Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (MD&A)

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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (MD&A)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (MD&A)

In this report, "Occidental" means Occidental Petroleum Corporation (OPC), or OPC and one or more entities in which it owns a controlling interest (subsidiaries). Occidental's principal businesses consist of three segments. The oil and gas segment explores for, develops and produces oil and condensate, natural gas liquids (NGLs) and natural gas. The chemical segment (OxyChem) mainly manufactures and markets basic chemicals and

vinyls. The midstream and marketing segment gathers, processes, transports, stores, purchases and markets oil, condensate, NGLs, natural gas, carbon dioxide (CO2) and power. It also trades around its assets, including transportation and storage capacity. Additionally, the midstream and marketing segment invests in entities that conduct similar activities.

STRATEGY

General

Through its operations, Occidental aims to maximize Total Shareholder Return through a combination of:

ØConsistent dividend growth;
ØValue growth through oil and gas development that meets above cost-of-capital returns (ROE and ROCE) and return targets of greater than 15 percent and 20 percent for domestic and international projects, respectively;
ØTarget growth rates of 5 percent to 8 percent average per year over the long-term; and
ØMaintain a strong balance sheet.

In conducting its business, Occidental accepts commodity, engineering and limited exploration risks. Capital is employed to operate all assets in a safe and environmentally sound manner. Occidental seeks to limit its financial and political risks.

Price volatility is inherent in the oil and gas business. In 2016, Occidental continued to experience a challenging price environment with low oil, natural gas and NGLs prices. In order to manage this risk, Occidental strives to retain sufficient cash on hand and may access capital markets, as necessary.

In connection with Occidental's strategic review initiatives, Occidental:

ØAcquired producing and non-producing leasehold acreage, CO2 properties and related infrastructure in the Permian Basin, which leverages existing infrastructure and operational synergies; and
ØCompleted its exit of non-core operations in the Piceance Basin, Bahrain, Iraq, Libya and Yemen.

The following describes the application of Occidental’s overall strategy for each of its operating segments:

Oil and Gas

The oil and gas business implements Occidental's strategy primarily by:

ØOperating and developing areas where reserves are known to exist and to increase production from core areas, primarily in the Permian Basin, Colombia, Oman, Qatar and UAE;
ØFocusing on cost-reduction efficiencies, improvement in new well productivity and better base management to reduce total spend per barrel;
ØUsing enhanced oil recovery techniques, such as CO2, water and steam floods, in mature fields;
ØFocusing many of Occidental's subsurface characterization and technical activities on unconventional opportunities, primarily in the Permian Basin. This focus is in support of a sizable capital program within these developments; and
ØMaintaining a disciplined and prudent approach with capital expenditures to focus on returns and maintain

discipline, with an emphasis on creating value and further enhancing Occidental's existing positions.

In 2016, oil and gas capital expenditures were approximately $2.0 billion, and were mainly comprised of expenditures in the Permian Basin and the Middle East. This activity reflects Occidental's strategy to focus on achieving returns above the cost of capital even in a low price environment.

Management believes Occidental's oil and gas segment growth will occur primarily through exploitation and development opportunities in the Permian Basin and Colombia and focused international projects in the Middle East.

Chemical

The primary objective of OxyChem is to generate cash flow in excess of its normal capital expenditure requirements and achieve above-cost-of-capital returns. The chemical segment's strategy is to be a low-cost producer in order to maximize its cash flow generation. OxyChem concentrates on the chlorovinyls chain beginning with chlorine, which is co-produced with caustic soda, and markets both to external customers. In addition, chlorine, together with ethylene, is converted through a series of intermediate products into polyvinyl chloride (PVC). OxyChem's focus on chlorovinyls allows it to maximize the benefits of integration and take advantage of economies of scale. Capital is employed to sustain production capacity and to focus on projects and developments designed to improve the competitiveness of segment assets. Acquisitions and plant development opportunities may be pursued when they are expected to enhance the existing core chlor-alkali and PVC businesses or take advantage of other specific opportunities. In early 2014, OxyChem, through a 50/50 joint venture with Mexichem S.A.B. de C.V., broke ground on a 1.2 billion pound-per-year ethylene cracker at the OxyChem Ingleside facility. The joint venture provides an opportunity to capitalize on the advantage that U.S. shale gas development has presented to U.S. chemical producers by providing low-cost ethane as a raw material. The joint venture will provide OxyChem with an ongoing source of ethylene, significantly reducing OxyChem's reliance on third-party ethylene suppliers. The construction of the ethylene cracker remains on budget and on schedule and is expected to begin operating in early 2017. In 2016, capital expenditures for OxyChem totaled $324 million. Additionally, $160 million was spent on the Mexichem joint venture. In the first quarter of 2016, OxyChem sold its Occidental Tower building in Dallas for a pre-tax gain of approximately $57 million and a non-core specialty chemicals business for a pre-tax gain of approximately $31 million. In 2016, OxyChem announced a $145 million expansion of its manufacturing plant in Geismar, Louisiana. The project will produce an OxyChem patented new raw material used in making next-generation, climate-friendly refrigerants with a low global warming and ozone depletion potential. Construction work has begun with an anticipated completion date in late 2017.

Midstream and Marketing

The midstream and marketing segment strives to maximize realized value by optimizing use of its assets, including its transportation and storage capacity, and by providing access to multiple markets. In order to generate returns, the segment evaluates opportunities across the value chain and uses its assets to provide services to other Occidental segments as well as third parties. The segment invests in and operates pipeline systems, gas plants, co-generation facilities, and storage facilities. The segment also seeks to minimize the costs of gas, power and other commodities used in Occidental's businesses, while limiting credit risk exposure. Capital is employed to sustain or, where appropriate, increase operational and transportation capacity and to improve the competitiveness of Occidental's assets. In 2016, capital expenditures totaled $358 million related to Permian Basin gas processing and gathering infrastructure, Al Hosn Gas and the Ingleside Crude Terminal.

Key Performance Indicators

Occidental seeks to meet its strategic goals by continually measuring its success in its key performance metrics that drive total stockholder return. In addition to production growth and capital allocation and deployment discussed above, Occidental believes the following are its most significant metrics:

ØHealth, environmental, safety and process metrics;
ØTotal Shareholder Return, including funding the dividend;
ØReturn on equity (ROE) and return on capital employed (ROCE); and
ØSpecific measures such as total spend per barrel, per-unit profit, production cost, cash flow, finding and development costs and reserves replacement percentages.

OIL AND GAS SEGMENT

Business Environment

Oil and gas prices are the major variables that drive the industry’s financial performance. The following table presents the average daily West Texas Intermediate (WTI), Brent and New York Mercantile Exchange (NYMEX) prices for 2016 and 2015:

20162015
WTI oil ($/barrel)$43.32$48.80
Brent oil ($/barrel)$45.04$53.64
NYMEX gas ($/Mcf)$2.42$2.75

The following table presents Occidental's average realized prices as a percentage of WTI, Brent and NYMEX for 2016 and 2015:

20162015
Worldwide oil as a percentage of average WTI89%97%
Worldwide oil as a percentage of average Brent86%88%
Worldwide NGLs as a percentage of average WTI34%33%
Worldwide NGLs as a percentage of average Brent33%30%
Domestic natural gas as a percentage of NYMEX79%78%

Average WTI and Brent oil price indexes declined 11 percent and 16 percent, from $48.80 and $53.64 in 2015 to $43.32 and $45.04 in 2016, respectively. Average worldwide realized oil prices fell $8.37, or 18 percent, in 2016 compared to 2015. However, the WTI and Brent oil price indexes increased significantly in the fourth quarter of 2016, closing at $53.72 per barrel and $56.82 per barrel, respectively, as of December 31, 2016, well above the 2016 average prices. The average realized domestic natural gas price in 2016 decreased 12 percent from 2015. Average NYMEX natural gas prices declined 12 percent, from $2.75 in 2015 to $2.42 in 2016.

Prices and differentials can vary significantly, even on a short-term basis, making it impossible to predict realized prices with a reliable degree of certainty.

The decline in oil and gas prices during 2016 and 2015, as well as the decision to sell or exit non-core assets, caused Occidental to assess the carrying value of all of its oil and gas producing assets and assess development plans for its non-producing assets. In 2016, impairment and related charges were immaterial. In 2015, Occidental recorded total pre-tax impairment and related charges of $3.5 billion for its domestic assets and $5.0 billion for its international assets. To assess carrying value of its oil and gas assets, Occidental uses oil and gas price curves settled on the last trading day of each quarter. While oil and gas future prices were increasing at the end of 2016 any future sustained declines in commodity prices may result in additional impairments in the future.

Operations

2016 Developments

In March 2016, Occidental completed the sale of its Piceance Basin operations in Colorado for approximately $153 million resulting in a pre-tax gain of $121 million.

In September 2016, Occidental completed the sale of its South Texas Eagle Ford non-operated properties for $63 million resulting in a pre-tax gain of $59 million.

In October 2016, Occidental acquired producing and non-producing leasehold acreage in the Permian Basin. This acquisition includes 35,000 net acres in Reeves and Pecos counties, Texas, in the Southern Delaware Basin, in areas where Occidental currently operates or has working interests. Separately, Occidental also acquired working interests in several producing oil and gas properties with CO2 floods and related EOR infrastructure, increasing Occidental's ownership in several properties where it is currently the operator or an existing working interest partner. The total purchase price for these

transactions was approximately $2.0 billion.

In 2016, Occidental completed its exit of non-core operations in Bahrain, Iraq, Libya and Yemen.

Business Review

Domestic Interests

Occidental conducts its domestic operations through land leases, subsurface mineral rights it owns or a combination of both surface land and subsurface mineral rights it owns. Occidental's domestic oil and gas leases have a primary term ranging from one to ten years, which is extended through the end of production once it commences. Of the total 3.6 million net acres in which Occidental has interests, approximately 84 percent is leased, 15 percent is owned subsurface mineral rights and 1 percent is owned land with mineral rights.

The following charts show Occidental’s domestic total production volumes for the last five years:

Domestic Production Volumes

(thousands BOE/day)

prodgraph6aa02.jpg

Notes:

•Excludes volumes from California Resources, which was separated on November 30, 2014, and included as discontinued operations for all applicable periods.
•Operations sold include Piceance (sold in March 2016), Williston (sold in November 2015) and Hugoton (sold in April 2014)

United States Assets

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United States

1.Permian Basin
2.South Texas and Other interests

Permian Basin

Occidental's Permian Basin production is diversified across a large number of producing areas. The basin extends throughout west Texas and southeast New Mexico and is one of the largest and most active oil basins in the United States, accounting for approximately 16 percent of the total United States oil production. Occidental is the largest operator and the largest producer of oil in the Permian Basin with an approximate 12 percent net share of the total oil production in the basin. Occidental also produces and processes natural gas and NGLs in the basin.

Occidental manages its Permian Basin operations through two business units: Permian Resources, which includes growth-oriented unconventional opportunities and Permian EOR, which utilizes enhanced oil recovery techniques such as CO2 floods and waterfloods. During 2016, the Permian operations focused on full cycle value through capital efficiency, reduced operating expense, improved base production and new well productivity. In the Permian Basin, Occidental spent over $1.2 billion of capital in 2016, with 60 percent spent on Permian Resources assets. In 2017, Occidental expects to allocate approximately one third of the 2017 capital budget to Permian Resources for focused development areas in the Midland and Delaware Basins and approximately 10 to 15 percent to Permian EOR in order to add to existing facilities to increase CO2 production and injection capacity for future projects.

Occidental's Permian Resources operations are among its fastest growing assets with over 11,650 drilling locations in its horizontal inventory located in the Midland and Delaware sub-basins. This inventory was developed using data gathered from appraisal efforts, and development drilling, along with offset operators drilling activities. As of year end, approximately 650 of these drilling locations represented proved reserves. Continued wellbore placement and completion optimization through advanced subsurface characterization and the application of enhanced manufacturing principles, combined with projected commercial savings, are expected to increase the well inventory even further. The development program, which largely began in 2010, continued in 2016. In 2016, Permian Resources drilled 63 horizontal wells. Production from Permian Resources comes from approximately 5,550 net wells, of which 23 percent are operated by other operators. These investments in Permian wells operated by others allows Occidental to access and leverage additional data in the same areas where it is operating. By analyzing the operated by others data with the significant amount of data Occidental has gathered, its Permian operations are able to use the information to aid in reducing operating expenses, gain drilling and completions efficiencies, increase the productivity of its wells and improve the base production. In 2016, Permian Resources added 92 million BOE to Occidental's proved reserves.

Permian EOR operates a combination of CO2 floods and waterfloods, which have similar development characteristics and ongoing monitoring and maintenance requirements. Due to a unique combination of characteristics, the Permian Basin has been a leader in the

implementation of CO2 enhanced oil recovery projects. The Permian Basin’s concentration of large conventional reservoirs, favorable CO2 flooding performance and the proximity to naturally occurring CO2 supply has resulted in decades of steady growth in enhanced oil production. With 31 active floods and over 40 years of experience, Permian EOR is the industry leader in Permian Basin CO2 flooding.

Occidental is an industry leader in applying this technology, which can increase ultimate oil recovery by 10 to 25 percent in the fields where it is employed. Significant opportunity remains to expand Occidental's existing projects into new portions of reservoirs that thus far have only been water-flooded, leaving opportunity for significant additional recovery with new CO2 injection. Even small improvements in recovery efficiency can add significant reserves. Technology improvements, such as the recent trend towards vertical expansion of the CO2 flooded interval into residual oil zone targets continue to yield more recovery from existing projects. Over the last few years, Occidental has had an ongoing program of deepening wells, with 125 wells deepened in 2016 and 100 wells planned for 2017. Occidental utilizes workover rigs to drill the extra depth into additional CO2 floodable sections of the reservoir. These are low cost projects that can add reserves even in a low price environment. Permian EOR has a large inventory of future CO2 projects which could be developed over the next 20 years or accelerated, depending on market conditions. In 2016, Permian EOR had its largest improved recovery additions in more than 10 years adding 72 million BOE to Occidental's proved reserves, primarily as a result of executing CO2 flood development projects and expansions as well as extending the approved CO2 slug size of current floods.

The current strategy for Permian EOR is to invest sufficient capital to maintain current production and provide cash flow. By exploiting natural synergies between Permian EOR and Permian Resources, Occidental is able to deliver unique advantages, efficiencies and expertise across its Permian Basin operations. Occidental's share of production in the Permian Basin was approximately 269,000 BOE per day in 2016 with 124,000 BOE per day coming from Permian Resources and 145,000 BOE per day from Permian EOR.

South Texas and Other

Occidental holds approximately 178,000 net acres in South Texas. Occidental's share of production in South Texas and Other was approximately 33,000 BOE per day.

International Interests

Production-Sharing Contracts

Occidental's interests in Oman and Qatar are subject to production sharing contracts (PSC). Under such contracts, Occidental records a share of production and reserves to recover certain production costs and an additional share for profit. In addition, certain contracts in Colombia are subject to contractual arrangements similar to a PSC. These contracts do not transfer any right of ownership to Occidental and reserves reported from these arrangements are based on Occidental’s economic interest as defined in the contracts. Occidental’s share of production and reserves from these contracts decreases

when product prices rise and increases when prices decline. Overall, Occidental’s net economic benefit from these contracts is greater when product prices are higher.

The following charts show Occidental’s international production volumes for the last five years:

International Production Volumes

(thousands BOE/day)

prodgraph7b.jpg

Notes:

•Operations sold or exited include Bahrain, Iraq, Libya and Yemen.

Middle East Assets

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Middle East

1.Qatar
2.United Arab Emirates
3.Oman

Oman

In Oman, Occidental is the operator of Block 9 with a 50-percent working interest, Block 27 with a 65-percent working interest, Block 53 with a 45-percent working interest; and Block 62, with an 80-percent working interest.

In December 2015, the existing production sharing contract for Block 9 expired and Occidental agreed to operate Block 9 under modified operating terms until a new contract is approved. The Block 9 Exploration and Production Sharing Agreement 15-year extension was signed in January 2017 and will be effective upon ratification through Royal Decree. In 2016, the average gross production from Block 9 was 94,000 BOE per day. The term for Block 27 expires in 2035.

A 30-year PSC for the Mukhaizna Field (Block 53) was signed with the Government of Oman in 2005, pursuant to

which Occidental assumed operation of the field. By the end of 2016, Occidental had drilled more than 2,900 new wells and continued implementation of a major steamflood project. In 2016, the average gross daily production was 127,000 BOE per day, including a record fourth quarter production of 133,000 BOE per day, which was approximately 16 times higher than the production rate in September 2005 when Occidental assumed operations.

In 2008, Occidental was awarded a 20-year contract for Block 62, subject to declaration of commerciality, where it is pursuing development and exploration opportunities targeting natural gas and condensate resources. In 2014, Occidental signed a five-year extension for the initial phase for the discovered non associated gas area (natural gas not in contact with crude oil in a reservoir) for Block 62. Production commenced in January 2016.

In 2016, Occidental achieved record production in Oman, and Occidental's share of production averaged 96,000 BOE per day in 2016.

Qatar

In Qatar, Occidental is the operator of the offshore fields Idd El Shargi North Dome (ISND) and Idd El Shargi South Dome (ISSD), with a 100-percent working interest in each, and Al Rayyan (Block 12), with a 92.5-percent working interest. The terms for ISND and ISSD expire in 2019 and 2022, respectively. The term for Block 12 expires on May 31, 2017 and this contract will not be extended. Production from Block 12 was not significant.

Occidental has continued to successfully implement large scale water flooding projects combined with state of the art horizontal drilling, advanced completion techniques as well as utilizing extensive automated artificial lift systems that are significantly extending the life of the field. Since the commencement of its operations in 1994, Occidental has boosted the production from the Idd El Shargi fields by over 400 percent with current gross oil rates of around 95,000 BOE per day. The ISSD field recently demonstrated encouraging results and is achieving record levels of production. Despite complex marine operations, Occidental is recognized as the lowest cost in country oil operator.

Occidental also holds the Dolphin investment that is comprised of two separate economic interests through which Occidental owns: (i) a 24.5-percent undivided interest in the upstream operations under a Development and Production Sharing Agreement with the Government of Qatar to develop and produce natural gas, NGLs and condensate in Qatar’s North Field through mid-2032, with a provision to request a five-year extension; and (ii) a 24.5-percent interest in the stock of Dolphin Energy Limited (Dolphin Energy), which operates a pipeline and is discussed further in "Midstream and Marketing Segment - Pipeline Transportation."

Occidental's share of production from Qatar was approximately 108,000 BOE per day in 2016.

United Arab Emirates

In 2011, Occidental acquired a 40-percent participating interest in Al Hosn Gas, joining with the Abu Dhabi National Oil Company (ADNOC) in a 30-year joint venture agreement. In 2016, Al Hosn Gas gross production

exceeded expectations, producing over 570 MMcf per day of natural gas and 95,000 barrels per day of NGLs and condensate in its highest month of production. Occidental’s share of production from Al Hosn Gas was 190 MMcf per day of natural gas and 32,000 barrels per day of NGLs and condensate in 2016.

Additionally, Al Hosn Gas includes gas processing facilities which are discussed further in "Midstream and Marketing Segment - Gas Processing Plants and CO2 Fields and Facilities".

Occidental conducts a majority of its Middle East business development activities through its office in Abu Dhabi, which also provides various support functions for Occidental’s Middle East oil and gas operations.

Latin America Assets

a201510klav2rgba03.jpgLatin America 1. Colombia

Colombia

Occidental has working interests in the La Cira-Infantas and Teca areas and has operations within the Llanos Norte Basin. Occidental's interests range from 39 to 61 percent and certain interests expire between 2023 and 2038, while others extend through the economic limit of the areas. In 2016, Occidental started a thermal recovery pilot at the Teca heavy oil field and the initial results are better than anticipated. Production began from these pilots in 2016. Occidental's share of production from Colombia was approximately 33,000 BOE per day in 2016.

Occidental also holds working interests in the Tarija, Chuquisaca and Santa Cruz regions of Bolivia, which produce gas. Occidental's share of production from Bolivia was 1,000 BOE per day in 2016.

Proved Reserves

Proved oil, NGLs and gas reserves were estimated using the unweighted arithmetic average of the first-day-of-the-month price for each month within the year, unless prices were defined by contractual arrangements. Oil, NGLs and natural gas prices used for this purpose were based on posted benchmark prices and adjusted for price differentials including gravity, quality and transportation costs. For the 2016, 2015 and 2014 disclosures, the calculated average West Texas Intermediate oil prices

were $42.75, $50.28 and $94.99 per barrel, respectively. The calculated average Brent oil prices for 2016, 2015 and 2014 disclosures were $44.49, $55.57 and $99.51, per barrel, respectively. The calculated average Henry Hub gas prices for 2016, 2015 and 2014 were $2.55, $2.66 and $4.42 per MMBtu, respectively.

Occidental had proved reserves at year-end 2016 of 2,406 million BOE, compared to the year-end 2015 amount of 2,200 million BOE. Proved reserves at year-end 2016 and 2015 consisted of, respectively, 56 percent and 59 percent oil, 17 percent and 15 percent NGLs and 27 percent and 26 percent natural gas. Proved developed reserves represented approximately 77 percent and 79 percent, respectively, of Occidental’s total proved reserves at year-end 2016 and 2015.

Occidental does not have any reserves from non-traditional sources. For further information regarding Occidental's proved reserves, see "Supplemental Oil and Gas Information" following the "Financial Statements."

Changes in Proved Reserves

Occidental's total proved reserves increased 206 million BOE in 2016, which included additions of 187 million BOE from Occidental's development program.

Changes in reserves were as follows:

(in millions of BOE)2016
Revisions of previous estimates159
Improved recovery185
Extensions and discoveries2
Purchases137
Sales(46)
Production(231)
Total206

Occidental's ability to add reserves, other than through purchases, depends on the success of improved recovery, extension and discovery projects, each of which depends on reservoir characteristics, technology improvements and oil and natural gas prices, as well as capital and operating costs. Many of these factors are outside management’s control, and may negatively or positively affect Occidental's reserves.

Revisions of Previous Estimates

Revisions can include upward or downward changes to previous proved reserve estimates for existing fields due to the evaluation or interpretation of geologic, production decline or operating performance data. In addition, product price changes affect proved reserves recorded by Occidental. For example, lower prices may decrease the economically recoverable reserves, particularly for domestic properties, because the reduced margin limits the expected life of the operations. Offsetting this effect, lower prices increase Occidental's share of proved reserves under PSCs because more oil is required to recover costs. Conversely, when prices rise, Occidental's share of proved reserves decreases for PSCs and economically recoverable reserves may increase for other operations. In 2016, positive revisions of 159 million BOE were primarily due to technical revisions in Al Hosn Gas and price

revisions in Oman due to the PSC impact, partially offset by negative domestic price revisions.

Reserve estimation rules require that estimated ultimate recoveries be much more likely to increase or remain constant than to decrease, as changes are made due to increased availability of technical data.

Improved Recovery

In 2016, Occidental added proved reserves of 185 million BOE mainly associated with the Permian Basin and Oman operations. These properties comprise both conventional projects, which are characterized by the deployment of EOR development methods, largely employing application of CO2 flood, waterflood or steam flood, and unconventional projects. These types of conventional EOR development methods can be applied through existing wells, though additional drilling is frequently required to fully optimize the development configuration. Waterflooding is the technique of injecting water into the formation to displace the oil to the offsetting oil production wells. The use of either CO2 or steam flooding depends on the geology of the formation, the evaluation of engineering data, availability and cost of either CO2 or steam and other economic factors. Both techniques work similarly to lower viscosity causing the oil to move more easily to the producing wells. Many of Occidental's projects, including unconventional projects, rely on improving permeability to increase flow in the wells. In addition, some improved recovery comes from drilling infill wells that allow recovery of reserves that would not be recoverable from existing wells.

Extensions and Discoveries

Occidental also added proved reserves from extensions and discoveries, which are dependent on successful exploration and exploitation programs. In 2016, extensions and discoveries added 2 million BOE related primarily to the recognition of proved developed reserves in Oman.

Purchases of Proved Reserves

Occidental continues to seek opportunities to add reserves through acquisitions when properties are available at prices it deems reasonable. As market conditions change, the available supply of properties may increase or decrease accordingly.

In 2016, Occidental purchased 137 million BOE of proved reserves in the Permian Basin, which mainly came from acquisitions made in October 2016.

Sales of Proved Reserves

In 2016, Occidental sold 46 million BOE in proved reserves mainly related to Libya and Piceance.

Proved Undeveloped Reserves

In 2016, Occidental had proved undeveloped reserve additions of 195 million BOE mainly from Permian Basin improved recovery and purchases. These proved undeveloped reserve additions were partially offset by transfers of 66 million BOE to the proved developed category as a result of the 2016 development programs

and 47 million BOE of negative price and price related revisions. Permian Basin and Oman accounted for approximately 89 percent of the reserve transfers from proved undeveloped to proved developed in 2016. Occidental incurred approximately $0.5 billion in 2016 to convert proved undeveloped reserves to proved developed reserves. A substantial portion of the proved undeveloped reserves as of December 31, 2016, was the result of the development program in the Permian Basin, which represents 75 percent of total year-end proved undeveloped reserves.

Reserves Evaluation and Review Process

Occidental's estimates of proved reserves and associated future net cash flows as of December 31, 2016, were made by Occidental’s technical personnel and are the responsibility of management. The estimation of proved reserves is based on the requirement of reasonable certainty of economic producibility and funding commitments by Occidental to develop the reserves. This process involves reservoir engineers, geoscientists, planning engineers and financial analysts. As part of the proved reserves estimation process, all reserve volumes are estimated by a forecast of production rates, operating costs and capital expenditures. Price differentials between benchmark prices (the unweighted arithmetic average of the first-day-of-the-month price for each month within the year) and realized prices and specifics of each operating agreement are then used to estimate the net reserves. Production rate forecasts are derived by a number of methods, including estimates from decline curve analysis, type-curve analysis, material balance calculations that take into account the volumes of substances replacing the volumes produced and associated reservoir pressure changes, seismic analysis and computer simulation of the reservoir performance. These field-tested technologies have demonstrated reasonably certain results with consistency and repeatability in the formation being evaluated or in an analogous formation. Operating and capital costs are forecast using the current cost environment applied to expectations of future operating and development activities.

Net proved developed reserves are those volumes that are expected to be recovered through existing wells with existing equipment and operating methods for which the incremental cost of any additional required investment is relatively minor. Net proved undeveloped reserves are those volumes that are expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required for recompletion.

The current Senior Vice President, Reserves for Oxy Oil and Gas is responsible for overseeing the preparation of reserve estimates, in compliance with U.S. Securities and Exchange Commission (SEC) rules and regulations, including the internal audit and review of Occidental's oil and gas reserves data. The Senior Vice President has over 30 years of experience in the upstream sector of the exploration and production business, and has held various assignments in North America, Asia and Europe. He is a three-time past Chair of the Society of Petroleum Engineers Oil and Gas Reserves Committee. He is an American Association of Petroleum Geologists (AAPG) Certified

Petroleum Geologist and currently serves on the AAPG Committee on Resource Evaluation. He is a member of the Society of Petroleum Evaluation Engineers, the Colorado School of Mines Potential Gas Committee and the UNECE Expert Group on Resource Classification. The Senior Vice President has Bachelor of Science and Master of Science degrees in geology from Emory University in Atlanta.

Occidental has a Corporate Reserves Review Committee (Reserves Committee), consisting of senior corporate officers, to review and approve Occidental's oil and gas reserves. The Reserves Committee reports to the Audit Committee of Occidental's Board of Directors during the year. Since 2003, Occidental has retained Ryder Scott Company, L.P. (Ryder Scott), independent petroleum engineering consultants, to review its annual oil and gas reserve estimation processes.

In 2016, Ryder Scott conducted a process review of the methods and analytical procedures utilized by Occidental’s engineering and geological staff for estimating the proved reserves volumes, preparing the economic evaluations and determining the reserves classifications as of December 31, 2016, in accordance with the SEC regulatory standards. Ryder Scott reviewed the specific application of such methods and procedures for selected oil and gas properties considered to be a valid representation of Occidental’s 2016 year-end total proved reserves portfolio. In 2016, Ryder Scott reviewed approximately 18 percent of Occidental’s proved oil and gas reserves. Since being engaged in 2003, Ryder Scott has reviewed the specific application of Occidental’s reserve estimation methods and procedures for approximately 80 percent of Occidental’s existing proved oil and gas reserves. Management retains Ryder Scott to provide objective third-party input on its methods and procedures and to gather industry information applicable to Occidental’s reserve estimation and reporting process. Ryder Scott has not been engaged to render an opinion as to the reasonableness of reserves quantities reported by Occidental. Occidental has filed Ryder Scott's independent report as an exhibit to this Form 10-K.

Based on its reviews, including the data, technical processes and interpretations presented by Occidental, Ryder Scott has concluded that the overall procedures and methodologies Occidental utilized in estimating the proved reserves volumes, documenting the changes in reserves from prior estimates, preparing the economic evaluations and determining the reserves classifications for the reviewed properties are appropriate for the purpose thereof and comply with current SEC regulations.

Industry Outlook

The petroleum industry is highly competitive and subject to significant volatility due to various market conditions. Average annual WTI and Brent oil price indexes for 2016 were below the 2015 averages, but ended the year higher, closing at $53.72 per barrel and $56.82 per barrel, respectively, as of December 31, 2016. Commodity prices remained relatively constant in early 2017.

Oil prices will continue to be affected by: (i) global supply and demand, which are generally a function of global economic conditions, inventory levels, production disruptions, technological advances, regional market

conditions and the actions of OPEC, other significant producers and governments; (ii) transportation capacity, infrastructure constraints, and cost in producing areas; (iii) currency exchange rates; and (iv) the effect of changes in these variables on market perceptions.

NGLs prices are related to the supply and demand for the components of products making up these liquids. Some of them more typically correlate to the price of oil while others are affected by natural gas prices as well as the demand for certain chemical products for which they are used as feedstock. In addition, infrastructure constraints magnify the pricing volatility from region to region.

Domestic natural gas prices and local differentials are strongly affected by local supply and demand fundamentals, as well as government regulations and availability of transportation capacity from producing areas.

These and other factors make it impossible to predict the future direction of oil, NGLs and domestic gas prices reliably. International gas prices are generally fixed under long-term contracts. Occidental continues to respond to economic conditions by adjusting capital expenditures in line with current economic conditions with the goal of keeping returns well above its cost of capital.

CHEMICAL SEGMENT

Business Environment

Although United States economic growth in 2016 lagged behind that of 2015, demand for domestically produced energy and feedstocks remained fairly constant as natural gas and ethylene pricing was lower on average than in 2015. Historically high planned and unplanned ethylene outages, resulting in price volatility within the spot market, and rising energy costs in the last half of 2016 put pressure on chemical margins. The impact of energy and feedstock costs was partially offset by the end of 2016 as tighter supply in the caustic soda and PVC markets resulted in improved margins.

Business Review

Basic Chemicals

In 2016, the United States economic growth rate was expected to be below the 2.6 percent experienced in 2015. The lower than expected U.S. growth rate tempered domestic demand as the 2016 industry chlorine operating rate increased by only 1 percent, to 84 percent, resulting in only a moderate improvement in chlorine pricing. Exports of downstream chlorine derivatives into the vinyls chain were relatively strong in 2016 as United States ethylene and energy costs were advantaged over global pricing. Liquid caustic soda prices improved both domestically and globally in the last three quarters of 2016 as new capacity growth in the United States slowed.

Vinyls

Demand for domestic and export PVC improved year- over-year 4.1 percent and 4.2 percent, respectively. Domestic demand was driven by construction as housing starts continued their year-over-year increase and rising home values drove increased home remodeling. Export volume remains a significant portion of PVC sales representing over 30 percent of total North American

producer’s production. PVC industry operating rates in 2016 were approximately 2.3 percent higher than 2015. Industry PVC margins declined slightly in 2016 compared to 2015, as PVC pricing decreased with lower ethylene pricing.

Industry Outlook

Industry performance will depend on the health of the global economy, specifically in the housing, construction, automotive and durable goods markets. Margins also depend on market supply and demand balances and feedstock and energy prices. Long-term weakness in the petroleum industry may negatively affect the demand and pricing of a number of Occidental’s products that are consumed by industry participants. Further strengthening of the U.S. dollar may cause headwinds in the U.S. commodity export market.

Basic Chemicals

Continued improvement in the United States housing, automotive and durable goods markets should drive a moderate increase in domestic demand for basic chemical products in 2017. Export demand for caustic is also expected to remain firm in 2017. Overall, the low chlor-alkali operating rates driven by capacity increases over the last few years should improve as the pace of expansions have slowed considerably both domestically and globally. Improved 2016 margins from historically low values in 2015 are expected to continue as long as United States feedstock costs, primarily natural gas and ethylene, remain favorable compared to global feedstock costs. Businesses such as calcium chloride and muriatic acid continue to be challenged but are expected to improve as oil prices rise.

Vinyls

North American demand should improve slightly in 2017 over 2016 levels as growth in construction spending continues with further upside potential driven by new infrastructure projects. North American operating rates are expected to remain relatively flat with 2016 but margins should improve as demand in the United States strengthens.

MIDSTREAM AND MARKETING SEGMENT

Business Environment

Midstream and marketing segment earnings are affected by the performance of its marketing business and its processing, transportation and power generation assets. The marketing business aggregates and markets Occidental's and third-party volumes and engages in storage activities. Marketing performance is affected primarily by commodity price changes and margins in oil and gas transportation and storage programs. Processing and transportation results are affected by the volumes that are processed and transported through the segment's plants and pipelines, as well as the margins obtained on related services.

The midstream and marketing segment earnings in 2016 were significantly higher than those in 2015, primarily due to impairments taken in 2015. Excluding the 2015 impairments, 2016 earnings were lower because of

unfavorable contract pricing on long-term supply agreements as well as unfavorable Permian to Gulf Coast differentials, decreased throughput and lower realized NGLs pricing.

Business Review

Pipeline Transportation

Margin and cash flow from pipeline transportation operations mainly reflect volumes shipped. Dolphin Energy owns and operates a 230-mile-long, 48-inch-diameter natural gas pipeline (Dolphin Pipeline), which transports dry natural gas from Qatar to the UAE and Oman. The Dolphin Pipeline contributes significantly to Occidental's pipeline transportation results through Occidental's 24.5-percent interest in Dolphin Energy. The Dolphin Pipeline has capacity to transport up to 3.2 Bcf of natural gas per day and currently transports approximately 2.2 Bcf per day, and up to 2.5 Bcf per day in the summer. Dolphin Pipeline is currently expanding gas compression facilities to achieve maximum pipeline capacity. Occidental believes substantial opportunities remain to provide gas transportation to additional customers in the region to reach the full capacity of the Dolphin Pipeline and generate additional midstream revenues and cash flows.

Occidental owns an oil common carrier pipeline and storage system with approximately 2,900 miles of pipelines from southeast New Mexico across the Permian Basin in west Texas to Cushing, Oklahoma. The system has a current throughput capacity of about 720,000 barrels per day, 7.1 million barrels of active storage capability and 128 truck unloading facilities at various points along the system, which allow for additional volumes to be delivered into the pipeline.

Occidental's 2016 pipeline transportation earnings declined from 2015 due to lower throughput volumes.

Gas Processing Plants and CO2 Fields and Facilities

Occidental processes its and third-party domestic wet gas to extract NGLs and other gas byproducts, including CO2, and delivers dry gas to pipelines. Margins primarily result from the difference between inlet costs of wet gas and market prices for NGLs. Occidental’s 2016 earnings from these operations decreased compared to 2015 due to lower realized NGL pricing.

Occidental, together with ADNOC, developed Al Hosn Gas in Abu Dhabi, of which Occidental has a 40-percent participating interest. Al Hosn Gas is designed to process 1.0 Bcf per day of natural gas and separate it into sales gas, condensate, NGLs and sulfur. The processing facilities include processing and treatment facilities, sulfur recovery units, including facilities to extract sulfur from natural gas and to load and store sulfur. The facilities produce approximately 10,000 tons per day of sulfur, of which approximately 4,000 tons is Occidental's share. Al Hosn Gas facilities generates revenues from gas processing fees and the sale of sulfur. The decrease in 2016 earnings compared to 2015 was primarily due to lower sulfur pricing.

Power Generation Facilities

Earnings from power and steam generation facilities are derived from sales to affiliates and third parties. The

increase in earnings in 2016 compared to 2015 was a result of higher production due to fewer outages.

Marketing

The marketing group markets substantially all of Occidental’s oil, NGLs and gas production, as well as trades around its assets, including its own and third party transportation and storage capacity. Occidental’s third-party marketing activities focus on purchasing oil, NGLs and gas for resale from parties whose oil and gas supply is located near its transportation and storage assets. These purchases allow Occidental to aggregate volumes to better utilize and optimize its assets. Marketing performance in 2016 declined compared to 2015 due to unfavorable Permian to Gulf Coast crude oil price differentials.

Industry Outlook

The pipeline transportation and power generation businesses are expected to remain relatively stable. Marketing results can have significant volatile results depending on significant price swings, as well as Permian to Gulf Coast crude oil differentials. Occidental continues to actively focus on marketing its commodity production to generate maximum value for its stakeholders. The gas processing plant operations could have volatile results depending mostly on NGLs prices, which cannot reasonably be predicted. Generally, higher NGLs prices result in higher profitability.

SEGMENT RESULTS OF OPERATIONS AND SIGNIFICANT ITEMS AFFECTING EARNINGS

Segment earnings exclude income taxes, interest income, interest expense, environmental remediation expenses, unallocated corporate expenses and discontinued operations, but include gains and losses from dispositions of segment assets and income from the segments' equity investments. Seasonality is not a primary driver of changes in Occidental's consolidated quarterly earnings during the year.

The statements of income and cash flows, and supplemental oil and gas information related to California Resources have been treated as discontinued operations for the year ended December 31, 2014. The assets and liabilities of California Resources were removed from Occidental's consolidated balance sheet as of November 30, 2014 because of the spin-off from Occidental.

The following table sets forth the sales and earnings of each operating segment and corporate items:

(in millions, except per share amounts)
For the years ended December 31,201620152014
NET SALES (a)
Oil and Gas$6,377$8,304$13,887
Chemical3,7563,9454,817
Midstream and Marketing6848911,373
Eliminations (a)(727)(660)(765)
$10,090$12,480$19,312
SEGMENT RESULTS AND EARNINGS
Domestic$(1,552)$(4,151)$(2,381)
Foreign965(3,747)2,935
Exploration(49)(162)(126)
Oil and Gas (b,c,d)(636)(8,060)428
Chemical (e)571542420
Midstream and Marketing (f,g)(381)(1,194)2,564
(446)(8,712)3,412
Unallocated corporate items
Interest expense, net(275)(141)(71)
Income taxes6621,330(1,685)
Other (h)(943)(623)(1,800)
Income (loss) from continuing operations (i)(1,002)(8,146)(144)
Discontinued operations, net (j)428317760
Net Income attributable to common stock$(574)$(7,829)$616
Basic Earnings per Common Share$(0.75)$(10.23)$0.79

See footnotes following significant transactions and events affecting Occidental's earnings.

The following table sets forth significant transactions and events affecting Occidental’s earnings that vary widely and unpredictably in nature, timing and amount.

Benefit (Charge) (in millions)201620152014
OIL AND GAS
Asset sales gains (b)$107$10$531
Asset impairments and related items domestic (c)(1)(3,457)(4,766)
Asset impairments and related items international (d)(70)(5,050)(1,066)
Total Oil and Gas$36$(8,497)$(5,301)
CHEMICAL
Asset sales gains (e)$88$98$—
Asset impairments and related items—(121)(149)
Total Chemical$88$(23)$(149)
MIDSTREAM AND MARKETING
Asset sale gains (f)$—$—$1,984
Asset impairments and related items (g)(160)(1,259)31
Total Midstream and Marketing$(160)$(1,259)$2,015
CORPORATE
Asset sale losses$—$(8)$—
Asset impairments (h)(619)(235)(1,358)
Severance, spin-off and other—(118)(61)
Tax effect of pre-tax and other adjustments4241,903927
Discontinued operations, net of tax (j)428317760
Total Corporate$233$1,859$268
TOTAL$197$(7,920)$(3,167)
(a)Intersegment sales eliminate upon consolidation and are generally made at prices approximating those that the selling entity would be able to obtain in third-party transactions.
(b)The 2016 gain on sale of assets included the sale of Piceance and South Texas oil and gas properties. The 2014 amount represented the gain on sale of the Hugoton properties.
(c)The 2015 amount included approximately $1.6 billion of impairment and related charges associated with non-core domestic oil and gas assets in the Williston Basin (sold in November 2015) and Piceance Basin sold in March 2016. The remaining 2015 charges were mainly associated with the decline in commodity prices and management changes to future development plans. The 2014 amount was mainly comprised of impairment and related charges on the Williston and Piceance assets.
(d)The 2016 amount included a net charge of $61 million related to the sale of Libya and exit from Iraq. The 2015 amount included impairment and related charges of approximately $1.7 billion for operations where Occidental exited or reduced its involvement in and $3.4 billion related to the decline in commodity prices.
(e)The 2016 amount included the gain on sale of the Occidental Tower in Dallas and a non-core specialty chemicals business. The 2015 amount represented a gain on sale of an idled facility.
(f)The 2014 amount included a $633 million gain on sale of Occidental’s interest in BridgeTex Pipeline Company, LLC, and a $1.4 billion gain on sale of a portion of Occidental’s investment in Plains Pipeline.
(g)The 2016 amount included charges related to the termination of crude oil supply contracts.The 2015 amount included an impairment charge of $814 million related to the Century gas processing plant as a result of SandRidge’s inability to provide volumes to the plant and meet its contractual obligations to deliver CO2.
(h)The 2016 amount included charges of $541 million related to a reserve for doubtful accounts and $78 million loss on the distribution of the remaining CRC stock. The 2015 amount included a $227 million other-than-temporary loss on Occidental’s investment in California Resources. The 2014 amount included an $805 million impairment charge for the Joslyn oil sand project and a $553 million other-than-temporary loss on the investment in California Resources.
(i)Represents amounts attributable to income from continuing operations after deducting a non controlling interest amount of $14 million in 2014. The non controlling interest amount has been netted in the midstream and marketing segment earnings.
(j)The 2016 and 2015 amounts included gains related to the Ecuador settlement. See Note 2 of the consolidated financial statements. The 2014 amount included the results of Occidental's California operations.

Oil and Gas

(in millions)201620152014
Segment Sales$6,377$8,304$13,887
Segment Results
Domestic$(1,552)$(4,151)$(2,381)
Foreign965(3,747)2,935
Exploration(49)(162)(126)
$(636)$(8,060)$428

The following tables set forth the production and sales volumes of oil, NGLs and natural gas per day for each of the three years in the period ended December 31, 2016. The differences between the production and sales volumes per day are generally due to the timing of shipments at Occidental’s international locations where product is loaded onto tankers.

Production per Day (MBOE)201620152014
United States
Permian Resources12411075
Permian EOR145145147
South Texas and Other337396
Total302328318
Latin America343729
Middle East/North Africa
Al Hosn6435—
Dolphin434138
Oman968976
Qatar656669
Other267267
Total294303250
Total Production (MBOE) (a)630668597
(See footnote following the Average Realized Prices table)
Production per Day from Ongoing Operations (MBOE)201620152014
United States
Permian Resources12411075
Permian EOR145145147
South Texas and Other314252
Total300297274
Latin America343729
Middle East/North Africa
Al Hosn6435—
Dolphin434138
Oman968976
Qatar656669
Total268231183
Total Production Ongoing Operations602565486
Sold domestic operations23144
Sold or Exited MENA operations267267
Total Production (MBOE) (a)630668597
(See footnote following the Average Realized Prices table)
Production per Day by Products201620152014
United States
Oil (MBBL)
Permian Resources777143
Permian EOR108110111
South Texas and Other42129
Total189202183
NGLs (MBBL)
Permian Resources211612
Permian EOR272930
South Texas and Other51013
Total535555
Natural gas (MMCF)
Permian Resources158137120
Permian EOR593738
South Texas and Other144250318
Total361424476
Latin America
Oil (MBBL) – Colombia333527
Natural gas (MMCF) – Bolivia81011
Middle East/North Africa
Oil (MBBL)
Al Hosn127—
Dolphin777
Oman778269
Qatar656669
Other73228
Total168194173
NGLs (MBBL)
Al Hosn2010—
Dolphin887
Total28187
Natural gas (MMCF)
Al Hosn190109—
Dolphin166158143
Oman1154443
Other114237236
Total585548422
Total Production (MBOE) (a)630668597
(See footnote following the Average Realized Prices table)
Production per Day by Products from Ongoing Operations201620152014
United States
Oil (MBBL)
Permian Resources777143
Permian EOR108110111
South Texas and Other467
Total189187161
NGLs (MBBL)
Permian Resources211612
Permian EOR272930
South Texas and Other579
Total535251
Natural gas (MMCF)
Permian Resources158137120
Permian EOR593738
South Texas and Other133173210
Total350347368
Latin America
Oil (MBBL) – Colombia333527
Natural gas (MMCF) – Bolivia81011
Middle East/North Africa
Oil (MBBL)
Al Hosn127—
Dolphin777
Oman778269
Qatar656669
Total161162145
NGLs (MBBL)
Al Hosn2010—
Dolphin887
Total28187
Natural gas (MMCF)
Al Hosn190109—
Dolphin166158143
Oman1154443
Total471311186
Total Production Ongoing Operations602565486
Sold domestic operations23144
Sold or Exited MENA operations267267
Total Production (MBOE) (a)630668597
(See footnote following the Average Realized Prices table)
Sales Volumes per Day by Products201620152014
United States
Oil (MBBL)189202183
NGLs (MBBL)535555
Natural gas (MMCF)361424476
Latin America
Oil (MBBL) – Colombia343529
Natural gas (MMCF) – Bolivia81011
Middle East/North Africa
Oil (MBBL)
Al Hosn127—
Dolphin787
Oman778269
Qatar666769
Other73627
Total169200172
NGLs (MBBL)
Al Hosn2010—
Dolphin887
Total28187
Natural gas (MMCF)585548422
Total Sales Volumes (MBOE) (a)632674598
(See footnote following the Average Realized Prices table)
Sales Volumes per Day by Products from Ongoing Operations201620152014
United States
Oil (MBBL)189187161
NGLs (MBBL)535251
Natural gas (MMCF)350347368
Latin America
Oil (MBBL) – Colombia343529
Natural gas (MMCF) – Bolivia81011
Middle East/North Africa
Oil (MBBL)
Al Hosn127—
Dolphin787
Oman778269
Qatar666769
Total162164145
NGLs (MBBL)
Al Hosn2010—
Dolphin887
Total28187
Natural gas (MMCF)471311186
Total Sales Ongoing Operations604567488
Sold domestic operations23144
Sold or Exited MENA operations267666
Total Sales Volumes (MBOE) (a)632674598
(See footnote following the Average Realized Prices table)
201620152014
Average Realized Prices
Oil Prices ($ per bbl)
United States$39.38$45.04$84.73
Latin America$37.48$44.49$88.00
Middle East/North Africa$38.25$49.65$96.34
Total worldwide$38.73$47.10$90.13
NGLs Prices ($ per bbl)
United States$14.72$15.35$37.79
Middle East/North Africa$15.01$17.88$30.98
Total worldwide$14.82$15.96$37.01
Gas Prices ($ per Mcf)
United States$1.90$2.15$3.97
Latin America$3.78$5.20$8.94
Total worldwide$1.53$1.49$2.55
(a)Natural gas volumes have been converted to BOE based on energy content of six Mcf of gas to one barrel of oil. Barrels of oil equivalence does not necessarily result in price equivalence.

Oil and gas segment results were losses of $0.6 billion and $8.1 billion in 2016 and 2015, respectively, and income of $0.4 billion in 2014. The 2016 results for the oil and gas segment included pre-tax gains of $107 million, mainly comprised of the sales of Piceance and South Texas assets, and net charges of $61 million related to the sale of Libya and exit from Iraq.

Oil and gas segment results in 2015 included pre-tax impairment and related charges of $3.5 billion and $5.0 billion on domestic and international assets, respectively. Approximately $1.3 billion of the domestic impairment and related charges were due to the exit of Occidental’s operations in the Williston Basin, which was sold in November 2015 and in the Piceance Basin, which was sold in March 2016. The remaining domestic charges were due to the significant decline in the futures price curve as well as management’s decision not to pursue development activities associated with certain non-producing acreage. Internationally, the impairments and related charges were due to a combination of Occidental’s strategic plan to exit or reduce our exposure in certain Middle East and North Africa operations as well as the decline in the futures price curve, which have made certain projects in the region unprofitable. Earnings in 2014 included pre-tax charges of $5.3 billion related to the impairment of domestic and international assets and the gain from the sale of Hugoton assets.

Domestic oil and gas segment results were losses of $1.6 billion, $4.2 billion and $2.4 billion in 2016, 2015 and 2014, respectively. Excluding the significant items noted above, the decrease in domestic oil and gas results in 2016, compared to 2015, reflected significantly lower realized oil prices, which had decreased by 13 percent in 2016 compared to 2015 and higher DD&A rates. To a lesser extent, the lower 2016 results also reflected lower oil volumes due to the sale of non-core domestic operations. The decrease in results compared to 2015 were partially offset by lower cash operating expenses.

Similar to domestic results, and excluding the significant items noted above, the decrease in international earnings in 2016, compared to 2015, reflected significantly

lower realized crude oil prices, which had decreased by 23 percent in the Middle East and 16 percent in Latin America partially offset by lower DD&A rates.

Average production costs for 2016, excluding taxes other than on income, were $10.76 per BOE, compared to

$11.57 per BOE for 2015. The decrease in average costs reflected lower maintenance, workover and support costs as a result of improvements in operating efficiencies, especially in the domestic operations.

Average daily production volumes were 630,000 BOE and 668,000 BOE for 2016 and 2015, respectively, and included production from assets sold or exited of 28,000 BOE and 103,000 BOE for 2016 and 2015, respectively. Excluding production for assets sold or exited, average daily production volumes were 602,000 BOE and 565,000 BOE for 2016 and 2015, respectively. The increase in production from on-going operations mainly reflected higher production from Al Hosn Gas as it was not fully operational in 2015 and higher production from Permian Resources, which increased its 2016 production by 13 percent compared to 2015. These increases were offset by lower production from South Texas and Other due to curtailed drilling.

In addition to the impairments and related charges noted above, the decrease in domestic oil and gas segment results in 2015, compared to 2014, reflected significantly lower crude oil, NGL and natural gas prices, partially offset by higher crude oil production volumes and lower operating costs from lower workover and maintenance costs and lower DD&A expenses. The decrease in international earnings reflected lower realized crude oil prices, partially offset by higher sales volumes.

Average daily production volumes were 668,000 BOE and 597,000 BOE for 2015 and 2014, respectively, and included 103,000 BOE and 111,000 BOE of production from assets sold or exited in 2015 and 2014, respectively. Excluding production for assets sold or exited, average daily production volumes were 565,000 BOE and 486,000 BOE for 2015 and 2014, respectively. The increase in on going production reflected the commencement of production at Al Hosn in 2015 along with a 47 percent increase in production from Permian Resources.

Average production costs for 2015, excluding taxes other than on income, were $11.57 per BOE, compared to $13.50 per BOE in 2014. The decrease in average costs reflected decreased activity in downhole maintenance and lower overall cost structure.

Chemical

(in millions)201620152014
Segment Sales$3,756$3,945$4,817
Segment Results$571$542$420

Chemical segment earnings were $571 million, $542 million and $420 million for 2016, 2015 and 2014 respectively. Included in 2016 earnings are a pre-tax gain on sale of $57 million from the sale of the Occidental Tower building in Dallas and a $31 million pre-tax gain from the sale of a non-core specialty chemicals business. Included in 2015 earnings are pre-tax asset impairments of $121 million and a pre-tax gain on sale of $98 million from the

sale of an idled facility. Excluding these significant items, the decrease in 2016 earnings, compared to 2015, reflected lower PVC margins as PVC pricing decreased with lower ethylene pricing, which was partially offset by lower ethylene and energy costs.

Segment earnings for 2014 included asset impairments of $149 million. Excluding these significant items, the decrease in 2015 earnings, compared to 2014 reflected lower caustic soda pricing and lower sales volumes across most products, offset by improved PVC margins resulting primarily from lower energy and ethylene costs.

Midstream and Marketing

(in millions)201620152014
Segment Sales$684$891$1,373
Segment Results$(381)$(1,194)$2,564

Midstream and marketing segment results were losses of $0.4 billion and $1.2 billion in 2016 and 2015, respectively, and earnings of $2.6 billion in 2014. Included in 2016 results was a $160 million charge related to the termination of crude oil supply contracts. Included in 2015 results were impairments and related charges of $1.3 billion. Included in 2014 earnings were $2.0 billion of gains from the sale of BridgeTex Pipeline and part of Occidental's investment in Plains Pipeline. Excluding the significant items noted above, the decrease in 2016 results compared to 2015 reflected lower marketing margins due to unfavorable contract pricing on long-term supply agreements as well as unfavorable Permian to Gulf Coast differentials, decreased throughput and lower realized NGLs pricing. Excluding the significant items noted above, the decrease in 2015 results, compared to 2014, primarily reflected lower marketing margins due to the narrowing of the Permian to Gulf Coast differentials, lower domestic gas processing income due to lower NGL prices and lower Dolphin Pipeline income and the decrease in Occidental's interest in Plains Pipeline.

TAXES

Deferred tax liabilities, net of deferred tax assets of $2.3 billion, were $1.1 billion at December 31, 2016. The deferred tax assets, net of allowances, are expected to be realized through future operating income and reversal of temporary differences.

Worldwide Effective Tax Rate

The following table sets forth the calculation of the worldwide effective tax rate for income from continuing operations:

(in millions)201620152014
SEGMENT RESULTS
Oil and Gas$(636)$(8,060)$428
Chemical571542420
Midstream and Marketing (a)(381)(1,194)2,564
Unallocated Corporate Items(1,218)(764)(1,871)
Pre-tax (loss) income(1,664)(9,476)1,541
Income tax (benefit) expense
Federal and State(1,298)(2,070)(157)
Foreign6367401,842
Total income tax (benefit) expense(662)(1,330)1,685
Loss from continuing operations(a)$(1,002)$(8,146)$(144)
Worldwide effective tax rate40%14%109%
(a)Represents amounts attributable to income from continuing operations after deducting a non-controlling interest amount of $14 million in 2014. The non-controlling interest amount has been netted in the midstream and marketing segment earnings.

Occidental's 2016 worldwide effective tax rate was 40 percent, which is higher than the 2015 rate mainly due to the mix of domestic operating losses and foreign operating income, tax credits and tax benefits resulting from the write off of exploration blocks. Excluding the impact of impairments and other nonrecurring items, Occidental’s worldwide effective tax rate for 2016 would be 24 percent.

A deferred tax liability has not been recognized for temporary differences related to unremitted earnings of certain consolidated foreign subsidiaries, as it is Occidental’s intention to reinvest such earnings permanently. If the earnings of these foreign subsidiaries were not indefinitely reinvested, an additional deferred tax liability of approximately $116 million would be required, assuming utilization of available foreign tax credits.

CONSOLIDATED RESULTS OF OPERATIONS

Changes in components of Occidental's results of continuing operations are discussed below:

Revenue and Other Income Items

(in millions)201620152014
Net sales$10,090$12,480$19,312
Interest, dividends and other income$106$118$130
Gain on sale of equity investments and other assets$202$101$2,505

The decrease in net sales in 2016, compared to 2015, was mainly due to the decline in average worldwide realized oil prices in 2016 and a decline in worldwide production as Occidental exited non-core areas. Average worldwide realized oil prices fell by approximately 18 percent from 2015 to 2016.

The decrease in net sales in 2015, compared to 2014, was due to a significant decline in worldwide oil, NGLs and gas prices, partially offset by higher domestic and international crude oil volumes. Average WTI and Brent

prices fell by nearly 50 percent and NYMEX gas prices fell by over 35 percent in 2015 compared to 2014 prices.

Price and volume changes in the oil and gas segment generally represent the majority of the change in oil and gas segment sales which is a substantially larger portion of the overall change in sales than the chemical and midstream and marketing segments.

The 2016 gain on sale included the sale of Piceance and South Texas oil and gas properties, the Occidental Tower building in Dallas, and a non-core specialty chemicals business. The 2015 gain on sale included $98 million for the sale of an idled chemical facility. The 2014 gain on sale included $1.4 billion for the sale of a portion of the investment in Plains Pipeline, $633 million for the sale of BridgeTex Pipeline and $531 million for the sale of Hugoton properties.

Expense Items

(in millions)201620152014
Cost of sales$5,189$5,804$6,803
Selling, general and administrative and other operating expenses$1,330$1,270$1,503
Depreciation, depletion and amortization$4,268$4,544$4,261
Asset impairments and related items$825$10,239$7,379
Taxes other than on income$277$343$550
Exploration expense$62$36$150
Interest and debt expense, net$292$147$77

Cost of sales decreased in 2016 from the prior year due primarily to lower oil and gas maintenance costs and lower chemical feedstock and energy costs. Cost of sales decreased in 2015, compared to 2014, due to lower energy and feedstock costs in the chemical segment, lower fuel costs in the power generation operations and lower worldwide production costs, including workovers and downhole maintenance costs.

Selling, general and administrative and other operating expenses increased in 2016 compared to 2015, due to a lower compensation accruals in 2015 related to Occidental's decision not to pay bonuses.

Selling, general and administrative and other operating expenses decreased in 2015 compared to 2014, due to lower compensation expense.

DD&A expense decreased in 2016, compared to 2015, due to lower volumes from the exited non-core oil and gas operations and lower DD&A rates in the Middle East. DD&A expense increased in 2015, compared to 2014 due to higher production volumes partially offset by lower DD&A rates.

In 2016, Occidental incurred impairment and related items charges of $825 million, of which $541 million related to a reserve for doubtful accounts and $160 million for the termination of crude oil supply contracts, $78 million related to the disposal of CRC stock and $61 million related to exits from Libya and Iraq.

Asset impairments and related items in 2015 of $10.2 billion included charges of $3.5 billion related to domestic oil and gas assets due to Occidental’s exit from the Williston and Piceance basins as well as the decline in the futures price curve and management’s decision not to pursue activities associated with certain non-producing acreage.

International oil and gas charges of $5.0 billion were due to a combination of Occidental’s strategic plan to exit or reduce its exposure in certain Middle East and North Africa operations as well as the decline in the futures price curve, which have made certain projects in the region unprofitable. Midstream charges of $1.3 billion included the impairment of Occidental’s Century gas processing plant as a result of SandRidge’s inability to provide volumes to the plant and meet their contractual obligations to deliver CO2. Occidental recorded an other-than-temporary loss of $227 million for its available for sale investment in California Resources.

Asset impairments and related items in 2014 of $7.4 billion included $2.8 billion in the Williston basin, $904 million related to Occidental's gas and NGLs assets, $889 million for other domestic acreage and $1.1 billion primarily related to operations in Bahrain and other international operations. Asset impairments also include charges for Joslyn oil sands of $805 million and an other than temporary loss of $553 million for the available for sale investment in California Resources stock.

Taxes other than on income decreased in 2016 from 2015 due primarily to lower production taxes, which are directly tied to lower commodity prices. Taxes other than on income in 2015 decreased from 2014 due primarily to lower oil, NGL and gas prices, which resulted in lower ad valorem and severance taxes.

Other Items

Income/(expense) (in millions)201620152014
(Provision for) benefit from income taxes$662$1,330$(1,685)
Income from equity investments$181$208$331
Discontinued operations, net$428$317$760

The benefit from income taxes decreased in 2016 from the prior year as a result of a lower net loss in 2016, compared to 2015, which reflected significant impairments and related items charges. The provision for income taxes decreased in 2015, compared to 2014, due to the pre-tax loss in 2015 as a result of the lower price environment and impairments and related charges.

The decline in income from equity investments in 2016 from 2015 is the result of lower Dolphin gas sales. The decline in 2015 from 2014 is a result of the lower Dolphin gas sales, Occidental's reduced ownership in Plains Pipeline and the expiration of Occidental's contract in Yemen Block 10, where Occidental held an equity interest.

Discontinued operations, net in 2016 and 2015 of $428 and $317 million, respectively, primarily include settlement payments by the Republic of Ecuador. See Note 2 of the Consolidated Financial Statements.

CONSOLIDATED ANALYSIS OF FINANCIAL POSITION

The changes in select components of Occidental’s balance sheet are discussed below:

(in millions)20162015
CURRENT ASSETS
Cash and cash equivalents$2,233$3,201
Restricted cash—1,193
Trade receivables, net3,9892,970
Inventories866986
Assets held for sale—141
Other current assets1,340911
Total current assets$8,428$9,402
Investments in unconsolidated entities$1,401$1,267
Available for sale investment$—$167
Property, plant and equipment, net$32,337$31,639
Long-term receivables and other assets, net$943$934
CURRENT LIABILITIES
Current maturities of long-term debt$—$1,450
Accounts payable3,9263,069
Accrued liabilities2,4362,213
Liabilities of assets held for sale—110
Total current liabilities$6,362$6,842
Long-term debt, net$9,819$6,855
Deferred credits and other liabilities-income taxes$1,132$1,323
Deferred credits and other liabilities-other$4,299$4,039
Stockholders’ equity$21,497$24,350

Assets

See "Liquidity and Capital Resources — Cash Flow Analysis" for discussion of the change in cash and cash equivalents and restricted cash.

The increase in trade receivables, net, was the result of improved oil and gas prices at the end of 2016, compared to the end of 2015. Average December WTI and Brent prices were below $40.00 per barrel in 2015 compared to over $50.00 per barrel in 2016. Inventories decreased as a result of lower materials and supplies inventories in the oil and gas segment. The decrease in assets held for sale is the result of the sale of Piceance oil and gas properties and the Dallas Tower office building. Other current assets increased as a result of receivables recorded for federal and state tax refunds anticipated on the net loss carryback. The increase in investments in unconsolidated entities was due to contributions to the ethylene cracker joint venture, which were partially offset by distributions from Dolphin Energy and Plains All American Pipeline Company. The decrease in the available for sale investment is due to the complete distribution of Occidental's retained interest in California Resources as a special stock dividend in the first quarter of 2016. The increase in PP&E, net, was due to capital expenditures and the fourth quarter Permian acquisitions, which were partially offset by DD&A.

Liabilities and Stockholders' Equity

The increase in accounts payable reflected higher marketing payables as a result of higher oil and gas prices at the end of 2016 compared to the end of 2015. Liabilities of assets held for sale were transferred with the sale of the Piceance properties in the first quarter of 2016.

The decrease in deferred credits and other liabilities-income taxes was due to the decrease in the difference between the book and tax basis of Occidental's oil and gas properties. The increase in deferred credits and other liabilities was primarily due to the additional asset retirement obligation (ARO) recorded related to the Permian acquisitions and newly drilled wells and additional environmental liabilities recorded for Maxus indemnified sites. The decrease in stockholders' equity reflected the distribution of cash dividends and the 2016 net loss.

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 2016, Occidental had approximately $2.2 billion in cash and cash equivalents. A substantial majority of this cash is held and available for use in the United States. Income and cash flows are largely dependent on the oil and gas segment's prices, sales volumes and costs.

Occidental utilized the remaining restricted cash balance resulting from the spin-off of California Resources in the first quarter of 2016 to retire debt and pay dividends.

In November 2016, Occidental issued $1.5 billion of senior notes, comprised of $750 million of 3.0-percent senior notes due 2027 and $750 million of 4.1-percent senior notes due 2047. Occidental received net proceeds of $1.49 billion. Interest on the senior notes is payable semi-annually in arrears in February and August each year for each series of senior notes beginning August 15, 2017. Occidental will use the proceeds for general corporate purposes.

In May and June 2016, respectively, Occidental utilized part of the proceeds from the April 2016 senior note offering (described below) to exercise the early redemption option on $1.25 billion of 1.75-percent senior notes due in the first quarter of 2017 and to retire all $750 million of 4.125-percent senior notes that matured in June 2016.

In April 2016, Occidental issued $2.75 billion of senior notes, comprised of $0.4 billion of 2.6-percent senior notes due 2022, $1.15 billion of 3.4-percent senior notes due 2026 and $1.2 billion of 4.4-percent senior notes due 2046. Occidental received net proceeds of approximately $2.72 billion. Interest on the senior notes is payable semi-annually in arrears in April and October of each year for each series of senior notes, beginning on October 15, 2016. Occidental used a portion of the proceeds to retire debt in May and June 2016, and will use the remaining proceeds for general corporate purposes.

In February 2016, Occidental retired $700 million of 2.5-percent senior notes that had matured.

In June 2015, Occidental issued $1.5 billion of debt that was comprised of $750 million of 3.50-percent senior unsecured notes due 2025 and $750 million of 4.625-percent senior unsecured notes due 2045. Occidental received net proceeds of approximately $1.48 billion. Interest on the notes is payable semi-annually in arrears in June and December of each year for both series of notes, beginning on December 15, 2015.

In August 2014, Occidental entered into a new five-year, $2.0 billion bank credit facility (Credit Facility) in order to replace its previous $2.0 billion bank credit facility, which was scheduled to expire in October 2016. The 2014 Credit

Facility does not contain material adverse change clauses or debt ratings triggers that could restrict Occidental's ability to borrow under this facility. Occidental did not draw down any amounts under the Credit Facility during 2016 or 2015 and no amounts were outstanding as of December 31, 2016.

As of December 31, 2016, under the most restrictive covenants of its financing agreements, Occidental had substantial capacity for additional unsecured borrowings, the payment of cash dividends and other distributions on, or acquisitions of, Occidental stock.

Occidental expects to fund its liquidity needs, including future dividend payments, through cash on hand, cash generated from operations, monetization of non-core assets or investments and through future borrowings, and if necessary, proceeds from other forms of capital issuance.

Cash Flow Analysis

Cash provided by operating activities
(in millions)201620152014
Operating cash flow from continuing operations$2,519$3,254$8,871
Operating cash flow from discontinued operations, net of taxes864972,197
Net cash provided by operating activities$3,383$3,351$11,068

Cash provided by operating activities from continuing operations in 2016 decreased $0.7 billion to $2.5 billion, from $3.3 billion in 2015. Operating cash flows were negatively impacted by lower worldwide average realized oil prices in the first half of 2016, which on a year-over-year basis declined 18 percent. The effect of lower commodity prices was partially offset by lower operating costs, especially in the oil and gas segment where year over year production costs decreased by 7 percent. Cash flows from continuing operations in 2016 also included collections of $325 million of federal and state tax refunds. The usage of working capital in 2016 reflected an increase in receivables as oil prices were much higher at the end of 2016, compared to the end of 2015. Operating cash flows from discontinued operations reflected the collection of the Ecuador settlement.

Cash provided by operating activities from continuing operations in 2015 decreased $5.6 billion to $3.3 billion, from $8.9 billion in 2014. Operating cash flows were negatively impacted by lower worldwide realized oil, NGLs, and natural gas prices throughout 2015, which on a year-over-year basis declined 48 percent, 57 percent, and 42 percent, respectively. The effect of lower commodity prices was partially offset by higher production and lower operating costs. The usage of working capital in 2015 reflected lower realized prices that impacted receivable collections and payments related to higher capital and operating spending accrued in the fourth quarter of 2014 and paid in 2015.

Other cost elements, such as labor costs and overhead, are not significant drivers of changes in cash flow because they are relatively stable within a narrow range over the short to intermediate term. Changes in these costs had a much smaller effect on cash flows than changes

in oil and gas product prices, sales volumes and operating costs.

The chemical and midstream and marketing segments cash flows are significantly smaller and their overall cash flows are generally less significant than the impact of the oil and gas segment.

Cash used by investing activities
(in millions)201620152014
Capital expenditures
Oil and Gas$(1,978)$(4,442)$(6,533)
Chemical(324)(254)(314)
Midstream and Marketing(358)(535)(1,983)
Corporate(57)(41)(100)
Total(2,717)(5,272)(8,930)
Other investing activities, net(2,025)(151)2,686
Net cash used by investing activities – continuing operations(4,742)(5,423)(6,244)
Investing cash flow from discontinued operations——(2,226)
Net cash used by investing activities$(4,742)$(5,423)$(8,470)

Occidental’s net capital expenditures declined by $2.7 billion in 2016 to $2.9 billion, after contributions to the OxyChem Ingleside facility which is included in other investing activities. The decline was a result of the oil and gas budget reduction due to lower commodity price environment and reductions in spending on long-term projects such as the OxyChem Ingleside facility, which is expected to come on line in early 2017.

Occidental's net capital expenditures declined $3.1 billion in 2015 to $5.6 billion, after contributions to the OxyChem Ingleside facility which was included in other investing activities. The decline was the result of lower spending in oil and gas non-core operations in the United States and Middle East and reduced expenditures on long-term projects coming on line at the end of 2014.

While the 2017 environment remains challenging, Occidental remains committed to allocating capital to only its highest return projects. Occidental's 2017 capital spending is expected to be in the range of $3.0 billion to $3.6 billion.

In 2016, cash flows used in other investing activities of $2.0 billion is comprised primarily of the acquisition of acreage in the Permian in October 2016.

In 2015, cash flows used in other investing activities of $0.1 billion is comprised primarily of changes in the capital accrual and asset purchases offset by the sales of equity investments and assets.

Capital commitments for long-term projects currently under construction in the midstream and chemicals segment in 2017 are planned to be approximately $140 million.

Cash provided (used) by financing activities
(in millions)201620152014
Financing cash flow from continuing operations$391$1,484$(2,326)
Financing cash flow from discontinued operations——124
Net cash provided (used) by financing activities$391$1,484$(2,202)

Cash provided by financing activities in 2016 was $0.4 billion, as compared to cash provided by financing activities in 2015 of $1.5 billion. Financing activities in 2016 included proceeds from long term debt of $4.2 billion and payments of long term debt of $2.7 billion. Occidental used restricted cash of $1.2 billion to pay dividends and retire debt.

Cash provided by financing activities in 2015 was $1.5 billion, as compared to cash used by financing activities in 2014 of $2.2 billion. Financing activities in 2015 included proceeds from long term debt of $1.5 billion. Occidental used restricted cash of $2.8 billion to pay dividends and purchase treasury stock.

OFF-BALANCE-SHEET ARRANGEMENTS

The following is a description of the business purpose and nature of Occidental's off-balance-sheet arrangements.

Guarantees

Occidental has guaranteed its portion of equity method investees' debt and has entered into various other guarantees including performance bonds, letters of credit, indemnities and commitments provided by Occidental to third parties, mainly to provide assurance that OPC or its subsidiaries and affiliates will meet their various obligations (guarantees). As of December 31, 2016, Occidental’s guarantees were not material and a substantial majority consisted of limited recourse guarantees on approximately $296 million of Dolphin’s debt. The fair value of the guarantees was immaterial.

Occidental has guaranteed certain obligations of its subsidiaries for various letters of credit, indemnities and commitments.

See "Oil and Gas Segment — Business Review — Qatar" and “Segment Results of Operations” for further information about Dolphin.

Leases

Occidental has entered into various operating lease agreements, mainly for transportation equipment, power plants, machinery, terminals, storage facilities, land and office space. Occidental leases assets when leasing offers greater operating flexibility. Lease payments are generally expensed as part of cost of sales and selling, general and administrative expenses. For more information, see "Contractual Obligations."

CONTRACTUAL OBLIGATIONS

The table below summarizes and cross-references Occidental’s contractual obligations. This summary indicates on- and off-balance-sheet obligations as of December 31, 2016.

Contractual Obligations (in millions)Payments Due by Year
Total20172018 and 20192020 and 20212022 and thereafter
On-Balance Sheet
Long-term debt (Note 5) (a)$9,907$—$616$1,249$8,042
Other long-term liabilities (b)2,218760323294841
Off-Balance Sheet
Operating leases (Note 6)1,274255364186469
Purchase obligations (c)8,9381,6492,0371,4503,802
Total$22,337$2,664$3,340$3,179$13,154
(a)Excludes unamortized debt discount and interest on the debt. As of December 31, 2016, interest on long-term debt totaling $5.1 billion is payable in the following years (in millions): 2017 - $362, 2018 and 2019 - $705, 2020 and 2021 - $640, 2022 and thereafter - $3,399.
(b)Includes obligations under postretirement benefit and deferred compensation plans, accrued transportation commitments and other accrued liabilities.
(c)Amounts include payments which will become due under long-term agreements to purchase goods and services used in the normal course of business to secure terminal, pipeline and processing capacity, drilling rigs and services, CO2, electrical power, steam and certain chemical raw materials. Amounts exclude certain product purchase obligations related to marketing activities for which there are no minimum purchase requirements or the amounts are not fixed or determinable. Long-term purchase contracts are discounted at a 3.7 percent discount rate.

Delivery Commitments

Occidental has commitments to certain refineries and other buyers to deliver oil, natural gas and NGLs. The domestic volumes contracted to be delivered, which are not presented in Note 7 of the consolidated financial statements, are approximately 81 million barrels of oil through 2025, 5 Bcf of gas through 2017 and 11 million barrels of NGLs through 2018. The price for these deliveries is set at the time of delivery of the product. Occidental has significantly more production capacity than the amounts committed and has the ability to secure additional volumes in case of a shortfall.

LAWSUITS, CLAIMS AND CONTINGENCIES

Occidental or certain of its subsidiaries are involved, in the normal course of business, in lawsuits, claims and other legal proceedings that seek, among other things, compensation for alleged personal injury, breach of contract, property damage or other losses, punitive damages, civil penalties, or injunctive or declaratory relief. Occidental or certain of its subsidiaries also are involved in proceedings under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) and similar federal, state, local and foreign environmental laws. These environmental proceedings seek funding or performance of remediation and, in some cases,

compensation for alleged property damage, punitive damages, civil penalties and injunctive relief. Usually Occidental or such subsidiaries are among many companies in these environmental proceedings and have to date been successful in sharing response costs with other financially sound companies. Further, some lawsuits, claims and legal proceedings involve acquired or disposed assets with respect to which a third party or Occidental retains liability or indemnifies the other party for conditions that existed prior to the transaction.

In accordance with applicable accounting guidance, Occidental accrues reserves for outstanding lawsuits, claims and proceedings when it is probable that a liability has been incurred and the liability can be reasonably estimated. In Note 8, Occidental has disclosed its reserve balances for environmental remediation matters that satisfy these criteria. Reserve balances for matters, other than environmental remediation, that satisfy these criteria as of December 31, 2016 and December 31, 2015 were not material to Occidental’s consolidated balance sheets.

Occidental also evaluates the amount of reasonably possible losses that it could incur as a result of outstanding lawsuits, claims and proceedings and discloses its estimable range of reasonably possible additional losses for sites where it is a participant in environmental remediation. Occidental believes that other reasonably possible losses for non-environmental matters that it could incur in excess of reserves accrued on the balance sheet would not be material to its consolidated financial position or results of operations. Occidental reassesses the probability and estimability of contingent losses as new information becomes available.

Tax Matters

During the course of its operations, Occidental is subject to audit by tax authorities for varying periods in various federal, state, local and foreign tax jurisdictions. Although taxable years through 2009 for United States federal income tax purposes have been audited by the United States Internal Revenue Service (IRS) pursuant to its Compliance Assurance Program, subsequent taxable years are currently under review. Additionally, in December 2012, Occidental filed United States federal refund claims for tax years 2008 and 2009 that are subject to IRS review. Taxable years from 2002 through the current year remain subject to examination by foreign and state government tax authorities in certain jurisdictions. In certain of these jurisdictions, tax authorities are in various stages of auditing Occidental’s income taxes. During the course of tax audits, disputes have arisen and other disputes may arise as to facts and matters of law. Occidental believes that the resolution of outstanding tax matters would not have a material adverse effect on its consolidated financial position or results of operations.

Indemnities to Third Parties

Occidental, its subsidiaries, or both, have indemnified various parties against specified liabilities those parties might incur in the future in connection with purchases and other transactions that they have entered into with Occidental. These indemnities usually are contingent upon

the other party incurring liabilities that reach specified thresholds. As of December 31, 2016, Occidental is not aware of circumstances that it believes would reasonably be expected to lead to indemnity claims that would result in payments materially in excess of reserves.

ENVIRONMENTAL LIABILITIES AND EXPENDITURES

Occidental’s operations are subject to stringent federal, state, local and foreign laws and regulations related to improving or maintaining environmental quality.

The laws that require or address environmental remediation, including CERCLA and similar federal, state, local and foreign laws, may apply retroactively and regardless of fault, the legality of the original activities or the current ownership or control of sites. OPC or certain of its subsidiaries participate in or actively monitor a range of remedial activities and government or private proceedings under these laws with respect to alleged past practices at operating, closed and third-party sites. Remedial activities may include one or more of the following: investigation involving sampling, modeling, risk assessment or monitoring; cleanup measures including removal, treatment or disposal; or operation and maintenance of remedial systems. The environmental proceedings seek funding or performance of remediation and, in some cases, compensation for alleged property damage, punitive damages, civil penalties, injunctive relief and government oversight costs.

ENVIRONMENTAL REMEDIATION

As of December 31, 2016, Occidental participated in or monitored remedial activities or proceedings at 147 sites. The following table presents Occidental’s environmental remediation reserves as of December 31, 2016, 2015 and 2014, the current portion of which is included in accrued liabilities ($131 million in 2016, $70 million in 2015, and $79 million in 2014) and the remainder in deferred credits and other liabilities — other ($739 million in 2016, $316 million in 2015, and $255 million in 2014). The reserves are grouped as environmental remediation sites listed or proposed for listing by the U.S. Environmental Protection Agency on the CERCLA National Priorities List (NPL) sites and three categories of non-NPL sites — third-party sites, Occidental-operated sites and closed or non-operated Occidental sites.

($ amounts in millions)201620152014
# of SitesReserve Balance# of SitesReserve Balance# of SitesReserve Balance
NPL sites33$46134$2730$23
Third-party sites681636612867101
Occidental-operated sites171061810717107
Closed or non-operated Occidental sites291403112431103
Total147$870149$386145$334

As of December 31, 2016, Occidental’s environmental reserves exceeded $10 million each at 16 of the 147 sites

described above, and 88 of the sites had reserves from $0 to $1 million each.

As of December 31, 2016, three sites — the Diamond Alkali Superfund Site and a former chemical plant in Ohio(both of which are indemnified by Maxus Energy Corporation, as discussed further below), and a landfill in Western New York — accounted for 95 percent of its reserves associated with NPL sites. The reserve balance above includes 17 NPL sites subject to indemnification by Maxus.

Four of the 68 third-party sites a Maxus-indemnified chrome site in New Jersey, a former copper mining and smelting operation in Tennessee, an active plant outside of the United States and an active refinery in Louisiana where Occidental reimburses the current owner for certain remediation activities accounted for 53 percent of Occidental’s reserves associated with these sites. The reserve balance above includes 9 third-party sites subject to indemnification by Maxus.

Three sites chemical plants in Kansas, Louisiana, and Texas accounted for 48 percent of the reserves associated with the Occidental-operated sites.

Six other sites a landfill in western New York, former chemical plants in Tennessee, Delaware, Washington and California, and a closed coal mine in Pennsylvania — accounted for 69 percent of the reserves associated with closed or non-operated Occidental sites.

When Occidental acquired Diamond Shamrock Chemicals Company (DSCC) in 1986, Maxus Energy Corporation (Maxus), currently a subsidiary of YPF S.A. (YPF), agreed to indemnify Occidental for a number of environmental sites, including the Diamond Alkali Superfund Site (Site) along a portion of the Passaic River. On June 17, 2016, Maxus and several affiliated companies filed for Chapter 11 bankruptcy in Federal District Court in the State of Delaware. Prior to filing for bankruptcy, Maxus defended and indemnified Occidental in connection with clean-up and other costs associated with the sites subject to the indemnity, including the Site. Occidental is pursuing Maxus and its parent company, YPF, as the alter ego of Maxus, to recover all indemnified costs, which will include costs to be incurred at the Site.

In March 2016, the EPA issued a Record of Decision (ROD) specifying remedial actions required for the lower 8.3 miles of the Lower Passaic River. The ROD does not address any potential remedial action for the upper nine miles of the Lower Passaic River or Newark Bay. During the third quarter of 2016, and following Maxus’s bankruptcy filing, Occidental and the EPA entered into an Administrative Order on Consent (AOC) to complete the design of the proposed clean-up plan outlined in the ROD at an estimated cost of $165 million. The EPA announced that it will pursue similar agreements with other potentially responsible parties.

Occidental has accrued a reserve relating to its estimated allocable share of the costs to perform the design and the remediation called for in the AOC and the ROD, as well as for certain other Maxus-indemnified sites. Occidental’s ultimate share of this liability may be higher or lower than the reserved amount, and is subject to final design plans and the resolution of Occidental's allocable share with other potentially responsible parties. Occidental

continues to evaluate the costs to be incurred to comply with the AOC, the ROD and to perform remediation at other Maxus-indemnified sites in light of the Maxus bankruptcy and the share of ultimate liability of other potentially responsible parties.

Environmental reserves vary over time depending on factors such as acquisitions or dispositions, identification of additional sites and remedy selection and implementation.

Based on current estimates, Occidental expects to expend funds corresponding to approximately 40 percent of the current environmental reserves at the sites described above over the next three to four years and the balance at these sites over the subsequent 10 or more years. Occidental believes its range of reasonably possible additional losses beyond those liabilities recorded for environmental remediation at these sites could be up to $1.0 billion.

Environmental Costs

Occidental’s environmental costs, some of which include estimates, are presented below for each segment for each of the years ended December 31:

(in millions)201620152014
Operating Expenses
Oil and Gas$65$93$103
Chemical757480
Midstream and Marketing111311
$151$180$194
Capital Expenditures
Oil and Gas$43$122$143
Chemical254135
Midstream and Marketing5411
$73$167$189
Remediation Expenses
Corporate$61$117$79

Operating expenses are incurred on a continual basis. Capital expenditures relate to longer-lived improvements in properties currently operated by Occidental. Remediation expenses relate to existing conditions from past operations.

Occidental presently estimates capital expenditures for environmental compliance of approximately $89 million for 2017.

FOREIGN INVESTMENTS

Many of Occidental’s assets are located outside North America. At December 31, 2016, the carrying value of Occidental’s assets in countries outside North America aggregated approximately $9.5 billion, or 22 percent of Occidental’s total assets at that date. Of such assets, approximately $8.2 billion are located in the Middle East and approximately $1.0 billion are located in Latin America. For the year ended December 31, 2016, net sales outside North America totaled $3.7 billion, or approximately 37 percent of total net sales.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The process of preparing financial statements in accordance with generally accepted accounting principles

requires Occidental's management to make informed estimates and judgments regarding certain items and transactions. Changes in facts and circumstances or discovery of new information may result in revised estimates and judgments, and actual results may differ from these estimates upon settlement but generally not by material amounts. There has been no material change to Occidental's critical accounting policies over the past three years. The selection and development of these policies and estimates have been discussed with the Audit Committee of the Board of Directors. Occidental considers the following to be its most critical accounting policies and estimates that involve management's judgment.

Oil and Gas Properties

The carrying value of Occidental’s PP&E represents the cost incurred to acquire or develop the asset, including any asset retirement obligations and capitalized interest, net of accumulated depreciation, depletion, and amortization (DD&A) and any impairment charges. For assets acquired, PP&E cost is based on fair values at the acquisition date. Asset retirement obligations and interest costs incurred in connection with qualifying capital expenditures are capitalized and amortized over the lives of the related assets.

Occidental uses the successful efforts method to account for its oil and gas properties. Under this method, Occidental capitalizes costs of acquiring properties, costs of drilling successful exploration wells and development costs. The costs of exploratory wells are initially capitalized pending a determination of whether proved reserves have been found. If proved reserves have been found, the costs of exploratory wells remain capitalized. Otherwise, Occidental charges the costs of the related wells to expense. In some cases, a determination of proved reserves cannot be made at the completion of drilling, requiring additional testing and evaluation of the wells. Occidental generally expenses the costs of such exploratory wells if a determination of proved reserves has not been made within a 12-month period after drilling is complete.

Occidental expenses annual lease rentals, the costs of injectants used in production and geological, geophysical and seismic costs as incurred.

Occidental determines depreciation and depletion of oil and gas producing properties by the unit-of-production method. It amortizes acquisition costs over total proved reserves and capitalized development and successful exploration costs over proved developed reserves.

Proved oil and gas reserves are those quantities of oil and gas which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible—from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and government regulations—prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation. Occidental has no proved oil and gas reserves for which the determination of economic producibility is subject to the completion of major additional capital expenditures.

Several factors could change Occidental’s proved oil and gas reserves. For example, Occidental receives a share of production from PSCs to recover its costs and generally an additional share for profit. Occidental’s share of production and reserves from these contracts decreases when product prices rise and increases when prices decline. Overall, Occidental’s net economic benefit from these contracts is greater at higher product prices. In other cases, particularly with long-lived properties, lower product prices may lead to a situation where production of a portion of proved reserves becomes uneconomical. For such properties, higher product prices typically result in additional reserves becoming economical. Estimation of future production and development costs is also subject to change partially due to factors beyond Occidental's control, such as energy costs and inflation or deflation of oil field service costs. These factors, in turn, could lead to changes in the quantity of proved reserves. Additional factors that could result in a change of proved reserves include production decline rates and operating performance differing from those estimated when the proved reserves were initially recorded. In 2016, positive revisions of previous estimates of 159 million BOE were primarily positive technical revisions in Al Hosn Gas and price revisions in Oman due to the PSC impact, partially offset by negative domestic price revisions.

Additionally, Occidental performs impairment tests with respect to its proved properties whenever events or circumstances indicate that the carrying value of property may not be recoverable. If there is an indication the carrying amount of the asset may not be recovered due to declines in current and forward prices, significant changes in reserve estimates, changes in management's plans, or other significant events, management will evaluate the property for impairment. Under the successful efforts method, if the sum of the undiscounted cash flows is less than the carrying value of the proved property, the carrying value is reduced to estimated fair value and reported as an impairment charge in the period. Individual proved properties are grouped for impairment purposes at the lowest level for which there are identifiable cash flows, which is generally on a field by field basis. The fair value of impaired assets is typically determined based on the present value of expected future cash flows using discount rates believed to be consistent with those used by market participants. The impairment test incorporates a number of assumptions involving expectations of future cash flows which can change significantly over time. These assumptions include estimates of future product prices, contractual prices, estimates of risk-adjusted oil and gas reserves and estimates of future operating and development costs. It is reasonably possible that prolonged low or further declines in commodity prices, reduced capital spending in response to lower prices or increases in operating costs could result in other additional impairments.

The most significant ongoing financial statement effect from a change in Occidental's oil and gas reserves or impairment of its proved properties would be to the DD&A rate. For example, a 5 percent increase or decrease in the amount of oil and gas reserves would change the DD&A rate by approximately $0.60 per barrel, which would

increase or decrease pre-tax income by approximately $140 million annually at current production rates.

A portion of the carrying value of Occidental’s oil and gas properties is attributable to unproved properties. Net capitalized costs attributable to unproved properties were $1.4 billion and $0.3 billion at December 31, 2016 and 2015, respectively. The unproved amounts are not subject to DD&A until they are classified as proved properties. Capitalized costs attributable to the properties become subject to DD&A when proved reserves are assigned to the property. If the exploration efforts are unsuccessful, or management decides not to pursue development of these properties as a result of lower commodity prices, higher development and operating costs, contractual conditions or other factors, the capitalized costs of the related properties would be expensed. The timing of any writedowns of these unproved properties, if warranted, depends upon management's plans, the nature, timing and extent of future exploration and development activities and their results. Occidental believes its current plans and exploration and development efforts will allow it to realize its unproved property balance.

Chemical Assets

Occidental's chemical assets are depreciated using either the unit-of-production or the straight-line method, based upon the estimated useful lives of the facilities. The estimated useful lives of Occidental’s chemical assets, which range from three years to 50 years, are also used for impairment tests. The estimated useful lives for the chemical facilities are based on the assumption that Occidental will provide an appropriate level of annual expenditures to ensure productive capacity is sustained. Such expenditures consist of ongoing routine repairs and maintenance, as well as planned major maintenance activities (PMMA). Ongoing routine repairs and maintenance expenditures are expensed as incurred. PMMA costs are capitalized and amortized over the period until the next planned overhaul. Additionally, Occidental incurs capital expenditures that extend the remaining useful lives of existing assets, increase their capacity or operating efficiency beyond the original specification or add value through modification for a different use. These capital expenditures are not considered in the initial determination of the useful lives of these assets at the time they are placed into service. The resulting revision, if any, of the asset’s estimated useful life is measured and accounted for prospectively.

Without these continued expenditures, the useful lives of these assets could decrease significantly. Other factors that could change the estimated useful lives of Occidental’s chemical assets include sustained higher or lower product prices, which are particularly affected by both domestic and foreign competition, demand, feedstock costs, energy prices, environmental regulations and technological changes.

Occidental performs impairment tests on its chemical assets whenever events or changes in circumstances lead to a reduction in the estimated useful lives or estimated future cash flows that would indicate that the carrying amount may not be recoverable, or when management’s plans change with respect to those assets. Any impairment

loss would be calculated as the excess of the asset's net book value over its estimated fair value.

Occidental's net PP&E for the chemical segment is approximately $2.4 billion and its depreciation expense for 2017 is expected to be approximately $300 million. The most significant financial statement impact of a decrease in the estimated useful lives of Occidental's chemical plants would be on depreciation expense. For example, a reduction in the remaining useful lives of one year would increase depreciation and reduce pre-tax earnings by approximately $45 million per year.

Midstream, Marketing and Other Assets

Derivatives are carried at fair value and on a net basis when a legal right of offset exists with the same counterparty. Occidental applies hedge accounting when transactions meet specified criteria for cash-flow hedge treatment and management elects and documents such treatment. Otherwise, any fair value gains or losses are recognized in earnings in the current period. For cash-flow hedges, the gain or loss on the effective portion of the derivative is reported as a component of other comprehensive income (OCI) with an offsetting adjustment to the basis of the item being hedged. Realized gains or losses from cash-flow hedges, and any ineffective portion, are recorded as a component of net sales in the consolidated statements of operations. Ineffectiveness is primarily created by a lack of correlation between the hedged item and the hedging instrument due to location, quality, grade or changes in the expected quantity of the hedged item. Gains and losses from derivative instruments are reported net in the consolidated statements of operations. There were no fair value hedges as of and during the years ended December 31, 2016, 2015 and 2014.

A hedge is regarded as highly effective such that it qualifies for hedge accounting if, at inception and throughout its life, it is expected that changes in the fair value or cash flows of the hedged item will be offset by 80 to 125 percent of the changes in the fair value or cash flows, respectively, of the hedging instrument. In the case of hedging a forecast transaction, the transaction must be probable and must present an exposure to variations in cash flows that could ultimately affect reported net income or loss. Occidental discontinues hedge accounting when it determines that a derivative has ceased to be highly effective as a hedge; when the hedged item matures or is sold or repaid; or when a forecast transaction is no longer deemed probable.

Occidental's midstream and marketing PP&E is depreciated over the estimated useful lives of the assets, using either the unit-of-production or straight-line method. Occidental performs impairment tests on its midstream and marketing assets whenever events or changes in circumstances lead to a reduction in the estimated useful lives or estimated future cash flows that would indicate that the carrying amount may not be recoverable, or when management’s plans change with respect to those assets. Any impairment loss would be calculated as the excess of the asset's net book value over its estimated fair value.

Fair Value Measurements

Occidental has categorized its assets and liabilities that are measured at fair value in a three-level fair value hierarchy, based on the inputs to the valuation techniques: Level 1 – using quoted prices in active markets for the assets or liabilities; Level 2 – using observable inputs other than quoted prices for the assets or liabilities; and Level 3 – using unobservable inputs. Transfers between levels, if any, are recognized at the end of each reporting period.

Fair Values - Recurring

Occidental primarily applies the market approach for recurring fair value measurements, maximizes its use of observable inputs and minimizes its use of unobservable inputs. Occidental utilizes the mid-point between bid and ask prices for valuing the majority of its assets and liabilities measured and reported at fair value. In addition to using market data, Occidental makes assumptions in valuing its assets and liabilities, including assumptions about the risks inherent in the inputs to the valuation technique. For assets and liabilities carried at fair value, Occidental measures fair value using the following methods:

ØOccidental values exchange-cleared commodity derivatives using closing prices provided by the exchange as of the balance sheet date. These derivatives are classified as Level 1.

Ø Over-the-Counter (OTC) bilateral financial commodity contracts, foreign exchange contracts, options and physical commodity forward purchase and sale contracts are generally classified as Level 2 and are generally valued using quotations provided by brokers or industry-standard models that consider various inputs, including quoted forward prices for commodities, time value, volatility factors, credit risk and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Substantially all of these inputs are observable in the marketplace throughout the full term of the instrument, and can be derived from observable data or are supported by observable prices at which transactions are executed in the marketplace.

ØOccidental values commodity derivatives based on a market approach that considers various assumptions, including quoted forward commodity prices and market yield curves. The assumptions used include inputs that are generally unobservable in the marketplace or are observable but have been adjusted based upon various assumptions and the fair value is designated as Level 3 within the valuation hierarchy.

Occidental generally uses an income approach to measure fair value when there is not a market-observable price for an identical or similar asset or liability. This approach utilizes management's judgments regarding expectations of projected cash flows, and discounts those cash flows using a risk-adjusted discount rate.

Environmental Liabilities and Expenditures

Environmental expenditures that relate to current

operations are expensed or capitalized as appropriate. Occidental records environmental reserves and related charges and expenses for estimated remediation costs that relate to existing conditions from past operations when environmental remediation efforts are probable and the costs can be reasonably estimated. In determining the reserves and the range of reasonably possible additional losses, Occidental refers to currently available information, including relevant past experience, remedial objectives, available technologies, applicable laws and regulations and cost-sharing arrangements. Occidental bases environmental reserves on management’s estimate of the most likely cost to be incurred, using the most cost-effective technology reasonably expected to achieve the remedial objective. Occidental periodically reviews reserves and adjusts them as new information becomes available. Occidental records environmental reserves on a discounted basis when it deems the aggregate amount and timing of cash payments to be reliably determinable at the time the reserves are established. The reserve methodology with respect to discounting for a specific site is not modified once it is established. Presently none of the environmental reserves are recorded on a discounted basis. Occidental generally records reimbursements or recoveries of environmental remediation costs in income when received, or when receipt of recovery is highly probable.

Many factors could affect Occidental’s future remediation costs and result in adjustments to its environmental reserves and range of reasonably possible additional losses. The most significant are: (1) cost estimates for remedial activities may be inaccurate; (2) the length of time, type or amount of remediation necessary to achieve the remedial objective may change due to factors such as site conditions, the ability to identify and control contaminant sources or the discovery of additional contamination; (3) a regulatory agency may ultimately reject or modify Occidental’s proposed remedial plan; (4) improved or alternative remediation technologies may change remediation costs; (5) laws and regulations may change remediation requirements or affect cost sharing or allocation of liability; and (6) changes in allocation or cost-sharing arrangements may occur.

Certain sites involve multiple parties with various cost-sharing arrangements, which fall into the following three categories: (1) environmental proceedings that result in a negotiated or prescribed allocation of remediation costs among Occidental and other alleged potentially responsible parties; (2) oil and gas ventures in which each participant pays its proportionate share of remediation costs reflecting its working interest; or (3) contractual arrangements, typically relating to purchases and sales of properties, in which the parties to the transaction agree to methods of allocating remediation costs. In these circumstances, Occidental evaluates the financial viability of other parties with whom it is alleged to be jointly liable, the degree of their commitment to participate and the consequences to Occidental of their failure to participate when estimating Occidental's ultimate share of liability. Occidental records reserves at its expected net cost of remedial activities and, based on these factors, believes that it will not be required to assume a share of liability of

such other potentially responsible parties in an amount materially above amounts reserved.

In addition to the costs of investigations and cleanup measures, which often take in excess of 10 years at NPL sites, Occidental's reserves include management's estimates of the costs to operate and maintain remedial systems. If remedial systems are modified over time in response to significant changes in site-specific data, laws, regulations, technologies or engineering estimates, Occidental reviews and adjusts its reserves accordingly.

If Occidental were to adjust the environmental reserve balance based on the factors described above, the amount of the increase or decrease would be recognized in earnings. For example, if the reserve balance were reduced by 10 percent, Occidental would record a pre-tax gain of $87 million. If the reserve balance were increased by 10 percent, Occidental would record an additional remediation expense of $87 million.

Other Loss Contingencies

Occidental is involved, in the normal course of business, in lawsuits, claims and other legal proceedings and audits. Occidental accrues reserves for these matters when it is probable that a liability has been incurred and the liability can be reasonably estimated. In addition, Occidental discloses, in aggregate, its exposure to loss in excess of the amount recorded on the balance sheet for these matters if it is reasonably possible that an additional material loss may be incurred. Occidental reviews its loss contingencies on an ongoing basis.

Loss contingencies are based on judgments made by management with respect to the likely outcome of these matters and are adjusted as appropriate. Management’s judgments could change based on new information, changes in, or interpretations of, laws or regulations, changes in management’s plans or intentions, opinions regarding the outcome of legal proceedings, or other factors. See "Lawsuits, Claims and Contingencies" for additional information.

SIGNIFICANT ACCOUNTING AND DISCLOSURE CHANGES

See Note 3, Accounting and Disclosure Changes, in the Notes to Condensed Consolidated Financial Statements in Part II Item 8 of this Form 10-K.

SAFE HARBOR DISCUSSION REGARDING OUTLOOK AND OTHER FORWARD-LOOKING DATA

Portions of this report, including Items 1 and 2, "Business and Properties," Item 3, "Legal Proceedings," Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations," and Item 7A, "Quantitative and Qualitative Disclosures About Market Risk," contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 and involve risks and uncertainties that could materially affect expected results of operations, liquidity, cash flows and business prospects. Words such as "estimate," "project," "predict," "will," "would," "should," "could," "may," "might," "anticipate," "plan," "intend," "believe," "expect," "aim,"

"goal," "target," "objective," "likely" or similar expressions that convey the prospective nature of events or outcomes generally indicate forward-looking statements. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this report. Unless legally required, Occidental does not undertake any obligation to update any forward-looking statements as a result of new information, future events or otherwise. Factors that may cause Occidental’s results of operations and financial position to differ from expectations include the factors discussed in Item 1A, "Risk Factors" and elsewhere.

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