filings.toolsItem 1. Financial Statements (unaudited)
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Item 1. Financial Statements (unaudited)
| Consolidated Condensed Balance Sheets | Occidental Petroleum Corporation and Subsidiaries |
| millions | March 31, 2024 | December 31, 2023 | ||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash and cash equivalents | $ | 1,272 | $ | 1,426 | ||||
| Trade receivables, net of reserves of $29 in 2024 and $29 in 2023 | 3,271 | 3,195 | ||||||
| Inventories | 2,131 | 2,022 | ||||||
| Other current assets | 1,671 | 1,732 | ||||||
| Total current assets | 8,345 | 8,375 | ||||||
| INVESTMENTS IN UNCONSOLIDATED ENTITIES | 3,400 | 3,224 | ||||||
| PROPERTY, PLANT AND EQUIPMENT | ||||||||
| Oil and gas | 110,680 | 109,214 | ||||||
| Chemical | 8,315 | 8,279 | ||||||
| Midstream and marketing | 8,487 | 8,279 | ||||||
| Corporate | 1,060 | 1,039 | ||||||
| Gross property, plant and equipment | 128,542 | 126,811 | ||||||
| Accumulated depreciation, depletion and amortization | (69,779) | (68,282) | ||||||
| Net property, plant and equipment | 58,763 | 58,529 | ||||||
| OPERATING LEASE ASSETS | 1,038 | 1,130 | ||||||
| OTHER LONG-TERM ASSETS | 2,731 | 2,750 | ||||||
| TOTAL ASSETS | $ | 74,277 | $ | 74,008 | ||||
| The accompanying notes are an integral part of these Consolidated Condensed Financial Statements. |
| Consolidated Condensed Balance Sheets | Occidental Petroleum Corporation and Subsidiaries |
| millions, except share and per-share amounts | March 31, 2024 | December 31, 2023 | ||||||
| LIABILITIES AND EQUITY | ||||||||
| CURRENT LIABILITIES | ||||||||
| Current maturities of long-term debt | $ | 1,203 | $ | 1,202 | ||||
| Current operating lease liabilities | 424 | 446 | ||||||
| Accounts payable | 3,827 | 3,646 | ||||||
| Accrued liabilities | 3,358 | 3,854 | ||||||
| Total current liabilities | 8,812 | 9,148 | ||||||
| LONG-TERM DEBT, NET | 18,545 | 18,536 | ||||||
| DEFERRED CREDITS AND OTHER LIABILITIES | ||||||||
| Deferred income taxes, net | 5,728 | 5,764 | ||||||
| Asset retirement obligations | 3,867 | 3,882 | ||||||
| Pension and postretirement obligations | 933 | 931 | ||||||
| Environmental remediation liabilities | 870 | 889 | ||||||
| Operating lease liabilities | 664 | 727 | ||||||
| Other | 3,891 | 3,782 | ||||||
| Total deferred credits and other liabilities | 15,953 | 15,975 | ||||||
| EQUITY | ||||||||
| Preferred stock, at $1.00 per share par value: 2024 — 84,897 shares and 2023 —84,897 shares | 8,287 | 8,287 | ||||||
| Common stock, at $0.20 per share par value, authorized shares: 1.5 billion, issued shares: 2024 — 1,114,773,127 shares and 2023 — 1,107,516,500 shares | 223 | 222 | ||||||
| Treasury stock: 2024 — 228,053,397 shares and 2023 — 228,053,397 shares | (15,582) | (15,582) | ||||||
| Additional paid-in capital | 17,456 | 17,422 | ||||||
| Retained earnings | 20,147 | 19,626 | ||||||
| Accumulated other comprehensive income | 280 | 275 | ||||||
| Total stockholders' equity | 30,811 | 30,250 | ||||||
| Non-controlling interest | 156 | 99 | ||||||
| Total equity | $ | 30,967 | $ | 30,349 | ||||
| TOTAL LIABILITIES AND EQUITY | $ | 74,277 | $ | 74,008 |
The accompanying notes are an integral part of these Consolidated Condensed Financial Statements.
| Consolidated Condensed Statements of Operations | Occidental Petroleum Corporation and Subsidiaries |
| Three months ended March 31, | ||||||||||||||
| millions, except per-share amounts | 2024 | 2023 | ||||||||||||
| REVENUES AND OTHER INCOME | ||||||||||||||
| Net sales | $ | 5,975 | $ | 7,225 | ||||||||||
| Interest, dividends and other income | 36 | 29 | ||||||||||||
| Gains (losses) on sales of assets and other, net | (1) | 4 | ||||||||||||
| Total | 6,010 | 7,258 | ||||||||||||
| COSTS AND OTHER DEDUCTIONS | ||||||||||||||
| Oil and gas operating expense | 1,161 | 1,081 | ||||||||||||
| Transportation and gathering expense | 353 | 384 | ||||||||||||
| Chemical and midstream cost of sales | 742 | 745 | ||||||||||||
| Purchased commodities | 86 | 498 | ||||||||||||
| Selling, general and administrative expenses | 259 | 241 | ||||||||||||
| Other operating and non-operating expense | 410 | 308 | ||||||||||||
| Taxes other than on income | 235 | 306 | ||||||||||||
| Depreciation, depletion and amortization | 1,693 | 1,721 | ||||||||||||
| Acquisition-related costs | 12 | — | ||||||||||||
| Exploration expense | 66 | 102 | ||||||||||||
| Interest and debt expense, net | 284 | 238 | ||||||||||||
| Total | 5,301 | 5,624 | ||||||||||||
| Income before income taxes and other items | 709 | 1,634 | ||||||||||||
| OTHER ITEMS | ||||||||||||||
| Income from equity investments and other | 301 | 100 | ||||||||||||
| Total | 301 | 100 | ||||||||||||
| Income before income taxes | 1,010 | 1,734 | ||||||||||||
| Income tax expense | (304) | (471) | ||||||||||||
| Income from continuing operations | 706 | 1,263 | ||||||||||||
| Discontinued operations, net of taxes | 182 | — | ||||||||||||
| NET INCOME | 888 | 1,263 | ||||||||||||
| Less: Preferred stock dividends and redemption premiums | (170) | (280) | ||||||||||||
| NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS | $ | 718 | $ | 983 | ||||||||||
| PER COMMON SHARE | ||||||||||||||
| Income from continuing operations—basic | $ | 0.60 | $ | 1.08 | ||||||||||
| Discontinued operations—basic | $ | 0.21 | $ | — | ||||||||||
| Net income attributable to common stockholders—basic | $ | 0.81 | $ | 1.08 | ||||||||||
| Income from continuing operations—diluted | $ | 0.56 | $ | 1.00 | ||||||||||
| Discontinued operations—diluted | $ | 0.19 | $ | — | ||||||||||
| Net income attributable to common stockholders—diluted | $ | 0.75 | $ | 1.00 | ||||||||||
| The accompanying notes are an integral part of these Consolidated Condensed Financial Statements. |
| Consolidated Condensed Statements of Comprehensive Income | Occidental Petroleum Corporation and Subsidiaries |
| Three months ended March 31, | ||||||||||||||
| millions | 2024 | 2023 | ||||||||||||
| Net income | $ | 888 | $ | 1,263 | ||||||||||
| Other comprehensive income (loss) items: | ||||||||||||||
| Gains on derivatives (a) | 9 | 63 | ||||||||||||
| Pension and postretirement losses (b) | (4) | (5) | ||||||||||||
| Other | — | 2 | ||||||||||||
| Other comprehensive income, net of tax | 5 | 60 | ||||||||||||
| Comprehensive income attributable to preferred and common stockholders | $ | 893 | $ | 1,323 |
(a) Net of tax expense of zero for the three months ended March 31, 2024 and 2023.
(b) Net of tax expense of $1 million for the three months ended March 31, 2024 and 2023.
The accompanying notes are an integral part of these Consolidated Condensed Financial Statements.
| Consolidated Condensed Statements of Cash Flows | Occidental Petroleum Corporation and Subsidiaries |
| Three months ended March 31, | ||||||||
| millions | 2024 | 2023 | ||||||
| CASH FLOW FROM OPERATING ACTIVITIES | ||||||||
| Net income | $ | 888 | $ | 1,263 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Discontinued operations, net | (182) | — | ||||||
| Depreciation, depletion and amortization of assets | 1,693 | 1,721 | ||||||
| Deferred income tax provision (benefit) | (91) | 17 | ||||||
| Noncash charges to income and other | 138 | 152 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| (Increase) decrease in receivables | (76) | 1,010 | ||||||
| Increase in inventories | (110) | (248) | ||||||
| (Increase) decrease in other current assets | 6 | (122) | ||||||
| Decrease in accounts payable and accrued liabilities | (454) | (1,174) | ||||||
| Increase in current domestic and foreign income taxes | 195 | 251 | ||||||
| Net cash provided by operating activities | 2,007 | 2,870 | ||||||
| CASH FLOW FROM INVESTING ACTIVITIES | ||||||||
| Capital expenditures | (1,783) | (1,461) | ||||||
| Change in capital accrual | 51 | (20) | ||||||
| Purchases of businesses and assets, net | (142) | (151) | ||||||
| Proceeds from sales of assets, net | 98 | 54 | ||||||
| Equity investments and other, net | (34) | (20) | ||||||
| Net cash used by investing activities | (1,810) | (1,598) | ||||||
| CASH FLOW FROM FINANCING ACTIVITIES | ||||||||
| Payments of long-term debt, net | — | (22) | ||||||
| Proceeds from issuance of common stock | 88 | 30 | ||||||
| Purchases of treasury stock | — | (732) | ||||||
| Cash dividends paid on common and preferred stock | (332) | (320) | ||||||
| Contribution from noncontrolling interest | 57 | — | ||||||
| Other financing, net | (141) | (36) | ||||||
| Net cash used by financing activities | (328) | (1,080) | ||||||
| Increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents | (131) | 192 | ||||||
| Cash, cash equivalents, restricted cash and restricted cash equivalents — beginning of period | 1,464 | 1,026 | ||||||
| Cash, cash equivalents, restricted cash and restricted cash equivalents — end of period | $ | 1,333 | $ | 1,218 | ||||
| The accompanying notes are an integral part of these Consolidated Condensed Financial Statements. |
| Consolidated Condensed Statements of Equity | Occidental Petroleum Corporation and Subsidiaries |
| Equity Attributable to Common Stock | |||||||||||||||||||||||
| millions, except per-share amounts | Preferred Stock | Common Stock | Treasury Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Income | Total Equity | ||||||||||||||||
| Balance as of December 31, 2022 | $ | 9,762 | $ | 220 | $ | (13,772) | $ | 17,181 | $ | 16,499 | $ | 195 | $ | 30,085 | |||||||||
| Net income | — | — | — | — | 1,263 | — | 1,263 | ||||||||||||||||
| Other comprehensive income, net of tax | — | — | — | — | — | 60 | 60 | ||||||||||||||||
| Dividends on common stock, $0.18 per share | — | — | — | — | (164) | — | (164) | ||||||||||||||||
| Dividends on preferred stock, $2,000 per share | — | — | — | — | (200) | — | (200) | ||||||||||||||||
| Preferred stock redemption - face value | (647) | — | — | — | — | — | (647) | ||||||||||||||||
| Preferred stock redemption - premium | — | — | — | — | (65) | — | (65) | ||||||||||||||||
| Preferred stock redemption value in excess of carrying value | 15 | — | — | — | (15) | — | — | ||||||||||||||||
| Shareholder warrants exercised | — | — | — | 2 | — | — | 2 | ||||||||||||||||
| Options exercised | — | — | — | 7 | — | — | 7 | ||||||||||||||||
| Issuance of common stock and other, net of cancellations | — | 1 | — | (31) | — | — | (30) | ||||||||||||||||
| Purchases of treasury stock | — | — | (752) | — | — | — | (752) | ||||||||||||||||
| Balance as of March 31, 2023 | $ | 9,130 | $ | 221 | $ | (14,524) | $ | 17,159 | $ | 17,318 | $ | 255 | $ | 29,559 |
| Equity Attributable to Common Stock | ||||||||||||||||||||||||||
| millions, except per-share amounts | Preferred Stock | Common Stock | Treasury Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Income | Non-controlling Interests | Total Equity | ||||||||||||||||||
| Balance as of December 31, 2023 | $ | 8,287 | $ | 222 | $ | (15,582) | $ | 17,422 | $ | 19,626 | $ | 275 | $ | 99 | $ | 30,349 | ||||||||||
| Net income | — | — | — | — | 888 | — | — | 888 | ||||||||||||||||||
| Other comprehensive income, net of tax | — | — | — | — | — | 5 | — | 5 | ||||||||||||||||||
| Dividends on common stock, $0.22 per share | — | — | — | — | (197) | — | — | (197) | ||||||||||||||||||
| Dividends on preferred stock, $2,000 per share | — | — | — | — | (170) | — | — | (170) | ||||||||||||||||||
| Shareholder warrants exercised | — | — | — | 72 | — | — | — | 72 | ||||||||||||||||||
| Issuance of common stock and other, net of cancellations | — | 1 | — | (38) | — | — | — | (37) | ||||||||||||||||||
| Noncontrolling interest contributions | — | — | — | — | — | — | 57 | 57 | ||||||||||||||||||
| Balance as of March 31, 2024 | $ | 8,287 | $ | 223 | $ | (15,582) | $ | 17,456 | $ | 20,147 | $ | 280 | $ | 156 | $ | 30,967 |
The accompanying notes are an integral part of these Consolidated Condensed Financial Statements.
| Notes to Consolidated Condensed Financial Statements | Occidental Petroleum Corporation and Subsidiaries |
| NOTE 1 - GENERAL |
NATURE OF OPERATIONS
Occidental conducts its operations through various subsidiaries and affiliates. Occidental has made its disclosures in accordance with United States generally accepted accounting principles as they apply to interim reporting, and condensed or omitted, as permitted by the U.S. Securities and Exchange Commission’s rules and regulations, certain information and disclosures normally included in Consolidated Financial Statements and the notes thereto. These unaudited Consolidated Condensed Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and the notes thereto in the 2023 Form 10-K.
In the opinion of Occidental’s management, the accompanying unaudited Consolidated Condensed Financial Statements in this report reflect all adjustments (consisting of normal recurring adjustments) that are necessary to fairly present Occidental’s results of operations and cash flows for the three months ended March 31, 2024 and 2023 and Occidental’s financial position as of March 31, 2024 and December 31, 2023. The income and cash flows for the periods ended March 31, 2024 and 2023 are not necessarily indicative of the income or cash flows to be expected for the full year.
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 balances for the periods presented include 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 in the Consolidated Condensed Statements of Cash Flows as of March 31, 2024 and 2023:
| millions | 2024 | 2023 | ||||||
| Cash and cash equivalents | $ | 1,272 | $ | 1,165 | ||||
| Restricted cash and restricted cash equivalents included in other current assets | 44 | 36 | ||||||
| Restricted cash and restricted cash equivalents included in other long-term assets, net | 17 | 17 | ||||||
| Cash, cash equivalents, restricted cash and restricted cash equivalents | $ | 1,333 | $ | 1,218 |
SUPPLEMENTAL CASH FLOW INFORMATION
The following table represents U.S. federal, state and international income taxes paid and interest paid during the three months ended March 31, 2024 and 2023, respectively:
| millions | 2024 | 2023 | ||||||
| Income tax payments | $ | 152 | $ | 164 | ||||
| Interest paid (a) | $ | 395 | $ | 410 |
(a) Net of capitalized interest of $33 million and $19 million for the three months ended March 31, 2024 and 2023, respectively.
WES INVESTMENT
WES is a publicly traded limited partnership with its limited partner units traded on the NYSE under the ticker symbol "WES". As of March 31, 2024, Occidental owned all of the 2.3% non-voting general partner interest, 48.7% of the WES limited partner units, and a 2% non-voting limited partner interest in WES Operating, a subsidiary of WES. As of March 31, 2024, Occidental's combined share of net income from WES and its subsidiaries was 50.9%.
NON-CONTROLLING INTEREST
In 2023, Occidental and BlackRock formed a joint venture for the continued development of the first commercial scale direct air capture facility using Carbon Engineering technology. The joint venture is a VIE and Occidental consolidates the VIE as it is the primary beneficiary. BlackRock’s investment is accounted for as an NCI. Each party has committed to make additional investments towards the completion of the direct air capture facility in Ector County, Texas, with BlackRock committed to invest up to $550 million. In addition, Occidental has entered into agreements with the joint venture related to
project management, operations and maintenance and carbon removal offtake. Occidental may incur additional payments if certain construction and operational thresholds are not met.
Occidental may call the NCI on June 30, 2025 or earlier if the plant does not achieve commercial operations or ceases and permanently discontinues operations. Dividends from the joint venture will be distributed preferentially to the NCI up to a return threshold, then preferentially to Occidental thereafter. The NCI receives preferential distributions in liquidation.
Because distributions from the joint venture will not be consistent over time, or with the initial investments or ownership interest, Occidental has determined that the appropriate methodology for attributing income and loss from the joint venture is the HLBV method. Under the HLBV method, the amounts of income and loss attributed to the NCI in the consolidated statements of operations reflect changes in the amounts the NCI would hypothetically receive at each balance sheet date if the joint venture was liquidated. As of March 31, 2024, the VIE’s assets were comprised of $432 million construction in progress.
| NOTE 2 - REVENUE |
Revenue from customers is recognized when obligations under the terms of a contract with customers are satisfied; this generally occurs with the delivery of oil, NGL, gas, chemicals or services, such as transportation. As of March 31, 2024, trade receivables, net of $3.3 billion represent rights to payment for which Occidental has satisfied its obligations under a contract and its right to payment is conditioned only on the passage of time.
The following table shows a reconciliation of revenue from customers to total net sales for the three months ended March 31, 2024 and 2023:
| Three months ended March 31, | ||||||||||||||
| millions | 2024 | 2023 | ||||||||||||
| Revenue from customers | $ | 6,731 | $ | 7,115 | ||||||||||
| All other revenues (a) | (756) | 110 | ||||||||||||
| Net sales | $ | 5,975 | $ | 7,225 |
(a) Includes marketing and chemical other revenues.
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 | International | Eliminations | Total | ||||||||||
| Three months ended March 31, 2024 | ||||||||||||||
| Oil and gas | ||||||||||||||
| Oil | $ | 3,349 | $ | 772 | $ | — | $ | 4,121 | ||||||
| NGL | 416 | 99 | — | 515 | ||||||||||
| Gas | 187 | 87 | — | 274 | ||||||||||
| Other | 5 | — | — | 5 | ||||||||||
| Segment total | $ | 3,957 | $ | 958 | $ | — | $ | 4,915 | ||||||
| Chemical | $ | 1,115 | $ | 70 | $ | — | $ | 1,185 | ||||||
| Midstream and marketing | $ | 760 | $ | 96 | $ | — | $ | 856 | ||||||
| Eliminations | $ | — | $ | — | $ | (225) | $ | (225) | ||||||
| Consolidated | $ | 5,832 | $ | 1,124 | $ | (225) | $ | 6,731 | ||||||
| millions | United States | International | Eliminations | Total | ||||||||||
| Three months ended March 31, 2023 | ||||||||||||||
| Oil and gas | ||||||||||||||
| Oil | $ | 3,650 | $ | 718 | $ | — | $ | 4,368 | ||||||
| NGL | 460 | 85 | — | 545 | ||||||||||
| Gas | 355 | 72 | — | 427 | ||||||||||
| Other | (16) | 1 | — | (15) | ||||||||||
| Segment total | $ | 4,449 | $ | 876 | $ | — | $ | 5,325 | ||||||
| Chemical | $ | 1,308 | $ | 94 | $ | — | $ | 1,402 | ||||||
| Midstream and marketing | $ | 540 | $ | 104 | $ | — | $ | 644 | ||||||
| Eliminations | $ | — | $ | — | $ | (256) | $ | (256) | ||||||
| Consolidated | $ | 6,297 | $ | 1,074 | $ | (256) | $ | 7,115 |
| NOTE 3 - INVENTORIES |
Finished goods primarily represent 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. As of March 31, 2024 and December 31, 2023, inventories consisted of the following:
| millions | March 31, 2024 | December 31, 2023 | ||||||
| Raw materials | $ | 107 | $ | 115 | ||||
| Materials and supplies | 1,068 | 988 | ||||||
| Commodity inventory and finished goods | 1,064 | 1,027 | ||||||
| 2,239 | 2,130 | |||||||
| Revaluation to LIFO | (108) | (108) | ||||||
| Total | $ | 2,131 | $ | 2,022 |
| NOTE 4 - LONG-TERM DEBT |
As of March 31, 2024 and December 31, 2023, Occidental’s debt consisted of the following:
| millions | March 31, 2024 | December 31, 2023 | ||||||||||||||||||
| 2.900% senior notes due 2024 | $ | 654 | $ | 654 | ||||||||||||||||
| 6.950% senior notes due 2024 | 291 | 291 | ||||||||||||||||||
| 3.450% senior notes due 2024 | 111 | 111 | ||||||||||||||||||
| 5.875% senior notes due 2025 | 606 | 606 | ||||||||||||||||||
| 3.500% senior notes due 2025 | 137 | 137 | ||||||||||||||||||
| 5.500% senior notes due 2025 | 465 | 465 | ||||||||||||||||||
| 5.550% senior notes due 2026 | 870 | 870 | ||||||||||||||||||
| 3.200% senior notes due 2026 | 182 | 182 | ||||||||||||||||||
| 3.400% senior notes due 2026 | 284 | 284 | ||||||||||||||||||
| 7.500% debentures due 2026 | 112 | 112 | ||||||||||||||||||
| 8.500% senior notes due 2027 | 489 | 489 | ||||||||||||||||||
| 3.000% senior notes due 2027 | 216 | 216 | ||||||||||||||||||
| 7.125% debentures due 2027 | 150 | 150 | ||||||||||||||||||
| 7.000% debentures due 2027 | 48 | 48 | ||||||||||||||||||
| 6.625% debentures due 2028 | 14 | 14 | ||||||||||||||||||
| 7.150% debentures due 2028 | 232 | 232 | ||||||||||||||||||
| 7.200% senior debentures due 2028 | 82 | 82 | ||||||||||||||||||
| 6.375% senior notes due 2028 | 578 | 578 | ||||||||||||||||||
| 7.200% debentures due 2029 | 135 | 135 | ||||||||||||||||||
| 7.950% debentures due 2029 | 116 | 116 | ||||||||||||||||||
| 8.450% senior notes due 2029 | 116 | 116 | ||||||||||||||||||
| 3.500% senior notes due 2029 | 286 | 286 | ||||||||||||||||||
| Variable rate bonds due 2030 (5.690% and 5.750% as of March 31, 2024 and December 31, 2023, respectively) | 68 | 68 | ||||||||||||||||||
| 8.875% senior notes due 2030 | 1,000 | 1,000 | ||||||||||||||||||
| 6.625% senior notes due 2030 | 1,449 | 1,449 | ||||||||||||||||||
| 6.125% senior notes due 2031 | 1,143 | 1,143 | ||||||||||||||||||
| 7.500% senior notes due 2031 | 900 | 900 | ||||||||||||||||||
| 7.875% senior notes due 2031 | 500 | 500 | ||||||||||||||||||
| 6.450% senior notes due 2036 | 1,727 | 1,727 | ||||||||||||||||||
| Zero Coupon senior notes due 2036 | 673 | 673 | ||||||||||||||||||
| 0.000% loan due 2039 | 19 | 19 | ||||||||||||||||||
| 4.300% senior notes due 2039 | 247 | 247 | ||||||||||||||||||
| 7.950% senior notes due 2039 | 325 | 325 | ||||||||||||||||||
| 6.200% senior notes due 2040 | 737 | 737 | ||||||||||||||||||
| 4.500% senior notes due 2044 | 191 | 191 | ||||||||||||||||||
| 4.625% senior notes due 2045 | 296 | 296 | ||||||||||||||||||
| 6.600% senior notes due 2046 | 1,117 | 1,117 | ||||||||||||||||||
| 4.400% senior notes due 2046 | 424 | 424 | ||||||||||||||||||
| 4.100% senior notes due 2047 | 258 | 258 | ||||||||||||||||||
| (continued on next page) |
| millions (continued) | 2024 | 2023 | ||||||||||||||||||
| 4.200% senior notes due 2048 | 304 | 304 | ||||||||||||||||||
| 4.400% senior notes due 2049 | 280 | 280 | ||||||||||||||||||
| 7.730% debentures due 2096 | 58 | 58 | ||||||||||||||||||
| 7.500% debentures due 2096 | 60 | 60 | ||||||||||||||||||
| 7.250% debentures due 2096 | 5 | 5 | ||||||||||||||||||
| Total borrowings at face value | $ | 17,955 | $ | 17,955 |
The following table summarizes Occidental's outstanding debt, including finance lease liabilities:
| millions | March 31, 2024 | December 31, 2023 | ||||||
| Total borrowings at face value | $ | 17,955 | $ | 17,955 | ||||
| Adjustments to book value: | ||||||||
| Unamortized premium, net | 1,125 | 1,152 | ||||||
| Debt issuance costs | (66) | (106) | ||||||
| Net book value of debt | $ | 19,014 | $ | 19,001 | ||||
| Long-term finance leases, included in Long-term debt | 588 | 591 | ||||||
| Current finance leases, included in Current maturities of long-term debt | 146 | 146 | ||||||
| Total debt and finance leases | $ | 19,748 | $ | 19,738 | ||||
| Less: current maturities of financing leases | (146) | (146) | ||||||
| Less: current maturities of long-term debt | (1,057) | (1,056) | ||||||
| Long-term debt, net | $ | 18,545 | $ | 18,536 |
DEBT ACTIVITY
In February 2024, Occidental entered into a Third Amended and Restated Credit Agreement for the RCF retaining its $4.0 billion borrowing capacity, but extending the maturity date to June 30, 2028. Occidental has $1.1 billion of debt maturities due in the next 12 months.
In the first quarter of 2023, Occidental used cash on hand to repay $22 million of its 8.750% medium-term notes upon maturity.
FAIR VALUE OF DEBT
The estimated fair value of Occidental’s debt as of March 31, 2024 and December 31, 2023, substantially all of which was classified as Level 1, was approximately $18.0 billion.
| NOTE 5 - ACQUISITIONS |
CROWNROCK ACQUISITION
In December 2023, Occidental entered into an agreement to purchase CrownRock L.P. for total consideration of approximately $12.0 billion. If regulatory approval is received, Occidental intends to finance the purchase with the issuance with up to $9.1 billion of new debt, the issuance of approximately 29.6 million shares of common equity and the assumption of CrownRock’s $1.2 billion of existing debt. The amount of new debt issued will be decreased by any available cash and excess cash flow generated by CrownRock from January 1, 2024 to close. The agreement is subject to customary closing conditions and the receipt of regulatory approval, including the expiration or termination of the waiting period (and any extensions thereof) under the HSR Act.
In connection with the CrownRock Acquisition, Occidental has secured a fully-committed $5.3 billion bridge loan facility, a $2.0 billion 364-day term loan, and a $2.7 billion two-year term loan. No amounts were drawn as of March 31, 2024 under any of the aforementioned acquisition financings. Proceeds from the loans must be used to fund all or a portion of the CrownRock Acquisition. Financing costs related to the CrownRock Acquisition of $44 million were included in interest and debt expense, net, for the three months ended March 31, 2024.
On January 19, 2024, Occidental and the Sellers each received a Second Request from the Federal Trade Commission in connection with its review of the CrownRock Acquisition. A Second Request extends the waiting period imposed by the HSR Act until 30 days after each of Occidental and the Sellers have substantially complied with the Second Request issued to them, unless that period is extended voluntarily by Occidental and the Sellers or terminated sooner by the Federal Trade Commission. The response to the Second Request is ongoing, and Occidental and the Sellers continue to work constructively with the Federal Trade Commission in its review of the CrownRock Acquisition.
| NOTE 6 - DERIVATIVES |
OBJECTIVE AND STRATEGY
Occidental uses a variety of derivative financial instruments and physical contracts to manage its exposure to commodity price fluctuations and transportation commitments and to fix margins on the future sale of stored commodity volumes. Derivatives are carried at fair value and on a net basis when a legal right of offset exists with the same counterparty. Occidental may occasionally use a variety of derivative financial instruments to manage its exposure to foreign currency fluctuations and interest rate risks. 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 in rates on debt issuances. The value of cash flow hedges is insignificant for all periods presented. As of March 31, 2024, Occidental’s marketing derivatives are not designated as hedges.
MARKETING DERIVATIVES
Occidental's marketing derivative instruments are short-duration physical and financial forward contracts. As of March 31, 2024, the weighted-average settlement price of these forward contracts was $80.26 per barrel and $1.51 per Mcf for crude oil and natural gas, respectively. The weighted-average settlement price was $76.36 per barrel and $2.62 per Mcf for crude oil and natural gas, respectively, as of December 31, 2023. Derivative instruments that are 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. Net gains and losses associated with marketing derivative instruments are recognized currently in net sales.
The following table summarizes net short volumes associated with the outstanding marketing commodity derivatives as of:
| long (short) | March 31, 2024 | December 31, 2023 | ||||||
| Oil commodity contracts | ||||||||
| Volume (MMbbl) | (27) | (20) | ||||||
| Natural gas commodity contracts | ||||||||
| Volume (Bcf) | (138) | (113) |
FAIR VALUE OF DERIVATIVES
The following tables present the fair values of Occidental’s outstanding derivatives. Fair values are presented at gross amounts below, including when the derivatives are subject to netting arrangements, and are presented on a net basis in the Consolidated Condensed Balance Sheets:
| millions | Fair Value Measurements Using | Netting (a) | Total Fair Value | ||||||||||||||
| Balance Sheet Classifications | Level 1 | Level 2 | Level 3 | ||||||||||||||
| March 31, 2024 | |||||||||||||||||
| Marketing Derivatives | |||||||||||||||||
| Other current assets | $ | 1,289 | $ | 95 | $ | — | $ | (1,349) | $ | 35 | |||||||
| Other long-term assets | 6 | 1 | — | (6) | 1 | ||||||||||||
| Accrued liabilities | (1,340) | (99) | — | 1,349 | (90) | ||||||||||||
| Deferred credits and other liabilities - other | (6) | (3) | — | 6 | (3) | ||||||||||||
| December 31, 2023 | |||||||||||||||||
| Marketing Derivatives | |||||||||||||||||
| Other current assets | $ | 1,008 | $ | 100 | $ | — | $ | (1,009) | $ | 99 | |||||||
| Other long-term assets | 47 | 1 | — | (43) | 5 | ||||||||||||
| Accrued liabilities | (967) | (64) | — | 1,009 | (22) | ||||||||||||
| Deferred credits and other liabilities - other | (43) | (6) | — | 43 | (6) | ||||||||||||
(a)These amounts do not include collateral. Occidental netted $45 million of collateral deposited with brokers against derivatives liabilities as of March 31, 2024 and netted $42 million of collateral received with brokers against derivative assets as of December 31, 2023.
GAINS AND LOSSES ON DERIVATIVES
The following table presents net losses related to Occidental's derivative instruments and the location on the Consolidated Condensed Statements of Operations.
| millions | Three months ended March 31, | |||||||||||||
| Income Statement Classification | 2024 | 2023 | ||||||||||||
| Marketing Derivatives (included in Net sales) | $ | (238) | $ | (6) | ||||||||||
CREDIT RISK
The majority of Occidental’s counterparty credit risk is related to the physical delivery of energy commodities to its customers and their potential 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, if any.
| NOTE 7 - INCOME TAXES |
The following table summarizes components of income tax expense:
| Three months ended March 31, | ||||||||||||||
| millions | 2024 | 2023 | ||||||||||||
| Income before income taxes | $ | 1,010 | $ | 1,734 | ||||||||||
| Current | ||||||||||||||
| Federal | (243) | (265) | ||||||||||||
| State and Local | (12) | (18) | ||||||||||||
| Foreign | (140) | (171) | ||||||||||||
| Total current tax expense | $ | (395) | $ | (454) | ||||||||||
| Deferred | ||||||||||||||
| Federal | 81 | (14) | ||||||||||||
| State and Local | 2 | (3) | ||||||||||||
| Foreign | 8 | — | ||||||||||||
| Total deferred tax benefit (expense) | $ | 91 | $ | (17) | ||||||||||
| Total income tax expense | $ | (304) | $ | (471) | ||||||||||
| Net income | $ | 706 | $ | 1,263 | ||||||||||
| Worldwide effective tax rate | 30 | % | 27 | % |
The 30% and 27% worldwide effective tax rates for the three months ended March 31, 2024 and three months ended March 31, 2023, respectively, are primarily driven by Occidental's jurisdictional mix of income. U.S. income is taxed at a U.S. federal statutory rate of 21%, while international income is subject to tax at statutory rates as high as 55%.
INFLATION REDUCTION ACT AND PILLAR TWO
In August 2022, Congress passed the IRA that contains, among other provisions, a corporate book minimum tax on financial statement income, an excise tax on stock buybacks, a methane emissions charge and certain tax incentives related to climate change and clean energy. Occidental is currently evaluating the guidance and proposed regulations. The ultimate impact of the IRA to Occidental will depend on a number of factors including future commodity prices, interpretations and assumptions as well as additional regulatory guidance.
Approximately 140 countries have agreed to a statement in support of the OECD Pillar Two initiative that proposes a 15% global minimum tax on a jurisdiction-by-jurisdiction basis. A number of countries, including European Union member states, the United Kingdom, and Canada have enacted or are in the process of enacting legislation to be effective in 2024, with widespread implementation of a global minimum tax expected by 2025. As the legislation becomes effective in countries in which Occidental operates, its cash tax could increase, and its effective tax rate could be negatively impacted. Occidental will continue to monitor proposed legislation and guidance issued by both the OECD as well as the jurisdictions in which it operates to assess the impact on its tax position. We do not expect the provisions effective in 2024 to have a materially adverse impact on our results of operations, financial position, or cash flows.
| NOTE 8 - ENVIRONMENTAL LIABILITIES AND EXPENDITURES |
Occidental and its subsidiaries and their respective operations are subject to stringent federal, regional, state, provincial, tribal, 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, regional, state, provincial, tribal, 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. Occidental 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 Third-Party, Currently Operated, and Closed or Non-Operated Sites. Remedial activities may include one or more of the following: investigation involving sampling, modeling, risk assessment or monitoring; clean-up 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, natural resource damages, punitive damages, civil penalties, injunctive relief and government oversight costs.
ENVIRONMENTAL REMEDIATION
As of March 31, 2024, certain Occidental subsidiaries participated in or monitored remedial activities or proceedings at 159 sites. The following table presents the current and non-current environmental remediation liabilities of such subsidiaries on a consolidated basis as of March 31, 2024. The current portion of $131 million is included in accrued liabilities and the remainder of $870 million is included in deferred credits and other liabilities - environmental remediation liabilities.
These environmental remediation sites are grouped into NPL Sites and the following three categories of non-NPL Sites—Third-Party Sites, Currently Operated Sites and Closed or Non-Operated Sites.
| millions, except number of sites | Number of Sites | Remediation Balance | ||||||
| NPL Sites | 32 | $ | 432 | |||||
| Third-Party Sites | 64 | 220 | ||||||
| Currently Operated Sites | 12 | 96 | ||||||
| Closed or Non-Operated Sites | 51 | 253 | ||||||
| Total | 159 | $ | 1,001 |
As of March 31, 2024, environmental remediation liabilities of Occidental subsidiaries exceeded $10 million each at 18 of the 159 sites described above, and 93 of the sites had liabilities from $0 to $1 million each. Based on current estimates, Occidental expects its subsidiaries to expend funds corresponding to approximately 45% of the period-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 of its subsidiaries beyond those amounts currently recorded for environmental remediation for the 159 environmental sites in the table above could be up to $2.6 billion. The status of Occidental's involvement with the sites and related significant assumptions, including those sites indemnified by Maxus, has not changed materially since December 31, 2023.
MAXUS ENVIRONMENTAL SITES
A significant portion of aggregate estimates of environmental remediation liabilities and reasonably possible additional losses described above relates to the former DSCC. When OxyChem acquired DSCC in 1986, Maxus agreed to indemnify OxyChem for a number of environmental sites, including the DASS. In June 2016, Maxus and several affiliated companies filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the District of Delaware. Prior to filing for bankruptcy, Maxus defended and indemnified OxyChem in connection with remediation costs and other liabilities associated with the sites subject to the indemnity. In 2023, OxyChem recovered on its remaining claims for indemnified costs from the proceeds of litigation brought by the Maxus Liquidating Trust.
DIAMOND ALKALI SUPERFUND SITE
The EPA has organized the DASS into four Operable Units (OUs) for evaluating, selecting and implementing remediation under CERCLA. OxyChem’s current activities in each OU are summarized below, many of which are performed on OxyChem’s behalf by Glenn Springs Holdings, Inc.
OU1 – The Former Diamond Alkali Plant at 80-120 Lister Avenue in Newark: Maxus and its affiliates implemented an interim remedy of OU1 pursuant to a 1990 Consent Decree, for which OxyChem currently performs maintenance and monitoring. The EPA conducts periodic evaluations of the interim remedy for OU1.
OU2 – The Lower 8.3 Miles of the Lower Passaic River: In March 2016, the EPA issued a ROD specifying remedial actions required for OU2. During the third quarter of 2016, and following Maxus’s bankruptcy filing, OxyChem and the EPA entered into an AOC to complete the design of the remedy selected in the ROD. At that time, the EPA sent notice letters to approximately 100 parties notifying them that they were potentially responsible to pay the costs to implement the remedy in OU2 and announced that it would pursue similar agreements with other potentially responsible parties. In June 2018, OxyChem filed a complaint under CERCLA in U.S. District Court for the District of New Jersey against numerous potentially responsible parties seeking contribution and cost recovery of amounts incurred or to be incurred to comply with the AOC and the OU2 ROD, or to perform other remediation activities related to the DASS (2018 Contribution Action). The District Court has not adjudicated OxyChem’s relative share of responsibility for those costs. The EPA has estimated the cost to remediate OU2 to be approximately $1.4 billion.
OU3 – Newark Bay Study Area, including Newark Bay and Portions of the Hackensack River, Arthur Kill, and Kill van Kull: Maxus and its affiliates initiated a remedial investigation and feasibility study of OU3 pursuant to a 2004 AOC which was amended in 2010. OxyChem is currently performing feasibility study activities in OU3. In September 2022, the EPA listed the Lower Hackensack River (LHR) on the NPL, and this newly listed site comprises several existing NPL sites along a portion of that river that flows into OU3. In January 2024, EPA sent a general notice letter requesting that OxyChem and four other entities coordinate certain investigation activities at the LHR site.
OU4 – The 17-mile Lower Passaic River Study Area, comprising OU2 and the Upper 9 Miles of the Lower Passaic River: In September 2021, the EPA issued a ROD selecting an interim remedy for the portion of OU4 that excludes OU2 and is located upstream from the Lister Avenue Plant site for which OxyChem inherited legal responsibility. The EPA has estimated the cost to remediate OU4 to be approximately $440 million. At this time, OxyChem's role or responsibilities under the OU4 ROD, and those of other potentially responsible parties, have not been adjudicated. To provide continued, efficient remediation progress, in January 2022, OxyChem offered to design and implement the interim remedy for OU4 subject to certain conditions, including a condition that the EPA would not seek to bar OxyChem’s right to seek contribution or cost recovery from any other parties that are potentially responsible to pay for the OU4 interim remedy. In March 2022, the EPA sent a notice letter to OxyChem and other parties requesting good faith offers to implement the selected remedies at OU2 and OU4. OxyChem submitted a good faith offer in June 2022, reaffirming the offer to design the remedy for OU4 and offering to enter into additional sequential agreements to remediate OU2 and OU4, subject to similar conditions, including that the EPA not seek to bar OxyChem from pursuing contribution or cost recovery from other responsible parties. The EPA did not accept OxyChem's June 2022 offer. In March 2023, the EPA issued a Unilateral Administrative Order (OU4 UAO) in which it directed and ordered OxyChem to design the EPA’s selected interim remedy for OU4 and to provide approximately $93 million in financial assurance to secure its performance. Subject to all its defenses, OxyChem is designing the interim remedy in compliance with the OU4 UAO. As a result of OxyChem incurring costs to implement the OU4 UAO, and the EPA's proposal described below to bar OxyChem's contribution claims against various parties, including those asserted in the 2018 Contribution Action, OxyChem filed a cost recovery action under CERCLA in March 2023 in the District Court against multiple parties (2023 Cost Recovery Action).
Natural Resource Trustees – In addition to the activities of the EPA and OxyChem in the OUs described above, federal and state natural resource trustees are assessing natural resources in the Lower Passaic River and Greater Newark Bay to evaluate potential claims for natural resource damages.
ALDEN LEEDS LITIGATION
In December 2022, the EPA and the DOJ filed a proposed Consent Decree in the Alden Leeds litigation seeking court approval to settle with 85 parties for a total of $150 million which OxyChem believes is based on an unauthorized, flawed and disproportionate allocation of responsibility, release the settling companies from liability to the United States for remediation costs in DASS OU2 and OU4 and bar OxyChem from pursuing contribution against those parties for remediation costs OxyChem had incurred or may incur in the future to design and implement the remedies in OU2 and OU4, including claims OxyChem asserted in the 2018 Contribution Action. The proposed settlement does not address the liability of entities that were excluded from the settlement for the DASS, including OU2, OU3, OU4 or natural resource damages, or the liability of any settling party with respect to OU3 or natural resource damages. The proposed settlement was subject to a public comment period that closed in March 2023. In January 2024, the DOJ filed a proposed Amended Consent Decree in which it excluded three companies from the proposed settlement, among other changes, and a motion to approve the Amended Consent Decree.
OxyChem believes the proposed settlement and Amended Consent Decree rely, improperly, on an allocation report prepared by an EPA contractor in which the contractor purported to assign a disproportionate share of the responsibility for remediation costs in OU2 and OU4 to OxyChem. OxyChem also believes that process was unreasonably limited in scope and unreliably based on voluntary reporting by the settling parties, instead of sworn evidence, publicly available sampling results and historical documents reflecting the operating history and disposal practices of the 82 parties that the EPA proposes to release in this settlement.
OxyChem intends to challenge vigorously the proposed settlement and Amended Consent Decree, as well as the allocation report and process upon which they are based, and to seek contribution and cost recovery from other potentially
responsible parties for remediation costs it has incurred or may incur at the DASS. OxyChem filed its response to the motion to approve the Amended Consent Decree on April 1, 2024. Replies to OxyChem's filing are due in May 2024.
OxyChem does not know when the District Court will rule on the DOJ’s motion to approve the Amended Consent Decree. If the Amended Consent Decree is approved by the District Court and not overturned on appeal, then, notwithstanding OxyChem’s vigorous, good faith effort to contest the settlement proposed in the Alden Leeds litigation, the EPA could attempt to compel OxyChem to bear substantially all the estimated cost to design and implement the OU2 and OU4 remedies. Such a result could have a material adverse impact on OxyChem and Occidental’s consolidated results of operations in the period recorded.
While the remedies for OU2 and OU4 are expected to take over ten years to complete, the EPA may seek to require OxyChem to provide additional financial assurance. In the OU4 UAO, the EPA directed OxyChem to post financial assurance in the amount of approximately $93 million. Subject to all defenses, OxyChem has complied with this directive. The amount of any additional financial assurance is not subject to estimation at this time. It is uncertain when or to what extent the EPA may take action to compel OxyChem to perform further remediation in OU2 or OU4 or the amount of financial assurance the EPA may attempt to require OxyChem to post. For further information on the Alden Leeds litigation, see Note 9 - Lawsuits, Claims, Commitments and Contingencies.
OTHER INFORMATION
For the DASS, OxyChem has accrued a reserve relating to its estimated allocable share of the costs to perform the maintenance and monitoring required in the OU1 Consent Decree, the design and implementation of remedies selected in the OU2 ROD and AOC and the OU4 ROD and OU4 UAO, and the remedial investigation and feasibility study required in OU3.
OxyChem’s accrued environmental remediation reserve does not reflect the potential for additional remediation costs or natural resource damages for the DASS that OxyChem believes are not reasonably estimable. OxyChem’s ultimate liability at the DASS may be higher or lower than the reserved amount and the reasonably possible additional losses, and is subject to final design plans, further action by the EPA and natural resource trustees, and the resolution of OxyChem's allocable share with other potentially responsible parties, among other factors.
OxyChem continues to evaluate the estimated costs currently recorded for remediation at the DASS as well as the range of reasonably possible additional losses beyond those amounts currently recorded. Given the complexity and extent of the remediation efforts, estimates of the remediation costs may increase or decrease over time as new information becomes available.
| NOTE 9 - 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, regional, state, provincial, tribal, local and international environmental laws. These environmental proceedings seek funding or performance of remediation and, in some cases, compensation for alleged property damage, natural resource damages, punitive damages, civil penalties, injunctive relief and government oversight costs. Usually Occidental or such subsidiaries are among many companies in these environmental proceedings and have to date been successful in sharing remediation 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 or its subsidiary retains liability or indemnifies the other party for conditions that existed prior to the transaction.
In accordance with applicable accounting guidance, Occidental or its subsidiaries accrue 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 the arbitration award (disclosed below), tax matters or environmental remediation, that satisfy these criteria as of March 31, 2024 and 2023 were not material to Occidental’s Consolidated Condensed 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 will reassess the probability and estimability of contingent losses as new information becomes available.
ANDES ARBITRATION
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 Occidental's 60% of the value of Block 15. In 2017, Andes commenced an arbitration against OEPC, claiming it is entitled to a 40% share of the judgment amount obtained by Occidental. Occidental believes 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. In March 2021, the arbitration tribunal issued an award in favor of Andes and against OEPC in the amount of $391 million plus interest. In June 2023, the U.S. Court of Appeals for the Second Circuit confirmed the District Court's ruling with respect to the arbitration award but overturned the District Court's decision to add prejudgment interest in the amount of $166 million, ordering the District Court to recalculate the interest amount. Simultaneously, OEPC sought review of the Second Circuit ruling in the U.S. Supreme Court.
During 2021, OEPC commenced an arbitration against Andes to recover significant additional claims, which were not addressed by the prior arbitration tribunal, relating to Andes' 40% share of costs, liabilities, losses, and expenses due under the farmout agreement and joint operating agreement to which Andes and OEPC are parties. In July 2023, a majority of the arbitration tribunal declined to award any costs to OEPC based upon the doctrine of res judicata. One arbitrator dissented, noting that the prior arbitration panel expressly noted that it was not ruling on the types of claims asserted by OEPC. Andes sought to confirm this award in New York federal district court, and OEPC asked to vacate it because, among other reasons, OEPC believed there were fundamental legal errors embodied in the award.
During the pendency of the appeal of the 2021 Andes Award, Andes filed state court claims in New York and Delaware against OEPC, Occidental Petroleum Corporation (OPC) and OXY USA to attempt to recover on its judgment against OEPC. Andes also filed a turnover application against OPC in New York federal district court. The New York state court dismissed Andes’ action against OPC with prejudice in March 2023. Andes appealed. Both OXY USA and Andes filed motions for summary judgment in the Delaware state court action. The Delaware state court heard argument on these motions in November 2023. The Delaware state court action and the New York federal district court action were pending at the end of Q1.
On April 5, 2024, Andes and the Occidental entities named in the pending actions executed a confidential final settlement in which the parties agreed to dismiss all pending legal actions. The settlement resulted in a gain of $182 million, net of taxes, in discontinued operations.
ALDEN LEEDS AND OTHER LITIGATION
As described in Note 8 – Environmental Liabilities and Expenditures, OxyChem intends to challenge vigorously the proposed settlement and Amended Consent Decree in the Alden Leeds litigation, as well as the allocation report and process upon which they are based. In the 2018 Contribution Action and 2023 Cost Recovery Action, OxyChem also intends to defend and prosecute vigorously its right to seek contribution and cost recovery from all potentially responsible parties to pay remediation costs in the DASS and to seek a judicial allocation of responsibility under CERCLA. The 2018 Contribution Action and the 2023 Cost Recovery Action are currently stayed pending the outcome of the Alden Leeds litigation. As the Alden Leeds litigation is in its early stages, OxyChem is unable to estimate the timing of the District Court’s decision, its outcome, or the outcome of any appeals from the District Court’s decision.
TAX MATTERS AND DISPUTES
During the course of its operations, Occidental is subject to audit by tax authorities for varying periods in various federal, state, local and international tax jurisdictions. Tax years through 2021 for U.S. federal income tax purposes have been audited by the IRS pursuant to its Compliance Assurance Program and subsequent taxable years are currently under review. Tax years through 2018 have been audited for state income tax purposes. There are no outstanding significant audit matters in international jurisdictions. During the course of tax audits, disputes have arisen and other disputes may arise as to facts and matters of law.
For Anadarko, its taxable years through 2014 and tax year 2016 for U.S. federal tax purposes have been audited and closed by the IRS. Tax years 2015 and 2017 through 2019 have been audited by the IRS but remain open pending the outcome of the Tronox U.S. Tax court litigation discussed below. Tax years through 2010 have been audited for state income tax purposes. There is one outstanding significant tax matter in an international jurisdiction related to a discontinued operation. 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 dispute discussed below, Occidental believes that the resolution of these outstanding tax disputes 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. Trial was held in May 2023. The parties filed simultaneous post-
trial briefs on September 1, 2023 and filed reply briefs on December 7, 2023. Closing arguments are scheduled for May 2024. An opinion by the Tax Court could be issued at any time. If any tax liability is due as a result of the Tax Court’s opinion, it must be fully bonded or paid in full within 90 days of the entry of decision by the Tax Court. If an appeal is not pursued by Anadarko, any resulting tax deficiency will be assessed by the IRS and would be due within 30 days of receiving a formal notice of tax assessment.
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. Additionally, Occidental has recorded no tax benefit on approximately $500 million of additional cash tax benefits realized from the utilization of tax attributes generated as a result of the deduction of the $5.2 billion Tronox Adversary Proceeding settlement payment in 2015. 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, as of March 31, 2024, Occidental would be required to repay approximately $1.4 billion in federal taxes, $28 million in state taxes and accrued interest of $622 million. A liability for the taxes and 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 or its subsidiaries. These indemnities usually are contingent upon the other party incurring liabilities that reach specified thresholds. As of March 31, 2024, 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.
| NOTE 10 - EARNINGS PER SHARE AND EQUITY |
The following table presents the calculation of basic and diluted EPS attributable to common stockholders:
| Three months ended March 31, | |||||||||||||||||
| millions except per-share amounts | 2024 | 2023 | |||||||||||||||
| Income from continuing operations | $ | 706 | $ | 1,263 | |||||||||||||
| Discontinued operations, net of taxes (a) | 182 | — | |||||||||||||||
| Net income | $ | 888 | $ | 1,263 | |||||||||||||
| Less: Preferred stock dividends and redemption premiums | (170) | (280) | |||||||||||||||
| Net income attributable to common stock | $ | 718 | $ | 983 | |||||||||||||
| Less: Net income allocated to participating securities | (4) | (6) | |||||||||||||||
| Net income, net of participating securities | $ | 714 | $ | 977 | |||||||||||||
| Weighted-average number of basic shares | 884.1 | 901.2 | |||||||||||||||
| Basic income per common share | $ | 0.81 | $ | 1.08 | |||||||||||||
| Net income attributable to common stock | $ | 718 | $ | 983 | |||||||||||||
| Less: Net income allocated to participating securities | (4) | (6) | |||||||||||||||
| Net income, net of participating securities | $ | 714 | $ | 977 | |||||||||||||
| Weighted-average number of basic shares | 884.1 | 901.2 | |||||||||||||||
| Dilutive securities | 64.5 | 74.1 | |||||||||||||||
| Dilutive effect of potentially dilutive securities | 948.6 | 975.3 | |||||||||||||||
| Diluted income per common share | $ | 0.75 | $ | 1.00 |
(a) See Note 9 - Lawsuits, Claims, Commitments and Contingencies
For the three months ended March 31, 2024 and 2023, there were no Occidental common stock warrants nor options that were excluded from diluted shares.
The following table presents Occidental's common share activity, including exercises of warrants, and other transactions in Occidental's common stock in 2024:
| Period | Exercise of Warrants (a) | Other (b) | Common Stock Outstanding (c) | |||||||||||
| December 31, 2023 | 879,463,103 | |||||||||||||
| First Quarter 2024 | 3,277,628 | 3,978,999 | 886,719,730 | |||||||||||
(a) Approximately $72 million of cash was received as a result of the exercise of common stock warrants.
(b) Consists of issuances from the 2015 long-term incentive plan, the OPC savings plan and the dividend reinvestment plan.
(c) As of March 31, 2024, Occidental has 96.2 million outstanding warrants with a strike of $22.00 per share and 83.9 million of warrants with a strike of $59.62 per share.
PREFERRED STOCK
Occidental paid $170 million in preferred stock dividends in the first quarter of 2024. Occidental did not redeem any preferred stock in the three months ended March 31, 2024. As of the date of this filing, approximately $8.5 billion face value of preferred stock, or 84,897 shares, remains outstanding.
| NOTE 11 - SEGMENTS |
Occidental conducts its operations through three segments: (1) oil and gas; (2) chemical; and (3) midstream and marketing. Income taxes, interest income, interest expense, environmental remediation expenses 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. The following table presents Occidental’s industry segments:
| millions | Oil and gas (a) | Chemical | Midstream and marketing (b) | Corporate and eliminations (c) | Total | ||||||||||||
| Three months ended March 31, 2024 | |||||||||||||||||
| Net sales | $ | 4,915 | $ | 1,186 | $ | 99 | $ | (225) | $ | 5,975 | |||||||
| Income (loss) before income taxes | $ | 1,238 | $ | 254 | $ | (33) | $ | (449) | $ | 1,010 | |||||||
| Income tax expense | — | — | — | (304) | (304) | ||||||||||||
| Net income (loss) | $ | 1,238 | $ | 254 | $ | (33) | $ | (753) | $ | 706 | |||||||
| Three months ended March 31, 2023 | |||||||||||||||||
| Net sales | $ | 5,325 | $ | 1,405 | $ | 751 | $ | (256) | $ | 7,225 | |||||||
| Income (loss) before income taxes | $ | 1,640 | $ | 472 | $ | 2 | $ | (380) | $ | 1,734 | |||||||
| Income tax expense | — | — | — | (471) | (471) | ||||||||||||
| Net income (loss) | $ | 1,640 | $ | 472 | $ | 2 | $ | (851) | $ | 1,263 | |||||||
(a) The three months ended March 31, 2024 included a $44 million international legal settlement provision. The three months ended March 31, 2023 included a $26 million litigation settlement gain.
(b) The three months ended March 31, 2024 included $122 million of income from equity investments related to Occidental's share of WES's gains on asset divestitures and a $91 million derivative loss. The three months ended March 31, 2023 included a $26 million impairment charge included in income from equity investments.
(c) The three months ended March 31, 2024 included $56 million of acquisition-related costs made up of $44 million for financing costs and $12 million of transaction costs relating to the CrownRock Acquisition.
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