================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) MAY 3, 2002
OCCIDENTAL PETROLEUM CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 1-9210 95-4035997
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
10889 WILSHIRE BOULEVARD
LOS ANGELES, CALIFORNIA 90024
(Address of principal executive offices) (ZIP code)
Registrant's telephone number, including area code:
(310) 208-8800
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Item 9. Regulation FD Disclosure
------ ------------------------
Speech by Dr. Ray R. Irani, Chairman and Chief Executive Officer
----------------------------------------------------------------
May 3, 2002
-----------
The following is the text of the speech made by Dr. Ray R. Irani, Chairman
and Chief Executive Officer of Occidental Petroleum Corporation, at the
Occidental Petroleum Corporation 2002 Annual Meeting of Stockholders on May 3,
2002, in Los Angeles, California.
1
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OCCIDENTAL PETROLEUM CORPORATION
Dr. Ray R. Irani
Chairman & Chief Executive Officer
Annual Shareholders Meeting
Los Angeles
May 3, 2002
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Good morning. Five years ago we began a sweeping restructuring program
aimed at significantly enhancing Occidental's financial performance and
establishing a strong platform for future growth and profitability.
The results have been dramatic.
2
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2000 - 2001 RECURRING EARNINGS
The Two Best Years in Occidental's History
2000 2001
---- ----
o $1.326 Billion o $1.328 Billion
o $3.60 per share o $3.57 per share
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2000 and 2001 were the two best years in Occidental's history, with
recurring earnings in excess of 1.3 billion dollars for both years. Earnings for
2001 were just three cents per share less than our record earnings in 2000.
Last year was notable not only in terms of financial performance, but also
in establishing a strong, durable foundation for long term growth and
profitability.
A key part of our strong financial performance is a clear, concise strategy
to grow our oil and gas business.
3
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OVERALL BUSINESS STRATEGY
OIL AND GAS
o Focus on large, "legacy" oil and gas assets in U.S., Middle East
and Latin America
- Purchased $7.2 billion in assets
CHEMICALS
o Harvest cash
- Generated $185 million in free cash flow in 2001
BALANCE SHEET
o Maintain strong balance sheet
- Established strongest balance sheet in 20 years
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First, we focused on building a strong base around large, "legacy" oil and
gas assets in the United States, the Middle East and Latin America. We invested
approximately $7.2 billion to purchase oil and gas assets in Elk Hills and Long
Beach in California and in the Permian Basin in Texas. We divested non-core and
under-performing gas pipeline, oil and gas and chemical assets. The result is a
much stronger, more durable asset base with greater earnings power and improved
cash flow.
Second, the role of our chemical business is to generate cash. Our chemical
business has always generated positive cash flow - even under the most difficult
market conditions. In 2001, the basic chemicals industry experienced its worst
year in two decades and our chemical business still generated $185 million in
free cash flow.
The third element of our strategy is to maintain a strong balance sheet -
and we've succeeded in establishing the strongest balance sheet in more than 20
years.
4
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TOTAL DEBT
$ Millions
[the following is a tabular representation of graphical materials]
Pro-Forma
12/31/97 12/31/98 12/31/99 Post Altura 12/31/00 12/31/01
-------- -------- -------- ----------- -------- --------
Oxy Public Debt 4,965 5,402 4,401 8,166 5,444 4,119
Recourse Debt 1,361 776 1,047 1,009 912 771
-------- -------- -------- ----------- -------- --------
Total 6,326 6,178 5,448 9,175 6,356 4,890
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At the end of 1997, our total debt was $6.3 billion. Since then, we
absorbed $7.2 billion in acquisition costs, continued to fund our capital
program at an appropriate level, paid an annual dividend of one dollar per share
- and still managed to reduce our total debt by 23-percent.
Our debt of $4.9 billion at the end of last year was $1.4 billion below the
year-end total in 1997. Our year-end 2001 debt-to-capitalization ratio of
46-percent was the lowest in nearly twenty years.
5
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INTEREST EXPENSE
$ Millions
2000 2001 2002E
---- ---- -----
$554 $423 $345
Estimated Savings = $0.36 Per Share
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Interest expense and preferred dividends declined from $554 million in 2000
to $423 million last year. We expect that number to fall to $345 million this
year. That's a savings of $209 million compared to 2000 and equates to an annual
improvement of 36-cents a share.
6
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SHAREHOLDERS' EQUITY
$ Billions
[the following is a tabular representation of graphical materials]
Shareholders'
Year Equity
---- -------------
1997 $3.1
1998 $3.1
1999 $3.5
2000 $4.8
2001 $5.6
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Since 1997, we've increased shareholders' equity by $2.5 billion - or 81
percent. In 2001, shareholder's equity grew by $860 million - or 18 percent. The
increase in shareholders' equity, together with improved total returns to
shareholders and strong earnings, is being driven by the strong performance of
our oil and gas business.
7
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SAFETY PERFORMANCE
ILLNESS & INJURY RATES
Industry Comparisons
[the following is a tabular representation of graphical materials]
Illness & Injury
Rate
----------------
Occidental .69
Oil & Gas 3.5
Chemical 4.4
All Industries 6.3
Construction 8.6
Iron & Steel 20.1
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Before reviewing our oil and gas results, I'd like to say a few words about
our safety performance. Our financial performance goes hand-in-hand with our
exemplary performance in making sure we have a safe work environment.
A common safety performance benchmark for industries and businesses
worldwide is the injury and illness rate. The "Rate" is based on the number of
injuries sustained by 100 workers per year. Occidental's "Rate" of .69 means
that on a statistical basis, we had less than one injury per hundred workers per
year. We not only outperformed the chemical and oil and gas industries, but all
industries.
We've lowered our "Rate" for the sixth consecutive year to the point where
Occidental today is one of the safest companies in the world.
8
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OIL AND GAS RECURRING EARNINGS
$ Million
[the following is a tabular representation of graphical materials]
Year Earnings
---- --------
1999 841
2000 2,404
2001 2,439
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In 2001, oil and gas earnings before special items were the highest in
Occidental's history - slightly above the record performance of 2000. These
achievements were the result of a sound oil and gas business strategy which
enabled Occidental to benefit from higher oil and gas prices.
9
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OIL & GAS STRATEGY
o Three-part strategy - no single part dominates
- Exploration
o Concentrating on opportunities in core areas
- Enhanced recovery
o Seek EOR projects with superior returns
- Acquisitions
o Acquire assets with upside potential at attractive
prices & divest assets with limited earnings potential
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That strategy has three parts - each of which plays an important role.
o We focus on adding commercial reserves in and around our core areas
through the drill bit.
o We pursue opportunities with host governments in our core areas to
enhance the development of mature fields with large volumes of
remaining oil in place.
o Finally, we maintain a disciplined approach in buying assets whose
performance can be improved by the application of new technology and
practices - and selling non-strategic and under performing assets.
The successful implementation of this strategy is reflected in the
replacement of our production with low cost oil and gas reserves.
10
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PRODUCTION REPLACEMENT
2001
Excludes Purchases
(Percentage)
[the following is a tabular representation of graphical materials]
Company
Trading Production
Symbol Replacement
------- -----------
KMG 291
BP 191
APC 173
UCL 167
APA 144
OXY 138
COC 113
CVX 112
P 111
BR 103
XOM 98
AHC 80
DVN 56
MRO 32
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Last year, excluding purchases, we replaced 138 percent of our worldwide
production of 174 million barrels of oil equivalent. As you can see, our
replacement rate put us in the top half of the industry.
11
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PRODUCTION REPLACEMENT
1999-2001 Weighted Average
Excludes Purchases
(Percentage)
[the following is a tabular representation of graphical materials]
Company
Trading Production
Symbol Replacement
------- -----------
APC 199
KMG 190
BP 160
APA 127
OXY 115
P 109
UCL 109
BR 108
CVX 106
XOM 105
DVN 97
COC 94
AHC 79
MRO (4)
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Our three-year weighted average replacement ratio from 1999 through 2001
was 115 percent. Only four companies had higher replacement rates.
Replacing reserves is essential to the long term viability of companies in
the oil and gas industry.
12
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FINDING & DEVELOPMENT COSTS*
2001 Annual
Excludes Purchases
($/BOE)
[the following is a tabular representation of graphical materials]
Company Finding &
Trading Development
Symbol Costs
------- -----------
BP 3.73
OXY 4.54
UCL 4.90
XOM 4.94
KMG 5.21
P 5.39
CVX 5.53
COC 6.62
BR 7.04
APA 7.15
APC 8.26
AHC 11.74
DVN 17.55
MRO 18.63
* CVX adjusted for Texaco purchase
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Even more important is keeping our replacement costs low. Low finding and
development costs for oil and gas are a strong indicator of future performance
because lower costs contribute to higher profitability. Our 2001 replacement
costs, excluding purchases, were the second lowest in the industry.
13
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FINDING & DEVELOPMENT COSTS*
1999-2001 Average
Excludes Purchases
($/BOE)
[the following is a tabular representation of graphical materials]
Company Finding &
Trading Development
Symbol Costs
------- -----------
BP 3.39
OXY 3.84
XOM 4.12
KMG 4.80
P 4.83
CVX 4.84
BR 5.42
UCL 6.68
APA 6.69
APC 6.79
COC 7.03
DVN 8.04
AHC 9.50
* CVX adjusted for Texaco purchase.
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Anyone can have one good year. That's why it's important to measure
performance over a multi-year period to determine the real underlying strengths
of a business. As you can see, Occidental also had the second lowest average
replacement costs for the 1999 through 2001 period.
While we succeeded in keeping our costs down, we also dramatically
increased reserves.
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PROVEN RESERVES
Million BOE
[the following is a tabular representation of graphical materials]
1997 1998 1999 2000 2001
------ ------ ------ ------ ------
US 470 761 765 1,695 1,698
International 840 663 587 476 543
------ ------ ------ ------ ------
Total 1,310 1,424 1,352 2,171 2,241
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From 1997 through 2001, our proven reserves grew by over 70 percent. At the
end of 2001, we had proven reserves of 2.24 billion barrels of oil equivalent.
Historically, our international reserves dominated our portfolio, but the
restructuring has dramatically changed that picture - particularly with the
acquisition of Elk Hills in 1998 and Altura in 2000.
Domestic reserves, shown in red, accounted for 76 percent of our worldwide
reserves at the end of last year compared to 36 percent at the end of 1997. This
shift lowers our risk profile and provides a large, stable base to support
future growth opportunities.
15
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PROVEN RESERVES
Million BOE
[the following is a tabular representation of graphical materials]
Proven
Country Reserves
------- --------
US 1,698
Qatar 200
Ecuador 85
Yemen 63
Colombia 58
Oman 57
Russia 52
Pakistan 27
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The breakdown of our proven reserves by country clearly illustrates the
dominance of our U.S. assets. Qatar is our largest international operation, but
it accounts for only 9 percent of our proven reserves. Ecuador is next with
about 4 percent.
16
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OIL & GAS PRODUCTION
Thousand BOE/Day
[the following is a tabular representation of graphical materials]
1997 1998 1999 2000 2001
------ ------ ------ ------ ------
US 156 183 183 282 315
International 239 255 242 179 161
------ ------ ------ ------ ------
Total 395 438 425 461 476
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Since 1997, we've increased our total worldwide production by an average of
5 percent per year. In 2001, production averaged 476,000 barrels of oil
equivalent per day.
Domestic production, shown in red, made up 66 percent of the total in 2001
- compared to 40 percent in 1997.
17
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2001 PROFITABILITY*
$/BOE
[the following is a tabular representation of graphical materials]
Company
Trading
Symbol Profitability
------- -------------
OXY 10.13
APC 7.61
BP 7.22
APA 7.14
DVN 6.33
XOM 6.15
COC 6.03
KMG 5.82
BR 5.80
MRO 5.67
AHC 5.59
CVX 5.17
UCL 4.76
P 4.71
* Exploration and production income (SEC 10-K filings] after taxes and before
interest expense.
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A driving force behind our restructuring was our goal of improving our
financial performance versus the competition. There are a variety of ways to
measure our success in achieving that goal.
I've already shown you how we've succeeded in replacing our production at
competitive costs, but the key is achieving strong profitability on a
unit-of-production basis. Last year, we were the industry leader in
profitability per barrel for the third consecutive year.
18
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AVERAGE ANNUAL PROFITABILITY*
1999-2001
$/BOE
[the following is a tabular representation of graphical materials]
Company
Trading
Symbol Profitability
------- -------------
OXY 9.07
APC 7.56
APA 7.10
BP 6.68
KMG 6.06
DVN 5.79
COC 5.64
XOM 5.51
CVX 5.23
AHC 5.04
P 4.88
UCL 4.29
BR 3.91
MRO 3.74
* Exploration and production income (SEC 10-K filings] after taxes and before
interest expense.
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As I said earlier, anyone can have one good year. The key is to sustain
that performance over time. As you can see, Occidental was number one in average
annual profitability for the three year period from 1999 through 2001. I might
add that we were also the top performer in 1999 and 2000.
While profitability speaks to the quality of the barrels and the efficiency
of the operations, the underlying financial strength and resiliency of the
company is reflected in our cash flow per barrel.
19
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2001 FREE CASH FLOW*
$/BOE
[the following is a tabular representation of graphical materials]
Company Free
Trading Cash
Symbol Flow
------- ----
OXY 9.27
MRO 6.03
BP 5.55
COC 5.39
XOM 5.20
BR 5.05
AHC 4.34
UCL 4.34
CVX 3.32
APA 3.20
P 2.91
DVN 2.65
APC (1.16)
KMG (1.86)
* Exploration and production income (SEC filings) after taxes & before
interest expense, plus DD&A, plus exploration expense, minus capital -
divided by BOE sales
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Our free cash flow per barrel, which is net of capital expenditures, shows
a high correlation with our profitability. In 2001, Occidental ranked first in
cash flow per barrel. Much of the cash we generated was used to reduce debt and
strengthen our balance sheet.
20
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AVERAGE ANNUAL FREE CASH FLOW*
1999-2001
$/BOE
[the following is a tabular representation of graphical materials]
Company Free
Trading Cash
Symbol Flow
------- ----
OXY 9.37
BP 5.93
AHC 5.24
XOM 5.15
MRO 5.00
COC 4.86
APA 4.78
BR 4.46
CVX 4.28
P 4.05
UCL 4.00
KMG 3.96
DVN 3.51
APC (0.78)
* Exploration and production income (SEC filings) after taxes & before
interest expense, plus DD&A, plus exploration expense, minus capital -
divided by BOE sales
--------------------------------------------------------------------------------
Because capital spending can vary significantly from year-to-year, a better
measure of free cash flow is to determine the average over a multi-year period.
From 1999 through 2001, Occidental's average annual free cash flow per barrel of
$9.37 led the industry.
21
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DEBT, RESERVES & PRODUCTION
1997 2001
------ ------
Total Debt ($ Millions) $6,326 $4,890
Production (Thousand BOE/Day) 395 476
Proven Reserves (Million BOE) 1,310 2,241
Reserves/Production Ratio (Years) 9.1 12.9
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This table illustrates that while our debt was coming down by over $1.4
billion between year-end 1997 and 2001, our production increased by 81,000
barrels per day - or 21 percent. At the same time, our proven reserves grew by
more than 900 million barrels - or 71 percent. And we also increased our
reserves life by about four years.
The growth in reserves and production began with the 1998 acquisition of
Elk Hills, and with the purchase of Altura and THUMS in 2000.
22
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ELK HILLS
[map of Elk Hills]
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Acquiring Elk Hills made us the largest producer of natural gas and third
largest oil producer in California. This strategic acquisition enabled us to
capture the benefits of one of the strongest natural gas markets in recent
history.
Through the first quarter this year, Elk Hills had generated cash of $2.5
billion after accounting for capital expenditures. This means we've already
recovered 71 percent of the $3.5 billion purchase price for an asset that will
remain productive for another 30 years.
When we purchased Elk Hills, we added proven reserves of 425 million BOE.
Through the end of last year, we had produced a total of 132 million BOE and
still had 437 million BOE of proven reserves on our books.
23
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ELK HILLS PRODUCTION FORECAST
[the following is a tabular representation of graphical materials]
1998 1999 2000 2001 2002 2003 2004 2005
------ ------ ------ ------ ------ ------ ------ ------
Oil 50 48 47 50 50 55 54 55
Gas 31 49 50 50 43 26 22 20
------ ------ ------ ------ ------ ------ ------ ------
Total 81 97 97 100 93 81 76 75
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Since taking over the Elk Hills operation in 1998, we've stabilized liquids
production, shown in green, that had been in a steep decline. Our success in
developing sophisticated reservoir models through good geo-technical work is
allowing us to tap additional reserves to gradually ramp up production.
At the same time, our production of the Elk Hills gas cap, shown in green,
that overlays the oil deposits has been very successful. We added both pipeline
and compressor capacity to accelerate production to take full advantage of
California's robust gas markets over a period of 18 months.
It's worth emphasizing that the upward trend in liquids production clearly
demonstrates that production of the gas cap has added tremendous value without
adversely impacting liquids production, as some had predicted.
24
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OXY PERMIAN
[map of Oxy Permian]
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In April 2000, we completed the $3.6 billion acquisition of Altura Energy
which made us the largest oil producer and second largest natural gas producer
in Texas. Through the first quarter this year, we recovered approximately $1.3
billion - or 36 percent of the purchase price - in just two years.
At the closing of the acquisition, our total proven reserves in the Permian
were approximately 940 million BOE. By the end of 2001, we had produced
approximately 100 million BOE - and we still had 955 million BOE of proven
reserves remaining in the Permian.
25
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PERMIAN PRODUCTION FORECAST
Thousand BOE/Day
[the following is a tabular representation of graphical materials]
1997 1998 1999 2000* 2001 2002 2003 2004 2005
------ ------ ------ ------ ------ ------ ------ ------ ------
188 174 167 163 161 163 167 172 175
* Altura Purchase Closes in April
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Since taking over the operation, we've succeeded in stabilizing production
that had been declining sharply under the previous owners. Of even greater
significance, production began to rise this year due to a combination of sound
technical work and a cost effective capital program.
This improvement will become more pronounced in the 2003 - 2005 period as
our new carbon dioxide flooding projects and our aggressive infill drilling
program move forward. The CO2 flooding process involves injecting CO2 under
pressure into oil producing formations to enhance recovery of the remaining oil
in place. The CO2 acts as a highly efficient solvent that mixes with the oil,
causing it to flow more freely so that it can be pumped to the surface. This
process increases recovery rates and prolongs the producing life of mature
fields.
26
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THUMS - LONG BEACH
[photo of THUMS]
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The results at Elk Hills and Permian have been excellent, but not as good
as the results from the much smaller THUMS acquisition in Long Beach. We
recovered the entire $110 million purchase price for THUMS in fourteen months.
When we acquired THUMS in April 2000, we booked 94 million BOE of reserves.
By year-end 2001, our cumulative net production from THUMS was nearly 16 million
barrels - and we still had 99 million barrels of proven reserves on our books.
This is an example of our success in replacing our production.
Other core assets, like Hugoton, also continue to turn in strong
performances.
27
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HUGOTON
o Largest gas field in North
America
o Generates strong earnings [map of Hugoton]
and steady cash flow
o Continuing to apply new
technologies to increase
recovery rates
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Hugoton is the largest gas field in North America that stretches from
Kansas into Oklahoma and Texas. As one of the field's largest producers,
Occidental continues to generate strong earnings and steady cash flow from this
world class asset by applying new technology to increase recovery rates. Last
year, Hugoton accounted for approximately one-third of our worldwide gas
reserves and one-quarter of our total gas production.
Our strong positions in Hugoton, California and Texas provide a solid base
to support future growth initiatives.
28
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MIDDLE EAST - OXY INTERESTS
[map of Middle East]
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While we expect modest growth in the U.S. over the next five years, higher
growth will come from building on our strong position in the Middle East.
Oman, Qatar and Yemen, highlighted in yellow, account for total net oil
production of about 90,000 barrels per day. This represents about 25-percent of
our worldwide oil production. These three countries hold approximately
17-percent of our worldwide oil reserves.
Currently, we're pursuing new business opportunities in the United Arab
Emirates and a possible return to Libya - both highlighted in green.
Our newest venture in the region is in Saudi Arabia which is highlighted in
light blue. We were one of eight companies chosen to participate in the
Kingdom's Natural Gas Initiative.
29
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SAUDI ARABIA - CORE VENTURE 2
o Development of Midyan
and Barqan gas fields
- Pipelines & processing
plants
o Downstream projects [map of Saudi Arabia]
- Water desalination
- Power generation
o Exploration in Blocks 40-
49
- Exploration success tied
to other investment
options
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In Saudi Arabia, we have a 20-percent interest in the Core Venture 2
consortium in which ExxonMobil is the lead partner. Intensive negotiations are
continuing between the Saudi Government and the consortium members.
Once the final deal is signed, this project is expected to become
operational in 2006. Meanwhile, we're working hard to optimize the value from
our strong position in Oman, Qatar and Yemen.
30
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OMAN
[map of Oman]
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Our business in Oman centers on the 300-million barrel Safah field in Block
9, shown in yellow. Since the 1983 Safah discovery, our technical staff has
continued adding new recoverable reserves with a series of smaller discoveries
in the Block. Occidental's net production is currently averaging about 13,000
barrels per day.
In June 1998, we signed a contract for a 100-percent working interest to
explore Block 27, shown in light blue. Exploratory activities are currently
underway. Seismic studies have identified potential oil and natural gas
prospects.
31
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QATAR
o ISND contract awarded in
1994
- Reversed production
drop from below 20,000
barrels/day to 138,000
barrels
o ISND success leads to [map of Qatar]
new opportunities
o South Dome contract
awarded in 1998
- South Dome being
developed as North
Dome satellite
o Combined net production
is 42,000 barrels/day
--------------------------------------------------------------------------------
In Qatar, we successfully reversed 25 years of declining production in the
North Dome field by applying new technologies. Since taking over the operation
in 1994, we increased gross production from 20,000 barrels per day to a peak of
138,000 barrels.
Our success at North Dome helped establish Occidental as a leader in
maximizing recovery from mature fields and opened the door to new investment
opportunities in Qatar and other parts of the Middle East.
In 1998, the Qatari government awarded Occidental a production sharing
contract to develop the South Dome field, located 15 miles from North Dome.
Occidental is developing South Dome as a satellite field to the North Dome to
optimize the capital efficiency of the two projects.
Occidental's net production in Qatar is currently averaging about 40,000
barrels per day.
32
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QATAR
o Implementing innovative
ISND waterflood
- Projected recovery of
additional 110 million gross
barrels
o Oxy net is 42 million
o Moving forward with ISND [map of Qatar]
Phase 2
o Potential recovery of
additional 145 million gross
barrels
o Oxy net is 75 million
o Evaluating exploration
opportunities
- Submitted bid on Block 10
--------------------------------------------------------------------------------
We're implementing an innovative waterflood program at North Dome that will
recover an additional 110 million gross barrels of the remaining oil in place.
Our share is 42 million barrels.
We also reached agreement on all technical issues with the Government for
Phase 2 of the North Dome project and are awaiting final approval. This new
phase has the potential of recovering an additional 145 million barrels,
including approximately 75 million barrels net to Occidental.
In addition, we're awaiting word on our exploration bid for Block 10,
located next to the billion-barrel Al Shaheen Field.
33
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YEMEN
[map of Yemen]
--------------------------------------------------------------------------------
In Yemen, we have an interest in the billion-barrel Masila field which was
one of the world's largest oil discoveries in the 1990s. Today, Masila's gross
production of 230,000 barrels of oil per day accounts for more than half of
Yemen's total production. Occidental also holds an interest in the East Shabwa
field where gross production is currently averaging 27,000 barrels of oil per
day. Our net share from both fields is approximately 36,000 barrels per day.
In addition to Masila and East Shabwa, we have interests in seven
exploration blocks shown in blue.
34
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ABU DHABI - DOLPHIN PROJECT
o 25-year project
between UAE & Qatar
o Deliver 2 Bcf/day of
gas from Qatar's
North Field to UAE
[map of Dolphin project] o Construct 260-mile
pipeline
Short-Listed
Companies
* Occidental
* British Petroleum
* ExxonMobil
* Royal Dutch/Shell
* Conoco
--------------------------------------------------------------------------------
Now I'd like to mention several new prospects we're pursuing. Last March,
the governments of the UAE and Qatar signed a 25-year agreement to deliver 2
billion cubic feet per day of natural gas from Qatar's North Field to markets in
the UAE. The agreement created the Dolphin Project which involves the
development of proven gas reserves in the North Field and construction of a 260
mile pipeline from Qatar to the UAE.
We're pleased to be one of five companies selected to compete for a 24.5
percent share of this $3.5 billion project. We submitted our bid on April 6 and
expect to be notified of the results shortly. If we're successful, it will add
180 million cubic feet per day of natural gas to our base production - which
equates to 30,000 barrels of oil equivalent. We also will be able to book
approximately 900 billion cubic feet of proven reserves - or 150 million
equivalent barrels.
This project is low risk because it's built on proven reserves and a long
term purchase agreement. For Oxy, the project would provide a long term and
stable source of income and cash that will reduce volatility through the
business cycle.
35
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LIBYA
[map of Libya]
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Let me add a few words about Libya. When the Reagan Administration imposed
sanctions on Libya in 1986, Occidental left the country, but retained an
interest in the assets we formerly operated. The Libyan government would like us
to return, and we're prepared to do so when sanctions are lifted.
I'm encouraged to see both the U.S. and Libyan governments engaged in
constructive dialogue aimed at resolving their differences. I believe people on
both sides are committed to normalizing relations. When that day arrives,
Occidental is prepared to move quickly. This will be a good development for our
shareholders, and also for the people of Libya and the US.
36
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DEVELOPMENT PROJECTS
[map of Horn Mountain]
o On schedule/under budget
- First production (Late 2002)
o Net production of 20,000 BOE/Day (2003)
o Net production of 22,000 BOE/Day (2005)
o Gross reserves = 150 million BOE
--------------------------------------------------------------------------------
In our U.S. oil and gas operations, the development of the Horn Mountain
discovery in the deep water Gulf of Mexico is on schedule for start up later
this year.
We expect net production to increase from 20,000 BOE per day in 2003 to
22,000 BOE in 2005. Gross reserves are in the 150-million BOE range, with Oxy's
share being one-third.
37
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DEVELOPMENT PROJECTS
[map of Ecuador]
--------------------------------------------------------------------------------
In Latin America, construction of the OCP pipeline in Ecuador is underway
and Occidental has begun development of the Eden-Yuturi oil field in the
southeastern corner of Block 15. Occidental has been operating in Block 15 since
the late 1980s.
The startup of Eden-Yuturi is scheduled to coincide with the completion of
the pipeline in mid-2003. Eden-Yuturi, together with other development work,
will add net incremental production of 35,000 barrels of oil per day. Our
current net production in Ecuador is averaging about 13,000 barrels per day.
38
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DEVELOPMENT PROJECTS
[map of Pakistan]
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Occidental has been active in the Badin concession in Pakistan for 25
years. Post-September 11th events have had no impact on operations there. Our
net production from Badin is currently averaging about 16,000 BOE per day.
British Petroleum is the operator.
As part of the Government of Pakistan's privatization program, Occidental
and British Petroleum have submitted a 50-50 bid for the Governments share of
Badin.
If the bid is successful, it will increase our net share of production to
more than 24,000 BOE per day.
Now I'd like to look to the future, beginning with the production forecast
for our major producing areas - starting with the U.S.
39
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U.S. PRODUCTION
Thousand BOE/Day
[the following is a tabular representation of graphical materials]
2001 2002 2003 2004 2005
------ ------ ------ ------ ------
Permian 161 163 167 172 175
California 126 124 114 111 111
Hugoton 27 27 26 25 24
Horn Mt. 0 1 20 21 22
------ ------ ------ ------ ------
Total 314 315 327 329 332
--------------------------------------------------------------------------------
o I've already discussed our forecast for Permian which is shown in green. As
you can see, we expect production this year to be flat with last year -
followed by modest increases through 2005.
o Good technical work is yielding positive results in California, shown in
red, with increasing liquids production at Elk Hills partially offsetting
the effects of the decline in gas production. We see overall California
production stabilizing in 2005 due to continuing development work in the
Sacramento Valley and Kern Front.
o We expect Hugoton to taper off slowly as shown in light blue.
o The net result is that we expect our U.S. base production from Permian,
California and Hugoton to remain flat through 2005.
o Real U.S. production growth will come from the addition of new barrels at
Horn Mountain which is shown at the top in dark blue.
40
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MIDDLE EAST PRODUCTION
Thousand BOE/Day
[the following is a tabular representation of graphical materials]
2001 2002 2003 2004 2005
------ ------ ------ ------ ------
Qatar 43 45 53 64 73
Yemen 33 37 44 43 40
Oman 12 15 14 13 12
------ ------ ------ ------ ------
Total 88 97 111 120 125
--------------------------------------------------------------------------------
o As we shift to the Middle East, we see steady growth in Qatar which is
shown in green. Our production will get a boost from the implementation of
the waterflood and Phase 2 of the ISND re-development projects I mentioned
earlier.
o Yemen, shown in red, will ramp up a bit next year and then begin to decline
gradually.
o The light blue area shows Oman entering a period of gradual decline.
o Overall, the Middle East shows steady growth from about 90,000 barrels per
day in 2001 to 125,000 barrels in 2005.
o It's worth emphasizing that this forecast does not include any of the new
projects we're currently pursuing in the region.
41
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LATIN AMERICAN PRODUCTION
Thousand BOE/Day
[the following is a tabular representation of graphical materials]
2001 2002 2003 2004 2005
------ ------ ------ ------ ------
Colombia 18 15 20 20 20
Ecuador 13 15 26 46 50
------ ------ ------ ------ ------
Total 31 30 46 66 70
--------------------------------------------------------------------------------
o As we look to Latin America, our estimates for Colombia, shown in green,
assume the government succeeds in keeping the pipeline operational 50 to 60
percent of the time.
o The red area shows our base production in Ecuador increasing this year by
2,000 barrels per day above the 2001 level. Significant growth will begin
in 2003 with the mid-year start up of the Eden Yuturi field. Total
production for Ecuador in 2005 is expected to be nearly three times higher
than in 2001.
o Let's now combine these regional forecasts to see their impact on our total
production worldwide.
42
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OIL & GAS PRODUCTION FORECAST
Thousand BOE/Day
[the following is a tabular representation of graphical materials]
2001 2002 2003 2004 2005
------ ------ ------ ------ ------
United States 314 315 327 329 332
Middle East 88 97 111 120 125
Latin America 31 30 46 66 70
Other 43 43 41 42 41
------ ------ ------ ------ ------
Total 476 485 525 557 568
--------------------------------------------------------------------------------
o What we see is U.S. production growing at a modest rate as shown in light
blue.
o Our Middle East production, shown in dark blue, will grow at a higher rate.
o Our production in Latin America, shown in red, also will increase
significantly.
o The green area shows our "Other" production which is made up of Pakistan
and Russia.
o This forecast is based on projects that are already part of our portfolio
and assumes no new projects or exploration success. The 5 percent average
annual growth rate shown here matches our average annual growth since 1997.
This level of growth is significant in this business.
o If we're successful in capturing some of the new opportunities we're
pursuing, they would be added on top of this base.
o The success of our restructuring program is not only reflected in our
improved performance since 1997, but also has laid the foundation for
future growth in profitability.
43
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TOTAL RETURN TO SHAREHOLDERS
2001
(Percentage)
[the following is a tabular representation of graphical materials]
Company Total
Trading Return to
Symbol Shareholders
------- ------------
OXY 13.8
MRO 11.5
CVX 9.3
P 8.6
COC 0.4
BP 0.0
UCL (4.6)
XOM (7.5)
AHC (13.0)
KMG (15.6)
APC (19.7)
APA (21.2)
BR (24.6)
--------------------------------------------------------------------------------
Now let's talk about the results of our strategy in terms of its impact on
shareholders - beginning with total returns.
In 2001, we led our competitors in total return to shareholders with a
return of about 14-percent. The return is calculated by taking the difference
between the closing stock prices at year-end 2000 and 2001, adding our annual
dividend of one dollar per share and dividing the result by the 2000 closing
price.
44
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TOTAL RETURN TO SHAREHOLDERS
3-Year Annualized
(Percentage)
[the following is a tabular representation of graphical materials]
Company Total
Trading Return to
Symbol Shareholders
------- ------------
APA 30
OXY 22
KMG 17
P 15
UCL 10
AHC 9
APC 9
CVX 6
COC 5
XOM 5
MRO 3
BR 3
BP 2
* Conoco annualized since trading began on 7-15-99.
--------------------------------------------------------------------------------
When we apply the same methodology for the period 1999 through 2001, our
annualized total return was 22-percent - placing us second among our
competitors.
Another way investors keep score is comparing dividend yields.
45
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ANNUAL DIVIDEND YIELD
Based on 4/26/02 Stock Prices
(Percentage)
[the following is a tabular representation of graphical materials]
Company Annual
Trading Dividend
Symbol Yield
------- --------
OXY 3.5
CVX 3.3
MRO 3.2
KMG 3.0
BP 2.8
COC 2.7
P 2.4
XOM 2.3
UCL 2.2
AHC 1.5
BR 1.2
APA 0.7
APC 0.6
--------------------------------------------------------------------------------
Based on the closing stock prices on April 26, our dividend yield of 3
1/2-percent was the highest among the oil companies. If you look at the entire
S&P 500, you will find our yield ranks in the top 10 percent.
It's also important to point out that, your investment in Occidental is
less volatile as a result of the success of our strategy.
46
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REDUCED VOLATILITY
Interest Expense & Preferred Dividends
as a Percent of
Operating Income
1998 1999 2000 2001
---- ---- ---- ----
88% 59% 21% 18%
--------------------------------------------------------------------------------
One way to illustrate this point is the decline of our interest expense and
preferred dividends relative to our operating income. This table shows it took
88 percent of our operating income to cover our interest expense in 1998. By
2001, that coverage ratio dropped to 18 percent. The decline in that ratio
reduces volatility and improves our financial flexibility.
I've discussed a number of items this morning to demonstrate how our
strategy is reflected in our performance and how we match up with our industry
competitors. Let's look at all of this now from the broader perspective of the
entire S&P 500 investment universe.
47
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THE BUSINESSWEEK FIFTY
"The Top Performing Companies of the S&P 500"
o Occidental Ranks in top 5% for second year in a row
- Performance Grades
o B Total Return (1 Year)
o A Total Return (3 Years)
o C Sales Growth (1 Year)
o A Sales Growth (3 Years)
o C Profit Growth (1 Year)
o A Profit Growth (3 Years)
o B Net Margin
o A Return on Equity
--------------------------------------------------------------------------------
For the second consecutive year, Occidental is ranked among the top
5-percent of the S&P 500 companies by BusinessWeek based on performance.
These rankings are based on composite performance grades for total return,
sales growth, profit growth, net margin and return on equity. BusinessWeek
divides the S&P 500 into 24 different industry groups and ranks the companies
based on these performance measures. If a company ranks in the top 20 percent in
a category, it receives grade of "A". BusinessWeek then takes a weighted average
of all the performance grades to develop an overall ranking. We're especially
pleased to have received high marks in the most important categories of total
returns, profit growth and return on equity. The end result is that Occidental
made the top 5 percent two years in a row.
48
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THE BUSINESSWEEK FIFTY
"The Top Performing Companies of the S&P 500"
2002 Rank 2001 Rank
--------- ---------
Phillips 17 Anadarko 2
Occidental 21 Occidental 7
Marathon 24 Apache 8
Apache 41 Kerr-McGee 9
Amerada 42 Amerada 18
Phillips 22
EOG 24
ChevTex 35
ExxonMobil 44
--------------------------------------------------------------------------------
Based on the methodology I just described, BusinessWeek again ranked
Occidental second among the oil and gas companies. In 2001, 9 oil and gas
companies ranked in the top 50, but only five made it in 2002.
49
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FORBES - AMERICA'S TOP 500
Occidental selected as 1 of 20 "value stocks" based on
beating sector averages in at least four of five ratios:
o Return on Equity o Price-to-Book
o Price-to-Sales o Price-to-Cash-Flow
o Price-to-Earnings
--------------------------------------------------------------------------------
In addition, in its April 15th issue, Forbes selected Occidental as one of
the 20 most undervalued companies in the S&P 500. Occidental was the only large
cap oil company Forbes selected as a "value stock". Forbes believes these stocks
are undervalued on an absolute basis and relative to industry peers based on
beating their sector averages in at least four of the five ratios listed here.
Forbes calls these 20 companies "potential bargains."
50
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OCCIDENTAL'S OUTLOOK
o Occidental much stronger than in 1997
- Lowest debt in 20 years
- Highest reserves in company's history
- Production up by 21%
- Operations concentrated in large assets in three core areas
U.S. Middle East Latin America
- Oil & gas production growth forecast exceeds 5% per year
o Occidental - an attractive investment opportunity
- Strong balance sheet
- Large, stable U.S. assets
- Favorable position in Middle East
--------------------------------------------------------------------------------
In summary, Occidental is much stronger than in 1997 and our outlook has
never been better.
o Our total debt is the lowest it's been in almost 20 years.
o Our proven oil and gas reserves have grown 71-percent to the highest
level in the company's history.
o Our production has increased by 21-percent - and, as you've just seen,
our production will continue to grow based on projects that are
already a part of our portfolio.
o Our operations are focused on three core geographic areas - the U.S.,
the Middle East and Latin America.
o Our oil and gas production has grow by an average of 5-percent per
year since 1997 and our forecast projects a continuation of 5-percent
average annual growth through 2005.
o Our strong balance sheet and large, stable U.S. assets and favorable
position in the Middle East provide a solid platform to capture new
growth opportunities.
This combination of factors, when coupled with exciting new investment
prospects, make Occidental an attractive investment opportunity.
51
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OCCIDENTAL PETROLEUM CORPORATION
Statements in this presentation that contain words such as "will" or
"expect", or otherwise relate to the future, are forward-looking and
involve risks and uncertainties that could significantly affect
expected results. Factors that could cause results to differ
materially include, but are not limited to: global commodity pricing
fluctuations, and supply/demand considerations, for oil, gas and
chemicals; higher-than-expected costs; and not successfully completing
(or any material delay in) any expansion, capital expenditure,
acquisition, or disposition. Occidental disclaims any obligation to
update any forward-looking statements.
--------------------------------------------------------------------------------
52
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
OCCIDENTAL PETROLEUM CORPORATION
(Registrant)
DATE: May 3, 2002 S. P. Dominick, Jr.
--------------------------------------------------
S. P. Dominick, Jr., Vice President and Controller
(Chief Accounting and Duly Authorized Officer)