Preliminary Fourth Quarter Results
The preliminary estimated financial and operational results included in this Current Report on Form 8-K (“Current Report”) for the quarter and full-year ended December
31, 2019 remain subject to the completion of Occidental Petroleum Corporation’s (“Occidental”) customary quarterly closing and review procedures. Occidental will announce its final fourth quarter and full-year results on February 27, 2020.
The preliminary results included in this Current Report shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), or otherwise subject to the liabilities of that section, and shall not be incorporated by reference into any filings made by Occidental under the Securities Act of 1933, as amended, or the Exchange Act, except as may be
expressly set forth by specific reference in such filing.
Financial Reporting Updates for the Fourth Quarter
Occidental will report fourth quarter net income on a Reported and Adjusted basis. Adjusted income is a supplemental measure not calculated in accordance with generally
accepted accounting principles (“GAAP”). Occidental defines Adjusted income as net income excluding the effects of significant transactions and events that affect earnings but vary widely and unpredictably in nature, timing and amount. These events
may recur, even across successive reporting periods. This non-GAAP measure is not meant to disassociate those items from management’s performance, but rather is meant to provide useful information to investors interested in comparing Occidental’s
earnings performance between periods. Reported net income is considered representative of management’s performance over the long term, and Adjusted income is not considered to be an alternative to net income reported in accordance with GAAP.
As previously disclosed, as of December 31, 2019, and on a go-forward basis, Occidental will no longer consolidate the statement of operations, balance sheet, and
statement of cash flows of Western Midstream Partners, LP (“WES”). Occidental’s statements of operations and cash flows for the fourth quarter of 2019 will include WES’s results of operations and cash flows, while Occidental’s balance sheet as of
December 31, 2019 will reflect Occidental’s investment in WES upon applying the equity method of accounting.
Capital Spending
Occidental expects to report capital spending for the fourth quarter of 2019 of $1.95 billion excluding discontinued operations and WES. Pro forma capital spending
excluding discontinued operations and WES for the full-year 2019 is expected to be $8.2 billion, $400 million below Occidental’s 2019 pro forma capital budget of $8.6 billion.
Production
Occidental expects to report production from continuing operations for the fourth quarter of 2019 of 1,402 thousand barrels of oil equivalent per day (MBOED), including
Permian Resources production of 476 MBOED and International production of 257 MBOED.
Production from continuing operations for the fourth quarter exceeded guidance of 1,312 – 1,336 MBOED provided on November 4, 2019 due to:
Additionally, production in the quarter was impacted by:
Adjusting for the above, normalized production for fourth quarter of 2019 was 1,391 MBOED.
Pro forma ongoing production for 2019 totaled 1,346 MBOED. Annual production is expected to grow 2% in 2020 with the full-year capital budget of $5.2 - $5.4 billion.
Domestic Realized Prices
Occidental expects to report the following domestic realized prices for the fourth quarter of 2019:
Domestic Reported production for the quarter is expected to consist of approximately 56% Oil, 20% NGLs, and 24% Natural Gas.
Domestic Transportation Costs for the quarter are expected to be $3.92/BOE.
Domestic Depreciation, Depletion, and Amortization (DD&A)
Domestic DD&A for the fourth quarter is expected to be $16.23/BOE.
Items Affecting Comparability
Occidental expects that its Reported income for the fourth quarter will be impacted by pre-tax charges related to Occidental’s acquisition of Anadarko Petroleum
Corporation (the “Acquisition”), and certain other items affecting comparability. Items affecting comparability for the fourth quarter of 2019 are expected to include:
Marketing and Midstream
The Marketing and Midstream Segment is expected to report pre-tax income results within guidance for the fourth quarter of 2019 excluding a negative $89 million
mark-to-market adjustment.
Overhead Expenses
SG&A and other operating expenses in the fourth quarter of 2019 are expected to be $901 million in part due to seasonally higher environmental remediation charges.
Synergy realizations are expected to lower overhead expenses to $2.2 billion in 2020.
Income Tax Expense
Income tax expense for the fourth quarter of 2019 is expected to be approximately $45 million on a Reported basis and $110 million on an Adjusted basis. The deferred
income tax provision for the fourth quarter is expected to be approximately $25 million.
Cautionary Statement Regarding Forward-Looking Statements
Any statements in this Current Report about Occidental’s expectations, plans or forecasts, including statements regarding preliminary financial and operational estimates
that are not historical facts are forward-looking statements. These statements are typically identified by words such as “estimate,” “project,” “predict,” “will,” “would,” “should,” “could,” “may,” “might,” “anticipate,” “plan,” “intend,”
“believe,” “expect,” “aim,” “goal,” “target,” “objective,” “likely” or similar expressions that convey the prospective nature of events or outcomes. Forward-looking statements involve estimates, expectations, projections, goals, forecasts,
assumptions, risks and uncertainties. Actual results may differ from anticipated results, sometimes materially, and reported or expected results should not be considered an indication of future performance. Factors that could cause actual results
to differ include, but are not limited to: general economic conditions that are less favorable than expected; Occidental’s indebtedness, including the substantial indebtedness Occidental incurred in connection with the Acquisition and the need to
generate sufficient cash flows to service and repay such debt; Occidental’s ability to obtain the regulatory approvals required for the sale of Anadarko’s assets in Algeria and Ghana to Total may not be obtained on the terms expected or on the
anticipated schedule or at all; the possibility that Occidental may be unable to achieve expected synergies and operating efficiencies within the expected time-frames or at all and to successfully integrate Anadarko’s operations with those of
Occidental; that such integration may be more difficult, time-consuming or costly than expected; that operating costs, customer loss and business disruption (including, without limitation, difficulties in maintaining relationships with employees,
customers or suppliers) may be greater than expected following the Acquisition; that Occidental is subject to intense competition and increased competition is expected in the future.
Factors that could cause actual results to differ and that may affect Occidental’s results of operations and financial position appear in Part I, Item 1A “Risk Factors”
of Occidental’s Annual Report on Form 10-K for the year ended December 31, 2018, and in Occidental’s other filings with the U.S. Securities and Exchange Commission (“SEC”). Because the factors referred to above could cause actual results or
outcomes to differ materially from those expressed or implied in any forward-looking statements, you should not place undue reliance on any such forward-looking statements. Further, any forward-looking statement speaks only as of the date of this
Current Report and, unless legally required, Occidental does not undertake any obligation to update any forward-looking statement, as a result of new information, future events or otherwise.