 net barrels per day
for 1996 to approximately 89,800 net barrels per day for 1997. Average net
interest production from such field in 1997 amounted to approximately 45,000
barrels per day, amounting to an approximate 50 percent working interest. Proved
developed and undeveloped project reserves are presently estimated by Occidental
to be approximately 206 million barrels.
In December 1997, Occidental signed a second production-sharing agreement to
develop the ISSD field, 15 miles south of the ISND field. Occidental will
operate ISSD as a satellite of the ISND field, which
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<PAGE> 12
has sufficient capacity to handle the field's expected production of 50,000
barrels per day. Occidental expects to eventually invest up to $450 million in
capital and have a net interest of approximately 44 percent over the life of the
field.
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 1997, gross
production averaged 54,000 barrels per day compared to 50,800 barrels per day in
1996. Approximately 39 percent of such oil was exported in 1997. Occidental
expects to continue exports of a minimum of 30 percent of its oil production in
1998. Export prices are materially higher than domestic prices in Russia.
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. 1996
Occidental results included a $105 million charge, reflecting the write-down of
its investment in Komi. No operations were undertaken in 1997.
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). CanadianOxy, the
operator, with a 52 percent working interest, has made 14 oil discoveries,
including one in 1997. Production started in July 1993. Occidental's net share
under a production-sharing contract was 14,100 barrels per day in 1997 compared
to 14,700 barrels per day in 1996.
Other International Operations
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
in 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. Each of
Occidental and its partner, Shell Philippines Exploration B.V., the operator,
each has a 50 percent working interest in this project. With recoverable gas
estimated by the operator of 3.4 Tcf, the fields have the capacity to supply a
plateau rate of 400 MMcf per day for 20 years. Recoverable condensate is
estimated at about 120 million barrels. Occidental and Shell have negotiated
conditional gas sale agreements. Under these agreements, if approved by the
Philippine government and the parties, beginning in 2002, joint ventures formed
by First Philippine Holdings, British Gas and the Manila Electric Company would
consume approximately 200 MMcf of natural gas per day at newly built combined
cycle gas turbine ("CCGT") power plants at Santa Rita and Calabarson, and the
Philippine National Power Corporation would construct a CCGT plant in Iljian and
consume approximately 150 MMcf of natural gas per day.
In East Malaysia, Occidental has made significant gas discoveries offshore
Sarawak. In 1995, agreements were executed with its partners for the
commercialization of these discoveries. A joint venture company will be owned by
Occidental and its partners, PETRONAS, the Malaysian national oil company, Shell
Gas B.V. and Nippon Oil Company to construct the country's third liquefied
natural gas ("LNG") plant. Feedstock for the plant initially will come from the
Occidental discovery containing recoverable gas estimated at 2.9 Tcf. Occidental
is the operator, with a 33.75 percent interest in the gas
S-11
<PAGE> 13
discoveries. An Occidental subsidiary will have a 9 percent interest in the new
LNG plant. The partners began the detailed upstream facility design in 1996. In
1997 Occidental sold 10 percent of its interest in these Malaysian operations by
selling equity in two Occidental subsidiaries to a third party.
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 1998 to determine if the natural gas
reserves are sufficient to justify construction of an LNG plant on Irian Jaya.
Prior to ARCO farming in to the Berau Block, Occidental made two discoveries.
The Berau Block discoveries, together with ARCO's Wiriagar Block discovery,
contain an estimated 20 Tcf of natural gas, sufficient to justify construction
of a multi-train LNG project which might be slated for start-up early in the
next century.
In addition, during 1997 Occidental acquired new exploration blocks in the
United States, Gulf of Mexico and Albania. Occidental acquired interests in 15
exploration blocks in a promising deep-water section of the Gulf of Mexico.
During 1998, exploration activities are planned in these areas as well as on
previously acquired blocks in Albania, Angola, Bangladesh, Colombia, the Congo,
Ecuador, Gabon, Indonesia, Malaysia, Netherlands, Oman, Pakistan, Papua New
Guinea, Peru and the Philippines.
Reserves, Production and Related Information. For certain additional
information with respect to reserves, production and related information,
including the manner in which the estimates of reserves have been made, see the
1997 Form 10-K, which is incorporated by reference in the accompanying
Prospectus.
Special Items in 1997. In 1997, Occidental recorded charges of $256 million for
the write-down of various nonstrategic assets, including assets expected to be
sold and related costs; and additional environmental and other reserves. The
asset write-downs included $88 million for the Austin Chalk oil and gas property
and $44 million for the Garden Banks oil and gas property. The operating results
from these properties were not significant.
CHEMICAL OPERATIONS
Occidental conducts its chemical operations through Occidental Chemical
Corporation and its various subsidiaries and affiliates (collectively,
"OxyChem"). OxyChem manufactures and markets a variety of chlorovinyls
(including basic chemicals and polymers and plastics), specialty chemicals and
petrochemicals. Occidental has entered into an agreement to contribute its
Petrochemicals Business to a joint venture. See "Recent Developments; Equistar."
OxyChem 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.
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 1997 by higher sales prices and lower
hydrocarbon feedstock costs, partially offset by increased energy costs,
resulting in improved 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 1997. Operating rates for
certain products may decline in 1998 as a result of weakness in key Asian
economies.
OxyChem's operations also have been affected by environmental regulation and
associated costs. For information regarding such environmental regulation and
associated costs, see the 1997 Form 10-K.
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.
Approximately 70 percent of
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<PAGE> 14
OxyChem's ethylene and 45 percent of its chlorine production is consumed
internally, primarily into the vinyls product chain, including ethylene
dichloride ("EDC"), vinyl chloride monomer ("VCM") and polyvinyl chloride
("PVC") resin. To better manage and sharpen its focus on its chlor-alkali and
plastic businesses, OxyChem combined its basic chemicals and polymers and
plastics groups into the Chloro-Vinyls Group.
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
products 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 has targeted the Specialty Business Group for substantial growth in the
coming years through volume expansion in existing products, development of new
products and acquisitions of synergistic businesses and product lines.
OxyChem continues to build on its specialty business acquired in large part
through the following acquisitions. In 1996, OxyChem acquired a 64 percent
equity interest (on a fully-diluted basis) in INDSPEC Holding Corporation, and,
indirectly, its sole operating subsidiary INDSPEC Chemical Corporation
("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 1996, OxyChem acquired three specialty chemical units: Laurel
Industries, Inc. ("Laurel"); Natural Gas Odorizing, Inc. ("NGO"); and a plant
from Power Silicates Manufacturing, Inc. ("Power Silicates"). Laurel 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). NGO 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, augmenting
OxyChem's five existing silicates plants by its presence in the growing
southeast U.S. market.
OxyChem produces the following chemical products:
<TABLE>
<CAPTION>
PRINCIPAL PRODUCTS MAJOR USES
------------------ ----------
<S> <C> <C>
Chlorovinyls Chlor-alkali chemicals
Chlorine Raw material for 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
Vinyl chloride monomer Raw material for polyvinyl
chloride
Polyvinyl chloride Calendering and film, pipe, wire
insulation, flooring, footwear,
bottles, siding, windows, door
frames and other home construction
products
</TABLE>
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<PAGE> 15
<TABLE>
<CAPTION>
PRINCIPAL PRODUCTS MAJOR USES
------------------ ----------
<S> <C> <C>
Specialty Businesses Sodium silicates Soaps and detergents, catalysts,
paint pigments
Chrome chemicals Metal and wood treatments, leather
tanning
ACL pool chemicals (chlorinated
isocyanurates) Swimming pool sanitation,
household and industrial
disinfecting and sanitizing
products
Proprietary chemicals (chemical
intermediates derived
principally from fluorine,
chlorine and sulfur) Agricultural, pharmaceutical,
plastics, metal plating, aerospace
and food-service applications
Phenolic resins/molding compounds Automotive brake pistons,
adhesives, carbonless copy paper,
pot and pan handles
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 production of
polypropylene and acrylonitrile
Ethylene glycols and other
ethylene oxide derivatives Polyester products, antifreeze,
brake fluids
</TABLE>
Based on statistics in chemical industry publications, Occidental believes that
during 1997: it was the largest U.S. merchant marketer of chlorine and caustic
soda; including OxyMar (OxyChem's joint venture with Marubeni), the
second-largest U.S. producer of VCM; the third-largest producer of PVC resins in
North America; the largest producer of chrome chemicals and phenolic molding
compounds, antimony oxide and mercaptan warning agents, and, through its
interest in INDSPEC, resorcinol; the second-largest producer of sodium
silicates; and, including its PD Glycol joint venture with Du Pont, the
third-largest producer of ethylene oxide and ethylene glycols. 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.
Special Items in 1997. Chemical division earnings reflected charges of $82
million related to the write-down of various nonstrategic assets, and a charge
of $65 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 chemical business requires capital expenditures to remain
competitive and to comply with safety and environmental laws. Occidental's
capital expenditures for its ongoing businesses totaled approximately $1.549
billion in 1997, $1.2 billion in 1996 and $979 million in 1995, exclusive of the
noncash consideration for acquisitions. The 1997 amount included capital
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<PAGE> 16
expenditures aggregating $1.15 billion for oil and gas, $396 million for
chemical and $3 million for corporate and other. Occidental's total capital
expenditures, exclusive of acquisitions, if any, for 1998 are expected to
approximate $1.2 billion, with approximately $850 million for oil and gas, the
majority of which is for international oil and gas operations. These amounts do
not include the $3.5 billion acquisition of the Elk Hills field in 1998.
LEGAL PROCEEDINGS
For information regarding legal proceedings, see the 1997 Form 10-K.
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<PAGE> 17
HISTORICAL FINANCIAL INFORMATION
The following historical financial information of Occidental and its
consolidated subsidiaries is derived from, should be read in conjunction with,
and is qualified in its entirety by, Occidental's Consolidated Financial
Statements for each of the three years in the period ended December 31, 1997 and
as of December 31, 1997 and December 31, 1996, and "Management's Discussion and
Analysis of Financial Condition and Results of Operations," which are included
in the 1997 Form 10-K, which is incorporated by reference in the accompanying
Prospectus.
RESULTS OF OPERATIONS
IN MILLIONS, EXCEPT PER-SHARE AMOUNTS OCCIDENTAL PETROLEUM CORPORATION
AND CONSOLIDATED SUBSIDIARIES
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31, 1997 1996 1995
============================================================ ====== ====== ======
<S> <C> <C> <C>
REVENUES
Net sales and operating revenues
Oil and gas operations $3,667 $3,680 $3,019
Chemical operations 4,349 4,307 5,370
------ ------ ------
8,016 7,987 8,389
Interest, dividends and other income 88 244 105
Gains on disposition of assets, net (4) 11 45
Income from equity investments 1 70 94
------ ------ ------
8,101 8,312 8,633
------ ------ ------
COST AND OTHER DEDUCTIONS
Cost of sales 5,060 5,060 5,492
Selling, general and administrative and other operating
expenses 1,002 933 996
Depreciation, depletion and amortization of assets 822 761 768
Environmental remediation 136 100 21
Exploration expense 119 120 106
Interest and debt expense, net 434 482 579
------ ------ ------
7,573 7,456 7,962
------ ------ ------
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE TAXES 528 856 671
Provision for domestic and foreign income and other taxes 311 342 313
------ ------ ------
INCOME (LOSS) FROM CONTINUING OPERATIONS 217 514 358
Discontinued operation, net (607) 184 153
Extraordinary gain (loss), net -- (30) --
------ ------ ------
NET INCOME (LOSS) $ (390) $ 668 $ 511
====== ====== ======
EARNINGS (LOSS) APPLICABLE TO COMMON STOCK $ (478) $ 575 $ 418
====== ====== ======
BASIC EARNINGS PER COMMON SHARE
Income (loss) from continuing operations $ .39 $ 1.30 $ .83
Discontinued operations, net (1.82) .56 .48
Extraordinary gain (loss), net -- (.09) --
------ ------ ------
BASIC EARNINGS (LOSS) PER COMMON SHARE $(1.43) $ 1.77 $ 1.31
====== ====== ======
DILUTED EARNINGS (LOSS) PER COMMON SHARE $(1.43) $ 1.73 $ 1.31
============================================================ ====== ====== ======
</TABLE>
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<PAGE> 18
FINANCIAL POSITION
IN MILLIONS, EXCEPT SHARE AMOUNTS OCCIDENTAL PETROLEUM CORPORATION
AND CONSOLIDATED SUBSIDIARIES
<TABLE>
<CAPTION>
ASSETS AT DECEMBER 31, 1997 1996
- ------------------------------------------------------------ ------- -------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 113 $ 258
Trade receivables, net of reserves of $24 in both 1997 and
1996 603 626
Receivables from joint ventures, partnerships and other 210 131
Inventories 604 582
Prepaid expenses and other 386 313
------- -------
TOTAL CURRENT ASSETS 1,916 1,910
------- -------
LONG-TERM RECEIVABLES, NET 153 153
EQUITY INVESTMENTS 921 985
PROPERTY, PLANT AND EQUIPMENT, AT COST
Oil and gas operations 9,039 8,554
Chemical operations 6,077 5,893
Corporate and other 1,441 1,439
------- -------
16,557 15,886
Accumulated depreciation, depletion and amortization (7,967) (7,690)
------- -------
8,590 8,196
OTHER ASSETS 470 416
------- -------
NET ASSETS OF DISCONTINUED OPERATIONS 3,232 3,321
------- -------
$15,282 $14,981
======= =======
LIABILITIES AND EQUITY AT DECEMBER 31,
============================================================
CURRENT LIABILITIES
Current maturities of long-term debt and capital lease
liabilities $ 6 $ 27
Notes payable 35 20
Accounts payable 717 617
Accrued liabilities 957 970
Dividends payable 106 107
Domestic and foreign income taxes 49 96
------- -------
TOTAL CURRENT LIABILITIES 1,870 1,837
------- -------
LONG-TERM DEBT, NET OF CURRENT MATURITIES AND UNAMORTIZED
DISCOUNT 4,925 4,511
------- -------
DEFERRED CREDITS AND OTHER LIABILITIES
Deferred and other domestic and foreign income taxes 1,028 839
Other 3,173 2,654
------- -------
4,201 3,493
------- -------
CONTINGENT LIABILITIES AND COMMITMENTS
STOCKHOLDERS' EQUITY
Nonredeemable preferred stock, $1.00 par value; authorized
50 million shares; outstanding shares:
1997 -- 22,491,478 and 1996 -- 26,493,209; stated at
liquidation value of $50 per share 1,125 1,325
ESOP preferred stock, $1.00 par value; authorized and
outstanding shares:
1997 and 1996 -- 1,400,000 1,400 1,400
Unearned ESOP shares (1,348) (1,394)
Common stock, $.20 par value; authorized 500 million
shares; outstanding shares:
1997 -- 341,126,546 and 1996 -- 329,227,688 68 66
Additional paid-in capital 4,149 4,463
Retained earnings (deficit) (1,094) (726)
Cumulative foreign currency translation adjustments (14) 6
------- -------
4,286 5,140
------- -------
$15,282 $14,981
============================================================ ======= =======
</TABLE>
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<PAGE> 19
CASH FLOWS
IN MILLIONS OCCIDENTAL PETROLEUM CORPORATION
AND CONSOLIDATED SUBSIDIARIES
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31, 1997 1996 1995
=========================================================== ======= ======= =======
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Income (loss) from continuing operations, after
extraordinary gain (loss), net $ 217 $ 484 $ 358
Adjustments to reconcile income to net cash provided by
operating activities:
Extraordinary (gain) loss, net -- 30 --
Depreciation, depletion and amortization of assets 822 761 768
Amortization of debt discount and deferred financing
costs 11 7 32
Deferred income tax provision (9) (3) 70
Other noncash charges (credits) to income 426 298 209
Gains on disposition of assets, net 4 (11) (45)
Income from equity investments (1) (70) (94)
Exploration expense 119 120 106
Changes in operating assets and liabilities:
Decrease (increase) in accounts and notes receivable (125) 201 117
Decrease (increase) in inventories (20) (32) (85)
Increase in prepaid expenses and other assets (75) (6) (33)
Increase (decrease) in accounts payable and accrued
liabilities 13 (65) (34)
Increase (decrease) in current domestic and foreign
income taxes (66) 39 44
Other operating, net (185) (164) (51)
------- ------- -------
1,131 1,589 1,362
Operating cash flow from discontinued operations 266 398 139
------- ------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,397 1,987 1,501
------- ------- -------
CASH FLOW FROM INVESTING ACTIVITIES
Capital expenditures (1,549) (1,038) (829)
Proceeds from disposal of property, plant and equipment,
net 25 229 178
Buyout of operating leases (21) -- (141)
Purchase of businesses, net (22) (18) (7)
Sale of businesses, net 95 31 756
Equity investments, net 46 40 50
------- ------- -------
(1,426) (756) 7
Investing cash flow from discontinued operations (79) (223) (143)
------- ------- -------
NET CASH USED BY INVESTING ACTIVITIES (1,505) (979) (136)
------- ------- -------
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from long-term debt 107 65 322
Net proceeds from commercial paper and revolving credit
agreements 667 645 (528)
Payments of long-term debt and capital lease liabilities (374) (1,570) (396)
Proceeds from issuance of common stock 21 25 28
Repurchase of common stock (119) -- --
Proceeds (payments) of notes payable, net 17 (1) (5)
Cash dividends paid (422) (415) (406)
Other financing, net 13 9 12
------- ------- -------
(90) (1,242) (973)
Financing cash flow from discontinued operations 53 (88) 12
------- ------- -------
NET CASH USED BY FINANCING ACTIVITIES (37) (1,330) (961)
------- ------- -------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (145) (322) 404
CASH AND CASH EQUIVALENTS -- BEGINNING OF YEAR 258 580 176
------- ------- -------
CASH AND CASH EQUIVALENTS -- END OF YEAR $ 113 $ 258 $ 580
=========================================================== ======= ======= =======
</TABLE>
S-18
<PAGE> 20
PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial information has been prepared in
accordance with the rules and regulations of the Securities and Exchange
Commission and gives effect to the disposition of the Petrochemicals Business as
if it occurred for balance sheet purposes on December 31, 1997 and for results
of operations purposes on January 1, 1997. See "Recent Developments; Equistar."
Such unaudited pro forma financial information should be read in conjunction
with Occidental's historical financial statements appearing in the 1997 Form
10-K and does not give effect to (i) the use by Occidental of the cash proceeds
from the disposition of the Petrochemicals Business or (ii) Occidental's equity
share of Equistar's income.
The pro forma information set forth below is not necessarily indicative of the
results that would have been obtained had the disposition of the Petrochemicals
Business actually occurred on the dates specified and does not give effect to
any events other than the disposition of the Petrochemicals Business. In
addition, such pro forma information does not purport to project Occidental's
results of operations or financial position as of any future date or for any
future period.
UNAUDITED PRO FORMA RESULTS OF OPERATIONS
IN MILLIONS, EXCEPT PER-SHARE DATA
<TABLE>
<CAPTION>
DISPOSITION OF
OCCIDENTAL PETROCHEMICALS OCCIDENTAL
FOR THE YEAR ENDED DECEMBER 31, 1997 HISTORICAL BUSINESS(1) PRO FORMA(2)
- ---------------------------------------------------- ---------- -------------- -------------
<S> <C> <C> <C>
Revenues $ 8,101 $ (1,803) $ 6,298
Costs and other deductions
Cost of sales 5,844 (1,530) 4,314
Selling, general and administrative and other 1,295 (44) 1,251
Interest and debt expense, net 434 (74)(3) 360
-------- -------- --------
7,573 (1,648) 5,925
-------- -------- --------
Income (loss) from continuing operations before
taxes 528(4) (155) 373(4)
Provision for domestic and foreign income and other
taxes 311 (62)(5) 249
-------- -------- --------
Income (loss) from continuing operations 217 (93) 124
Preferred dividend requirements 88 -- 88
-------- -------- --------
Earnings (loss) from continuing operations
applicable to common stock $ 129 $ (93) $ 36
======== ======== ========
Basic earnings (loss) per common share from
continuing operations $ .39 $ .11
======== ========
Average shares outstanding (in thousands) 334,341 334,341
======== ========
Diluted earnings (loss) per common share from
continuing operations $ .39 $ .11
======== ========
Average shares outstanding (in thousands) 334,916 334,916
======== ========
</TABLE>
- ---------------------------------------------------------------
(1) Reflects the disposition of Occidental's Petrochemicals Business, which is
anticipated to be consummated in mid-1998, as if the transaction had taken
place on January 1, 1997.
(2) Does not reflect Occidental's equity share of Equistar's income.
(3) Includes actual interest expense and an allocated amount based on the
Petrochemicals Business assets in comparison to Occidental's total assets.
(4) Reflects pre-tax charges for special items of $478 million.
(5) Calculated as though the Petrochemicals Business was on a stand alone basis.
S-19
<PAGE> 21
UNAUDITED PRO FORMA FINANCIAL POSITION
IN MILLIONS
<TABLE>
<CAPTION>
DISPOSITION OF
OCCIDENTAL PETROCHEMICALS DISPOSITION OCCIDENTAL
DECEMBER 31, 1997 HISTORICAL BUSINESS(1) ADJUSTMENTS(2) PRO FORMA
- ------------------------------------- ---------- -------------- -------------- ----------
<S> <C> <C> <C> <C>
ASSETS
Current assets $ 1,916 $ (288) $ 420 $ 2,048
Property, plant and equipment, net 8,590 (1,830) -- 6,760
Equity investments 921 (89) 1,444 2,276
Other assets 623 (24) -- 599
Net assets of discontinued operations 3,232 -- -- 3,232
------- ------- ------- -------
$15,282 $(2,231) $ 1,864 $14,915
======= ======= ======= =======
LIABILITIES AND EQUITY
Current liabilities $ 1,870 $ (136) $ -- $ 1,734
Long-term debt, net 4,925 -- -- 4,925
Deferred and other domestic and
foreign income taxes 1,028 -- -- 1,028
Other deferred credits and other
liabilities 3,173 (231) -- 2,942
Stockholders' equity 4,286 (1,864) 1,864 4,286
------- ------- ------- -------
$15,282 $(2,231) $ 1,864 $14,915
======= ======= ======= =======
</TABLE>
- ---------------------------------------------
(1) Reflects the disposition of Occidental's Petrochemicals Business, which is
anticipated to be consummated in mid-1998, as if the transaction had taken
place on December 31, 1997.
(2) To reflect cash and an equity investment to be received as proceeds from the
disposition of Occidental's Petrochemicals Business.
S-20
<PAGE> 22
DESCRIPTION OF THE NOTES
The $250,000,000 aggregate principal amount of 6.50% Senior Notes due April 1,
2005 (the "Seven-Year Notes"), the $200,000,000 aggregate principal amount of
7.20% Senior Debentures due April 1, 2028 (the "Thirty-Year Debentures" and,
together with the Seven-Year Notes, the "Senior Notes") and the $450,000,000
aggregate principal amount of 6.40% Senior Notes due April 1, 2013, Mandatorily
Tendered on April 1, 2003 (the "Mandatorily Tendered Notes" and, together with
the Senior Notes, the "Notes") will each be issued as a separate series of
senior debt securities under an Indenture, dated as of April 1, 1998 (as
amended, modified or supplemented from time to time, the "Indenture"), between
Occidental and The Bank of New York, as trustee (the "Trustee"). The following
summary of certain provisions of the Notes and of the Indenture does not purport
to be complete and is qualified in its entirety by reference to the Indenture, a
copy of the form of which has been filed as an exhibit to the Registration
Statement referred to in the accompanying Prospectus. Capitalized terms used but
not defined herein or in the accompanying Prospectus have the meanings given to
them in the Indenture. This description of the particular terms of the Notes
supplements, and, to the extent inconsistent therewith, replaces, the
description of the general terms and provisions of the Debt Securities and the
Indenture set forth in the accompanying Prospectus under the heading
"Description of the Debt Securities," to which description reference is hereby
made. The Notes are "Debt Securities" as that term is used in the accompanying
Prospectus and are also referred to therein as the "Offered Securities." The
term "Securities," as used under this caption, refers to all Debt Securities
issuable from time to time under the Indenture and includes the Notes.
GENERAL
All Securities, including the Notes, to be issued under the Indenture will be
senior unsecured obligations of Occidental and will rank pari passu with all
other senior unsecured indebtedness of Occidental from time to time outstanding.
The Indenture does not limit the aggregate principal amount of Securities which
may be issued thereunder, and Securities may be issued thereunder from time to
time as a single series or in two or more separate series up to the aggregate
principal amount from time to time authorized by Occidental for each series.
Occidental may, from time to time, without the consent of the Holders of the
Notes, provide for the issuance of Notes or other Securities under the Indenture
in addition to the Notes offered hereby. As of the date of this Prospectus
Supplement, no Securities were outstanding.
The Securities will be senior unsecured obligations of Occidental. However,
substantially all of Occidental's operations are conducted through subsidiaries,
and any right of Occidental to receive assets of any of its subsidiaries upon
the liquidation or recapitalization of any such subsidiary (and the consequent
right of Holders of the Securities to participate in those assets) will be
subject to the claims of such subsidiary's creditors, except to the extent that
Occidental is itself recognized as a creditor of such subsidiary. Even if
Occidental is recognized as a creditor of a subsidiary, Occidental's claims
would still be subject to any security interests in the assets of such
subsidiary securing another creditor of such subsidiary and would be subject to
any indebtedness or other liability of such subsidiary senior to Occidental's
claims. Accordingly, by operation of the foregoing principles, the Securities
will be effectively subordinated to all indebtedness and other liabilities,
including trade accounts payable, of Occidental's subsidiaries. As of December
31, 1997, the total amount of indebtedness and other liabilities of such
subsidiaries that would have been senior to the Holders' rights under the
Securities within the meaning of the two preceding sentences was approximately
$3.4 billion (excluding interest).
Principal of and interest on the Notes will be payable, and the transfer of
Notes will be registrable, at the Corporate Trust Office of the Trustee or at
any other office or agency designated by Occidental for such purpose. Interest
shall be calculated based on a 360-day year consisting of twelve 30-day months.
The Notes will bear interest from April 1, 1998 at the respective rates per
annum shown in the title of such series on the front cover of this Prospectus
Supplement. Interest on the Notes will be payable semi-
S-21
<PAGE> 23
annually in arrears on April 1 and October 1 of each year (each, an "Interest
Payment Date"), commencing on October 1, 1998, to the persons in whose names the
Notes are registered at the close of business on March 15 and September 15, as
the case may be, next preceding the related Interest Payment Date (each, a
"Regular Record Date"). If any Interest Payment Date, maturity date or date of
redemption of any Notes, or date of repurchase of Mandatorily Tendered Notes,
falls on a day that is not a Business Day, the payment shall be made on the next
Business Day with the same force and effect as if it were made on the date such
payment was due and no interest shall accrue on the amount so payable for the
period from and after such Interest Payment Date, maturity date, redemption date
or repurchase date, as the case may be.
The Notes are not entitled to any mandatory redemption or sinking fund payments.
The Notes are redeemable at the option of the Company on the terms set forth
below. See "Optional Redemption."
THE SENIOR NOTES
The Seven-Year Notes and the Thirty-Year Debentures will be limited to
$250,000,000 and $200,000,000, respectively, aggregate principal amount and will
mature on April 1, 2005 and April 1, 2028, respectively.
THE MANDATORILY TENDERED NOTES
The Mandatorily Tendered Notes will be limited to $450,000,000 aggregate
principal amount and will mature on April 1, 2013 (the "Final Maturity Date").
Until April 1, 2003 (the "Remarketing Date"), the Mandatorily Tendered Notes
will bear interest from April 1, 1998 at the annual interest rate of 6.40%
payable semiannually in arrears on each Interest Payment Date, commencing
October 1, 1998, to the persons in whose names the Mandatorily Tendered Notes
are registered on the Regular Record Date next preceding the related Interest
Payment Date. If the Remarketing Dealer elects to remarket the Mandatorily
Tendered Notes, except in the limited circumstances described herein, (i) the
Mandatorily Tendered Notes will be subject to mandatory tender to the
Remarketing Dealer at 100% of the principal amount thereof for remarketing on
the Remarketing Date, on the terms and subject to the conditions described
herein, and (ii) on and after the Remarketing Date, the Mandatorily Tendered
Notes will bear interest at the rate determined by the Remarketing Dealer in
accordance with the procedures set forth below (the "Interest Rate to
Maturity"). See "Tender of Mandatorily Tendered Notes; Remarketing" below.
Under the circumstances described below, the Mandatorily Tendered Notes are
subject to redemption by Occidental from the Remarketing Dealer on the
Remarketing Date. See "Redemption From Remarketing Dealer" below. If the
Remarketing Dealer for any reason does not purchase all tendered Mandatorily
Tendered Notes on the Remarketing Date or elects not to remarket the Mandatorily
Tendered Notes, or in certain other limited circumstances described herein,
Occidental will be required to repurchase the Mandatorily Tendered Notes from
the Holders thereof on the Remarketing Date, at 100% of the principal amount
thereof plus accrued interest, if any. See "Repurchase" below.
Tender of Mandatorily Tendered Notes; Remarketing
The following description sets forth the terms and conditions of the remarketing
of the Mandatorily Tendered Notes, in the event that the Remarketing Dealer
elects to purchase the Mandatorily Tendered Notes and remarket the Mandatorily
Tendered Notes on the Remarketing Date (the "Remarketing Right").
Mandatory Tender. Provided that the Remarketing Dealer gives notice to
Occidental and the Trustee on a Business Day not later than five Business Days
prior to the Remarketing Date of its intention to purchase the Mandatorily
Tendered Notes for remarketing (the "Notification Date"), each Mandatorily
Tendered Note will be automatically tendered, or deemed tendered, to the
Remarketing Dealer for purchase on the Remarketing Date, except in the
circumstances described under "Repurchase" or
S-22
<PAGE> 24
"Redemption From Remarketing Dealer" below. The purchase price for the tendered
Mandatorily Tendered Notes to be paid by the Remarketing Dealer will equal 100%
of the principal amount thereof (interest accrued, if any, to the Remarketing
Date will be paid by Occidental on such date to the persons in whose names the
Mandatorily Tendered Notes are registered on the Regular Record Date immediately
preceding the Remarketing Date). See "Notification of Results; Settlement"
below. When the Mandatorily Tendered Notes are tendered for remarketing, the
Remarketing Dealer may, under certain circumstances, remarket the Mandatorily
Tendered Notes for its own account. From and after the Remarketing Date, the
Mandatorily Tendered Notes will bear interest at the Interest Rate to Maturity.
If the Remarketing Dealer elects to remarket the Mandatorily Tendered Notes, the
obligation of the Remarketing Dealer to purchase the Mandatorily Tendered Notes
on the Remarketing Date is subject, among other things, to the conditions that,
since the Notification Date, no material adverse change in the consolidated
financial condition of Occidental and its subsidiaries, taken as a whole, shall
have occurred and that no Event of Default with respect to the Mandatorily
Tendered Notes shall have occurred and be continuing. If for any reason the
Remarketing Dealer does not purchase all tendered Mandatorily Tendered Notes on
the Remarketing Date, Occidental will be required to repurchase the Mandatorily
Tendered Notes from the Holders thereof at a price equal to the principal amount
thereof plus accrued interest, if any, to the Remarketing Date. See "Repurchase"
below.
The Interest Rate to Maturity shall be determined by the Remarketing Dealer by
3:30 p.m., New York City time, on the third Business Day immediately preceding
the Remarketing Date (the "Determination Date") to the nearest one
hundred-thousandth (0.00001) of one percent per annum and will be equal to
5.666% (the "Base Rate") plus the Applicable Spread (as defined below), which
will be based on the Dollar Price (as defined below) of the Mandatorily Tendered
Notes. The Interest Rate to Maturity announced by the Remarketing Dealer, absent
manifest error, shall be binding and conclusive upon the Holders of the
Mandatorily Tendered Notes, Occidental and the Trustee.
The "Applicable Spread" will be the lowest bid, expressed as a spread (in the
form of a percentage or in basis points) above the Base Rate, obtained by the
Remarketing Dealer on the Determination Date from the bids quoted by five
Reference Corporate Dealers (as defined below) for the purchase by such
Reference Corporate Dealer of the full aggregate principal amount of the
Mandatorily Tendered Notes at the Dollar Price, assuming (i) an issue date equal
to the Remarketing Date, with settlement on such date without accrued interest,
(ii) a maturity date equal to the Final Maturity Date, and (iii) a stated annual
interest rate, payable semiannually on each Interest Payment Date, equal to the
Base Rate plus the spread bid by the applicable Reference Corporate Dealer. If
fewer than five Reference Corporate Dealers bid as described above, then the
Applicable Spread shall be the lowest of such bids obtained as described above.
"Dollar Price" means, with respect to the Mandatorily Tendered Notes, the
present value determined by the Remarketing Dealer, as of the Remarketing Date,
of the Remaining Scheduled Payments (as defined below) discounted to the
Remarketing Date, on a semiannual basis (assuming a 360-day year consisting of
twelve 30-day months), at the Treasury Rate (as defined below).
"Reference Corporate Dealers" mean leading dealers of publicly traded debt
securities of Occidental in The City of New York (which, unless otherwise
specified by the Remarketing Dealer, shall include the Remarketing Dealer or one
of its affiliates) selected by Occidental, after consultation with the
Remarketing Dealer, and notified to the Remarketing Dealer not later than one
Business Day prior to the Determination Date; provided, that if the Company does
not so notify the Remarketing Dealer by the close of business on the Business
Day prior to the Determination Date, then such Reference Corporate Dealers shall
be selected by the Remarketing Dealer.
"Treasury Rate" means, with respect to the Remarketing Date, the rate per annum
equal to the semiannual equivalent yield to maturity or interpolated (on a day
count basis) yield to maturity of the Comparable Treasury Issues (as defined
below), assuming a price for the Comparable Treasury Issues (expressed as a
percentage of its principal amount), equal to the Comparable Treasury Price (as
defined below) for such Remarketing Date.
S-23
<PAGE> 25
"Comparable Treasury Issues" means the current on-the-run (as such term is used
by dealers in the United States Treasury securities market) ten-year United
States Treasury security as set forth at 11:00 a.m., New York City time, on the
Determination Date on "Telerate Page 500" (as defined below) (or such other page
as may replace Telerate Page 500); provided, that if ten-year United States
Treasury securities shall not have been issued within the twelve-month period
preceding the Remarketing Date, "Comparable Treasury Issues" shall mean the
United States Treasury security or securities selected by the Remarketing Dealer
as having an actual or interpolated maturity or maturities comparable to the
term remaining to the Final Maturity Date of the Mandatory Tendered Notes being
remarketed.
"Comparable Treasury Price" means, with respect to the Remarketing Date, (a) the
offer prices for the Comparable Treasury Issues (expressed in each case as a
percentage of its principal amount) on the Determination Date, as set forth on
"Telerate Page 500" (or such other page as may replace Telerate Page 500) or (b)
if such page (or any successor page) is not displayed or does not contain such
offer prices on the Determination Date, (i) the average of the Reference
Treasury Dealer Quotations for such Remarketing Date, after excluding the
highest and lowest of such Reference Treasury Dealer Quotations, or (ii) if the
Remarketing Dealer obtains fewer than four such Reference Treasury Dealer
Quotations, the average of all such Reference Treasury Dealer Quotations.
"Telerate Page 500" means the display designated as "Telerate Page 500" on Dow
Jones Markets Limited (or such other page as may replace Telerate Page 500 on
such service) or such other service displaying the offer prices specified in
clause (a) above as may replace Dow Jones Markets Limited.
"Reference Treasury Dealer Quotations" means, with respect to each Reference
Treasury Dealer and the Remarketing Date, the offer prices for the Comparable
Treasury Issues (expressed in each case as a percentage of its principal amount)
quoted to the Remarketing Dealer by such Reference Treasury Dealer by 3:30 p.m.,
New York City time, on the Determination Date.
"Reference Treasury Dealer" means each of Merrill Lynch, Pierce, Fenner & Smith
Incorporated, J.P. Morgan Securities, Inc., BancAmerica Robertson Stephens,
Chase Securities Inc. and Morgan Stanley & Co. Incorporated (or their respective
affiliates which are primary U.S. Government securities dealers) and their
respective successors; provided, however, that if any of the foregoing or their
affiliates shall cease to be a primary U.S. Government securities dealer in The
City of New York (a "Primary Treasury Dealer"), the Remarketing Dealer shall
substitute therefor another Primary Treasury Dealer.
"Remaining Scheduled Payments" means, with respect to the Mandatorily Tendered
Notes, the remaining scheduled payments of the principal thereof and interest
thereon, calculated at the Base Rate only, that would be due after the
Remarketing Date to and including the Final Maturity Date, as determined by the
Remarketing Dealer.
Notification of Results; Settlement. Provided the Remarketing Dealer has
previously notified Occidental and the Trustee on the Notification Date of its
intention to purchase all tendered Mandatorily Tendered Notes on the Remarketing
Date, the Remarketing Dealer will notify Occidental, the Trustee and the DTC by
telephone, confirmed in writing (which may include facsimile or other electronic
transmission), by 4:00 p.m., New York City time, on the Determination Date, of
the Interest Rate to Maturity.
All of the tendered Mandatorily Tendered Notes will be automatically delivered
to the account of the Trustee, by book-entry through DTC pending payment of the
purchase price therefor, on the Remarketing Date.
In the event that the Remarketing Dealer purchases the tendered Mandatorily
Tendered Notes on the Remarketing Date, the Remarketing Dealer will make or
cause the Trustee to make payment to the DTC participant of each tendering owner
of a beneficial interest (a "Beneficial Owner") of Mandatorily Tendered Notes,
by book-entry through DTC by the close of business on the Remarketing Date
against delivery through DTC of such Beneficial Owner's tendered Mandatorily
Tendered Notes, of 100% of the principal amount of the tendered Mandatorily
Tendered Notes that have been purchased for remarketing by the Remarketing
Dealer. If the Remarketing Dealer does not purchase all of the Mandatorily
Tendered Notes on the Remarketing Date, Occidental will be required to make or
cause to
S-24
<PAGE> 26
be made such payment for the Mandatorily Tendered Notes, as described below
under "Repurchase." In any case, Occidental will make or cause the Trustee to
make payment of interest due on the Remarketing Date to each person in whose
name a Mandatorily Tendered Note is registered on the Regular Record Date
immediately preceding the Remarketing Date by the close of business on the
Remarketing Date.
The transactions described above will be executed on the Remarketing Date
through DTC in accordance with the procedures of DTC, and the accounts of the
respective DTC participants will be debited and credited and the Mandatorily
Tendered Notes delivered by book-entry as necessary to effect the purchases and
sales thereof. Transactions involving the sale and purchase of Mandatorily
Tendered Notes remarketed by the Remarketing Dealer on and after the Remarketing
Date will settle in immediately available funds through DTC's Same-Day Funds
Settlement System.
The tender and settlement procedures described above, including provisions for
payment by purchasers of Mandatorily Tendered Notes in the remarketing or for
payment to selling Beneficial Owners of tendered Mandatorily Tendered Notes, may
be modified to the extent required by DTC or to the extent required to
facilitate the tender and remarketing of Mandatorily Tendered Notes in
certificated form, if the book-entry system is no longer available for the
Mandatorily Tendered Notes at the time of the remarketing. In addition, the
Remarketing Dealer may, in accordance with the terms of the Indenture, modify
the tender and settlement procedures set forth above in order to facilitate the
tender and settlement process.
As long as DTC's nominee holds the certificates representing any Mandatorily
Tendered Notes in the book-entry system of DTC, no certificates for such
Mandatorily Tendered Notes will be delivered by any selling Beneficial Owner to
reflect any transfer of such Mandatorily Tendered Notes effected in the
remarketing. In addition, under the terms of the Mandatorily Tendered Notes and
the Remarketing Agreement (described below), Occidental has agreed that,
notwithstanding any provision to the contrary set forth in the Indenture, (i) it
will use its commercially reasonable efforts to maintain the Mandatorily
Tendered Notes in book-entry form with DTC or any successor thereto and to
appoint a successor depositary to the extent necessary to maintain the
Mandatorily Tendered Notes in book-entry form, and (ii) it will waive any
discretionary right it otherwise has under the Indenture to cause the
Mandatorily Tendered Notes to be issued in certificated form.
For further information with respect to transfers and settlement through DTC,
see "Description of the Notes; Book-Entry System" below.
The Remarketing Dealer. Occidental and the Remarketing Dealer are entering into
a Remarketing Agreement, the general terms and provisions of which are
summarized below.
The Remarketing Dealer will not receive any fees or reimbursement of expenses
from Occidental in connection with the remarketing. Occidental will agree, under
certain circumstances, to indemnify the Remarketing Dealer against certain
liabilities, including liabilities under the Securities Act of 1933 (the "Act"),
arising out of or in connection with its duties under the Remarketing Agreement.
In the event that the Remarketing Dealer elects to remarket the Mandatorily
Tendered Notes as described herein, the obligation of the Remarketing Dealer to
purchase the Mandatorily Tendered Notes from tendering Beneficial Owners of the
Mandatorily Tendered Notes will be subject to several conditions precedent set
forth in the Remarketing Agreement, including the conditions that, since the
Notification Date, there shall not have been any material adverse change in the
consolidated financial condition of Occidental and its subsidiaries, taken as a
whole, and that no Event of Default with respect to the Mandatorily Tendered
Notes shall have occurred and be continuing. In addition, the Remarketing
Agreement will provide for the termination thereof by the Remarketing Dealer on
or before the Remarketing Date, upon the occurrence of certain events as set
forth in the Remarketing Agreement.
No Holder or Beneficial Owner of any Mandatorily Tendered Notes shall have any
rights or claims under the Remarketing Agreement or against the Remarketing
Dealer as a result of the Remarketing Dealer not purchasing such Mandatorily
Tendered Notes.
S-25
<PAGE> 27
The Remarketing Agreement will also provide that the Remarketing Dealer may
resign at any time as Remarketing Dealer, such resignation to be effective 10
days after the delivery to Occidental and the Trustee of notice of such
resignation. In such case, it shall be the sole obligation of Occidental to
appoint a successor Remarketing Dealer.
The Remarketing Dealer, in its individual or any other capacity, may buy, sell,
hold and deal in any of the Mandatorily Tendered Notes. The Remarketing Dealer
may exercise any vote or join in any action which any Beneficial Owner of
Mandatorily Tendered Notes may be entitled to exercise or take with like effect
as if it did not act in any capacity under the Remarketing Agreement. The
Remarketing Dealer, in its individual capacity, either as principal or agent,
may also engage in or have an interest in any financial or other transaction
with Occidental as freely as if it did not act in any capacity under the
Remarketing Agreement.
Repurchase
In the event that (i) the Remarketing Dealer for any reason does not notify
Occidental of the Interest Rate to Maturity by 4:00 p.m., New York City time, on
the Determination Date, or (ii) prior to the Remarketing Date, the Remarketing
Dealer has resigned and no successor has been appointed on or before the
Determination Date, or (iii) since the Notification Date, the Remarketing Dealer
terminates the Remarketing Agreement due to the occurrence of a material adverse
change in the consolidated financial condition of Occidental and its
subsidiaries, taken as a whole, or an Event of Default with respect to the
Mandatorily Tendered Notes shall have occurred and be continuing, or any other
event constituting a termination event under the Remarketing Agreement, or (iv)
the Remarketing Dealer does not elect to remarket the Mandatorily Tendered
Notes, or (v) the Remarketing Dealer for any reason does not purchase all
tendered Mandatorily Tendered Notes on the Remarketing Date, Occidental will
repurchase the Mandatorily Tendered Notes as a whole on the Remarketing Date at
a price equal to 100% of the principal amount thereof plus all accrued and
unpaid interest, if any, on the Mandatorily Tendered Notes to the Remarketing
Date. In any such case, payment will be made by Occidental to the registered
holders of the Mandatorily Tendered Notes by book-entry through DTC by the close
of business on the Remarketing Date against delivery through DTC of such
tendered Mandatorily Tendered Notes.
Redemption From Remarketing Dealer
If the Remarketing Dealer elects to remarket the Mandatorily Tendered Notes on
the Remarketing Date, the Mandatorily Tendered Notes will be subject to
mandatory tender to the Remarketing Dealer for remarketing on such date, in each
case subject to the conditions described above under "Tender of Mandatorily
Tendered Notes; Remarketing" and "Repurchase" and to Occidental's right to
redeem the Mandatorily Tendered Notes from the Remarketing Dealer as described
in the next sentence. Occidental will notify the Remarketing Dealer and the
Trustee, not later than the close of business on the Business Day immediately
preceding the Determination Date, if Occidental irrevocably elects to exercise
its right to redeem the Mandatorily Tendered Notes, in whole but not in part,
from the Remarketing Dealer on the Remarketing Date at the Optional Redemption
Price.
The "Optional Redemption Price" shall be the greater of (i) 100% of the
principal amount of the Mandatorily Tendered Notes and (ii) the sum of the
present values of the Remaining Scheduled Payments thereon, as determined by the
Remarketing Dealer, discounted to the Remarketing Date on a semiannual basis
(assuming a 360-day year consisting of twelve 30-day months) at the Treasury
Rate, plus in either case accrued and unpaid interest at a rate equal to 6.40%
per annum on the principal amount being redeemed from the Remarketing Date to
the date of redemption if payment in respect of such redemption occurs after the
Remarketing Date. If Occidental elects to redeem the Mandatorily Tendered Notes,
it shall pay the redemption price therefor in same-day funds by wire transfer to
an account designated by the Remarketing Dealer on the Remarketing Date. No
portion of the Optional Redemption Price shall be payable to any person other
than the Remarketing Dealer.
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<PAGE> 28
OPTIONAL REDEMPTION
The Notes of each series will be redeemable, in whole or from time to time in
part, at the option of Occidental at any time with respect to the Senior Notes
and after the Remarketing Date with respect to the Mandatorily Tendered Notes at
a redemption price equal to the greater of (i) 100% of the principal amount of
the Notes of such series to be redeemed and (ii) an amount (determined by the
Quotation Agent (as defined below)) equal to the sum of the present values of
the remaining scheduled payments of principal and interest on the Notes of such
series to be redeemed (not including any portion of such payments of interest
accrued as of the date of redemption) discounted to the date of redemption on a
semi-annual basis (assuming a 360-day year consisting of twelve 30-day months)
at the Adjusted Treasury Rate (as defined below) plus 15 basis points in the
case of the Seven-Year Notes and the Mandatorily Tendered Notes and 20 basis
points in the case of the Thirty-Year Debentures, plus, in each case, accrued
interest thereon to the date of redemption; provided, however, that installments
of interest on the Notes whose stated maturity is on or prior to the relevant
redemption date shall be payable to the Holders of such Notes registered as such
at the close of business on the relevant Regular Record Dates.
"Adjusted Treasury Rate" means, with respect to any redemption date, the rate
per annum equal to the semi-annual equivalent yield to maturity of the
Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such redemption date.
"Comparable Treasury Issue" means the United States Treasury security selected
by the Quotation Agent as having a maturity comparable to the remaining term of
the Notes of the applicable series to be redeemed that would be utilized, at the
time of selection and in accordance with customary financial practice, in
pricing new issues of corporate debt securities of comparable maturity to the
remaining term of such series of Notes.
"Comparable Treasury Price" means, with respect to any redemption date, (i) the
average of the Reference Treasury Dealer Quotations for such redemption date,
after excluding the highest and lowest such Reference Treasury Dealer
Quotations, or (ii) if the Trustee obtains fewer than three such Reference
Treasury Dealer Quotations, the average of such Quotations, such average in any
case to be determined by the Quotation Agent, or (iii) if only one Reference
Treasury Dealer Quotation is received, such Quotation.
"Quotation Agent" means the Reference Treasury Dealer appointed by Occidental.
"Reference Treasury Dealer" means (i) J.P. Morgan Securities Inc., Merrill
Lynch, Pierce, Fenner & Smith Incorporated, BancAmerica Robertson Stephens,
Chase Securities Inc. and Morgan Stanley & Co. Incorporated and their respective
successors; provided, however, that if any of the foregoing shall cease to be a
primary U.S. Government securities dealer in New York City (a "Primary Treasury
Dealer"), Occidental shall substitute therefor another Primary Treasury Dealer,
and (ii) any other Primary Treasury Dealer(s) selected by Occidental.
"Reference Treasury Dealer Quotations" means, with respect to each Reference
Treasury Dealer and any redemption date, the average, as determined by the
Quotation Agent, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m. on the
third Business Day in the City of New York preceding such redemption date.
Notice of any redemption will be mailed at least 30 days but not more than 60
days before the redemption date to each Holder of the Notes of any series to be
redeemed. Unless Occidental defaults in payment of the redemption price, on and
after the redemption date, interest will cease to accrue on the Notes or
portions thereof called for redemption. If less than all of the Notes of any
series are to be redeemed, the Notes of such series (or portions thereof) to be
redeemed shall be selected by the Trustee by such method as the Trustee shall
deem fair and appropriate.
S-27
<PAGE> 29
BOOK-ENTRY SYSTEM
Upon issuance, all Notes of the same series having the same original issue date,
Stated Maturity and otherwise having identical terms and provisions will be
represented by a single global security (each, a "Global Security"); provided,
however, that if by reason of the foregoing, a single Global Security would
exceed $200,000,000 in aggregate principal amount, one Global Security will be
issued to represent each $200,000,000 of aggregate principal amount and an
additional Global Security will be issued to represent any remaining principal
amount. Each Global Security representing Notes of any series will be deposited
with, or on behalf of, the Depositary identified below. Except as set forth
below, a Global Security may not be transferred except as a whole by the
Depositary to a nominee of the Depositary or by a nominee of the Depositary to
the Depositary or another nominee of the Depositary or by the Depositary or any
nominee to a successor of the Depositary or a nominee of such successor.
The Depository Trust Company, New York, New York ("DTC") will be the initial
Depositary with respect to the Notes. DTC has advised Occidental that it is a
limited-purpose trust company organized under the laws of the State of New York,
a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the Uniform Commercial Code and a "clearing agency" registered
pursuant to the provisions of Section 17A of the Securities Exchange Act of
1934, as amended (the "Exchange Act"). The Depositary was created to hold
securities of its participants and to facilitate the clearance and settlement of
securities transactions among its participants in such securities through
electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movement of securities certificates. DTC's
participants include securities brokers and dealers (including the
Underwriters), banks, trust companies, clearing corporations and certain other
organizations, some of whom (and/or their representatives) own DTC. Access to
DTC's book-entry system is also available to others, such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly. Persons who are
not participants may beneficially own securities held by DTC only through
participants.
Upon the issuance by Occidental of Notes of any series represented by a Global
Security, the Depositary will credit, in its book-entry registration and
transfer system, the respective principal amounts of the Notes of such series
represented by such Global Security to the accounts of participants. The
accounts to be credited shall be designated by the Underwriters or Occidental,
if such Notes are offered and sold directly by Occidental. Ownership of
beneficial interests in a Global Security will be limited to participants or
persons that hold interests through participants. Ownership of beneficial
interests in Notes of any series represented by a Global Security or Securities
will be shown on, and the transfer of that ownership will be effected only
through, records maintained by the Depositary (with respect to interests of
participants in the Depositary), or by participants in the Depositary or persons
that may hold interests through such participants (with respect to persons other
than participants in the Depositary). The laws of some states require that
certain purchasers of securities take physical delivery of such securities in
definitive form. Such limits and such laws may impair the ability to transfer
beneficial interests in a Global Security.
So long as the Depositary for a Global Security, or its nominee, is the
registered owner of the Global Security, the Depositary or its nominee, as the
case may be, will be considered the sole owner or holder of the Notes
represented by such Global Security, for all purposes under the Indenture.
Except as provided below, owners of beneficial interests in Notes of any series
represented by a Global Security or Securities will not be entitled to have
Notes of such series represented by such Global Security registered in their
names, will not receive or be entitled to receive physical delivery of Notes of
such series in definitive form and will not be considered the owners or holders
thereof under the Indenture.
Payments of principal of and interest, if any, on the Notes of any series
represented by a Global Security registered in the name of the Depositary or its
nominee will be made by Occidental through the Trustee to the Depositary or its
nominee, as the case may be, as the registered owner of a Global Security. None
of Occidental, the Trustee, the Paying Agent or the Security Registrar will have
any responsibility or liability for any aspect of the records relating to or
payments made on account of
S-28
<PAGE> 30
beneficial ownership interests of a Global Security or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests. Occidental expects that the Depositary, upon receipt of any payment
of principal or interest in respect of a Global Security, will immediately
credit the accounts of the related participants with payments in amounts
proportionate to their respective holdings in principal amount of beneficial
interests in such Global Security as shown on the records of the Depositary.
Occidental also expects that payments by participants to owners of beneficial
interests in a Global Security will be governed by standing customer
instructions and customary practices, as is now the case with securities held
for the accounts of customers in bearer form or registered in "street name" and
will be the responsibility of such participants.
If the Depositary with respect to any Global Security or Securities is at any
time unwilling or unable to continue as Depositary and a successor Depositary is
not appointed by Occidental within 90 days, Occidental will issue Notes in
definitive form in exchange for the Notes represented by such Global Security or
Securities. In addition, with respect to the Senior Notes, Occidental may at any
time and in its sole discretion determine not to have a Global Security or
Securities, and, in such event, will issue Senior Notes in definitive form in
exchange for the Senior Notes represented by such Global Security or Securities.
CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS
The following is a summary of certain United States federal income tax
consequences of the purchase, ownership and disposition of the Mandatorily
Tendered Notes. Unless otherwise stated, this summary deals only with
Mandatorily Tendered Notes held as capital assets (generally, assets held for
investment under the Code) by holders who purchase the Mandatorily Tendered
Notes upon original issuance. The tax treatment of a holder of Mandatorily
Tendered Notes may vary depending upon his particular situation. This summary
does not address all of the tax consequence that may be relevant to holders who
may be subject to special tax treatment such as insurance companies,
broker-dealers, tax-exempt organizations, or, except to the extent described
below, foreign taxpayers. In addition, this summary does not address any aspects
of state, local, or foreign tax laws. This summary is based on the United States
federal income tax law in effect as of the date hereof, which is subject to
change, possibly on a retroactive basis. Each investor is urged to consult his
tax advisor as to the particular consequences of purchasing, owning and
disposing of Mandatorily Tendered Notes, including the application and effect of
United States federal, state, local, and foreign tax laws.
Although there is no authority on point characterizing instruments such as the
Mandatorily Tendered Notes, and the matter is not free from doubt, the
Mandatorily Tendered Notes should be treated as fixed rate debt instruments that
mature on the Remarketing Date. Under this characterization, each holder should
include in income the interest paid or accrued on the Mandatorily Tendered Notes
in accordance with its usual method of accounting. Upon the sale, exchange,
redemption or other disposition by a holder of the Mandatorily Tendered Notes,
the holder should recognize capital gain or loss equal to the difference between
the amount realized from the disposition of the Mandatorily Tendered Notes
(exclusive of amounts attributable to the payment of accrued interest not
previously included in income, which will be taxable as ordinary income) and the
holder's adjusted tax basis in the Mandatorily Tendered Notes at the time of
sale, exchange, redemption or other disposition. A holder's adjusted tax basis
in the Mandatorily Tendered Notes will generally equal the holder's purchase
price for such Mandatorily Tendered Notes.
It is possible, however, that the Internal Revenue Service may assert that the
Mandatorily Tendered Notes should be subject to different tax treatment, which
could result in less favorable tax consequences to holders of Mandatorily
Tendered Notes. For example, the Internal Revenue Service could assert that the
Mandatorily Tendered Notes are subject to certain Treasury Regulations dealing
with contingent debt obligations, in which case a holder could be required
(regardless of such holder's usual method of accounting) to include annually in
its ordinary taxable income amounts in excess of actual cash payments received.
In addition, any gain recognized upon the sale, retirement or other disposition
of a
S-29
<PAGE> 31
Mandatorily Tendered Note would be treated as interest income, while any loss
recognized upon such events would generally be treated as ordinary loss to the
extent of the prior accruals of interest.
ERISA CONSIDERATIONS RELATING TO THE MANDATORILY TENDERED NOTES
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and
the Code impose certain restrictions on (a) employee benefit plans (as defined
in Section 3(3) of ERISA), (b) plans described in section 4975(e)(1) of the
Code, including individual retirement accounts or Keogh plans, (c) any entities
whose underlying assets include plan assets by reason of a plan's investment in
such entities (each a "Plan") and (d) persons who have certain specified
relationships to such Plans ("Parties-in-Interest" under ERISA and "Disqualified
Persons" under the Code). Moreover, based on the reasoning of the United States
Supreme Court in John Hancock Life Ins. v. Harris Trust and Sav. Bank, 114 S.
Ct. 517 (1993), an insurance company's general account may be deemed to include
assets of the Plans investing in the general account (e.g., through the purchase
of an annuity contract). ERISA also imposes certain duties on persons who are
fiduciaries of Plans subject to ERISA, and ERISA and the Code prohibit certain
transactions between a Plan and Parties-in-Interest or Disqualified Persons with
respect to such Plan.
Occidental and the Remarketing Dealer, because of their activities or the
activities of their respective affiliates, may be considered to be
Parties-In-Interest or Disqualified Persons with respect to certain Plans. If
the Mandatorily Tendered Notes are acquired by a Plan with respect to which
Occidental or the Remarketing Dealer is, or subsequently becomes, a
Party-in-Interest or Disqualified Person, the purchase, holding or sale of
Mandatorily Tendered Notes could be deemed to be a direct or indirect violation
of the prohibited transaction rules of ERISA and the Code unless such
transaction were subject to one or more statutory or administrative exemptions
(such as Prohibited Transaction Class Exemption("PTCE") 75-1, which exempts
certain transactions involving employee benefit plans and certain
broker-dealers, reporting dealers and banks; PTCE 90-1, which exempts certain
transactions involving insurance company pooled separate accounts; PTCE 91-38,
which exempts certain transactions involving bank collective investment funds;
PTCE 84-14, which exempt certain transactions effected on behalf of a Plan by a
"qualified professional asset manager"; PTCE 95-60, which exempts certain
transactions involving insurance company general accounts; or PTCE 96-23, which
exempts certain transactions effected on behalf of a Plan by an "in-house asset
manager").
Accordingly, prior to making an investment in the Mandatorily Tendered Notes, a
Plan should determine whether Occidental or the Remarketing Dealer may become a
Party-In-Interest or Disqualified Person with respect to such Plan and, if so,
whether such transaction is subject to one or more statutory or administrative
exemptions, including those described above.
Prior to making an investment in Mandatorily Tendered Notes, each Plan fiduciary
contemplating such an investment should consult with its legal advisors
concerning the impact of ERISA and the Code and the potential consequences of
such investment with respect to their specific circumstances. Moreover, each
Plan fiduciary should take into account, among other considerations, whether the
fiduciary has the authority to make the investment on behalf of the Plan;
whether the purchase, holding or sale of Mandatorily Tendered Notes would
constitute a direct or indirect transaction with any Party-in-Interest or
Disqualified Persons with respect to the Plan; and whether under the general
fiduciary standards of investment procedure and diversification an investment in
Mandatorily Tendered Notes is prudent and appropriate for the Plan, taking into
account the overall investment policy of the Plan and the composition of the
Plan's investment portfolio.
S-30
<PAGE> 32
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
dated the date hereof, Occidental has agreed to sell to each of the Underwriters
named below, severally, and each of the Underwriters (for whom J.P. Morgan
Securities Inc. is acting as book manager in the case of the Senior Notes and
for whom Merrill Lynch, Pierce, Fenner & Smith Incorporated is acting as book
manager in the case of the Mandatorily Tendered Notes) has severally agreed to
purchase, the principal amount of the Notes set forth opposite its name below:
<TABLE>
<CAPTION>
------------------------------------
PRINCIPAL AMOUNT PRINCIPAL AMOUNT
OF SEVEN-YEAR OF THIRTY-YEAR
UNDERWRITERS NOTES DEBENTURES
------------ ---------------- ----------------
<S> <C> <C>
J.P. Morgan Securities Inc. $ 50,000,000 $ 40,000,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated 50,000,000 40,000,000
BancAmerica Robertson Stephens 50,000,000 40,000,000
Chase Securities Inc. 50,000,000 40,000,000
Morgan Stanley & Co. Incorporated 50,000,000 40,000,000
------------ ------------
Total $250,000,000 $200,000,000
============ ============
</TABLE>
<TABLE>
<CAPTION>
----------------
PRINCIPAL AMOUNT
OF MANDATORILY
UNDERWRITERS TENDERED NOTES
------------ ----------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated $ 90,000,000
J.P. Morgan Securities Inc. 90,000,000
BancAmerica Robertson Stephens 90,000,000
Chase Securities Inc. 90,000,000
Morgan Stanley & Co. Incorporated 90,000,000
------------
Total $450,000,000
============
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the Underwriters
are obligated to take and pay for all of the Notes if any are taken.
The Underwriters initially propose to offer the Notes directly to the public at
the public offering prices set forth on the cover page of this Prospectus
Supplement and to certain dealers at such prices less a concession not in excess
of .375% of the principal amount in the case of the Seven-Year Notes, not in
excess of .500% of the principal amount in the case of the Thirty-Year
Debentures and not in excess of .350% of the principal amount in the case of the
Mandatorily Tendered Notes. The Underwriters may allow, and such dealers may
reallow, a concession not in excess of .250% of the principal amount of the
Notes to certain other dealers. After the initial public offering, the public
offering prices and such concessions may be changed.
Each series of the Notes will be a new issue of securities with no established
trading market. Occidental does not intend to apply for listing of any series of
the Notes on a national securities exchange, but has been advised by the
Underwriters that they intend to make a market in each series of the Notes. The
Underwriters are not obligated, however, to make a market in any series of the
Notes and may discontinue market making at any time without notice. No assurance
can be given as to the liquidity of, or trading market for, any series of the
Notes.
Occidental has agreed to indemnify the Underwriters against certain liabilities,
including liabilities under the Securities Act of 1933, as amended.
In the ordinary course of their respective businesses, the Underwriters or their
affiliates have engaged, are engaging and may in the future engage in investment
banking, financial advisory and/or commercial banking transactions with
Occidental and its affiliates.
S-31
<PAGE> 33
In connection with the offering of the Notes, the Underwriters may engage in
transactions that stabilize, maintain or otherwise affect the prices of the
Notes. Specifically, the Underwriters may overallot in connection with the
offerings of the Notes, creating a syndicate short position. In addition, the
Underwriters may bid for, and purchase, Notes in the open market to cover
syndicate shorts or to stabilize the prices of the Notes. Finally, the
underwriting syndicate may reclaim selling concessions allowed for distributing
the Notes in the offering of the Notes, if the syndicate repurchases previously
distributed Notes in syndicate covering transactions, stabilization transactions
or otherwise. Any of these activities may stabilize or maintain the market
prices of the Notes above independent market levels. The Underwriters are not
required to engage in any of these activities, and may end any of them at any
time.
LEGAL MATTERS
Certain matters with respect to the legality of the securities being offered
hereby will be passed upon for Occidental by Robert E. Sawyer, Esq., Associate
General Counsel of Occidental, and by Skadden, Arps, Slate, Meagher & Flom LLP,
Los Angeles, California. Mr. Sawyer beneficially owns, and has rights to acquire
under employee stock options, an aggregate of less than 1% of the outstanding
common stock of Occidental. Skadden, Arps, Slate, Meagher & Flom LLP has
represented each of the Underwriters from time to time on various unrelated
legal matters. Brown & Wood LLP, Los Angeles, California will act as counsel for
the Underwriters.
S-32
<PAGE> 34
PROSPECTUS
OCCIDENTAL PETROLEUM CORPORATION
(LOGO)
SENIOR DEBT SECURITIES
------------------------
Occidental Petroleum Corporation ("Occidental") may offer from time to time
pursuant to this Prospectus its senior unsecured debt securities consisting of
notes, debentures or other evidences of indebtedness (the "Debt Securities").
The Debt Securities will be limited to $750,000,000 aggregate public offering
price (or, if applicable, the equivalent thereof in any foreign currency or
composite currency or currency unit, based on the applicable exchange rate in
effect at the time of the sale of such Debt Securities). The Debt Securities may
be offered as a single series or as two or more separate series in amounts, at
prices and on terms to be determined in light of market conditions at the time
of sale and to be set forth in one or more Prospectus Supplements.
The terms of each series of Debt Securities, including, where applicable,
the specific designation, the aggregate principal amount, the authorized
denominations, the maturity, the rate or rates and the time or times of payment
of any interest, any terms for optional or mandatory redemption or payment of
additional amounts or any sinking fund provisions, the initial public offering
price, the proceeds to Occidental and any other specific terms in connection
with the offering and sale of such series will be set forth in one or more
Prospectus Supplements. As used herein, Debt Securities shall include securities
denominated in United States dollars or, at the option of Occidental if so
specified in an applicable Prospectus Supplement, in any other currency or in
composite currencies or currency units or in amounts determined by reference to
an index. This Prospectus may not be used to consummate sales of Debt Securities
unless accompanied by a Prospectus Supplement.
The Debt Securities may be sold to or through one or more underwriters or
dealers, directly by Occidental, or through one or more agents designated from
time to time. See "Plan of Distribution." If any underwriter or agent of
Occidental is involved in the sale of any Debt Securities in respect of which
this Prospectus is being delivered, the name of such underwriter or agent and
any applicable commission or discount will be set forth in a Prospectus
Supplement. The net proceeds to Occidental from such sale also will be set forth
in such Prospectus Supplement.
The Debt Securities may be issued in registered form or bearer form or
both. Debt Securities issued in bearer form may be offered only to non-United
States persons and to offices located outside the United States of certain
United States financial institutions. If the Debt Securities of any series are
issuable in bearer form, certain limitations on such issuance will be set forth
in an applicable Prospectus Supplement.
For a discussion of certain United States Federal income tax consequences
to holders of Debt Securities, see "United States Taxation."
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
THE DATE OF THIS PROSPECTUS IS MARCH 26, 1998.
<PAGE> 35
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS OR
ANY PROSPECTUS SUPPLEMENT AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY OCCIDENTAL
OR ANY UNDERWRITER OR AGENT. NEITHER THIS PROSPECTUS NOR ANY PROSPECTUS
SUPPLEMENT SHALL CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO
WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER THE
DELIVERY OF THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT NOR ANY SALE MADE
HEREUNDER AND THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THE INFORMATION HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THEIR RESPECTIVE DATES.
AVAILABLE INFORMATION
Occidental has filed a Registration Statement on Form S-3 (the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with the Securities and Exchange Commission (the
"Commission") with respect to the Debt Securities. This Prospectus does not
contain all the information set forth in the Registration Statement, certain
items of which are omitted in accordance with the rules and regulations of the
Commission. For further information regarding the Debt Securities offered
hereby, reference is made to the Registration Statement and exhibits thereto,
which may be inspected without charge at the offices of the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and
copies of which may be obtained from the Commission at prescribed rates.
Occidental is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Commission. Such reports, proxy statements and other information may be
inspected at, and, upon payment of the Commission's customary charges, copies
may be obtained from, the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and should also be available for inspection and copying at the
regional offices of the Commission located at 7 World Trade Center, 13th Floor,
New York, New York 10048 and 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such materials can also be obtained from the Public
Reference Section of the Commission at the above Washington, D.C. address at
prescribed rates. In addition, the Commission maintains a site on the World Wide
Web that contains reports, proxy statements and other information filed
electronically with the Commission. The address of such Web site is
http://www.sec.gov. Such material should also be available for inspection at the
offices of the New York Stock Exchange, 20 Broad Street, New York, New York and
the Pacific Exchange, 115 Sansome Street, Suite 1104, San Francisco, California.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed by Occidental with the
Commission, are hereby incorporated by reference in this Prospectus:
(i) Annual Report on Form 10-K for the fiscal year ended December 31,
1997; and
(ii) Current Reports on Form 8-K, dated January 26, 1998, January 30,
1998, January 31, 1998, February 11, 1998, and February 12, 1998.
All documents filed by Occidental pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the Debt Securities shall be deemed to be
incorporated by reference into this Prospectus and to be a part hereof from the
respective dates of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any supplement hereto, or in any
other subsequently filed document that also is or is deemed to be incorporated
by reference herein, modifies or supersedes such statement. Any such statement
so modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
Occidental will furnish without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon written or oral
request of such person, a copy of any documents incorporated by reference
herein, except for exhibits to such documents (unless such exhibits are
specifically incorporated by reference into such documents). Requests should be
directed to Occidental Petroleum Corporation, 10889 Wilshire Boulevard, Los
Angeles, California 90024, Attention: David C. Yen, Vice President and Treasurer
(telephone (310) 208-8800).
------------------------
Unless otherwise indicated, currency amounts in this Prospectus and any
Prospectus Supplement are stated in United States dollars ("$," "dollars," "U.S.
dollars" or "U.S.$").
2
<PAGE> 36
OCCIDENTAL PETROLEUM CORPORATION
Occidental, a Delaware corporation, explores for, develops, produces and
markets crude oil and natural gas and manufactures and markets a variety of
chlorovinyls, specialty chemicals and petrochemicals. Occidental conducts its
principal operations through two subsidiaries: Occidental Oil and Gas
Corporation and Occidental Chemical Corporation. Occidental's executive offices
are located at 10889 Wilshire Boulevard, Los Angeles, California 90024;
telephone (310) 208-8800.
USE OF PROCEEDS
Unless otherwise indicated in an applicable Prospectus Supplement,
Occidental intends to use the net proceeds from the sale of the Debt Securities
for general corporate purposes, primarily the retirement of outstanding
indebtedness.
RATIOS OF EARNINGS TO FIXED CHARGES
The following are Occidental's total enterprise ratios of earnings to fixed
charges for each of the periods indicated:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
- ------------------------------------------------------------------
1997 1996 1995 1994 1993
- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C>
1.55 2.08 1.75 (a) (a)
</TABLE>
- ---------------
(a) Earnings were inadequate to cover fixed charges by $298 million in 1994 and
$224 million in 1993.
Earnings are based on Occidental's consolidated income from continuing
operations, before taxes on income (other than foreign oil and gas taxes) and
before fixed charges. Fixed charges consist of interest and debt expense,
including the proportionate share of interest and debt expense of
50-percent-owned equity investments, the portion of lease rentals representative
of the interest factor and preferred dividends to minority stockholders of
subsidiaries adjusted to a pretax basis.
DESCRIPTION OF THE DEBT SECURITIES
The following description of the terms of the Debt Securities sets forth
certain general terms and provisions of the Debt Securities to which any
Prospectus Supplement may relate. The particular terms of the Debt Securities
offered by any Prospectus Supplement (the "Offered Securities") and the extent
to which such general provisions may apply to the Offered Securities will be
described in a Prospectus Supplement relating to such Offered Securities.
The Debt Securities will be issued under an Indenture, to be dated as of
April 1, 1998 (the "Indenture"), between Occidental and The Bank of New York, as
trustee (the "Trustee"). The terms of the Debt Securities include those stated
in the Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"), and holders of
the Debt Securities are referred to the Indenture and the Trust Indenture Act
for a statement thereof. The following summary of certain provisions of the Debt
Securities and of the Indenture does not purport to be complete and is qualified
in its entirety by reference to the Indenture, the proposed form of which has
been filed as an exhibit to the Registration Statement. Capitalized terms used
but not defined herein have the meanings given to them in the Indenture. The
term "Securities," as used under this caption, refers to all securities issued
or issuable from time to time under the Indenture and includes the Debt
Securities.
GENERAL
The Indenture will not limit the aggregate principal amount of Securities
that may be issued thereunder, and Securities may be issued thereunder from time
to time as a single series or in two or more separate series. As of the date of
this Prospectus, Occidental has authorized the issuance under the Indenture of
up to $750,000,000 aggregate public offering price of the Debt Securities, none
of which was outstanding as of the
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date of this Prospectus. The Indenture will not limit the ability of Occidental
or its subsidiaries to incur additional unsecured indebtedness.
Reference is made to the Prospectus Supplement that accompanies this
Prospectus for a description of the specific terms of the Offered Securities to
which such Prospectus Supplement relates, including, without limitation: (i) the
title of the Offered Securities; (ii) any limit on the aggregate principal
amount of the Offered Securities; (iii) whether the Offered Securities are to be
issuable as Registered Securities, Bearer Securities or both, whether the
Offered Securities may be represented by a Security in temporary or definitive
global form, and, if so, the initial Depositary with respect to such temporary
or definitive global Security, and, if other than as provided in Section 304 or
Section 305 of the Indenture, as applicable, whether, and the circumstances
under which, beneficial owners of interests in any such temporary or definitive
global Security may exchange such interests for Securities of such series of
like tenor and of any authorized form and denomination; (iv) the price or prices
(expressed as a percentage of the aggregate principal amount thereof) at which
the Offered Securities will be issued; (v) the date or dates on which the
principal of the Offered Securities is payable or the method of determination
thereof; (vi) the rate or rates (which may be fixed or variable) at which the
Offered Securities will bear interest, if any, or the method of calculating such
rate or rates and the date or dates from which such interest, if any, will
accrue; (vii) the Interest Payment Dates on which such interest, if any, on the
Offered Securities will be payable and the Regular Record Date for any interest
payable on any Offered Securities that are Registered Securities on any Interest
Payment Date; (viii) the person to whom any interest will be payable on any
Offered Security that is a Registered Security, if other than the person in
whose name the Offered Security is registered at the close of business on the
Regular Record Date for the payment of such interest; (ix) the manner in which,
or the person to whom, any interest on any Offered Security that is a Bearer
Security will be payable, if other than upon presentation and surrender of the
coupons appertaining thereto, and the extent to which, and the manner in which,
any interest payable on a temporary or definitive global Security on an Interest
Payment Date will be paid; (x) any mandatory or optional sinking fund or
analogous provisions and any provisions for the remarketing of the Offered
Securities; (xi) each office or agency where, subject to the terms of the
Indenture as described below under "Payment and Paying Agents," the principal of
and interest, if any, on the Offered Securities will be payable and each office
or agency where, subject to the terms of the Indenture as described below under
"Form, Exchange, Registration and Transfer," the Offered Securities may be
presented for exchange and Offered Securities that are Registered Securities may
be presented for registration of transfer; (xii) the date, if any, after or on
which, and the price or prices at which, the Offered Securities may, pursuant to
any optional or mandatory redemption provisions, be redeemed, in whole or in
part, and the other detailed terms and provisions of any such optional or
mandatory redemption provisions; (xiii) the denominations in which any Offered
Securities that are Registered Securities will be issuable, if other than the
denomination of $1,000 and any integral multiple thereof, and the denominations
in which any Offered Securities that are Bearer Securities will be issuable, if
other than denominations of $5,000 and $100,000; (xiv) the currency or
currencies, including composite currencies or currency units, for which the
Offered Securities may be purchased or in which the Offered Securities may be
denominated, and/or in which the payment of principal of and interest, if any,
on the Offered Securities shall be payable, if other than U.S. dollars, and, if
other than U.S. dollars, whether the Offered Securities may be satisfied and
discharged other than as provided in Article Four of the Indenture; (xv) if the
amounts of payments of principal of and interest, if any, on the Offered
Securities are to be determined by reference to an index, formula or other
method, or based on a coin or currency other than that in which the Offered
Securities are stated to be payable, the manner in which such amounts shall be
determined and the calculation agent, if any, with respect thereto; (xvi) if
other than the principal amount thereof, the portion of the principal amount of
the Offered Securities that will be payable upon declaration of acceleration of
the Maturity thereof pursuant to an Event of Default; (xvii) if other than as
defined in the Indenture, the meaning of "Business Day" when used with respect
to the Offered Securities; (xviii) if the Offered Securities may be issued or
delivered (whether upon original issuance or upon exchange of a temporary
Security of such series or otherwise), or any installment of principal or
interest is payable, only upon receipt of certain certificates or other
documents or satisfaction of other conditions in addition to those specified in
the Indenture, the forms and terms of such certificates, documents or
conditions; (xix) any addition to, or modification or deletion of, any Event of
Default, covenant of Occidental or other term or
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provision specified in the Indenture with respect to the Offered Securities; and
(xx) any other terms of the Offered Securities whether or not consistent with
the provisions of the Indenture. Any such Prospectus Supplement also will
describe any special provisions for the payment of additional amounts with
respect to the Offered Securities. The variable terms of the Securities are
subject to change from time to time, but no such change will affect any Security
already issued or as to which an offer to purchase has been accepted by
Occidental.
Securities may be issued as Discount Securities, which may be sold at a
discount below their principal amount. Special United States Federal income tax
considerations applicable to Securities issued at an original issue discount,
including Discount Securities, are described generally under "United States
Taxation -- Original Issue Discount" and may be described in more detail in any
applicable Prospectus Supplement. Special United States Federal tax
considerations and other restrictions or terms applicable to any Offered
Securities that are (i) issuable in bearer form, (ii) offered exclusively to
Non-United States Holders (as defined in the Indenture) or (iii) denominated in
a currency other than United States dollars will be set forth in a Prospectus
Supplement relating thereto.
FORM, EXCHANGE, REGISTRATION AND TRANSFER
The Securities of a series may be issued solely as Registered Securities,
solely as Bearer Securities (with or without coupons attached) or as both
Registered Securities and Bearer Securities. Securities of a series may be
issuable in whole or part in the form of one or more global Securities, as
described below under "Global Securities."
Registered Securities of any series will be exchangeable for other
Registered Securities of the same series of any authorized denominations and of
a like aggregate principal amount and tenor. In addition, if Securities of any
series are issuable as both Registered Securities and as Bearer Securities, at
the option of the Holder, subject to the terms of the Indenture, Bearer
Securities (accompanied by all unmatured coupons, except as provided below, and
all matured coupons in default) of such series will be exchangeable for
Registered Securities of the same series of any authorized denominations and of
a like aggregate principal amount and tenor. Unless otherwise indicated in an
applicable Prospectus Supplement, any Bearer Security surrendered in exchange
for a Registered Security between a Regular Record Date or a Special Record Date
and the relevant date for payment of interest will be surrendered without the
coupon relating to such date for payment of interest and such interest will not
be payable in respect of the Registered Security issued in exchange for such
Bearer Security, but will be payable only to the Holder of such coupon when due
in accordance with the terms of the Indenture. Bearer Securities will not be
issued in exchange for Registered Securities.
Securities may be presented for exchange as provided above, and, unless
otherwise indicated in an applicable Prospectus Supplement, Registered
Securities may be presented for registration of transfer (duly endorsed or
accompanied by a duly executed written instrument of transfer), at the office of
the Security Registrar or at the office of any transfer agent designated by
Occidental for such purpose with respect to any series of Securities and
referred to in an applicable Prospectus Supplement, without service charge and
upon payment of any taxes and other governmental charges as described in the
Indenture. Such exchange or transfer, as the case may be, will be effected upon
the Security Registrar or such transfer agent, as the case may be, being
satisfied with the documents of title and identity of the person making the
request. Occidental has initially appointed the Trustee as Security Registrar.
If a Prospectus Supplement refers to any transfer agent (in addition to the
Security Registrar) designated by Occidental with respect to any series of
Securities, Occidental may at any time rescind the designation of any such
transfer agent or approve a change in the location through which any such
transfer agent acts, except that, if Securities of a series are issuable only as
Registered Securities, Occidental will be required to maintain a transfer agent
in each Place of Payment for such series, and, if Securities of a series are
issuable as Bearer Securities, Occidental will be required to maintain a
transfer agent in New York City and in a Place of Payment for such series
located outside the United States. Occidental may at any time designate
additional transfer agents with respect to any series of Securities.
Occidental will not be required to (i) issue, register the transfer of or
exchange Securities of any series during a period beginning at the opening of
business 15 days before any selection of Securities of that series to be
redeemed and ending (subject to certain exceptions) at the close of business on
(a) if Securities of the
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series are issuable only as Registered Securities, the day of mailing of the
relevant notice of redemption and (b) if Securities of the series are issuable
as Bearer Securities, the day of the first publication of the relevant notice of
redemption or, if Securities of the series are also issuable as Registered
Securities and there is no publication, the mailing of the relevant notice of
redemption; (ii) register the transfer of or exchange any Registered Security,
or portion thereof, called for redemption, except the unredeemed portion of any
Registered Security being redeemed in part; or (iii) exchange any Bearer
Security called for redemption, except to exchange such Bearer Security for a
Registered Security of that series and of like tenor and principal amount that
is immediately surrendered for redemption.
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in an applicable Prospectus Supplement, payment
of principal of and interest, if any, on Registered Securities will be made at
the office of such Paying Agent or Paying Agents as Occidental may designate
from time to time, except that, at the option of Occidental, payment of any
interest may be made (i) by check mailed to the address of the Person entitled
thereto, as such address shall appear in the Security Register, or (ii) by wire
transfer to an account maintained by the Person entitled thereto, as specified
in the Security Register. Unless otherwise indicated in an applicable Prospectus
Supplement, payment of any installment of interest on a Registered Security will
be made to the Person in whose name such Registered Security is registered at
the close of business on the Regular Record Date for such interest installment.
Unless otherwise indicated in an applicable Prospectus Supplement, payment
of principal of and interest, if any, on Bearer Securities will be made, subject
to any applicable laws and regulations, at the offices of such Paying Agent or
Paying Agents outside the United States as Occidental may designate from time to
time, or by check mailed to an address or by transfer to an account maintained
by the payee outside the United States. Unless otherwise indicated in an
applicable Prospectus Supplement, any payment of an installment of interest on
any Bearer Security will be made only against surrender of the coupon relating
to such interest installment.
Unless otherwise indicated in an applicable Prospectus Supplement, the
Trustee, acting through its Corporate Trust Office, will be designated as
Occidental's sole Paying Agent for payments with respect to Securities that are
issuable solely as Registered Securities and as Occidental's Paying Agent in the
Borough of Manhattan, The City of New York, for payments with respect to
Securities (subject to any limitations described in any applicable Prospectus
Supplement) that are issuable as Bearer Securities. Any Paying Agent outside the
United States and any other Paying Agent in the United States initially
designated by Occidental for the Offered Securities will be named in an
applicable Prospectus Supplement. Occidental may at any time designate one or
more additional Paying Agents or rescind the designation of any Paying Agent or
approve a change in the office through which any Paying Agent acts, except that,
if Securities of a series are issuable only as Registered Securities, Occidental
will be required to maintain a Paying Agent in each Place of Payment for such
series, and, if Securities of a series are issuable as Bearer Securities,
Occidental will be required to maintain (i) a Paying Agent in the Borough of
Manhattan, The City of New York, for payments with respect to any Registered
Securities of the series (and for payments with respect to Bearer Securities of
the series in the circumstances described in the Indenture, but not otherwise)
and (ii) a Paying Agent in a Place of Payment located outside the United States
where Securities of such series and any related coupons may be presented and
surrendered for payment; provided, however, that if the Securities of such
series are listed on The London Stock Exchange or the Luxembourg Stock Exchange
or any other stock exchange located outside the United States and such stock
exchange shall so require, Occidental will maintain a Paying Agent in London,
Luxembourg or any other required city located outside the United States, as the
case may be, for the Securities of such series.
All moneys paid by Occidental to a Paying Agent for the payment of
principal of or interest, if any, on any Security that remain unclaimed at the
end of two years after such principal or interest shall have become due and
payable will be repaid to Occidental, and the Holder of such Security or any
coupon will thereafter look only to Occidental for payment thereof.
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GLOBAL SECURITIES
The Securities of a series may be issued in whole or in part in global
form. A Security in global form will be deposited with, or on behalf of, a
Depositary, which will be identified in an applicable Prospectus Supplement. A
global Security may be issued in either registered or bearer form and in either
temporary or definitive form. A Security in global form may not be transferred,
except as a whole by the Depositary for such Security to a nominee of such
Depositary, or by a nominee of such Depositary to such Depositary or another
nominee of such Depositary, or by such Depositary or any such nominee to a
successor of such Depositary or a nominee of such successor. If any Securities
of a series are issuable in global form, the applicable Prospectus Supplement
will describe the circumstances, if any, under which beneficial owners of
interests in any such global Security may exchange such interests for definitive
Securities of such series and of like tenor and principal amount in any
authorized form and denomination, the manner of payment of principal of and
interest, if any, on any such global Security and the specific terms of the
depositary arrangement with respect to any such global Security.
CERTAIN COVENANTS OF OCCIDENTAL
Limitation on Liens. Occidental will not, nor will it permit any
Consolidated Subsidiary (as defined below) to, incur, create, assume, guarantee
or otherwise become liable with respect to any Secured Debt (as defined below),
unless the Securities are secured equally and ratably with (or prior to) such
Secured Debt. This covenant will not apply to: (i) Liens (as defined below)
existing on the date of the Indenture; (ii) Liens existing on property of, or on
any shares of stock or Indebtedness of, any corporation at the time such
corporation becomes a Consolidated Subsidiary; (iii) Liens in favor of
Occidental or a Consolidated Subsidiary; (iv) Liens in favor of governmental
bodies to secure progress, advance or other payments; (v) Liens existing on
property, shares of stock or Indebtedness at the time of acquisition thereof
(including acquisition through merger or consolidation) or Liens to secure the
payment of all or any part of the purchase price thereof or the cost of
construction, installation, renovation, improvement or development thereon or
thereof or to secure any Indebtedness incurred prior to, at the time of, or
within 360 days after the later of the acquisition, completion of such
construction, installation, renovation, improvement or development or the
commencement of full operation of such property or within 360 days after the
acquisition of such shares or Indebtedness for the purpose of financing all or
any part of the purchase price or cost thereof; and (vi) any extension, renewal
or refunding of any Liens referred to in the foregoing clauses (i) through (v).
Notwithstanding the foregoing, Occidental and one or more Consolidated
Subsidiaries may incur, create, assume, guarantee or otherwise become liable
with respect to Secured Debt that would otherwise be subject to the foregoing
restrictions if, after giving effect thereto, the aggregate amount of all
Secured Debt, together with all Discounted Rental Value (as defined below) in
respect of sale and leaseback transactions subject to the restrictions discussed
in the following paragraph (excluding sale and leaseback transactions exempted
from such restrictions pursuant to clause (i) or (ii) of the last sentence of
such paragraph), would not exceed 10% of consolidated Net Tangible Assets (as
defined below) of Occidental and its consolidated subsidiaries.
Limitation on Sale and Leaseback Transactions. Occidental will not nor will
it permit any Consolidated Subsidiary to sell and lease back any Principal
Domestic Property (as defined below) unless: (i) the transaction is one in which
the sale has occurred within 360 days after the later of the acquisition,
completion of construction or commencement of full operations of the Principal
Domestic Property; (ii) Occidental or such Consolidated Subsidiary could subject
such Principal Domestic Property to a Lien pursuant to the provisions described
above under "Limitation on Liens" in an amount equal to the Discounted Rental
Value with respect to the sale and leaseback transaction without equally and
ratably securing the Securities; or (iii) Occidental or such Consolidated
Subsidiary, within 120 days after such sale, applies or causes to be applied to
the retirement of its Funded Debt (as defined below) an amount (subject to
credits for certain voluntary retirements of Funded Debt) not less than the
greater of (a) the net proceeds of the sale of the Principal Domestic Property
leased pursuant to such arrangement or (b) the fair value (as determined in any
manner approved by the Board of Directors of Occidental) of the Principal
Domestic Property so leased. This restriction will not apply to any sale and
leaseback transaction (i) between Occidental and a Consolidated
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Subsidiary or between Consolidated Subsidiaries or (ii) involving the taking
back of a lease for a period, including renewals, of not more than three years.
Other than the limitations in the Indenture on Liens and sale and leaseback
transactions described above, the provisions of the Indenture do not afford
Holders of the Debt Securities protection in the event of a highly leveraged
transaction, reorganization, restructuring, change in control, merger or similar
transaction involving Occidental that may adversely affect Holders of the Debt
Securities.
CERTAIN DEFINITIONS
"Consolidated Subsidiary" means any Subsidiary included in the financial
statements of Occidental and its Subsidiaries prepared on a consolidated basis
in accordance with generally accepted accounting principles.
"Discounted Rental Value" means, as to any particular lease under which any
Person is at the time liable and at any date as of which the amount thereof is
to be determined, the total net amount of rent (after deducting the amount of
rent to be received by such Person under noncancelable subleases) required to be
paid by such Person under such lease during the remaining noncancelable term
thereof (including any such period for which such lease has been extended or
may, at the option of the lessor, be extended), discounted from the respective
due dates thereof to such date at a rate per annum of 11 3/4%. The net amount of
rent required to be paid under any such lease for any such period shall be the
aggregate amount of the rent payable by the lessee with respect to such period,
after excluding amounts required to be paid on account of maintenance and
repairs, insurance, taxes, water rates and similar charges. In the case of any
lease which is terminable by the lessee upon the payment of a penalty, such net
amount shall also include the amount of such penalty, but no rent shall be
considered as required to be paid under such lease subsequent to the first date
upon which it may be so terminated. If and to the extent the amount of any rent
during any future period is not definitely determinable under the lease in
question, the amount of such rent shall be estimated in such reasonable manner
as the Board of Directors of Occidental may in good faith determine.
"Funded Debt" means all Indebtedness maturing one year or more from the
date of the creation thereof, all Indebtedness directly or indirectly renewable
or extendible, at the option of the debtor, by its terms or by the terms of any
instrument or agreement relating thereto, to a date one year or more from the
date of the creation thereof, and all Indebtedness under a revolving credit or
similar agreement obligating the lender or lenders to extend credit over a
period of one year or more, even though such Indebtedness may also conform to
the definition of Short-Term Borrowing.
"Lien" means and includes any mortgage, pledge, lien, security interest,
conditional sale or other title retention agreement or other similar encumbrance
to secure Indebtedness for borrowed money but excluding any security interest
which a lessor may be deemed to have under a lease and any lien which may be
deemed to exist under a Production Payment or under any subordination
arrangement. "Production Payment" means any economic interest in oil, gas or
mineral reserves which (i) entitles the holder thereof to a specified share of
future production from such reserves, free of the costs and expenses of such
production and (ii) terminates when a specified quantity of such share of future
production from such reserves has been delivered or a specified sum has been
realized from the sale of such share of future production from such reserves.
"Net Tangible Assets" of any specified Person means the total of all assets
properly appearing on a balance sheet of such Person prepared in accordance with
generally accepted accounting principles, after deducting from such total,
without duplication of deductions, (i) all Current Liabilities of such Person;
(ii) that portion of the book amount of all such assets which would be treated
as intangibles under generally accepted accounting principles, including,
without limitation, all such items as goodwill, trademarks, trade names, brands,
copyrights, patents, licenses and rights with respect to the foregoing and
unamortized debt discount and expense; and (iii) the amount, if any, at which
any stock of such Person appears on the asset side of such balance sheet.
"Principal Domestic Property" means any (i) developed oil or gas producing
property or (ii) processing or manufacturing plant, in each case which as of the
date of the Indenture is or thereafter is owned or leased by Occidental or any
Consolidated Subsidiary and which is located in the continental United States
(provided, however, that any such property or plant declared by the Board of
Directors by Board Resolution not to be of
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material importance to the business of Occidental and its Consolidated
Subsidiaries taken as a whole will be excluded from the foregoing definition).
"Secured Debt" means any Indebtedness of Occidental or any Consolidated
Subsidiary, secured by a Lien on any Principal Domestic Property or on any
shares of stock or on any Indebtedness of any Consolidated Subsidiary which owns
any Principal Domestic Property.
MERGER AND CONSOLIDATION
Occidental may consolidate with or merge into any other corporation, and
Occidental may convey, transfer or lease its properties and assets substantially
as an entirety to any Person, provided that: (i) the corporation formed by such
consolidation or into which Occidental is merged, or the Person that acquires by
conveyance or transfer or which leases the properties and assets of Occidental
substantially as an entirety, shall be organized and existing under the laws of
the United States, any State thereof or the District of Columbia and shall
expressly assume the payment of the principal of and interest on the Securities
and the performance of every covenant of the Indenture and the Securities on the
part of Occidental to be performed or observed; and (ii) immediately after
giving effect to such transaction, no Event of Default (as described below), and
no event which, after notice or lapse of time, or both, would become an Event of
Default, shall have happened and be continuing.
EVENTS OF DEFAULT
The following are Events of Default under the Indenture with respect to
each series of Securities individually: (i) default in the payment of any
installment of interest on any Security of such series when due, continued for
30 days; or (ii) default in the payment of the principal of any Security of such
series when due; or (iii) default in the performance, or breach, of any other
covenant or warranty of Occidental in the Indenture (other than a covenant or
warranty that is solely for the benefit of other series of the Securities),
continued for 60 days after written notice by the Trustee or the Holders of at
least 25% in principal amount of the Outstanding Securities of such series; or
(iv) acceleration of any indebtedness for money borrowed by Occidental under the
terms of the instrument under which such indebtedness is or may be outstanding,
if such indebtedness is not discharged or such acceleration is not annulled or
rescinded within 20 days after written notice by the Trustee or the Holders of
at least 25% in principal amount of the Outstanding Securities of such series
(provided, that no Event of Default under this clause (iv) shall be deemed to
exist as a result of an acceleration of any such indebtedness if the principal
of and interest on such indebtedness, when added to the principal of and
interest on all other such indebtedness which has been accelerated as aforesaid
(excluding any such indebtedness which has been discharged or as to which the
acceleration has been duly rescinded or annulled), shall not exceed
$50,000,000); or (v) certain events of bankruptcy, insolvency or reorganization
of Occidental; or (vi) any other event designated in the relevant Prospectus
Supplement as an "Event of Default" with respect to the Securities of such
series. If an Event of Default with respect to the Securities of any series
occurs and is continuing, the Trustee or Holders of not less than 25% in
principal amount of the Outstanding Securities of such series may declare the
principal amount (or, if any of the Securities of such series are Discount
Securities, such portion of the principal amount of such Securities as may be
specified by the terms thereof) of all of the Securities of such series to be
due and payable immediately. Under certain circumstances, the Holders of a
majority in principal amount of the Outstanding Securities of such series may
rescind such a declaration.
The Holders of a majority in principal amount of the Outstanding Securities
of any series may direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee or exercising any trust or power
conferred on the Trustee with respect to the Securities of such series, provided
that, among other things, such direction is not in conflict with any rule of law
or the Indenture. In case an Event of Default occurs (and is not cured), the
Trustee is required to exercise such of its rights and powers under the
Indenture, and use the same degree of care and skill in their exercise, as a
prudent person would exercise or use under the circumstances in the conduct of
his own affairs. Subject to such provisions, the Trustee is under no obligation
to exercise any of its rights or powers under the Indenture at the request or
direction of any of the Holders of the Securities of any series, unless such
Holders have offered to the Trustee reasonable security or
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indemnity against the costs, expenses and liabilities that might be incurred by
it in compliance with any such request or direction.
MODIFICATION AND WAIVER
Occidental and the Trustee may execute a supplemental indenture, without
the consent of the Holders of the Securities or any related coupons: (i) to add
to the covenants, agreements and obligations of Occidental for the benefit of
the Holders of all the Securities of any series or to surrender any right or
power conferred in the Indenture upon Occidental; (ii) to evidence the
succession of another person to Occidental and the assumption by it of the
covenants of Occidental in the Indenture and the Securities; (iii) to provide
that Bearer Securities may be registrable as to principal, to change or
eliminate any restrictions on the payment of principal of or interest, if any,
on Bearer Securities, to permit Bearer Securities to be issued in exchange for
Registered Securities, to permit Bearer Securities to be issued in exchange for
Bearer Securities of other authorized denominations or to permit the issuance of
Securities in uncertificated form, provided that any such action shall not
adversely affect the interests of the Holders of Securities of any series or any
related coupons in any material respect; (iv) to establish the form or terms of
Securities of any series and any related coupons as permitted by Sections 201
and 301 of the Indenture; (v) to provide for the acceptance of appointment under
the Indenture of a successor Trustee with respect to the Securities of one or
more series and to add to or change any provisions of the Indenture as shall be
necessary to provide for or facilitate the administration of the trusts by more
than one Trustee; (vi) to cure any ambiguity or correct any inconsistency in the
Indenture or make other changes, provided that no such action shall adversely
affect the interests of the Holders of the Securities; (vii) to add to, change
or eliminate any provisions (which addition, change or elimination may apply to
one or more series of Securities), provided that any such addition, change or
elimination neither (a) applies to any Security of any series created prior to
the execution of such supplemental indenture that is entitled to the benefit of
such provision nor (b) modifies the rights of the Holder of any such Security
with respect to such provision; or (viii) to secure the Securities.
With the consent of the Holders of not less than a majority in principal
amount of the Outstanding Securities of the series affected by such supplemental
indenture, Occidental and the Trustee also may execute a supplemental indenture
to add provisions to, or change in any manner or eliminate any provisions of,
the Indenture with respect to such series of Securities or modify in any manner
the rights of the holders of the Securities of such series and any related
coupons under the Indenture, provided that no such supplemental indenture will,
without the consent of the Holder of each Outstanding Security affected thereby:
(i) change the stated maturity of the principal of, or any installment of
principal or interest on, any such Security, or reduce the amount of principal
of any such Discount Security that would be due and payable upon declaration of
acceleration of maturity thereof; (ii) reduce the principal amount of, or the
rate of interest on, or any premium payable on, any such Security; (iii) change
the place or currency of payment of principal or interest, if any, on any such
Security; (iv) impair the right to institute suit for the enforcement of any
payment on or with respect to any such Security; (v) reduce the above-stated
percentage of Holders of Securities of any series necessary to modify or amend
the Indenture; or (vi) modify the foregoing requirements or reduce the
percentage in principal amount of Outstanding Securities of any series necessary
to waive any covenant or past default. Holders of not less than a majority in
principal amount of the Outstanding Securities of any series may waive certain
past defaults and may waive compliance by Occidental with certain of the
restrictive covenants in the Indenture (including the restrictive covenants
described above under "Certain Covenants of Occidental") with respect to the
Securities of such series.
DISCHARGE
Unless otherwise indicated in an applicable Prospectus Supplement,
Occidental may terminate at any time its obligations under the Indenture with
respect to the Securities of any series by (i)(a) delivering all Outstanding
Securities of such series to the Trustee for cancellation or (b) depositing with
the Trustee funds or non-callable United States government obligations
sufficient to pay all remaining principal and interest on the Securities of such
series and (ii) complying with certain other provisions of the Indenture. See
"United States Taxation -- Defeasance of Debt Securities."
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REPORTS
Occidental is required to furnish to the Trustee annually (i) a statement
as to the fulfillment by Occidental of all of its covenants under the Indenture
and (ii) within 20 days after the occurrence thereof, notice of each
acceleration which, with the giving of notice and the lapse of time, would be an
Event of Default, as described above in clause (iv) under "Events of Default."
THE TRUSTEE
The Trustee is a New York banking corporation. The Trustee is a
participating lender under a revolving credit agreement of Occidental and
provides commercial banking services to Occidental and certain of its
subsidiaries. The Indenture contains certain limitations on the rights of the
Trustee, as a creditor of Occidental, to obtain payment of claims in certain
cases or to realize on certain property received in respect of any such claim as
security or otherwise. The Trustee will be permitted to engage in other
transactions with Occidental and its subsidiaries; provided, however, that if
the Trustee acquires any conflicting interest at such time as a default is
pending under the Indenture, it must (with certain exceptions) eliminate such
conflict or resign.
UNITED STATES TAXATION
GENERAL
Set forth below is a summary of certain Federal income tax considerations
of importance to the original purchasers of the Debt Securities. The summary
does not discuss all of the aspects of Federal income taxation that may be
relevant to particular investors in light of their personal investment
circumstances, nor does it discuss any foreign, state or local income or other
tax considerations. The summary is based upon the Internal Revenue Code of 1986,
as amended (the "Code"), and on regulations, rulings and decisions that are now
in effect, all of which are subject to change, possibly retroactively.
Prospective purchasers of the Debt Securities are advised to consult with their
tax advisors regarding the Federal, state, local and foreign income and other
tax consequences of purchasing, holding and disposing of the Debt Securities.
Special Federal tax considerations and other restrictions or terms applicable to
any Debt Securities that are issuable as Bearer Securities, offered exclusively
to Non-United States Holders or denominated in a currency other than United
States dollars will be set forth in an applicable Prospectus Supplement.
For purposes of this summary, "Non-United States Holder" means any person
who, for Federal income tax purposes, is any person other than (i) a citizen or
resident of the United States, (ii) a corporation or partnership created or
organized in the United States or under the laws of the United States or any
state thereof, (iii) an estate whose income is includable in gross income for
United States federal income tax purposes regardless of its source, or (iv) a
trust whose administration is subject to the primary supervision of a United
States court and which has one or more United States persons who have the
authority to control all substantial decisions of the trust.
ORIGINAL ISSUE DISCOUNT
Debt Securities with a term greater than one year may be issued with
original issue discount for Federal income tax purposes. Original issue discount
may arise because the stated principal amount at maturity of a Debt Security
exceeds its issue price by more than a de minimis amount or because of certain
interest payment characteristics of the Debt Security (e.g., interest holidays,
interest payable in additional Debt Securities, stepped rates or rates based on
multiple indices). If the Debt Securities are issued with original issue
discount, holders of the Debt Securities will be required to include amounts in
gross income for Federal income tax purposes in advance of the receipt of the
cash to which such income is attributable. The amount of original issue discount
to be included in income in any tax period will be determined using a constant
yield-to-maturity method that will result in the allocation of less original
issue discount to the earlier years of the term of the Debt Securities and more
original issue discount to the later years. Any amounts included in income as
original issue discount will increase a holder's tax basis in the Debt Security.
Any special Federal income tax
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considerations that may be applicable to Debt Securities that (i) provide for
interest at one or more variable rates; or (ii) provide for any amounts of
payments of interest or principal to be determined by reference to an index,
formula or other method, or based on a currency other than that in which the
Debt Securities are stated to be payable, will be set forth in the applicable
Prospectus Supplement or any Pricing Supplement thereto.
Occidental will report annually to the Internal Revenue Service and each
holder the original issue discount accrued with respect to the Debt Securities.
Prospective holders are advised to consult their tax advisors with respect to
the particular original issue discount characteristics of the Debt Security that
is being purchased.
ACQUISITION DISCOUNT
Debt Securities that have a fixed maturity of one year or less may be
issued with acquisition discount. Acquisition discount may arise for the reasons
stated above with respect to original issue discount. Accrual basis taxpayers
and taxpayers in certain specified classes would be required to include
acquisition discount in income currently, in an amount and manner similar to
that applicable to original issue discount. Individuals and other cash basis
taxpayers holding such Debt Securities are not required, but may elect, to
include accrued acquisition discount in income until the cash attributable to
such amounts is received, which amounts will be treated as ordinary income. A
holder who does not recognize acquisition discount currently also may be subject
to limitations on the deductibility of interest on indebtedness incurred to
purchase or, in certain circumstances, carry such Debt Securities.
DISPOSITION OF DEBT SECURITIES
In general, and subject to the foregoing discussion of acquisition
discount, an original holder of a Debt Security will recognize gain or loss on
the sale, redemption, exchange or other disposition of the Debt Security, which
gain or loss will be measured by the difference between the amount of cash
received (except to the extent attributable to accrued interest) and the
holder's tax basis in the Debt Security.
Pursuant to recently enacted legislation, net capital gain (generally,
capital gain in excess of capital loss) recognized by an individual from the
sale of a capital asset that has been held for more than 18 months will be
subject to tax at a rate not to exceed 20%, capital gain from the sale of an
asset held for more than 12 months, but not more than 18 months, will be subject
to tax at a rate not to exceed 28%, and capital gain recognized from the sale of
a capital asset that has been held for 12 months or less will be subject to tax
at ordinary income tax rates. The ability to use capital losses to offset
ordinary income in determining taxable income is generally limited. In addition,
capital gain recognized by a corporate taxpayer will be subject to tax at the
ordinary income tax rates applicable to corporations.
DEFEASANCE OF DEBT SECURITIES
If Occidental exercises its right to satisfy and discharge its obligations
under the Indenture with respect to any series of the Debt Securities prior to
its maturity by depositing money or United States government obligations in
trust for holders of outstanding Debt Securities of that series, such
satisfaction and discharge ("discharge"), under present law, is likely to be
treated as a redemption of the Debt Securities of that series prior to maturity
in exchange for the property deposited in trust. In such event, and subject to
the foregoing discussion of acquisition discount, each holder would generally
recognize, at the time of discharge, gain or loss measured by the difference
between (i) the sum of (a) the amount of any cash and (b) the fair market value
of any property deposited in trust deemed received by the holder (except to the
extent attributable to accrued interest) and (ii) the holder's tax basis in the
Debt Securities deemed surrendered. Thereafter, each holder would be treated as
if it held an undivided interest in the cash (or investments made therewith) and
the property held in trust. Each holder would generally be subject to tax
liability in respect of interest income and original issue discount, if
applicable, thereon and would recognize any gain or loss upon any disposition,
including redemption, of the assets held in trust. Although tax might be owed,
the holder of a discharged Debt Security would not receive cash (except for
current payments of interest on such Debt Security) until the
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<PAGE> 46
maturity or earlier redemption of such Debt Security. Such tax treatment could
affect the purchase price that a holder would receive upon the sale of the Debt
Securities.
HOLDERS WHO ARE NON-UNITED STATES HOLDERS
Under present Federal income and estate tax law, assuming certain
certification requirements are satisfied (which, in the case of Registered
Securities, includes identification of the beneficial owner of a Debt Security),
and subject to the discussion of backup withholding below:
(i) payments of interest (including any original issue discount) on a
Debt Security to any Non-United States Holder will not be subject to
Federal income or withholding tax; provided that (a) the holder does not
actually or constructively own 10% or more of the total combined voting
power of all classes of stock of Occidental entitled to vote, (b) the
holder is not (1) a foreign tax-exempt organization or foreign private
foundation for Federal income tax purposes, (2) a bank receiving interest
on an extension of credit pursuant to a loan agreement entered into in the
ordinary course of its trade or business or (3) a controlled foreign
corporation that is related to Occidental through stock ownership and (c)
such interest payments are not effectively connected with the conduct of a
United States trade or business of the holder;
(ii) a holder of a Debt Security who is a Non-United States Holder
will not be subject to Federal income or withholding tax on gain realized
on the sale, exchange, retirement or other disposition of such Debt
Security, unless (a) such holder is an individual who is present in the
United States for 183 days or more during the taxable year and holds such
Debt Security as a capital asset, and certain other requirements are met,
or (b) the gain is effectively connected with the conduct of a United
States trade or business of the holder; and
(iii) a Debt Security held by an individual, who at the time of death
is not a citizen or resident of the United States, will not be subject to
Federal estate tax as a result of such individual's death unless (a) the
income from the Debt Security is effectively connected with a United States
trade or business of the holder or (b) the individual actually or
constructively owns 10% or more of the total combined voting power of all
classes of stock of Occidental entitled to vote.
OWNER STATEMENT REQUIREMENT
Sections 871(h) and 881(c) of the Code require that either the beneficial
owner of a Debt Security or a securities clearing organization, bank or other
financial institution that holds customers' securities in the ordinary course of
its trade or business (a "Financial Institution") and that holds a Debt Security
on behalf of such owner file a statement with Occidental or its agent to the
effect that the beneficial owner is not a U.S. person in order to avoid
withholding of United States federal income tax. Under current regulations, this
requirement will be satisfied if Occidental or its agent receives (i) a
statement (an "Owner's Statement") from the beneficial owner of a Debt Security
in which such owner certifies, under penalties of perjury, that such owner is
not a U.S. person and provides such owner's name and address, or (ii) a
statement from the Financial Institution holding the Debt Security on behalf of
the beneficial owner in which the Financial Institution certifies, under
penalties of perjury, that it has received the Owner's Statement together with a
copy of the Owner's Statement. The beneficial owner must inform Occidental or
its agent (or, in the case of a statement described in clause (ii) of the
immediately preceding sentence, the Financial Institution) within 30 days of any
change in information on the Owner's Statement.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Occidental will, where required, report to the holders of the Debt
Securities and the Internal Revenue Service the amount of any interest paid or
original issue discount accruing on the Debt Securities in each calendar year
and the amounts of tax withheld, if any, with respect to such payments.
Under current United States federal income tax law, a 31% "backup"
withholding tax is applied to certain payments made to, and to the proceeds of
sales before maturity by, certain U.S. persons if such persons (i) fail
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to furnish their taxpayer identification numbers which, for an individual, would
be his Social Security Number or (ii) in certain circumstances, fail to certify,
under penalties of perjury, that they have both furnished a correct taxpayer
identification number and not been notified by the Internal Revenue Service that
they are subject to backup withholding for failure to report interest payments.
Under current regulations, this backup withholding will not apply to payments
made by Occidental or a paying agent on a Debt Security if the Owner's Statement
is received; provided in each case that the Company or the paying agent, as the
case may be, does not have actual knowledge that the payee is a U.S. person.
Under current regulations, payments of the proceeds of the sale of a Debt
Security to or through a foreign office of a "broker" will not be subject to
backup withholding but will be subject to information reporting if the broker is
a U.S. person, a controlled foreign corporation for United States federal income
tax purposes, or a foreign person 50% or more of whose gross income is from a
United States trade or business for a specified three-year period (a "U.S.
Connected Broker"), unless the broker has in its records documentary evidence
that the holder of a Debt Security is not a U.S. person and certain conditions
are met or the holder of a Debt Security otherwise establishes an exemption.
Payment of the proceeds of a sale to or through the United States office of a
broker is subject to backup withholding and information reporting unless the
holder certifies its non-United States status under penalties of perjury or
otherwise establishes an exemption.
On October 7, 1997, the Treasury Department released new Treasury
Regulations governing the backup withholding and information reporting
requirements described herein. The new regulations generally would not alter the
treatment of Non-U.S. Holders who furnish an Owner's Statement to the payor. The
new regulations may change certain procedures applicable to the foreign office
of a United States broker or foreign brokers with certain types of relationships
to the United States. The new regulations are generally effective for payments
made after December 31, 1998.
PLAN OF DISTRIBUTION
Occidental may sell Debt Securities to one or more underwriters or dealers
for public offering and sale by them or may sell Debt Securities to investors
directly or through one or more agents designated from time to time by
Occidental. Any such underwriter or agent involved in the offer and sale of the
Debt Securities will be named in an applicable Prospectus Supplement.
Underwriters or agents may offer and sell the Debt Securities at a fixed
price or prices, which may be changed, or from time to time at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated prices. Occidental also may offer and sell the Debt
Securities in exchange for one or more of its outstanding issues of debt
securities. In connection with the sale of Debt Securities, underwriters or
agents may be deemed to have received compensation from Occidental in the form
of underwriting discounts or commissions and also may receive commissions from
purchasers of Debt Securities for whom they may act as agent. Underwriters may
sell Debt Securities to or through dealers, and such dealers may receive
compensation in the form of discounts, concessions or commissions from the
underwriters and/or commissions (which may be changed from time to time) from
the purchasers of Debt Securities for whom they may act as agent.
Any compensation paid by Occidental to underwriters or agents in connection
with the offering of Debt Securities, and any discounts, concessions or
commissions allowed by underwriters to participating dealers, will be set forth
in an applicable Prospectus Supplement. Underwriters, dealers and agents
participating in the distribution of the Debt Securities may be deemed to be
underwriters, and any discounts and commissions received by them and any profit
realized by them on resale of the Debt Securities may be deemed to be
underwriting discounts and commissions under the Securities Act. Underwriters,
dealers and agents may be entitled, under agreements with Occidental, to
indemnification against, and contribution toward, certain civil liabilities,
including liabilities under the Securities Act, and to reimbursement by
Occidental for certain expenses.
Underwriters, dealers or agents to or through which Debt Securities may be
offered and sold may engage in transactions with, or perform other services for,
Occidental and its subsidiaries in the ordinary course of business.
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<PAGE> 48
If so indicated in an applicable Prospectus Supplement, Occidental may
authorize underwriters or dealers, acting as Occidental's agents, to solicit
offers by certain institutions to purchase Debt Securities from Occidental at
the public offering price set forth in such Prospectus Supplement pursuant to
Delayed Delivery Contracts ("Contracts") providing for payment and delivery on
the date or dates stated in such Prospectus Supplement. Each Contract will be
for an amount not less than, and the aggregate principal amount of Debt
Securities sold pursuant to Contracts shall not be less nor more than, the
respective amounts stated in such Prospectus Supplement. Institutions with whom
Contracts, when authorized, may be made include commercial and savings banks,
insurance companies, pension funds, investment companies, educational and
charitable institutions and other institutions, but will in all cases be subject
to the approval of Occidental. Contracts will not be subject to any conditions
except: (i) the purchase by an institution of the Debt Securities covered by its
Contracts shall not at the time of delivery be prohibited under the laws of any
jurisdiction in the United States to which such institution is subject; and (ii)
if the Debt Securities are being sold to underwriters, Occidental shall have
sold to such underwriters the total principal amount of the Debt Securities,
less the principal amount thereof covered by Contracts. Underwriters and dealers
will have no responsibility in respect of the delivery or performance of
Contracts, except to the extent they have entered into a Contract.
The Debt Securities may or may not be listed on a national securities
exchange or a foreign securities exchange. No assurances can be given that there
will be a market for the Debt Securities.
LEGAL MATTERS
Certain legal matters with respect to the legality of the Debt Securities
being offered hereby will be passed upon for Occidental by Robert E. Sawyer,
Esq., Associate General Counsel of Occidental, and by Skadden, Arps, Slate,
Meagher & Flom LLP, Los Angeles, California. Mr. Sawyer beneficially owns, and
has rights to acquire under employee stock options, an aggregate of less than 1%
of the outstanding common stock of Occidental.
EXPERTS
The consolidated financial statements and financial statement schedule of
Occidental and its subsidiaries, for the fiscal year ended December 31, 1997,
included or incorporated by reference in Occidental's Annual Report on Form 10-K
for the fiscal year ended December 31, 1997, which are incorporated by reference
in this Prospectus, have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports with respect thereto, and are
incorporated by reference herein in reliance upon the authority of said firm as
experts in accounting and auditing in giving said reports.
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======================================================
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IN
CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY OCCIDENTAL OR ANY UNDERWRITER. NEITHER THE
DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY SALE MADE
HEREUNDER AND THEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF OCCIDENTAL SINCE THE DATE
HEREOF. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER
OR A SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION.
------------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Occidental Petroleum Corporation...... S-2
Recent Developments................... S-2
Use of Proceeds....................... S-4
Capitalization........................ S-5
Business.............................. S-6
Historical Financial Information...... S-16
Pro Forma Financial Information....... S-19
Description of the Notes.............. S-21
Certain United States Federal Tax
Considerations...................... S-29
ERISA Considerations Relating to the
Mandatorily Tendered Notes.......... S-30
Underwriting.......................... S-31
Legal Matters......................... S-32
PROSPECTUS
Available Information................. 2
Incorporation of Certain Documents by
Reference........................... 2
Occidental Petroleum Corporation...... 3
Use of Proceeds....................... 3
Ratios of Earnings to Fixed Charges... 3
Description of the Debt Securities.... 3
United States Taxation................ 11
Plan of Distribution.................. 14
Legal Matters......................... 15
Experts............................... 15
============================================
</TABLE>
======================================================
(LOGO)
OCCIDENTAL
PETROLEUM
CORPORATION
$900,000,000
$250,000,000 6.50% SENIOR NOTES
DUE APRIL 1, 2005
$200,000,000 7.20% SENIOR DEBENTURES
DUE APRIL 1, 2028
$450,000,000 6.40% SENIOR NOTES
DUE APRIL 1, 2013,
MANDATORILY TENDERED
ON APRIL 1, 2003
------------------------------------
PROSPECTUS SUPPLEMENT
APRIL 2, 1998
------------------------------------
Managers for the Offering of the Senior Notes:
Joint Lead Managers
J.P. MORGAN & CO. MERRILL LYNCH & CO.
------------------------
BANCAMERICA ROBERTSON STEPHENS
CHASE SECURITIES INC.
MORGAN STANLEY DEAN WITTER
Managers for the
Offering of the Mandatorily Tendered Notes:
Joint Lead Managers
MERRILL LYNCH & CO. J.P. MORGAN & CO.
------------------------
BANCAMERICA ROBERTSON STEPHENS
CHASE SECURITIES INC.
MORGAN STANLEY DEAN WITTER
======================================================
