Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON CONSOLIDATED FINANCIAL STATEMENTS

The Board of Directors and Stockholders

Occidental Petroleum Corporation:

We have audited the accompanying consolidated balance sheets of Occidental Petroleum Corporation and subsidiaries as of December 31, 2016 and 2015, and the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for each of the years in the three‑year period ended December 31, 2016. In connection with our audits of the consolidated financial statements, we also have audited financial statement schedule II - valuation and qualifying accounts. These consolidated financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Occidental Petroleum Corporation and subsidiaries as of December 31, 2016 and 2015, and the results of their operations and their cash flows for each of the years in the three‑year period ended December 31, 2016, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Occidental Petroleum Corporation’s internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 23, 2017 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

/s/ KPMG LLP

Houston, Texas

February 23, 2017

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The Board of Directors and Stockholders

Occidental Petroleum Corporation:

We have audited Occidental Petroleum Corporation’s internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Occidental Petroleum Corporation’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Assessment of and Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Occidental Petroleum Corporation and its subsidiaries maintained, in all material respects, effective internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Occidental Petroleum Corporation and subsidiaries as of December 31, 2016 and 2015, and the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for each of the years in the three‑year period ended December 31, 2016, and our report dated February 23, 2017 expressed an unqualified opinion on those consolidated financial statements.

/s/ KPMG LLP

Houston, Texas

February 23, 2017

Consolidated Balance Sheets	Occidental Petroleum Corporation and Subsidiaries
(in millions)

Assets at December 31,		2016				2015
CURRENT ASSETS
Cash and cash equivalents		$	2,233			$	3,201
Restricted cash		—				1,193
Trade receivables, net of reserves of $16 in 2016 and $17 in 2015		3,989				2,970
Inventories		866				986
Assets held for sale		—				141
Other current assets		1,340				911
Total current assets		8,428				9,402
INVESTMENTS
Investment in unconsolidated entities		1,401				1,267
Available for sale investment		—				167
Total investments		1,401				1,434
PROPERTY, PLANT AND EQUIPMENT
Oil and gas segment		54,673				55,025
Chemical segment		6,930				6,717
Midstream and marketing		9,216				8,899
Corporate		474				417
		71,293				71,058
Accumulated depreciation, depletion and amortization		(38,956		)		(39,419		)
		32,337				31,639
LONG-TERM RECEIVABLES AND OTHER ASSETS, NET		943				934
TOTAL ASSETS		$	43,109			$	43,409

The accompanying notes are an integral part of these consolidated financial statements.

Consolidated Balance Sheets	Occidental Petroleum Corporation and Subsidiaries
(in millions, except share and per-share amounts)

Liabilities and Stockholders’ Equity at December 31,		2016				2015
CURRENT LIABILITIES
Current maturities of long-term debt		$	—			$	1,450
Accounts payable		3,926				3,069
Accrued liabilities		2,436				2,213
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
Deferred domestic and foreign income taxes		1,132				1,323
Other		4,299				4,039
		5,431				5,362
STOCKHOLDERS' EQUITY
Common stock, $0.20 per share par value, authorized shares: 1.1 billion, issued shares: 2016 — 892,214,604 and 2015 — 891,360,091		178				178
Treasury stock: 2016 — 127,977,306 shares and 2015 — 127,681,335 shares		(9,143		)		(9,121		)
Additional paid-in capital		7,747				7,640
Retained earnings		22,981				25,960
Accumulated other comprehensive loss		(266		)		(307		)
Total stockholders' equity		21,497				24,350
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY		$	43,109			$	43,409

The accompanying notes are an integral part of these consolidated financial statements.

Consolidated Statements of Operations	Occidental Petroleum Corporation and Subsidiaries
(in millions, except per-share amounts)

For the years ended December 31,		2016				2015				2014
REVENUES AND OTHER INCOME
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
		10,398				12,699				21,947
COSTS AND OTHER DEDUCTIONS
Cost of sales (excludes depreciation, depletion, and amortization of $4,266 in 2016, $4,540 in 2015, and $4,257 in 2014)		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
		12,243				22,383				20,723
INCOME (LOSS) BEFORE INCOME TAXES AND OTHER ITEMS		(1,845		)		(9,684		)		1,224
(Provision for) benefit from domestic and foreign income taxes		662				1,330				(1,685		)
Income from equity investments		181				208				331
INCOME (LOSS) FROM CONTINUING OPERATIONS		(1,002		)		(8,146		)		(130		)
Income from discontinued operations		428				317				760
NET INCOME (LOSS)		$	(574	)		$	(7,829	)		$	630
Less: Net income attributable to noncontrolling interest		—				—				(14		)
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCK		$	(574	)		$	(7,829	)		$	616
BASIC EARNINGS (LOSS) PER COMMON SHARE (attributable to common stock)
Income (loss) from continuing operations		$	(1.31	)		$	(10.64	)		$	(0.18	)
Discontinued operations, net		0.56				0.41				0.97
BASIC EARNINGS (LOSS) PER COMMON SHARE		$	(0.75	)		$	(10.23	)		$	0.79
DILUTED EARNINGS (LOSS) PER COMMON SHARE (attributable to common stock)
Income (loss) from continuing operations		$	(1.31	)		$	(10.64	)		$	(0.18	)
Discontinued operations, net		0.56				0.41				0.97
DILUTED EARNINGS (LOSS) PER COMMON SHARE		$	(0.75	)		$	(10.23	)		$	0.79
DIVIDENDS PER COMMON SHARE		$	3.02			$	2.97			$	2.88
The accompanying notes are an integral part of these consolidated financial statements.

Consolidated Statements of Comprehensive Income	Occidental Petroleum Corporation and Subsidiaries
(in millions)

For the years ended December 31,		2016				2015				2014
Net income (loss) attributable to common stock		$	(574	)		$	(7,829	)		$	616
Other comprehensive income (loss) items:
Foreign currency translation (losses) gains		—				(2		)		(2		)
Unrealized gains (losses) on derivatives (a)		(14		)		3				(5		)
Pension and postretirement gains (losses) (b)		47				48				(77		)
Distribution of California Resources to shareholders (c)		—				—				22
Reclassification to income of realized losses (gains) on derivatives (d)		8				1				8
Other comprehensive income (loss), net of tax (e)		41				50				(54		)
Comprehensive income (loss)		$	(533	)		$	(7,779	)		$	562

(a)	Net of tax of $8, $(2) and $3 in 2016, 2015 and 2014, respectively. The 2015 amount includes a lower of cost or market inventory adjustment for hedged natural gas of $(2).

(b)	Net of tax of $(26), $(27) and $44 in 2016, 2015 and 2014, respectively. See Note 13, Retirement and Postretirement Benefit Plans, for additional information.

(c)	Net of tax of $(14) in 2014. Employees of California Resources no longer participate in Occidental benefit plans as of the separation date, see Note 17, Spin-off of California Resources.

(d)	Net of tax of $(4), $(1) and $(5) in 2016, 2015 and 2014, respectively.

(e)	There were no other comprehensive income (loss) items related to noncontrolling interests in 2016, 2015 and 2014.

The accompanying notes are an integral part of these consolidated financial statements.

Consolidated Statements of Stockholders' Equity	Occidental Petroleum Corporation and Subsidiaries
(in millions)

		Equity Attributable to Common Stock
		Common Stock				Treasury Stock				Additional Paid-in Capital				Retained Earnings				Accumulated Other Comprehensive Income (Loss)				Noncontrolling Interest				Total Equity
Balance, December 31, 2013		$	178			$	(6,095	)		$	7,515			$	41,831			$	(303	)		$	246			$	43,372
Net income		—				—				—				616				—				—				616
Other comprehensive loss, net of tax		—				—				—				—				(76		)		—				(76		)
Dividends on common stock		—				—				—				(2,252		)		—				—				(2,252		)
Issuance of common stock and other, net		—				—				84				—				—				—				84
Distribution of California Resources stock to shareholders		—				—				—				(4,128		)		22				—				(4,106		)
Noncontrolling interest distributions and other		—				—				—				—				—				(246		)	(a)	(246		)
Purchases of treasury stock		—				(2,433		)		—				—				—				—				(2,433		)
Balance, December 31, 2014		$	178			$	(8,528	)		$	7,599			$	36,067			$	(357	)		$	—			$	34,959
Net loss		—				—				—				(7,829		)		—				—				(7,829		)
Other comprehensive income, net of tax		—				—				—				—				50				—				50
Dividends on common stock		—				—				—				(2,278		)		—				—				(2,278		)
Issuance of common stock and other, net		—				—				41				—				—				—				41
Purchases of treasury stock		—				(593		)		—				—				—				—				(593		)
Balance, December 31, 2015		$	178			$	(9,121	)		$	7,640			$	25,960			$	(307	)		$	—			$	24,350
Net loss		—				—				—				(574		)		—				—				(574		)
Other comprehensive income, net of tax		—				—				—				—				41				—				41
Dividends on common stock		—				—				—				(2,405		)		—				—				(2,405		)
Issuance of common stock and other, net		—				—				107				—				—				—				107
Purchases of treasury stock		—				(22		)		—				—				—				—				(22		)
Balance, December 31, 2016		$	178			$	(9,143	)		$	7,747			$	22,981			$	(266	)		$	—			$	21,497

(a)	Reflects contributions (disposition) from the noncontrolling interest in BridgeTex Pipeline which was sold in the fourth quarter 2014.

The accompanying notes are an integral part of these consolidated financial statements.

Consolidated Statements of Cash Flows	Occidental Petroleum Corporation and Subsidiaries
(in millions)

For the years ended December 31,		2016				2015				2014
CASH FLOW FROM OPERATING ACTIVITIES
Net income (loss)		$	(574	)		$	(7,829	)		$	630
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Income from discontinued operations		(428		)		(317		)		(760		)
Depreciation, depletion and amortization of assets		4,268				4,544				4,261
Deferred income tax benefit		(517		)		(1,372		)		(1,178		)
Other noncash charges to income		121				159				101
Asset impairments and related items		665				9,684				7,379
Gain on sale of equity investments and other assets		(202		)		(101		)		(2,505		)
Undistributed earnings from equity investments		3				6				38
Dry hole expenses		33				10				99
Changes in operating assets and liabilities:
Decrease (increase) in receivables		(1,091		)		1,431				1,413
Decrease (increase) in inventories		17				(24		)		(112		)
Decrease in other current assets		65				33				89
(Decrease) increase in accounts payable and accrued liabilities		603				(1,989		)		(530		)
(Decrease) increase in current domestic and foreign income taxes		17				(331		)		(54		)
Other operating, net		(461		)		(650		)		—
Operating cash flow from continuing operations		2,519				3,254				8,871
Operating cash flow from discontinued operations, net of taxes		864				97				2,197
Net cash provided by operating activities		3,383				3,351				11,068
CASH FLOW FROM INVESTING ACTIVITIES
Capital expenditures		(2,717		)		(5,272		)		(8,930		)
Change in capital accrual		(114		)		(592		)		542
Payments for purchases of assets and businesses		(2,044		)		(109		)		(1,687		)
Sales of equity investments and assets, net		302				819				4,177
Other, net		(169		)		(269		)		(346		)
Investing cash flow from 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		)
CASH FLOW FROM FINANCING ACTIVITIES
Change in restricted cash		1,193				2,826				(4,019		)
Special cash distributions from California Resources		—				—				6,100
Proceeds from long-term debt		4,203				1,478				—
Payments of long-term debt		(2,710		)		—				(107		)
Proceeds from issuance of common stock		36				37				33
Purchases of treasury stock		(22		)		(593		)		(2,500		)
Contributions from noncontrolling interest		—				—				375
Cash dividends paid		(2,309		)		(2,264		)		(2,210		)
Other, net		—				—				2
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		)
Increase (decrease) in cash and cash equivalents		(968		)		(588		)		396
Cash and cash equivalents — beginning of year		3,201				3,789				3,393
Cash and cash equivalents — end of year		$	2,233			$	3,201			$	3,789

The accompanying notes are an integral part of these consolidated financial statements.

Notes to Consolidated Financial Statements	Occidental Petroleum Corporation and Subsidiaries

NOTE 1	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF OPERATIONS

In this report, "Occidental" means Occidental Petroleum Corporation, a Delaware corporation (OPC), or OPC and one or more entities in which it owns a controlling interest (subsidiaries). Occidental conducts its operations through various subsidiaries and affiliates. 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.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements have been prepared in conformity with United States generally accepted accounting principles (GAAP) and include the accounts of OPC, its subsidiaries and its undivided interests in oil and gas exploration and production ventures. Occidental accounts for its share of oil and gas exploration and production ventures, in which it has a direct working interest, by reporting its proportionate share of assets, liabilities, revenues, costs and cash flows within the relevant lines on the balance sheets, income statements and cash flow statements.

Certain financial statements, notes and supplementary data for prior years have been reclassified to conform to the 2016 presentation.

As a result of the spin-off of California Resources Corporation (California Resources) the statements of income and cash flows 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. See Note 17 Spin-off of California Resources for additional information.

INVESTMENTS IN UNCONSOLIDATED ENTITIES

Occidental’s percentage interest in the underlying net assets of affiliates as to which it exercises significant influence without having a controlling interest (excluding oil and gas ventures in which Occidental holds an undivided interest) are accounted for under the equity method. Occidental reviews equity-method investments for impairment whenever events or changes in circumstances indicate that an other-than-temporary decline in value may have occurred. The amount of impairment, if any, is based on quoted market prices, when available, or other valuation techniques, including discounted cash flows.

REVENUE RECOGNITION

Revenue is recognized from oil and gas production when title has passed to the customer, which occurs when the product is shipped. In international locations where oil is shipped by tanker, title passes when the tanker is loaded or product is received by the customer, depending on the shipping terms. This process occasionally causes a difference between actual production in a reporting period and sales volumes that have been recognized as revenue. Revenues from the production of oil and gas properties in which Occidental has an interest with other producers are recognized on the basis of Occidental’s net revenue interest.

Revenue from chemical product sales is recognized when the product is shipped and title has passed to the customer. Certain incentive programs may provide for payments or credits to be made to customers based on the volume of product purchased over a defined period. Total customer incentive payments over a given period are estimated and recorded as a reduction to revenue ratably over the contract period. Such estimates are evaluated and revised as warranted.

Revenue from marketing activities is recognized on net settled transactions upon completion of contract terms and, for physical deliveries, upon title transfer. For unsettled transactions, contracts are recorded at fair value and changes in fair value are reflected in net sales. Revenue from all marketing activities is reported on a net basis.

Occidental records revenue net of any taxes, such as sales taxes, that are assessed by governmental authorities on Occidental's customers.

RISKS AND UNCERTAINTIES

The process of preparing consolidated financial statements in conformity with GAAP requires Occidental's management to make informed estimates and judgments regarding certain types of financial statement balances and disclosures. Such estimates primarily relate to unsettled transactions and events as of the date of the consolidated financial statements and judgments on expected outcomes as well as the materiality of transactions and balances. Changes in facts and circumstances or discovery of new information relating to such transactions and events may result in revised estimates and judgments and actual results may differ from estimates upon settlement. Management believes that these estimates and judgments provide

a reasonable basis for the fair presentation of Occidental’s financial statements. Occidental establishes a valuation allowance against net operating losses and other deferred tax assets to the extent it believes the future benefit from these assets will not be realized in the statutory carryforward periods. Realization of deferred tax assets, including any net operating loss carryforwards, is dependent upon Occidental generating sufficient future taxable income and reversal of temporary differences in jurisdictions where such assets originate.

The accompanying consolidated financial statements include assets of approximately $9.5 billion as of December 31, 2016, and net sales of approximately $3.7 billion for the year ended December 31, 2016, relating to Occidental’s operations in countries outside North America. Occidental operates some of its oil and gas business in countries that have experienced political instability, nationalizations, corruption, armed conflict, terrorism, insurgency, civil unrest, security problems, labor unrest, OPEC production restrictions, equipment import restrictions and sanctions, all of which increase Occidental's risk of loss, delayed or restricted production or may result in other adverse consequences. Occidental attempts to conduct its affairs so as to mitigate its exposure to such risks and would seek compensation in the event of nationalization.

Because Occidental’s major products are commodities, significant changes in the prices of oil and gas and chemical products may have a significant impact on Occidental’s results of operations.

Also, see "Property, Plant and Equipment" below.

CASH EQUIVALENTS

Cash equivalents are short-term, highly liquid investments that are readily convertible to cash. Cash equivalents were approximately $2.0 billion and $2.9 billion at December 31, 2016 and 2015, respectively.

RESTRICTED CASH

Restricted cash is the result of the separation of California Resources in 2014. As of December 31, 2015, there was $1.2 billion of cash restricted for the payment of dividends, payment of debt or share repurchases. In 2016, Occidental utilized the remaining restricted cash balance to retire debt and pay dividends.

INVESTMENTS

Available-for-sale securities are recorded at fair value with any unrealized gains or losses included in accumulated other comprehensive income/loss (AOCI). Trading securities are recorded at fair value with unrealized and realized gains or losses included in net sales.

A decline in market value of any available-for-sale securities below cost that is deemed to be other-than-temporary results in an impairment to reduce the carrying amount to fair value. To determine whether an impairment is other-than-temporary, Occidental considers all available information relevant to the investment, including past events and current conditions. Evidence considered in this assessment includes the reasons for the impairment, the severity and duration of the impairment, changes in value subsequent to year‑end, and the general market condition in the geographic area or industry the investee operates in.

INVENTORIES

Materials and supplies are valued at weighted-average cost and are reviewed periodically for obsolescence. Oil, NGLs and natural gas inventories are valued at the lower of cost or market.

For the chemical segment, Occidental's finished goods inventories are valued at the lower of cost or market. For most of its domestic inventories, other than materials and supplies, the chemical segment uses the last-in, first-out (LIFO) method as it better matches current costs and current revenue. For other countries, Occidental uses the first-in, first-out method (if the costs of goods are specifically identifiable) or the average-cost method (if the costs of goods are not specifically identifiable).

PROPERTY, PLANT AND EQUIPMENT

Oil and Gas

The carrying value of Occidental’s property, plant and equipment (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.

The following table summarizes the activity of capitalized exploratory well costs for continuing operations for the years ended December 31:

in millions		2016				2015				2014
Balance — Beginning of Year		$	76			$	141			$	140
Additions to capitalized exploratory well costs pending the determination of proved reserves		29				88				462
Reclassifications to property, plant and equipment based on the determination of proved reserves		(28		)		(78		)		(423		)
Spin-off of California Resources		—				—				(17		)
Capitalized exploratory well costs charged to expense		(21		)		(75		)		(21		)
Balance — End of Year		$	56			$	76			$	141

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.

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. See Note 15 and below for further discussion of asset impairments.

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.

Chemical

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 fifty 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.

Midstream and Marketing

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.

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 reported at the end of each reporting period.

IMPAIRMENTS AND RELATED ITEMS

In 2016, Occidental recorded net impairment and related charges of $61 million related to the sale of Libya and exit from Iraq and the termination of crude oil supply contracts at a cost of $160 million. The corporate amount included an allowance for doubtful accounts.

In 2015, Occidental recorded impairment and related charges on oil and gas assets due to the decline in oil and gas prices, the decision to sell or exit non-core assets and changes in development plans for its non-producing assets. In November 2015, Occidental sold its Williston Basin assets in North Dakota and in December 2015, Occidental entered into an agreement to sell its Piceance Basin operations in Colorado. In Iraq, Occidental issued a notice of withdrawal and reassigned its interest in the Zubair Field in accordance with the contract terms. In Bahrain, Occidental issued a notice of withdrawal, reassigning its interest, and completed the exit in 2016. In Yemen, Occidental’s non-operated interest in Block 10 East Shabwa Field expired in December 2015, and in February 2016, Occidental sold its interests in Block S-1, An Nagyah Field.

In 2015, the midstream and marketing segment recorded an impairment charge for 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.

In 2014, Occidental recorded impairment and related charges mainly for Williston, Bahrain, the Joslyn oil sands project and other non-core domestic gas properties due to declining prices and changes in development plans.

For the years ended December 31, (in millions)		2016				2015				2014
OIL AND GAS
United States
Impairments and related charges of exiting operations		$	(44	)		$	1,862		(a)	$	3,253
Impairments related to decline in commodity prices and changes in future development plans		15				1,428				1,381
Rig termination charges		—				192				—
Other asset impairment related charges		5				204				119
Latin America
Impairments related to decline in commodity prices		9				559				57
Middle East and North Africa
Impairments of exiting operations		61				1,658				918
Impairments related to decline in commodity prices		—				2,833				91
CHEMICAL
Impairments of assets		—				121				149
MIDSTREAM AND MARKETING
Century gas processing plant		—				814				—
Other asset impairment related charges		160				216				40
CORPORATE
Other-than-temporary impairment of investment in California Resources		78				227				553
Joslyn impairment		—				—				805
Severance, spin-off and allowance for doubtful accounts		541				125				13
		$	825			$	10,239			$	7,379

(a)	A portion of the 2015 charges are reported in the Midstream and Marketing segment.

It is reasonably possible that prolonged 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.

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 reported 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:

Ø	Occidental 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.

Ø

Occidental 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.

ACCRUED LIABILITIES—CURRENT

Accrued liabilities include accrued payroll, commissions and related expenses of $341 million and $188 million at December 31, 2016 and 2015, respectively.

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 the 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 Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) National Priorities List (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.

ASSET RETIREMENT OBLIGATIONS

Occidental recognizes the fair value of asset retirement obligations in the period in which a determination is made that a legal obligation exists to dismantle an asset and reclaim or remediate the property at the end of its useful life and the cost of the obligation can be reasonably estimated. The liability amounts are based on future retirement cost estimates and incorporate many assumptions such as time to abandonment, technological changes, future inflation rates and the risk-adjusted discount rate. When the liability is initially recorded, Occidental capitalizes the cost by increasing the related PP&E balances. If the estimated future cost of the asset retirement obligation changes, Occidental records an adjustment to both the asset retirement obligation and PP&E. Over time, the liability is increased and expense is recognized for accretion, and the capitalized cost is depreciated over the useful life of the asset.

At a certain number of its facilities, Occidental has identified conditional asset retirement obligations that are related mainly to plant decommissioning. Occidental does not know or cannot estimate when it may settle these obligations. Therefore, Occidental cannot reasonably estimate the fair value of these liabilities. Occidental will recognize these conditional asset retirement obligations in the periods in which sufficient information becomes available to reasonably estimate their fair values.

The following table summarizes the activity of the asset retirement obligation, of which $1.2 billion is included in deferred credits and other liabilities - other, with the remaining current portion in accrued liabilities at both December 31, 2016 and 2015.

For the years ended December 31, (in millions)		2016				2015
Beginning balance		$	1,124			$	1,091
Liabilities incurred – capitalized to PP&E		46				46
Liabilities settled and paid		(38		)		(35		)
Accretion expense		59				54
Acquisitions, dispositions and other – changes in PP&E		11				(209		)
Revisions to estimated cash flows – changes in PP&E		167				177
Ending balance		$	1,369			$	1,124

DERIVATIVE INSTRUMENTS

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 forecasted transaction is no longer deemed probable.

STOCK-BASED INCENTIVE PLANS

Occidental has established several stockholder-approved stock-based incentive plans for certain employees and directors (Plans) that are more fully described in Note 12. A summary of Occidental’s accounting policy for awards issued under the Plans is as follows.

For cash- and stock-settled restricted stock units or incentive award shares (RSUs) and capital employed incentive awards and return on assets (ROCEI/ROAI), compensation value is initially measured on the grant date using the quoted market price of Occidental’s common stock and the estimated payout at the grant date. For total shareholder return incentives (TSRIs), compensation value is initially measured on the grant date using estimated payout levels derived from a Monte Carlo valuation model. Compensation expense for RSUs, ROCEI/ROAI and TSRIs is recognized on a straight-line basis over the requisite service periods, which is generally over the awards’ respective vesting or performance periods. Compensation expense for the dividends accrued on unvested awards is adjusted quarterly for any changes in stock price and the number of share equivalents expected to be paid based on the relevant performance and market criteria, if applicable. All such performance or stock-price-related changes are recognized in periodic compensation expense. The stock-settled portion of these awards is expensed using the initially measured compensation value.

EARNINGS PER SHARE

Occidental's instruments containing rights to nonforfeitable dividends granted in stock-based awards are considered participating securities prior to vesting and, therefore, have been deducted from earnings in computing basic and diluted EPS under the two-class method.

Basic EPS was computed by dividing net income attributable to common stock, net of income allocated to participating securities, by the weighted-average number of common shares outstanding during each period, net of treasury shares and including vested but unissued shares and share units. The computation of diluted EPS reflects the additional dilutive effect of stock options and unvested stock awards.

RETIREMENT AND POSTRETIREMENT BENEFIT PLANS

Occidental recognizes the overfunded or underfunded amounts of its defined benefit pension and postretirement plans, which are more fully described in Note 13, in its financial statements using a December 31 measurement date.

Occidental determines its defined benefit pension and postretirement benefit plan obligations based on various assumptions and discount rates. The discount rate assumptions used are meant to reflect the interest rate at which the obligations could effectively be settled on the measurement date. Occidental estimates the rate of return on assets with regard to current market factors but within the context of historical returns. Occidental funds and expenses negotiated pension increases for domestic union employees over the terms of the applicable collective bargaining agreements.

Pension and any postretirement plan assets are measured at fair value. Common stock, preferred stock, publicly registered mutual funds, U.S. government securities and corporate bonds are valued using quoted market prices in active markets when available. When quoted market prices are not available, these investments are valued using pricing models with observable inputs from both active and non-active markets. Common and collective trusts are valued at the fund units' net asset value (NAV) provided by the issuer, which represents the quoted price in a non-active market. Short-term investment funds are valued at the fund units' NAV provided by the issuer.

SUPPLEMENTAL CASH FLOW INFORMATION

Occidental paid United States federal, state and foreign income taxes for continuing operations of approximately $0.3 billion, $1.0 billion and $2.9 billion during the years ended December 31, 2016, 2015 and 2014, respectively. Occidental also paid production, property and other taxes of approximately $343 million, $445 million and $610 million during the years ended December 31, 2016, 2015 and 2014, respectively, substantially all of which was in the United States. Interest paid totaled approximately $312 million, $246 million and $219 million, net of capitalized interest of $64 million, $138 million and $180 million, for the years 2016, 2015 and 2014, respectively.

FOREIGN CURRENCY TRANSACTIONS

The functional currency applicable to all of Occidental’s foreign oil and gas operations is the United States dollar since cash flows are denominated principally in United States dollars. In Occidental's other operations, Occidental's use of non-United States dollar functional currencies was not material for all years presented. The effect of exchange rates on transactions in foreign currencies is included in periodic income. Occidental reports the exchange rate differences arising from translating foreign-currency-denominated balance sheet accounts to the United States dollar as of the reporting date in other comprehensive income. Exchange-rate gains and losses for continuing operations were not material for all years presented.

NOTE 2	ACQUISITIONS, DISPOSITIONS AND OTHER TRANSACTIONS

2016

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

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 used the proceeds for general corporate purposes.

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 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 which was allocated between unproved and proved property.

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 August 2016, Occidental terminated crude oil supply contracts at a cost of $160 million.

In the second quarter of 2016, Occidental received $330 million as final payment from the settlement with the Republic of Ecuador. In January 2016, Occidental reached an understanding on the terms of payment for the approximate $1.0 billion payable to Occidental by the Republic of Ecuador under a November 2015 International Center for Settlement of Investment Disputes arbitration award. This award relates to Ecuador's 2006 expropriation of Occidental's Participation Contract for Block 15. Occidental recorded a pre-tax gain of $681 million in the first quarter of 2016. The results related to Ecuador were presented as discontinued operations.

In May and June 2016, respectively, Occidental utilized part of the proceeds from the April 2016 senior notes 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 used the remaining proceeds for general corporate purposes.

In March 2016, Occidental distributed its remaining shares of California Resources Corporation (California Resources) through a special stock dividend to stockholders of record as of February 29, 2016. Upon distribution, Occidental recorded a $78 million loss to reduce the investment to its fair market value, and Occidental no longer owns any shares of California Resources common stock.

In March 2016, Occidental completed the sale of its Piceance Basin operations in Colorado for $153 million resulting in a pre-tax gain of $121 million. The assets and liabilities related to these operations were presented as held for sale at December 31, 2015, and primarily included property, plant and equipment and current accrued liabilities and asset retirement obligations.

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

In January 2016, Occidental completed the sale of its Occidental Tower building in Dallas, Texas, for net proceeds of approximately $85 million, resulting in a pre-tax gain of $57 million. The building was classified as held for sale as of December 31, 2015.

2015

In January 2016, Occidental reached an understanding on the terms of payment for the approximate $1.0 billion payable to Occidental by the Republic of Ecuador under a November 2015 International Center for the Settlement of Investment Disputes arbitration award. This award relates to Ecuador's 2006 expropriation of Occidental's Participation Contract for Block 15. As of December 31, 2015, Occidental recorded a pre-tax gain of $322 million. The result of this settlement with Ecuador has been presented as discontinued operations.

In December 2015, Occidental entered a sales agreement to sell its Piceance Basin operations in Colorado for approximately $155 million. The transaction was completed in March 2016. As a result of exiting the Piceance Basin operations Occidental recorded certain contractual liabilities which are included in deferred credits and other liabilities - other on the consolidated balance sheet. The assets and liabilities related to these operations are presented as held for sale at December 31, 2015 and primarily include property, plant and equipment and current accrued liabilities and asset retirement obligations.

In November 2015, Occidental sold its Williston Basin assets in North Dakota for approximately $590 million.

In October 2015, Occidental completed the sale of its Westwood building in Los Angeles, California for net proceeds of $65 million.

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.

2014

In December 2014, Occidental spent $1.3 billion on an acquisition in the Permian Basin totaling approximately 100,000 net acres. The assets acquired include primarily unproved oil and gas property leases and the related existing lease contracts, permits, licenses, easements, and equipment located on the properties.

On November 30, 2014, Occidental's California oil and gas operations and related assets was spun-off through the pro rata distribution of 81.3 percent of the outstanding shares of common stock of California Resources, creating an independent, publicly traded company. See Note 17 Spin-off of California Resources Corporation.

In November 2014, Occidental entered into an agreement with Plains All American Pipeline, L.P., Plains GP Holdings, L.P. (Plains Pipeline), and Magellan Midstream Partners, L.P. (Magellan) to sell its interest in the BridgeTex Pipeline Company, LLC (BridgeTex), which owns the BridgeTex Pipeline. The sale of Occidental's interest in BridgeTex included two transactions: Plains Pipeline purchased Occidental's interest in BridgeTex for $1.075 billion, and Magellan acquired Occidental's interest in the southern leg of the BridgeTex Pipeline for $75 million. Occidental recognized a pre-tax gain of $633 million.

Concurrent with the sale of its interest in the BridgeTex Pipeline Company, LLC, Occidental sold a portion of Plains Pipeline for pre-tax proceeds of $1.7 billion, resulting in a pre-tax gain of $1.4 billion.

In February 2014, Occidental entered into an agreement to sell its Hugoton Field operations in Kansas, Oklahoma and Colorado for pre-tax proceeds of $1.4 billion. The transaction was completed in April 2014 and, after taking into account purchase price adjustments, it resulted in pre-tax proceeds of $1.3 billion. Occidental recorded a pre-tax gain on sale of $531 million.

NOTE 3	ACCOUNTING AND DISCLOSURE CHANGES

RECENTLY ADOPTED ACCOUNTING AND DISCLOSURE CHANGES

In November 2016, the Financial Accounting Standards Board ("FASB") issued new guidance related to the cash flow classification and presentation of the changes in restricted cash on the statement of cash flows. The rules become effective for the interim and annual periods beginning after December 15, 2017. Occidental is currently evaluating the impact of this guidance on its financial statements.

In October 2016, the FASB issued new guidance related to the income tax consequences of intra-entity transfers of assets other than inventory. The rules become effective for the interim and annual periods beginning after December 15, 2017. Occidental is currently evaluating the impact of these rules on its financial statements.

In August 2016, the FASB issued new guidance related to the classification of certain cash receipts and payments on the statement of cash flows. The rules become effective for the interim and annual periods beginning after December 15, 2017. Occidental is currently evaluating the impact of these rules on its financial statements.

In March, April, and May of 2016, the FASB issued rules clarifying several aspects of the new revenue recognition standard, previously issued in May 2014. The guidance is effective for interim and annual reporting periods starting January 1, 2018. Under the new standard, an entity will recognize revenue when it transfers promised goods or services to customers in an amount that reflects what it expects to receive in exchange for the goods and services. The new standard also requires more detailed disclosures related to the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. Occidental will not early adopt the standard, and plans to use a modified retrospective approach upon adoption, with the cumulative effect of initial application recognized at the date of initial application subject to certain additional disclosures. Occidental has started the assessment process by evaluating its revenue streams and evaluating contracts under the revised standards. Occidental is currently evaluating the impact the standard is expected to have on its consolidated financial statements.

In March 2016, the FASB issued rules affecting entities that issue share-based payment awards to their employees. These rules are designed to simplify several aspects of accounting for share-based payment award transactions, including: (1) accounting and cash flow classification for excess tax benefits and deficiencies, (2) forfeitures, and (3) tax withholding requirements and cash flow classification. The rules were adopted for the second quarter of 2016 and did not have a material impact on Occidental's financial statements upon adoption.

In March 2016, the FASB issued an update to eliminate the requirement to retrospectively adopt the equity method of accounting if an investment qualifies for use of the equity method as a result of an increase in the level of ownership or degree of influence. The update requires that the equity method investor add the cost of acquiring the additional interest and adopt the equity method of accounting as of the date the investment becomes qualified for equity method accounting. The rules became effective for the interim and annual periods beginning after December 15, 2016. The rules do not have a material impact on Occidental's financial statements upon adoption.

In March 2016, the FASB issued rules clarifying that a change in one of the parties to a derivative contract that is part of a hedge accounting relationship does not, by itself, require dedesignation of that relationship, as long as all other hedge accounting criteria continue to be met. The rules became effective for the interim and annual periods beginning after December 15, 2016. These rules do not have a material impact on Occidental's financial statements.

In February 2016, the FASB issued rules which require Occidental to recognize most leases, including operating leases, on the balance sheet. The new rules require lessees to recognize a right-of-use asset and lease liability for all leases with lease terms of more than 12 months. The lease liability represents the discounted obligation to make future minimum lease payments and corresponding right-of-use asset on the balance sheet for most leases. The guidance retains the current accounting for lessors and does not make significant changes to the recognition, measurement and presentation of expenses and cash flows by a lessee. Recognition, measurement and presentation of expenses and cash flows arising from a lease will depend on classification as a finance or operating lease. Occidental is the lessee under various agreements for real estate, equipment, plants and facilities, aircraft, and vehicles that are currently accounted for as operating leases, refer to Note 6, Lease Commitments. As a result, these new rules will increase reported assets and liabilities. Occidental will not early adopt this standard. Occidental will apply the revised lease rules for our interim and annual reporting periods starting January 1, 2019 using a modified retrospective approach, including several optional practical expedients related to leases commenced before the effective date. Occidental is currently evaluating the impact of these rules on its financial statements and has started the assessment process by evaluating the population of leases under the revised definition. The quantitative impacts of the new standard are dependent on the leases in force at the time of adoption. As a result, the evaluation of the effect of the new standards will extend over future periods.

In April 2015, the FASB issued rules simplifying the presentation of debt issuance costs. The new rules require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. Occidental adopted these rules retrospectively as of January 1, 2016. These rules do not have a material impact on Occidental's financial statements.

NOTE 4	INVENTORIES

Net carrying values of inventories valued under the LIFO method were approximately $192 million and $189 million at December 31, 2016 and 2015, respectively. Inventories consisted of the following:

Balance at December 31, (in millions)		2016				2015
Raw materials		$	65			$	73
Materials and supplies		446				568
Finished goods		395				395
		906				1,036
Revaluation to LIFO		(40		)		(50		)
Total		$	866			$	986

NOTE 5	LONG-TERM DEBT

Long-term debt consisted of the following:

Balance at December 31, (in millions)		2016				2015
1.50% senior notes due 2018		$	500			$	500
9.25% senior debentures due 2019		116				116
4.10% senior notes due 2021		1,249				1,249
3.125% senior notes due 2022		813				813
2.60% senior notes due 2022		400				—
2.70% senior notes due 2023		1,191				1,191
8.75% medium-term notes due 2023		22				22
3.50% senior notes due 2025		750				750
3.40% senior notes due 2026		1,150				—
3.00% senior notes due 2027		750				—
7.20% senior debentures due 2028		82				82
8.45% senior debentures due 2029		116				116
4.625% senior notes due 2045		750				750
4.40% senior notes due 2046		1,200				—
4.10% senior notes due 2047		750				—
2.50% senior notes due 2016		—				700
4.125% senior notes due 2016		—				750
1.75% senior notes due 2017		—				1,250
Variable rate bonds due 2030 (0.9% and 0.15% as of December 31, 2016 and 2015, respectively )		68				68
		9,907				8,357
Less:
Unamortized discount, net		(36		)		(24		)
Debt issuance costs		(52		)		(28		)
Current maturities		—				(1,450		)
Total		$	9,819			$	6,855

Occidental has a bank credit facility (Credit Facility) with a $2.0 billion commitment expiring in 2019. No amounts have been drawn under this Credit Facility. Up to $1.0 billion of the Credit Facility is available in the form of letters of credit. Borrowings under the Credit Facility bear interest at various benchmark rates, including LIBOR, plus a margin based on Occidental's senior debt ratings. Additionally, Occidental paid average annual facility fees of 0.08 percent in 2016 on the total commitment amounts of the Credit Facility.

The Credit Facility provides for the termination of loan commitments and requires immediate repayment of any outstanding amounts if certain events of default occur. The Credit Facility and other debt agreements do not contain material adverse change clauses or debt ratings triggers that could restrict Occidental's ability to borrow or that would permit lenders to terminate their commitments or accelerate debt.

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.

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 notes 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 used the remaining proceeds for general corporate purposes.

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

Occidental has provided guarantees on Dolphin Energy's debt, which are limited to certain political and other events. At December 31, 2016 and 2015, Occidental’s total guarantees were not material and a substantial majority of the amounts consisted of limited recourse guarantees on approximately $296 million and $318 million, respectively, of Dolphin’s debt. The fair value of the guarantees was immaterial.

At December 31, 2016, principal payments on long-term debt aggregated approximately $9.9 billion, of which zero is due in 2017, $0.5 billion is due in 2018, $0.1 billion is due in 2019, zero is due in 2020, $1.3 billion is due in 2021 and $8 billion is due in 2022 and thereafter.

Occidental estimates the fair value of fixed-rate debt based on the quoted market prices for those instruments or on quoted market yields for similarly rated debt instruments, taking into account such instruments' maturities. The estimated fair values of Occidental’s debt at December 31, 2016 and 2015, substantially all of which were classified as Level 1, were approximately $10.9 billion and $8.4 billion, respectively, compared to carrying values of approximately $9.8 billion and $8.3 billion, respectively. Occidental's exposure to changes in interest rates relates primarily to its variable-rate, long-term debt obligations, and is not material. As of December 31, 2016 and 2015, variable-rate debt constituted approximately one percent of Occidental's total debt.

NOTE 6	LEASE COMMITMENTS

Operating lease agreements include leases for transportation equipment, power plants, machinery, terminals, storage facilities, land and office space. Occidental’s operating lease agreements frequently include renewal or purchase options and require the Company to pay for utilities, taxes, insurance and maintenance expenses. At December 31, 2016, future net minimum lease payments for noncancelable operating leases (excluding oil and gas and other mineral leases, utilities, taxes, insurance and maintenance expense) were the following:

(in millions)		Amount
2017		$	255
2018		230
2019		134
2020		100
2021		86
Thereafter		469
Total minimum lease payments		$	1,274

Rental expense for operating leases was $237 million in 2016, $197 million in 2015 and $155 million in 2014.

NOTE 7	DERIVATIVES

Objective & Strategy

Occidental uses a variety of derivative financial instruments and physical contracts, including those designated as cash flow hedges, to manage its exposure to commodity price fluctuations, transportation commitments and to fix margins on the future sale of stored volumes of oil and natural gas. Where Occidental buys product for its own consumption or sells its production to a defined customer, Occidental elects normal purchases and normal sales exclusions. Occidental usually applies cash flow hedge accounting treatment to derivative financial instruments to lock in margins on the forecasted sales of its natural gas storage volumes, and at times for other strategies to lock in margins. Occidental also enters into derivative financial instruments for speculative or trading purposes; however, the results of any transactions are immaterial to the marketing portfolio. Refer to Note 1 for Occidental’s accounting policy on derivatives.

The financial instruments, not designated as hedges, will impact Occidental's earnings through mark-to-market until the offsetting future physical commodity is delivered. For GAAP purposes, any physical inventory is carried at lower of cost or market on the balance sheet. A substantial majority of Occidental's physical derivative contracts are index-based and carry no mark-to-market value in earnings. Net gains and losses associated with derivative instruments not designated as hedging instruments are recognized currently in net sales. Net gains and losses attributable to derivatives instruments subject to hedge accounting reside in accumulated other comprehensive income (loss) and are reclassified to earnings as the transactions to which the derivatives relate are recognized in earnings.

Cash-Flow Hedges

Occidental’s marketing operations store natural gas purchased from third parties at Occidental’s leased storage facilities. Derivative instruments are used to fix margins on the future sales of the stored volumes. These agreements continue through 2017. As of December 31, 2016, Occidental had approximately 7 billion cubic feet (Bcf) of natural gas held in storage, and had cash-flow hedges for the forecasted sales, to be settled by physical delivery, of approximately 7 Bcf of stored natural gas. As of December 31, 2015, Occidental had approximately 13 Bcf of natural gas held in storage, and had cash-flow hedges for the forecasted sales, to be settled by physical delivery, of approximately 14 Bcf of stored natural gas. The amount of cash-flow hedges, including the ineffective portion was immaterial for the years ended December 31, 2016 and 2015.

Derivatives Not Designated as Hedging Instruments

The following table summarizes the amounts reported in net sales related to the outstanding commodity derivative instruments not designated as hedging instruments as of December 31, 2016 and 2015:

As of December 31, (in millions, except Long/(Short) volumes)		2016				2015
Gain (loss) on derivatives not designated as hedges
Oil commodity contracts		$	(5	)		$	28
Natural gas commodity contracts		$	1			$	(26	)
Outstanding net volumes on derivatives not designated as hedges
Oil Commodity Contracts
Volume (MMBOE)		67				83
Price Per Bbl		$	53.86			$	45.25
Natural gas commodity contracts
Volume (Bcf)		(12		)		(5		)
Price Per MMBTU		$	3.19			$	2.72

Fair Value of Derivatives

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 reported at the end of each reporting period. The following summarizes the fair value of the Company’s derivative assets and liabilities by input level within the fair-value hierarchy:

As of December 31, 2016				Fair Value Measurements Using									Netting (b)			Total Fair Value
(in millions)		Balance Sheet Location		Level 1			Level 2			Level 3
Assets:
Cash-flow hedges (a)
Commodity contracts		Other current assets		—			1			—			—			1
	Long-term receivables and other assets, net		—			—			—			—			—
Derivatives not designated as hedging instruments (a)
Commodity contracts		Other current assets		166			57			—			(196	)		27
	Long-term receivables and other assets, net		2			3			—			(2	)		3
Liabilities:
Cash-flow hedges (a)
Commodity contracts		Accrued liabilities		—			6			—			—			6
	Deferred credits and liabilities		—			—			—			—			—
Derivatives not designated as hedging instruments (a)
Commodity contracts		Accrued liabilities		172			51			—			(196	)		27
	Deferred credits and liabilities		1			6			—			(2	)		5

(a)	Fair values are presented at gross amounts, including when the derivatives are subject to master netting arrangements and presented on a net basis in the consolidated balance sheets.

(b)

These amounts do not include collateral. As of December 31, 2016, collateral received of $4 million has been netted against derivative assets and collateral paid of $13 million has been netted against derivative liabilities. Select clearinghouses and brokers require Occidental to post an initial margin deposit. Collateral, mainly for initial margin, of $25 million as of December 31, 2016, deposited by Occidental, has not been reflected in these derivative fair value tables. This collateral is included in other current assets in the consolidated balance sheets. These amounts do not include collateral.

As of December 31, 2015				Fair Value Measurements Using									Netting (b)			Total Fair Value
(in millions)		Balance Sheet Location		Level 1			Level 2			Level 3
Assets:
Cash-flow hedges (a)
Commodity contracts		Other current assets		—			8			—			—			8
	Long-term receivables and other assets, net		—			—			—			—			—
Derivatives not designated as hedging instruments (a)
Commodity contracts		Other current assets		554			72			—			(519	)		107
	Long-term receivables and other assets, net		3			6			—			(2	)		7
Liabilities:
Cash-flow hedges (a)
Commodity contracts		Accrued liabilities		—			1			—						1
	Deferred credits and liabilities		—			—			—			—			—
Derivatives not designated as hedging instruments (a)
Commodity contracts		Accrued liabilities		541			84			—			(519	)		106
	Deferred credits and liabilities		3			5			—			(2	)		6

(a)	Fair values are presented at gross amounts, including when the derivatives are subject to master netting arrangements and presented on a net basis in the consolidated balance sheets.

(b)

These amounts do not include collateral. As of December 31, 2015, collateral received of $14 million has been netted against derivative assets and collateral paid of $4 million has been netted against derivative liabilities. Select clearinghouses and brokers require Occidental to post an initial margin deposit. Collateral, mainly for initial margin, of $3 million as of December 31, 2015, deposited by Occidental, has not been reflected in these derivative fair value tables. This collateral is included in other current assets in the consolidated balance sheets. These amounts do not include collateral.

Credit Risk

The majority of Occidental's counterparty credit risk is related to the physical delivery of energy commodities to its customers and their inability to meet their settlement commitments. Occidental manages credit risk by selecting counterparties that it believes to be financially strong, by entering into master netting arrangements with counterparties and by requiring collateral or other credit risk mitigants, as appropriate. Occidental actively evaluates the creditworthiness of its counterparties, assigns appropriate credit limits, and monitors credit exposures against those assigned limits. Occidental also enters into future contracts through regulated exchanges with select clearinghouses and brokers, which are subject to minimal credit risk as a significant portion of these transactions settle on a daily margin basis.

Certain of Occidental's OTC derivative instruments contain credit-risk-contingent features, primarily tied to credit ratings for Occidental or its counterparties, which may affect the amount of collateral that each would need to post. Occidental believes that if it had received a one-notch reduction in its credit ratings, it would not have resulted in a material change in its collateral-posting requirements as of December 31, 2016 and 2015. The aggregate fair value of derivative instruments with credit-risk-related contingent features for which a net liability position existed was immaterial for both December 31, 2016, and December 31, 2015.

NOTE 8	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 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)		2016							2015							2014
		Number of Sites			Reserve Balance				Number of Sites			Reserve Balance				Number of Sites			Reserve Balance
NPL sites		33			$	461			34			$	27			30			$	23
Third-party sites		68			163				66			128				67			101
Occidental-operated sites		17			106				18			107				17			107
Closed or non-operated Occidental sites		29			140				31			124				31			103
Total		147			$	870			149			$	386			145			$	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)		2016				2015				2014
Operating Expenses
Oil and Gas		$	65			$	93			$	103
Chemical		75				74				80
Midstream and Marketing		11				13				11
		$	151			$	180			$	194
Capital Expenditures
Oil and Gas		$	43			$	122			$	143
Chemical		25				41				35
Midstream and Marketing		5				4				11
		$	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.

NOTE 9	LAWSUITS, CLAIMS, COMMITMENTS 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 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 this criteria. Reserve balances for matters, other than environmental remediation, that satisfy this 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.

OPC, its subsidiaries, or both, have entered into agreements providing for future payments to secure terminal and pipeline capacity, drilling rigs and services, electrical power, steam and certain chemical raw materials. Occidental has certain other commitments under contracts, guarantees and joint ventures, including purchase commitments for goods and services at market-related prices and certain other contingent liabilities. At December 31, 2016, total purchase obligations were $8.9 billion, which included approximately $1.7 billion, $1.2 billion, $0.9 billion, $0.8 billion and $0.7 billion that will be paid in 2017, 2018, 2019, 2020 and 2021, respectively. Included in the purchase obligations are commitments for major fixed and determinable capital expenditures during 2017 and thereafter, which were approximately $0.5 billion.

NOTE 10	DOMESTIC AND FOREIGN INCOME TAXES

The domestic and foreign components of income (loss) from continuing operations before domestic and foreign income taxes were as follows:

For the years ended December 31, (in millions)		Domestic				Foreign				Total
2016		$	(2,698	)		$	1,034			$	(1,664	)
2015		$	(5,810	)		$	(3,666	)		$	(9,476	)
2014		$	(732	)		$	2,273			$	1,541

The provisions (credits) for domestic and foreign income taxes on continuing operations consisted of the following:

For the years ended December 31, (in millions)		United States Federal				State and Local				Foreign				Total
2016
Current		$	(784	)		$	9			$	630			$	(145	)
Deferred		(505		)		(19		)		7				(517		)
		$	(1,289	)		$	(10	)		$	637			$	(662	)
2015
Current		$	(810	)		$	(31	)		$	883			$	42
Deferred		(1,146		)		(83		)		(143		)		(1,372		)
		$	(1,956	)		$	(114	)		$	740			$	(1,330	)
2014
Current		$	870			$	81			$	1,912			$	2,863
Deferred		(1,037		)		(71		)		(70		)		(1,178		)
		$	(167	)		$	10			$	1,842			$	1,685

The following reconciliation of the United States federal statutory income tax rate to Occidental’s worldwide effective tax rate on income from continuing operations is stated as a percentage of pre-tax income:

For the years ended December 31,		2016			2015			2014
United States federal statutory tax rate		35	%		35	%		35	%
Other than temporary loss on available for sale investment in California Resources stock		(2	)		(1	)		12
Enhanced oil recovery credit		5			—			—
Tax benefit due to write off of exploration blocks		14			—			—
Operations outside the United States		(14	)		(21	)		65
State income taxes, net of federal benefit		—			1			1
Other		2			—			(4	)
Worldwide effective tax rate		40	%		14	%		109	%

The tax effects of temporary differences resulting in deferred income taxes at December 31, 2016 and 2015 were as follows:

		2016								2015
Tax effects of temporary differences (in millions)		Deferred Tax Assets				Deferred Tax Liabilities				Deferred Tax Assets				Deferred Tax Liabilities
Property, plant and equipment differences		$	—			$	3,345			$	—			$	3,232
Equity investments, partnerships and foreign subsidiaries		—				58				—				12
Environmental reserves		314				—				136				—
Postretirement benefit accruals		342				—				346				—
Deferred compensation and benefits		222				—				179				—
Asset retirement obligations		406				—				372				—
Foreign tax credit carryforwards		2,046				—				2,034				—
Alternative minimum tax credit carryforwards		226				—				—				—
General business credit carryforwards		186				—				—				—
Federal benefit of state income taxes		8				—				11				—
All other		370				—				677				—
Subtotal		4,120				3,403				3,755				3,244
Valuation allowance		(1,849		)		—				(1,834		)		—
Total deferred taxes		$	2,271			$	3,403			$	1,921			$	3,244

Total deferred tax assets were $2.3 billion and $1.9 billion as of December 31, 2016 and 2015, respectively. Occidental expects to realize the recorded deferred tax assets, net of any allowances, through future operating income and reversal of temporary differences. The reduction in the net deferred tax liabilities is primarily related to the addition of deferred tax benefits associated with various tax credit carryforwards as well as a net reduction in the deferred tax asset related to the allowance for bad debts.

Occidental had, as of December 31, 2016, foreign tax credit carryforward of $2.0 billion, which expire in varying amounts through 2026, and various state operating loss carryforwards, which have varying carryforward periods through 2036. In addition, Occidental had, as of December 31, 2016, alternative minimum tax credit carryforwards of $226 million, that do not expire, and $186 million of general business credit carryforwards that expire between 2023 and 2036. Occidental's valuation allowance provides for substantially all of the foreign tax credit.

A deferred tax liability has not been recognized for temporary differences related to unremitted earnings of certain consolidated foreign subsidiaries aggregating approximately $8.5 billion, net of foreign taxes, at December 31, 2016 , 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.

Discontinued operations include income tax charges of $249 million, $1 million, and $454 million in 2016, 2015, and 2014, respectively.

As of December 31, 2016, Occidental had liabilities for unrecognized tax benefits of approximately $22 million included in deferred credits and other liabilities – other, all of which, if subsequently recognized, would favorably affect Occidental’s effective tax rate.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

For the years ended December 31, (in millions)		2016				2015
Balance at January 1,		$	22			$	61
Reductions based on tax positions related to prior years and settlements		—				(39		)
Balance at December 31,		$	22			$	22

Management believes it is unlikely that Occidental’s liabilities for unrecognized tax benefits related to existing matters would increase or decrease within the next 12 months by a material amount. Occidental cannot reasonably estimate a range of potential changes in such benefits due to the unresolved nature of the various audits.

Occidental has recognized $761 million and $297 million in income tax receivables at December 31, 2016 and 2015, respectively, which were recorded in other current assets.

Occidental is subject to audit by various tax authorities in varying periods. See Note 9 for a discussion of these matters.

Occidental records estimated potential interest and penalties related to liabilities for unrecognized tax benefits in the provisions for domestic and foreign income taxes and these amounts were not material for the years ended December 31, 2016, 2015 and 2014.

NOTE 11	STOCKHOLDERS' EQUITY

The following is a summary of common stock issuances:

Shares in thousands		Common Stock
Balance, December 31, 2013		889,919
Issued		584
Options exercised and other, net		55
Balance, December 31, 2014		890,558
Issued		782
Options exercised and other, net		20
Balance, December 31, 2015		891,360
Issued		843
Options exercised and other, net		12
Balance, December 31, 2016		892,215

TREASURY STOCK

On October 2, 2014, Occidental increased the total number of shares authorized for its share repurchase program by 60 million shares to 185 million shares total; however, the program does not obligate Occidental to acquire any specific number of shares and may be discontinued at any time. No shares were purchased under the program in 2016. In 2015 Occidental purchased 7.4 million shares under the program at an average cost of $76.99 per share. Additionally, Occidental purchased shares from the trustee of its defined contribution savings plan during each year. As of December 31, 2016, 2015 and 2014, treasury stock shares numbered 128.0 million, 127.7 million and 120.0 million, respectively.

NONREDEEMABLE PREFERRED STOCK

Occidental has authorized 50,000,000 shares of preferred stock with a par value of $1.00 per share. At December 31, 2016, 2015 and 2014, Occidental had no outstanding shares of preferred stock.

EARNINGS PER SHARE

The following table presents the calculation of basic and diluted EPS for the years ended December 31:

(in millions, except per-share amounts)		2016				2015				2014
Income (loss) from continuing operations		$	(1,002	)		$	(8,146	)		$	(130	)
Less: Income from continuing operations attributable to noncontrolling interest		—				—				(14		)
Income (loss) from contributing operations attributable to common stock		(1,002		)		(8,146		)		(144		)
Income from discontinued operations		428				317				760
Net income (loss)		(574		)		(7,829		)		616
Less: Net income allocated to participating securities		—				—				—
Net income (loss), net of participating securities		$	(574	)		$	(7,829	)		$	616
Weighted average number of basic shares		763.8				765.6				781.1
Basic earnings (loss) per common share		$	(0.75	)		$	(10.23	)		$	0.79
Net income (loss), net of participating securities		$	(574	)		$	(7,829	)		$	616
Weighted average number of basic shares		763.8				765.6				781.1
Dilutive securities		—				—				—
Total diluted weighted average common shares		763.8				765.6				781.1
Diluted earnings (loss) per common share		$	(0.75	)		$	(10.23	)		$	0.79

ACCUMULATED OTHER COMPREHENSIVE LOSS

Accumulated other comprehensive loss consisted of the following after-tax amounts:

Balance at December 31, (in millions)		2016				2015
Foreign currency translation adjustments		$	(10	)		$	(9	)
Unrealized losses on derivatives		(13		)		(7		)
Pension and post-retirement adjustments (a)		(243		)		(291		)
Total		$	(266	)		$	(307	)

(a)	See Note 13 for further information.

NOTE 12	STOCK-BASED INCENTIVE PLANS

Occidental has established several plans that allow it to issue stock-based awards including in the form of RSUs, stock options (Options), stock appreciation rights (SARs), ROCEI/ROAI and TSRIs. An aggregate of 35 million shares of Occidental common stock were authorized for issuance and approximately 4.5 million shares had been allocated to employee awards through December 31, 2016. In accordance with the terms of the shareholder approved 2015 Long-Term Incentive Plan (LTIP), awards issued under the superseded 2005 LTIP and subsequently forfeited after adoption of the 2015 LTIP increase the shares available for issuance under the 2015 LTIP. As of December 31, 2016, approximately 30 million shares were available for grants of future awards. The plan requires each share covered by an award (other than Options and SARs) to be counted as if three shares were issued in determining the number of shares that are available for future awards. Accordingly, the number of shares available for future awards may be less than 30 million depending on the type of award granted. Additionally, under the plan, the shares available for future awards may increase, depending on the award type, by the number of shares currently unvested or forfeitable, or three times that number as applicable, that (i) fail to vest, (ii) are forfeited or canceled, or (iii) correspond to the portion of any stock-based awards settled in cash, including awards that were issued under a previous plan that remain outstanding.

During 2016, non-employee directors were granted awards for 23,888 shares of common stock. Compensation expense for these awards was measured using the closing quoted market price of Occidental's common stock on the grant date and was fully recognized at that time.

The following table summarizes total share-based compensation expense recognized in income related to continuing and discontinued operations and the associated tax benefit for the years ended December 31:

For the years ended December 31, (in millions)		2016				2015				2014
Compensation expense		$	121			$	49			$	129
Income tax benefit recognized in the income statement		43				17				46

As of December 31, 2016, unrecognized compensation expense for all unvested stock-based incentive awards was $231 million. This expense is expected to be recognized over a weighted-average period of 2.2 years.

RSUs

Certain employees are awarded the right to receive RSUs, some of which have performance criteria based on net income or earnings per share, and are in the form of, or equivalent in value to, actual shares of Occidental common stock. Depending on their terms, RSUs are settled in cash or stock at the time of vesting. These awards vest from one to four years following the grant date, however, certain of the RSUs are forfeitable if performance objectives are not satisfied by the seventh anniversary of the grant date. For certain RSUs, dividend equivalents are paid during the vesting period. For those awards that cliff vest between one to three years, dividend equivalents are accumulated during the vesting or performance period, as appropriate, and are paid upon vesting or performance certification, as appropriate.

The weighted-average, grant-date fair values of cash-settled RSUs granted in 2016, 2015 and 2014 were $75.57, $72.64, and $100.95 per share, respectively. The weighted-average, grant-date fair values of the stock-settled RSUs granted in 2016, 2015, and 2014 were $74.82, $72.54, and $101.77, respectively. Cash-Settled RSUs resulted in payments of $41 million, $39 million, and $64 million during the years ended December 31, 2016, 2015, and 2014, respectively. The fair value of RSUs settled in shares during the years ended December 31, 2016, 2015, and 2014 was $31 million, $28 million, and $56 million, respectively.

A summary of changes in Occidental’s unvested cash- and stock-settled RSUs during the year ended December 31, 2016 is presented below:

		Cash-Settled									Stock-Settled
		RSUs (000's)			Weighted-Average Grant-Date Fair Value						RSUs (000's)			Weighted-Average Grant-Date Fair Value
Unvested at January 1		1,130				$	81.06				1,758				$	81.19
Granted		53				75.57					2,238				74.82
Vested		(536	)			83.18					(417	)			82.35
Forfeitures		(46	)			80.89					(79	)			77.00
Unvested at December 31		601				78.70					3,500				77.07

TSRIs

Certain executives are awarded TSRIs that vest at the end of a three-year period following the grant date. Payout is based upon Occidental's total shareholder return performance relative to its peers and the S&P 500. TSRIs granted in 2016 and 2015 have payouts that range from 0 to 200 percent of the target award. TSRIs granted in July 2014 have payouts that range from 0 to 150 percent of the target award; all outstanding TSRIs settle fully in stock once certified. Dividend equivalents for TSRIs are accumulated and paid upon certification of the award. The fair value of TSRIs settled in shares during the years ended December 31, 2016, 2015, and 2014 was $8 million, $14 million, and zero, respectively.

The fair values of TSRIs are initially determined on the grant date using a Monte Carlo simulation model based on Occidental's assumptions, noted in the following table, and the volatility from corresponding peer group companies. The expected life is based on the vesting period (Term). The risk-free interest rate is the implied yield available on zero coupon T-notes (US Treasury Strip) at the time of grant with a remaining term equal to the Term. The dividend yield is the expected annual dividend yield over the Term, expressed as a percentage of the stock price on the grant date. Estimates of fair value may not accurately predict the value ultimately realized by the employees who receive the awards, and the ultimate value may not be indicative of the reasonableness of the original estimates of fair value made by Occidental.

The grant-date assumptions used in the Monte Carlo simulation models for the estimated payout level of TSRIs were as follows:

		TSRIs
Year Granted		2016				2015				2014
Assumptions used:
Risk-free interest rate		0.8		%		0.9		%		1.0		%
Dividend yield		3.9		%		4.1		%		2.8		%
Volatility factor		42		%		37		%		27		%
Expected life (years)		3				3				3
Grant-date fair value of underlying Occidental common stock		$	76.83			$	72.54			$	101.95

A summary of Occidental’s unvested TSRIs as of December 31, 2016, and changes during the year ended December 31, 2016, is presented below:

		TSRIs
		Awards (000’s)			Weighted-Average Grant-Date Fair Value of Occidental Stock
Unvested at January 1 (a)		346				$	83.75
Granted (a)		473				76.83
Vested (a)		(102	)			87.27
Forfeitures		(10	)			76.43
Unvested at December 31		707				78.72

(a)	Presented at the target payouts.

STOCK OPTIONS AND SARs

Certain employees have been granted Stock Appreciation Rights (SAR) or Options that are settled in stock. Exercise prices of the Options were equal to the quoted market value of Occidental’s stock on the grant date. No options were granted in 2016. The intrinsic value of options and stock-settled SARs exercised during the years ended December 31, 2016, 2015,

and 2014 was $1 million, zero, and $5 million, respectively. In 2014, cash payments of $26 million were made for cash - settled SAR awards granted in 2004. In 2015 and 2016 no cash based SAR awards were granted or outstanding.

The fair value of each Option or stock-settled SAR is initially measured on the grant date using the Black Scholes option valuation model. The expected life is estimated based on the vesting and expiration terms of the award. The volatility factors are based on the historical volatilities of Occidental common stock over the expected lives as estimated on the grant date. The risk-free interest rate is the implied yield available on US Treasury Strips at the grant date with a remaining term equal to the expected life of the measured instrument. The dividend yield is the expected annual dividend yield over the expected life, expressed as a percentage of the stock price on the grant date. Estimates of fair value may not accurately predict the value ultimately realized by employees who receive stock-based incentive awards, and the ultimate value may not be indicative of the reasonableness of the original estimates of fair value made by Occidental.

The following is a summary of Option and SAR transactions during the year ended December 31, 2016:

		SARs & Options (000's)			Weighted-Average Exercise Price				Weighted-Average Remaining Contractual Term (yrs)			Aggregate Intrinsic Value (000’s)
Beginning balance, January 1		629			$	77.58
Exercised		(47	)		45.53
Granted		—			—
Forfeited		(11	)		79.98
Ending balance, December 31		571			79.98				5.1			$	—
Exercisable at December 31		214			79.98				5.1			$	—

ROCEI / ROAI

Occidental grants share-equivalents to certain employees that vest at the end of a three-year period if performance targets based on return on assets of the applicable segment or return on capital employed are certified as being met. These awards are settled in stock upon certification of the performance target, with payouts that range from 0 to 200 percent of the target award. Dividend equivalents are accumulated and paid upon certification of the award.

		ROCEI / ROAI
		Awards (000's)			Weighted-Average Grant-Date Fair Value of Occidental Stock
Unvested at January 1		392				$	85.43
Unvested at December 31		392				85.43

NOTE 13	RETIREMENT AND POSTRETIREMENT BENEFIT PLANS

Occidental has various benefit plans for its salaried, domestic union and nonunion hourly, and certain foreign national employees.

DEFINED CONTRIBUTION PLANS

All domestic employees and certain foreign national employees are eligible to participate in one or more of the defined contribution retirement or savings plans that provide for periodic contributions by Occidental based on plan-specific criteria, such as base pay, level and employee contributions. Certain salaried employees participate in a supplemental retirement plan that restores benefits lost due to governmental limitations on qualified retirement benefits. The accrued liabilities for the supplemental retirement plan were $163 million and $175 million as of December 31, 2016 and 2015, respectively, and Occidental expensed $113 million in 2016, $136 million in 2015 and $146 million in 2014 under the provisions of these defined contribution and supplemental retirement plans.

DEFINED BENEFIT PLANS

Participation in defined benefit plans is limited and approximately 600 domestic and 1,100 foreign national employees, mainly union, nonunion hourly and certain employees that joined Occidental from acquired operations with grandfathered benefits, are currently accruing benefits under these plans.

Pension costs for Occidental’s defined benefit pension plans, determined by independent actuarial valuations, are generally funded by payments to trust funds, which are administered by independent trustees.

POSTRETIREMENT AND OTHER BENEFIT PLANS

Occidental provides medical and dental benefits and life insurance coverage for certain active, retired and disabled employees and their eligible dependents. Occidental generally funds the benefits as they are paid during the year. These benefit costs, including the postretirement costs, were approximately $182 million in 2016, $200 million in 2015 and $215 million in 2014.

OBLIGATIONS AND FUNDED STATUS

The following tables show the amounts recognized in the consolidated balance sheets of Occidental related to its pension and postretirement benefit plans and their funding status, obligations and plan asset fair values:

(in millions)		Pension Benefits								Postretirement Benefits
As of December 31,		2016				2015				2016				2015
Amounts recognized in the consolidated balance sheet:
Other assets		$	61			$	45			$	—			$	—
Accrued liabilities		(3		)		(7		)		(58		)		(58		)
Deferred credits and other liabilities — other		(71		)		(65		)		(892		)		(921		)
		$	(13	)		$	(27	)		$	(950	)		$	(979	)
AOCI included the following after-tax balances:
Net loss		$	76			$	93			$	169			$	197
Prior service cost		—				—				1				1
		$	76			$	93			$	170			$	198
For the years ended December 31,
Changes in the benefit obligation:
Benefit obligation — beginning of year		$	411			$	453			$	979			$	1,036
Service cost — benefits earned during the period		7				7				20				26
Interest cost on projected benefit obligation		18				18				39				40
Actuarial gain		(1		)		(16		)		(28		)		(66		)
Foreign currency exchange rate (gain) loss		1				(9		)		—				—
Benefits paid		(37		)		(42		)		(60		)		(57		)
Benefit obligation — end of year		$	399			$	411			$	950			$	979
Changes in plan assets:
Fair value of plan assets — beginning of year		$	384			$	436			$	—			$	—
Actual return on plan assets		34				(21		)		—				—
Employer contributions		5				11				—				—
Benefits paid		(37		)		(42		)		—				—
Fair value of plan assets — end of year		$	386			$	384			$	—			$	—
Funded/(Unfunded) status:		$	(13	)		$	(27	)		$	(950	)		$	(979	)

The following table sets forth details of the obligations and assets of Occidental's defined benefit pension plans:

(in millions)		Accumulated Benefit Obligation in Excess of Plan Assets								Plan Assets in Excess of Accumulated Benefit Obligation
As of December 31,		2016				2015				2016				2015
Projected Benefit Obligation		$	193			$	160			$	206			$	251
Accumulated Benefit Obligation		$	189			$	156			$	206			$	251
Fair Value of Plan Assets		$	119			$	88			$	267			$	296

Occidental does not expect any plan assets to be returned during 2017.

COMPONENTS OF NET PERIODIC BENEFIT COST

The following table sets forth the components of net periodic benefit costs:

		Pension Benefits												Postretirement Benefits
For the years ended December 31, (in millions)		2016				2015				2014				2016				2015				2014
Net periodic benefit costs:
Service cost — benefits earned during the period		$	7			$	7			$	11			$	19			$	26			$	24
Interest cost on projected benefit obligation		18				18				23				39				40				44
Expected return on plan assets		(24		)		(27		)		(33		)		—				—				—
Recognized actuarial loss		12				10				6				15				27				20
Other costs and adjustments		4				(4		)		(8		)		1				1				1
Net periodic benefit cost		$	17			$	4			$	(1	)		$	74			$	94			$	89

The estimated net loss and prior service cost for the defined benefit pension plans that will be amortized from AOCI into net periodic benefit cost over the next fiscal year are $10 million and zero, respectively. The estimated net loss and prior service cost for the defined benefit postretirement plans that will be amortized from AOCI into net periodic benefit cost over the next fiscal year are $15 million and $1 million, respectively.

ADDITIONAL INFORMATION

The following table sets forth the weighted-average assumptions used to determine Occidental's benefit obligation and net periodic benefit cost for domestic plans:

		Pension Benefits						Postretirement Benefits
For the years ended December 31,		2016			2015			2016			2015
Benefit Obligation Assumptions:
Discount rate		3.90	%		4.14	%		4.15	%		4.36	%
Net Periodic Benefit Cost Assumptions:
Discount rate		4.14	%		3.81	%		4.36	%		3.99	%
Assumed long term rate of return on assets		6.50	%		6.50	%		—			—

For domestic pension plans and postretirement benefit plans, Occidental based the discount rate on the Aon/Hewitt AA-AAA Universe yield curve in 2016 and 2015. The assumed long term rate of return on assets is estimated with regard to current market factors but within the context of historical returns for the asset mix that exists at year end.

In 2016, Occidental adopted the Society of Actuaries 2016 Mortality Improvement Scale, which updated the mortality assumptions that private defined benefit retirement plans in the United States use in the actuarial valuations that determine a plan sponsor’s pension obligations. The new mortality improvement scale reflects additional data that the Social Security Administration has released since the 2014 Mortality Tables Report and Mortality Improvement Scale released in 2015. This additional data shows a lower degree of mortality improvement than previously reflected. The changes in the mortality improvement scale results in a decrease of $5 million and $19 million in the pension and postretirement benefit obligation at December 31, 2016.

For pension plans outside the United States, Occidental based its discount rate on rates indicative of government or investment grade corporate debt in the applicable country, taking into account hyperinflationary environments when necessary. The discount rates used for the foreign pension plans ranged from 1.0 percent to 10.8 percent at December 31, 2016 and from 1.5 percent to 10 percent at December 31, 2015. The average rate of increase in future compensation levels ranged from 1.0 percent to 10.0 percent in 2016, depending on local economic conditions.

The postretirement benefit obligation was determined by application of the terms of medical and dental benefits and life insurance coverage, including the effect of established maximums on covered costs, together with relevant actuarial assumptions and healthcare cost trend rates projected at an assumed U.S. Consumer Price Index (CPI) increase of 1.97 percent and 1.60 percent as of December 31, 2016 and 2015, respectively. Since 1993, participants other than certain union employees have paid for all medical cost increases in excess of increases in the CPI. For those union employees, Occidental projected that healthcare cost trend rates would decrease 0.25 percent per year from 6.50 percent in 2016 until they reach 4.50 percent in 2025, and remain at 4.50 percent thereafter. A 1-percent increase or a 1-percent decrease in these assumed healthcare cost trend rates would result in an increase of $44 million or a reduction of $36 million, respectively, in the postretirement benefit obligation as of December 31, 2016. The annual service and interest costs would not be materially affected by these changes.

The actuarial assumptions used could change in the near term as a result of changes in expected future trends and other factors that, depending on the nature of the changes, could cause increases or decreases in the plan assets and liabilities.

FAIR VALUE OF PENSION PLAN ASSETS

Occidental employs a total return investment approach that uses a diversified blend of equity and fixed-income investments to optimize the long-term return of plan assets at a prudent level of risk. The investments are monitored by Occidental’s Pension and Retirement Trust and Investment Committee (Investment Committee) in its role as fiduciary. The Investment Committee, consisting of senior Occidental executives, selects and employs various external professional investment management firms to manage specific investments across the spectrum of asset classes. Equity investments are diversified across United States and non-United States stocks, as well as differing styles and market capitalizations. Other asset classes, such as private equity and real estate, may be used with the goals of enhancing long-term returns and improving portfolio diversification. The target allocation of plan assets is 65 percent equity securities and 35 percent debt securities. Investment performance is measured and monitored on an ongoing basis through quarterly investment portfolio and manager guideline compliance reviews, annual liability measurements and periodic studies.

The fair values of Occidental’s pension plan assets by asset category are as follows:

(in millions)		Fair Value Measurements at December 31, 2016 Using
Description		Level 1				Level 2				Level 3				Total
Asset Class:
U.S. government securities		$	13			$	—			$	—			$	13
Corporate bonds (a)		—				85				—				85
Common/collective trusts (b)		—				18				—				18
Mutual funds:
Bond funds		18				—				—				18
Blend funds		48				—				—				48
Common and preferred stocks (c)		178				—				—				178
Other		—				29				—				29
Total pension plan assets (d)		$	257			$	132			$	—			$	389

(in millions)		Fair Value Measurements at December 31, 2015 Using
Description		Level 1				Level 2				Level 3				Total
Asset Class:
U.S. government securities		$	16			$	—			$	—			$	16
Corporate bonds (a)		—				78				—				78
Common/collective trusts (b)		—				12				—				12
Mutual funds:
Bond funds		33				—				—				33
Blend funds		48				—				—				48
Common and preferred stocks (c)		169				—				—				169
Other		—				29				—				29
Total pension plan assets (d)		$	266			$	119			$	—			$	385

(a)	This category represents investment grade bonds of U.S. and non-U.S. issuers from diverse industries.

(b)	This category includes investment funds that primarily invest in U.S. and non-U.S. common stocks and fixed-income securities.

(c)	This category represents direct investments in common and preferred stocks from diverse U.S. and non-U.S. industries.

(d)	Amounts exclude net payables of approximately $3 million and $1 million as of December 31, 2016 and 2015, respectively.

The activity during the years ended December 31, 2016 and 2015, for the assets using Level 3 fair value measurements was insignificant. Occidental expects to contribute $3 million in cash to its defined benefit pension plans during 2017.

Estimated future benefit payments, which reflect expected future service, as appropriate, are as follows:

For the years ended December 31, (in millions)		Pension Benefits				Postretirement Benefits
2017		$	41			$	59
2018		$	30			$	58
2019		$	28			$	58
2020		$	29			$	57
2021		$	29			$	57
2022 - 2026		$	185			$	285

NOTE 14	INVESTMENTS AND RELATED-PARTY TRANSACTIONS

EQUITY INVESTMENTS

As of December 31, 2016 and 2015, investments in unconsolidated entities comprised $1.4 billion and $1.3 billion of equity-method investments, respectively.

As of December 31, 2016, Occidental’s equity investments consisted mainly of a 12-percent interest in Plains Pipeline, a 24.5-percent interest in the stock of Dolphin Energy, and various other partnerships and joint ventures. Equity investments paid dividends of $224 million, $438 million, and $396 million to Occidental in 2016, 2015 and 2014, respectively. As of December 31, 2016, cumulative undistributed earnings of equity-method investees since they were acquired was immaterial. As of December 31, 2016, Occidental's investments in equity investees exceeded the underlying equity in net assets by approximately $653 million, of which almost $537 million represented goodwill and the remainder comprised intangibles amortized over their estimated useful lives.

The following table presents Occidental’s interest in the summarized financial information of its equity-method investments:

For the years ended December 31, (in millions)		2016				2015				2014
Revenues		$	1,238			$	1,050			$	3,090
Costs and expenses		1,043				827				2,774
Net income		$	195			$	223			$	316
As of December 31, (in millions)		2016				2015
Current assets		$	914			$	896
Non-current assets		$	3,605			$	3,589
Current liabilities		$	577			$	536
Long-term debt		$	1,957			$	2,141
Other non-current liabilities		$	159			$	149
Stockholders’ equity		$	1,826			$	1,659

Occidental’s investment in Dolphin, which was acquired in 2002, consists of two separate economic interests through which Occidental owns (i) a 24.5-percent undivided interest in the upstream operations under an agreement which is proportionately consolidated in the financial statements; and (ii) a 24.5-percent interest in the stock of Dolphin Energy, which operates a pipeline and is accounted for as an equity investment.

In November 2014, Occidental sold a portion of its equity interest in Plains Pipeline for approximately $1.7 billion, resulting in a pre-tax gain of approximately $1.4 billion.

AVAILABLE FOR SALE INVESTMENT IN CALIFORNIA RESOURCES STOCK

As part of Occidental's spin-off of its California oil and gas operations and related assets, Occidental retained 71.5 million shares of, or approximately 18.7 percent interest in, California Resources stock, which was recorded as an available for sale investment. Occidental recorded an other-than-temporary loss of $227 million for this available for sale investment as of December 31, 2015. At December 31, 2015, Occidental's available for sale investment in California Resources was $167 million.

In March 2016, Occidental distributed a special stock dividend for all of its 71.5 million shares of common stock of California Resources to stockholders and recorded a $78 million loss to reduce the investment to its fair market value. Occidental no longer owns any shares of California Resources common stock.

RELATED-PARTY TRANSACTIONS

From time to time, Occidental purchases oil, NGLs, power, steam and chemicals from and sells oil, NGLs, natural gas, chemicals and power to certain of its equity investees and other related parties. During 2016, 2015 and 2014, Occidental entered into the following related-party transactions and had the following amounts due from or to its related parties:

For the years ended December 31, (in millions)		2016				2015				2014
Sales (a)		$	602			$	555			$	835
Purchases		$	7			$	26			$	6
Services		$	17			$	32			$	27
Advances and amounts due from		$	59			$	60			$	26
Amounts due to		$	—			$	5			$	15

(a)

In 2016, 2015 and 2014, sales of Occidental-produced oil and NGLs to Plains Pipeline accounted for 89 percent, 87 percent and 46 percent of these totals, respectively. Sales to Plains Pipeline related to Occidental's oil and gas production are disclosed above. In addition to these sales, Occidental conducts marketing activities with Plains Pipeline for oil, NGLs and transportation. Net margins associated with these marketing activities are negligible.

NOTE 15	FAIR VALUE MEASUREMENTS

FAIR VALUES – RECURRING

In January 2012, Occidental entered into a long-term contract to purchase CO2. This contract contains a price adjustment clause that is linked to changes in NYMEX crude oil prices. Occidental determined that the portion of this contract linked to NYMEX oil prices is not clearly and closely related to the host contract, and Occidental therefore bifurcated this embedded pricing feature from its host contract and accounts for it at fair value in the consolidated financial statements.

The following tables provide fair value measurement information for assets and liabilities that are measured on a recurring basis:

(in millions)		Fair Value Measurements at December 31, 2016 Using														Netting and Collateral				Total Fair Value
Description				Level 1				Level 2				Level 3
Liabilities:
Embedded derivative		Accrued liabilities		$	—			$	43			$	—			$	—			$	43
	Deferred credits and liabilities		$	—			$	178			$	—			$	—			$	178

(in millions)		Fair Value Measurements at December 31, 2015 Using														Netting and Collateral				Total Fair Value
Description				Level 1				Level 2				Level 3
Assets:
Available for sale investment				$	167			$	—			$	—			$	—			$	167
Liabilities:
Embedded derivative		Accrued liabilities		$	—			$	47			$	—			$	—			$	47
	Deferred credits and liabilities		$	—			$	267			$	—			$	—			$	267

FAIR VALUES – NONRECURRING

During the 12 months ended December 31, 2016, Occidental recognized pre-tax impairment charges of $15 million related to proved oil and gas properties.

As a result of the sharp decline of the forward price curve during 2015, as well as the decision to sell or exit non-core operations, Occidental recognized approximately $6.5 billion in pre-tax impairment charges related to proved oil and gas properties. Internationally, Occidental recognized $4.7 billion in pre-tax impairment charges related to $1.8 billion in charges in Oman, $1.3 billion in Iraq and Libya, $1 billion in Qatar, and $550 million in Colombia and Bolivia. Domestically, Occidental recognized approximately $763 million pre-tax impairment charges related to the sale of the Williston assets, $460 million pre-tax impairment charges for assets in the Piceance Basin as well as a $554 million pre-tax impairment charges related to proved oil and gas properties in South Texas.

The impairment tests, including the fair value estimation, incorporated a number of assumptions involving expectations of future cash flows. These assumptions included estimates of future product prices, which Occidental based on forward price curves and, where applicable, contractual prices, estimates of oil and gas reserves, estimates of future expected operating and development costs and a risk adjusted discount rate of 8-20 percent. These properties were impacted by persistently worldwide low oil and natural gas prices and changing management's development plans. Occidental used the income approach to measure the fair value of these properties, using inputs categorized as Level 3 in the fair value hierarchy.

In the fourth quarter 2015, Occidental recognized approximately $814 million in pre-tax impairment charges for a Midstream CO2 treatment plant related to recurring CO2 shortfalls and unpaid penalty fees.

In 2015, Occidental recognized approximately $121 million pre-tax charges related to the impairments of Chemical assets.

(in millions)		Fair Value Measurements at December 31, 2015 Using												Net Book Value (a)				Total Pre-tax (Non-cash) Impairment Loss
Description		Level 1				Level 2				Level 3
Assets:
Impaired proved oil and gas assets - international		$	—			$	—			$	2,666			$	7,359			$	4,693
Impaired proved oil and gas assets - domestic		$	—			$	—			$	625			$	1,655			$	1,030
Impaired Midstream assets		$	—			$	—			$	50			$	891			$	841
Impaired Chemical property, plant, and equipment		$	—			$	—			$	3			$	124			$	121
(in millions)		Fair Value Measurements at September 30, 2015 Using												Net Book Value (a)				Total Pre-tax (Non-cash) Impairment Loss
Description		Level 1				Level 2				Level 3
Williston proved oil and gas assets (b)		$	—			$	—			$	615			$	1,378			$	763

(a)Amount represents net book value at date of assessment.

(b)Williston assets sold in November 2015, classified as held for sale and written down to the sales price at September 30, 2015.

FINANCIAL INSTRUMENTS FAIR VALUE

The carrying amounts of cash and cash equivalents and other on-balance sheet financial instruments, other than fixed-rate debt, approximate fair value. See Note 5 for the fair value of Long-term Debt.

NOTE 16	INDUSTRY SEGMENTS AND GEOGRAPHIC AREAS

Occidental conducts its continuing operations through three segments: (1) oil and gas; (2) chemical; and (3) midstream and marketing. The oil and gas segment explores for, develops and produces oil and condensate, NGLs, and natural gas. The chemical segment 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, 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.

Results of industry segments and geographic areas 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 and geographic area assets and income from the segments' equity investments. 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.

Identifiable assets are those assets used in the operations of the segments. Corporate assets consist of cash and restricted cash, certain corporate receivables and PP&E.

Industry Segments
(in millions)		Oil and Gas				Chemical				Midstream and Marketing				Corporate and Eliminations				Total
Year ended December 31, 2016
Net sales		$	6,377		(a)	$	3,756		(b)	$	684		(c)	$	(727	)		$	10,090
Pretax operating profit (loss)		$	(636	)	(d)	$	571		(e)	$	(381	)	(f)	$	(1,218	)	(g)	$	(1,664	)
Income taxes		—				—				—				662			(h)	662
Discontinued operations, net		—				—				—				428			(i)	428
Net income (loss) attributable to common stock		$	(636	)		$	571			$	(381	)		$	(128	)		$	(574	)
Investments in unconsolidated entities		$	—			$	730			$	666			$	5			$	1,401
Property, plant and equipment additions, net (k)		$	1,998			$	353			$	370			$	59			$	2,780
Depreciation, depletion and amortization		$	3,575			$	340			$	313			$	40			$	4,268
Total assets		$	24,130			$	4,348			$	11,059			$	3,572			$	43,109
Year ended December 31, 2015
Net sales		$	8,304		(a)	$	3,945		(b)	$	891		(c)	$	(660	)		$	12,480
Pretax operating profit (loss)		$	(8,060	)	(d)	$	542		(e)	$	(1,194	)	(f)	$	(764	)	(g)	$	(9,476	)
Income taxes		—				—				—				1,330			(j)	1,330
Discontinued operations, net		$	—			—				—				317			(i)	317
Net income (loss) attributable to common stock		$	(8,060	)		$	542			$	(1,194	)		$	883			$	(7,829	)
Investments in unconsolidated entities		$	4			$	550			$	708			$	5			$	1,267
Property, plant and equipment additions, net (k)		$	4,485			$	271			$	611			$	42			$	5,409
Depreciation, depletion and amortization		$	3,886			$	371			$	249			$	38			$	4,544
Total assets		$	23,591			$	3,982			$	10,175			$	5,661			$	43,409
Year ended December 31, 2014
Net sales		$	13,887		(a)	$	4,817		(b)	$	1,373		(c)	$	(765	)		$	19,312
Pretax operating profit (loss)		$	428		(d)	$	420		(e)	$	2,578		(f)	$	(1,871	)	(g)	$	1,555
Net income attributable to noncontrolling interest										(14		)						(14		)
Income taxes														(1,685		)	(h)	(1,685		)
Discontinued operations, net		—				—				—				760			(j)	760
Net income (loss) attributable to common stock		$	428			$	420			$	2,564			$	(2,796	)		$	616
Investments in unconsolidated entities		$	11			$	202			$	948			$	10			$	1,171
Property, plant and equipment additions, net (l)		$	6,589			$	325			$	2,093			$	103			$	9,110
Depreciation, depletion and amortization		$	3,701			$	367			$	160			$	33			$	4,261
Total assets		$	31,072			$	3,917			$	12,283			$	8,965			$	56,237
(See footnotes on next page)

Footnotes:

(a)	Oil sales represented approximately 90 percent of the oil and gas segment net sales for the years ended December 31, 2016, 2015 and 2014.

(b)	Net sales for the chemical segment comprised the following products:

		Basic Chemicals		Vinyls		Other Chemicals
Year ended December 31, 2016		57%		40%		3%
Year ended December 31, 2015		56%		40%		4%
Year ended December 31, 2014		54%		43%		3%

(c)	Net sales for the midstream and marketing segment comprised the following:

		Gas Processing		Power		Marketing, Transportation and other *
Year ended December 31, 2016		92%		44%		(36)%
Year ended December 31, 2015		70%		31%		(1)%
Year ended December 31, 2014		49%		31%		20%

• Revenue from all marketing activities is reported on a net basis.

(d)

The 2016 amount includes pre-tax asset sale gains of $121 million and $59 million related to Piceance and South Texas oil and gas properties, pre-tax charges of $61 million related to the sale of Libya and the exit from Iraq, and pre-tax gain of $24 million for other related items. The 2015 amount includes pre-tax charges of $5 billion for impairment of international oil and gas assets and related items and $3.5 billion for the impairment of domestic oil and gas assets and related items. The 2014 amount includes pre-tax charges of $4.7 billion for the impairment of domestic oil and gas assets, pre-tax charges of $1.1 billion for the impairment of foreign oil and gas assets, and pre-tax gain of $531 million for the sale of the Hugoton field.

(e)

The 2016 amount includes gain on sale of $57 million and $31 million related to Occidental Tower in Dallas, Texas and a non-core specialty chemicals business, respectively. The 2015 amount includes the pre-tax charge of $121 million related to asset impairment partially offset by a $98 million gain on sale of an idled facility. The 2014 amount includes the pre-tax charge of $149 million related to asset impairment.

(f)

The 2016 amount includes pre-tax charges of $160 million related to the termination of crude oil supply contracts. The 2015 amount includes pre-tax charges of $1.3 billion related to asset impairments and related items. The 2014 amount includes pre-tax gains of $633 million and $1,351 million for the sales of BridgeTex Pipeline and a portion of an investment in Plains Pipeline, respectively, and other charges of $31 million.

(g)	Includes unallocated net interest expense, administration expense, environmental remediation and other pre-tax items noted in footnote (k) below.

(h)	Includes all foreign and domestic income taxes from continuing operations.

(i)	Includes discontinued operations from Ecuador.

(j)	Includes discontinued operations from Ecuador and California Resources.

(k)	Includes the following significant items affecting earnings for the years ended December 31:

Benefit (Charge) (in millions)		2016				2015				2014
CORPORATE
Pre-tax operating profit (loss)
Asset sale losses		$	—			$	(8	)		$	—
Asset impairments and related items		(619		)		(235		)		(1,358		)
Severance, spin-off and other		—				(118		)		(61		)
		$	(619	)		$	(361	)		$	(1,419	)
Income taxes
Tax effect of pre-tax and other adjustments *		$	424			$	1,903			$	927

• Amounts represent the tax effect of the pre-tax adjustments listed in this note, as well as those in footnotes (d), (e) and (f).

(l) Includes capital expenditures and capitalized interest, but excludes acquisition and disposition of assets.

GEOGRAPHIC AREAS

(in millions)		Net sales (a)												Property, plant and equipment, net
For the years ended December 31,		2016				2015				2014				2016				2015				2014
United States		$	6,290			$	7,479			$	11,943			$	24,004			$	23,265			$	26,673
Foreign
Oman		1,101				1,631				2,524				1,858				1,292				2,876
Qatar		1,206				1,449				2,803				1,299				1,354				2,605
Colombia		463				570				938				741				821				1,396
United Arab Emirates		664				477				—				4,373				4,484				4,312
Other Foreign		366				874				1,104				62				423				1,868
Total Foreign		3,800				5,001				7,369				8,333				8,374				13,057
Total		$	10,090			$	12,480			$	19,312			$	32,337			$	31,639			$	39,730

(a)	Sales are shown by individual country based on the location of the entity making the sale.

NOTE 17	SPIN-OFF OF CALIFORNIA RESOURCES CORPORATION

On November 30, 2014, Occidental's California oil and gas operations and related assets were spun-off through the pro rata distribution of 81.3 percent of the outstanding shares of common stock of California Resources, creating an independent, publicly traded company. Occidental shareholders at the close of business on the record date of November 17, 2014 received 0.4 shares of California Resources for every share of Occidental common stock held.

In connection with the spin-off, California Resources distributed to Occidental $4.95 billion in restricted cash and $1.15 billion in unrestricted cash. The $4.95 billion distribution was used solely to pay dividends, repurchase shares of Occidental stock and repay debt within eighteen months following the distribution.

On March 24, 2016, Occidental distributed all of its remaining 71.5 million shares of common stock of California Resources to stockholders of record as of February 29, 2016 as a special stock dividend.

Sales and other operating revenues and income from discontinued operations related to California Resources were as follows:

For the years ended December 31, (in millions)		2014
Sales and other operating revenue from discontinued operations		$	3,951
Income from discontinued operations before-tax		1,205
Income tax expense		440
Income from discontinued operations		$	765

2016 Quarterly Financial Data (Unaudited)	Occidental Petroleum Corporation and Subsidiaries
in millions, except per-share amounts

Three months ended		March 31				June 30				September 30				December 31
Segment net sales
Oil and gas		$	1,275			$	1,625			$	1,660			$	1,817
Chemical		890				908				988				970
Midstream and marketing		133				141				202				208
Eliminations		(175		)		(143		)		(202		)		(207		)
Net sales		$	2,123			$	2,531			$	2,648			$	2,788
Gross profit		$	(335	)		$	143			$	203			$	345
Segment earnings
Oil and gas		$	(485	)	(a)	$	(117	)		$	(51	)	(a)	$	17		(a)
Chemical		214			(b)	88				117				152
Midstream and marketing		(95		)		(58		)		(180		)	(c)	(48		)
		(366		)		(87		)		(114		)		121
Unallocated corporate items
Interest expense, net		(57		)		(84		)		(62		)		(72		)
Income taxes		203				96				30				333
Other		(140		)	(d)	(61		)		(92		)		(650		)	(d)
Income (loss) from continuing operations		(360		)		(136		)		(238		)		(268		)
Discontinued operations, net		438			(e)	(3		)		(3		)		(4		)
Net income (loss) attributable to common stock		$	78			$	(139	)		$	(241	)		$	(272	)
Basic earnings per common share
Income (loss) from continuing operations		$	(0.47	)		$	(0.18	)		$	(0.31	)		$	(0.35	)
Discontinued operations, net		0.57				—				(0.01		)		(0.01		)
Basic earnings per common share		$	0.10			$	(0.18	)		$	(0.32	)		$	(0.36	)
Diluted earnings per common share
Income (loss) from continuing operations		$	(0.47	)		$	(0.18	)		$	(0.31	)		$	(0.35	)
Discontinued operations, net		0.57				—				(0.01		)		(0.01		)
Diluted earnings per common share		$	0.10			$	(0.18	)		$	(0.32	)		$	(0.36	)
Dividends per common share		$	0.75			$	0.75			$	0.76			$	0.76
Market price per common share
High		$	72.19			$	78.31			$	78.48			$	75.60
Low		$	58.24			$	66.94			$	67.83			$	64.37

(a)

Includes pre-tax asset sale gains of $48 million in the first quarter related to the sale of domestic oil and gas properties, and $59 million in the third quarter related to the sale of South Texas oil and gas properties. Includes pre-tax charges of $25 million in the first quarter, $61 million in the third quarter, $9 million in the fourth quarter and a $24 million gain in the fourth quarter related to oil and gas asset impairments, related items, and other.

(b)	Includes first quarter pre-tax asset sale gain of $57 million from the sale of the Occidental Tower building in Dallas and a $31 million gain from the sale of a non-core specialty chemicals business.

(c)	Includes third quarter pre-tax charges of $160 million related to the termination of crude oil supply contracts.

(d)	Includes first quarter pre-tax charges of $78 million and fourth quarter pre-tax charges of $541 million related to a reserve for doubtful accounts.

(e)	Includes the gains related to the Ecuador settlement.

2015 Quarterly Financial Data (Unaudited)	Occidental Petroleum Corporation and Subsidiaries
in millions, except per-share amounts

Three months ended		March 31				June 30				September 30				December 31
Segment net sales
Oil and gas		$	2,009			$	2,342			$	2,054			$	1,899
Chemical		1,000				1,030				1,008				907
Midstream and marketing		197				294				231				169
Eliminations		(117		)		(197		)		(177		)		(169		)
Net sales		$	3,089			$	3,469			$	3,116			$	2,806
Gross profit		$	396			$	766			$	501			$	126
Segment earnings
Oil and gas		$	(266	)	(a)	$	355			$	(3,128	)	(a)	$	(5,021	)	(a)
Chemical		139				136				272			(b)	(5		)	(b)
Midstream and marketing(c)		(15		)		87				24				(1,290		)	(d)
		(142		)		578				(2,832		)		(6,316		)
Unallocated corporate items
Interest expense, net		(28		)		(7		)		(47		)		(59		)
Income taxes		19				(324		)		445				1,190
Other		(64		)		(67		)		(172		)	(d)	(320		)	(e)
Income from continuing operations (c)		(215		)		180				(2,606		)		(5,505		)
Discontinued operations, net		(3		)		(4		)		(3		)		327
Net income		$	(218	)		$	176			$	(2,609	)		$	(5,178	)
Basic earnings per common share
Income (loss) from continuing operations		$	(0.28	)		$	0.23			$	(3.41	)		$	(7.21	)
Discontinued operations, net		—				—				(0.01		)		0.43
Basic earnings per common share		$	(0.28	)		$	0.23			$	(3.42	)		$	(6.78	)
Diluted earnings per common share
Income (loss) from continuing operations		$	(0.28	)		$	0.23			$	(3.41	)		$	(7.21	)
Discontinued operations, net		—				—				(0.01		)		0.43
Diluted earnings per common share		$	(0.28	)		$	0.23			$	(3.42	)		$	(6.78	)
Dividends per common share		$	0.72			$	0.75			$	0.75			$	0.75
Market price per common share
High		$	83.74			$	82.06			$	77.76			$	77.37
Low		$	71.70			$	73.35			$	63.60			$	64.89

(a)	Includes pre-tax charges of $310 million in the first quarter, $3.3 billion in the third quarter and $4.9 billion related to oil and gas asset impairments and related items.

(b)	Includes third quarter pre-tax asset sale gain of $98 million related to an idled facility and the fourth quarter includes pre-tax charges of $121 million related to asset impairments.

(c)	Includes fourth quarter pre-tax charges of $1.2 billion related to asset impairments and related items.

(d)	Includes pre-tax charges of $100 million related to severance and other items.

(e)	Includes fourth quarter pre-tax charges of an other than temporary loss of $227 million for available for sale investment in California Resources stock.

Supplemental Oil and Gas Information (Unaudited)

The following tables set forth Occidental’s net interests in quantities of proved developed and undeveloped reserves of oil (including condensate), NGLs and natural gas and changes in such quantities. Proved oil, NGLs and natural 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 Henry Hub natural gas prices for 2016, 2015 and 2014 were $2.55, $2.66 and $4.42 per MMBtu, respectively. Reserves are stated net of applicable royalties. Estimated reserves include Occidental's economic interests under production-sharing contracts (PSCs) and other similar economic arrangements. In addition, discussions of oil and gas production or volumes, in general, refer to sales volumes unless the context requires or it is indicated otherwise.

Prices for crude oil, natural gas and NGLs fluctuate widely. Historically, the markets for crude oil, natural gas, NGLs and refined products have been volatile and may continue to be volatile in the future. Prolonged or further declines in crude oil, natural gas and NGLs prices would continue to reduce Occidental's operating results and cash flows, and could impact its future rate of growth and further impact the recoverability of the carrying value of its assets.

Oil Reserves
in millions of barrels (MMbbl)
		United			Latin			Middle East/
		States			America			North Africa (a)			Total
PROVED DEVELOPED AND UNDEVELOPED RESERVES
Balance at December 31, 2013		1,131			88			394			1,613
Revisions of previous estimates		(54	)		6			40			(8	)
Improved recovery		224			9			32			265
Extensions and discoveries		15			—			2			17
Purchases of proved reserves		33			—			—			33
Sales of proved reserves (b)		(9	)		—			—			(9	)
Production		(67	)		(11	)		(63	)		(141	)
Balance at December 31, 2014		1,273			92			405			1,770
Revisions of previous estimates (c)		(220	)		(10	)		22			(208	)
Improved recovery		81			8			12			101
Extensions and discoveries		—			—			2			2
Purchases of proved reserves		—			—			—			—
Sales of proved reserves (b)		(146	)		—			(51	)		(197	)
Production		(73	)		(13	)		(73	)		(159	)
Balance at December 31, 2015		915			77			317			1,309
Revisions of previous estimates		(90	)		4			86			—
Improved recovery		114			2			9			125
Extensions and discoveries		—			—			2			2
Purchases of proved reserves		90			—			—			90
Sales of proved reserves (b)		—			—			(26	)		(26	)
Production		(69	)		(12	)		(62	)		(143	)
Balance at December 31, 2016		960			71			326			1,357
PROVED DEVELOPED RESERVES
December 31, 2013		822			76			281			1,179
December 31, 2014		819			86			316			1,221
December 31, 2015		673			77			278			1,028
December 31, 2016 (d)		670			69			298			1,037
PROVED UNDEVELOPED RESERVES
December 31, 2013		309			12			113			434
December 31, 2014		454			6			89			549
December 31, 2015		242			—			39			281
December 31, 2016 (e)		290			2			28			320

(a)	A majority of the proved reserve amounts relate to PSCs and other similar economic arrangements.

(b)	Sales of proved reserves in 2016 were related to the sale of Libya. Sales of proved reserves in 2015 were related to the sale of Williston and exit from Iraq. Sales of proved reserves in 2014 were related to the sale of Hugoton.

(c)	Revisions of previous estimates were primarily price and price-related.

(d)	Approximately 9 percent of the proved developed reserves at December 31, 2016 are nonproducing, primarily associated with Permian EOR.

(e)	A portion of the proved undeveloped reserves associated with Al Hosn Gas are expected to be developed beyond five years and is tied to an approved long term development project.

NGLs Reserves
in millions of barrels (MMbbl)
		United			Latin			Middle East/
		States			America			North Africa			Total
PROVED DEVELOPED AND UNDEVELOPED RESERVES
Balance at December 31, 2013		204			—			134			338
Revisions of previous estimates		6			—			8			14
Improved recovery		37			—			—			37
Extensions and discoveries		2			—			—			2
Purchases of proved reserves		3			—			—			3
Sales of proved reserves (a)		(10	)		—			—			(10	)
Production		(20	)		—			(2	)		(22	)
Balance at December 31, 2014		222			—			140			362
Revisions of previous estimates (b)		(28	)		—			10			(18	)
Improved recovery		12			—			1			13
Extensions and discoveries		—			—			—			—
Purchases of proved reserves		—			—			—			—
Sales of proved reserves		—			—			—			—
Production		(20	)		—			(7	)		(27	)
Balance at December 31, 2015		186			—			144			330
Revisions of previous estimates		1			—			70			71
Improved recovery		28			—			—			28
Extensions and discoveries		—			—			—			—
Purchases of proved reserves		26			—			—			26
Sales of proved reserves		(3	)		—			(2	)		(5	)
Production		(19	)		—			(11	)		(30	)
Balance, December 31, 2016		219			—			201			420
PROVED DEVELOPED RESERVES
December 31, 2013		151			—			51			202
December 31, 2014		147			—			109			256
December 31, 2015		141			—			112			253
December 31, 2016 (c)		149			—			164			313
PROVED UNDEVELOPED RESERVES
December 31, 2013		53			—			83			136
December 31, 2014		75			—			31			106
December 31, 2015		45			—			32			77
December 31, 2016 (d)		70			—			37			107

(a)	Sales of proved reserves in 2014 were related to the sale of Hugoton.

(b)	Revisions of previous estimates were primarily price and price-related.

(c)	Approximately 5 percent of the proved developed reserves at December 31, 2016 are nonproducing, primarily associated with Permian EOR.

(d)	A portion of the proved undeveloped reserves associated with Al Hosn Gas are expected to be developed beyond five years and is tied to an approved long term development project.

Natural Gas Reserves
in billions of cubic feet (Bcf)
		United			Latin			Middle East/
		States			America			North Africa (a)			Total
PROVED DEVELOPED AND UNDEVELOPED RESERVES
Balance, December 31, 2013		2,012			24			2,687			4,723
Revisions of previous estimates		(111	)		3			(273	)		(381	)
Improved recovery		284			4			25			313
Extensions and discoveries		27			—			101			128
Purchases of proved reserves		46			—			—			46
Sales of proved reserves (b)		(371	)		—			—			(371	)
Production		(173	)		(4	)		(154	)		(331	)
Balance at December 31, 2014		1,714			27			2,386			4,127
Revisions of previous estimates (c)		(600	)		(4	)		64			(540	)
Improved recovery		123			—			64			187
Extensions and discoveries		—			—			17			17
Purchases of proved reserves		—			—			—			—
Sales of proved reserves (b)		(63	)		—			—			(63	)
Production		(155	)		(4	)		(201	)		(360	)
Balance at December 31, 2015		1,019			19			2,330			3,368
Revisions of previous estimates		(19	)		(10	)		554			525
Improved recovery		138			—			51			189
Extensions and discoveries		—			—			2			2
Purchases of proved reserves		128			—			—			128
Sales of proved reserves (b)		(89	)		—			—			(89	)
Production		(132	)		(3	)		(214	)		(349	)
Balance at December 31, 2016		1,045			6			2,723			3,774
PROVED DEVELOPED RESERVES
December 31, 2013		1,495			23			1,684			3,202
December 31, 2014		1,128			26			1,915			3,069
December 31, 2015		813			19			1,872			2,704
December 31, 2016 (d)		708			6			2,324			3,038
PROVED UNDEVELOPED RESERVES
December 31, 2013		517			1			1,003			1,521
December 31, 2014		586			1			471			1,058
December 31, 2015		206			—			458			664
December 31, 2016 (e)		337			—			399			736

(a)	Over half of proved reserve amounts relate to PSCs and other similar economic arrangements.

(b)	2016 sales of proved reserves are related to Piceance. Sales of proved reserves in 2015 were related to the sale of Williston. Sales of proved reserves in 2014 were related to the sale of Hugoton.

(c)	Revisions of previous estimates were primarily price and price-related.

(d)	Approximately 3 percent of the proved developed reserves at December 31, 2016 are nonproducing, primarily associated with the Permian.

(e)	A portion of the proved undeveloped reserves associated with Al Hosn Gas are expected to be developed beyond five years and is tied to an approved long term development project.

Total Reserves
in millions of BOE (MMBOE) (a)
		United			Latin			Middle East/
		States			America			North Africa			Total (b)
PROVED DEVELOPED AND UNDEVELOPED RESERVES
Balance at December 31, 2013		1,670			92			976			2,738
Revisions of previous estimates		(67	)		6			3			(58	)
Improved recovery		310			9			35			354
Extensions and discoveries		22			—			19			41
Purchases of proved reserves		43			—			—			43
Sales of proved reserves (c)		(81	)		—			—			(81	)
Production		(116	)		(11	)		(91	)		(218	)
Balance at December 31, 2014		1,781			96			942			2,819
Revisions of previous estimates		(348	)		(10	)		43			(315	)
Improved recovery		113			8			23			144
Extensions and discoveries		—			—			5			5
Purchases of proved reserves		—			—			—			—
Sales of proved reserves (c)		(156	)		—			(51	)		(207	)
Production		(119	)		(14	)		(113	)		(246	)
Balance at December 31, 2015		1,271			80			849			2,200
Revisions of previous estimates (d)		(92	)		3			248			159
Improved recovery		165			2			18			185
Extensions and discoveries		—			—			2			2
Purchases of proved reserves		137			—			—			137
Sales of proved reserves (c)		(18	)		—			(28	)		(46	)
Production		(110	)		(13	)		(108	)		(231	)
Balance at December 31, 2016		1,353			72			981			2,406
PROVED DEVELOPED RESERVES
December 31, 2013		1,222			80			613			1,915
December 31, 2014		1,154			90			744			1,988
December 31, 2015		950			80			702			1,732
December 31, 2016 (e)		937			70			849			1,856
PROVED UNDEVELOPED RESERVES
December 31, 2013		448			12			363			823
December 31, 2014		627			6			198			831
December 31, 2015		321			—			147			468
December 31, 2016 (f)		416			2			132			550

(a)

Natural gas volumes have been converted to barrels of oil equivalent (BOE) based on energy content of six thousand cubic feet (Mcf) of gas to one barrel of oil. Barrels of oil equivalence does not necessarily result in price equivalence. The price of natural gas on a barrel of oil equivalent basis is currently substantially lower than the corresponding price for oil and has been similarly lower for a number of years. For example, in 2016, the average prices of West Texas Intermediate (WTI) oil and New York Mercantile Exchange (NYMEX) natural gas were $43.32 per barrel and $2.42 per Mcf, respectively, resulting in an oil to gas ratio of 18 to 1.

(b)	Includes proved reserves related to PSCs and other similar economic arrangements of 0.5 billion BOE, 0.5 billion BOE, 0.7 billion BOE and 0.8 billion BOE, at December 31, 2016, 2015, 2014, and 2013, respectively.

(c)	2016 sales of proved reserves are related to Libya and Piceance. Sales of proved reserves in 2015 were related to the sale of Williston and exit from Iraq. Sales of proved reserves in 2014 were related to the sale of Hugoton.

(d)	Revisions are 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.

(e)	Approximately 7 percent of the proved developed reserves at December 31, 2016 are nonproducing, primarily associated with Permian EOR.

(f)	A portion of the proved undeveloped reserves associated with Al Hosn Gas are expected to be developed beyond five years and is tied to an approved long term development project.

,

CAPITALIZED COSTS

Capitalized costs relating to oil and gas producing activities and related accumulated DD&A were as follows:

		United				Latin				Middle East/
in millions		States				America				North Africa				Total
December 31, 2016
Proved properties		$	32,220			$	3,029			$	16,792			$	52,041
Unproved properties		2,548				28				54				2,630
Total capitalized costs (a)		34,768				3,057				16,846				54,671
Proved properties depreciation, depletion and amortization		(15,085		)		(2,285		)		(13,067		)		(30,437		)
Unproved properties valuation		(1,178		)		(27		)		—				(1,205		)
Total Accumulated depreciation, depletion and amortization		(16,263		)		(2,312		)		(13,067		)		(31,642		)
Net capitalized costs		$	18,505			$	745			$	3,779			$	23,029
December 31, 2015
Proved properties		$	30,200			$	2,955			$	19,290			$	52,445
Unproved properties		1,376				27				1,077				2,480
Total capitalized costs (a)		31,576				2,982				20,367				54,925
Proved properties depreciation, depletion and amortization		(12,544		)		(2,119		)		(15,718		)		(30,381		)
Unproved properties valuation		(1,204		)		(27		)		(961		)		(2,192		)
Total Accumulated depreciation, depletion and amortization		(13,748		)		(2,146		)		(16,679		)		(32,573		)
Net capitalized costs		$	17,828			$	836			$	3,688			$	22,352
December 31, 2014
Proved properties		$	33,186			$	2,788			$	19,545			$	55,519
Unproved properties		2,389				27				1,026				3,442
Total capitalized costs (a)		35,575				2,815				20,571				58,961
Proved properties depreciation, depletion and amortization		(13,943		)		(1,365		)		(12,625		)		(27,933		)
Unproved properties valuation		(1,301		)		(27		)		—				(1,328		)
Total Accumulated depreciation, depletion and amortization		(15,244		)		(1,392		)		(12,625		)		(29,261		)
Net capitalized costs		$	20,331			$	1,423			$	7,946			$	29,700

(a)	Includes acquisition costs, development costs, capitalized interest and asset retirement obligations.

COSTS INCURRED

Costs incurred in oil and gas property acquisition, exploration and development activities, whether capitalized or expensed, were as follows:

		United				Latin				Middle East/
in millions		States				America				North Africa				Total
FOR THE YEAR ENDED DECEMBER 31, 2016
Property acquisition costs
Proved properties		$	797			$	—			$	367			$	1,164
Unproved properties		1,265				—				—				1,265
Exploration costs		13				6				52				71
Development costs		1,417				75				670				2,162
Costs incurred		$	3,492			$	81			$	1,089			$	4,662
FOR THE YEAR ENDED DECEMBER 31, 2015
Property acquisition costs
Proved properties		$	37			$	—			$	47			$	84
Unproved properties		25				—				—				25
Exploration costs		74				2				66				142
Development costs		2,880				170				1,461				4,511
Costs incurred		$	3,016			$	172			$	1,574			$	4,762
FOR THE YEAR ENDED DECEMBER 31, 2014
Property acquisition costs
Proved properties		$	771			$	—			$	—			$	771
Unproved properties		842				—				—				842
Exploration costs		379				4				180				563
Development costs		3,665				305				2,138				6,108
Costs incurred		$	5,657			$	309			$	2,318			$	8,284

RESULTS OF OPERATIONS

Occidental’s oil and gas producing activities for continuing operations, which exclude items such as asset dispositions, corporate overhead, interest and royalties, were as follows:

		United				Latin				Middle East/
in millions		States				America				North Africa				Total
FOR THE YEAR ENDED DECEMBER 31, 2016
Revenues (a)		$	3,135			$	476			$	2,766			$	6,377
Production costs (b)		1,335				170				982				2,487
Other operating expenses		426				36				218				680
Depreciation, depletion and amortization		2,793				156				626				3,575
Taxes other than on income		240				10				—				250
Exploration expenses		8				5				49				62
Pretax income (loss) before impairments and related items		(1,667		)		99				891				(677		)
Asset impairments and related items		1				9				61				71
Pretax income (loss)		(1,668		)		90				830				(748		)
Income tax expense (benefit) (c)		(784		)		65				336				(383		)
Results of operations		$	(884	)		$	25			$	494			$	(365	)
FOR THE YEAR ENDED DECEMBER 31, 2015
Revenues (a)		$	3,809			$	589			$	3,906			$	8,304
Production costs (b)		1,571				160				1,113				2,844
Other operating expenses		511				29				238				778
Depreciation, depletion and amortization		2,109				196				1,581				3,886
Taxes other than on income		307				16				—				323
Exploration expenses		18				2				16				36
Pretax income (loss) before impairments and related items		(707		)		186				958				437
Asset impairments and related items		3,447				559				4,491				8,497
Pretax income (loss)		(4,154		)		(373		)		(3,533		)		(8,060		)
Income tax expense (benefit) (c)		(1,606		)		(61		)		787				(880		)
Results of operations		$	(2,548	)		$	(312	)		$	(4,320	)		$	(7,180	)
FOR THE YEAR ENDED DECEMBER 31, 2014
Revenues (a)		$	6,773			$	977			$	6,160			$	13,910
Production costs (b)		1,683				185				1,076				2,944
Other operating expenses		588				(2		)		266				852
Depreciation, depletion and amortization		2,114				161				1,426				3,701
Taxes other than on income		519				15				—				534
Exploration expenses		70				4				76				150
Pretax income before impairments and related items		1,799				614				3,316				5,729
Asset impairments and related items		4,766				57				1,009				5,832
Pretax income (loss)		(2,967		)		557				2,307				(103		)
Income tax expense (benefit) (c)		(1,182		)		223				1,730				771
Results of operations		$	(1,785	)		$	334			$	577			$	(874	)

(a)	Revenues are net of royalty payments.

(b)	Production costs are the costs incurred in lifting the oil and gas to the surface and include gathering, primary processing and field storage, but do not include DD&A, royalties, income taxes, interest, general and administrative and other expenses.

(c)	United States federal income taxes reflect certain expenses related to oil and gas activities allocated for United States income tax purposes only, including allocated interest and corporate overhead.

RESULTS PER UNIT OF PRODUCTION FOR CONTINUING OPERATIONS

		United				Latin				Middle East/
$/BOE (a)		States				America				North Africa				Total
FOR THE YEAR ENDED DECEMBER 31, 2016
Revenues (b)		$	28.36			$	36.87			$	25.67			$	27.59
Production costs		12.07				13.16				9.12				10.76
Other operating expenses		3.86				2.76				2.02				2.94
Depreciation, depletion and amortization		25.27				12.12				5.81				15.46
Taxes other than on income		2.17				0.77				—				1.08
Exploration expenses		0.07				0.39				0.45				0.27
Pretax income (loss) before impairments and related items		(15.08		)		7.67				8.27				(2.92		)
Asset impairments and related items		0.01				0.70				0.57				0.31
Pretax income (loss)		(15.09		)		6.97				7.70				(3.23		)
Income tax expense (benefit) (c)		(7.09		)		5.03				3.12				(1.66		)
Results of operations		$	(8.00	)		$	1.94			$	4.58			$	(1.57	)
FOR THE YEAR ENDED DECEMBER 31, 2015
Revenues (b)		$	31.84			$	43.83			$	34.64			$	33.78
Production costs		13.13				11.93				9.87				11.57
Other operating expenses		4.27				2.18				2.11				3.15
Depreciation, depletion and amortization		17.63				14.54				14.02				15.81
Taxes other than on income		2.57				1.19				—				1.32
Exploration expenses		0.15				0.15				0.14				0.15
Pretax income (loss) before impairments and related items		(5.91		)		13.84				8.50				1.78
Asset impairments and related items		28.81				41.60				39.82				34.56
Pretax income (loss)		(34.72		)		(27.76		)		(31.32		)		(32.78		)
Income tax expense (benefit) (c)		(13.42		)		(4.54		)		6.98				(3.58		)
Results of operations		$	(21.30	)		$	(23.22	)		$	(38.30	)		$	(29.20	)
FOR THE YEAR ENDED DECEMBER 31, 2014
Revenues (b)		$	58.50			$	85.81			$	67.74			$	63.78
Production costs		14.54				16.25				11.83				13.50
Other operating expenses		5.08				(0.18		)		2.93				3.91
Depreciation, depletion and amortization		18.26				14.14				15.68				16.97
Taxes other than on income		4.48				1.32				—				2.45
Exploration expenses		0.60				0.35				0.84				0.69
Pretax income before impairments and related items		15.54				53.93				36.46				26.26
Asset impairments and related items		41.17				5.01				11.10				26.74
Pretax income (loss)		(25.63		)		48.92				25.36				(0.48		)
Income tax expense (benefit) (c)		(10.21		)		19.59				19.02				3.54
Results of operations		$	(15.42	)		$	29.33			$	6.34			$	(4.02	)

(a)

Natural gas volumes have been converted to barrels of oil equivalent (BOE) based on energy content of six thousand cubic feet (Mcf) of gas to one barrel of oil. Barrels of oil equivalence does not necessarily result in price equivalence. The price of natural gas on a barrel of oil equivalent basis is currently substantially lower than the corresponding price for oil and has been similarly lower for a number of years. For example, in 2016, the average prices of West Texas Intermediate (WTI) oil and New York Mercantile Exchange (NYMEX) natural gas were $43.32 per barrel and $2.42 per Mcf, respectively, resulting in an oil to gas ratio of 18 to 1.

(b)	Revenues are net of royalty payments.

(c)	United States federal income taxes reflect certain expenses related to oil and gas activities allocated for United States income tax purposes only, including allocated interest and corporate overhead.

STANDARDIZED MEASURE, INCLUDING YEAR-TO-YEAR CHANGES THEREIN, OF DISCOUNTED FUTURE NET CASH FLOWS

For purposes of the following disclosures, future cash flows were computed by applying to Occidental's proved oil and gas reserves the unweighted arithmetic average of the first-day-of-the-month price for each month within the years ended December 31, 2016, 2015 and 2014, respectively, unless prices were defined by contractual arrangements, and exclude escalations based upon future conditions. The realized prices used to calculate future cash flows vary by producing area and market conditions. Future operating and capital costs were forecast using the current cost environment applied to expectations of future operating and development activities to develop and produce proved reserves at year end. Future income tax expenses were computed by applying, generally, year-end statutory tax rates (adjusted for permanent differences, tax credits, allowances and foreign income repatriation considerations) to the estimated net future pre-tax cash flows. The discount was computed by application of a 10 percent discount factor. The calculations assumed the continuation of existing economic, operating and contractual conditions at December 31, 2016, 2015 and 2014. Such assumptions, which are required by regulation, have not always proven accurate in the past. Other valid assumptions would give rise to substantially different results.

Standardized Measure of Discounted Future Net Cash Flows
in millions
		United				Latin				Middle East/
		States				America				North Africa				Total
AT DECEMBER 31, 2016
Future cash inflows		$	42,289			$	2,551			$	21,079			$	65,919
Future costs
Production costs and other operating expenses		(23,574		)		(1,418		)		(8,101		)		(33,093		)
Development costs (a)		(7,204		)		(134		)		(1,900		)		(9,238		)
Future income tax expense		—				(244		)		(2,349		)		(2,593		)
Future net cash flows		11,511				755				8,729				20,995
Ten percent discount factor		(6,676		)		(202		)		(4,404		)		(11,282		)
Standardized measure of discounted future net cash flows		$	4,835			$	553			$	4,325			$	9,713
AT DECEMBER 31, 2015
Future cash inflows		$	47,290			$	3,416			$	22,994			$	73,700
Future costs
Production costs and other operating expenses		(25,386		)		(1,852		)		(9,041		)		(36,279		)
Development costs (a)		(7,245		)		(178		)		(2,672		)		(10,095		)
Future income tax expense		(759		)		(392		)		(4,045		)		(5,196		)
Future net cash flows		13,900				994				7,236				22,130
Ten percent discount factor		(7,446		)		(293		)		(2,996		)		(10,735		)
Standardized measure of discounted future net cash flows		$	6,454			$	701			$	4,240			$	11,395
AT DECEMBER 31, 2014
Future cash inflows		$	122,377			$	8,325			$	48,684			$	179,386
Future costs
Production costs and other operating expenses		(48,436		)		(3,422		)		(13,020		)		(64,878		)
Development costs (a)		(16,618		)		(397		)		(7,245		)		(24,260		)
Future income tax expense		(15,939		)		(1,322		)		(11,211		)		(28,472		)
Future net cash flows		41,384				3,184				17,208				61,776
Ten percent discount factor		(23,722		)		(1,219		)		(6,686		)		(31,627		)
Standardized measure of discounted future net cash flows		$	17,662			$	1,965			$	10,522			$	30,149

(a)	Includes asset retirement costs.

Changes in the Standardized Measure of Discounted Future
Net Cash Flows From Proved Reserve Quantities
in millions
For the years ended December 31,		2016				2015				2014
Beginning of year		$	11,395			$	30,149			$	30,412
Sales and transfers of oil and gas produced, net of production costs and other operating expenses		(3,830		)		(4,952		)		(11,016		)
Net change in prices received per barrel, net of production costs and other operating expenses		(3,714		)		(36,081		)		(3,641		)
Extensions, discoveries and improved recovery, net of future production and development costs		811				854				4,754
Change in estimated future development costs		(227		)		3,091				(3,375		)
Revisions of quantity estimates		868				(1,782		)		190
Previously estimated development costs incurred during the period		1,662				3,327				4,676
Accretion of discount		1,034				3,220				3,456
Net change in income taxes		1,367				13,046				3,673
Purchases and sales of reserves in place, net		178				(2,334		)		45
Changes in production rates and other		169				2,857				975
Net change		(1,682		)		(18,754		)		(263		)
End of year		$	9,713			$	11,395			$	30,149

Average Sales Prices

The following table sets forth, for each of the three years in the period ended December 31, 2016, Occidental’s approximate average sales prices in continuing operations.

						United				Latin				Middle East/
						States				America				North Africa				Total
2016
Oil		—		Average sales price ($/bbl)		$	39.38			$	37.48			$	38.25			$	38.73
NGLs		—		Average sales price ($/bbl)		$	14.72			$	—			$	15.01			$	14.82
Gas		—		Average sales price ($/mcf)		$	1.90			$	3.78			$	1.27			$	1.53
2015
Oil		—		Average sales price ($/bbl)		$	45.04			$	44.49			$	49.65			$	47.10
NGLs		—		Average sales price ($/bbl)		$	15.35			$	—			$	17.88			$	15.96
Gas		—		Average sales price ($/mcf)		$	2.15			$	5.20			$	0.91			$	1.49
2014
Oil		—		Average sales price ($/bbl)		$	84.73			$	88.00			$	96.34			$	90.13
NGLs		—		Average sales price ($/bbl)		$	37.79			$	—			$	30.98			$	37.01
Gas		—		Average sales price ($/mcf)		$	3.97			$	8.94			$	0.77			$	2.55

Net Productive and Dry — Exploratory and Development Wells Completed

The following table sets forth, for each of the three years in the period ended December 31, 2016, Occidental’s net productive and dry–exploratory and development wells completed.

						United			Latin			Middle East/
						States			America			North Africa			Total
2016
Oil		—		Exploratory		—			—			2			2
				Development		166			12			157			335
Gas		—		Exploratory		—			—			—			—
				Development		—			—			10			10
Dry		—		Exploratory		—			—			6			6
				Development		—			—			—			—
2015
Oil		—		Exploratory		17			—			1			18
				Development		387			24			217			628
Gas		—		Exploratory		—			—			2			2
				Development		4			1			12			17
Dry		—		Exploratory		—			—			4			4
				Development		—			1			1			2
2014
Oil		—		Exploratory		25			—			5			30
				Development		419			52			253			724
Gas		—		Exploratory		2			—			2			4
				Development		33			1			13			47
Dry		—		Exploratory		—			1			3			4
				Development		—			1			—			1

Productive Oil and Gas Wells

The following table sets forth, as of December 31, 2016, Occidental’s productive oil and gas wells (both producing and capable of production).

Wells at December 31, 2016 (a)						United States						Latin America					Middle East						Total
Oil		—		Gross (b)		16,501			(841	)		1,493			—		2,209			(28	)		20,203			(869	)
				Net (c)		14,350			(773	)		748			—		1,198			(15	)		16,296			(788	)
Gas		—		Gross (b)		4,083			(319	)		34			—		117			—			4,234			(319	)
				Net (c)		3,608			(298	)		31			—		61			—			3,700			(298	)

(a)	The numbers in parentheses indicate the number of wells with multiple completions.

(b)	The total number of wells in which interests are owned.

(c)	The sum of fractional interests.

Participation in Exploratory and Development Wells Being Drilled

The following table sets forth, as of December 31, 2016, Occidental’s participation in exploratory and development wells being drilled.

Wells at December 31, 2016						United States			Latin America			Middle East			Total
Exploratory and development wells
		—		Gross		34			5			26			65
		—		Net		32			4			16			52

At December 31, 2016, Occidental was participating in 109 pressure-maintenance projects, mostly waterfloods, in the United States, 13 in Latin America and 30 in the Middle East.

Oil and Gas Acreage

The following table sets forth, as of December 31, 2016, Occidental’s holdings of developed and undeveloped oil and gas acreage.

Thousands of acres at						United			Latin			Middle
December 31, 2016						States			America			East			Total
Developed (a)
		—		Gross (b)		6,437			130			636			7,203
		—		Net (c)		2,949			88			246			3,283
Undeveloped (d)
		—		Gross (b)		1,597			269			1,802			3,668
		—		Net (c)		494			213			1,105			1,812

(a)	Acres spaced or assigned to productive wells.

(b)	Total acres in which interests are held.

(c)	Sum of the fractional interests owned based on working interests, or interests under PSCs and other economic arrangements.

(d)	Acres on which wells have not been drilled or completed to a point that would permit the production of commercial quantities of oil and gas, regardless of whether the acreage contains proved reserves.

Occidental’s investment in developed and undeveloped acreage comprises numerous concessions, blocks and leases. Work programs are designed to ensure that the exploration potential of any property is fully evaluated before expiration. In some instances, Occidental may elect to relinquish acreage in advance of the contractual expiration date if the evaluation process is complete and there is not a business basis for extension. In cases where additional time may be required to fully evaluate acreage, Occidental has generally been successful in obtaining extensions. Scheduled lease and concession expirations for undeveloped acreage over the next three years are not expected to have a material adverse impact on Occidental.

Oil, NGLs and Natural Gas Production and Sales Volumes Per Day

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)		2016			2015			2014
United States
Permian Resources		124			110			75
Permian EOR		145			145			147
South Texas and Other		33			73			96
Total		302			328			318
Latin America		34			37			29
Middle East/North Africa
Al Hosn		64			35			—
Dolphin		43			41			38
Oman		96			89			76
Qatar		65			66			69
Other		26			72			67
Total		294			303			250
Total Production (MBOE) (a)		630			668			597
(See footnote following the Sales Volumes from Ongoing Operations table)

Production per Day from Ongoing Operations (MBOE)		2016			2015			2014
United States
Permian Resources		124			110			75
Permian EOR		145			145			147
South Texas and Other		31			42			52
Total		300			297			274
Latin America		34			37			29
Middle East
Al Hosn		64			35			—
Dolphin		43			41			38
Oman		96			89			76
Qatar		65			66			69
Total		268			231			183
Total Production Ongoing Operations (MBOE) (a)		602			565			486
Sold domestic operations		2			31			44
Sold or Exited MENA operations		26			72			67
Total Production (MBOE) (a)		630			668			597
(See footnote following the Sales Volumes from Ongoing Operations table)

Production per Day by Products		2016			2015			2014
United States
Oil (MBBL)
Permian Resources		77			71			43
Permian EOR		108			110			111
South Texas and Other		4			21			29
Total		189			202			183
NGLs (MBBL)
Permian Resources		21			16			12
Permian EOR		27			29			30
South Texas and Other		5			10			13
Total		53			55			55
Natural gas (MMCF)
Permian Resources		158			137			120
Permian EOR		59			37			38
South Texas and Other		144			250			318
Total		361			424			476
Latin America
Oil (MBBL) – Colombia		33			35			27
Natural gas (MMCF) – Bolivia		8			10			11
Middle East/North Africa
Oil (MBBL)
Al Hosn		12			7			—
Dolphin		7			7			7
Oman		77			82			69
Qatar		65			66			69
Other		7			32			28
Total		168			194			173
NGLs (MBBL)
Al Hosn		20			10			—
Dolphin		8			8			7
Total		28			18			7
Natural gas (MMCF)
Al Hosn		190			109			—
Dolphin		166			158			143
Oman		115			44			43
Other		114			237			236
Total		585			548			422
Total Production (MBOE) (a)		630			668			597
(See footnote following the Sales Volumes from Ongoing Operations table)

Production per Day by Products from Ongoing Operations		2016			2015			2014
United States
Oil (MBBL)
Permian Resources		77			71			43
Permian EOR		108			110			111
South Texas and Other		4			6			7
Total		189			187			161
NGLs (MBBL)
Permian Resources		21			16			12
Permian EOR		27			29			30
South Texas and Other		5			7			9
Total		53			52			51
Natural gas (MMCF)
Permian Resources		158			137			120
Permian EOR		59			37			38
South Texas and Other		133			173			210
Total		350			347			368
Latin America
Oil (MBBL) – Colombia		33			35			27
Natural gas (MMCF) – Bolivia		8			10			11
Middle East
Oil (MBBL)
Al Hosn		12			7			—
Dolphin		7			7			7
Oman		77			82			69
Qatar		65			66			69
Total		161			162			145
NGLs (MBBL)
Al Hosn		20			10			—
Dolphin		8			8			7
Total		28			18			7
Natural gas (MMCF)
Al Hosn		190			109			—
Dolphin		166			158			143
Oman		115			44			43
Total		471			311			186
Total Production Ongoing Operations (MBOE) (a)		602			565			486
Sold domestic operations		2			31			44
Sold or Exited MENA operations		26			72			67
Total Production (MBOE) (a)		630			668			597
(See footnote following the Sales Volumes from Ongoing Operations table)

Sales Volumes per Day by Products		2016			2015			2014
United States
Oil (MBBL)		189			202			183
NGLs (MBBL)		53			55			55
Natural gas (MMCF)		361			424			476
Latin America
Oil (MBBL) – Colombia		34			35			29
Natural gas (MMCF) – Bolivia		8			10			11
Middle East/North Africa
Oil (MBBL)
Al Hosn		12			7			—
Dolphin		7			8			7
Oman		77			82			69
Qatar		66			67			69
Other		7			36			27
Total		169			200			172
NGLs (MBBL)
Al Hosn		20			10			—
Dolphin		8			8			7
Total		28			18			7
Natural gas (MMCF)		585			548			422
Total Sales Volumes (MBOE) (a)		632			674			598
(See footnote following the Sales Volumes from Ongoing Operations table)

Sales Volumes per Day by Products from Ongoing Operations		2016			2015			2014
United States
Oil (MBBL)		189			187			161
NGLs (MBBL)		53			52			51
Natural gas (MMCF)		350			347			368
Latin America
Oil (MBBL) – Colombia		34			35			29
Natural gas (MMCF) – Bolivia		8			10			11
Middle East
Oil (MBBL)
Al Hosn		12			7			—
Dolphin		7			8			7
Oman		77			82			69
Qatar		66			67			69
Total		162			164			145
NGLs (MBBL)
Al Hosn		20			10			—
Dolphin		8			8			7
Total		28			18			7
Natural gas (MMCF)		471			311			186
Total Sales Ongoing Operations (MBOE) (a)		604			567			488
Sold domestic operations		2			31			44
Sold or Exited MENA operations		26			76			66
Total Sales Volumes (MBOE) (a)		632			674			598

(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. The price of natural gas on a barrel of oil equivalent basis is currently substantially lower than the corresponding price for oil and has been similarly lower for a number of years. For example, in 2016, the average prices of WTI oil and NYMEX natural gas were $43.32 per barrel and $2.42, respectively, resulting in an oil to gas ratio of 18 to 1.

Schedule II – Valuation and Qualifying Accounts	Occidental Petroleum Corporation and Subsidiaries
in millions

						Additions
		Balance at Beginning of Period				Charged to Costs and Expenses				Charged to Other Accounts				Deductions (a)				Balance at End of Period
2016
Allowance for doubtful accounts		$	20			$	543			$	(3	)		$	(2	)		$	558		(b)
Environmental, litigation, tax and other reserves		$	479			$	61			$	531			$	(74	)		$	997		(c)
2015
Allowance for doubtful accounts		$	19			$	9			$	(3	)		$	(5	)		$	20		(b)
Environmental, litigation, tax and other reserves		$	672			$	119			$	2			$	(314	)		$	479		(c)
2014
Allowance for doubtful accounts		$	17			$	4			$	(2	)		$	—			$	19		(b)
Environmental, litigation, tax and other reserves		$	496			$	80			$	183			$	(87	)		$	672		(c)

Note: The amounts presented represent continuing operations.

(a)	Primarily represents payments.

(b)	Of these amounts, $17 million, $20 million and $19 million in 2016, 2015 and 2014, respectively, are classified as current.

(c)	Of these amounts, $197 million, $98 million and $287 million in 2016, 2015 and 2014, respectively, are classified as current.