filings.toolsItem 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
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Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
| 56 | OXY 2020 FORM 10-K |
 | FINANCIAL STATEMENTS REPORT |
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
Occidental Petroleum Corporation:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Occidental Petroleum Corporation and subsidiaries (the Company) as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows for each of the years in the three‑year period ended December 31, 2020, and the related notes and financial statement schedule II – valuation and qualifying accounts (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the years in the three‑year period ended December 31, 2020, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 26, 2021 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting*.*
Change in Accounting Principle
As discussed in Notes 2 and 8 to the consolidated financial statements, the Company changed its method of accounting for leases as of January 1, 2019 due to the adoption of Accounting Standards Codification Topic 842, Leases.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
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| FINANCIAL STATEMENTS REPORT |
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Evaluation of the environmental liability associated with the lower 8.3 miles of the Lower Passaic River site
As discussed in Notes 1 and 10 to the consolidated financial statements, the Company accrues a liability for estimated environmental remedial activities when it is probable a liability has been incurred and the amount of remediation costs can be estimated. The Company accrued a liability related to its estimated allocable share of the costs to perform the remedial activities required for the lower 8.3 miles of the Lower Passaic River site. As of December 31, 2020, the Company’s estimated environmental liabilities were $1.2 billion.
We identified the evaluation of the environmental liability associated with the lower 8.3 miles of the Lower Passaic River site as a critical audit matter. There was a high degree of subjective auditor judgment in applying and evaluating the results of our procedures. This is due to (1) possible changes to expected remedial activities to implement the proposed clean-up plan outlined in the Record of Decision (ROD) issued by the Environmental Protection Agency (EPA) and their estimated costs, and (2) possible changes to the Company’s estimated share of the remediation costs.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s environmental liability process to estimate the cost of remedial activities and estimate the Company’s allocable share of the remediation costs. We evaluated the remedial activities and related cost assumptions used by the Company by comparing them against remedial activities and cost estimates provided by the EPA in the ROD. We compared certain design documentation provided by the Company to the EPA in order to identify potential differences between the design plan and the ROD and assessed the impact of any such differences on the remediation cost assumptions used by the Company to estimate the liability. We assessed the Company’s assumption for its allocable share of the remediation costs and analyzed publicly available data sources for information that might be contrary to the information used by the Company. We involved an environmental analysis professional with specialized skills and knowledge who assisted in reading correspondence between the Company and the EPA related to the design phase for this site to assess the Company’s remediation cost assumptions.
Assessment of the estimated proved oil and gas reserves on the determination of depreciation and depletion expense related to proved oil and gas properties
As discussed in Note 1 to the consolidated financial statements, the Company determines depreciation and depletion of oil and gas producing properties by the unit-of-production method. Under this method, capitalized costs are amortized over estimated proved reserves. For the year ended December 31, 2020, the Company recorded depreciation and depletion expense related to proved oil and gas properties of $7.4 billion.
We identified the assessment of the estimated proved oil and gas reserves on the determination of depreciation and depletion expense related to proved oil and gas properties as a critical audit matter. Complex auditor judgment was required to assess the Company’s estimate of proved oil and gas reserves, which is a key input for the determination of depreciation and depletion expense. Estimating proved oil and gas reserves requires the expertise of professional petroleum reservoir engineers. The key assumptions included (1) commodity prices, inclusive of market differentials, (2) estimated future production quantities, and (3) estimated operating and capital costs.
| 58 | OXY 2020 FORM 10-K |
| FINANCIAL STATEMENTS REPORT |
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s depreciation and depletion process, including the estimation of proved oil and gas reserves. We analyzed and assessed the determination of depreciation and depletion expense for compliance with industry and regulatory standards. We assessed compliance of the methodology used by the Company’s engineering and technical staff to estimate proved oil and gas reserves with industry and regulatory standards. We read the findings of the independent reservoir engineering specialist’s review of the methods and procedures used by the Company in estimating the proved reserves for compliance with industry and regulatory standards. We assessed the commodity prices, including relevant market differentials, used by the Company’s engineering and technical staff by comparing them to publicly available prices, adjusted for historical market differentials. To assess the Company’s ability to accurately estimate future production quantities, we compared the future production quantity assumptions used by the Company in prior periods to the actual production amounts. We compared the estimated future production quantities used by the Company in the current period to historical production rates. We evaluated the operating and capital cost assumptions used by the Company’s engineering and technical staff by comparing them to historical costs. We evaluated the professional qualifications and the knowledge, skills, and ability of the Company’s internal reserve engineers and the independent reservoir engineering specialists engaged by the Company.
Evaluation of the recoverability and fair value estimate of certain proved oil and gas properties
As discussed in Notes 1 and 17 to the consolidated financial statements, the Company performs impairment tests with respect to its proved oil and gas 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, the Company estimates the undiscounted cash flows of the proved oil and gas property and compares the undiscounted cash flows to carrying value of the proved property. 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. The Company recorded impairment charges of $4.6 billion for its proved oil and gas properties, including properties held for sale, for the year ended December 31, 2020.
We identified the evaluation of the recoverability and fair value estimate of certain proved oil and gas properties as a critical audit matter. Subjective auditor judgment was required to evaluate the key assumptions used to estimate the undiscounted future net cash flows used in the recoverability analysis and the discounted future net cash flows used in the determination of fair value for those properties where the carrying value exceeded the undiscounted cash flows. The key assumptions included (1) estimated future commodities prices, (2) estimated future production quantities, (3) estimated future operating and capital costs, (4) discount rate, and (5) reserve category risk adjustment factors.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s proved oil and gas impairment process, including controls related to the key assumptions. We compared benchmark commodity prices used by the Company in estimating future commodity prices to publicly disclosed projected commodity prices. To assess the Company’s ability to accurately estimate future production quantities, we compared the future production quantity assumptions used by the Company in prior periods to the actual production amounts. We compared the estimated future production quantities used by the Company in the current period to historical production rates. We evaluated the estimated future operating and capital cost assumptions by comparing them to historical costs. We evaluated the professional qualifications and the knowledge, skills, and ability of the Company’s internal reserve engineers, including their ability to estimate applicable reserve category risk adjustment factors. In addition, we involved valuation professionals with specialized skills and knowledge, who assisted in evaluating the (1) discount rate by comparing it to a discount rate range that was independently developed using publicly available market data for comparable entities and (2) reserve category risk adjustment factors by comparing them to third party publications of risk adjustment factors utilized by market participants.
Evaluation of the fair value measurement of certain unproved oil and gas properties
As discussed in Notes 1 and 17 to the consolidated financial statements, the Company performs impairment tests with respect to its unproved oil and gas properties whenever events or circumstances indicate that the carrying value of property may not be recoverable. Occidental periodically reviews unproved properties for impairments; numerous factors are considered, including but not limited to, current exploration and development plans, favorable or unfavorable exploration activity, geologists’ evaluation of the property, the current and projected political and regulatory climate, and the remaining
| OXY 2020 FORM 10-K | 59 |
| FINANCIAL STATEMENTS REPORT |
lease term for the property. The Company measured the fair value of certain domestic onshore unproved property based on a market approach using an implied acreage valuation derived from domestic onshore market participants excluding the fair value assigned to proved properties, which was based on an income approach. Impairment charges of $4.6 billion were recorded for the year ended December 31, 2020.
We identified the evaluation of the fair value of certain domestic onshore unproved oil and gas properties as a critical audit matter. A high degree of subjectivity was involved in evaluating the results of the market-based enterprise values, the control premium, and the discounted cash flow models used in the income approach. The evaluation of the market-based enterprise values and control premium included determining which market participants had acreage positions most comparable to the Company’s acreage position of certain domestic onshore oil and gas properties. In addition, the income approach utilized risk adjusted discounted cash flow models, which included several significant assumptions. The key assumptions used in the risk adjusted discounted cash flow models include (1) estimated future commodities prices, (2) estimated future production quantities, (3) estimated future operating and capital costs, (4) discount rate, and (5) reserve category risk adjustment factors.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s unproved oil and gas impairment process, including controls related to the key assumptions, identification of comparable acreage positions and selection of the control premium. We evaluated the selection of market participants having acreage positions most comparable to the Company by comparing the domestic onshore acreage held by the market participants to the oil and gas properties under evaluation. We compared benchmark commodity prices used by the Company in estimating future commodity prices to publicly disclosed projected commodity prices. To assess the Company’s ability to accurately estimate future production quantities, we compared the future production quantity assumptions used by the Company in prior periods to the actual production amounts. We compared estimated future production quantities used by the Company in the current period to historical production rates. We evaluated the estimated future operating and capital cost assumptions by comparing them to historical costs. We evaluated the professional qualifications and the knowledge, skills, and ability of the Company’s internal reserve engineers, including their ability to estimate applicable reserve category risk adjustment factors. In addition, we involved valuation professionals with specialized skills and knowledge, who assisted in evaluating the Company’s:
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market-based enterprise value by comparing the Company’s estimated value for certain domestic onshore unproved oil and gas properties to a range of indicated values based on comparable companies using publicly available market data
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control premium by comparing it to a control premium range that was independently developed using publicly available market data for comparable companies
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discount rate by comparing it to a discount rate range that was independently developed using publicly available market data for comparable entities
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reserve category risk adjustment factors by comparing them to third party publications of risk adjustment factors utilized by market participants
/s/ KPMG LLP
We have served as the Company’s auditor since 2002.
Houston, Texas
February 26, 2021
| 60 | OXY 2020 FORM 10-K |
| FINANCIAL STATEMENTS REPORT |
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
Occidental Petroleum Corporation:
Opinion on Internal Control Over Financial Reporting
We have audited Occidental Petroleum Corporation and subsidiaries’ (the Company) internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2020, and the related notes and financial statement schedule II – valuation and qualifying accounts (collectively, the consolidated financial statements), and our report dated February 26, 2021 expressed an unqualified opinion on those consolidated financial statements.
Basis for Opinion
The Company’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 are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. 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 of internal control over financial reporting 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.
Definition and Limitations of Internal Control Over Financial Reporting
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.
/s/ KPMG LLP
Houston, Texas
February 26, 2021
| OXY 2020 FORM 10-K | 61 |
 | FINANCIAL STATEMENTS |
| Consolidated Balance Sheets | Occidental Petroleum Corporation and Subsidiaries |
| December 31, | ||||||||||||||
| millions | 2020 | 2019 | ||||||||||||
| ASSETS | ||||||||||||||
| CURRENT ASSETS | ||||||||||||||
| Cash and cash equivalents | $ | 2,008 | $ | 3,032 | ||||||||||
| Restricted cash and restricted cash equivalents | 170 | 485 | ||||||||||||
| Trade receivables, net of reserves of $24 in 2020 and $19 in 2019 | 2,115 | 4,233 | ||||||||||||
| Inventories | 1,898 | 1,581 | ||||||||||||
| Assets held for sale | 1,433 | 3,870 | ||||||||||||
| Other current assets | 1,195 | 1,432 | ||||||||||||
| Total current assets | 8,819 | 14,633 | ||||||||||||
| INVESTMENTS IN UNCONSOLIDATED ENTITIES | 3,250 | 6,389 | ||||||||||||
| PROPERTY, PLANT AND EQUIPMENT | ||||||||||||||
| Oil and gas | 102,454 | 107,801 | ||||||||||||
| Chemical | 7,356 | 7,172 | ||||||||||||
| Midstream and marketing | 8,232 | 8,176 | ||||||||||||
| Corporate | 922 | 1,118 | ||||||||||||
| 118,964 | 124,267 | |||||||||||||
| Accumulated depreciation, depletion and amortization | (53,075) | (42,037) | ||||||||||||
| Total property, plant and equipment, net | 65,889 | 82,230 | ||||||||||||
| OPERATING LEASE ASSETS | 1,062 | 1,411 | ||||||||||||
| LONG-TERM RECEIVABLES AND OTHER ASSETS, NET | 1,044 | 2,527 | ||||||||||||
| TOTAL ASSETS | $ | 80,064 | $ | 107,190 |
The accompanying notes are an integral part of these consolidated financial statements.
| 62 | OXY 2020 FORM 10-K |
| FINANCIAL STATEMENTS |
| Consolidated Balance Sheets | Occidental Petroleum Corporation and Subsidiaries |
| December 31, | ||||||||||||||
| millions except share and per-share amounts | 2020 | 2019 | ||||||||||||
| LIABILITIES AND EQUITY | ||||||||||||||
| CURRENT LIABILITIES | ||||||||||||||
| Current maturities of long-term debt | $ | 440 | $ | 51 | ||||||||||
| Current operating lease liabilities | 473 | 579 | ||||||||||||
| Accounts payable | 2,987 | 4,910 | ||||||||||||
| Accrued liabilities | 3,570 | 5,447 | ||||||||||||
| Liabilities of assets held for sale | 753 | 1,718 | ||||||||||||
| Total current liabilities | 8,223 | 12,705 | ||||||||||||
| LONG-TERM DEBT, NET | ||||||||||||||
| Long-term debt, net | 35,745 | 38,537 | ||||||||||||
| DEFERRED CREDITS AND OTHER LIABILITIES | ||||||||||||||
| Deferred income taxes, net | 7,113 | 9,717 | ||||||||||||
| Asset retirement obligations | 3,977 | 4,411 | ||||||||||||
| Pension and postretirement obligations | 1,763 | 1,823 | ||||||||||||
| Environmental remediation liabilities | 1,028 | 1,035 | ||||||||||||
| Operating lease liabilities | 641 | 872 | ||||||||||||
| Other | 3,001 | 3,858 | ||||||||||||
| Total deferred credits and other liabilities | 17,523 | 21,716 | ||||||||||||
| EQUITY | ||||||||||||||
| Preferred stock, at $1.00 per share par value (100,000 shares at December 31, 2020) | 9,762 | 9,762 | ||||||||||||
| Common stock, $0.20 per share par value, authorized shares: 1.5 billion, issued shares: 2020 — 1,080,564,947 and 2019 — 1,044,434,893 | 216 | 209 | ||||||||||||
| Treasury stock: 2020 — 149,051,634 shares and 2019 — 150,323,151 shares | (10,665) | (10,653) | ||||||||||||
| Additional paid-in capital | 16,552 | 14,955 | ||||||||||||
| Retained earnings | 2,996 | 20,180 | ||||||||||||
| Accumulated other comprehensive loss | (288) | (221) | ||||||||||||
| Total stockholders’ equity | 18,573 | 34,232 | ||||||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 80,064 | $ | 107,190 |
The accompanying notes are an integral part of these consolidated financial statements.
| OXY 2020 FORM 10-K | 63 |
| FINANCIAL STATEMENTS |
| Consolidated Statements of Operations | Occidental Petroleum Corporation and Subsidiaries |
| Years Ended December 31, | ||||||||||||||||||||
| millions except per-share amounts | 2020 | 2019 | 2018 | |||||||||||||||||
| REVENUES AND OTHER INCOME | ||||||||||||||||||||
| Net sales | $ | 17,809 | $ | 20,911 | $ | 17,824 | ||||||||||||||
| Interest, dividends and other income | 118 | 217 | 136 | |||||||||||||||||
| Gains (losses) on sale of assets, net | (1,666) | 622 | 974 | |||||||||||||||||
| Total | 16,261 | 21,750 | 18,934 | |||||||||||||||||
| COSTS AND OTHER DEDUCTIONS | ||||||||||||||||||||
| Oil and gas operating expense | 3,065 | 3,282 | 2,761 | |||||||||||||||||
| Transportation and gathering expense | 1,600 | 635 | 152 | |||||||||||||||||
| Chemical and midstream cost of sales | 2,408 | 2,791 | 2,833 | |||||||||||||||||
| Purchased commodities | 1,395 | 1,679 | 822 | |||||||||||||||||
| Selling, general and administrative | 864 | 893 | 585 | |||||||||||||||||
| Other operating and non-operating expense | 884 | 1,421 | 1,028 | |||||||||||||||||
| Depreciation, depletion and amortization | 8,097 | 6,140 | 3,977 | |||||||||||||||||
| Asset impairments and other charges | 11,083 | 1,361 | 561 | |||||||||||||||||
| Taxes other than on income | 622 | 840 | 439 | |||||||||||||||||
| Anadarko Acquisition-related costs | 339 | 1,647 | — | |||||||||||||||||
| Exploration expense | 132 | 247 | 110 | |||||||||||||||||
| Interest and debt expense, net | 1,424 | 1,066 | 389 | |||||||||||||||||
| Total | 31,913 | 22,002 | 13,657 | |||||||||||||||||
| Income (loss) before income taxes and other items | (15,652) | (252) | 5,277 | |||||||||||||||||
| OTHER ITEMS | ||||||||||||||||||||
| Gains (losses) on interest rate swaps and warrants, net | (423) | 233 | — | |||||||||||||||||
| Income from equity investments | 370 | 373 | 331 | |||||||||||||||||
| Total | (53) | 606 | 331 | |||||||||||||||||
| Income (loss) from continuing operations before income taxes | (15,705) | 354 | 5,608 | |||||||||||||||||
| Income tax benefit (expense) | 2,172 | (861) | (1,477) | |||||||||||||||||
| Income (loss) from continuing operations | (13,533) | (507) | 4,131 | |||||||||||||||||
| Loss from discontinued operations, net of tax | (1,298) | (15) | — | |||||||||||||||||
| NET (LOSS) INCOME | (14,831) | (522) | 4,131 | |||||||||||||||||
| Less: Net loss attributable to noncontrolling interest | — | (145) | — | |||||||||||||||||
| Less: Preferred stock dividends | (844) | (318) | — | |||||||||||||||||
| NET (LOSS) INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS | $ | (15,675) | $ | (985) | $ | 4,131 | ||||||||||||||
| PER COMMON SHARE | ||||||||||||||||||||
| Income (loss) from continuing operations—basic | $ | (15.65) | $ | (1.20) | $ | 5.40 | ||||||||||||||
| Loss from discontinued operations—basic | (1.41) | (0.02) | — | |||||||||||||||||
| Net income (loss) attributable to common stockholders—basic | $ | (17.06) | $ | (1.22) | $ | 5.40 | ||||||||||||||
| Income (loss) from continuing operations—diluted | $ | (15.65) | $ | (1.20) | $ | 5.39 | ||||||||||||||
| Loss from discontinued operations—diluted | (1.41) | (0.02) | — | |||||||||||||||||
| Net income (loss) attributable to common stockholders—diluted | $ | (17.06) | $ | (1.22) | $ | 5.39 |
The accompanying notes are an integral part of these consolidated financial statements.
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| FINANCIAL STATEMENTS |
| Consolidated Statements of Comprehensive Income (Loss) | Occidental Petroleum Corporation and Subsidiaries |
| Years Ended December 31, | ||||||||||||||||||||
| millions | 2020 | 2019 | 2018 | |||||||||||||||||
| Net income (loss) | $ | (14,831) | $ | (522) | $ | 4,131 | ||||||||||||||
| Other comprehensive income (loss) items: | ||||||||||||||||||||
| Losses on derivatives (a) | (2) | (129) | (6) | |||||||||||||||||
| Pension and postretirement gains (losses) (b) | (71) | 78 | 137 | |||||||||||||||||
| Reclassification of realized losses on derivatives (c) | 6 | 2 | 13 | |||||||||||||||||
| Other comprehensive income (loss), net of tax | (67) | (49) | 144 | |||||||||||||||||
| Comprehensive income (loss) | (14,898) | (571) | 4,275 | |||||||||||||||||
| Less: Comprehensive income attributable to noncontrolling interests | — | (145) | — | |||||||||||||||||
| Comprehensive income (loss) attributable to preferred and common stockholders | $ | (14,898) | $ | (716) | $ | 4,275 |
(a)Net of tax of $1, $36 and $2 in 2020, 2019 and 2018, respectively.
(b)Net of tax of $24, $(25) and $(38) in 2020, 2019 and 2018, respectively. See Note 15 - Retirement and Postretirement Benefit Plans in the Notes to Consolidated Financial Statements in Part II Item 8 of this Form 10-K for additional information.
(c)Net of tax of $(2), $0 and $(4) in 2020, 2019 and 2018, respectively.
The accompanying notes are an integral part of these consolidated financial statements.
| OXY 2020 FORM 10-K | 65 |
| FINANCIAL STATEMENTS |
| Consolidated Statements of Stockholders’ Equity | Occidental Petroleum Corporation and Subsidiaries |
| Equity Attributable to Common Stock | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Treasury Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Non-controlling Interests | Total Equity | |||||||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2017 | $ | — | $ | 179 | $ | (9,168) | $ | 7,884 | $ | 21,935 | $ | (258) | $ | — | $ | 20,572 | ||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | 4,131 | — | — | 4,131 | ||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income, net of tax | — | — | — | — | — | 144 | — | 144 | ||||||||||||||||||||||||||||||||||||||||||
| Dividends on common stock, $3.10 per share | — | — | — | — | (2,374) | — | — | (2,374) | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock and other, net | — | — | — | 162 | — | — | — | 162 | ||||||||||||||||||||||||||||||||||||||||||
| Purchases of treasury stock | — | — | (1,305) | — | — | — | — | (1,305) | ||||||||||||||||||||||||||||||||||||||||||
| Reclassification of stranded tax effects | — | — | — | — | 58 | (58) | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2018 | $ | — | $ | 179 | $ | (10,473) | $ | 8,046 | $ | 23,750 | $ | (172) | $ | — | $ | 21,330 | ||||||||||||||||||||||||||||||||||
| Net income (loss) | — | — | — | — | (667) | — | 145 | (522) | ||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss, net of tax | — | — | — | — | — | (49) | — | (49) | ||||||||||||||||||||||||||||||||||||||||||
| Dividends on common stock, $3.14 per share | — | — | — | — | (2,585) | — | — | (2,585) | ||||||||||||||||||||||||||||||||||||||||||
| Dividends on preferred stock, $3,489 per share | — | — | — | — | (318) | — | — | (318) | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock, net | — | 30 | — | 6,909 | — | — | — | 6,939 | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of preferred stock | 9,762 | — | — | — | — | — | — | 9,762 | ||||||||||||||||||||||||||||||||||||||||||
| Purchases of treasury stock | — | — | (180) | — | — | — | — | (180) | ||||||||||||||||||||||||||||||||||||||||||
| Fair value of noncontrolling interest acquired | — | — | — | — | — | — | 4,895 | 4,895 | ||||||||||||||||||||||||||||||||||||||||||
| Noncontrolling interest distributions, net | — | — | — | — | — | — | (131) | (131) | ||||||||||||||||||||||||||||||||||||||||||
| Change in control WES | — | — | — | — | — | — | (4,909) | (4,909) | ||||||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2019 | $ | 9,762 | $ | 209 | $ | (10,653) | $ | 14,955 | $ | 20,180 | $ | (221) | $ | — | $ | 34,232 | ||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | (14,831) | — | — | (14,831) | ||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss, net of tax | — | — | — | — | — | (67) | — | (67) | ||||||||||||||||||||||||||||||||||||||||||
| Dividends on common stock, $0.82 per share | — | — | — | — | (746) | — | — | (746) | ||||||||||||||||||||||||||||||||||||||||||
| Dividends on preferred stock, $8,444 per share | — | 6 | — | 438 | (844) | — | — | (400) | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of warrants on common stock | — | — | — | 767 | (763) | — | — | 4 | ||||||||||||||||||||||||||||||||||||||||||
| Berkshire Warrants | — | — | — | 103 | — | — | — | 103 | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock and other, net | — | 1 | — | 289 | — | — | — | 290 | ||||||||||||||||||||||||||||||||||||||||||
| Purchases of treasury stock | — | — | (12) | — | — | — | — | (12) | ||||||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2020 | $ | 9,762 | $ | 216 | $ | (10,665) | $ | 16,552 | $ | 2,996 | $ | (288) | $ | — | $ | 18,573 |
The accompanying notes are an integral part of these consolidated financial statements.
| 66 | OXY 2020 FORM 10-K |
| FINANCIAL STATEMENTS |
| Consolidated Statements of Cash Flows | Occidental Petroleum Corporation and Subsidiaries |
| Years Ended December 31, | ||||||||||||||||||||
| millions | 2020 | 2019 | 2018 | |||||||||||||||||
| CASH FLOW FROM OPERATING ACTIVITIES | ||||||||||||||||||||
| Net income (loss) | $ | (14,831) | $ | (522) | $ | 4,131 | ||||||||||||||
| Adjustments to reconcile net income (loss) to net cash from operating activities: | ||||||||||||||||||||
| Discontinued operations, net | 1,298 | 15 | — | |||||||||||||||||
| Depreciation, depletion and amortization of assets | 8,097 | 6,140 | 3,977 | |||||||||||||||||
| Deferred income tax (benefit) provision | (2,517) | (1,027) | 371 | |||||||||||||||||
| Other noncash charges to income | 419 | 958 | 34 | |||||||||||||||||
| Asset impairments and other charges | 11,002 | 1,328 | 561 | |||||||||||||||||
| (Gain) loss on sales of equity investments and other assets, net | 1,666 | (622) | (974) | |||||||||||||||||
| Undistributed earnings from affiliates | (61) | (50) | (43) | |||||||||||||||||
| Dry hole expense | 47 | 89 | 56 | |||||||||||||||||
| Changes in operating assets and liabilities: | ||||||||||||||||||||
| Decrease in receivables | 2,062 | 401 | 955 | |||||||||||||||||
| (Increase) decrease in inventories | (484) | 78 | (108) | |||||||||||||||||
| Decrease in other current assets | 350 | 170 | 94 | |||||||||||||||||
| Increase (decrease) in accounts payable and accrued liabilities | (3,228) | 358 | (1,500) | |||||||||||||||||
| Increase in current domestic and foreign income taxes | 22 | 20 | 38 | |||||||||||||||||
| Other operating, net | — | — | 77 | |||||||||||||||||
| Operating cash flow from continuing operations | 3,842 | 7,336 | 7,669 | |||||||||||||||||
| Operating cash flow from discontinued operations, net of taxes | 113 | 39 | — | |||||||||||||||||
| Net cash provided by operating activities | 3,955 | 7,375 | 7,669 | |||||||||||||||||
| CASH FLOW FROM INVESTING ACTIVITIES | ||||||||||||||||||||
| Capital expenditures | (2,535) | (6,367) | (4,975) | |||||||||||||||||
| Change in capital accrual | (519) | (249) | 55 | |||||||||||||||||
| Purchase of businesses and assets, net | (114) | (28,088) | (928) | |||||||||||||||||
| Proceeds from sale of assets and equity investments, net | 2,281 | 6,143 | 2,824 | |||||||||||||||||
| Equity investments and other, net | 109 | (291) | (182) | |||||||||||||||||
| Investing cash flow from continuing operations | (778) | (28,852) | (3,206) | |||||||||||||||||
| Investing cash flow from discontinued operations | (41) | (175) | — | |||||||||||||||||
| Net cash used by investing activities | (819) | (29,027) | (3,206) | |||||||||||||||||
| CASH FLOW FROM FINANCING ACTIVITIES | ||||||||||||||||||||
| Proceeds from long-term debt, net - Occidental | 6,936 | 21,557 | 978 | |||||||||||||||||
| Payments of long-term debt, net - Occidental | (8,916) | (6,959) | (500) | |||||||||||||||||
| Proceeds from long-term debt, net - WES | — | 459 | — | |||||||||||||||||
| Proceeds from issuance of common and preferred stock | 134 | 10,028 | 33 | |||||||||||||||||
| Purchases of treasury stock | (12) | (237) | (1,248) | |||||||||||||||||
| Cash dividends paid on common and preferred stock | (1,845) | (2,624) | (2,374) | |||||||||||||||||
| Distributions to noncontrolling interest | — | (257) | — | |||||||||||||||||
| Payment of liabilities associated with the sale of future royalties | (386) | (28) | — | |||||||||||||||||
| Other financing, net | (419) | 257 | 9 | |||||||||||||||||
| Financing cash flow from continuing operations | (4,508) | 22,196 | (3,102) | |||||||||||||||||
| Financing cash flow from discontinued operations | (8) | (3) | — | |||||||||||||||||
| Net cash provided (used) by financing activities | (4,516) | 22,193 | (3,102) | |||||||||||||||||
| Increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents | (1,380) | 541 | 1,361 | |||||||||||||||||
| Cash, cash equivalents, restricted cash and restricted cash equivalents — beginning of year | 3,574 | 3,033 | 1,672 | |||||||||||||||||
| Cash, cash equivalents, restricted cash and restricted cash equivalents — end of year | $ | 2,194 | $ | 3,574 | $ | 3,033 |
The accompanying notes are an integral part of these consolidated financial statements.
| OXY 2020 FORM 10-K | 67 |
| FINANCIAL STATEMENTS FOOTNOTES |
| 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. On August 8, 2019, pursuant to the Agreement and Plan of Merger dated as of May 9, 2019 (the Merger Agreement), among Occidental, Baseball Merger Sub 1, Inc., a Delaware corporation and an indirect, wholly owned subsidiary of Occidental (Merger Subsidiary), and Anadarko Petroleum Corporation (Anadarko), Occidental acquired all of the outstanding shares of Anadarko through a transaction in which Merger Subsidiary merged with and into Anadarko (the Acquisition), with Anadarko continuing as the surviving entity and as an indirect, wholly owned subsidiary of Occidental. See Note 3 - The Acquisition for further information.
Occidental’s principal businesses consist of three reporting segments: oil and gas, chemical and midstream and marketing. The oil and gas segment explores for, develops and produces oil and condensate, natural gas liquids (NGL) and natural gas. The chemical segment (OxyChem) mainly manufactures and markets basic chemicals and vinyls. The midstream and marketing segment purchases, markets, gathers, processes, transports and stores oil, condensate, NGL, natural gas, CO2 and power. It also trades around its assets, including transportation and storage capacity, and invests in entities that conduct similar activities such as Western Midstream Partners, L.P. (WES). The midstream and marketing segment also includes Oxy Low Carbon Ventures (OLCV). OLCV seeks to leverage Occidental’s carbon management expertise that is derived from its enhanced oil recovery (EOR) operations to develop carbon capture, utilization and storage facilities that are expected to source anthropogenic CO2 and promote innovative technologies that drive cost efficiencies and economically grow Occidental’s business while reducing emissions.
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, its undivided interests in oil and gas exploration and production ventures and, previously, variable interest entities (VIE) for which Occidental was the primary beneficiary. 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, statements of operations and statements of cash flows.
The Acquisition introduced different revenue and expense streams to Occidental’s legacy operations. As a result, changes were made to the structure of certain financial statements, notes and supplementary data to provide clarity. In addition, certain prior period amounts have been reclassified to conform to the current presentation.
WES INVESTMENT
WES is a publicly traded limited partnership with its common units traded on the New York Stock Exchange (NYSE) under the ticker symbol “WES.” WES owns the entire non-economic general partner interest and a 98% limited partner interest in Western Midstream Operating, LP (WES Operating), a Delaware limited partnership formed by Anadarko in 2007 to acquire, own, develop and operate midstream assets.
From the Acquisition date through December 31, 2019, WES was determined to be a VIE, and Occidental, through its ownership of the general partner interest in WES, had the power to direct the activities that significantly affected the economic performance of WES and the obligation to absorb losses or the right to receive benefits that could be significant to WES. As such, Occidental was considered the primary beneficiary and consolidated WES and its consolidated subsidiaries from the date of the Acquisition to December 31, 2019. All intercompany transactions were eliminated during the consolidated period. Revenues of $1.1 billion, cost of sales of $500 million and operating cash flows of $498 million from the date of the Acquisition to December 31, 2019 are attributable to WES and are included in Occidental’s consolidated financial statements. Net income from noncontrolling interest for the same period relates to the 44.6% limited partner interest of WES owned by the public.
| 68 | OXY 2020 FORM 10-K |
| FINANCIAL STATEMENTS FOOTNOTES |
On December 31, 2019, Occidental and WES executed several agreements to allow WES to operate as an independent midstream company to support its ongoing pursuit of third-party growth opportunities. The executed agreements include amendments to the partnership agreement that significantly expand the unaffiliated limited partner unitholders’ rights. The significant amendments to the partnership agreement included:
■Providing for a simple majority of the unaffiliated unitholders to remove and elect a new general partner;
■Allowing for 20% of the unaffiliated unitholders to call a special meeting to vote to remove the general partner;
■Eliminating ownership thresholds that could have prevented unaffiliated unitholders from voting;
■Limiting Occidental’s voting percentage to 45% for certain unitholder matters until Occidental owns less than 40% of the limited partner units for twelve consecutive months; and
■Transferring 2% of Occidental’s limited partner interest to the general partner to provide a 2% economic interest to the general partner.
In addition to the partnership agreement amendments, in December 2019, the WES management team’s employment was transferred from Occidental to WES, and WES-dedicated personnel were seconded to WES from Occidental. The seconded employees’ employment was contractually obligated to be transferred to WES during 2020 once employee benefit plans were established. As of December 31, 2020, there were no seconded employees remaining for WES. Additionally, as of December 31, 2019, Occidental employees no longer comprise a majority of the board of directors of WES’ general partner.
As a result of the 2019 partnership agreement amendments and other related agreements, WES no longer met the criteria to be considered a VIE. Accordingly, Occidental evaluated WES under the voting interest model and determined, because Occidental did not control the power to appoint or remove a successor general partner, it should no longer consolidate WES. Occidental recognized, at fair value, an equity method investment of $5.1 billion based on the closing market price of WES as of December 31, 2019 and recognized a loss of approximately $1 billion that was included in asset impairments and other charges on the Statement of Operations for the year ended December 31, 2019.
In the first quarter 2020, Occidental recorded a loss from an equity investment of $236 million primarily as a result of WES’ write-off of its goodwill. At the end of the third quarter 2020, Occidental recorded an other-than-temporary impairment of $2.7 billion, see Note 17 - Fair Value Measurements for a description of the inputs and assumptions utilized.
In addition, Occidental recorded a loss of $46 million as a result of a non-cash transaction with WES in which Occidental exchanged approximately 27.9 million of its WES common units to retire a $260 million note payable to WES, see Note 7 - Long-Term Debt.
As of December 31, 2020, Occidental’s equity method investment in WES was $1.9 billion, which exceeds Occidental’s pro-rata interest in the net assets of WES by $437 million. This basis difference is primarily associated with WES' property, plant and equipment and equity investments and is subject to amortization over their estimated average lives. Subsequent to the other-than-temporary impairment there was no equity method goodwill associated with the WES equity investment. As of December 31, 2020, Occidental has a 2% non-voting general partner interest and a 51.8% limited partner interest in WES and a 2% non-voting limited partner interest in WES Operating, a subsidiary of WES. On a combined basis, Occidental's total effective economic interest in WES and its subsidiaries is 53.5%. Occidental intends to reduce its limited partner ownership interest in WES to below 50%.
INVESTMENTS IN UNCONSOLIDATED ENTITIES
Occidental’s percentage interest in the underlying net assets of affiliates for 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. See Note 16 - Investments and Related-Party Transactions for further discussion regarding investments in unconsolidated entities.
DISCONTINUED OPERATIONS
In connection with the Acquisition, Occidental entered into a purchase and sale agreement with TOTAL S.A. (Total) to sell all of the assets, liabilities, businesses and operations of Anadarko's operations in Algeria, Ghana, Mozambique and South Africa. Total and Occidental completed the sale of the Mozambique assets in September 2019 for approximately $4.2 billion and the South Africa assets in January 2020 for approximately $100 million.
In April 2020, subsequent to communications with Algerian government officials, Occidental determined that the sale of the Algeria operations to Total would not be consummated and the decision was made to continue to operate within Algeria. As a result, as of the second quarter of 2020, Occidental no longer classified the Algeria operations as a held for sale asset in discontinued operations and reclassified prior periods to reflect the Algeria operations as continuing operations, see Note 4 - Divestitures and Other Transactions for the impact on prior periods. In addition, in the second quarter 2020, Occidental recorded a $931 million impairment to remeasure the Algeria oil and gas properties to their fair value, which was lower than the carrying amount as if DD&A were recorded from the date of the Acquisition. The fair value of the oil and gas properties
| OXY 2020 FORM 10-K | 69 |
| FINANCIAL STATEMENTS FOOTNOTES |
was measured based on the income approach, see Note 17 - Fair Value Measurements for a description of inputs and assumptions utilized.
In May 2020, Occidental and Total mutually agreed to execute a waiver of the obligation to purchase and sell the Ghana assets, so that Occidental could begin marketing the sale of the Ghana assets to other third parties. Occidental is currently marketing the Ghana assets. The assets and liabilities for Ghana remain presented as held for sale at December 31, 2020. Occidental recorded an after-tax impairment of $1.4 billion in the second quarter 2020 to reflect the held for sale assets at their fair value less costs to sell based on the income approach, refer to Note 17 - Fair Value Measurements. The results of operations of Ghana continue to be presented as discontinued operations, see Note 4 - Divestitures and Other Transactions.
Unless otherwise indicated, information presented in the Notes to the Consolidated Financial Statements relates only to Occidental's continuing operations. Information related to discontinued operations is included in Note 4 - Divestitures and Other Transactions and in some instances, where appropriate, is included as a separate disclosure within the individual Notes to the Consolidated Financial Statements.
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 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, 2020 and net sales of approximately $3.4 billion for the year ended December 31, 2020, 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, NGL, natural gas and chemical products may have a significant impact on Occidental’s results of operations. Also, see Property, Plant and Equipment section below.
RECEIVABLES AND OTHER CURRENT ASSETS
Trade receivables, net, of $2.1 billion and $4.2 billion at December 31, 2020, and 2019, respectively, represent rights to payment for which Occidental has satisfied its obligations under a contract with a customer and its right to payment is conditioned only on the passage of time.
Other current assets includes amounts receivable from working interest partners in Occidental’s oil and gas operations, derivative assets and taxes receivable.
INVENTORIES
Materials and supplies are valued at weighted-average cost and are reviewed periodically for obsolescence. Oil, NGL 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 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
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| FINANCIAL STATEMENTS FOOTNOTES |
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. For exploratory wells that find reserves that cannot be classified as proved when drilling is completed, costs continue to be capitalized as suspended exploratory drilling costs if there have been sufficient reserves found to justify completion as a producing well and sufficient progress is being made in assessing the reserves and the economic and operating viability of the project. At the end of each quarter, management reviews the status of all suspended exploratory drilling costs in light of ongoing exploration activities, in particular, whether Occidental is making sufficient progress in its ongoing exploration and appraisal efforts or, in the case of discoveries requiring government sanctioning, analyzing whether development negotiations are underway and proceeding as planned. If management determines that future appraisal drilling or development activities are unlikely to occur, associated suspended exploratory well costs are expensed.
The following table summarizes the activity of capitalized exploratory well costs for continuing operations for the years ended December 31:
| millions | 2020 | 2019 | 2018 | |||||||||||||||||
| Balance — beginning of year | $ | 424 | $ | 112 | $ | 108 | ||||||||||||||
| Exploratory well costs acquired through the Acquisition | — | 231 | — | |||||||||||||||||
| Additions to capitalized exploratory well costs pending the determination of proved reserves | 122 | 383 | 220 | |||||||||||||||||
| Reclassifications to property, plant and equipment based on the determination of proved reserves | (309) | (230) | (198) | |||||||||||||||||
| Capitalized exploratory well costs charged to expense | (26) | (72) | (18) | |||||||||||||||||
| Balance — end of year | $ | 211 | $ | 424 | $ | 112 |
Occidental expenses annual lease rentals, the costs of injectants used in production and geological and geophysical costs as incurred.
Occidental determines depreciation and depletion of oil and gas producing properties by the unit-of-production method. It amortizes leasehold 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. Proved reserves includes proved undeveloped reserves. Proved undeveloped reserves are supported by a management approved, detailed, field-level development plan where sufficient capital has been committed to develop those reserves. A majority of the proved undeveloped reserves are supported by a five-year, development plan while certain international proved undeveloped reserves are associated with approved long-term development plans.
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 prolonged 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. 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 future production and timing of production, 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 17 - Fair Value Measurements and below for further discussion of asset impairments.
Net capitalized costs attributable to unproved properties were $18.6 billion at December 31, 2020 and $29.5 billion at December 31, 2019. The unproved amounts are not subject to DD&A until they are classified as proved properties. Individually insignificant unproved properties are combined and amortized on a group basis based on factors such as lease terms, success rates and other factors to provide for full amortization upon lease expiration or abandonment.
Significant unproved properties, primarily as a result of the Acquisition, are assessed individually for impairment and when events or circumstances indicate that the carrying value of property may not be recovered a valuation allowance is provided if an impairment is indicated. Occidental periodically reviews significant unproved properties for impairments; numerous factors are considered, including but not limited to, availability of funds for future exploration and development activities, current exploration and development plans, favorable or unfavorable exploration activity on the property or the adjacent property, geologists’ evaluation of the property, the current and projected political and regulatory climate,
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| FINANCIAL STATEMENTS FOOTNOTES |
contractual conditions and the remaining lease term for the properties. If an impairment is indicated, Occidental will first determine whether a comparable transaction for similar properties or implied acreage valuation derived from domestic onshore market participants is available and will adjust the carrying amount of the unproved property to its fair value using the market approach. In situations where the market approach is not observable and unproved reserves are available, undiscounted future net cash flows used in the impairment analysis are determined based on managements’ risk adjusted estimates of unproved reserves, future commodity prices and future costs to produce the reserves. If undiscounted future net cash flows are less than the carrying value of the property, the future net cash flows are discounted and compared to the carrying value for determining the amount of the impairment loss to record. Occidental utilizes the same assumptions and methodology discussed above for cash flows associated with proved properties.
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 50 years, are also used for impairment tests. The estimated useful lives for the chemical facilities are based on the assumption that Occidental will provide an appropriate level of annual expenditures to ensure productive capacity is sustained. Such expenditures consist of ongoing routine repairs and maintenance, as well as planned major maintenance activities (PMMA). Ongoing routine repairs and maintenance expenditures are expensed as incurred. PMMA costs are capitalized and amortized over the period until the next planned overhaul. Additionally, Occidental incurs capital expenditures that extend the remaining useful lives of existing assets, increase their capacity or operating efficiency beyond the original specification or add value through modification for a different use. These capital expenditures are not considered in the initial determination of the useful lives of these assets at the time they are placed into service. The resulting revision, if any, of the asset’s estimated useful life is measured and accounted for prospectively.
Without these continued expenditures, the useful lives of these assets could decrease significantly. Other factors that could change the estimated useful lives of Occidental’s chemical assets include sustained higher or lower product prices, which are affected by domestic and international 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.
GOODWILL
As of December 31, 2019, Occidental had $1.2 billion of goodwill related to its ownership in WES, which was included in long-term receivables and other assets, net. Significant declines in the market value of WES’ publicly traded units resulted in management’s determination that, more likely than not, the fair value of the reporting unit was significantly less than its carrying value and the entire $1.2 billion in goodwill was fully impaired in the first quarter of 2020. The market value of WES’ publicly traded units is considered a Level 1 input.
IMPAIRMENTS AND OTHER CHARGES
During 2020, Occidental’s oil and gas segment recognized pre-tax impairment and related charges of $7.0 billion relating to proved and unproved properties. An additional pre-tax impairment of $2.2 billion related to Ghana is included in discontinued operations.
During 2019, Occidental’s oil and gas segment recognized pre-tax impairment and related charges of $285 million related to domestic undeveloped leases that were set to expire in the near-term, where Occidental had no plans to pursue exploration activities, and $39 million related to Occidental’s mutually agreed early termination of its Qatar Idd El Shargi South Dome (ISSD) contract.
In 2018, Occidental recognized pre-tax impairment and related charges of $416 million related to Qatar Idd El Shargi North Dome (ISND) and ISSD proved properties and inventory. Also in 2018, the midstream and marketing segment incurred approximately $100 million of charges primarily for lower of cost or market adjustments on its crude inventory and line fill.
It is reasonably possible that prolonged declines in commodity prices, reduced capital spending in response to lower prices or increases in operating costs could result in additional impairments.
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| FINANCIAL STATEMENTS FOOTNOTES |
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:
■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.
■OTC bilateral financial commodity contracts, foreign exchange contracts, interest rate swaps, warrants, 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.
■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 values debt using market-observable information for debt instruments that are traded on secondary markets. For debt instruments that are not traded, the fair value is determined by interpolating the value based on debt with similar terms and credit risk.
NON-FINANCIAL ASSETS
Occidental uses market-observable prices for assets when comparable transactions can be identified that are similar to the asset being valued. When Occidental is required to measure fair value and there is not a market-observable price for the asset or for a similar asset then the cost or income approach is used depending on the quality of information available to support management’s assumptions. The cost approach is based on management’s best estimate of the current asset replacement cost. The income approach is based on management’s best assumptions regarding expectations of future net cash flows. The expected cash flows are discounted using a commensurate risk-adjusted discount rate. Such evaluations involve significant judgment, and the results are based on expected future events or conditions such as sales prices, estimates of future oil and gas production or throughput, development and operating costs and the timing thereof, economic and regulatory climates and other factors, most of which are often outside of management’s control. However, assumptions used reflect a market participant’s view of long-term prices, costs and other factors and are consistent with assumptions used in Occidental’s business plans and investment decisions.
ACCRUED LIABILITIES - CURRENT
Accrued liabilities - current included accrued payroll, commissions and related expenses of $461 million and $1.2 billion at December 31, 2020, and 2019, respectively. Dividends payable, also included in accrued liabilities - current, were $189 million and $884 million at December 31, 2020, and 2019, respectively. Derivative financial instruments, also included in accrued liabilities - current, were $1.1 billion and $641 million at December 31, 2020, and 2019, respectively.
ENVIRONMENTAL LIABILITIES AND EXPENDITURES
Environmental expenditures that relate to current operations are expensed or capitalized as appropriate. Occidental records environmental liabilities 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 environmental remediation liability 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 its environmental remediation liabilities 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 its environmental remediation liabilities and adjusts them as new information becomes available. Occidental records environmental remediation liabilities on a discounted basis when it deems the aggregate amount and timing of cash payments to be reliably
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| FINANCIAL STATEMENTS FOOTNOTES |
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 its environmental remediation liabilities 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 remediation liabilities and the range of reasonably possible additional losses. The most significant are: (1) cost estimates for remedial activities may vary from the initial estimate; (2) the length of time, type or amount of remediation necessary to achieve the remedial objective may change due to factors such as site conditions, the ability to identify and control contaminant sources or the discovery of additional contamination; (3) a regulatory agency may ultimately reject or modify Occidental’s proposed remedial plan; (4) improved or alternative remediation technologies may change remediation costs; (5) laws and regulations may change remediation requirements or affect cost sharing or allocation of liability; and (6) changes in allocation or cost-sharing arrangements may occur.
Certain sites involve multiple parties with various cost-sharing arrangements, which fall into the following three categories: (1) environmental proceedings that result in a negotiated or prescribed allocation of remediation costs among Occidental and other alleged potentially responsible parties; (2) oil and gas ventures in which each participant pays its proportionate share of remediation costs reflecting its working interest; or (3) contractual arrangements, typically relating to purchases and sales of properties, in which the parties to the transaction agree to methods of allocating remediation costs. In these circumstances, Occidental evaluates the financial viability of other parties with whom it is alleged to be jointly liable, the degree of their commitment to participate and the consequences to Occidental of their failure to participate when estimating Occidental’s ultimate share of liability. Occidental records its environmental remediation liabilities 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 CERCLA NPL sites, Occidental’s environmental remediation liabilities 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 environmental remediation liabilities 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, 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 obligations changes, Occidental records an adjustment to both the asset retirement obligations 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.
The majority of Occidental’s asset retirement obligations relate to the plugging of wells and the related abandonment of oil and gas properties. Revisions in estimated liabilities during the period primarily relate to liabilities acquired in the Acquisition and include, but are not limited to, changes in estimates of asset retirement costs, revisions of estimated inflation rates, changes in property lives and the expected timing of settlements.
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.
| 74 | OXY 2020 FORM 10-K |
| FINANCIAL STATEMENTS FOOTNOTES |
The following table summarizes the activity of asset retirement obligations for the years ended December 31:
| millions | 2020 | 2019 | ||||||||||||
| Beginning balance | $ | 4,659 | $ | 1,499 | ||||||||||
| Liabilities assumed in the Acquisition | — | 3,370 | ||||||||||||
| Liabilities incurred – capitalized to PP&E | 79 | 71 | ||||||||||||
| Liabilities settled and paid | (186) | (200) | ||||||||||||
| Accretion expense | 147 | 131 | ||||||||||||
| Acquisitions, divestitures and other, net | (294) | — | ||||||||||||
| WES loss of control | — | (359) | ||||||||||||
| Revisions to previous estimates | (275) | 147 | ||||||||||||
| Ending balance (a) | $ | 4,130 | $ | 4,659 |
(a)The ending balance included $153 million and $248 million related to the current balance of AROs that are included in Accrued Liabilities on the Consolidated Balance Sheets at December 31, 2020, and 2019, respectively.
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 carrying value 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, 2020, 2019 and 2018.
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 14 - Stock-Based Incentive Plans. A summary of Occidental’s accounting policy for awards issued under the Plans is as follows.
For cash- and stock-settled restricted stock units (RSU) and cash return on capital employed incentive awards (CROCEI), compensation value is initially measured on the grant date using the quoted market price of Occidental’s common stock and the estimated payout on the grant date. The fair value of stock options is estimated using a Black Scholes model. For total shareholder return incentive awards (TSRI), compensation value is initially measured on the grant date using the fair value derived from a Monte Carlo valuation model. Compensation expense for all awards is recognized on a straight-line basis over the requisite service periods, which is generally over the awards’ respective vesting or performance periods. The stock-settled portion of these awards is expensed using the initially measured compensation value. The liability resulting from the cash settled portion of these awards and accrued dividends are remeasured at each reporting period. Dividends accrued on unvested awards are adjusted quarterly for any changes in the number of share equivalents expected to be paid based on the relevant performance and market criteria, if applicable.
EARNINGS PER SHARE (EPS)
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, 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 15 - Retirement and Postretirement Benefit Plans, in its financial statements using a December 31 measurement date.
Occidental’s defined benefit pension and postretirement benefit plan obligations are actuarially determined 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
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| FINANCIAL STATEMENTS FOOTNOTES |
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 U.S. federal, state and foreign income taxes for continuing operations of approximately $0.5 billion, $1.9 billion and $1.1 billion during the years ended December 31, 2020, 2019 and 2018, respectively. Occidental received refunds of $223 million, $80 million and $82 million during the years ended December 31, 2020, 2019, and 2018, respectively. Occidental also paid production, property and other taxes of approximately $755 million, $724 million and $508 million during the years ended December 31, 2020, 2019 and 2018, respectively, substantially all of which was in the United States. Interest paid totaled $1.6 billion, $912 million and $383 million, net of capitalized interest of $83 million, $89 million and $46 million, for the years 2020, 2019 and 2018, respectively.
CASH EQUIVALENTS AND RESTRICTED CASH EQUIVALENTS
Occidental considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents or restricted cash equivalents. The cash equivalents and restricted cash equivalents balance at December 31, 2020, included investments in government money market funds in which the carrying value approximates fair value.
The following table provides a reconciliation of cash, cash equivalents, restricted cash and restricted cash equivalents as reported at the end of the period in the Consolidated Statements of Cash Flows for the year ended December 31, 2020, and 2019 to the line items within the Consolidated Balance Sheet at December 31, 2020 and 2019.
| millions | December 31, 2020 | December 31, 2019 | |||||||||
| Cash and cash equivalents | $ | 2,008 | $ | 3,032 | |||||||
| Restricted cash and restricted cash equivalents | 170 | 485 | |||||||||
| Cash and restricted cash included in assets held for sale | — | 3 | |||||||||
| Restricted cash and restricted cash equivalents included in long-term receivables and other assets, net | 16 | 54 | |||||||||
| Cash, cash equivalents, restricted cash and restricted cash equivalents | $ | 2,194 | $ | 3,574 |
Total restricted cash and restricted cash equivalents are primarily associated with an international joint venture, a benefits trust for former Anadarko employees and a judicially-controlled account related to a Brazilian tax dispute. Total restricted cash at December 31, 2019 also included payments of future hard-minerals royalties conveyed, the related liability of which was settled in August 2020, see Note 4 - Divestitures and Other Transactions.
FOREIGN CURRENCY TRANSACTIONS
The functional currency applicable to all of Occidental’s international oil and gas operations is the U.S. dollar since cash flows are denominated principally in U.S. 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.
INCOME TAXES
Occidental files various U.S. federal, state and foreign income tax returns. The impact of changes in tax regulations are reflected when enacted. In general, deferred federal, state and foreign income taxes are provided on temporary differences between the financial statement carrying amounts of assets and liabilities and their respective tax basis. Occidental routinely assesses the realizability of its deferred tax assets. If Occidental concludes that it is more likely than not that some of the deferred tax assets will not be realized, the tax asset is reduced by a valuation allowance. Occidental recognizes a tax benefit from an uncertain tax position when it is more likely than not that the position will be sustained upon examination, based on the technical merits of the position. The tax benefit recorded is equal to the largest amount that is greater than 50% likely to be realized through final settlement with a taxing authority. Interest and penalties related to unrecognized tax benefits are recognized in income tax expense (benefit). Occidental uses the flow-through method to account for its investment tax credits. See Note 12 - Income Taxes for more information.
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| FINANCIAL STATEMENTS FOOTNOTES |
OTHER LOSS 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 international 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 10 - Environmental Liabilities and Expenditures, Occidental has disclosed its reserve balances for environmental remediation matters that satisfy this criteria. See Note 11 - Lawsuits, Claims, Commitments and Contingencies.
| NOTE 2 - ACCOUNTING AND DISCLOSURE CHANGES |
RECENTLY ADOPTED ACCOUNTING AND DISCLOSURE CHANGES
In January 2020, Occidental adopted Accounting Standards Update (ASU) 2016-13 Financial Instruments - Credit Losses (Topic 326). The new standard makes significant changes to the accounting for credit losses on financial assets and disclosures regarding credit losses. For trade receivables, loans and held-to-maturity debt securities, entities will be required to estimate lifetime expected credit losses. This will result in the earlier recognition of credit losses than the current incurred-loss model. The acceleration of the recognition of losses is more material for entities whose receivables and other held-to-maturity debt investments are (1) long dated and (2) with less credit worthy counterparties.
The majority of Occidental's receivables are short dated with maturities of less than 60 days with creditworthy counterparties, including refiners, pipelines and resellers. Occidental strives to maintain a strong credit portfolio and there have been no negative indications regarding the collectability of these receivables as of the date of this filing. The adoption of this standard has no material impact. Occidental will continue to assess the risk to its receivables in the future.
In January 2019, Occidental adopted the new lease standard ASC Topic 842 - Leases (ASC 842) using the modified retrospective approach, which did not require restatement of prior year amounts and disclosures. ASC 842 requires Occidental to recognize most leases, including operating leases, on the balance sheet. The new rules require lessees to recognize a right-of-use (ROU) asset and lease liability for all leases with lease terms of more than 12 months. Occidental adopted the standard including adopting the following practical expedients:
■Leases that commenced before the effective date carried forward their historical lease classification;
■Existing or expired land easements as of December 31, 2018, were not reassessed to determine whether or not they contained a lease;
■Leases with a lease term of 12 months or less from lease commencement date are considered short-term leases and not recorded on the Consolidated Balance Sheet; however, the lease expenditures recognized are captured and reported as incurred; and
■For asset classes, except long-term drilling rigs, Occidental elected to account for the lease and non-lease components as a single lease component as the non-lease portions were not significant to separate in determining the lease liability. For long-term drilling rig contracts, Occidental bifurcated the lease and non-lease components using relative fair value as a stand-alone selling price between the asset rental and the services obtained.
For Occidental operations, adoption of ASC 842 resulted in recording of net lease assets and lease liabilities of $772 million as of January 1, 2019. There was no material impact to net income, cash flows, or stockholders’ equity. See Note 8 - Lease Commitments.
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| FINANCIAL STATEMENTS FOOTNOTES |
| NOTE 3 - THE ACQUISITION |
On May 9, 2019, Occidental entered into the Acquisition Agreement with Anadarko. On August 8, 2019, Anadarko’s stockholders voted to approve the Acquisition and it was made effective the same day. The Acquisition added to Occidental’s oil and gas portfolio, primarily in the Permian Basin, DJ Basin and Gulf of Mexico and Algeria and a controlling interest in WES.
In exchange for each share of Anadarko common stock, Anadarko stockholders received $59.00 in cash and 0.2934 of a share of Occidental common stock, plus cash in lieu of any fractional share of Occidental common stock that otherwise would have been issued, based on the average price of $46.31 per share of Occidental common stock on the NYSE on August 8, 2019.
In connection with the Acquisition, Occidental issued $13.0 billion of new senior unsecured notes, $8.8 billion of term loans (the Term Loans) and 100,000 shares of series A preferred stock (the Preferred Stock) with a warrant to purchase 80 million shares of Occidental common stock at an exercise price of $62.50 (the Warrant) for $10 billion. In addition, Occidental increased its existing $3.0 billion RCF by an additional $2.0 billion in commitments. See Note 7 - Long-term Debt and Note 13 - Stockholders’ Equity for additional information.
The Acquisition constitutes a business combination and was accounted for using the acquisition method of accounting. The following table presents the Acquisition consideration paid to Anadarko stockholders as a result of the Acquisition:
| millions except per-share amounts | As of August 8, 2019 | |||||||
| Total shares of Anadarko common stock eligible for Acquisition consideration | 491.6 | |||||||
| Cash consideration (per share of common stock and shares underlying Anadarko stock-based awards eligible for Acquisition consideration) | $ | 59.00 | ||||||
| Cash portion of Acquisition consideration | $ | 29,002 | ||||||
| Total shares of Anadarko common stock eligible for Acquisition consideration | 491.6 | |||||||
| Exchange ratio (per share of Anadarko common stock) | 0.2934 | |||||||
| Total shares of Occidental common stock issued to Anadarko stockholders | 144 | |||||||
| Average share price of Occidental common stock at August 8, 2019 | $ | 46.31 | ||||||
| Stock portion of Acquisition consideration | $ | 6,679 | ||||||
| Acquisition consideration attributable to Anadarko stock-based awards | $ | 23 | ||||||
| Total Acquisition consideration | $ | 35,704 |
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| FINANCIAL STATEMENTS FOOTNOTES |
The following table sets forth the allocation of the Acquisition consideration. Occidental finalized the purchase price allocation during the 12 month period following the Acquisition date, those measurement period adjustments recorded were immaterial and did not result in a material impact to the statements of operations.
| millions | As of August 8, 2019 | |||||||
| Fair value of assets acquired: | ||||||||
| Current assets | $ | 3,586 | ||||||
| Assets held for sale (a) | 10,616 | |||||||
| Investments in unconsolidated entities | 194 | |||||||
| Property, plant and equipment | 49,125 | |||||||
| Other assets | 836 | |||||||
| Amount attributable to assets acquired | $ | 64,357 | ||||||
| Fair value of liabilities assumed: | ||||||||
| Current liabilities | $ | 3,467 | ||||||
| Liabilities of assets held for sale (a) | 2,200 | |||||||
| Long-term debt | 13,240 | |||||||
| Deferred income taxes | 8,591 | |||||||
| Asset retirement obligations | 2,724 | |||||||
| Pension and post-retirement obligations | 1,072 | |||||||
| Non-current derivative liabilities | 1,280 | |||||||
| Other long-term liabilities | 2,323 | |||||||
| Amount attributable to liabilities assumed | $ | 34,897 | ||||||
| Net assets | $ | 29,460 | ||||||
| Fair value of WES net assets acquired less noncontrolling interests (a) | $ | 6,244 | ||||||
| Total Acquisition consideration | $ | 35,704 |
(a)See Note 1 - Summary of Significant Accounting Policies for a discussion for the purchase and sale agreement with Total and for a discussion of the WES investment.
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| FINANCIAL STATEMENTS FOOTNOTES |
The following table summarizes the fair value of the major categories of WES assets acquired and liabilities assumed at the Acquisition date as well as the noncontrolling interest, which primarily consisted of the 44.6% limited partner interest in WES owned by the public. The fair value of Occidental’s controlling interest in WES is calculated based on the market capitalization value at the Acquisition date.
| millions | As of August 8, 2019 | |||||||
| Fair value of WES assets acquired: | ||||||||
| Current assets | $ | 499 | ||||||
| Investments in unconsolidated entities | 2,425 | |||||||
| Property, plant and equipment | 10,160 | |||||||
| Intangible assets - customer relationships | 1,800 | |||||||
| Goodwill | 5,772 | |||||||
| Other assets | 342 | |||||||
| Amount attributable to assets acquired | $ | 20,998 | ||||||
| Fair value of WES liabilities assumed: | ||||||||
| Current liabilities | $ | 815 | ||||||
| Long-term debt | 7,407 | |||||||
| Deferred income taxes | 1,174 | |||||||
| Asset retirement obligations | 321 | |||||||
| Other long-term liabilities | 142 | |||||||
| Amount attributable to liabilities assumed | $ | 9,859 | ||||||
| Net assets | $ | 11,139 | ||||||
| Less: Fair value of noncontrolling interests in WES | $ | 4,895 | ||||||
| Fair value of WES net assets acquired less noncontrolling interests | $ | 6,244 |
The aggregate purchase price noted above was allocated to the major categories of assets and liabilities acquired based upon their preliminary estimated fair values at the date of the Acquisition. The valuation of certain assets, including property and intangible assets, are based on preliminary appraisals. The majority of measurements of assets acquired and liabilities assumed, other than debt, are based on inputs that are not observable in the market and thus represent Level 3 inputs. The fair value of acquired properties and equipment is based on both available market data and a cost approach.
Onshore undeveloped oil and gas properties were valued primarily using a market approach based on comparable transactions for similar properties while the income approach was utilized for developed oil and gas properties based on underlying reserve projections at the Acquisition date. For the acquired Gulf of Mexico offshore properties, an income approach was used as the primary valuation method based on underlying reserve projections. Income approaches are considered level 3 fair value estimates and include significant assumptions of future production, commodity prices and operating and capital cost estimates, discounted using weighted average cost of capital for industry peers and risk adjustment factors based on reserve category. Price assumptions were based on a combination of market information and published industry resources adjusted for historical differentials. Cost estimates were based on current observable costs inflated based on historical and expected future inflation. Taxes were based on current statutory rates.
The fair value of WES investments in unconsolidated entities were valued using an income approach for each investment, with significant inputs being forecasted distributions, an anticipated growth rate and an estimated discount rate. Acquired WES property, plant and equipment primarily consisted of gathering systems and processing and treating facilities and were primarily valued using a replacement cost approach. Intangible assets primarily consist of relationships with third-party customers, the fair value of which was determined using an income approach, including significant assumptions related to estimated cash flows from third-party customers less a contributory asset charge, a customer retention rate and an estimated discount rate. Customer relationships are amortized over 30 years. Goodwill is attributable to the difference in WES market capitalization value and the net assets acquired and primarily relates to the relationship between Occidental and WES that is not recognized as a separate asset, due to Occidental consolidating WES as of the Acquisition date.
Deferred income taxes represent the tax effects of differences in the tax basis and acquisition-date fair values of assets acquired and liabilities assumed. The measurement of debt instruments was based on unadjusted quoted prices in an active market and are primarily Level 1; approximately $2.5 billion of the assumed Anadarko debt is considered Level 2, while
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| FINANCIAL STATEMENTS FOOTNOTES |
approximately $730 million of the WES debt is considered Level 2. The value of derivative instruments was based on observable inputs, primarily forward commodity price and interest rate curves and is considered Level 2.
With the completion of the Acquisition, Occidental acquired proved and unproved properties of approximately $19.1 billion and $27.4 billion, respectively, primarily associated with the Permian Basin, DJ Basin, Gulf of Mexico and Powder River Basin. The remaining $2.5 billion in PP&E consisted of non-oil and gas mineral interests and other real estate assets.
From the date of the Acquisition through December 31, 2019, revenues and the net loss attributable to common stockholders associated with the operations acquired through the Acquisition totaled $4.2 billion and $1.7 billion, respectively, which includes a charge as a result of recording Occidental’s investment in WES at fair value as of December 31, 2019 upon the loss of control.
The following table summarizes the unaudited pro forma condensed financial information of Occidental for the year ended December 31 as if the Acquisition had occurred on January 1, 2018:
| Year ended December 31, | ||||||||
| millions except per-share amounts | 2019 | 2018 | ||||||
| Revenues | $ | 28,723 | $ | 31,206 | ||||
| Net income (loss) attributable to common stockholders (a) | $ | (769) | $ | 2,965 | ||||
| Net income (loss) attributable to common stockholders per share—basic | $ | (0.95) | $ | 3.26 | ||||
| Net income (loss) attributable to common stockholders per share—diluted | $ | (0.95) | $ | 3.25 | ||||
(a)Excluding the pro-forma results of WES, net income (loss) attributable to common stockholders would be $(1.1) billion and $2.8 billion for the year ended December 31, 2019 and 2018, respectively.
The unaudited pro forma information is presented for illustration purposes only and is not necessarily indicative of the operating results that would have occurred had the Acquisition been completed at January 1, 2018, nor is it necessarily indicative of future operating results of the combined entity. The unaudited pro forma information for 2019 is a result of combining the statements of operations of Occidental with the pre-Acquisition results from January 1, 2019 of Anadarko and included adjustments for revenues and direct expenses. The pro forma results exclude results from the held for sale Africa assets, any cost savings anticipated as a result of the Acquisition and the impact of any Acquisition-related costs. The pro forma results include adjustments to DD&A based on the purchase price allocated to property, plant and equipment and the estimated useful lives as well as adjustments to interest expense. The pro forma adjustments include estimates and assumptions based on currently available information. Management believes the estimates and assumptions are reasonable and the relative effects of the Acquisition are properly reflected.
ANADARKO ACQUISITION-RELATED COSTS
The following table summarizes the Acquisition-related costs incurred for the year ended December 31:
| millions | 2020 | 2019 | |||||||||
| Employee severance and related employee cost | $ | 314 | $ | 1,033 | |||||||
| Licensing fees for critical seismic data | — | 401 | |||||||||
| Bank, legal, consulting and other | 25 | 213 | |||||||||
| Total | $ | 339 | $ | 1,647 | |||||||
Employee severance and related employee cost primarily relates to one-time severance costs and the accelerated vesting of certain Anadarko share-based awards for former Anadarko employees based on the terms of the Acquisition Agreement and existing change of control provisions within the former Anadarko employment agreements. In addition, employee severance and related employee cost included expenses for a voluntary separation program for eligible employees. Occidental initiated this program to align the size and composition of its workforce with its expected future operating and capital plans.
The seismic licensing fees relate to relicensing of critical seismic data related to the Gulf of Mexico, Permian Basin and DJ Basin that Anadarko had licensed from third-party vendors. The third-party vendors who own the seismic data required a transfer fee in order for Occidental to use the data.
DEBT ISSUED AND ASSUMED IN CONNECTION WITH THE ACQUISITION
On August 8, 2019, Occidental issued $13.0 billion of new senior unsecured notes, consisting of both floating and fixed rate debt. Occidental also borrowed under the Term Loans, which consist of: (1) a 364-day senior unsecured variable-rate term loan tranche of $4.4 billion and (2) a two-year senior unsecured variable-rate term loan tranche of $4.4 billion. In total,
| OXY 2020 FORM 10-K | 81 |
| FINANCIAL STATEMENTS FOOTNOTES |
the $21.8 billion in debt issued was used to finance part of the cash portion of the purchase price for the Acquisition.
In the Acquisition, Occidental assumed Anadarko debt with an outstanding principal balance of $11.9 billion. In September 2019, Occidental completed its offers to exchange the Anadarko senior notes and debentures assumed as part of the Acquisition for notes of a corresponding series issued by Occidental and cash and related solicitation of consents. Of the approximately $11.9 billion in aggregate principal amount of Anadarko senior notes and debentures offered in the exchange, 97%, or approximately $11.5 billion, were tendered and accepted in the exchange offers. The portion not exchanged, approximately $400 million, remained outstanding.
| NOTE 4 - DIVESTITURES AND OTHER TRANSACTIONS |
DIVESTITURES AND OTHER TRANSACTIONS
2020
In November 2020 and December 2020, Occidental divested of certain non-core, largely non-operated proved and unproved acreage in the Permian for a loss of approximately $820 million. The losses have been presented within gains (losses) on sale of assets, net in the Consolidated Statement of Operations. The net proceeds were used to pay down near-term maturities.
In October 2020, Occidental entered into an agreement to sell its onshore oil and gas Colombia assets. The transaction closed in December 2020, and Occidental recorded a loss on sale of approximately $353 million. The loss has been presented within gains (losses) on sale of assets, net in the Consolidated Statement of Operations. The net proceeds were used to pay down near-term maturities.
In August 2020, Occidental entered into an agreement to sell approximately 4.5 million mineral acres and 1 million fee surface acres located in Wyoming, Colorado and Utah for approximately $1.33 billion. The transaction closed in October 2020 for net cash proceeds of approximately $1.0 billion, after satisfying $329 million of liabilities associated with the sale of future royalties. Occidental recorded a loss on sale of $440 million. The loss has been presented within gains (losses) on sale of assets, net in the Consolidated Statement of Operations. The net proceeds were utilized to pay down a portion of the 2-year variable rate Term Loan due 2021. See Note 7 - Long-Term Debt for further information.
2019
In December 2019, Occidental disposed of real estate assets for $565 million. Occidental utilized net proceeds to pay down a portion of the Term Loans. Concurrent with the sale, Occidental entered a 13-year lease for part of the real estate assets. Based on the terms of the lease, Occidental treated this as a failed sale-leaseback, retained the related book value in property, plant and equipment and recognized a finance lease of approximately $300 million based on the discounted future minimum lease payments.
In November 2019, Occidental and Ecopetrol closed on the joint venture to develop approximately 97,000 net acres of Occidental’s Midland Basin unproved properties in the Permian Basin. Ecopetrol paid $750 million in cash at closing and up to $750 million of carried capital in exchange for a 49% interest in the new venture. Occidental recognized a gain of $563 million on the sale. Following the close, Occidental owned a 51% interest and operates the joint venture. During the carry period, Ecopetrol will pay 75% of Occidental’s share of capital expenditures, up to $750 million. The joint venture allows Occidental to accelerate its development plans in the Midland Basin, where it currently has minimal activity. Occidental will retain production and cash flow from its existing operations in the Midland Basin. The proceeds were used to pay down a portion of the Term Loans.
In September 2019, Occidental sold its remaining equity investment in Plains for net proceeds of $646 million, which resulted in a pre-tax gain of $114 million. The proceeds were used to pay down a portion of the Term Loans.
2018
In September 2018, Occidental divested non-core domestic midstream assets for total consideration of $2.6 billion, of which approximately $2.4 billion was received at closing, resulting in a pre-tax net gain of $907 million. These assets include the Centurion common carrier oil pipeline and storage system, Southeast New Mexico oil gathering system and Ingleside Crude Terminal. Following the transactions, Occidental retained its long-term flow assurance, pipeline takeaway and export capacity through its retained marketing business.
In July 2018, Occidental acquired a previously leased power and steam cogeneration facility for $443 million.
In March 2018, Occidental divested non-core midstream assets for approximately $150 million, resulting in a pre-tax gain of $43 million.
| 82 | OXY 2020 FORM 10-K |
| FINANCIAL STATEMENTS FOOTNOTES |
DISCONTINUED OPERATIONS
The following table presents the amounts reported in discontinued operations, net of income taxes, related to the Ghana assets for the year ended December 31, 2020 and for the Ghana, Mozambique and South Africa assets subsequent to the Acquisition closing date through December 31, 2019:
| millions | 2020 | 2019 | ||||||
| Revenues and other income | ||||||||
| Net sales | $ | 419 | $ | 221 | ||||
| Costs and other deductions | ||||||||
| Oil and gas lease operating expense | 117 | 45 | ||||||
| Fair value adjustment on assets held for sale | 2,263 | 85 | ||||||
| Other | 48 | 45 | ||||||
| Total costs and other deductions | $ | 2,428 | $ | 175 | ||||
| Income (loss) before income taxes | $ | (2,009) | $ | 46 | ||||
| Income tax benefit (expense) | 711 | (61) | ||||||
| Discontinued operations, net of tax | $ | (1,298) | $ | (15) |
The following table presents amounts related to the Ghana assets reported as held for sale in the Consolidated Balance Sheet as of December 31, 2020 and the amounts related to the Mozambique, South Africa and Ghana assets reported as held for sale in the Consolidated Balance Sheet as of December 31, 2019, respectively:
| millions | 2020 | 2019 | ||||||
| Current assets | $ | 37 | $ | 40 | ||||
| Property, plant and equipment, net | 1,364 | 3,720 | ||||||
| Long-term receivables and other assets, net | 32 | 110 | ||||||
| Assets held for sale | $ | 1,433 | $ | 3,870 | ||||
| Current liabilities | $ | 84 | $ | 264 | ||||
| Long-term debt, net - finance leases | 175 | 185 | ||||||
| Deferred income taxes | 328 | 1,112 | ||||||
| Asset retirement obligations | 166 | 155 | ||||||
| Other | — | 2 | ||||||
| Liabilities of assets held for sale | $ | 753 | $ | 1,718 | ||||
| Net assets held for sale | $ | 680 | $ | 2,152 | ||||
| OXY 2020 FORM 10-K | 83 |
| FINANCIAL STATEMENTS FOOTNOTES |
ALGERIA OPERATIONS RECLASSIFICATION
The following table presents the amounts previously reported in discontinued operations, net of income taxes, for the year ended December 31, 2019 which was reclassified to continuing operations as a result of Occidental's decision to operate in Algeria.
| millions | Year ended December 31, 2019 | |||||||
| Revenues and other income | ||||||||
| Net sales | $ | 518 | ||||||
| Costs and other deductions | ||||||||
| Oil and gas lease operating expense | 36 | |||||||
| Transportation expense | 14 | |||||||
| Taxes other than on income | 133 | |||||||
| Depreciation, depletion and amortization | 159 | |||||||
| Other | 9 | |||||||
| Total costs and other deductions | 351 | |||||||
| Income before income taxes | 167 | |||||||
| Income tax expense | (167) | |||||||
| Net income of Algeria operations, after taxes | $ | — |
The following table presents the amounts previously reported in the Consolidated Balance Sheets as held for sale related to Algeria that were subsequently reclassified as of December 31, 2019:
| millions | December 31, 2019 | |||||||
| Current assets | $ | 249 | ||||||
| Property, plant and equipment, net | 1,761 | |||||||
| Long-term receivables and other assets, net | 146 | |||||||
| Total Assets | $ | 2,156 | ||||||
| Current liabilities | $ | 188 | ||||||
| Non-current liabilities | 104 | |||||||
| Total Liabilities | $ | 292 |
| NOTE 5 - REVENUE |
Revenue from customers is recognized when obligations under the terms of a contract are satisfied; this generally occurs with the delivery of oil, NGL, gas, chemicals or services such as transportation. Revenue from customers is measured as the amount of consideration Occidental expects to receive in exchange for the delivery of goods or services. Contracts may last from one month to one year or more and may have renewal terms that extend indefinitely at the option of either party. Price is typically based on market indexes. Volumes fluctuate due to production and, in certain cases, customer demand and transportation availability. Occidental records revenue net of certain taxes, such as sales taxes, that are assessed by governmental authorities on Occidental’s customers.
Occidental does not incur significant costs to obtain contracts. Incidental items that are immaterial in the context of the contract are recognized as expenses. Sales of hydrocarbons and chemicals to customers are invoiced and settled on a monthly basis. Occidental is not usually subject to obligations for warranties, rebates, returns or refunds except in the case of customer incentive payments as discussed for the chemical segment below. Occidental does not typically receive payment in advance of satisfying its obligations under the terms of its sales contracts with customers; therefore, liabilities related to such payment are immaterial to Occidental. Occidental does not disclose consideration for remaining performance obligations with an original expected duration of one year or less or for variable consideration related to unsatisfied
| 84 | OXY 2020 FORM 10-K |
| FINANCIAL STATEMENTS FOOTNOTES |
performance obligations. Revenue expected to be recognized from unsatisfied performance obligations as of December 31, 2020, was $103 million in 2021 and $59 million thereafter with the majority being recognized between 2022 and 2033.
OIL AND GAS SEGMENT
Revenue from oil and gas production is recognized when production is delivered and control passes to the customer. 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.
CHEMICALS SEGMENT
Revenue from chemical product sales is recognized when control passes 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. Customer incentives are estimated and recorded as a reduction to revenue ratably over the contract period. Such estimates are evaluated and revised as warranted. Revenue from exchange contracts is excluded from revenue from customers.
MIDSTREAM AND MARKETING SEGMENT
Revenue from pipeline and gas processing is recognized upon the completion of the transportation or processing service. Revenue from power sales is recognized upon delivery. Net marketing revenue is recognized upon completion of contract terms that are a prerequisite to payment and upon title transfer for physical deliveries. Unless the normal purchases and sales exception has been elected, net marketing revenue is classified as a derivative, reported on a net basis, recorded at fair value and changes in fair value are reflected in net sales, and excluded from revenue from customers in the table below.
The following table reconciles revenue from customers to total net sales for the years ended December 31:
| millions | 2020 | 2019 | ||||||||||||
| Revenue from customers | $ | 17,130 | $ | 19,192 | ||||||||||
| All other revenues (a) | 679 | 1,719 | ||||||||||||
| Net sales | $ | 17,809 | $ | 20,911 |
(a)Included net marketing derivatives, oil collars and calls and chemical exchange contracts.
| OXY 2020 FORM 10-K | 85 |
| FINANCIAL STATEMENTS FOOTNOTES |
DISAGGREGATION OF REVENUE FROM CONTRACTS WITH CUSTOMERS
The table below presents Occidental's revenue from customers by segment, product and geographical area. The oil and gas segment typically sells its oil, NGL and gas at the lease or concession area. Chemical segment revenues are shown by geographic area based on the location of the sale. Excluding net marketing revenue, midstream and marketing segment revenues are shown by the location of sale.
| millions | United States | Middle East | Latin America | Other International | Eliminations | Total | ||||||||||||||||||||||||||||||||
| Year ended December 31, 2020 | ||||||||||||||||||||||||||||||||||||||
| Oil and gas | ||||||||||||||||||||||||||||||||||||||
| Oil | $ | 7,485 | $ | 1,949 | $ | 454 | $ | — | $ | — | $ | 9,888 | ||||||||||||||||||||||||||
| NGL | 838 | 217 | — | — | — | 1,055 | ||||||||||||||||||||||||||||||||
| Gas | 660 | 313 | 13 | — | — | 986 | ||||||||||||||||||||||||||||||||
| Other | 65 | 1 | — | — | — | 66 | ||||||||||||||||||||||||||||||||
| Segment total | $ | 9,048 | $ | 2,480 | $ | 467 | $ | — | $ | — | $ | 11,995 | ||||||||||||||||||||||||||
| Chemical | $ | 3,524 | $ | — | $ | 137 | $ | 65 | $ | — | $ | 3,726 | ||||||||||||||||||||||||||
| Midstream and marketing | ||||||||||||||||||||||||||||||||||||||
| Gas processing | $ | 350 | $ | 294 | $ | — | $ | — | $ | — | $ | 644 | ||||||||||||||||||||||||||
| Marketing | 1,144 | — | — | 278 | — | 1,422 | ||||||||||||||||||||||||||||||||
| Power and other | 101 | — | — | — | — | 101 | ||||||||||||||||||||||||||||||||
| Segment total | $ | 1,595 | $ | 294 | $ | — | $ | 278 | $ | — | $ | 2,167 | ||||||||||||||||||||||||||
| Eliminations | $ | — | $ | — | $ | — | $ | — | $ | (758) | $ | (758) | ||||||||||||||||||||||||||
| Consolidated | $ | 14,167 | $ | 2,774 | $ | 604 | $ | 343 | $ | (758) | $ | 17,130 | ||||||||||||||||||||||||||
| Year ended December 31, 2019 | ||||||||||||||||||||||||||||||||||||||
| Oil and gas | ||||||||||||||||||||||||||||||||||||||
| Oil | $ | 8,411 | $ | 3,256 | $ | 683 | $ | — | $ | — | $ | 12,350 | ||||||||||||||||||||||||||
| NGL | 658 | 283 | — | — | — | 941 | ||||||||||||||||||||||||||||||||
| Gas | 424 | 319 | 20 | — | — | 763 | ||||||||||||||||||||||||||||||||
| Other | (1) | (5) | — | — | — | (6) | ||||||||||||||||||||||||||||||||
| Segment total | $ | 9,492 | $ | 3,853 | $ | 703 | $ | — | $ | — | $ | 14,048 | ||||||||||||||||||||||||||
| Chemical | $ | 3,858 | $ | — | $ | 155 | $ | 67 | $ | — | $ | 4,080 | ||||||||||||||||||||||||||
| Midstream and marketing (a) | ||||||||||||||||||||||||||||||||||||||
| Gas processing and CO2 | $ | 395 | $ | 351 | $ | — | $ | — | $ | — | $ | 746 | ||||||||||||||||||||||||||
| Marketing | 436 | — | — | — | — | 436 | ||||||||||||||||||||||||||||||||
| WES - Gas processing | 1,110 | — | — | — | — | 1,110 | ||||||||||||||||||||||||||||||||
| Power and other | 36 | — | — | — | — | 36 | ||||||||||||||||||||||||||||||||
| Segment total | $ | 1,977 | $ | 351 | $ | — | $ | — | $ | — | $ | 2,328 | ||||||||||||||||||||||||||
| Eliminations | $ | — | $ | — | $ | — | $ | — | $ | (1,264) | $ | (1,264) | ||||||||||||||||||||||||||
| Consolidated | $ | 15,327 | $ | 4,204 | $ | 858 | $ | 67 | $ | (1,264) | $ | 19,192 |
(a)The midstream and marketing segment included revenues from customers from WES from the date of the Acquisition to December 31, 2019. See Note 1 - Summary of Significant Accounting Policies for more information.
| 86 | OXY 2020 FORM 10-K |
| FINANCIAL STATEMENTS FOOTNOTES |
| NOTE 6 - INVENTORIES |
Finished goods primarily represents oil, which is carried at the lower of weighted-average cost or net realizable value, and caustic soda and chlorine, which are valued under the LIFO method. Inventories consisted of the following at December 31:
| millions | 2020 | 2019 | ||||||||||||
| Raw materials | $ | 70 | $ | 75 | ||||||||||
| Materials and supplies | 848 | 974 | ||||||||||||
| Commodity inventory and finished goods | 1,009 | 572 | ||||||||||||
| 1,927 | 1,621 | |||||||||||||
| Revaluation to LIFO | (29) | (40) | ||||||||||||
| Total | $ | 1,898 | $ | 1,581 |
| NOTE 7 - LONG-TERM DEBT |
At December 31, 2020 and 2019, Occidental’s long-term debt consisted of the following:
| millions | 2020 | 2019 | ||||||||||||||||||||||||
| 4.850% senior notes due 2021 | $ | 147 | $ | 677 | ||||||||||||||||||||||
| 2.600% senior notes due 2021 | 224 | 1,500 | ||||||||||||||||||||||||
| 4.100% senior note due 2021 | — | 1,249 | ||||||||||||||||||||||||
| Variable rate bonds due 2021 (1.193% and 2.854% as of December 31, 2020 and 2019, respectively) | 27 | 500 | ||||||||||||||||||||||||
| Variable rate bonds due 2021 (3.151% as of December 31, 2019) | — | 500 | ||||||||||||||||||||||||
| 2-year variable rate Term Loan due 2021 (3.111% as of December 31, 2019) | — | 1,956 | ||||||||||||||||||||||||
| 2.700% senior notes due 2022 | 629 | 2,000 | ||||||||||||||||||||||||
| 3.125% senior notes due 2022 | 276 | 814 | ||||||||||||||||||||||||
| 2.600% senior notes due 2022 | 101 | 400 | ||||||||||||||||||||||||
| Variable rate bonds due 2022 (1.730% and 3.360% as of December 31, 2020 and 2019, respectively) | 1,052 | 1,500 | ||||||||||||||||||||||||
| 2.700% senior notes due 2023 | 927 | 1,191 | ||||||||||||||||||||||||
| 8.750% medium-term notes due 2023 | 22 | 22 | ||||||||||||||||||||||||
| 2.900% senior notes due 2024 | 3,000 | 3,000 | ||||||||||||||||||||||||
| 6.950% senior notes due 2024 | 650 | 650 | ||||||||||||||||||||||||
| 3.450% senior notes due 2024 | 248 | 248 | ||||||||||||||||||||||||
| 8.000% senior notes due 2025 | 500 | — | ||||||||||||||||||||||||
| 5.875% senior notes due 2025 | 900 | — | ||||||||||||||||||||||||
| 3.500% senior notes due 2025 | 750 | 750 | ||||||||||||||||||||||||
| 5.500% senior notes due 2025 | 750 | — | ||||||||||||||||||||||||
| 5.550% senior notes due 2026 | 1,100 | 1,100 | ||||||||||||||||||||||||
| 3.200% senior notes due 2026 | 1,000 | 1,000 | ||||||||||||||||||||||||
| 3.400% senior notes due 2026 | 1,150 | 1,150 | ||||||||||||||||||||||||
| 7.500% debentures due 2026 | 112 | 112 | ||||||||||||||||||||||||
| 8.500% senior notes due 2027 | 500 | — | ||||||||||||||||||||||||
| 3.000% senior notes due 2027 | 750 | 750 | ||||||||||||||||||||||||
| 7.125% debentures due 2027 | 150 | 150 | ||||||||||||||||||||||||
| 7.000% debentures due 2027 | 48 | 48 | ||||||||||||||||||||||||
| 6.625% debentures due 2028 | 14 | 14 |
| OXY 2020 FORM 10-K | 87 |
| FINANCIAL STATEMENTS FOOTNOTES |
| 7.150% debentures due 2028 | 235 | 235 | ||||||||||||||||||||||||
| 7.200% senior debentures due 2028 | 82 | 82 | ||||||||||||||||||||||||
| 6.375% senior notes due 2028 | 600 | — | ||||||||||||||||||||||||
| 7.200% debentures due 2029 | 135 | 135 | ||||||||||||||||||||||||
| 7.950% debentures due 2029 | 116 | 116 | ||||||||||||||||||||||||
| 8.450% senior debentures due 2029 | 116 | 116 | ||||||||||||||||||||||||
| 3.500% senior notes due 2029 | 1,500 | 1,500 | ||||||||||||||||||||||||
| Variable rate bonds due 2030 (4.210% and 1.705% as of December 31, 2020 and 2019, respectively) | 68 | 68 | ||||||||||||||||||||||||
| 8.875% senior notes due 2030 | 1,000 | — | ||||||||||||||||||||||||
| 6.625% senior notes due 2030 | 1,500 | — | ||||||||||||||||||||||||
| 6.125% senior notes due 2031 | 1,250 | — | ||||||||||||||||||||||||
| 7.500% senior notes due 2031 | 900 | 900 | ||||||||||||||||||||||||
| 7.875% senior notes due 2031 | 500 | 500 | ||||||||||||||||||||||||
| 6.450% senior notes due 2036 | 1,750 | 1,750 | ||||||||||||||||||||||||
| Zero Coupon senior notes due 2036 | 2,269 | 2,271 | ||||||||||||||||||||||||
| 6.500% note payable to WES due 2038 | — | 260 | ||||||||||||||||||||||||
| 4.300% senior notes due 2039 | 750 | 750 | ||||||||||||||||||||||||
| 7.950% senior notes due 2039 | 325 | 325 | ||||||||||||||||||||||||
| 6.200% senior notes due 2040 | 750 | 750 | ||||||||||||||||||||||||
| 4.500% senior notes due 2044 | 625 | 625 | ||||||||||||||||||||||||
| 4.625% senior notes due 2045 | 750 | 750 | ||||||||||||||||||||||||
| 6.600% senior notes due 2046 | 1,100 | 1,100 | ||||||||||||||||||||||||
| 4.400% senior notes due 2046 | 1,200 | 1,200 | ||||||||||||||||||||||||
| 4.100% senior notes due 2047 | 750 | 750 | ||||||||||||||||||||||||
| 4.200% senior notes due 2048 | 1,000 | 1,000 | ||||||||||||||||||||||||
| 4.400% senior notes due 2049 | 750 | 750 | ||||||||||||||||||||||||
| 7.730% debentures due 2096 | 60 | 60 | ||||||||||||||||||||||||
| 7.500% debentures due 2096 | 78 | 78 | ||||||||||||||||||||||||
| 7.250% debentures due 2096 | 49 | 49 | ||||||||||||||||||||||||
| Total borrowings at face value | $ | 35,235 | $ | 37,401 | ||||||||||||||||||||||
| Adjustments to book value: | ||||||||||||||||||||||||||
| Unamortized premium, net | 748 | 914 | ||||||||||||||||||||||||
| Debt issuance costs | (156) | (125) | ||||||||||||||||||||||||
| Long-term finance leases | 316 | 347 | ||||||||||||||||||||||||
| Current finance leases | 42 | 51 | ||||||||||||||||||||||||
| Total debt and finance leases | $ | 36,185 | $ | 38,588 | ||||||||||||||||||||||
| Less current maturities of financing leases | (42) | (51) | ||||||||||||||||||||||||
| Less current maturities of long-term debt | (398) | — | ||||||||||||||||||||||||
| Long-term Debt, net | $ | 35,745 | $ | 38,537 |
DEBT MATURITIES
At December 31, 2020, future principal payments on long-term debt aggregated approximately $35.2 billion, of which, $398 million is due in 2021, $2.1 billion is due in 2022, $0.9 billion is due in 2023, $3.9 billion is due in 2024, and $27.9 billion is due in 2025 and thereafter.
| 88 | OXY 2020 FORM 10-K |
| FINANCIAL STATEMENTS FOOTNOTES |
DEBT ISSUED, REPAID AND EXCHANGED - 2020
The following table summarizes Occidental’s debt issuances, repurchases, repayments and exchanges for the twelve months ended December 31, 2020:
| millions | Borrowings at face value | |||||||
| Total borrowings at face value as of December 31, 2019 | $ | 37,401 | ||||||
| Issuance of July 2020 notes: | ||||||||
| 8.000% senior notes due 2025 | 500 | |||||||
| 8.500% senior notes due 2027 | 500 | |||||||
| 8.875% senior notes due 2030 | 1,000 | |||||||
| July tender and purchase: | ||||||||
| 4.100% senior notes due February 2021 | (943) | |||||||
| Variable rate bonds due February 2021 | (473) | |||||||
| 4.850% senior notes due March 2021 | (530) | |||||||
| 2.600% senior notes due August 2021 | (51) | |||||||
| Issuance of August 2020 notes: | ||||||||
| 5.875% senior notes due 2025 | 900 | |||||||
| 6.375% senior notes due 2028 | 600 | |||||||
| 6.625% senior notes due 2030 | 1,500 | |||||||
| August and September tender and purchase: | ||||||||
| 4.100% senior notes due February 2021 | (139) | |||||||
| Variable rate bonds due August 2021 | (123) | |||||||
| 2.600% senior notes due August 2021 | (1,099) | |||||||
| Variable rate bonds due August 2022 | (448) | |||||||
| 2.600% senior notes due April 2022 | (171) | |||||||
| 2.700% senior notes due August 2022 | (102) | |||||||
| 2.700% senior notes due February 2023 | (52) | |||||||
| August WES exchange: | ||||||||
| 6.500% note payable to WES due 2038 | (260) | |||||||
| September Term Loan repayment: | ||||||||
| 2-year variable rate term loan due 2021 | (500) | |||||||
| October Term Loan and note repayment: | ||||||||
| 2-year variable rate bonds due August 2021 | (377) | |||||||
| 0.00% senior notes due October 2036 | (2) | |||||||
| 2-year variable rate term loan due September 2021 | (1,010) | |||||||
| November Term Loan repayment: | ||||||||
| 2-year variable rate term loan due September 2021 | (232) | |||||||
| Issuance of December 2020 notes: | ||||||||
| 5.500% senior notes due 2025 | 750 | |||||||
| 6.125% senior notes due 2031 | 1,250 | |||||||
| December tender and purchase: | ||||||||
| 2.600% senior notes due August 2021 | (126) | |||||||
| 3.125% senior notes due February 2022 | (538) | |||||||
| 2.600% senior notes due April 2022 | (128) | |||||||
| 2.700% senior notes due August 2022 | (1,269) | |||||||
| 2.700% senior notes due February 2023 | (212) | |||||||
| December Term Loan and note repayment: | ||||||||
| 2-year variable rate term loan due September 2021 | (214) | |||||||
| 4.100% senior notes due February 2021 | (167) | |||||||
| Total borrowings at face value as of December 31, 2020 | $ | 35,235 |
| OXY 2020 FORM 10-K | 89 |
| FINANCIAL STATEMENTS FOOTNOTES |
In July, August, and December, 2020, Occidental issued $7.0 billion in senior unsecured notes, in aggregate, with maturities ranging from 2025 to 2031 and used the net proceeds to tender $3.5 billion of 2021, $2.7 billion of 2022 and $264 million of 2023 maturities. In addition, Occidental used proceeds from the sale of mineral and surface acres located in Wyoming, Colorado and Utah; the Colombian asset sale and proceeds from other divestitures and cash on hand to repay $2.5 billion of 2021 and $2 million of 2036 maturities.
In August 2020, Occidental exchanged approximately 27.9 million WES common units to retire a $260 million note payable to WES, resulting in a net loss of $46 million, which includes a $76 million gain on debt extinguished associated with an unamortized premium on the note payable to WES. This net loss on exchange has been presented in (losses) gains on sale of assets, net in the Consolidated Statement of Operations.
Interest on the notes issued in July 2020 will be paid semi-annually on July 15 and January 15 of each year, commencing on January 15, 2021. Interest on the notes issued in August 2020 will be paid semi-annually on September 1 and March 1 of each year, commencing on March 1, 2021. Interest on the December 2025 notes issued in December 2020 will be paid semi-annually on June 1 and December 1 of each year, commencing on June 1, 2021. Interest on the January 2031 notes issued in December 2020 will be paid semi-annually on July 1 and January 1 of each year, commencing on July 1, 2021.
REVOLVING CREDIT FACILITY
In March 2020, Occidental amended the sole financial covenant in its RCF by revising the definition of “Total Capitalization” to exclude any non-cash write downs, impairments and related charges occurring after September 30, 2019.
On June 30, 2019, Occidental entered into an amendment to its existing $3.0 billion RCF pursuant to which, among other things, the commitments under the RCF were increased to $5.0 billion at the closing of the Acquisition. Borrowings under the RCF bear interest at various benchmark rates, including LIBOR, plus a margin based on Occidental’s senior debt ratings. The facility has similar terms to other debt agreements and does 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 repayment. The facility provides for the termination of loan commitments and requires immediate repayment of any outstanding amounts if certain events of default occur. Occidental has not drawn down any amounts under the RCF. In 2020, Occidental paid average annual facility fees of 0.275% on the total commitment amount.
ZERO COUPON NOTES DUE 2036
The Zero Coupons have an aggregate principal amount due at maturity of approximately $2.3 billion, reflecting an accretion rate of 5.24%. The Zero Coupons can be put to Occidental in October of each year, in whole or in part, for the then-accreted value of the outstanding Zero Coupons. The Zero Coupons can next be put to Occidental in October 2021, which, if put in whole, would be $1.0 billion at such date. Occidental has the ability and intent to refinance these obligations under the RCF or other committed facilities.
DEBT GUARANTEES
As of December 31, 2020, and 2019, Occidental had provided limited recourse guarantees of approximately $242 million, primarily related to Dolphin Energy Limited’s debt, which are limited to certain political and other events.
FAIR VALUE OF DEBT
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, 2020, and 2019, substantially all of which were classified as Level 1, were approximately $33.8 billion and $38.8 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, 2020, and 2019, variable-rate debt constituted approximately 3% and 12% of Occidental’s total debt, respectively.
DEBT RATINGS
In connection with the Senior Notes Offerings, Occidental's long-term debt credit ratings were reviewed by the three major rating agencies. As of December 31, 2020, Occidental’s long-term debt was rated BB by Fitch Ratings, Ba2 by Moody’s Investors Service and BB- by Standard and Poor’s. Any additional downgrade in credit ratings could impact Occidental's ability to access capital markets and increase its cost of capital. In addition, given that Occidental’s current debt ratings are non-investment grade, Occidental may be requested, and in some cases required, to provide collateral in the form of cash, letters of credit, surety bonds or other acceptable support as financial assurance of its performance and payment obligations under certain contractual arrangements such as pipeline transportation contracts, environmental remediation obligations, oil and gas purchase contracts and certain derivative instruments.
As of the date of this filing, Occidental has provided required financial assurances through a combination of cash, letters of credit and surety bonds and has not issued any letters of credit under the RCF or other committed facilities. For additional information, see Risk Factors in Part I, Item IA of this Form 10-K.
| 90 | OXY 2020 FORM 10-K |
| FINANCIAL STATEMENTS FOOTNOTES |
| NOTE 8 - LEASE COMMITMENTS |
Occidental identifies leases through its accounts payable and contract monitoring process. Since the adoption of ASC 842, operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. The ROU assets include the discounted obligation in addition to any upfront payments or costs incurred during the contract execution of the lease and amortized on a straight-line basis over the course of the lease term. Except for leases with explicitly defined contract terms, Occidental utilizes judgment to assess likelihood of renewals, terminations and purchase options, in order to determine the lease term. Occidental uses the incremental borrowing rate at commencement date to determine the present value of lease payments. The incremental borrowing rate equates to the rate of interest that Occidental would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. Certain leases include variable lease payments which are over and above the minimum lease liability used to derive the ROU asset and lease liability and are based on the underlying asset’s operations. These variable lease costs are reported in the lease cost classification table.
Occidental’s operating lease agreements include lease liability for oil and gas exploration and development equipment, including offshore and onshore drilling rigs of $45 million, compressors of $140 million, storage facilities of $253 million, office space $406 million and other field equipment of $57 million, which are recorded gross on the Consolidated Balance Sheet and in the lease cost disclosures below. Contract expiration terms generally range from two to eight years. Further, actual expenditures are netted against joint-interest recoveries on the income statement through the normal joint-interest billing process. Occidental’s leases also include pipelines, rail cars, easements, aircraft and real estate of $213 million, which typically are not associated with joint-interest recoveries. Real estate and rail cars leases have contract expiration terms ranging from one to 13 years.
Occidental’s finance lease agreements include leases for oil and gas exploration and development equipment, as well as real estate offices, compressors and field equipment of approximately $358 million. The following table presents lease balances and their location on the Consolidated Balance Sheet at December 31, 2020 and 2019:
| millions | Balance sheet location | 2020 | 2019 | ||||||||||||||
| Assets: | |||||||||||||||||
| Operating | Operating lease assets | $ | 1,062 | $ | 1,411 | ||||||||||||
| Finance | Property, plant and equipment | 365 | 397 | ||||||||||||||
| Total lease assets | $ | 1,427 | $ | 1,808 | |||||||||||||
| Liabilities: | |||||||||||||||||
| Current | |||||||||||||||||
| Operating | Current operating lease liabilities | $ | 473 | $ | 579 | ||||||||||||
| Finance | Current maturities of long-term debt | 42 | 51 | ||||||||||||||
| Non-current | |||||||||||||||||
| Operating | Deferred credits and other liabilities - Operating lease liabilities | 641 | 872 | ||||||||||||||
| Finance | Long-term debt, net | 316 | 347 | ||||||||||||||
| Total lease liabilities | $ | 1,472 | $ | 1,849 |
At December 31, 2020, Occidental’s leases expire based on the following schedule:
| millions | Operating Leases (a) | Finance Leases (b) | Total | |||||||||||||||||
| 2021 | $ | 456 | $ | 44 | $ | 500 | ||||||||||||||
| 2022 | 182 | 43 | 225 | |||||||||||||||||
| 2023 | 108 | 41 | 149 | |||||||||||||||||
| 2024 | 87 | 46 | 133 | |||||||||||||||||
| 2025 | 71 | 30 | 101 | |||||||||||||||||
| Thereafter | 385 | 231 | 616 | |||||||||||||||||
| Total lease payments | 1,289 | 435 | 1,724 | |||||||||||||||||
| Less: Interest | (175) | (77) | (252) | |||||||||||||||||
| Total lease liabilities | $ | 1,114 | $ | 358 | $ | 1,472 |
(a)The weighted-average remaining lease term is 6.2 years and the weighted-average discount rate is 4.73%.
(b)The weighted-average remaining lease term is 10.6 years and the weighted-average discount rate is 3.47%.
| OXY 2020 FORM 10-K | 91 |
| FINANCIAL STATEMENTS FOOTNOTES |
The following tables present Occidental’s total lease cost and classifications, as well as cash paid for amounts included in the measurement of operating and finance lease liabilities for the years ended December 31:
| millions | ||||||||
| Lease cost classification (a) | 2020 | 2019 | ||||||
| Operating lease costs (b) | ||||||||
| Property, plant and equipment, net | $ | 197 | $ | 449 | ||||
| Operating expense and cost of sales | 557 | 391 | ||||||
| Selling, general and administrative expenses | 107 | 92 | ||||||
| Finance lease cost | ||||||||
| Amortization of ROU assets | 29 | 19 | ||||||
| Interest on lease liabilities | 14 | 2 | ||||||
| Total lease cost | $ | 904 | $ | 953 |
(a)Amounts reflected are gross before joint-interest recoveries.
(b)Included short-term lease cost of $207 million and $404 million and variable lease cost of $95 million and $162 million for the years ended December 31, 2020 and 2019, respectively.
| millions | 2020 | 2019 | ||||||
| Operating cash flows | $ | 506 | $ | 262 | ||||
| Investing cash flows | $ | 89 | $ | 112 | ||||
| Financing cash flows (a) | $ | 29 | $ | 19 |
(a)Excludes cash received of approximately $300 million associated with a failed sale-leaseback in 2019, see Note 4 - Divestitures and Other Transactions.
| NOTE 9 - DERIVATIVES |
OBJECTIVE AND STRATEGY
Occidental uses a variety of derivative financial instruments and physical contracts to manage its exposure to commodity price fluctuations, interest rate risks and transportation commitments and to fix margins on the future sale of stored commodity volumes. Occidental also enters into derivative financial instruments for trading purposes.
Occidental may elect normal purchases and normal sales exclusions when physically delivered commodities are purchased or sold to a customer. Occidental occasionally 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, such as to lock rates on forecasted debt issuances. Derivatives are carried at fair value and on a net basis when a legal right of offset exists with the same counterparty. See Note 1 - Summary of Significant Accounting Policies for Occidental’s accounting policy on derivatives.
DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS
As of December 31, 2020, Occidental’s derivatives not designated as hedges consist of oil call options, natural gas collars, interest rate swaps and marketing derivatives.
Derivative instruments that are derivatives not designated as hedging instruments are required to be recorded on the balance sheet at fair value. Changes in fair value will impact Occidental’s earnings through mark-to-market adjustments until the physical commodity is delivered or the financial instrument is settled. The fair value does not reflect the realized or cash value of the instrument.
COLLARS AND OIL CALL OPTIONS
In 2019, Occidental entered into 2020 Brent-priced 3-way collars combined with 2021 call options on the same volume to manage its near-term exposure to cash flow variability from oil price risks in 2020. The 2021 call options were sold to enhance the upside retention in 2020. In 2020, management elected to hedge a portion of Occidental’s expected 2021 natural gas production to enhance cash flow stability. The majority of the collars settled in 2020 with the receipt of cash of $960 million. The remaining $52 million settled in 2021.The 2021 call options were entered into to substantially improve the terms for the ceiling price that Occidental received for the contracted commodity volumes in 2020.
In September, 2020, Occidental entered into natural gas two-way collar derivative instruments for 2021 to manage its near-term exposure to cash flow variability from natural gas price risk. A two-way collar is a combination of two options: a
| 92 | OXY 2020 FORM 10-K |
| FINANCIAL STATEMENTS FOOTNOTES |
sold call and a purchased put. The sold call establishes the ceiling price that Occidental will receive for the contracted commodity volume for a defined period of time. The purchased put establishes the floor price that Occidental will receive for the contracted volumes. Net gains and losses associated with collars and calls are recognized currently in net sales.
Occidental had the following collars and calls outstanding at December 31, 2020:
| Collars and Calls, not designated as hedges | ||||||||||||||
| 2021 Settlement - oil | ||||||||||||||
| Call options sold (MMbbl) | 127.8 | |||||||||||||
| Average price per barrel (Brent oil pricing) | ||||||||||||||
| Ceiling sold price (call) | $ | 74.16 | ||||||||||||
| 2021 Settlement - natural gas | ||||||||||||||
| Natural Gas Collars (millions of MMbtu) | 177.0 | |||||||||||||
| Volume weighted average price per MMbtu (NYMEX) | ||||||||||||||
| Ceiling sold price (call) | $ | 3.64 | ||||||||||||
| Floor purchased price (put) | $ | 2.50 |
INTEREST RATE SWAPS
Occidental acquired interest rate swap contracts in the Acquisition. The contracts lock in a fixed interest rate in exchange for a floating interest rate indexed to three-month London Inter-Bank Offered Rate (LIBOR) throughout the reference period. Net gains and losses associated with interest rate derivative instruments not designated as hedging instruments are recognized currently in gains (losses) on interest rate swaps and warrants, net.
Occidental had the following outstanding interest rate swaps at December 31, 2020:
| millions except percentages | Mandatory | Weighted-Average | |||||||||||||||||||||
| Notional Principal Amount | Reference Period | Termination Date | Interest Rate | ||||||||||||||||||||
| $ | 400 | September 2016 - 2046 | September 2021 | 6.348 | % | ||||||||||||||||||
| $ | 350 | September 2017 - 2047 | September 2021 | 6.662 | % | ||||||||||||||||||
| $ | 275 | September 2016 - 2046 | September 2022 | 6.709 | % | ||||||||||||||||||
| $ | 450 | September 2017 - 2047 | September 2023 | 6.445 | % | ||||||||||||||||||
Depending on market conditions, liability management actions or other factors, Occidental may enter into offsetting interest rate swap positions or settle or amend certain or all of the currently outstanding interest rate swaps. Occidental settled interest rate swaps with a notional value of $125 million in October 2019. In the first quarter of 2020, Occidental extended all 2020 mandatory termination dates to 2021 or thereafter.
Derivative settlements and collateralization are classified as cash flows from operating activities unless the derivatives contain an other-than-insignificant financing element, in which case the settlements and collateralization are classified as cash flows from financing activities. Due to the liability position of the interest rate derivatives at the date of the Acquisition, the interest rate derivatives in Occidental’s portfolio contain an other-than-insignificant financing element, and therefore, any settlements, collateralization or cash payments related to interest rate derivatives are classified as cash flow from financing activities. Net cash payments related to settlements were $93 million for the twelve months ended December 31, 2020. Collateral with respect to interest rate swap agreements was paid in the amount of $270 million for the twelve months ended December 31, 2020.
MARKETING DERIVATIVES
Occidental’s marketing derivative instruments not designated as hedges are short-duration physical and financial forward contracts. A substantial majority of Occidental’s physically settled derivative contracts are index-based and carry no mark-to-market valuation in earnings. These instruments settle at a weighted-average contract price of $46.05 per barrel and $2.58 per Mcf for oil and natural gas, respectively, at December 31, 2020. The weighted-average contract price was $60.60 per barrel and $2.17 per Mcf for oil and natural gas, respectively, at December 31, 2019. Net gains and losses associated with marketing derivative instruments not designated as hedging instruments are recognized currently in net sales.
| OXY 2020 FORM 10-K | 93 |
| FINANCIAL STATEMENTS FOOTNOTES |
The following table summarizes net long/(short) volumes associated with the outstanding marketing commodity derivatives not designated as hedging instruments as of December 31, 2020, and 2019:
| 2020 | 2019 | |||||||||||||
| Oil Commodity Contracts | ||||||||||||||
| Volume (MMbbl) | (31) | 55 | ||||||||||||
| Natural gas commodity contracts | ||||||||||||||
| Volume (Bcf) | (117) | (128) |
THE BERKSHIRE WARRANTS
Warrants for 80 million shares of Occidental stock, with an initial exercise price of $62.50, were issued in connection with the financing of the Acquisition (the Berkshire Warrants). The Berkshire Warrants are exercisable at the holder’s option, in whole or in part, until the first anniversary of the date on which no shares of Preferred Stock remain outstanding, at which time the Berkshire Warrants expire. The holders of the Berkshire Warrants could have required net cash settlement if certain shareholder and regulatory approvals to issue shares of Occidental’s common stock underlying the Berkshire Warrants were not obtained. Prior to these approvals, the fair value of the Berkshire Warrants was remeasured each reporting date with gains and losses being recorded on the income statement.
At Occidental’s May 29, 2020 annual shareholders meeting, all remaining approvals were obtained and the Berkshire Warrants can no longer be cash settled. Upon these approvals, the fair value of the Berkshire Warrants was remeasured at May 29, 2020, using the Black-Scholes option model. The reclassification from liabilities to “Additional paid-in capital” was $103 million.
The following inputs were used in the Black-Scholes option model: the expected life of the Berkshire Warrants, a volatility factor and the exercise price. The expected life is based on the estimated term of the Berkshire Warrants, the volatility factor is based on historical volatilities of Occidental common stock and the initial exercise price of $62.50.
The Berkshire Warrants contain an anti-dilution provision that adjusts the exercise price and the number of shares of Occidental’s common stock issuable on exercise upon the occurrence of certain distributions to common shareholders. On June 26, 2020, Occidental’s Board of Directors declared a distribution to its common shareholders of warrants to purchase additional shares of common stock, See Note 13 - Stockholders’ Equity. This distribution to common shareholders resulted in an anti-dilution adjustment to the Berkshire Warrants, which lowered its exercise price to $59.624 and increased the number of shares of Occidental’s common stock issuable on exercise of the Berkshire Warrants by approximately 3.9 million shares.
DERIVATIVES DESIGNATED AS HEDGING INSTRUMENTS
Net gains and losses attributable to derivative instruments subject to cash flow hedge accounting reside in accumulated other comprehensive loss and are reclassified to earnings as the transactions to which the derivatives relate, primarily interest expense on debt issued to partially finance the Acquisition, are recognized in earnings.
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 table presents the fair values of Occidental’s outstanding derivatives. Fair values are presented at gross amounts below, including when derivatives are subject to netting arrangements, and are presented on a net basis in the Consolidated Balance Sheets.
| 94 | OXY 2020 FORM 10-K |
| FINANCIAL STATEMENTS FOOTNOTES |
| millions | Fair Value Measurements Using | Total Fair Value | ||||||||||||||||||||||||||||||
| Balance Sheet Classification | Level 1 | Level 2 | Level 3 | Netting (a) | ||||||||||||||||||||||||||||
| December 31, 2020 | ||||||||||||||||||||||||||||||||
| Collars and Calls | ||||||||||||||||||||||||||||||||
| Other current assets | $ | — | $ | 25 | $ | — | $ | — | $ | 25 | ||||||||||||||||||||||
| Accrued liabilities | — | (42) | — | — | (42) | |||||||||||||||||||||||||||
| Marketing Derivatives | ||||||||||||||||||||||||||||||||
| Other current assets | 1,155 | 80 | — | (1,204) | 31 | |||||||||||||||||||||||||||
| Long-term receivables and other assets, net | 7 | 2 | — | (7) | 2 | |||||||||||||||||||||||||||
| Accrued liabilities | (1,252) | (81) | — | 1,204 | (129) | |||||||||||||||||||||||||||
| Deferred credits and other liabilities - other | (7) | — | — | 7 | — | |||||||||||||||||||||||||||
| Interest Rate Swaps | ||||||||||||||||||||||||||||||||
| Accrued liabilities | — | (936) | — | — | (936) | |||||||||||||||||||||||||||
| Deferred credits and other liabilities - other | — | (822) | — | — | (822) | |||||||||||||||||||||||||||
| December 31, 2019 | ||||||||||||||||||||||||||||||||
| Collars and Calls | ||||||||||||||||||||||||||||||||
| Other current assets | $ | — | $ | 92 | $ | — | $ | — | $ | 92 | ||||||||||||||||||||||
| Deferred credits and other liabilities - other | — | (160) | — | — | (160) | |||||||||||||||||||||||||||
| Marketing Derivatives | ||||||||||||||||||||||||||||||||
| Other current assets | 945 | 79 | — | (973) | 51 | |||||||||||||||||||||||||||
| Long-term receivables and other assets, net | 4 | 12 | — | (4) | 12 | |||||||||||||||||||||||||||
| Accrued liabilities | (1,008) | (44) | — | 973 | (79) | |||||||||||||||||||||||||||
| Deferred credits and other liabilities - other | (4) | (1) | — | 4 | (1) | |||||||||||||||||||||||||||
| Interest Rate Swaps | ||||||||||||||||||||||||||||||||
| Other current assets | — | 5 | — | — | 5 | |||||||||||||||||||||||||||
| Long-term receivables and other assets, net | — | 5 | — | — | 5 | |||||||||||||||||||||||||||
| Accrued liabilities | — | (657) | — | — | (657) | |||||||||||||||||||||||||||
| Deferred credits and other liabilities - other | — | (776) | — | — | (776) | |||||||||||||||||||||||||||
| Berkshire Warrants | ||||||||||||||||||||||||||||||||
| Deferred credits and other liabilities - other | — | (107) | — | — | (107) |
(a)These amounts do not include collateral. As of December 31, 2020, $374 million of collateral has been netted against derivative liabilities related to interest rate swaps. Occidental had $85 million and $65 million of initial margin deposited with brokers as of December 31, 2020 and 2019, respectively, related to marketing derivatives.
| OXY 2020 FORM 10-K | 95 |
| FINANCIAL STATEMENTS FOOTNOTES |
GAINS AND LOSSES ON DERIVATIVES
The following table presents gains and (losses) related to Occidental’s derivative instruments on the Consolidated Statements of Operations:
| millions | December 31, | |||||||||||||||||||||||||||||||
| Income Statement Classification | 2020 | 2019 | 2018 | |||||||||||||||||||||||||||||
| Collars and Calls | ||||||||||||||||||||||||||||||||
| Net sales | $ | 1,064 | $ | (107) | $ | — | ||||||||||||||||||||||||||
| Marketing Derivatives | ||||||||||||||||||||||||||||||||
| Net sales (a) | (393) | 1,804 | 2,254 | |||||||||||||||||||||||||||||
| Interest Rate Swaps (Excluding WES) | ||||||||||||||||||||||||||||||||
| Gains (losses) on interest rate swaps and warrants, net | (428) | 122 | — | |||||||||||||||||||||||||||||
| Other (b) | ||||||||||||||||||||||||||||||||
| Gains on interest rate swaps and warrants, net | 5 | 111 | — |
(a)Includes derivative and non-derivative marketing activity.
(b)Primarily includes losses and gains on Berkshire Warrants prior to the May 29, 2020 reclassification to equity.
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 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 futures 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 party would need to post. The aggregate fair value of derivative instruments with credit-risk-contingent features for which a net liability position existed at December 31, 2020 was $104 million (net of $374 million collateral), primarily related to acquired interest rate swaps, and $787 million (net of $169 million of collateral) existed at December 31, 2019.
| NOTE 10 - ENVIRONMENTAL LIABILITIES AND EXPENDITURES |
Occidental’s operations are subject to stringent federal, state, local and international 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 international 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, 2020, Occidental participated in or monitored remedial activities or proceedings at 170 sites. The following table presents Occidental’s current and non-current environmental remediation liabilities as of December 31, 2020 and 2019, the current portion of which is included in accrued liabilities ($123 million in 2020 and $162 million in 2019) and the remainder in deferred credits and other liabilities - environmental remediation liabilities ($1.03 billion in 2020 and $1.04 billion in 2019).
Occidental’s environmental remediation sites are grouped into four categories: NPL sites listed or proposed for listing by the EPA on the CERCLA NPL and three categories of non-NPL sites — third-party sites, Occidental-operated sites and closed or non-operated Occidental sites.
| 96 | OXY 2020 FORM 10-K |
| FINANCIAL STATEMENTS FOOTNOTES |
| 2020 | 2019 | |||||||||||||||||||||||||
| millions, except number of sites | Number of Sites | Remediation Balance | Number of Sites | Remediation Balance | ||||||||||||||||||||||
| NPL sites | 35 | $ | 447 | 36 | $ | 463 | ||||||||||||||||||||
| Third-party sites | 69 | 293 | 74 | 311 | ||||||||||||||||||||||
| Occidental-operated sites | 17 | 144 | 17 | 154 | ||||||||||||||||||||||
| Closed or non-operated Occidental sites | 49 | 267 | 50 | 269 | ||||||||||||||||||||||
| Total | 170 | $ | 1,151 | 177 | $ | 1,197 |
As of December 31, 2020, Occidental’s environmental liabilities exceeded $10 million each at 19 of the 170 sites described above, and 96 of the sites had liabilities from $0 to $1 million each. As of December 31, 2020, two 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) — accounted for 92% of its liabilities associated with NPL sites. 17 of the 35 NPL sites are indemnified by Maxus.
Five of the 69 third-party sites — a Maxus-indemnified chrome site in New Jersey, a former copper mining and smelting operation in Tennessee, a former oil field and a landfill in California and an active refinery in Louisiana where Occidental reimburses the current owner for certain remediation activities — accounted for 76% of Occidental’s liabilities associated with these sites. 9 of the 69 third-party sites are indemnified by Maxus.
Five sites — oil and gas operations in Colorado and chemical plants in Kansas, Louisiana, New York and Texas — accounted for 70% of the liabilities associated with the Occidental-operated sites. Seven other sites — a landfill in Western New York, a former refinery in Oklahoma, former chemical plants in California, Michigan, Tennessee and Washington and a closed coal mine in Pennsylvania — accounted for 70% of the liabilities associated with closed or non-operated Occidental sites.
Environmental remediation liabilities vary over time depending on factors such as acquisitions or divestitures, identification of additional sites and remedy selection and implementation. Occidental recorded environmental remediation expenses of $36 million, $112 million and $47 million for the years ended December 31, 2020, 2019, and 2018, respectively. Environmental remediation expenses primarily relate to changes to existing conditions from past operations. Based on current estimates, Occidental expects to expend funds corresponding to approximately 45% of the year-end remediation balance over the next three to four years with the remainder over the subsequent 10 or more years. Occidental believes its range of reasonably possible additional losses beyond those amounts currently recorded for environmental remediation for all of its environmental sites could be up to $1.1 billion.
MAXUS ENVIRONMENTAL SITES
When Occidental acquired Diamond Shamrock Chemicals Company (DSCC) in 1986, Maxus 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.
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 remediation called for in the AOC and the ROD, as well as for certain other Maxus-indemnified sites. Occidental's accrued estimated environmental reserve does not consider any recoveries for indemnified costs. 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. In June 2018, Occidental filed a complaint under CERCLA in Federal District Court in the State of New Jersey against numerous potentially responsible parties for reimbursement of amounts incurred or to be incurred to comply with the AOC, the ROD, or to perform other remediation activities at the Site.
In June 2017, the court overseeing the Maxus bankruptcy approved a Plan of Liquidation (Plan) to liquidate Maxus and create a trust to pursue claims against current and former parents YPF and each of its respective subsidiaries and affiliates (YPF) and Repsol, S.A. and each of its respective subsidiaries and affiliates (Repsol), as well as others to satisfy claims by Occidental and other creditors for past and future cleanup and other costs. In July 2017, the court-approved Plan became final and the trust became effective. The trust is pursuing claims against YPF, Repsol and others and is expected to
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| FINANCIAL STATEMENTS FOOTNOTES |
distribute assets to Maxus' creditors in accordance with the trust agreement and Plan. In June 2018, the trust filed its complaint against YPF and Repsol in Delaware bankruptcy court asserting claims based upon, among other things, fraudulent transfer and alter ego. During 2019, the bankruptcy court denied Repsol's and YPF's motions to dismiss the complaint as well as their motions to move the case away from the bankruptcy court. Discovery remains ongoing at the time of this report.
| NOTE 11 - LAWSUITS, CLAIMS, COMMITMENTS AND CONTINGENCIES |
LEGAL MATTERS
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. Reserves for matters, other than for environmental remediation, that satisfy this criteria as of December 31, 2020 and 2019, were not material to Occidental’s Consolidated Balance Sheets.
In 2016, Occidental received payments from the Republic of Ecuador of approximately $1.0 billion pursuant to a November 2015 arbitration award for Ecuador’s 2006 expropriation of Occidental’s Participation Contract for Block 15. The awarded amount represented a recovery of 60% of the value of Block 15. In 2017, Andes Petroleum Ecuador Ltd. (Andes) filed a demand for arbitration, claiming it is entitled to a 40% share of the judgment amount obtained by Occidental. Occidental contends that Andes is not entitled to any of the amounts paid under the 2015 arbitration award because Occidental’s recovery was limited to Occidental’s own 60% economic interest in the block. The merits hearing occurred in September 2020 and an arbitration decision is expected within the next six months.
In August 2019, Sanchez Energy Corporation and certain of its affiliates (Sanchez) filed voluntary petitions for reorganization under Chapter 11 of the United States Bankruptcy Code. Sanchez is a party to agreements with Anadarko as a result of its 2017 purchase of Anadarko's Eagle Ford Shale assets. Sanchez is attempting to reject some of the agreements related to the purchase of Anadarko’s Eagle Ford Shale assets. If Sanchez is permitted to reject certain of those agreements, then Anadarko may owe deficiency payments to various third parties. Occidental intends to defend vigorously any attempt by Sanchez to reject the agreements. Occidental expects a ruling on Sanchez's purported contract rejection in the first half of 2021.
On May 26, 2020, a putative securities class action captioned City of Sterling Heights General Employees’ Retirement System, et al. v. Occidental Petroleum Corporation, et al., No. 651994/2020 (City of Sterling), was filed in the Supreme Court of the State of New York. The complaint asserts claims under Sections 11, 12 and 15 of the Securities Act of 1933, as amended (the Securities Act), based on alleged misstatements in the Securities Act filings, including the registration statement filed in connection with the Anadarko Acquisition and Occidental’s related issuance of common stock and debt securities offerings that took place in August 2019. The lawsuit was filed against Occidental, certain current and former officers and directors and certain underwriters of the debt securities offerings and seeks damages in an unspecified amount, plus attorneys’ fees and expenses. Two additional putative class actions were filed in the same court (together with City of Sterling, the State Cases) and the State Cases were consolidated into In re Occidental Petroleum Corporation Securities Litigation, No. 651830/2020. Occidental intends to vigorously defend itself in all respects in regard to the State Cases.
The ultimate outcome and impact of outstanding lawsuits, claims and proceedings on Occidental cannot be predicted. Management believes that the resolution of these matters will not, individually or in the aggregate, have a material adverse effect on Occidental’s Consolidated Balance Sheets. If unfavorable outcomes of these matters were to occur, future results of operations or cash flows for any particular quarterly or annual period could be materially adversely affected. Occidental’s estimates are based on information known about the legal matters and its experience in contesting, litigating and settling similar matters. 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. Taxable years through 2017 for U.S. federal income tax purposes have been audited by the U.S. Internal Revenue Service (IRS) pursuant to its Compliance Assurance Program and subsequent taxable
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| FINANCIAL STATEMENTS FOOTNOTES |
years are currently under review. Taxable years through 2009 have been audited for state income tax purposes. All other significant audit matters in foreign jurisdictions have been resolved through 2010. 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.
For Anadarko, its taxable years through 2014 and tax year 2016 for U.S. federal and state income tax purposes have been audited by the IRS and respective state taxing authorities. There are outstanding significant audit matters in one foreign jurisdiction. As stated above, during the course of tax audits, disputes have arisen and other disputes may arise as to facts and matters of law. Other than the matter discussed below, Occidental believes that the resolution of these outstanding tax matters would not have a material adverse effect on its consolidated financial position or results of operations.
Anadarko received an $881 million tentative refund in 2016 related to its $5.2 billion Tronox Adversary Proceeding settlement payment in 2015. In September 2018, Anadarko received a statutory notice of deficiency from the IRS disallowing the net operating loss carryback and rejecting Anadarko’s refund claim. As a result, Anadarko filed a petition with the U.S. Tax Court to dispute the disallowances in November 2018. The case was in the IRS appeals process until the second quarter of 2020, however it has since been returned to the U.S. Tax Court where Occidental expects to continue pursuing resolution.
In accordance with ASC 740’s guidance on the accounting for uncertain tax positions, Occidental has recorded no tax benefit on the tentative cash tax refund of $881 million. As a result, should Occidental not ultimately prevail on the issue, there would be no additional tax expense recorded relative to this position for financial statement purposes other than future interest. However, in that event Occidental would be required to repay approximately $925 million ($898 million in federal taxes and $27 million in state taxes) plus accrued interest of approximately $255 million. A liability for this amount plus interest is included in deferred credits and other liabilities-other.
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, 2020, 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.
PURCHASE OBLIGATIONS AND COMMITMENTS
Occidental, its subsidiaries, or both, have entered into agreements providing for future payments, primarily to secure terminal and pipeline capacity, and also for 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, 2020, total purchase obligations were $13.2 billion, which included approximately $2.8 billion in 2021, $4.4 billion in 2022 and 2023, $3.0 billion in 2024 and 2025, and $3.0 billion in 2026 and thereafter.
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| FINANCIAL STATEMENTS FOOTNOTES |
| NOTE 12 - INCOME TAXES |
The following summarizes domestic and foreign components of income (loss) from continuing operations before domestic and foreign income taxes for the years ended December 31:
| millions | 2020 | 2019 | 2018 | |||||||||||||||||
| Domestic | $ | (15,322) | $ | (1,632) | $ | 3,431 | ||||||||||||||
| Foreign | (383) | 1,986 | 2,177 | |||||||||||||||||
| Total | $ | (15,705) | $ | 354 | $ | 5,608 |
The following summarizes components of income tax expense (benefit) on continuing operations for the years ended December 31:
| millions | 2020 | 2019 | 2018 | |||||||||||||||||
| Current | ||||||||||||||||||||
| Federal | $ | (126) | $ | 33 | $ | (23) | ||||||||||||||
| State and Local | 6 | 46 | 52 | |||||||||||||||||
| Foreign | 465 | 1,809 | 1,077 | |||||||||||||||||
| Total current tax expense | $ | 345 | $ | 1,888 | $ | 1,106 | ||||||||||||||
| Deferred | ||||||||||||||||||||
| Federal | (2,384) | (130) | 422 | |||||||||||||||||
| State and Local | (103) | 17 | 12 | |||||||||||||||||
| Foreign | (30) | (914) | (63) | |||||||||||||||||
| Total deferred tax expense (benefit) | $ | (2,517) | $ | (1,027) | $ | 371 | ||||||||||||||
| Total income tax expense (benefit) | $ | (2,172) | $ | 861 | $ | 1,477 |
The following reconciliation of the U.S federal statutory income tax rate to Occidental’s worldwide effective tax rate on income from continuing operations for the years ended December 31 is stated as a percentage of income (loss) from continuing operations before income taxes:
| 2020 | 2019 | 2018 | ||||||||||||||||||
| U.S. federal statutory tax rate | 21 | % | 21 | % | 21 | % | ||||||||||||||
| Enhanced oil recovery credit and other general business credits | — | (2) | (3) | |||||||||||||||||
| Goodwill impairment | (3) | — | — | |||||||||||||||||
| Tax benefit due to reversal of indefinite reinvestment assertion | — | — | (2) | |||||||||||||||||
| Tax impact from foreign operations | (4) | 135 | 11 | |||||||||||||||||
| State income taxes, net of federal benefit | — | 14 | 1 | |||||||||||||||||
| Uncertain tax positions | — | 7 | — | |||||||||||||||||
| Transaction costs | — | 10 | — | |||||||||||||||||
| Non-controlling interest | — | (8) | — | |||||||||||||||||
| Executive compensation limitation | — | 12 | — | |||||||||||||||||
| Stock warrants | — | (5) | — | |||||||||||||||||
| WES loss of control | — | 58 | — | |||||||||||||||||
| Other | — | 1 | (2) | |||||||||||||||||
| Worldwide effective tax rate | 14 | % | 243 | % | 26 | % |
In 2020, Occidental’s worldwide effective tax rate was 14%, which was largely a result of the impairment of the WES goodwill and certain international assets for which Occidental received no tax benefit and higher-taxed foreign operations which generally caused Occidental’s tax rate to vary significantly from the U.S. corporate tax rate.
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| FINANCIAL STATEMENTS FOOTNOTES |
The tax effects of temporary differences resulting in deferred income taxes at December 31, 2020, and 2019 were as follows:
| millions | 2020 | 2019 | ||||||||||||
| Deferred tax liabilities | ||||||||||||||
| Property, plant and equipment differences | $ | (10,744) | $ | (12,375) | ||||||||||
| Equity investments, partnerships and foreign subsidiaries | (658) | (989) | ||||||||||||
| Gross long-term deferred tax liabilities | (11,402) | (13,364) | ||||||||||||
| Deferred tax assets | ||||||||||||||
| Environmental reserves | 257 | 261 | ||||||||||||
| Postretirement benefit accruals | 398 | 441 | ||||||||||||
| Deferred compensation and benefits | 186 | 266 | ||||||||||||
| Asset retirement obligations | 942 | 906 | ||||||||||||
| Foreign tax credit carryforwards | 4,465 | 4,379 | ||||||||||||
| General business credit carryforwards | 607 | 443 | ||||||||||||
| Net operating loss carryforward | 1,797 | 692 | ||||||||||||
| Interest expense carryforward | 668 | 492 | ||||||||||||
| All other | 720 | 782 | ||||||||||||
| Gross long-term deferred tax assets | 10,040 | 8,662 | ||||||||||||
| Valuation allowance | $ | (5,695) | $ | (4,959) | ||||||||||
| Net long-term deferred tax assets | $ | 4,345 | $ | 3,703 | ||||||||||
| Total deferred income taxes, net | $ | (7,057) | $ | (9,661) | ||||||||||
| Less: foreign deferred tax asset in long-term receivables and other assets, net | $ | (56) | $ | (56) | ||||||||||
| Total deferred income taxes | $ | (7,113) | $ | (9,717) |
Total deferred tax assets, after valuation allowances, were $4.3 billion and $3.7 billion as of December 31, 2020, and 2019, respectively. Occidental expects to realize the recorded deferred tax assets, net of any allowances, through future operating income and reversal of temporary differences. The total deferred tax liabilities were $11.4 billion and $13.4 billion as of December 31, 2020 and 2019, respectively. The decrease in net deferred tax liability in 2020 over 2019 is primarily driven by domestic asset impairments for which Occidental does not receive an immediate tax benefit as well as an increase in net operating loss carryforwards.
As of December 31, 2020, Occidental had foreign tax credit carryforwards of $4.5 billion, federal general business credits carryforwards of $607 million and state tax credit carryforwards of $39 million. Occidental has recorded a valuation allowance for $4.4 billion of the foreign tax credit carryforwards and $30 million of the state tax credit carryforwards.
As of December 31, 2020, Occidental had tax-effected federal net operating loss carryforwards of $631 million, foreign net operating loss carryforwards of $850 million and state operating loss carryforwards of $316 million. The carryforward balances have varying carryforward periods through 2040, excluding certain attributes for which there is an indefinite carryforward period. A valuation allowance was recorded for $251 million of the tax-effected state net operating loss carryforwards and $795 million of the tax-effected foreign net operating loss carryforwards. Occidental has an additional valuation allowance of $145 million against other foreign deferred tax assets.
Occidental had a tax-effected federal interest expense carryforward of $569 million and tax-effected state interest expense carryforward of $99 million as of December 31, 2020. Occidental recorded a valuation allowance for $64 million of the state interest expense carryforward.
A deferred tax liability has not been recognized for temporary differences related to unremitted earnings of certain consolidated international subsidiaries aggregating approximately $930 million at December 31, 2020, as it is Occidental’s intention to reinvest such earnings indefinitely. If the earnings of these international subsidiaries were not indefinitely reinvested, an additional deferred tax liability of approximately $214 million would be required.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
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| FINANCIAL STATEMENTS FOOTNOTES |
| millions | 2020 | 2019 | 2018 | |||||||||||||||||
| Balance at January 1 | $ | 2,173 | $ | — | $ | 22 | ||||||||||||||
| Increase related to Anadarko Acquisition | — | 2,143 | — | |||||||||||||||||
| Increases related to current-year positions | 14 | 30 | — | |||||||||||||||||
| Settlements | (42) | — | (22) | |||||||||||||||||
| Reductions for tax positions of prior years | (100) | — | — | |||||||||||||||||
| Balance at December 31 | $ | 2,045 | $ | 2,173 | $ | — |
The December 31, 2020 balance of unrecognized tax benefits of $2.0 billion included potential benefits of $2.0 billion of which, if recognized, $1.6 billion would affect the effective tax rate on income. Also included are benefits of $84 million related to tax positions for which the ultimate deductibility is highly certain, but the timing of such deductibility is uncertain. Occidental records estimated potential interest and penalties related to liabilities for unrecognized tax benefits in the provisions for domestic and foreign income taxes. During 2020, Occidental recorded interest related to liabilities for unrecognized tax benefits of $67 million, for a cumulative accrued interest related to liabilities for unrecognized tax benefits of $263 million as of December 31, 2020. There were no interest and penalties associated with liabilities for unrecognized tax benefits recorded for the years ended December 31, 2020 and 2019. Over the next 12 months, it is reasonably possible that the total amount of unrecognized tax benefits could decrease by $70 million to $80 million due to settlements with taxing authorities or lapse in statutes of limitation.
Occidental recognized $110 million and $86 million in federal and state income tax receivables at December 31, 2020, and 2019, respectively, which was recorded in other current assets. In addition, Occidental recognized $24 million in receivables associated with audits and $36 million in federal alternative minimum tax non-current receivables at December 31, 2020 and 2019, respectively, both of which were recorded in long-term receivables and other assets, net.
Occidental is subject to audit by various tax authorities in varying periods. See Note 11 - Lawsuits, Claims, Commitments and Contingencies for a discussion of these matters.
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| FINANCIAL STATEMENTS FOOTNOTES |
| NOTE 13 - STOCKHOLDERS’ EQUITY |
The following is a summary of common stock issuances:
| Shares in thousands | Common Stock | |||||||
| Balance, December 31, 2017 | 893,469 | |||||||
| Issued | 1,628 | |||||||
| Options exercised and other, net | 19 | |||||||
| Balance, December 31, 2018 | 895,116 | |||||||
| Issued | 3,188 | |||||||
| Issued as part of the Acquisition (a) | 146,131 | |||||||
| Balance, December 31, 2019 | 1,044,435 | |||||||
| Issued | 36,130 | |||||||
| Options exercised and other, net | — | |||||||
| Balance, December 31, 2020 | 1,080,565 |
(a)Included approximately 2 million shares of common stock issued to a benefits trust for former Anadarko employees treated as treasury stock at December 31, 2019. These shares were sold from the trust in the first quarter of 2020.
TREASURY STOCK
The total number of shares authorized for Occidental’s share repurchase program is 185 million shares of which 44.2 million may yet be purchased under the repurchase program. However, the program does not obligate Occidental to acquire any specific number of shares and may be discontinued at any time. In 2020, no shares were purchased under the program. In 2019, 2.7 million shares were purchased at an average price of $66.94. In 2018, 16.9 million shares were purchased at an average price of $74.92. Additionally, Occidental purchased shares from the trustee of its defined contribution savings plan in 2020 and 2018. As of December 31, 2020, 2019 and 2018, treasury stock shares numbered 149.1 million, 150.3 million and 145.7 million, respectively.
PREFERRED STOCK
In connection with the Acquisition, Occidental issued 100,000 shares of series A preferred stock (the Preferred Stock), having a face value of $100,000 per share and a liquidation preference of $105,000 per share plus unpaid accrued dividends. In connection with the preferred stock issuance, Occidental also issued the Warrant. The holder of the Warrant and the Preferred Stock may redeem the Preferred Stock as payment for the exercise price of the Warrant in lieu of cash payment upon exercise. The Preferred Stock is redeemable at Occidental’s option after the 10th anniversary of issuance. Dividends on the Preferred Stock will accrue on the face value at a rate per annum of 8%, but will be paid only when, as and if declared by Occidental’s Board of Directors. At any time, when such dividends have not been paid in full, the unpaid amounts will accrue dividends, compounded quarterly, at a rate per annum of 9%. Following the payment in full of any accrued but unpaid dividends, the dividend rate will remain at 9% per annum.
If preferred dividends are not paid in full, Occidental is prohibited from paying dividends on common stock. In March and June 2020, the Board of Directors elected to declare its quarterly dividend on the Preferred Stock in shares of common stock. In accordance with the Certificate of Designations, the number of shares issued was calculated based on 90 percent of the average of the volume weighted average price over each of the 10 consecutive trading days following the dividend declaration date. In April and July 2020, Occidental issued approximately 17.3 million and 11.6 million shares, respectively, of common stock to the holders of the Preferred Stock. In October 2020 and January 2021, Occidental paid $200 million cash in Preferred Stock dividends for the Q3 and Q4 dividends, respectively.
At December 31, 2020 and 2019, Occidental had 100,000 shares of preferred stock issued and outstanding, and none were outstanding in 2018.
COMMON STOCK WARRANTS
On June 26, 2020, the Board of Directors declared a distribution of warrants to holders of Occidental common stock, at a rate of 0.125 warrants per share of Occidental common stock (the Common Stock Warrants). Occidental issued approximately 116 million Common Stock Warrants on August 3, 2020 to holders of record of outstanding shares of Occidental’s common stock as of the close of business on July 6, 2020, and pursuant to Occidental’s outstanding equity-based incentive awards in connection with anti-dilution adjustments resulting from such distribution. The Common Stock Warrants have an exercise price of $22.00 per share and will expire on August 3, 2027. The Common Stock Warrants are listed on the New York Stock Exchange and trade under the symbol "OXY WS".
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| FINANCIAL STATEMENTS FOOTNOTES |
The Common Stock Warrants were measured at fair value on the declaration date using the Black-Scholes option model and were classified as equity in "Additional paid-in capital". The following level 2 inputs were used in the Black-Scholes option model: the expected life of the Common Stock Warrants, a volatility factor and the exercise price. The expected life is based on the estimated term of the Common Stock Warrants, the volatility factor is based on historical volatilities of Occidental common stock and the exercise of $22.00 per share of Occidental common stock. As of the declaration date, the fair value of the Common Stock Warrants was determined to be $767 million.
EARNINGS PER SHARE
The following table presents the calculation of basic and diluted earnings per share for the years ended December 31:
| millions except per share amounts | 2020 | 2019 | 2018 | |||||||||||||||||
| Income (loss) from continuing operations | $ | (13,533) | $ | (507) | $ | 4,131 | ||||||||||||||
| Loss from discontinued operations | (1,298) | (15) | — | |||||||||||||||||
| Net income (loss) | $ | (14,831) | $ | (522) | $ | 4,131 | ||||||||||||||
| Less: Net income attributable to noncontrolling interest | — | (145) | — | |||||||||||||||||
| Less: Preferred stock dividends | (844) | (318) | — | |||||||||||||||||
| Net income (loss) attributable to common stock | $ | (15,675) | $ | (985) | $ | 4,131 | ||||||||||||||
| Less: Net income allocated to participating securities | — | — | (17) | |||||||||||||||||
| Net income (loss), net of participating securities | $ | (15,675) | $ | (985) | $ | 4,114 | ||||||||||||||
| Weighted-average number of basic shares | 918.7 | 809.5 | 761.7 | |||||||||||||||||
| Basic earnings (loss) per common share | $ | (17.06) | $ | (1.22) | $ | 5.40 | ||||||||||||||
| Net income (loss), net of participating securities | $ | (15,675) | $ | (985) | $ | 4,114 | ||||||||||||||
| Weighted-average number of basic shares | 918.7 | 809.5 | 761.7 | |||||||||||||||||
| Dilutive securities | — | — | 1.6 | |||||||||||||||||
| Total diluted weighted-average common shares | 918.7 | 809.5 | 763.3 | |||||||||||||||||
| Diluted earnings (loss) per common share | $ | (17.06) | $ | (1.22) | $ | 5.39 |
ACCUMULATED OTHER COMPREHENSIVE LOSS
Accumulated other comprehensive loss consisted of the following after-tax amounts at December 31:
| millions | 2020 | 2019 | ||||||||||||
| Foreign currency translation adjustments | $ | (6) | $ | (7) | ||||||||||
| Losses on derivatives | (119) | (122) | ||||||||||||
| Pension and postretirement adjustments (a) | (163) | (92) | ||||||||||||
| Total | $ | (288) | $ | (221) |
(a)See Note 15 - Retirement and Postretirement Benefit Plans for further information.
| NOTE 14 - STOCK-BASED INCENTIVE PLANS |
Occidental issues stock-based awards to employees in accordance with the terms of the shareholder approved 2015 Long-Term Incentive Plan. An aggregate of 133 million shares of Occidental common stock were authorized for issuance and approximately 11.6 million shares had been allocated to employee awards through December 31, 2020. As of December 31, 2020, approximately 88.3 million shares were available for grants of future awards. The plan requires each share covered by an award (other than options) 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 88.3 million depending on the type of award granted, and shares available for future awards may increase by the number of shares that are forfeited, canceled, or correspond to the portion of any stock-based awards settled in cash, including awards that were issued under a previous plan that remain outstanding. Current outstanding awards include RSUs, stock options, CROCEIs and TSRIs.
During 2020, non-employee directors were granted awards for 144,603 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.
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| FINANCIAL STATEMENTS FOOTNOTES |
For the year ended December 31, 2020, Occidental incurred expenses of $202 million related to stock-based incentive plans, of which $59 million was related to the Acquisition. For the year ended December 31, 2019, expense related to stock-based incentive plans was $208 million of which $31 million was related to the Acquisition. For the year ended December 31, 2018, Occidental incurred expenses of $180 million related to stock-based incentive plans. The income tax benefit associated with this expense was $42 million, $43 million and $47 million in the years ended December 31, 2020, 2019, and 2018, respectively.
As of December 31, 2020, unrecognized compensation expense for all unvested stock-based incentive awards was $254 million. This expense is expected to be recognized over a weighted-average period of 1.7 years. Occidental accounts for forfeitures as they occur.
RSUs
Certain employees are awarded the right to receive RSUs, some of which have performance criteria, and are in the form of, or equivalent in value to, actual shares of Occidental common stock. Depending on their terms, RSUs may be settled in stock or may be cash settled liabilities. 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.
CASH-SETTLED RSU LIABILITY AWARDS
The weighted-average, grant-date fair values of cash-settled RSUs granted in 2020, 2019 and 2018 were $40.86, $42.62 and $75.86 per share, respectively. Cash-Settled RSUs resulted in payments of $3 million, $4 million and $18 million, during the years ended December 31, 2020, 2019 and 2018, respectively.
STOCK-SETTLED RSU EQUITY AWARDS
The weighted-average, grant-date fair values of the stock-settled RSUs granted in 2020, 2019, and 2018 were $41.60, $58.73 and $69.87, respectively. The fair value of RSUs settled in shares during the years ended December 31, 2020, 2019 and 2018 was $62 million, $148 million and $109 million, respectively.
A summary of changes in Occidental’s unvested cash- and stock-settled RSUs during the year ended December 31, 2020, is presented below:
| Cash-Settled | Stock-Settled | |||||||||||||||||||||||||||||||
| thousands, except fair values | RSUs | Weighted-Average Grant-Date Fair Value | RSUs | Weighted-Average Grant-Date Fair Value | ||||||||||||||||||||||||||||
| Unvested at January 1 | 4,347 | $ | 43.46 | 4,395 | $ | 65.88 | ||||||||||||||||||||||||||
| Granted | 1,500 | $ | 40.86 | 4,299 | $ | 41.60 | ||||||||||||||||||||||||||
| Vested | (114) | $ | 61.61 | (2,328) | $ | 64.19 | ||||||||||||||||||||||||||
| Forfeitures | (276) | $ | 42.68 | (510) | $ | 48.89 | ||||||||||||||||||||||||||
| Unvested at December 31 | 5,457 | $ | 42.41 | 5,856 | $ | 50.21 |
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 absolute total shareholder return and performance relative to its peers. TSRIs have payouts that range from 0% to 200% of the target award and settle 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, 2020, 2019 and 2018 was $9 million, $4 million and $12 million, 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 (U.S. 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.
| OXY 2020 FORM 10-K | 105 |
| FINANCIAL STATEMENTS FOOTNOTES |
The grant-date assumptions used in the Monte Carlo simulation models for the estimated payout level of TSRIs were as follows:
| TSRIs | ||||||||||||||||||||
| 2020 | 2019 | 2018 | ||||||||||||||||||
| Assumptions used: | ||||||||||||||||||||
| Risk-free interest rate | 1.4% | 2.5% | 2.3% | |||||||||||||||||
| Volatility factor | 26% | 22% | 24% | |||||||||||||||||
| Expected life (years) | 3 | 3 | 3 | |||||||||||||||||
| Grant-date fair value of underlying Occidental common stock | $ | 41.60 | $ | 67.19 | $ | 69.87 |
A summary of Occidental’s unvested TSRIs as of December 31, 2020 and changes during the year ended December 31, 2020 is presented below:
| TSRIs | |||||||||||||||||
| thousands, except fair values | Awards | Weighted-Average Grant-Date Fair Value of Occidental Stock | |||||||||||||||
| Unvested at January 1 | 1,537 | $ | 67.70 | ||||||||||||||
| Granted | 641 | $ | 41.60 | ||||||||||||||
| Vested (a) | (563) | $ | 67.21 | ||||||||||||||
| Forfeitures | (81) | $ | 52.47 | ||||||||||||||
| Unvested at December 31 | 1,534 | $ | 58.02 |
(a)Presented at the target payouts. The weighted-average payout at vesting was 40% of the target, resulting in the issuance of approximately 223,000 shares of Occidental common stock.
STOCK OPTIONS
In 2020, certain employees were granted options that vest over three years, expire on the tenth anniversary of the grant date, and settle in stock or cash. Exercise prices of the options were equal to the quoted market value of Occidental’s stock on the grant date. These options had a grant date fair value of $3.19, as estimated by the Black Scholes model. The inputs to this model are presented below:
| Options | |||||||||||
| 2020 | |||||||||||
| Assumptions used: | |||||||||||
| Risk-free interest rate | 1.5% | ||||||||||
| Volatility factor | 25% | ||||||||||
| Expected life (years) | 6 | ||||||||||
| Dividend yield | 7.6% | ||||||||||
| Grant-date fair value of underlying Occidental common stock | $ | 41.60 |
A summary of Occidental’s outstanding stock options as of December 31, 2020 and changes during the year ended December 31, 2020 is presented below:
| Vested | Unvested | |||||||||||||||||||
| thousands, except fair values | Options | Weighted Average Strike Price | Options | Weighted Average Strike Price | ||||||||||||||||
| January 1 | 530 | $ | 79.98 | — | ||||||||||||||||
| Granted | — | 2,573 | $ | 41.60 | ||||||||||||||||
| Anti-dilution adjustment | 21 | $ | 76.96 | 101 | $ | 40.03 | ||||||||||||||
| Vested | — | — | ||||||||||||||||||
| Expirations and Forfeitures, respectively | — | — | ||||||||||||||||||
| December 31 | 551 | $ | 76.96 | 2,674 | $ | 40.03 |
| 106 | OXY 2020 FORM 10-K |
| FINANCIAL STATEMENTS FOOTNOTES |
The intrinsic value of options exercised during the years ended December 31, 2020, 2019 and 2018 were insignificant. The issuance of the Common Stock Warrants, see Note 13 - Stockholders’ Equity, triggered certain anti-dilution provisions for both vested and unvested options, which resulted in an increase of the number of options exercisable and a decrease in the exercise price. As of December 31, 2020, the remaining life of fully vested options was 1.1 years.
CROCEI
Certain executives are awarded CROCEI awards that vest at the end of a three-year period if performance targets based on cash return on capital employed are met. These awards are settled in stock upon certification of the performance target, with payouts that range from 0% to 200% of the target award. Dividend equivalents are accumulated and paid upon certification of the award.
| CROCEI | |||||||||||||||||
| thousands, except fair values | Awards | Weighted-Average Grant-Date Fair Value of Occidental Stock | |||||||||||||||
| Unvested at January 1 | 154 | $ | 68.44 | ||||||||||||||
| Granted | 197 | $ | 41.60 | ||||||||||||||
| Vested (a) | (154) | $ | 68.47 | ||||||||||||||
| Forfeited | — | ||||||||||||||||
| Unvested at December 31 | 197 | $ | 41.60 |
(a)Presented at the target payouts. The weighted-average payout at vesting was 58% of the target resulting in the issuance of approximately 89,700 shares.
| NOTE 15 - RETIREMENT AND POSTRETIREMENT BENEFIT PLANS |
Occidental has various defined contribution and defined benefit plans for its salaried, domestic union and nonunion hourly and certain foreign national employees. In addition, Occidental also provides medical and other benefits for certain active, retired and disabled employees and their eligible dependents.
In conjunction with the Acquisition, Occidental acquired certain Anadarko contributory and non-contributory defined benefit pension plans, which include both qualified and supplemental plans and plans that provide health care and life insurance benefits for certain retired employees. The Anadarko pension and postretirement obligations were remeasured as of the Acquisition date. The remeasurement resulted in an increase to the benefit obligation of $193 million.
Effective as of June 30, 2020 the defined benefit pension plans and certain of the supplemental plans covering active Anadarko employees were frozen. This resulted in a decrease to the benefit obligation of approximately $278 million, including a curtailment gain of approximately $124 million and a corresponding offset to accumulated other comprehensive income of approximately $154 million.
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 $239 million and $261 million as of December 31, 2020, and 2019, respectively. Occidental expensed $192 million in 2020, $192 million in 2019 and $152 million in 2018 under the provisions of these defined contribution and supplemental retirement plans.
DEFINED BENEFIT PLANS
Participation in defined benefit plans is limited. Approximately 400 domestic and 300 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
| OXY 2020 FORM 10-K | 107 |
| FINANCIAL STATEMENTS FOOTNOTES |
benefit costs, including the postretirement costs, were approximately $235 million in 2020, $220 million in 2019 and $182 million in 2018.
OBLIGATIONS AND FUNDED STATUS
The following tables show the amounts recognized in Occidental’s consolidated balance sheets at December 31, 2020 and 2019, related to its pension and postretirement benefit plans:
| Pension Benefits | Postretirement Benefits | |||||||||||||||||||||||||
| millions | 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||
| Amounts recognized in the consolidated balance sheet: | ||||||||||||||||||||||||||
| Long-term receivables and other assets, net | $ | 167 | $ | 149 | $ | — | $ | — | ||||||||||||||||||
| Accrued liabilities | (9) | (96) | (74) | (72) | ||||||||||||||||||||||
| Deferred credits and other liabilities — pension and postretirement obligations | (578) | (720) | (1,185) | (1,103) | ||||||||||||||||||||||
| $ | (420) | $ | (667) | $ | (1,259) | $ | (1,175) | |||||||||||||||||||
| Accumulated other comprehensive loss included the following after-tax balances: | ||||||||||||||||||||||||||
| Net (gain) loss | $ | (3) | $ | (20) | $ | 226 | $ | 184 | ||||||||||||||||||
| Prior service credit | — | — | (60) | (67) | ||||||||||||||||||||||
| $ | (3) | $ | (20) | $ | 166 | $ | 117 |
The following tables show the funding status, obligations and plan asset fair values of Occidental related to its pension and postretirement benefit plans for the years ended December 31:
| Pension Benefits | Postretirement Benefits | |||||||||||||||||||||||||
| millions | 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||
| Changes in the benefit obligation: | ||||||||||||||||||||||||||
| Benefit obligation — beginning of year | $ | 2,508 | $ | 499 | $ | 1,175 | $ | 808 | ||||||||||||||||||
| Service cost — benefits earned during the period | 37 | 47 | 39 | 24 | ||||||||||||||||||||||
| Interest cost on projected benefit obligation | 52 | 40 | 37 | 36 | ||||||||||||||||||||||
| Actuarial (gain) loss | 251 | (41) | 73 | 45 | ||||||||||||||||||||||
| Curtailment (gain) loss | (278) | (136) | 2 | 10 | ||||||||||||||||||||||
| Special termination benefits | 23 | 49 | — | — | ||||||||||||||||||||||
| Benefits paid | (948) | (99) | (73) | (51) | ||||||||||||||||||||||
| Sale of Colombia assets | (24) | — | — | — | ||||||||||||||||||||||
| Additions due to the Acquisition | — | 2,136 | — | 301 | ||||||||||||||||||||||
| Other | (8) | 13 | 6 | 2 | ||||||||||||||||||||||
| Benefit obligation — end of year | $ | 1,613 | $ | 2,508 | $ | 1,259 | $ | 1,175 | ||||||||||||||||||
| Changes in plan assets: | ||||||||||||||||||||||||||
| Fair value of plan assets — beginning of year | $ | 1,841 | $ | 539 | $ | — | $ | — | ||||||||||||||||||
| Actual return on plan assets | 161 | 110 | — | — | ||||||||||||||||||||||
| Employer contributions | 146 | 41 | 67 | 49 | ||||||||||||||||||||||
| Benefits paid | (948) | (99) | (73) | (51) | ||||||||||||||||||||||
| Additions due to the Acquisition | — | 1,233 | — | — | ||||||||||||||||||||||
| Other | (7) | 17 | 6 | 2 | ||||||||||||||||||||||
| Fair value of plan assets — end of year | $ | 1,193 | $ | 1,841 | $ | — | $ | — | ||||||||||||||||||
| Unfunded status: | $ | (420) | $ | (667) | $ | (1,259) | $ | (1,175) |
| 108 | OXY 2020 FORM 10-K |
| FINANCIAL STATEMENTS FOOTNOTES |
Changes in actuarial gains and losses in the projected benefit obligation are primarily driven by discount rate movement.
The following table sets forth details of the obligations and assets of Occidental’s defined benefit pension plans for the years December 31:
| Accumulated Benefit Obligation in Excess of Plan Assets | Plan Assets in Excess of Accumulated Benefit Obligation | |||||||||||||||||||||||||
| millions | 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||
| Projected benefit obligation | $ | 1,226 | $ | 2,191 | $ | 387 | $ | 317 | ||||||||||||||||||
| Accumulated benefit obligation | $ | 1,221 | $ | 1,931 | $ | 379 | $ | 311 | ||||||||||||||||||
| Fair value of plan assets | $ | 670 | $ | 1,375 | $ | 523 | $ | 466 |
COMPONENTS OF NET PERIODIC BENEFIT COST
The following table sets forth the components of net periodic benefit costs for the years ended December 31:
| Pension Benefits | Postretirement Benefits | |||||||||||||||||||||||||||||||||||||
| millions | 2020 | 2019 | 2018 | 2020 | 2019 | 2018 | ||||||||||||||||||||||||||||||||
| Net periodic benefit costs: | ||||||||||||||||||||||||||||||||||||||
| Service cost — benefits earned during the period | $ | 37 | $ | 47 | $ | 5 | $ | 39 | $ | 24 | $ | 23 | ||||||||||||||||||||||||||
| Interest cost on projected benefit obligation | 52 | 40 | 15 | 37 | 36 | 34 | ||||||||||||||||||||||||||||||||
| Expected return on plan assets | (73) | (52) | (25) | — | — | — | ||||||||||||||||||||||||||||||||
| Recognized actuarial loss | 5 | 9 | 7 | 11 | 8 | 14 | ||||||||||||||||||||||||||||||||
| Recognized prior service credit | — | — | — | (8) | (8) | — | ||||||||||||||||||||||||||||||||
| (Gain) loss due to curtailment | (124) | (91) | — | 2 | 6 | — | ||||||||||||||||||||||||||||||||
| Gain due to settlement | (19) | — | — | — | — | — | ||||||||||||||||||||||||||||||||
| Special termination benefits | 22 | 49 | — | — | — | — | ||||||||||||||||||||||||||||||||
| Other costs and adjustments | 1 | (2) | 1 | — | — | (2) | ||||||||||||||||||||||||||||||||
| Net periodic benefit cost | $ | (99) | $ | — | $ | 3 | $ | 81 | $ | 66 | $ | 69 |
The service cost component of net periodic benefit cost is included in selling, general and administrative, oil and gas operating expense, chemical and midstream costs and exploration expense on Occidental’s Consolidated Statements of Operations. All other components of net periodic benefit cost are included in other operating and non-operating expense.
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 for the years ended December 31:
| Pension Benefits | Postretirement Benefits | |||||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||||||
| Benefit Obligation Assumptions: | ||||||||||||||||||||||||||
| Discount rate | 2.19 | % | 3.09 | % | 3.05 | % | 3.26 | % | ||||||||||||||||||
| Rate of increase in compensation levels | 5.07 | % | 5.32 | % | — | — | ||||||||||||||||||||
| Net Periodic Benefit Cost Assumptions: | ||||||||||||||||||||||||||
| Discount rate | 3.04 | % | 3.22 | % | 3.26 | % | 3.41 | % | ||||||||||||||||||
| Rate of increase in compensation levels | 5.34 | % | 5.35 | % | — | — | ||||||||||||||||||||
| Assumed long-term rate of return on assets | 6.02 | % | 6.03 | % | — | — |
For domestic pension plans and postretirement benefit plans, Occidental based the discount rate on a AA-AAA Universe yield curve in 2020 and 2019. The assumed long-term rate of return on assets is estimated with regard to current market
| OXY 2020 FORM 10-K | 109 |
| FINANCIAL STATEMENTS FOOTNOTES |
factors but within the context of historical returns for the asset mix that exists at year end. Assumed rates of compensation increases for active participants in certain plans and vary by age group.
In 2020, Occidental adopted the Society of Actuaries Pri-2012 Private Retirement Plans Mortality Tables with MP-2020 Mortality Improvement Scale, which updated the mortality assumptions that private defined-benefit plans in the United States use in the actuarial valuations that determine a plan sponsor’s pension obligations. The new mortality assumption reflects additional data that the Social Security Administration has released since the previous mortality tables and improvement scales were released. The changes in the mortality improvement scale results in a decrease of $8 million and $12 million in the pension and postretirement benefit obligation, respectively, at December 31, 2020.
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 health care cost trend rates. Health care cost trend rates for Medicare advantaged prescription drug (MAPD) plans of 9.6% starting in 2021, then grading down to 4.5% in 2028 and beyond. Health care cost trend rates used for non-MAPD plans are 6.5% to 7.0% in 2020, then grading down to 4.5% in 2028 and beyond.
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
Qualified defined benefit plan assets are monitored by Occidental’s Pension and Retirement Trust and Investment Committee in its role as a fiduciary. The Investment Committee selects and employs various external professional investment management firms to manage specific investments across the spectrum of asset classes. The Investment Committee employs a liability driven investment approach that uses a diversified blend of investments (equity securities, fixed-income securities, and alternative investments) along a glide path to optimize the long-term return of plan assets relative to plan liabilities, at a prudent level of risk. Equity investments are diversified across U.S. and non-U.S. stocks, as well as differing styles and market capitalizations. 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 were as follows:
| millions | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||
| December 31, 2020 | ||||||||||||||||||||||||||
| Asset Class: | ||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 38 | $ | — | $ | — | $ | 38 | ||||||||||||||||||
| Government securities | 65 | — | — | 65 | ||||||||||||||||||||||
| Corporate bonds (a) | — | 39 | — | 39 | ||||||||||||||||||||||
| Equity securities (b) | 138 | — | — | 138 | ||||||||||||||||||||||
| Other | — | 55 | — | 55 | ||||||||||||||||||||||
| Investments measured at fair value | $ | 241 | $ | 94 | $ | — | $ | 335 | ||||||||||||||||||
| Investments measured at net asset value (c) | — | — | — | 861 | ||||||||||||||||||||||
| Total pension plan assets (d) | $ | 241 | $ | 94 | $ | — | $ | 1,196 | ||||||||||||||||||
| December 31, 2019 | ||||||||||||||||||||||||||
| Asset Class: | ||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 42 | $ | — | $ | — | $ | 42 | ||||||||||||||||||
| Government securities | 63 | — | — | 63 | ||||||||||||||||||||||
| Corporate bonds (a) | — | 94 | — | 94 | ||||||||||||||||||||||
| Equity securities (b) | 311 | — | — | 311 | ||||||||||||||||||||||
| Other | — | 81 | — | 81 | ||||||||||||||||||||||
| Investments measured at fair value | $ | 416 | $ | 175 | $ | — | $ | 591 | ||||||||||||||||||
| Investments measured at net asset value (c) | — | — | — | 1,253 | ||||||||||||||||||||||
| Total pension plan assets (d) | $ | 416 | $ | 175 | $ | — | $ | 1,844 |
(a)This category represents investment grade bonds of U.S. and non-U.S. issuers from diverse industries.
(b)This category represents direct investments in mutual funds and common and preferred stocks from diverse U.S. and non-U.S. industries.
| 110 | OXY 2020 FORM 10-K |
| FINANCIAL STATEMENTS FOOTNOTES |
(c)Certain investments measured at fair value using the net asset value per share (or its equivalent) have not been categorized in the fair value hierarchy. Amounts presented in this table are intended to reconcile the fair value hierarchy to the pension plan assets.
(d)Amounts exclude net payables of approximately $3 million as of December 31, 2020 and 2019.
Occidental expects to contribute at least approximately $170 million in cash to its defined benefit pensions plans during 2021.
Estimated future benefit payments, which reflect expected future service, as appropriate, are as follows for the years ended December 31:
| millions | Pension Benefits | Postretirement Benefits | ||||||||||||
| 2021 | $ | 251 | $ | 75 | ||||||||||
| 2022 | 96 | 73 | ||||||||||||
| 2023 | 93 | 71 | ||||||||||||
| 2024 | 95 | 69 | ||||||||||||
| 2025 | 90 | 67 | ||||||||||||
| 2026 - 2030 | 399 | 312 |
| NOTE 16 - INVESTMENTS AND RELATED-PARTY TRANSACTIONS |
EQUITY INVESTMENTS
As of December 31, 2020, and 2019, investments in unconsolidated entities were $3.3 billion and $6.4 billion, respectively. As of December 31, 2020, Occidental’s significant equity investments primarily consisted of the following:
| millions | % Interest | Carrying amount | ||||||||||||
| WES (a) | 53.5 | % | $ | 1,930 | ||||||||||
| OxyChem Ingleside Facility | 50.0 | % | 635 | |||||||||||
| Dolphin Energy Limited | 24.5 | % | 290 | |||||||||||
| Other | various | 395 | ||||||||||||
| Total | $ | 3,250 |
(a) During most of 2019, WES was a consolidated variable interest entity. On December 31, 2019, Occidental unconsolidated WES. See Note 1 - Summary of Significant Accounting Policies for more information on the accounting treatment and resulting equity interest. In the first quarter of 2020, Occidental recorded an impairment of $1.2 billion in goodwill related to its ownership in WES and in the third quarter of 2020, recorded an other than temporary impairment of $2.7 billion related to the WES equity method investment. See Note 17 - Fair Value Measurements for more information on the impairments.
As of December 31, 2020 and 2019, Occidental’s significant equity investments consisted of investments in WES, OxyChem Ingleside Facility and Dolphin Energy Limited.
As part of the Acquisition, Occidental acquired equity investments in certain oil and gas properties and gathering and processing assets and assumed an associated notes payable which Occidental has the legal right of setoff and intends to net settle with its ownership interest in the equity investments. The notes payable can be net settled starting in 2022. The carrying value of the investment and note payable were $2.9 billion at December 31, 2020, respectively. Accordingly, the equity investments and the related notes payable are presented net on the Consolidated Balance Sheets.
Dividends received from equity investments were $678 million, $422 million and $329 million to Occidental in 2020, 2019 and 2018, respectively. As of December 31, 2020 and 2019, cumulative undistributed earnings of equity-method investees since they were acquired was $166 million and $40 million, respectively. As of December 31, 2020, Occidental’s investments in equity investees exceeded the underlying equity in net assets by approximately $649 million, of which, $326 million represented property, plant and equipment and equity investments with the remainder comprised of intangibles, both are subject to amortization over their estimated average lives.
| OXY 2020 FORM 10-K | 111 |
| FINANCIAL STATEMENTS FOOTNOTES |
The following table presents the summarized financial information of its equity-method investments combined for the years ended and as of December 31:
| millions | 2020 | 2019 | 2018 | |||||||||||||||||
| Summarized Results of Operations (a) | ||||||||||||||||||||
| Revenues and other income | $ | 5,455 | $ | 26,520 | $ | 28,091 | ||||||||||||||
| Costs and expenses | 5,455 | 24,084 | 25,029 | |||||||||||||||||
| Net income | $ | — | $ | 2,436 | $ | 3,062 | ||||||||||||||
| Summarized Balance Sheet | ||||||||||||||||||||
| Current assets | $ | 1,419 | $ | 1,130 | $ | 5,587 | ||||||||||||||
| Non-current assets | $ | 18,693 | $ | 21,158 | $ | 25,871 | ||||||||||||||
| Current liabilities | $ | 1,549 | $ | 785 | $ | 4,879 | ||||||||||||||
| Long-term debt | $ | 7,860 | $ | 8,673 | $ | 12,505 | ||||||||||||||
| Other non-current liabilities | $ | 866 | $ | 859 | $ | 95 | ||||||||||||||
| Stockholders’ equity | $ | 9,837 | $ | 11,971 | $ | 13,979 |
(a)The 2019 Summarized Results of Operations include results of Plains for the period beginning January 1, 2019 through the date Occidental’s interest was sold in September 2019. Plains accounted for $24.7 billion of equity-method investment revenues and other income in 2019.
RELATED-PARTY TRANSACTIONS
From time to time, Occidental purchases oil, NGL, power, steam and chemicals from and sells oil, NGL, natural gas, chemicals and power to certain of its equity investees and other related parties. During 2020, 2019 and 2018, 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:
| millions | 2020 | 2019 | 2018 | |||||||||||||||||
| Sales (a,c) | $ | 301 | $ | 691 | $ | 805 | ||||||||||||||
| Purchases (b,c) | $ | 1,112 | $ | 463 | $ | 502 | ||||||||||||||
| Services (d) | $ | 1,032 | $ | 28 | $ | 52 | ||||||||||||||
| Advances and amounts due from related parties | $ | 54 | $ | 133 | $ | 63 | ||||||||||||||
| Amounts due to related parties | $ | 273 | $ | 463 | $ | 46 |
(a)In 2020, sales of Occidental-produced NGL and marketing fees to WES accounted for 70% of these totals. In 2019 and 2018, sales of Occidental-produced oil and NGL to Plains Pipeline affiliates accounted for 87% and 89% of these totals, respectively. In September 2019, Occidental sold its equity investment in Plains. See Note 4 - Divestitures and Other Transactions for additional information.
(b)In 2020, purchases of gas and NGL marketed on behalf of WES accounted for 59% of related-party purchases. In 2020, 2019 and 2018, purchases of ethylene from the Ingleside ethylene cracker accounted for 41%, 98% and 98% of related-party purchases, respectively.
(c)Excluded sales to and purchases from WES in 2019 as it was a consolidated subsidiary from the date of the Acquisition through December 31, 2019.
(d)In 2020, services primarily relates to fees charged by WES to gather, process and treat Occidental produced oil, NGL and natural gas.
| NOTE 17 - 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 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.
| 112 | OXY 2020 FORM 10-K |
| FINANCIAL STATEMENTS FOOTNOTES |
The following tables provide fair value measurement information for assets and liabilities that are measured on a recurring basis:
| millions | Fair Value Measurements Using | Netting and Collateral | Total Fair Value | |||||||||||||||||||||||||||||
| Embedded derivatives | Level 1 | Level 2 | Level 3 | |||||||||||||||||||||||||||||
| December 31, 2020 | ||||||||||||||||||||||||||||||||
| Accrued liabilities | $ | — | $ | 64 | $ | — | $ | — | $ | 64 | ||||||||||||||||||||||
| December 31, 2019 | ||||||||||||||||||||||||||||||||
| Accrued liabilities | $ | — | $ | 40 | $ | — | $ | — | $ | 40 | ||||||||||||||||||||||
| Deferred credits and other liabilities - other | $ | — | $ | 49 | $ | — | $ | — | $ | 49 |
FAIR VALUES – NONRECURRING
The table below summarizes the significant impairments and other charges incurred to measure assets to their fair value on a nonrecurring basis throughout the year ended December 31, 2020:
| millions | Total Fair Value | |||||||
| Asset impairments and other charges | ||||||||
| Goodwill | $ | 1,153 | ||||||
| Oil and gas properties - proved | $ | 2,436 | ||||||
| Oil and gas properties - unproved | $ | 4,591 | ||||||
| Oil and gas properties - discontinued operations | $ | 2,191 | ||||||
| WES equity investment | $ | 2,673 |
GOODWILL
As of December 31, 2019, Occidental had $1.2 billion of goodwill related to its ownership in WES, which was included in long-term receivables and other assets, net. Significant declines in the market value of WES’ publicly traded units resulted in management’s determination that, more likely than not, the fair value of the reporting unit was significantly less than its carrying value and the remaining $1.2 billion in goodwill was fully impaired in the first quarter of 2020. The market value of WES’ publicly traded units is considered a Level 1 input.
OIL AND GAS PROPERTIES
In the second quarter 2020, as a result of the expected prolonged period of lower commodity prices brought on by the COVID-19 pandemic’s impact on oil demand, Occidental tested substantially all of its oil and gas assets for impairment. Occidental recognized total pre-tax impairments to its oil and gas proved and unproved properties of $8.6 billion, of which $6.4 billion is included in oil and gas segment results and $2.2 billion ($1.4 billion net of tax) related to Ghana is included in discontinued operations.
In the second quarter 2020, Occidental recorded proved property pre-tax impairments of $1.2 billion primarily related to certain assets for its domestic onshore and Gulf of Mexico assets and $0.9 billion to adjust the Algeria oil and gas proved properties to their fair value. The fair value of the proved properties was measured based on the income approach.
Unproved property pre-tax impairments of $4.3 billion were primarily related to domestic onshore unproved acreage. The fair value of this acreage was measured based on a market approach using an implied acreage valuation derived from domestic onshore market participants excluding the fair value assigned to proved properties.
Income approaches are considered Level 3 fair value estimates and include significant assumptions of future production and timing of production, commodity price assumptions and operating and capital cost estimates, discounted using a 10 percent weighted average cost of capital. Taxes were based on current statutory rates. Future production and timing of production is based on internal reserves estimates and internal economic models for a specific oil and gas asset. Internal reserve estimates consist of proved reserves and unproved reserves, the latter adjusted for uncertainty based on reserve category. Price assumptions were based on a combination of market information and published industry resources adjusted for historical differentials. Price assumptions ranged from approximately $40 per barrel of oil in 2020 increasing to approximately $70 per barrel of oil in 2034, with an unweighted arithmetic average price of $59.17 and $62.42 for WTI and Brent indexed assets for the 15 year period, respectively. Natural gas prices ranged from approximately $2.00 per Mcf in 2020 to approximately $3.60 per Mcf in 2034, with an unweighted arithmetic average price of $3.13 for NYMEX based assets for the 15 year period. Both oil and natural gas commodity prices were held flat after 2034 and were adjusted for location and quality differentials. Operating and capital cost estimates were based on current observable costs and were
| OXY 2020 FORM 10-K | 113 |
| FINANCIAL STATEMENTS FOOTNOTES |
further escalated 1 percent in every period where commodity prices exceeded $50 per barrel and 2 percent in every period where commodity prices exceeded $60 per barrel. The weighted average cost of capital is calculated based on industry peers and best approximates the cost of capital an external market participant would expect to obtain.
In the first quarter 2020, Occidental's oil and gas segment recognized pre-tax impairment and related charges of $581 million primarily related to both proved and unproved oil and gas properties and a lower of cost or net realizable value adjustment for crude inventory. Occidental recorded proved property impairments of $293 million related to certain international assets and the Gulf of Mexico. Occidental recorded unproved property impairments, of approximately $241 million, primarily related to domestic onshore undeveloped leases and offshore Gulf of Mexico where Occidental no longer intends to pursue exploration, appraisal or development activities primarily due to the reduction in near-term capital plans.
If there is a further worsening of the macroeconomic conditions and if such worsened conditions are expected to be prolonged, Occidental’s oil and gas properties may be subject to further testing for impairment, which could result in additional non-cash asset impairments. Such impairments could be material to our financial statements.
WES EQUITY INVESTMENT
At the end of the third quarter 2020, Occidental recorded an other-than-temporary impairment of $2.7 billion, as the fair value of Occidental’s investment in WES has remained significantly lower than its book value for the majority of the nine months ended September 30, 2020. Occidental concluded that the difference between the fair value and book value of WES was not temporary, primarily given both the magnitude and the duration that the fair value was below its book value. This other-than-temporary impairment was calculated based on the closing market price of WES as of September 30, 2020. The market value of WES’ publicly traded common units is considered a Level 1 input.
2019
During 2019, Occidental measured assets and liabilities at acquisition-date fair value on a nonrecurring basis related to the Acquisition. See Note 3 - The Acquisition for more detail.
In 2019, Occidental recorded a $1 billion charge as a result of recording Occidental’s equity investment in WES at fair value upon loss of control, see Note 1 - Summary of Significant Accounting Policies. Additionally, Occidental’s oil and gas segment recognized pre-tax impairment and related charges of $285 million related to domestic undeveloped leases that were set to expire in the near-term, where Occidental had no plans to pursue exploration activities, and $39 million related to Occidental’s mutually agreed early termination of its Qatar ISSD contract.
2018
During 2018, Occidental recognized pre-tax impairment and related charges of $416 million primarily related to Qatar ISND and ISSD proved properties and inventory. The fair value of the proved properties was measured based on the income approach, which incorporated a number of assumptions involving expectations of future cash flows.
FINANCIAL INSTRUMENTS FAIR VALUE
The carrying amounts of cash, cash equivalents, restricted cash, restricted cash equivalents and other on-balance sheet financial instruments, other than fixed-rate debt, approximate fair value. See Note 7 - Long-term Debt for the fair value of Long-term debt.
| NOTE 18 - INDUSTRY SEGMENTS AND GEOGRAPHIC AREAS |
Occidental conducts its operations through three segments: (1) oil and gas; (2) chemical; and (3) midstream and marketing. The factors used to identify these segments are based on the nature of the operations that are undertaken in each segment. Income taxes, interest income, interest expense, environmental remediation expenses, Anadarko Acquisition-related costs and unallocated corporate expenses are included under Corporate and Eliminations. 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. The chief operating decision maker analyzes each segment’s operating results to make decisions about resources to be allocated to the segment and to assess its performance as well as Occidental’s overall performance.
| 114 | OXY 2020 FORM 10-K |
| FINANCIAL STATEMENTS FOOTNOTES |
| Oil and gas | Chemical | Midstream and marketing | Corporate and eliminations | Total | |||||||||||||||||||||||||
| Year ended December 31, 2020 | |||||||||||||||||||||||||||||
| Net sales | $ | 13,066 | $ | 3,733 | $ | 1,768 | $ | (758) | $ | 17,809 | |||||||||||||||||||
| Income (loss) from continuing operations before income taxes | $ | (9,632) | (a) | $ | 664 | $ | (4,175) | (b) | $ | (2,562) | (c) | $ | (15,705) | ||||||||||||||||
| Income tax benefit | — | — | — | 2,172 | (d) | 2,172 | |||||||||||||||||||||||
| Income (loss) from continuing operations | $ | (9,632) | $ | 664 | $ | (4,175) | $ | (390) | $ | (13,533) | |||||||||||||||||||
| Investments in unconsolidated entities | $ | 168 | $ | 645 | $ | 2,437 | $ | — | $ | 3,250 | |||||||||||||||||||
| Property, plant and equipment additions (e) | $ | 2,279 | $ | 261 | $ | 50 | $ | 29 | $ | 2,619 | |||||||||||||||||||
| Depreciation, depletion and amortization | $ | 7,414 | $ | 356 | $ | 312 | $ | 15 | $ | 8,097 | |||||||||||||||||||
| Total assets | $ | 62,931 | $ | 4,326 | $ | 9,856 | $ | 2,951 | $ | 80,064 | |||||||||||||||||||
| Year ended December 31, 2019 | |||||||||||||||||||||||||||||
| Net sales | $ | 13,941 | $ | 4,102 | $ | 4,132 | $ | (1,264) | $ | 20,911 | |||||||||||||||||||
| Income (loss) from continuing operations before income taxes | $ | 2,520 | (a) | $ | 799 | $ | 241 | (b) | $ | (3,206) | (c) | $ | 354 | ||||||||||||||||
| Income tax expense | — | — | — | (861) | (d) | (861) | |||||||||||||||||||||||
| Income (loss) from continuing operations | $ | 2,520 | $ | 799 | $ | 241 | $ | (4,067) | $ | (507) | |||||||||||||||||||
| Investments in unconsolidated entities | $ | 181 | $ | 689 | $ | 5,519 | $ | — | $ | 6,389 | |||||||||||||||||||
| Property, plant and equipment additions (e) | $ | 5,571 | $ | 272 | $ | 475 | $ | 135 | $ | 6,453 | |||||||||||||||||||
| Depreciation, depletion and amortization | $ | 5,153 | $ | 368 | $ | 563 | $ | 56 | $ | 6,140 | |||||||||||||||||||
| Total assets | $ | 80,093 | $ | 4,361 | $ | 14,915 | $ | 7,821 | $ | 107,190 | |||||||||||||||||||
| Year ended December 31, 2018 | |||||||||||||||||||||||||||||
| Net sales | $ | 10,441 | $ | 4,657 | $ | 3,656 | $ | (930) | $ | 17,824 | |||||||||||||||||||
| Income (loss) from continuing operations before income taxes | $ | 2,442 | (a) | $ | 1,159 | $ | 2,802 | (b) | $ | (795) | $ | 5,608 | |||||||||||||||||
| Income tax expense | — | — | — | (1,477) | (d) | (1,477) | |||||||||||||||||||||||
| Income (loss) from continuing operations | $ | 2,442 | $ | 1,159 | $ | 2,802 | $ | (2,272) | $ | 4,131 | |||||||||||||||||||
| Investments in unconsolidated entities | $ | — | $ | 733 | $ | 947 | $ | — | $ | 1,680 | |||||||||||||||||||
| Property, plant and equipment additions (e) | $ | 4,443 | $ | 277 | $ | 221 | $ | 79 | $ | 5,020 | |||||||||||||||||||
| Depreciation, depletion and amortization | $ | 3,254 | $ | 354 | $ | 331 | $ | 38 | $ | 3,977 | |||||||||||||||||||
| Total assets | $ | 24,874 | $ | 4,359 | $ | 9,392 | $ | 3,534 | $ | 42,159 |
(a)The 2020 amount included $7.1 billion related to asset impairments and net asset sale losses of $1.6 billion, partially offset by a $1.1 billion gain on the oil and gas collars and calls. The 2019 amount included a net gain on sale of $475 million related to Occidental’s joint venture with Ecopetrol in the Midland Basin and sale of real estate assets, a $285 million impairment charge associated with domestic undeveloped leases that were set to expire in the near-term, where Occidental had no plans to pursue exploration activities, and a $39 million charge related to Occidental’s mutually agreed early termination of its Qatar ISSD contract. The 2018 amount included $416 million for the impairment of proved oil properties and inventory in Qatar ISND and ISSD due to the decline in oil prices.
(b)The 2020 amount included $2.7 billion of other-than-temporary impairment of WES equity investment and $1.4 billion of impairments related to the write-off of goodwill and a $236 million loss from an equity investment related to WES' write-off of its goodwill. The 2019 amount included a $1 billion charge as a result of recording Occidental’s investment in WES at fair value as of December 31, 2019 upon the loss of control, a $114 million gain on the sale of an equity investment in Plains and a $30 million mark-to-market gain on an interest rate swap for WES. The 2018 amount included pre-tax asset sale gains of $907 million on the sale of non-core domestic midstream assets.
(c)The 2020 amount included $339 million in expenses related to Anadarko Acquisition-related costs and a $428 million loss on interest rate swaps. The 2019 amount included corporate transactions related to the Acquisition including charges of $1.0 billion related to employee severance and related costs, $401 million related to crucial seismic data and $213 million for bank, legal and consulting fees. There were no significant corporate transactions and events affecting 2018 results. The tax effect of these pre-tax adjustments was a $1.9 billion benefit in 2020, a $245 million benefit in 2019, and $198 million expense in 2018.
(d)Included all foreign and domestic income taxes from continuing operations.
(e)Included capital expenditures and capitalized interest, but excluded acquisition and disposition of assets.
| OXY 2020 FORM 10-K | 115 |
| FINANCIAL STATEMENTS FOOTNOTES |
GEOGRAPHIC AREAS
| millions | Property, plant and equipment, net | |||||||||||||||||||
| For the years ended December 31, | 2020 | 2019 | 2018 | |||||||||||||||||
| United States | $ | 59,016 | $ | 72,808 | $ | 23,594 | ||||||||||||||
| International | ||||||||||||||||||||
| United Arab Emirates | 3,737 | 3,886 | 4,051 | |||||||||||||||||
| Oman | 1,901 | 2,115 | 2,048 | |||||||||||||||||
| Algeria | 664 | 1,761 | — | |||||||||||||||||
| Colombia | — | 1,010 | 927 | |||||||||||||||||
| Qatar | 510 | 563 | 741 | |||||||||||||||||
| Other International | 61 | 87 | 76 | |||||||||||||||||
| Total International | 6,873 | 9,422 | 7,843 | |||||||||||||||||
| Total | $ | 65,889 | $ | 82,230 | $ | 31,437 |
| 116 | OXY 2020 FORM 10-K |
| Supplemental Quarterly Information (Unaudited) |
| Quarterly Financial Data | Occidental Petroleum Corporation and Subsidiaries |
| millions except per-share amounts | First Quarter | Second Quarter | Third Quarter | Fourth Quarter | ||||||||||||||||||||||
| 2020 | ||||||||||||||||||||||||||
| Segment net sales | ||||||||||||||||||||||||||
| Oil and gas | $ | 5,060 | $ | 2,040 | $ | 2,989 | $ | 2,977 | ||||||||||||||||||
| Chemical | 962 | 846 | 937 | 988 | ||||||||||||||||||||||
| Midstream and marketing | 790 | 204 | 364 | 410 | ||||||||||||||||||||||
| Eliminations | (199) | (162) | (182) | (215) | ||||||||||||||||||||||
| Net sales | $ | 6,613 | $ | 2,928 | $ | 4,108 | $ | 4,160 | ||||||||||||||||||
| Gross profit | $ | 1,440 | $ | (1,048) | $ | 63 | $ | 167 | ||||||||||||||||||
| Segment earnings | ||||||||||||||||||||||||||
| Oil and gas | $ | 236 | $ | (7,734) | $ | (1,072) | $ | (1,062) | ||||||||||||||||||
| Chemical | 186 | 108 | 178 | 192 | ||||||||||||||||||||||
| Midstream and marketing | (1,287) | (7) | (2,791) | (90) | ||||||||||||||||||||||
| Total segment earnings | $ | (865) | $ | (7,633) | $ | (3,685) | $ | (960) | ||||||||||||||||||
| Unallocated corporate items | ||||||||||||||||||||||||||
| Interest expense, net | (352) | (310) | (353) | (409) | ||||||||||||||||||||||
| Income tax benefit | 25 | 1,468 | 403 | 276 | ||||||||||||||||||||||
| Other | (821) | (241) | (20) | (56) | ||||||||||||||||||||||
| Loss from continuing operations | $ | (2,013) | $ | (6,716) | $ | (3,655) | $ | (1,149) | ||||||||||||||||||
| Discontinued operations, net of taxes | — | (1,415) | 80 | 37 | ||||||||||||||||||||||
| Net Loss | $ | (2,013) | $ | (8,131) | $ | (3,575) | $ | (1,112) | ||||||||||||||||||
| Less: Preferred stock dividend | (219) | (222) | (203) | (200) | ||||||||||||||||||||||
| Net loss attributable to common stockholders | $ | (2,232) | $ | (8,353) | $ | (3,778) | $ | (1,312) | ||||||||||||||||||
| Basic loss per common share | $ | (2.49) | $ | (9.12) | $ | (4.07) | $ | (1.41) | ||||||||||||||||||
| Diluted loss per common share | $ | (2.49) | $ | (9.12) | $ | (4.07) | $ | (1.41) | ||||||||||||||||||
| Dividends per common share | $ | 0.79 | $ | 0.01 | $ | 0.01 | $ | 0.01 | ||||||||||||||||||
| 2019 | ||||||||||||||||||||||||||
| Segment net sales | ||||||||||||||||||||||||||
| Oil and gas | $ | 2,351 | $ | 2,718 | $ | 3,993 | $ | 4,879 | ||||||||||||||||||
| Chemical | 1,059 | 998 | 1,071 | 974 | ||||||||||||||||||||||
| Midstream and marketing (a) | 816 | 909 | 1,163 | 1,244 | ||||||||||||||||||||||
| Eliminations | (222) | (205) | (368) | (469) | ||||||||||||||||||||||
| Net sales | $ | 4,004 | $ | 4,420 | $ | 5,859 | $ | 6,628 | ||||||||||||||||||
| Gross profit | $ | 1,210 | $ | 1,449 | $ | 1,471 | $ | 1,414 | ||||||||||||||||||
| Segment earnings | ||||||||||||||||||||||||||
| Oil and gas | $ | 484 | $ | 726 | $ | 268 | $ | 1,042 | ||||||||||||||||||
| Chemical | 265 | 208 | 207 | 119 | ||||||||||||||||||||||
| Midstream and marketing (a) | 279 | 331 | 400 | (769) | ||||||||||||||||||||||
| Total segment earnings | $ | 1,028 | $ | 1,265 | $ | 875 | $ | 392 | ||||||||||||||||||
| Unallocated corporate items | ||||||||||||||||||||||||||
| Interest expense, net | (83) | (143) | (360) | (416) | ||||||||||||||||||||||
| Income tax expense | (225) | (306) | (163) | (167) | ||||||||||||||||||||||
| Other | (89) | (181) | (1,089) | (845) | ||||||||||||||||||||||
| Income (loss) from continuing operations | $ | 631 | $ | 635 | $ | (737) | $ | (1,036) | ||||||||||||||||||
| Discontinued operations, net of taxes | — | — | (15) | — | ||||||||||||||||||||||
| Net Income (loss) | $ | 631 | $ | 635 | $ | (752) | $ | (1,036) | ||||||||||||||||||
| Less: Net income attributable to noncontrolling interests | — | — | (42) | (103) | ||||||||||||||||||||||
| Less: Preferred stock dividend | — | — | (118) | (200) | ||||||||||||||||||||||
| Net income (loss) attributable to common stockholders | $ | 631 | $ | 635 | $ | (912) | $ | (1,339) | ||||||||||||||||||
| Basic earnings (loss) per common share | $ | 0.84 | $ | 0.84 | $ | (1.08) | $ | (1.50) | ||||||||||||||||||
| Diluted earnings (loss) per common share | $ | 0.84 | $ | 0.84 | $ | (1.08) | $ | (1.50) | ||||||||||||||||||
| Dividends per common share | $ | 0.78 | $ | 0.78 | $ | 0.79 | $ | 0.79 |
(a)Midstream and marketing segment net sales and earnings include the results of WES from the Acquisition date to the loss of control date.
| OXY 2020 FORM 10-K | 117 |
| Supplemental Oil and Gas Information (Unaudited) |
Supplemental Oil and Gas Information
OIL AND GAS RESERVES
The following tables set forth Occidental’s net interests in quantities of proved developed and undeveloped reserves of oil (including condensate), NGL and natural gas and changes in such quantities. Proved oil, NGL 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, NGL 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. The following table shows the pricing used in the reserve analysis for the periods presented:
| 2020 | 2019 | 2018 | ||||||||||||||||||
| Average WTI Oil ($/Bbl) | $ | 39.57 | $ | 55.69 | $ | 65.56 | ||||||||||||||
| Average Brent Oil ($/Bbl) | $ | 43.41 | $ | 63.03 | $ | 72.20 | ||||||||||||||
| Average Henry Hub Natural Gas ($/MMbtu) | $ | 1.98 | $ | 2.58 | $ | 3.10 | ||||||||||||||
| Average Mt. Belvieu NGL ($/Bbl) (a) | $ | 18.74 | N/A | N/A |
(a) Mt. Belvieu pricing was added as an NGL benchmark beginning in 2020. Prior to 2020, WTI Oil was used as a benchmark for NGL.
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 oil, NGL and natural gas fluctuate widely. Historically, the markets for oil, NGL and natural gas and refined products have been volatile and may continue to be volatile in the future. Prolonged or further declines in oil, NGL and natural gas 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.
| 118 | OXY 2020 FORM 10-K |
| Supplemental Oil and Gas Information (Unaudited) |
OIL RESERVES (a)
| millions of barrels (MMbbl) | United States | Latin America | Middle East / Africa (b) | Total | ||||||||||||||||||||||
| PROVED DEVELOPED AND UNDEVELOPED RESERVES | ||||||||||||||||||||||||||
| Balance at December 31, 2017 | 1,107 | 82 | 326 | 1,515 | ||||||||||||||||||||||
| Revisions of previous estimates | 15 | (2) | (7) | 6 | ||||||||||||||||||||||
| Improved recovery | 135 | 23 | 31 | 189 | ||||||||||||||||||||||
| Extensions and discoveries | — | 4 | 2 | 6 | ||||||||||||||||||||||
| Purchases of proved reserves | 32 | — | — | 32 | ||||||||||||||||||||||
| Sales of proved reserves | (12) | — | — | (12) | ||||||||||||||||||||||
| Production | (91) | (11) | (51) | (153) | ||||||||||||||||||||||
| Balance at December 31, 2018 | 1,186 | 96 | 301 | 1,583 | ||||||||||||||||||||||
| Revisions of previous estimates | (154) | 3 | 8 | (143) | ||||||||||||||||||||||
| Improved recovery | 128 | 12 | 25 | 165 | ||||||||||||||||||||||
| Extensions and discoveries | 37 | 2 | 2 | 41 | ||||||||||||||||||||||
| Purchases of proved reserves | 545 | — | 84 | 629 | ||||||||||||||||||||||
| Sales of proved reserves | (17) | — | — | (17) | ||||||||||||||||||||||
| Production | (155) | (12) | (52) | (219) | ||||||||||||||||||||||
| Balance at December 31, 2019 | 1,570 | 101 | 368 | 2,039 | ||||||||||||||||||||||
| Revisions of previous estimates (c) | (283) | 12 | (13) | (284) | ||||||||||||||||||||||
| Improved recovery | 82 | — | 18 | 100 | ||||||||||||||||||||||
| Extensions and discoveries | 9 | — | 5 | 14 | ||||||||||||||||||||||
| Purchases of proved reserves | 2 | — | — | 2 | ||||||||||||||||||||||
| Sales of proved reserves | (31) | (101) | — | (132) | ||||||||||||||||||||||
| Production | (205) | (12) | (47) | (264) | ||||||||||||||||||||||
| Balance at December 31, 2020 | 1,144 | — | 331 | 1,475 | ||||||||||||||||||||||
| PROVED DEVELOPED RESERVES | ||||||||||||||||||||||||||
| December 31, 2017 | 772 | 77 | 279 | 1,128 | ||||||||||||||||||||||
| December 31, 2018 | 843 | 77 | 240 | 1,160 | ||||||||||||||||||||||
| December 31, 2019 | 1,206 | 76 | 295 | 1,577 | ||||||||||||||||||||||
| December 31, 2020 (d) | 917 | — | 251 | 1,168 | ||||||||||||||||||||||
| PROVED UNDEVELOPED RESERVES | ||||||||||||||||||||||||||
| December 31, 2017 | 335 | 5 | 47 | 387 | ||||||||||||||||||||||
| December 31, 2018 | 343 | 19 | 61 | 423 | ||||||||||||||||||||||
| December 31, 2019 | 364 | 25 | 73 | 462 | ||||||||||||||||||||||
| December 31, 2020 | 227 | — | 80 | 307 | ||||||||||||||||||||||
(a)Excluded reserve amounts related to the held for sale assets. Reserves related to the Algeria assets have been reclassified and included in prior and the current periods.
(b)Over half of the proved reserve amounts relate to PSCs.
(c)Revisions of previous estimates in 2020 reflected negative price revisions of 185 MMboe, primarily in the Permian Basin (180 MMboe) and the DJ Basin (20 MMboe), partially offset by positive price revisions of 28 MMboe on PSCs. Another 127 MMboe in negative revisions were related to changes in development plans primarily in the Permian Basin, which were offset by 23 MMboe in positive revisions related to updates based on reservoir performance.
(d)Approximately 11% of the proved developed reserves at December 31, 2020, are nonproducing, primarily associated with the Permian Basin and Oman.
| OXY 2020 FORM 10-K | 119 |
| Supplemental Oil and Gas Information (Unaudited) |
NGL RESERVES (a)
| millions of barrels (MMbbl) | United States | Latin America | Middle East / Africa | Total | ||||||||||||||||||||||
| PROVED DEVELOPED AND UNDEVELOPED RESERVES | ||||||||||||||||||||||||||
| Balance at December 31, 2017 | 247 | — | 198 | 445 | ||||||||||||||||||||||
| Revisions of previous estimates | 7 | — | 15 | 22 | ||||||||||||||||||||||
| Improved recovery | 47 | — | — | 47 | ||||||||||||||||||||||
| Extensions and discoveries | — | — | — | — | ||||||||||||||||||||||
| Purchases of proved reserves | 11 | — | — | 11 | ||||||||||||||||||||||
| Sales of proved reserves | (3) | — | — | (3) | ||||||||||||||||||||||
| Production | (25) | — | (11) | (36) | ||||||||||||||||||||||
| Balance at December 31, 2018 | 284 | — | 202 | 486 | ||||||||||||||||||||||
| Revisions of previous estimates | (21) | — | 9 | (12) | ||||||||||||||||||||||
| Improved recovery | 58 | — | — | 58 | ||||||||||||||||||||||
| Extensions and discoveries | 11 | — | — | 11 | ||||||||||||||||||||||
| Purchases of proved reserves | 267 | — | 10 | 277 | ||||||||||||||||||||||
| Sales of proved reserves | (7) | — | — | (7) | ||||||||||||||||||||||
| Production | (52) | — | (13) | (65) | ||||||||||||||||||||||
| Balance at December 31, 2019 | 540 | — | 208 | 748 | ||||||||||||||||||||||
| Revisions of previous estimates (b) | (90) | — | 10 | (80) | ||||||||||||||||||||||
| Improved recovery | 32 | — | 10 | 42 | ||||||||||||||||||||||
| Extensions and discoveries | 2 | — | — | 2 | ||||||||||||||||||||||
| Purchases of proved reserves | 1 | — | — | 1 | ||||||||||||||||||||||
| Sales of proved reserves | (20) | — | — | (20) | ||||||||||||||||||||||
| Production | (81) | — | (13) | (94) | ||||||||||||||||||||||
| Balance at December 31, 2020 | 384 | — | 215 | 599 | ||||||||||||||||||||||
| PROVED DEVELOPED RESERVES | ||||||||||||||||||||||||||
| December 31, 2017 | 161 | — | 153 | 314 | ||||||||||||||||||||||
| December 31, 2018 | 196 | — | 145 | 341 | ||||||||||||||||||||||
| December 31, 2019 | 406 | — | 147 | 553 | ||||||||||||||||||||||
| December 31, 2020 (c) | 314 | — | 138 | 452 | ||||||||||||||||||||||
| PROVED UNDEVELOPED RESERVES | ||||||||||||||||||||||||||
| December 31, 2017 | 86 | — | 45 | 131 | ||||||||||||||||||||||
| December 31, 2018 | 88 | — | 57 | 145 | ||||||||||||||||||||||
| December 31, 2019 | 134 | — | 61 | 195 | ||||||||||||||||||||||
| December 31, 2020 | 70 | — | 77 | 147 |
(a)Excluded reserve amounts related to the held for sale assets. Reserves related to the Algeria assets have been reclassified and included in prior and the current periods.
(b)Revisions of previous estimates in 2020 reflected negative price revisions of 77 MMboe, primarily in the Permian Basin (56 MMboe) and the DJ Basin (21 MMboe). Another 36 MMboe in negative revisions were related to changes in development plans primarily in the Permian Basin, which were offset by 36 MMboe in positive revisions related to updates based on reservoir performance.
(c)Approximately 5% of the proved developed reserves at December 31, 2020, are nonproducing, primarily associated with the Permian Basin.
| 120 | OXY 2020 FORM 10-K |
| Supplemental Oil and Gas Information (Unaudited) |
NATURAL GAS RESERVES (a)
| billions of cubic feet (Bcf) | United States | Latin America | Middle East / Africa (b) | Total | ||||||||||||||||||||||
| PROVED DEVELOPED AND UNDEVELOPED RESERVES | ||||||||||||||||||||||||||
| Balance at December 31, 2017 | 1,205 | 12 | 2,614 | 3,831 | ||||||||||||||||||||||
| Revisions of previous estimates | (25) | — | 191 | 166 | ||||||||||||||||||||||
| Improved recovery | 329 | 1 | 17 | 347 | ||||||||||||||||||||||
| Extensions and discoveries | — | — | 4 | 4 | ||||||||||||||||||||||
| Purchases of proved reserves | 69 | — | — | 69 | ||||||||||||||||||||||
| Sales of proved reserves | (14) | — | — | (14) | ||||||||||||||||||||||
| Production | (119) | (2) | (187) | (308) | ||||||||||||||||||||||
| Balance at December 31, 2018 | 1,445 | 11 | 2,639 | 4,095 | ||||||||||||||||||||||
| Revisions of previous estimates | (409) | (1) | 90 | (320) | ||||||||||||||||||||||
| Improved recovery | 393 | 2 | 30 | 425 | ||||||||||||||||||||||
| Extensions and discoveries | 59 | 2 | 3 | 64 | ||||||||||||||||||||||
| Purchases of proved reserves | 2,996 | — | — | 2,996 | ||||||||||||||||||||||
| Sales of proved reserves | (30) | — | — | (30) | ||||||||||||||||||||||
| Production | (326) | (2) | (202) | (530) | ||||||||||||||||||||||
| Balance at December 31, 2019 | 4,128 | 12 | 2,560 | 6,700 | ||||||||||||||||||||||
| Revisions of previous estimates (c) | (823) | (1) | 103 | (721) | ||||||||||||||||||||||
| Improved recovery | 183 | — | 103 | 286 | ||||||||||||||||||||||
| Extensions and discoveries | 38 | — | — | 38 | ||||||||||||||||||||||
| Purchases of proved reserves | 4 | — | — | 4 | ||||||||||||||||||||||
| Sales of proved reserves | (523) | (9) | — | (532) | ||||||||||||||||||||||
| Production | (561) | (2) | (193) | (756) | ||||||||||||||||||||||
| Balance at December 31, 2020 | 2,446 | — | 2,573 | 5,019 | ||||||||||||||||||||||
| PROVED DEVELOPED RESERVES | ||||||||||||||||||||||||||
| December 31, 2017 | 782 | 11 | 2,131 | 2,924 | ||||||||||||||||||||||
| December 31, 2018 | 978 | 11 | 2,015 | 3,004 | ||||||||||||||||||||||
| December 31, 2019 | 3,198 | 11 | 1,996 | 5,205 | ||||||||||||||||||||||
| December 31, 2020 (d) | 2,028 | — | 1,846 | 3,874 | ||||||||||||||||||||||
| PROVED UNDEVELOPED RESERVES | ||||||||||||||||||||||||||
| December 31, 2017 | 423 | 1 | 483 | 907 | ||||||||||||||||||||||
| December 31, 2018 | 467 | — | 624 | 1,091 | ||||||||||||||||||||||
| December 31, 2019 | 930 | 1 | 564 | 1,495 | ||||||||||||||||||||||
| December 31, 2020 | 418 | — | 727 | 1,145 |
(a)Excluded reserve amounts related to the held for sale assets. Reserves related to the Algeria assets have been reclassified and included in prior and the current periods.
(b)Approximately a quarter of Middle East proved reserves relate to PSCs.
(c)Revisions of previous estimates in 2020 reflected negative price revisions of 483 Bcf, primarily in the Permian Basin (281 Bcf) and the DJ Basin (210 Bcf), partially offset by positive price revisions of 37 Bcf on PSCs. Another 209 Bcf in negative revisions were related to changes in development plans primarily in the Permian Basin and 7 Bcf in negative revisions related to updates based on reservoir performance.
(d)Approximately 2% of the proved developed reserves at December 31, 2020, are nonproducing, primarily associated with the Permian Basin, DJ Basin and Oman.
| OXY 2020 FORM 10-K | 121 |
| Supplemental Oil and Gas Information (Unaudited) |
TOTAL RESERVES (a)
| millions of Boe (MMboe) (b) | United States | Latin America | Middle East / Africa | Total (c) | ||||||||||||||||||||||
| PROVED DEVELOPED AND UNDEVELOPED RESERVES | ||||||||||||||||||||||||||
| Balance at December 31, 2017 | 1,555 | 84 | 959 | 2,598 | ||||||||||||||||||||||
| Revisions of previous estimates | 18 | (2) | 40 | 56 | ||||||||||||||||||||||
| Improved recovery | 237 | 23 | 34 | 294 | ||||||||||||||||||||||
| Extensions and discoveries | — | 4 | 3 | 7 | ||||||||||||||||||||||
| Purchases of proved reserves | 54 | — | — | 54 | ||||||||||||||||||||||
| Sales of proved reserves | (17) | — | — | (17) | ||||||||||||||||||||||
| Production | (136) | (11) | (93) | (240) | ||||||||||||||||||||||
| Balance at December 31, 2018 | 1,711 | 98 | 943 | 2,752 | ||||||||||||||||||||||
| Revisions of previous estimates | (243) | 3 | 32 | (208) | ||||||||||||||||||||||
| Improved recovery | 251 | 12 | 30 | 293 | ||||||||||||||||||||||
| Extensions and discoveries | 58 | 2 | 3 | 63 | ||||||||||||||||||||||
| Purchases of proved reserves | 1,311 | — | 94 | 1,405 | ||||||||||||||||||||||
| Sales of proved reserves | (29) | — | — | (29) | ||||||||||||||||||||||
| Production | (261) | (12) | (99) | (372) | ||||||||||||||||||||||
| Balance at December 31, 2019 | 2,798 | 103 | 1,003 | 3,904 | ||||||||||||||||||||||
| Revisions of previous estimates (d) | (510) | 12 | 14 | (484) | ||||||||||||||||||||||
| Improved recovery | 145 | — | 45 | 190 | ||||||||||||||||||||||
| Extensions and discoveries | 17 | — | 5 | 22 | ||||||||||||||||||||||
| Purchases of proved reserves | 4 | — | — | 4 | ||||||||||||||||||||||
| Sales of proved reserves | (138) | (103) | — | (241) | ||||||||||||||||||||||
| Production | (380) | (12) | (92) | (484) | ||||||||||||||||||||||
| Balance at December 31, 2020 | 1,936 | — | 975 | 2,911 | ||||||||||||||||||||||
| PROVED DEVELOPED RESERVES | ||||||||||||||||||||||||||
| December 31, 2017 | 1,063 | 79 | 786 | 1,928 | ||||||||||||||||||||||
| December 31, 2018 | 1,202 | 79 | 721 | 2,002 | ||||||||||||||||||||||
| December 31, 2019 | 2,145 | 78 | 775 | 2,998 | ||||||||||||||||||||||
| December 31, 2020 (e) | 1,569 | — | 697 | 2,266 | ||||||||||||||||||||||
| PROVED UNDEVELOPED RESERVES | ||||||||||||||||||||||||||
| December 31, 2017 | 492 | 5 | 173 | 670 | ||||||||||||||||||||||
| December 31, 2018 | 509 | 19 | 222 | 750 | ||||||||||||||||||||||
| December 31, 2019 | 653 | 25 | 228 | 906 | ||||||||||||||||||||||
| December 31, 2020 | 367 | — | 278 | 645 |
(a)Excluded reserve amounts related to the held for sale assets. Reserves related to the Algeria assets have been reclassified and included in prior and the current periods.
(b)Natural gas volumes have been converted to Boe based on an energy content of six Mcf of gas to one barrel of oil.
(c)Included proved reserves related to PSCs and other similar economic arrangements of 0.3 billion Boe at December 31, 2020, and 0.5 billion Boe at December 31, 2019, 2018 and 2017.
(d)Revisions of previous estimates in 2020 reflected negative price revisions of 342 MMboe, primarily in the Permian Basin (283 MMboe) and the DJ Basin (74 MMboe), partially offset by positive price revisions of 36 MMboe on international production sharing contracts. Another 197 MMboe in negative revisions were related to changes in development plans primarily in the Permian Basin, which were offset by 57 MMboe in positive revisions related to updates based on reservoir performance.
(e)Approximately 7% of the proved developed reserves at December 31, 2020, are nonproducing, primarily associated with the Permian Basin, Oman and Gulf of Mexico.
| 122 | OXY 2020 FORM 10-K |
| Supplemental Oil and Gas Information (Unaudited) |
CAPITALIZED COSTS
Capitalized costs relating to oil and gas producing activities and related accumulated DD&A were as follows:
| millions | United States | Latin America | Middle East / Africa | Total | ||||||||||||||||||||||
| December 31, 2020 | ||||||||||||||||||||||||||
| Proved properties | $ | 63,988 | $ | 116 | $ | 14,432 | $ | 78,536 | ||||||||||||||||||
| Unproved properties | 23,713 | 27 | 178 | 23,918 | ||||||||||||||||||||||
| Total capitalized costs (a) | 87,701 | 143 | 14,610 | 102,454 | ||||||||||||||||||||||
| Proved properties depreciation, depletion and amortization | (27,914) | (116) | (11,024) | (39,054) | ||||||||||||||||||||||
| Unproved properties valuation | (5,285) | (27) | — | (5,312) | ||||||||||||||||||||||
| Total Accumulated depreciation, depletion and amortization | (33,199) | (143) | (11,024) | (44,366) | ||||||||||||||||||||||
| Net capitalized costs | $ | 54,502 | $ | — | $ | 3,586 | $ | 58,088 | ||||||||||||||||||
| December 31, 2019 | ||||||||||||||||||||||||||
| Proved properties | $ | 59,658 | $ | 3,667 | $ | 13,707 | $ | 77,032 | ||||||||||||||||||
| Unproved properties | 30,301 | 36 | 432 | 30,769 | ||||||||||||||||||||||
| Total capitalized costs (a,b) | 89,959 | 3,703 | 14,139 | 107,801 | ||||||||||||||||||||||
| Proved properties depreciation, depletion and amortization | (20,961) | (2,643) | (9,012) | (32,616) | ||||||||||||||||||||||
| Unproved properties valuation | (1,025) | (27) | (170) | (1,222) | ||||||||||||||||||||||
| Total Accumulated depreciation, depletion and amortization | (21,986) | (2,670) | (9,182) | (33,838) | ||||||||||||||||||||||
| Net capitalized costs | $ | 67,973 | $ | 1,033 | $ | 4,957 | $ | 73,963 | ||||||||||||||||||
| December 31, 2018 | ||||||||||||||||||||||||||
| Proved properties | $ | 35,717 | $ | 3,436 | $ | 17,302 | $ | 56,455 | ||||||||||||||||||
| Unproved properties | 1,900 | 43 | 401 | 2,344 | ||||||||||||||||||||||
| Total capitalized costs (a) | 37,617 | 3,479 | 17,703 | 58,799 | ||||||||||||||||||||||
| Proved properties depreciation, depletion and amortization | (17,188) | (2,514) | (14,286) | (33,988) | ||||||||||||||||||||||
| Unproved properties valuation | (1,200) | (27) | (85) | (1,312) | ||||||||||||||||||||||
| Total Accumulated depreciation, depletion and amortization | (18,388) | (2,541) | (14,371) | (35,300) | ||||||||||||||||||||||
| Net capitalized costs | $ | 19,229 | $ | 938 | $ | 3,332 | $ | 23,499 |
(a)Included acquisition costs, development costs, capitalized interest and asset retirement obligations. Excluded capitalized costs related to Ghana, which is presented as held for sale. Capitalized costs related to the Algeria assets have been reclassified and included in prior and the current periods.
(b)$50.3 billion of capitalized costs are associated with the Acquisition.
| OXY 2020 FORM 10-K | 123 |
| Supplemental Oil and Gas Information (Unaudited) |
COSTS INCURRED
Costs incurred in oil and gas property acquisition, exploration and development activities, whether capitalized or expensed, were as follows:
| millions | United States | Latin America | Middle East / Africa | Total | ||||||||||||||||||||||
| December 31, 2020 (a) | ||||||||||||||||||||||||||
| Property acquisition costs | ||||||||||||||||||||||||||
| Proved properties | $ | 7 | $ | 2 | $ | 33 | $ | 42 | ||||||||||||||||||
| Unproved properties | 41 | 19 | 5 | 65 | ||||||||||||||||||||||
| Exploration costs | 117 | 11 | 84 | 212 | ||||||||||||||||||||||
| Development costs | 1,376 | 65 | 401 | 1,842 | ||||||||||||||||||||||
| Costs incurred | $ | 1,541 | $ | 97 | $ | 523 | $ | 2,161 | ||||||||||||||||||
| December 31, 2019 (b) | ||||||||||||||||||||||||||
| Property acquisition costs | ||||||||||||||||||||||||||
| Proved properties | $ | 19,567 | $ | 6 | $ | 1,909 | $ | 21,482 | ||||||||||||||||||
| Unproved properties | 29,042 | 1 | 11 | 29,054 | ||||||||||||||||||||||
| Exploration costs | 307 | 58 | 142 | 507 | ||||||||||||||||||||||
| Development costs | 4,449 | 196 | 575 | 5,220 | ||||||||||||||||||||||
| Costs incurred | $ | 53,365 | $ | 261 | $ | 2,637 | $ | 56,263 | ||||||||||||||||||
| December 31, 2018 | ||||||||||||||||||||||||||
| Property acquisition costs | ||||||||||||||||||||||||||
| Proved properties | $ | 428 | $ | — | $ | — | $ | 428 | ||||||||||||||||||
| Unproved properties | 46 | 4 | 2 | 52 | ||||||||||||||||||||||
| Exploration costs | 196 | 42 | 44 | 282 | ||||||||||||||||||||||
| Development costs | 3,387 | 203 | 698 | 4,288 | ||||||||||||||||||||||
| Costs incurred | $ | 4,057 | $ | 249 | $ | 744 | $ | 5,050 |
(a)Excluded costs incurred related to Ghana, which is presented as held for sale.
(b)Excluded costs incurred related to the Mozambique (sold 2019), South Africa (sold 2020) and Ghana assets (held for sale). Costs incurred related to the Algeria assets have been reclassified and included to reflect the Algeria operations as continued operations.
| 124 | OXY 2020 FORM 10-K |
| Supplemental Oil and Gas Information (Unaudited) |
RESULTS OF OPERATIONS
Occidental’s oil and gas producing activities for continuing operations, which exclude items such as asset divestitures, corporate overhead, interest and royalties, were as follows:
| millions | United States | Latin America | Middle East / Africa | Total | ||||||||||||||||||||||
| FOR THE YEAR ENDED DECEMBER 31, 2020 | ||||||||||||||||||||||||||
| Revenues (a) | $ | 9,058 | $ | 467 | $ | 2,480 | $ | 12,005 | ||||||||||||||||||
| Lease operating costs | 2,169 | 133 | 788 | 3,090 | ||||||||||||||||||||||
| Transportation costs | 1,425 | 9 | 63 | 1,497 | ||||||||||||||||||||||
| Other operating expenses | 960 | 42 | 179 | 1,181 | ||||||||||||||||||||||
| Depreciation, depletion and amortization | 6,611 | 125 | 678 | 7,414 | ||||||||||||||||||||||
| Taxes other than on income | 503 | 6 | 105 | 614 | ||||||||||||||||||||||
| Exploration expenses | 68 | 10 | 54 | 132 | ||||||||||||||||||||||
| Oil and gas mark-to-market - Collars and CO2 | (1,089) | — | — | (1,089) | ||||||||||||||||||||||
| Pretax income (loss) before impairments and other charges | (1,589) | 142 | 613 | (834) | ||||||||||||||||||||||
| Asset impairments and other charges | 5,973 | 21 | 1,187 | 7,181 | ||||||||||||||||||||||
| Pretax income (loss) | (7,562) | 121 | (574) | (8,015) | ||||||||||||||||||||||
| Income tax expense (benefit) (b) | (1,663) | 65 | 363 | (1,235) | ||||||||||||||||||||||
| Results of operations (c) | $ | (5,899) | $ | 56 | $ | (937) | $ | (6,780) | ||||||||||||||||||
| FOR THE YEAR ENDED DECEMBER 31, 2019 | ||||||||||||||||||||||||||
| Revenues (a) | $ | 9,497 | $ | 703 | $ | 3,853 | $ | 14,053 | ||||||||||||||||||
| Lease operating costs | 2,271 | 163 | 940 | 3,374 | ||||||||||||||||||||||
| Transportation costs | 647 | 5 | 92 | 744 | ||||||||||||||||||||||
| Other operating expenses | 1,125 | 51 | 207 | 1,383 | ||||||||||||||||||||||
| Depreciation, depletion and amortization | 4,113 | 135 | 905 | 5,153 | ||||||||||||||||||||||
| Taxes other than on income | 651 | 8 | 133 | 792 | ||||||||||||||||||||||
| Exploration expenses | 99 | 45 | 103 | 247 | ||||||||||||||||||||||
| Oil and gas mark-to-market - Collars and CO2 | 15 | — | — | 15 | ||||||||||||||||||||||
| Pretax income before impairments and other charges | 576 | 296 | 1,473 | 2,345 | ||||||||||||||||||||||
| Asset impairments and other charges | 288 | — | 39 | 327 | ||||||||||||||||||||||
| Pretax income | 288 | 296 | 1,434 | 2,018 | ||||||||||||||||||||||
| Income tax expense (b) | 74 | 135 | 802 | 1,011 | ||||||||||||||||||||||
| Results of operations (d) | $ | 214 | $ | 161 | $ | 632 | $ | 1,007 | ||||||||||||||||||
| FOR THE YEAR ENDED DECEMBER 31, 2018 | ||||||||||||||||||||||||||
| Revenues (a) | $ | 5,747 | $ | 731 | $ | 3,963 | $ | 10,441 | ||||||||||||||||||
| Lease operating costs | 1,675 | 151 | 939 | 2,765 | ||||||||||||||||||||||
| Transportation costs | 11 | 3 | 98 | 112 | ||||||||||||||||||||||
| Other operating expenses | 676 | 49 | 186 | 911 | ||||||||||||||||||||||
| Depreciation, depletion and amortization | 2,321 | 102 | 831 | 3,254 | ||||||||||||||||||||||
| Taxes other than on income | 407 | 6 | — | 413 | ||||||||||||||||||||||
| Exploration expenses | 64 | 19 | 27 | 110 | ||||||||||||||||||||||
| Oil and gas mark-to-market - CO2 | (4) | — | — | (4) | ||||||||||||||||||||||
| Pretax income before impairments and other charges | 597 | 401 | 1,882 | 2,880 | ||||||||||||||||||||||
| Asset impairments and other charges | 32 | — | 416 | 448 | ||||||||||||||||||||||
| Pretax income | 565 | 401 | 1,466 | 2,432 | ||||||||||||||||||||||
| Income tax expense (benefit) (b) | (131) | 174 | 925 | 968 | ||||||||||||||||||||||
| Results of operations | $ | 696 | $ | 227 | $ | 541 | $ | 1,464 |
(a)Revenues are net of royalty payments.
(b)U.S. federal income taxes reflect certain expenses related to oil and gas activities allocated for U.S. income tax purposes. These amounts are computed using the statutory rate in effect during the period.
(c)The 2020 results of operations excluded Ghana, which is presented as discontinued operations.
(d)The 2019 results of operations excluded discontinued operations related to the Mozambique, South Africa and Ghana assets. Results of operations related to the Algeria assets have been reclassified and are included to reflect the Algeria operations as continuing operations.
| OXY 2020 FORM 10-K | 125 |
| Supplemental Oil and Gas Information (Unaudited) |
RESULTS PER UNIT OF PRODUCTION FOR CONTINUING OPERATIONS
| $/Boe (a) | United States | Latin America | Middle East / Africa | Total | ||||||||||||||||||||||
| FOR THE YEAR ENDED DECEMBER 31, 2020 | ||||||||||||||||||||||||||
| Revenues (b) | $ | 23.86 | $ | 38.59 | $ | 26.79 | $ | 24.79 | ||||||||||||||||||
| Lease operating costs | 5.71 | 10.96 | 8.51 | 6.38 | ||||||||||||||||||||||
| Transportation costs | 3.75 | 0.73 | 0.68 | 3.09 | ||||||||||||||||||||||
| Other operating expenses | 2.53 | 3.48 | 1.93 | 2.44 | ||||||||||||||||||||||
| Depreciation, depletion and amortization | 17.41 | 10.33 | 7.32 | 15.31 | ||||||||||||||||||||||
| Taxes other than on income | 1.32 | 0.48 | 1.14 | 1.27 | ||||||||||||||||||||||
| Exploration expenses | 0.18 | 0.84 | 0.58 | 0.27 | ||||||||||||||||||||||
| Oil and gas mark-to-market - Collars and CO2 | (2.87) | — | — | (2.25) | ||||||||||||||||||||||
| Pretax income (loss) before impairments and other charges | (4.17) | 11.77 | 6.63 | (1.72) | ||||||||||||||||||||||
| Asset impairments and other charges | 15.73 | 1.75 | 12.81 | 14.83 | ||||||||||||||||||||||
| Pretax income (loss) | (19.90) | 10.02 | (6.18) | (16.55) | ||||||||||||||||||||||
| Income tax expense (benefit) (c) | (4.38) | 5.40 | 3.92 | (2.55) | ||||||||||||||||||||||
| Results of operations (d) | $ | (15.52) | $ | 4.62 | $ | (10.10) | $ | (14.00) | ||||||||||||||||||
| FOR THE YEAR ENDED DECEMBER 31, 2019 | ||||||||||||||||||||||||||
| Revenues (b) | $ | 36.43 | $ | 56.70 | $ | 38.97 | $ | 37.78 | ||||||||||||||||||
| Lease operating costs | 8.71 | 13.18 | 9.51 | 9.07 | ||||||||||||||||||||||
| Transportation costs | 2.48 | 0.34 | 0.93 | 2.00 | ||||||||||||||||||||||
| Other operating expenses | 4.32 | 4.15 | 2.10 | 3.72 | ||||||||||||||||||||||
| Depreciation, depletion and amortization | 15.78 | 10.85 | 9.15 | 13.85 | ||||||||||||||||||||||
| Taxes other than on income | 2.50 | 0.63 | 1.35 | 2.13 | ||||||||||||||||||||||
| Exploration expenses | 0.38 | 3.66 | 1.01 | 0.66 | ||||||||||||||||||||||
| Oil and gas mark-to-market - CO2 | 0.06 | — | — | 0.04 | ||||||||||||||||||||||
| Pretax income before impairments and other charges | 2.20 | 23.89 | 14.92 | 6.31 | ||||||||||||||||||||||
| Asset impairments and other charges | 1.11 | — | 0.43 | 0.88 | ||||||||||||||||||||||
| Pretax income | 1.09 | 23.89 | 14.49 | 5.43 | ||||||||||||||||||||||
| Income tax expense (c) | 0.29 | 10.90 | 8.10 | 2.72 | ||||||||||||||||||||||
| Results of operations (e) | $ | 0.80 | $ | 12.99 | $ | 6.39 | $ | 2.71 | ||||||||||||||||||
| FOR THE YEAR ENDED DECEMBER 31, 2018 | ||||||||||||||||||||||||||
| Revenues (b) | $ | 42.30 | $ | 63.37 | $ | 42.78 | $ | 43.50 | ||||||||||||||||||
| Lease operating costs | 12.33 | 13.08 | 10.14 | 11.52 | ||||||||||||||||||||||
| Transportation costs | 0.08 | 0.24 | 1.06 | 0.47 | ||||||||||||||||||||||
| Other operating expenses | 4.98 | 4.24 | 2.01 | 3.79 | ||||||||||||||||||||||
| Depreciation, depletion and amortization | 17.08 | 8.88 | 8.96 | 13.56 | ||||||||||||||||||||||
| Taxes other than on income | 3.00 | 0.52 | — | 1.72 | ||||||||||||||||||||||
| Exploration expenses | 0.47 | 1.65 | 0.29 | 0.46 | ||||||||||||||||||||||
| Oil and gas mark-to-market - CO2 | (0.03) | — | — | (0.01) | ||||||||||||||||||||||
| Pretax income before impairments and other charges | 4.39 | 34.76 | 20.32 | 11.99 | ||||||||||||||||||||||
| Asset impairments and other charges | 0.24 | — | 4.49 | 1.87 | ||||||||||||||||||||||
| Pretax income | 4.15 | 34.76 | 15.83 | 10.12 | ||||||||||||||||||||||
| Income tax expense (benefit) (c) | (0.96) | 15.08 | 9.99 | 4.03 | ||||||||||||||||||||||
| Results of operations | $ | 5.11 | $ | 19.68 | $ | 5.84 | $ | 6.09 |
(a)Natural gas volumes have been converted to Boe based on energy content of six Mcf of gas to one barrel of oil.
(b)Revenues are net of royalty payments.
(c)U.S. federal income taxes reflect certain expenses related to oil and gas activities allocated for U.S. income tax purposes. These amounts are computed using the statutory rate in effect during the period.
(d)The 2020 results of operations excluded Ghana, which is presented in discontinued operations.
(e)The 2019 results of operations excluded discontinued operations related to the Mozambique, South Africa and Ghana assets. Results of operations related to the Algeria assets have been reclassified and are included to reflect the Algeria operations as continuing operations.
| 126 | OXY 2020 FORM 10-K |
| Supplemental Oil and Gas Information (Unaudited) |
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, 2020, 2019 and 2018, 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% discount factor. The calculations assumed the continuation of existing economic, operating and contractual conditions at December 31, 2020, 2019 and 2018. 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
| millions | United States | Latin America | Middle East / Africa | Total | ||||||||||||||||||||||
| AT DECEMBER 31, 2020 | ||||||||||||||||||||||||||
| Future cash inflows | $ | 49,050 | $ | — | $ | 21,270 | $ | 70,320 | ||||||||||||||||||
| Future costs | ||||||||||||||||||||||||||
| Production costs and other operating | (29,147) | — | (8,304) | (37,451) | ||||||||||||||||||||||
| Development costs (a) | (9,103) | (6) | (2,404) | (11,513) | ||||||||||||||||||||||
| Future income tax expense | (19) | — | (2,088) | (2,107) | ||||||||||||||||||||||
| Future net cash flows | 10,781 | (6) | 8,474 | 19,249 | ||||||||||||||||||||||
| 10% discount factor | (3,827) | — | (4,071) | (7,898) | ||||||||||||||||||||||
| Standardized measure of discounted future net cash flows (b) | $ | 6,954 | $ | (6) | $ | 4,403 | $ | 11,351 | ||||||||||||||||||
| AT DECEMBER 31, 2019 | ||||||||||||||||||||||||||
| Future cash inflows | $ | 97,293 | $ | 5,803 | $ | 33,258 | $ | 136,354 | ||||||||||||||||||
| Future costs | ||||||||||||||||||||||||||
| Production costs and other operating | (47,685) | (2,824) | (11,318) | (61,827) | ||||||||||||||||||||||
| Development costs (a) | (13,137) | (553) | (2,719) | (16,409) | ||||||||||||||||||||||
| Future income tax expense | (4,097) | (687) | (3,842) | (8,626) | ||||||||||||||||||||||
| Future net cash flows | 32,374 | 1,739 | 15,379 | 49,492 | ||||||||||||||||||||||
| 10% discount factor | (12,427) | (701) | (7,135) | (20,263) | ||||||||||||||||||||||
| Standardized measure of discounted future net cash flows (c) | $ | 19,947 | $ | 1,038 | $ | 8,244 | $ | 29,229 | ||||||||||||||||||
| AT DECEMBER 31, 2018 | ||||||||||||||||||||||||||
| Future cash inflows | $ | 75,313 | $ | 6,104 | $ | 31,158 | $ | 112,575 | ||||||||||||||||||
| Future costs | ||||||||||||||||||||||||||
| Production costs and other operating | (33,373) | (2,673) | (9,609) | (45,655) | ||||||||||||||||||||||
| Development costs (a) | (9,450) | (377) | (2,136) | (11,963) | ||||||||||||||||||||||
| Future income tax expense | (4,150) | (959) | (3,524) | (8,633) | ||||||||||||||||||||||
| Future net cash flows | 28,340 | 2,095 | 15,889 | 46,324 | ||||||||||||||||||||||
| 10% discount factor | (14,288) | (846) | (7,729) | (22,863) | ||||||||||||||||||||||
| Standardized measure of discounted future net cash flows | $ | 14,052 | $ | 1,249 | $ | 8,160 | $ | 23,461 |
(a)Included asset retirement costs.
(b)2020 excluded discounted future net cash flows of $0.1 billion related to Ghana, which is presented as held for sale.
(c)2019 excluded discounted future net cash flows of $0.8 billion related to Occidental’s Mozambique (sold 2019), South Africa (sold 2020) and Ghana (held for sale) assets. Discounted future net cash flows for Algeria of $1.2 billion have been reclassified and included.
| OXY 2020 FORM 10-K | 127 |
| Supplemental Oil and Gas Information (Unaudited) |
CHANGES IN THE STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS FROM PROVED RESERVE QUANTITIES
| millions | 2020 | 2019 (a) | 2018 | |||||||||||||||||
| Balance at January 1 | $ | 29,229 | $ | 23,461 | $ | 16,220 | ||||||||||||||
| Sales and transfers of oil and gas produced, net of production costs and other operating expenses | (6,483) | (9,207) | (7,828) | |||||||||||||||||
| Net change in prices received per barrel, net of production costs and other operating expenses | (19,738) | (6,506) | 9,482 | |||||||||||||||||
| Extensions, discoveries and improved recovery, net of future production and development costs | 1,007 | 2,607 | 3,378 | |||||||||||||||||
| Change in estimated future development costs | 1,686 | (1,666) | (3,463) | |||||||||||||||||
| Revisions of quantity estimates | (1,989) | (2,172) | 664 | |||||||||||||||||
| Previously estimated development costs incurred during the period | 1,680 | 3,304 | 1,943 | |||||||||||||||||
| Accretion of discount | 2,541 | 2,381 | 1,551 | |||||||||||||||||
| Net change in income taxes | 3,212 | 3,285 | (1,182) | |||||||||||||||||
| Purchases and sales of reserves in place, net | (651) | 11,229 | 347 | |||||||||||||||||
| Changes in production rates and other | 857 | 2,513 | 2,349 | |||||||||||||||||
| Net change | (17,878) | 5,768 | 7,241 | |||||||||||||||||
| Balance at December 31 | $ | 11,351 | $ | 29,229 | $ | 23,461 |
(a)2019 values have been adjusted to reclassify and reflect the Algeria operations as continuing operations.
AVERAGE SALES PRICE
The following table sets forth, for each year in the three-year period ended December 31, 2020, Occidental’s approximate average sales prices in continuing operations:
| United States | Latin America | Middle East / Africa | Total | |||||||||||||||||||||||
| 2020 | ||||||||||||||||||||||||||
| Oil ($/Bbl) | $ | 36.39 | $ | 38.80 | $ | 41.52 | $ | 37.41 | ||||||||||||||||||
| NGL ($/Bbl) | $ | 11.98 | $ | — | $ | 16.22 | $ | 12.58 | ||||||||||||||||||
| Gas ($/Mcf) | $ | 1.18 | $ | 5.41 | $ | 1.62 | $ | 1.31 | ||||||||||||||||||
| 2019 | ||||||||||||||||||||||||||
| Oil ($/Bbl) | $ | 54.31 | $ | 57.26 | $ | 62.03 | $ | 56.32 | ||||||||||||||||||
| NGL ($/Bbl) | $ | 16.03 | $ | — | $ | 21.85 | $ | 17.20 | ||||||||||||||||||
| Gas ($/Mcf) | $ | 1.31 | $ | 7.01 | $ | 1.59 | $ | 1.45 | ||||||||||||||||||
| 2018 | ||||||||||||||||||||||||||
| Oil ($/Bbl) | $ | 56.30 | $ | 64.32 | $ | 67.69 | $ | 60.64 | ||||||||||||||||||
| NGL ($/Bbl) | $ | 27.64 | $ | — | $ | 23.20 | $ | 26.25 | ||||||||||||||||||
| Gas ($/Mcf) | $ | 1.59 | $ | 6.43 | $ | 1.58 | $ | 1.62 |
| 128 | OXY 2020 FORM 10-K |
| Supplemental Oil and Gas Information (Unaudited) |
NET PRODUCTIVE AND DRY— EXPLORATORY AND DEVELOPMENT WELLS COMPLETED
The following table sets forth, for each year in the three-year period ended December 31, 2020, Occidental’s net productive and dry exploratory and development wells completed:
| United States | Latin America | Middle East / Africa (a) | Total | |||||||||||||||||||||||
| 2020 | ||||||||||||||||||||||||||
| Oil | ||||||||||||||||||||||||||
| Exploratory | 7 | — | 2 | 9 | ||||||||||||||||||||||
| Development | 240 | — | 81 | 321 | ||||||||||||||||||||||
| Gas | ||||||||||||||||||||||||||
| Exploratory | — | 1 | 1 | 2 | ||||||||||||||||||||||
| Development | 6 | — | 1 | 7 | ||||||||||||||||||||||
| Dry | ||||||||||||||||||||||||||
| Exploratory | — | — | 1 | 1 | ||||||||||||||||||||||
| Development | — | — | — | — | ||||||||||||||||||||||
| 2019 | ||||||||||||||||||||||||||
| Oil | ||||||||||||||||||||||||||
| Exploratory | 22 | — | 7 | 29 | ||||||||||||||||||||||
| Development | 422 | 68 | 129 | 619 | ||||||||||||||||||||||
| Gas | ||||||||||||||||||||||||||
| Exploratory | — | 2 | 5 | 7 | ||||||||||||||||||||||
| Development | 2 | — | 2 | 4 | ||||||||||||||||||||||
| Dry | ||||||||||||||||||||||||||
| Exploratory | 1 | 3 | 6 | 10 | ||||||||||||||||||||||
| Development | — | 1 | — | 1 | ||||||||||||||||||||||
| 2018 | ||||||||||||||||||||||||||
| Oil | ||||||||||||||||||||||||||
| Exploratory | 11 | 2 | 5 | 18 | ||||||||||||||||||||||
| Development | 267 | 54 | 138 | 459 | ||||||||||||||||||||||
| Gas | ||||||||||||||||||||||||||
| Development | 3 | — | 1 | 4 | ||||||||||||||||||||||
| Dry | ||||||||||||||||||||||||||
| Exploratory | — | 2 | 3 | 5 | ||||||||||||||||||||||
(a)Prior period wells completed for Algeria have been reclassified and included to reflect the Algeria operations as continuing operations.
| OXY 2020 FORM 10-K | 129 |
| Supplemental Oil and Gas Information (Unaudited) |
PRODUCTIVE OIL AND GAS WELLS
The following table sets forth, as of December 31, 2020, Occidental’s productive oil and gas wells (both producing and capable of production):
| Wells at December 31, 2020 (a) | United States | Latin America | Middle East / Africa | Total | ||||||||||||||||||||||||||||||||||||||||||||||
| Oil | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Gross (b) | 20,189 | (1,271) | 1 | — | 2,817 | — | 23,007 | (1,271) | ||||||||||||||||||||||||||||||||||||||||||
| Net (c) | 16,549 | (1,169) | 1 | — | 1,238 | (35) | 17,788 | (1,204) | ||||||||||||||||||||||||||||||||||||||||||
| Gas | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Gross (b) | 4,441 | (2,166) | 36 | — | 127 | (2) | 4,604 | (2,168) | ||||||||||||||||||||||||||||||||||||||||||
| Net (c) | 3,198 | (1,982) | 34 | — | 60 | (4) | 3,292 | (1,986) |
(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 WELLS BEING DRILLED OR PENDING COMPLETION
The following table sets forth, as of December 31, 2020, Occidental’s participation in exploratory and development wells being drilled:
| United States | Latin America | Middle East / Africa | Total | |||||||||||||||||||||||
| Exploratory and development wells being drilled | ||||||||||||||||||||||||||
| Gross | 46 | — | 17 | 63 | ||||||||||||||||||||||
| Net | 33 | — | 11 | 44 | ||||||||||||||||||||||
| Exploratory and development wells pending completion (a) | ||||||||||||||||||||||||||
| Gross | 187 | — | 2 | 189 | ||||||||||||||||||||||
| Net | 150 | — | 1 | 151 |
(a)Wells suspended or waiting on completion include exploration and development wells where drilling has occurred, but the wells are awaiting the completion of hydraulic fracturing or other completion activities or the resumption of drilling in the future. There were 57 MMboe of PUDs primarily assigned to U.S. onshore development wells suspended or waiting on completion at December 31, 2020. Occidental expects to convert all of these PUDs reserves to developed status within five years of their initial disclosure.
At December 31, 2020, Occidental was participating in 104 and 33 gross pressure-maintenance projects in the United States and Middle East/Africa, respectively. In the United States, these projects primarily consisted of waterfloods with some CO2 floods, and in the Middle East/Africa, these projects consisted mostly of waterfloods.
| 130 | OXY 2020 FORM 10-K |
| Supplemental Oil and Gas Information (Unaudited) |
OIL AND GAS ACREAGE
The following table sets forth, as of December 31, 2020, Occidental’s holdings of developed and undeveloped oil and gas acreage:
| thousands | United States | Latin America | Middle East / Africa | Total | ||||||||||||||||||||||
| Developed (a) | ||||||||||||||||||||||||||
| Gross (b) | 6,449 | 67 | 1,068 | 7,584 | ||||||||||||||||||||||
| Net (c) | 3,960 | 56 | 320 | 4,336 | ||||||||||||||||||||||
| Undeveloped (d) | ||||||||||||||||||||||||||
| Gross (b) | 1,451 | — | 7,972 | 9,423 | ||||||||||||||||||||||
| Net (c) | 970 | — | 6,553 | 7,523 | ||||||||||||||||||||||
| Fee Mineral Ownership (e) | ||||||||||||||||||||||||||
| Gross (b) | 8,069 | — | — | 8,069 | ||||||||||||||||||||||
| Net (c) | 4,559 | — | — | 4,559 |
(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.
(e)Occidental’s fee mineral acreage is primarily undeveloped.
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 the contractual expiration date. 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.
| OXY 2020 FORM 10-K | 131 |
| Supplemental Oil and Gas Information (Unaudited) |
OIL, NGL AND NATURAL GAS SALES VOLUMES PER DAY
The following tables set forth the sales volumes from ongoing operations of oil, NGL and natural gas per day for each of the three years in the period ended December 31, 2020. The differences between the sales and production volumes per day are negligible and are generally due to the timing of shipments at Occidental’s international locations where product is loaded onto tankers. Natural gas volumes have been converted to Boe based on energy content of six Mcf of gas to one barrel of oil.
| Sales per Day from Ongoing Operations (Mboe/d) | 2020 | 2019 | 2018 | |||||||||||||||||
| United States | ||||||||||||||||||||
| Permian Resources | 435 | 355 | 214 | |||||||||||||||||
| Permian EOR | 140 | 154 | 154 | |||||||||||||||||
| DJ Basin | 293 | 120 | — | |||||||||||||||||
| Gulf of Mexico | 130 | 58 | — | |||||||||||||||||
| Other Domestic | 39 | 27 | 4 | |||||||||||||||||
| Total | 1,037 | 714 | 372 | |||||||||||||||||
| Latin America | 33 | 34 | 32 | |||||||||||||||||
| Middle East / Africa | ||||||||||||||||||||
| Algeria (a) | 45 | 24 | — | |||||||||||||||||
| Al Hosn Gas | 78 | 82 | 73 | |||||||||||||||||
| Dolphin | 45 | 42 | 40 | |||||||||||||||||
| Oman | 85 | 89 | 86 | |||||||||||||||||
| Total | 253 | 237 | 199 | |||||||||||||||||
| Total Sales from Ongoing Operations (Mboe/d) | 1,323 | 985 | 603 | |||||||||||||||||
| Operations exited or exiting | 28 | 44 | 55 | |||||||||||||||||
| Total Sales (Mboe/d) | 1,351 | 1,029 | 658 |
(a)Prior period sales volumes for Algeria have been reclassified and included to reflect the Algeria operations as ongoing operations.
| 132 | OXY 2020 FORM 10-K |
| Supplemental Oil and Gas Information (Unaudited) |
| Sales per Day by Products from Ongoing Operations (Mboe/d) | 2020 | 2019 | 2018 | |||||||||||||||||
| United States | ||||||||||||||||||||
| Oil (Mbbl) | ||||||||||||||||||||
| Permian Resources | 237 | 207 | 132 | |||||||||||||||||
| Permian EOR | 106 | 117 | 117 | |||||||||||||||||
| DJ Basin | 96 | 46 | — | |||||||||||||||||
| Gulf of Mexico | 109 | 48 | — | |||||||||||||||||
| Other Domestic | 13 | 7 | 1 | |||||||||||||||||
| Total | 561 | 425 | 250 | |||||||||||||||||
| NGL (Mbbl) | ||||||||||||||||||||
| Permian Resources | 101 | 74 | 38 | |||||||||||||||||
| Permian EOR | 28 | 30 | 29 | |||||||||||||||||
| DJ Basin | 79 | 28 | — | |||||||||||||||||
| Gulf of Mexico | 9 | 4 | — | |||||||||||||||||
| Other Domestic | 4 | 4 | — | |||||||||||||||||
| Total | 221 | 140 | 67 | |||||||||||||||||
| Natural gas (MMcf) | ||||||||||||||||||||
| Permian Resources | 584 | 442 | 261 | |||||||||||||||||
| Permian EOR | 36 | 44 | 50 | |||||||||||||||||
| DJ Basin | 713 | 275 | — | |||||||||||||||||
| Gulf of Mexico | 71 | 34 | — | |||||||||||||||||
| Other Domestic | 125 | 98 | 16 | |||||||||||||||||
| Total | 1,529 | 893 | 327 | |||||||||||||||||
| Latin America | ||||||||||||||||||||
| Oil (Mbbl) | 32 | 33 | 31 | |||||||||||||||||
| Natural gas (MMcf) | 6 | 7 | 6 | |||||||||||||||||
| Middle East / Africa | ||||||||||||||||||||
| Oil (Mbbl) | ||||||||||||||||||||
| Algeria | 42 | 22 | — | |||||||||||||||||
| Al Hosn Gas | 14 | 14 | 13 | |||||||||||||||||
| Dolphin | 7 | 7 | 7 | |||||||||||||||||
| Oman | 65 | 66 | 63 | |||||||||||||||||
| Total | 128 | 109 | 83 | |||||||||||||||||
| NGL (Mbbl) | ||||||||||||||||||||
| Algeria | 3 | 2 | — | |||||||||||||||||
| Al Hosn Gas | 25 | 26 | 23 | |||||||||||||||||
| Dolphin | 9 | 8 | 8 | |||||||||||||||||
| Total | 37 | 36 | 31 | |||||||||||||||||
| Natural gas (MMcf) | ||||||||||||||||||||
| Al Hosn Gas | 238 | 251 | 220 | |||||||||||||||||
| Dolphin | 171 | 161 | 152 | |||||||||||||||||
| Oman | 120 | 138 | 139 | |||||||||||||||||
| Total | 529 | 550 | 511 | |||||||||||||||||
| Total Sales from Ongoing Operations (Mboe/d) | 1,323 | 985 | 603 |
| OXY 2020 FORM 10-K | 133 |
| Schedule II – Valuation and Qualifying Accounts | Occidental Petroleum Corporation and Subsidiaries |
| Additions | |||||||||||||||||||||||||||||||||||
| millions | Balance at Beginning of Period | Charged to Costs and Expenses | Charged to Other Accounts | Deductions (a) | Balance at End of Period | ||||||||||||||||||||||||||||||
| 2020 | |||||||||||||||||||||||||||||||||||
| Allowance for doubtful accounts | $ | 788 | $ | 37 | $ | (3) | $ | — | $ | 822 | (b) | ||||||||||||||||||||||||
| Environmental, litigation and other reserves | $ | 2,411 | $ | 115 | $ | 43 | $ | (140) | $ | 2,429 | (c) | ||||||||||||||||||||||||
| 2019 | |||||||||||||||||||||||||||||||||||
| Allowance for doubtful accounts | $ | 668 | $ | 126 | $ | (6) | $ | — | $ | 788 | (b) | ||||||||||||||||||||||||
| Environmental, litigation, tax and other reserves | $ | 994 | $ | 182 | $ | 1,408 | $ | (173) | $ | 2,411 | (c) | ||||||||||||||||||||||||
| 2018 | |||||||||||||||||||||||||||||||||||
| Allowance for doubtful accounts | $ | 594 | $ | 77 | $ | (3) | $ | — | $ | 668 | (b) | ||||||||||||||||||||||||
| Environmental, litigation, tax and other reserves | $ | 935 | $ | 140 | $ | 85 | $ | (166) | $ | 994 | (c) |
(a)Primarily represents payments.
(b)Of these amounts, $42 million, $22 million and $24 million in 2020, 2019, and 2018, respectively, are classified as current.
(c)Of these amounts, $149 million, $188 million and $146 million in 2020, 2019, and 2018, respectively, are classified as current.
Note: The amounts presented represent continuing operations.
| 134 | OXY 2020 FORM 10-K |
Previous: Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK · Next: Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE