|
|
|
|
|
|
Consolidated Condensed Statements of Cash Flows
|
Occidental Petroleum Corporation and Subsidiaries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended
September 30,
|
millions
|
|
2020
|
|
2019
|
|
|
|
|
|
CASH FLOW FROM OPERATING ACTIVITIES
|
|
|
|
|
Net income (loss)
|
|
$
|
(13,719)
|
|
|
$
|
514
|
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
|
|
|
|
|
Discontinued operations, net
|
|
1,335
|
|
|
15
|
|
Depreciation, depletion and amortization of assets
|
|
6,343
|
|
|
3,771
|
|
Deferred income tax benefit
|
|
(2,117)
|
|
|
(1,050)
|
|
Asset impairments and other items
|
|
10,915
|
|
|
325
|
|
Losses (gains) on sales of assets, net
|
|
824
|
|
|
(150)
|
|
Other noncash charges to income
|
|
134
|
|
|
568
|
|
|
|
|
|
|
|
|
|
|
|
Changes in operating assets and liabilities
|
|
(1,240)
|
|
|
1,480
|
|
Operating cash flow from continuing operations
|
|
2,475
|
|
|
5,473
|
|
Operating cash flow from discontinued operations, net of taxes
|
|
76
|
|
|
(107)
|
|
Net cash provided by operating activities
|
|
2,551
|
|
|
5,366
|
|
|
|
|
|
|
CASH FLOW FROM INVESTING ACTIVITIES
|
|
|
|
|
Capital expenditures
|
|
(1,921)
|
|
|
(4,187)
|
|
Change in capital accrual
|
|
(725)
|
|
|
(128)
|
|
Purchase of businesses and assets, net
|
|
(102)
|
|
|
(27,926)
|
|
Proceeds from sale of assets, net
|
|
193
|
|
|
4,809
|
|
Equity investments and other, net
|
|
188
|
|
|
(140)
|
|
Investing cash flow from continuing operations
|
|
(2,367)
|
|
|
(27,572)
|
|
Investing cash flow from discontinued operations, net of taxes
|
|
(31)
|
|
|
(154)
|
|
Net cash used by investing activities
|
|
(2,398)
|
|
|
(27,726)
|
|
|
|
|
|
|
CASH FLOW FROM FINANCING ACTIVITIES
|
|
|
|
|
Proceeds from long-term debt, net of issuance costs
|
|
4,956
|
|
|
21,557
|
|
Payments of long-term debt
|
|
(4,615)
|
|
|
(4,949)
|
|
Proceeds from short-term borrowings and revolvers - WES
|
|
—
|
|
|
1,240
|
|
Payment of revolvers - WES
|
|
—
|
|
|
(1,000)
|
|
Proceeds from issuance of common and preferred stock
|
|
126
|
|
|
10,010
|
|
Purchases of treasury stock
|
|
(4)
|
|
|
(237)
|
|
Cash dividends paid on common and preferred stock
|
|
(1,634)
|
|
|
(1,766)
|
|
Distributions paid to noncontrolling interest
|
|
—
|
|
|
(127)
|
|
Financing portion of net cash paid for derivative instruments
|
|
(377)
|
|
|
11
|
|
Other financing, net
|
|
(99)
|
|
|
(46)
|
|
Financing cash flow from continuing operations
|
|
(1,647)
|
|
|
24,693
|
|
Financing cash flow from discontinued operations, net of taxes
|
|
(6)
|
|
|
(1)
|
|
Net cash (used) provided by financing activities
|
|
(1,653)
|
|
|
24,692
|
|
|
|
|
|
|
(Decrease) increase in cash, cash equivalents, restricted cash and restricted cash equivalents
|
|
(1,500)
|
|
|
2,332
|
|
Cash, cash equivalents, restricted cash and restricted cash equivalents — beginning of period
|
|
3,574
|
|
|
3,033
|
|
Cash, cash equivalents, restricted cash and restricted cash equivalents — end of period
|
|
$
|
2,074
|
|
|
$
|
5,365
|
|
|
|
|
|
|
SUPPLEMENTAL NON-CASH ACTIVITIES:
|
|
|
|
|
NON-CASH INVESTING ACTIVITIES
|
|
|
|
|
Exchange equity investment in WES (see Note 1)
|
|
$
|
260
|
|
|
$
|
—
|
|
NON-CASH FINANCING ACTIVITIES
|
|
|
|
|
Settlement of long-term debt - WES (see Note 8)
|
|
$
|
(260)
|
|
|
$
|
—
|
|
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 Loss
|
|
Non-controlling Interests
|
|
Total Equity
|
Balance at June 30, 2019
|
|
$
|
—
|
|
|
$
|
179
|
|
|
$
|
(10,653)
|
|
|
$
|
8,157
|
|
|
$
|
23,848
|
|
|
$
|
(184)
|
|
|
$
|
—
|
|
|
$
|
21,347
|
|
Net income (loss)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(794)
|
|
|
—
|
|
|
42
|
|
|
(752)
|
|
Other comprehensive loss, net of tax
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(148)
|
|
|
—
|
|
|
(148)
|
|
Dividends on common stock, $0.79 per share
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(709)
|
|
|
—
|
|
|
—
|
|
|
(709)
|
|
Dividends on preferred stock, $1,489 per share
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(118)
|
|
|
—
|
|
|
—
|
|
|
(118)
|
|
Issuance of common stock and other, net
|
|
—
|
|
|
30
|
|
|
—
|
|
|
6,710
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,740
|
|
Issuance of preferred stock, net
|
|
9,762
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9,762
|
|
Fair value of noncontrolling interest acquired
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,875
|
|
|
4,875
|
|
Noncontrolling interest contributions, net
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8
|
|
|
8
|
|
Balance at September 30, 2019
|
|
$
|
9,762
|
|
|
$
|
209
|
|
|
$
|
(10,653)
|
|
|
$
|
14,867
|
|
|
$
|
22,227
|
|
|
$
|
(332)
|
|
|
$
|
4,925
|
|
|
$
|
41,005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 Loss
|
|
|
|
Total Equity
|
Balance at June 30, 2020
|
|
$
|
9,762
|
|
|
$
|
213
|
|
|
$
|
(10,657)
|
|
|
$
|
16,235
|
|
|
|
|
$
|
8,105
|
|
|
$
|
(312)
|
|
|
|
|
$
|
23,346
|
|
Net loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
(3,575)
|
|
|
—
|
|
|
|
|
(3,575)
|
|
Other comprehensive income, net of tax
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
29
|
|
|
|
|
29
|
|
Dividends on common stock, $0.01 per share
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
(10)
|
|
|
—
|
|
|
|
|
(10)
|
|
Dividends on preferred stock, $2,000 per share
|
|
—
|
|
|
3
|
|
|
—
|
|
|
219
|
|
|
|
|
(203)
|
|
|
—
|
|
|
|
|
19
|
|
Issuance of common stock, net
|
|
—
|
|
|
—
|
|
|
—
|
|
|
51
|
|
|
|
|
—
|
|
|
—
|
|
|
|
|
51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2020
|
|
$
|
9,762
|
|
|
$
|
216
|
|
|
$
|
(10,657)
|
|
|
$
|
16,505
|
|
|
|
|
$
|
4,317
|
|
|
$
|
(283)
|
|
|
|
|
$
|
19,860
|
|
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 Loss
|
|
Non-controlling Interests
|
|
Total Equity
|
Balance at December 31, 2018
|
|
$
|
—
|
|
|
$
|
179
|
|
|
$
|
(10,473)
|
|
|
$
|
8,046
|
|
|
$
|
23,750
|
|
|
$
|
(172)
|
|
|
$
|
—
|
|
|
$
|
21,330
|
|
Net income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
472
|
|
|
—
|
|
|
42
|
|
|
514
|
|
Other comprehensive loss, net of tax
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(160)
|
|
|
—
|
|
|
(160)
|
|
Dividends on common stock, $2.35 per share
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,877)
|
|
|
—
|
|
|
—
|
|
|
(1,877)
|
|
Dividends on preferred stock, $1,489 per share
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(118)
|
|
|
—
|
|
|
—
|
|
|
(118)
|
|
Issuance of common stock, net
|
|
—
|
|
|
30
|
|
|
—
|
|
|
6,821
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,851
|
|
Issuance of preferred stock
|
|
9,762
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9,762
|
|
Purchases of treasury stock
|
|
—
|
|
|
—
|
|
|
(180)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(180)
|
|
Fair value of noncontrolling interest acquired
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,875
|
|
|
4,875
|
|
Noncontrolling interest contributions, net
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8
|
|
|
8
|
|
Balance at September 30, 2019
|
|
$
|
9,762
|
|
|
$
|
209
|
|
|
$
|
(10,653)
|
|
|
$
|
14,867
|
|
|
$
|
22,227
|
|
|
$
|
(332)
|
|
|
$
|
4,925
|
|
|
$
|
41,005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 Loss
|
|
|
|
Total Equity
|
Balance at December 31, 2019
|
|
$
|
9,762
|
|
|
$
|
209
|
|
|
$
|
(10,653)
|
|
|
$
|
14,955
|
|
|
|
|
$
|
20,180
|
|
|
$
|
(221)
|
|
|
|
|
$
|
34,232
|
|
Net loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
(13,719)
|
|
|
—
|
|
|
|
|
(13,719)
|
|
Other comprehensive loss, net of tax
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
(62)
|
|
|
|
|
(62)
|
|
Dividends on common stock, $0.81 per share
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
(737)
|
|
|
—
|
|
|
|
|
(737)
|
|
Dividends on preferred stock, $6,444 per share
|
|
—
|
|
|
6
|
|
|
—
|
|
|
438
|
|
|
|
|
(644)
|
|
|
—
|
|
|
|
|
(200)
|
|
Issuance of warrants on common stock
|
|
—
|
|
|
—
|
|
|
—
|
|
|
767
|
|
|
|
|
(763)
|
|
|
—
|
|
|
|
|
4
|
|
Berkshire warrants
|
|
—
|
|
|
—
|
|
|
—
|
|
|
103
|
|
|
|
|
—
|
|
|
—
|
|
|
|
|
103
|
|
Issuance of common stock and other, net
|
|
—
|
|
|
1
|
|
|
—
|
|
|
242
|
|
|
|
|
—
|
|
|
—
|
|
|
|
|
243
|
|
Purchases of treasury stock
|
|
—
|
|
|
—
|
|
|
(4)
|
|
|
—
|
|
|
|
|
—
|
|
|
—
|
|
|
|
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2020
|
|
$
|
9,762
|
|
|
$
|
216
|
|
|
$
|
(10,657)
|
|
|
$
|
16,505
|
|
|
|
|
$
|
4,317
|
|
|
$
|
(283)
|
|
|
|
|
$
|
19,860
|
|
The accompanying notes are an integral part of these Consolidated Condensed Financial Statements.
|
|
|
|
|
|
Notes to Consolidated Condensed Financial Statements
|
Occidental Petroleum Corporation and Subsidiaries
|
NATURE OF OPERATIONS
In this report, "Occidental" means Occidental Petroleum Corporation, a Delaware corporation (OPC), or OPC and one or more entities in which it owns a controlling interest (subsidiaries). Occidental conducts its operations through various subsidiaries and affiliates. Occidental has made its disclosures in accordance with United States generally accepted accounting principles (GAAP) 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 Occidental’s Annual Report on Form 10-K for the year ended December 31, 2019 (the 2019 Form 10-K).
In the opinion of Occidental’s management, the accompanying unaudited consolidated condensed financial statements contain all adjustments (consisting of normal recurring adjustments) necessary to fairly present Occidental’s consolidated financial position as of September 30, 2020 and December 31, 2019, the consolidated condensed statements of operations, comprehensive income, cash flows and stockholders' equity for the three and nine months ended September 30, 2020 and 2019. Certain data in the financial statements and notes for prior periods have been reclassified to conform to the current presentation. The income and cash flows for the periods ended September 30, 2020 and 2019 are not necessarily indicative of the income or cash flows to be expected for the full year.
THE ACQUISITION
On August 8, 2019, pursuant to the Agreement and Plan of Merger dated May 9, 2019, Occidental acquired all of the outstanding shares of Anadarko Petroleum Corporation (the Acquisition). The Acquisition added to Occidental's oil and gas portfolio, primarily in the Permian Basin, DJ Basin, Gulf of Mexico and Algeria, and an interest in Western Midstream Partners, L.P. (WES). The Acquisition constituted a business combination. Under the acquisition method of accounting, the acquisition consideration was allocated to tangible and intangible assets acquired and liabilities assumed based on their fair values.
Occidental expensed $302 million in acquisition-related costs for the nine months ended September 30, 2020, primarily related to severance costs.
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 and the South Africa assets in January 2020.
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 3 - 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 Depreciation, Depletion and Amortization (DD&A) were recorded from the date of the Acquisition. The fair value of the oil and gas properties was measured based on the income approach, see Note 7 - 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 September 30, 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 7 - Fair Value Measurements. The results of operations of Ghana continue to be presented as discontinued operations, see Note 3 - Divestitures and Other Transactions.
Unless otherwise indicated, information presented in the Notes to the Consolidated Condensed Financial Statements relates only to Occidental's continuing operations. Information related to discontinued operations is included in Note 3 -
Divestitures and Other Transactions, and in some instances, where appropriate, is included as a separate disclosure within the individual Notes to the Consolidated Condensed Financial Statements.
SUPPLEMENTAL CASH FLOW INFORMATION
Occidental paid U.S. domestic state and foreign income taxes for continuing operations of $375 million and $827 million during the nine months ended September 30, 2020 and 2019, respectively. Occidental received tax refunds of $223 million and $5 million during the nine months ended September 30, 2020 and 2019, respectively, related to continuing operations. Interest paid for continuing operations totaled $1.3 billion and $611 million during the nine months ended September 30, 2020 and 2019, 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 September 30, 2020, includes 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 Condensed Statements of Cash Flows for the nine months ended September 30, 2020 and 2019, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
millions
|
|
2020
|
|
2019
|
Cash and cash equivalents
|
|
$
|
1,896
|
|
|
$
|
4,840
|
|
Restricted cash and restricted cash equivalents
|
|
51
|
|
|
467
|
|
Cash and restricted cash included in assets held for sale
|
|
113
|
|
|
3
|
|
Restricted cash and restricted cash equivalents included in long-term receivables and other assets, net
|
|
14
|
|
|
55
|
|
Cash, cash equivalents, restricted cash and restricted cash equivalents
|
|
$
|
2,074
|
|
|
$
|
5,365
|
|
Total restricted cash and restricted cash equivalents are primarily associated with a benefits trust for former Anadarko employees that was funded as part of the Acquisition and a judicially controlled account related to a Brazilian tax dispute. Assets held for sale includes restricted cash for the payments of future hard-minerals royalties conveyed, see Note 3 - Divestitures and Other Transactions.
EQUITY METHOD INVESTMENT-WES
On December 31, 2019, Occidental and WES executed several agreements to allow WES to operate as an independent midstream company. Occidental's loss of control of WES on December 31, 2019, resulted in Occidental recognizing, at fair value, an equity method investment of $5.1 billion based on the closing market price of WES. The amounts presented as non-controlling interest on the Consolidated Condensed Statements of Operations relate to the period prior to Occidental's loss of control. Prior to the loss of control, Occidental consolidated WES as a variable interest entity, for which the non-controlling interest primarily consisted of the 44.6% limited partner interest of WES owned by the public.
In the first quarter 2020, Occidental recorded a loss from an equity investment of $440 million as a result of WES’s write-off of its goodwill.
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’s publicly traded common units is considered a Level 1 input.
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 8 - Long-Term Debt. Subsequent to this exchange and WES’s retirement of those common units, Occidental has a 2% non-voting general partner interest, a 51.5% limited partner interest and a 2% non-voting limited partner interest in WES Operating, a subsidiary of WES. As of September 30, 2020, 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%.
As of September 30, 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 $370 million. This basis difference is primarily associated with
WES's 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 is no equity method goodwill associated with WES equity investment.
Subsequent to loss of control, transactions between Occidental and WES were no longer eliminated upon consolidation. Occidental and WES entered into the following related-party transactions for the three and nine months ended September 30, 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
millions
|
|
Three months ended September 30, 2020
|
|
Nine months ended September 30, 2020
|
|
|
|
|
|
Sales
|
|
$
|
46
|
|
|
$
|
165
|
|
Purchases
|
|
$
|
164
|
|
|
$
|
474
|
|
Transportation, gathering and other fees paid
|
|
$
|
258
|
|
|
$
|
804
|
|
|
|
|
NOTE 2 - 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 vast majority of Occidental's receivables are short dated with maturities of less than 60 days with creditworthy counterparties, including refiners, pipelines and resellers. Given Occidental’s continued effort to maintain a strong credit portfolio, there have been no negative indications regarding the collectability of these receivables as of the date of this filing. Therefore, adoption of this standard has no material impact for the quarter. Occidental will continue to assess the risk to its receivables in the future.
|
|
|
NOTE 3 - DIVESTITURES AND OTHER TRANSACTIONS
|
DIVESTITURES
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. As of September 30, 2020, approximately $1.4 billion of assets, primarily property associated with mineral and fee surface acres, and $338 million of liabilities, assumed through the Acquisition, were classified as held for sale. Occidental recorded a loss on sale of $431 million. The loss has been presented within (losses) gains on sale of assets, net in the Consolidated Condensed Statement of Operations. The net proceeds were utilized to pay down a portion of the 2-year variable rate Term Loan due 2021 (Term Loan). See Note 8 - Long-Term Debt for further information.
In October 2020, Occidental entered into an agreement to sell its onshore oil and gas Colombia assets, which have been classified as held for sale within our Consolidated Condensed Balance Sheet as of September 30, 2020. The disposal group carrying value primarily includes approximately $587 million in property, plant and equipment. The transaction is expected to close in the fourth quarter 2020. In the third quarter 2020, Occidental recorded a loss of approximately $356 million associated with remeasuring the assets to their fair value, which was lower than their carrying amount. The loss has been presented within (losses) gains on sale of assets, net in the Consolidated Condensed Statement of Operations. The net proceeds will be used to pay down near-term maturities.
ALGERIA OPERATIONS - RECLASSIFICATION
The following table presents the amounts previously reported in discontinued operations, net of income taxes, which was reclassified to continuing operations, in the six months ended June 30, 2020, as a result of Occidental's decision to operate in Algeria.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
millions
|
|
Six months ended June 30, 2020
|
|
Three and nine months ended September 30, 2019
|
|
|
|
|
|
Revenues and other income
|
|
|
|
|
Net sales
|
|
$
|
319
|
|
|
$
|
172
|
|
|
|
|
|
|
Costs and other deductions
|
|
|
|
|
Oil and gas lease operating expense
|
|
44
|
|
|
12
|
|
Transportation expense
|
|
14
|
|
|
4
|
|
Taxes other than on income
|
|
48
|
|
|
46
|
|
Depreciation, depletion and amortization
|
|
110
|
|
|
61
|
|
Impairment upon reclassification to held for use
|
|
931
|
|
|
—
|
|
Other
|
|
10
|
|
|
2
|
|
Total costs and other deductions
|
|
1,157
|
|
|
125
|
|
|
|
|
|
|
Income (losses) before income taxes
|
|
(838)
|
|
|
47
|
|
Income tax expense
|
|
(95)
|
|
|
(47)
|
|
Net income of Algeria operations, after taxes
|
|
$
|
(933)
|
|
|
$
|
—
|
|
The following table presents the amounts previously reported in the Consolidated Condensed 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
|
|
DISCONTINUED OPERATIONS
In January 2020, Occidental completed the sale of the South Africa assets to Total. The results of the South Africa and Ghana assets are presented as discontinued operations in the Consolidated Condensed Statements of Operations and Cash Flows. The amounts related to the Ghana assets are presented as held for sale on the Consolidated Condensed Balance Sheets as of September 30, 2020 and December 31, 2019, of which approximately $1.4 billion and $3.6 billion are related to property, plant and equipment, net, respectively. Approximately $750 million of the amounts presented in liabilities held for sale are primarily related to deferred income taxes, asset retirement obligations and a finance lease liability.
The amounts presented in discontinued operations, net of income taxes, for the nine months ended September 30, 2020, primarily relate to a second quarter after-tax impairment of $1.4 billion recorded to adjust the Ghana assets to their fair value as the sale to Total will no longer be consummated. The amounts presented in discontinued operations, net of taxes, for the three months ended September 30, 2020 primarily relate to oil and gas revenues which have been partially offset by oil and gas operating expenses and other-operating expenses.
Revenue from customers is recognized when obligations under the terms of a contract with our customers are satisfied; this generally occurs with the delivery of oil, natural gas liquids (NGL), gas, chemicals or services, such as transportation. As of September 30, 2020, trade receivables, net, of $2.1 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 and nine months ended September 30, 2020 and 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
millions
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
Revenue from customers
|
|
$
|
4,018
|
|
|
$
|
5,403
|
|
|
$
|
12,576
|
|
|
$
|
12,569
|
|
All other revenues (a)
|
|
90
|
|
|
456
|
|
|
1,073
|
|
|
1,714
|
|
Net sales
|
|
$
|
4,108
|
|
|
$
|
5,859
|
|
|
$
|
13,649
|
|
|
$
|
14,283
|
|
(a) Includes net marketing derivatives, oil collars and calls, and chemical exchange contracts.
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, NGLs 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 / Africa
|
|
Latin America
|
|
Other International
|
|
Eliminations
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and Gas
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil
|
|
$
|
1,784
|
|
|
$
|
397
|
|
|
$
|
138
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,319
|
|
NGL
|
|
252
|
|
|
53
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
305
|
|
Gas
|
|
155
|
|
|
77
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
235
|
|
Other
|
|
23
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
23
|
|
Segment total
|
|
$
|
2,214
|
|
|
$
|
527
|
|
|
$
|
141
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,882
|
|
Chemical
|
|
$
|
888
|
|
|
$
|
—
|
|
|
$
|
33
|
|
|
$
|
18
|
|
|
$
|
—
|
|
|
$
|
939
|
|
Midstream and Marketing
|
|
|
|
|
|
|
|
|
|
|
|
|
Gas processing
|
|
$
|
89
|
|
|
$
|
73
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
162
|
|
Marketing
|
|
110
|
|
|
—
|
|
|
—
|
|
|
62
|
|
|
—
|
|
|
172
|
|
Power and other
|
|
45
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
45
|
|
Segment total
|
|
$
|
244
|
|
|
$
|
73
|
|
|
$
|
—
|
|
|
$
|
62
|
|
|
$
|
—
|
|
|
$
|
379
|
|
Eliminations
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(182)
|
|
|
$
|
(182)
|
|
Consolidated
|
|
$
|
3,346
|
|
|
$
|
600
|
|
|
$
|
174
|
|
|
$
|
80
|
|
|
$
|
(182)
|
|
|
$
|
4,018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
millions
|
|
United States
|
|
Middle East/Africa
|
|
Latin America
|
|
Other International
|
|
Eliminations
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and Gas
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil
|
|
$
|
2,453
|
|
|
$
|
852
|
|
|
$
|
177
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,482
|
|
NGL
|
|
177
|
|
|
66
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
243
|
|
Gas
|
|
125
|
|
|
78
|
|
|
5
|
|
|
—
|
|
|
—
|
|
|
208
|
|
Other
|
|
(18)
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(15)
|
|
Segment total
|
|
$
|
2,737
|
|
|
$
|
999
|
|
|
$
|
182
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,918
|
|
Chemical
|
|
$
|
1,009
|
|
|
$
|
—
|
|
|
$
|
36
|
|
|
$
|
16
|
|
|
$
|
—
|
|
|
$
|
1,061
|
|
Midstream and Marketing
|
|
|
|
|
|
|
|
|
|
|
|
|
Gas processing
|
|
$
|
93
|
|
|
$
|
81
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
174
|
|
Marketing
|
|
157
|
|
|
—
|
|
|
—
|
|
|
37
|
|
|
—
|
|
|
194
|
|
Power and other
|
|
41
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
41
|
|
Segment total
|
|
$
|
291
|
|
|
$
|
81
|
|
|
$
|
—
|
|
|
$
|
37
|
|
|
$
|
—
|
|
|
$
|
409
|
|
WES Midstream (a)
|
|
$
|
383
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
383
|
|
Eliminations
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(368)
|
|
|
$
|
(368)
|
|
Consolidated
|
|
$
|
4,420
|
|
|
$
|
1,080
|
|
|
$
|
218
|
|
|
$
|
53
|
|
|
$
|
(368)
|
|
|
$
|
5,403
|
|
(a) Occidental and WES executed several agreements to allow WES to operate as an independent midstream company resulting in Occidental's loss of control on December 31, 2019.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
millions
|
|
United States
|
|
Middle East / Africa
|
|
Latin America
|
|
Other International
|
|
Eliminations
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and Gas
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil
|
|
$
|
5,705
|
|
|
$
|
1,426
|
|
|
$
|
353
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
7,484
|
|
NGL
|
|
592
|
|
|
158
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
750
|
|
Gas
|
|
476
|
|
|
239
|
|
|
12
|
|
|
—
|
|
|
—
|
|
|
727
|
|
Other
|
|
54
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
55
|
|
Segment total
|
|
$
|
6,827
|
|
|
$
|
1,824
|
|
|
$
|
365
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
9,016
|
|
Chemical
|
|
$
|
2,591
|
|
|
$
|
—
|
|
|
$
|
101
|
|
|
$
|
47
|
|
|
$
|
—
|
|
|
$
|
2,739
|
|
Midstream and Marketing
|
|
|
|
|
|
|
|
|
|
|
|
|
Gas processing
|
|
$
|
261
|
|
|
$
|
215
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
476
|
|
Marketing
|
|
655
|
|
|
—
|
|
|
—
|
|
|
163
|
|
|
—
|
|
|
818
|
|
Power and other
|
|
70
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
70
|
|
Segment total
|
|
$
|
986
|
|
|
$
|
215
|
|
|
$
|
—
|
|
|
$
|
163
|
|
|
$
|
—
|
|
|
$
|
1,364
|
|
Eliminations
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(543)
|
|
|
$
|
(543)
|
|
Consolidated
|
|
$
|
10,404
|
|
|
$
|
2,039
|
|
|
$
|
466
|
|
|
$
|
210
|
|
|
$
|
(543)
|
|
|
$
|
12,576
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
millions
|
|
United States
|
|
Middle East/Africa
|
|
Latin America
|
|
Other International
|
|
Eliminations
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and Gas
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil
|
|
$
|
5,105
|
|
|
$
|
2,435
|
|
|
$
|
524
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
8,064
|
|
NGL
|
|
339
|
|
|
199
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
538
|
|
Gas
|
|
180
|
|
|
233
|
|
|
14
|
|
|
—
|
|
|
—
|
|
|
427
|
|
Other
|
|
(40)
|
|
|
(2)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(42)
|
|
Segment total
|
|
$
|
5,584
|
|
|
$
|
2,865
|
|
|
$
|
538
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
8,987
|
|
Chemical
|
|
$
|
2,937
|
|
|
$
|
—
|
|
|
$
|
119
|
|
|
$
|
53
|
|
|
$
|
—
|
|
|
$
|
3,109
|
|
Midstream and Marketing
|
|
|
|
|
|
|
|
|
|
|
|
|
Gas processing
|
|
$
|
302
|
|
|
$
|
272
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
574
|
|
Marketing
|
|
162
|
|
|
—
|
|
|
—
|
|
|
37
|
|
|
—
|
|
|
199
|
|
Power and other
|
|
112
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
112
|
|
Segment total
|
|
$
|
576
|
|
|
$
|
272
|
|
|
$
|
—
|
|
|
$
|
37
|
|
|
$
|
—
|
|
|
$
|
885
|
|
WES Midstream (a)
|
|
$
|
383
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
383
|
|
Eliminations
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(795)
|
|
|
$
|
(795)
|
|
Consolidated
|
|
$
|
9,480
|
|
|
$
|
3,137
|
|
|
$
|
657
|
|
|
$
|
90
|
|
|
$
|
(795)
|
|
|
$
|
12,569
|
|
(a) Occidental and WES executed several agreements to allow WES to operate as an independent midstream company resulting in Occidental's loss of control on December 31, 2019.
TRANSACTION PRICE ALLOCATED TO REMAINING PERFORMANCE OBLIGATIONS
Revenue expected to be recognized from certain performance obligations that are unsatisfied as of September 30, 2020 is reflected in the table below. Occidental applies the optional exemptions in ASU 2014-09 Revenue from Contracts with Customers (Topic 606) and 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 performance obligations. As a result, the following table represents a small portion of Occidental's expected future consolidated revenues, as future revenue from the sale of most products and services is dependent on future production or variable customer volume and variable commodity prices for that volume:
|
|
|
|
|
|
|
|
|
millions
|
|
|
Remainder of 2020
|
|
$
|
38
|
|
2021
|
|
114
|
|
2022
|
|
9
|
|
2023
|
|
9
|
|
2024
|
|
9
|
|
Thereafter
|
|
85
|
|
Total
|
|
$
|
264
|
|
Commodity inventory and finished goods primarily represents crude 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 last-in, first-out (LIFO) method. Inventories consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
millions
|
|
September 30, 2020
|
|
December 31, 2019
|
|
|
|
|
|
Raw materials
|
|
$
|
63
|
|
|
$
|
75
|
|
Materials and supplies
|
|
885
|
|
|
974
|
|
Finished goods
|
|
753
|
|
|
572
|
|
|
|
1,701
|
|
|
1,621
|
|
Revaluation to LIFO
|
|
(41)
|
|
|
(40)
|
|
Total
|
|
$
|
1,660
|
|
|
$
|
1,581
|
|
During the first half of 2020, Occidental recognized impairments of $54 million and $76 million due to obsolete material and supplies inventory and lower-than-cost or net-realizable value adjustments primarily related to commodity inventories, respectively. Occidental did not recognize any inventory impairments for the three months ended September 30, 2020.
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.
DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS
As of September 30, 2020, Occidental’s derivatives not designated as hedges consist of three-way oil collars and 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 CALL OPTIONS
In 2019, Occidental entered into three-way costless collar derivative instruments for 2020, along with additional call options in 2021 to manage its near-term exposure to cash flow variability from oil price risks. A three-way collar is a combination of three options: a sold call, a purchased put and a sold 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 unless the market price for the commodity falls below the sold put strike price, at which point the floor price equals the reference price plus the difference between the purchased put strike price and the sold put strike price for a defined period of time. Occidental entered into the 2021 call options to substantially improve the terms for the ceiling price that Occidental will receive for the contracted commodity volumes in 2020. Occidental received cash of $643 million associated with the oil collars in the nine months ended September 30, 2020.
In September 2020, Occidental entered into two-way collar derivative instruments for 2021 to manage its near-term exposure to cash-flow variability from natural gas commodity price risks. A two-way collar is a combination of two options: a 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 in net sales.
Occidental had the following collars and calls outstanding at September 30, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
Collars and Calls, not designated as hedges
|
|
2020 Settlement - oil
|
|
Three-way collars (Oil MMBBL)
|
32.2
|
|
|
Volume weighted average price per barrel (Brent oil pricing)
|
|
|
|
Ceiling sold price (call)
|
$
|
74.16
|
|
|
|
Floor purchased price (put)
|
$
|
55.00
|
|
|
|
Floor sold price (put)
|
$
|
45.00
|
|
|
|
|
|
2021 Settlement - oil
|
|
Call options sold (Oil 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)
|
182.5
|
|
|
Volume weighted average price per MMBTU (NYMEX)
|
|
|
|
Ceiling sold price (call)
|
$
|
3.61
|
|
|
|
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 InterBank 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 September 30, 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. In the first quarter of 2020, Occidental extended all 2020 mandatory termination dates to 2021 or thereafter.
In addition to the interest rate swaps, Occidental has approximately $1.1 billion of debt referenced to LIBOR that matures after 2021. It is expected that a number of private-sector banks currently reporting information used to set LIBOR will stop doing so after 2021. Occidental is currently evaluating the potential effect to its debt and derivative obligations due to the transition from LIBOR to another benchmark rate. The effect to our LIBOR indexed contracts will depend on the alternative reference rate selected by our counterparties and the contracts' relative values at the time of the transition.
Derivative settlements and collateralization are classified as cash flow 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 $47 million and $94 million for the
three and nine months ended September 30, 2020, respectively. Collateral with respect to interest rate swap agreements was returned (paid) in the amount of $37 million and $(283) million for the three and nine months ended September 30, 2020, respectively.
MARKETING DERIVATIVES
Occidental's marketing derivative instruments not designated as hedges are physical and financial-forward contracts which typically settle within three months. A substantial majority of Occidental's physically settled derivative contracts are index-based and carry no mark-to-market valuation in earnings. These instruments settled at a weighted average contract price of $41.73 per barrel and $2.36 per thousand cubic feet (Mcf) for crude oil and natural gas, respectively, at September 30, 2020. The weighted-average contract price was $60.60 per barrel and $2.17 per Mcf for crude 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.
The following table summarizes net long/(short) volumes associated with the outstanding marketing commodity derivatives not designated as hedging instruments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2020
|
|
December 31, 2019
|
Crude Oil Commodity Contracts
|
|
|
|
|
Volume (MMBBL)
|
|
(5)
|
|
|
55
|
|
Natural Gas Commodity Contracts
|
|
|
|
|
Volume (Bcf)
|
|
(111)
|
|
|
(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 - Earnings Per Share and 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 are recognized in earnings.
CASH FLOW HEDGES
Occidental’s marketing operations store natural gas purchased from third parties at Occidental’s leased storage facilities. Derivative instruments are used to fix margins on the future sales of the stored volumes. As of September 30, 2020 and December 31, 2019, cash flow hedges were immaterial.
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 master 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
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2020
|
|
|
|
|
|
|
|
|
|
Collars and Call Options
|
|
|
|
|
|
|
|
|
|
Other current assets
|
$
|
—
|
|
|
$
|
269
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
269
|
|
Deferred credits and other liabilities - other
|
—
|
|
|
(18)
|
|
|
—
|
|
|
—
|
|
|
(18)
|
|
Marketing Derivatives
|
|
|
|
|
|
|
|
|
|
Other current assets
|
1,162
|
|
|
37
|
|
|
—
|
|
|
(1,194)
|
|
|
5
|
|
Long-term receivables and other assets, net
|
77
|
|
|
2
|
|
|
—
|
|
|
(77)
|
|
|
2
|
|
Accrued liabilities
|
(1,180)
|
|
|
(49)
|
|
|
—
|
|
|
1,194
|
|
|
(35)
|
|
Deferred credits and other liabilities - other
|
(77)
|
|
|
—
|
|
|
—
|
|
|
77
|
|
|
—
|
|
Interest Rate Swaps
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued liabilities
|
—
|
|
|
(1,011)
|
|
|
—
|
|
|
—
|
|
|
(1,011)
|
|
Deferred credits and other liabilities - other
|
—
|
|
|
(894)
|
|
|
—
|
|
|
—
|
|
|
(894)
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
|
|
|
|
|
|
|
|
Collars and Call Options
|
|
|
|
|
|
|
|
|
|
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 (b)
|
|
|
|
|
|
|
|
|
|
Deferred credits and other liabilities - other
|
—
|
|
|
(107)
|
|
|
—
|
|
|
—
|
|
|
(107)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)These amounts do not include collateral.
(b)Berkshire Warrants were reclassified to equity on May 29, 2020.
As of September 30, 2020 and December 31, 2019, $388 million and $104 million of collateral had been netted against derivative liabilities related to interest rate swaps, respectively. As of September 30, 2020, Occidental had deposited $15 million of collateral with brokers related to marketing derivatives, which is netted with derivative liabilities. Initial margin of $65 million was deposited with brokers as of December 31, 2019, related to marketing derivatives.
GAINS AND LOSSES ON DERIVATIVES
The following table presents the effect of Occidental's derivative instruments on the Consolidated Condensed Statements of Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
millions
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
Income Statement Classification
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
Collars and Calls
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
110
|
|
|
$
|
75
|
|
|
$
|
1,067
|
|
|
$
|
75
|
|
Marketing Derivatives
|
|
|
|
|
|
|
|
|
Net sales (a)
|
|
(18)
|
|
|
91
|
|
|
—
|
|
|
(119)
|
|
Interest Rate Swaps
|
|
|
|
|
|
|
|
|
Gains (losses) on interest rate swaps and warrants, net
|
|
88
|
|
|
(53)
|
|
|
(577)
|
|
|
(53)
|
|
Berkshire Warrants
|
|
|
|
|
|
|
|
|
Gains on interest rate swaps and warrants, net (b)
|
|
$
|
—
|
|
|
$
|
20
|
|
|
$
|
5
|
|
|
$
|
20
|
|
(a) Includes derivative and non-derivative marketing activity.
(b) Includes losses and gains on Berkshire Warrants prior to the May 29, 2020 reclassification to equity.
CREDIT RISK
Occidental's counterparty credit risk related to the physical delivery of energy commodities results from its customers' 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 future contracts through regulated exchanges with select clearinghouses and brokers, which are subject to minimal credit risk as a significant portion of these transactions settle on a daily margin basis.
Certain of Occidental's over-the-counter 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-related contingent features for which a net liability position existed at September 30, 2020, was $35 million (net of $388 million of collateral), of which $12 million related to marketing activity, and the balance related to interest-rate swaps. The aggregate fair value of derivative instruments with credit-risk-related contingent features for which a net liability position existed at December 31, 2019, was $787 million (net of $169 million of collateral).
|
|
|
NOTE 7 - FAIR VALUE MEASUREMENTS
|
Occidental has categorized its assets and liabilities that are measured at fair value in a three-level fair value hierarchy, based on the inputs to the valuation techniques: Level 1 — using quoted prices in active markets for the assets or liabilities; Level 2 — using observable inputs other than quoted prices for the assets or liabilities; and Level 3 — using unobservable inputs. Transfers between levels, if any, are recognized at the end of each reporting period.
FAIR VALUES - RECURRING
In January 2012, Occidental entered into a long-term contract to purchase carbon dioxide (CO2). This contract contains a price adjustment clause that is linked to changes in NYMEX crude oil prices. Occidental determined that the portion of this contract linked to NYMEX oil prices is not clearly and closely related to the host contract, and Occidental therefore bifurcated this embedded pricing feature from its host contract and accounts for it at fair value in the Consolidated Condensed Financial Statements.
The following tables provide fair value measurement information for embedded derivatives that are measured on a recurring basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
millions
|
Fair Value Measurements Using
|
|
|
|
|
Embedded derivatives
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Netting and
Collateral
|
|
Total Fair
Value
|
As of September 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued liabilities
|
$
|
—
|
|
|
$
|
(79)
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(79)
|
|
Deferred credits and other liabilities - other
|
—
|
|
|
(19)
|
|
|
—
|
|
|
—
|
|
|
(19)
|
|
|
|
|
|
|
|
|
As of December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued liabilities
|
$
|
—
|
|
|
$
|
(40)
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(40)
|
|
Deferred credits and other liabilities - other
|
—
|
|
|
(49)
|
|
|
—
|
|
|
—
|
|
|
(49)
|
|
FAIR VALUES - NONRECURRING - IMPAIRMENTS
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 $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 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, and such impairments could be material to our financial statements.
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’s 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's publicly traded units is considered a Level 1 input.
The following table summarizes Occidental's outstanding debt, including finance lease liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
millions
|
|
September 30, 2020
|
|
December 31, 2019
|
Total borrowings at face value
|
|
$
|
37,511
|
|
|
$
|
37,401
|
|
Adjustments to book value:
|
|
|
|
|
Unamortized premium, net
|
|
765
|
|
|
914
|
|
Debt issuance costs
|
|
(144)
|
|
|
(125)
|
|
Long-term finance leases
|
|
292
|
|
|
347
|
|
Current finance leases
|
|
33
|
|
|
51
|
|
Total debt and finance leases
|
|
38,457
|
|
|
38,588
|
|
Less current maturities of long-term debt and financing leases
|
|
(2,558)
|
|
|
(51)
|
|
Long-term debt, net
|
|
$
|
35,899
|
|
|
$
|
38,537
|
|
DEBT ACTIVITY
In March 2020, Occidental amended the sole financial covenant in its revolving credit facility (RCF) and Term Loan by revising the definition of "Total Capitalization" within each agreement to exclude any non-cash write-downs, impairments and related charges occurring after September 30, 2019.
In July and August 2020, Occidental issued several series of notes with maturities from five to ten years and used the proceeds to fund cash tender offers for certain outstanding series of notes to pay down other indebtedness, with maturities from one to three years, and the Term Loan.
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 Condensed Statement of Operations.
The following table summarizes Occidental's debt issuances, repurchases, repayments and exchanges for the nine months ended September 30, 2020:
|
|
|
|
|
|
|
|
|
millions
|
|
Borrowings at face value
|
Total borrowings at face value as of December 31, 2019
|
|
$
|
37,401
|
|
Issuance of July 2020 Notes: (a)
|
|
|
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: (b)
|
|
|
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
|
|
(122)
|
|
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)
|
|
Total borrowings at face value as of September 30, 2020
|
|
$
|
37,511
|
|
(a) Interest on the July notes will be paid semi-annually in arrears on July 15 and January 15 of each year, commencing on January 15, 2021.
(b) Interest on the August notes will be paid semi-annually on March 1 and September 1 of each year, commencing on March 1, 2021.
SUBSEQUENT DEBT ACTIVITY
In October 2020, Occidental fully redeemed the remaining variable rate notes due August 2021 for $377 million, and Occidental paid $1.0 billion of the Term Loan with proceeds from the sale of mineral and surface acres located in Wyoming, Colorado and Utah. After this payment, $446 million of the Term Loan remained outstanding.
FAIR VALUE OF DEBT
The estimated fair value of Occidental’s debt as of September 30, 2020, was $31.5 billion. The majority of Occidental's debt is classified as Level 1, with $1.6 billion classified as Level 2. At December 31, 2019, the estimated fair value of Occidental's debt was $38.8 billion.
|
|
|
NOTE 9 - LEASE COMMITMENTS
|
Occidental’s operating lease agreements include leases for oil and gas exploration and development equipment, including offshore and onshore drilling rigs of $56 million, compressors of $155 million, storage facilities of $297 million, office space of $417 million and other field equipment of $58 million, which are recorded gross on the Consolidated Condensed 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, aircrafts and other real estate of $262 million, which typically are not associated with joint-interest recoveries. Office space and other real estate 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 $325 million.
The following table presents lease balances and their location on the Consolidated Condensed Balance Sheet at September 30, 2020, and December 31, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
millions
|
|
Balance sheet location
|
|
September 30, 2020
|
|
December 31, 2019
|
Assets:
|
|
|
|
|
|
|
Operating
|
|
Operating lease assets
|
|
$
|
1,196
|
|
|
$
|
1,411
|
|
Finance
|
|
Property, plant and equipment
|
|
329
|
|
|
397
|
|
Total lease assets
|
|
|
|
$
|
1,525
|
|
|
$
|
1,808
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
Operating
|
|
Current operating lease liabilities
|
|
$
|
459
|
|
|
$
|
579
|
|
Finance
|
|
Current maturities of long-term debt
|
|
33
|
|
|
51
|
|
Non-current
|
|
|
|
|
|
|
Operating
|
|
Deferred credits and other liabilities - Operating lease liabilities
|
|
786
|
|
|
872
|
|
Finance
|
|
Long-term debt, net
|
|
292
|
|
|
347
|
|
Total lease liabilities
|
|
|
|
$
|
1,570
|
|
|
$
|
1,849
|
|
At September 30, 2020, Occidental's leases expire based on the following schedule:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
|
|
Finance
|
|
|
millions
|
|
Leases (a)
|
|
Leases (b)
|
|
Total
|
Remainder of 2020
|
|
$
|
117
|
|
|
$
|
7
|
|
|
$
|
124
|
|
2021
|
|
454
|
|
|
35
|
|
|
489
|
|
2022
|
|
182
|
|
|
34
|
|
|
216
|
|
2023
|
|
110
|
|
|
32
|
|
|
142
|
|
2024
|
|
89
|
|
|
30
|
|
|
119
|
|
Thereafter
|
|
480
|
|
|
261
|
|
|
741
|
|
Total lease payments
|
|
1,432
|
|
|
399
|
|
|
1,831
|
|
Less: Interest
|
|
(187)
|
|
|
(74)
|
|
|
(261)
|
|
Total lease liabilities
|
|
$
|
1,245
|
|
|
$
|
325
|
|
|
$
|
1,570
|
|
(a) The weighted-average remaining lease term is 6.0 years and the weighted-average discount rate is 4.53%.
(b) The weighted-average remaining lease term is 11.8 years and the weighted-average discount rate is 3.37%.
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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
millions
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
Lease cost classification (a)
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Operating lease costs (b)
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
$
|
24
|
|
|
$
|
139
|
|
|
$
|
153
|
|
|
$
|
321
|
|
Cost of sales
|
|
131
|
|
|
135
|
|
|
417
|
|
|
273
|
|
Selling, general and administrative expenses
|
|
37
|
|
|
26
|
|
|
80
|
|
|
61
|
|
Finance lease cost:
|
|
|
|
|
|
|
|
|
Amortization of ROU assets
|
|
5
|
|
|
5
|
|
|
14
|
|
|
11
|
|
Interest on lease liabilities
|
|
3
|
|
|
1
|
|
|
9
|
|
|
1
|
|
Total lease cost
|
|
$
|
200
|
|
|
$
|
306
|
|
|
$
|
673
|
|
|
$
|
667
|
|
(a) Amounts reflected are gross before joint-interest recoveries.
(b) Includes short-term lease cost of $42 million and $146 million for the three and nine months ended September 30, 2020, respectively, and $139 million and $295 million for the three and nine months ended September 30, 2019, respectively. Includes variable lease cost of $11 million and $73 million for the three and nine months ended September 30, 2020, respectively, and $55 million and $115 million for the three and nine months ended September 30, 2019, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30,
|
millions
|
|
2020
|
|
2019
|
Operating cash flows
|
|
$
|
401
|
|
|
$
|
164
|
|
Investing cash flows
|
|
$
|
59
|
|
|
$
|
83
|
|
Financing cash flows
|
|
$
|
15
|
|
|
$
|
11
|
|
|
|
|
NOTE 10 - 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 the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) and similar federal, state, local and foreign environmental laws. These environmental proceedings seek funding or performance of remediation and, in some cases, compensation for alleged property damage, punitive damages, civil penalties and injunctive relief. Usually Occidental or such subsidiaries are among many companies in these environmental proceedings and have to date been successful in sharing response costs with other financially sound companies. Further, some lawsuits, claims and legal proceedings involve acquired or disposed assets with respect to which a third party or Occidental retains liability or indemnifies the other party for conditions that existed prior to the transaction.
In accordance with applicable accounting guidance, Occidental accrues reserves for outstanding lawsuits, claims and proceedings when it is probable that a liability has been incurred and the liability can be reasonably estimated. Reserve balances for matters, other than for environmental remediation, that satisfy these criteria as of September 30, 2020, and December 31, 2019, were not material to Occidental’s Consolidated Condensed 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 percent 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 percent 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 percent 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. The Company intends to defend vigorously any attempt by Sanchez to reject the agreements. The Company expects a ruling on Sanchez's purported contract rejection in the first quarter 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. The Company 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 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 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. For the legacy Occidental group, 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 years are currently under review. Taxable years through 2009 have been audited for state income tax purposes. All 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.
For Anadarko, its taxable years through 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. While Occidental believes it is entitled to this refund, in accordance with ASC 740’s guidance on the accounting for uncertain tax positions, as of September 30, 2020, 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. A liability was recorded in deferred credits and other liabilities-other at December 31, 2019, for the amount to be repaid plus interest in the event Occidental does not prevail.
On March 27, 2020, the President signed into law the Coronavirus Aid, Relief and Economic Security Act (hereafter, CARES Act), an economic stimulus package in response to the COVID-19 pandemic. The CARES Act contains several corporate income tax provisions, including provisions allowing for immediate refund of remaining unutilized AMT credits as well as allowing a 5-year carryback of net operating losses generated in tax years 2018, 2019 and 2020. For the nine months ended September 30, 2020, Occidental received approximately $195 million of cash refunds as a result of the aforementioned AMT credit and NOL carryback provisions. Occidental does not currently expect the various provisions of the CARES Act to have a material effect on current income tax expense or the realizability of deferred income tax assets. Occidental will continue to monitor additional guidance issued by the U.S. Treasury Department and the Internal Revenue Service.
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 September 30, 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.
|
|
|
NOTE 11 - 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 September 30, 2020, Occidental participated in or monitored remedial activities or proceedings at 174 sites. The following table presents Occidental’s current and non-current environmental remediation liabilities as of September 30, 2020. The current portion, $160 million, is included in accrued liabilities and the non-current portion, $975 million, in deferred credits and other liabilities-environmental remediation liabilities.
Occidental’s environmental remediation sites are grouped into four categories: sites listed or proposed for listing by the U.S. Environmental Protection Agency (EPA) on the CERCLA National Priorities List (NPL) and three categories of non-NPL sites—third-party sites, Occidental-operated sites and closed or non-operated Occidental sites.
|
|
|
|
|
|
|
|
|
|
|
|
millions, except number of sites
|
Number of Sites
|
|
Remediation Balance
|
NPL sites
|
35
|
|
|
$
|
451
|
|
Third-party sites
|
72
|
|
|
284
|
|
Occidental-operated sites
|
17
|
|
|
142
|
|
Closed or non-operated Occidental sites
|
50
|
|
|
258
|
|
Total
|
174
|
|
|
$
|
1,135
|
|
As of September 30, 2020, Occidental’s environmental remediation liabilities exceeded $10 million each at 19 of the 174 sites described above, and 98 of the sites had liabilities from zero to $1 million each. Based on current estimates, Occidental expects to expend funds corresponding to approximately 45 percent of the period-end remediation balance at the sites described above over the next three to four years and the remaining balance at these sites over the subsequent 10 or more years. Occidental believes its range of reasonably possible additional losses beyond those liabilities recorded for environmental remediation at these sites could be up to $1.1 billion. The status of Occidental's involvement with the sites and related significant assumptions, including those sites indemnified by Maxus Energy Corporation (Maxus), has not changed materially since December 31, 2019.
MAXUS ENVIRONMENTAL SITES
When Occidental acquired Diamond Shamrock Chemicals Company (DSCC) in 1986, Maxus, a subsidiary of YPF S.A. (YPF), agreed to indemnify Occidental for a number of environmental sites, including the Diamond Alkali Superfund Site (Site) along a portion of the Passaic River. On September 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 YPF, Repsol, and 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. Among other responsibilities, the trust will pursue claims against YPF, Repsol and others and 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 12 - RETIREMENT AND POSTRETIREMENT BENEFIT PLANS
|
Occidental has various defined benefit pension plans for certain domestic union, non-union hourly and 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. Effective as of June 30, 2020, the defined benefit pension plans and certain of the supplemental plans covering active Anadarko employees were frozen.
The following table contains a summary of Occidental's retirement and postretirement benefits plan costs for the three and nine months ended September 30, 2020 and 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
millions
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Net gains related to settlement, curtailment and special termination benefits (a)
|
|
$
|
5
|
|
|
$
|
24
|
|
|
$
|
121
|
|
|
$
|
24
|
|
Net periodic benefit costs related to pension benefits excluding settlement, curtailment and special termination benefits
|
|
—
|
|
(b)
|
15
|
|
|
22
|
|
|
19
|
|
Net periodic benefit costs related to postretirement benefits
|
|
18
|
|
|
19
|
|
|
56
|
|
|
48
|
|
Contributions to qualified and supplemental plans
|
|
$
|
30
|
|
|
$
|
7
|
|
|
$
|
132
|
|
|
$
|
8
|
|
(a) Net gains related to settlement, curtailment and special termination benefits for the three and nine months ended September 30, 2020 and 2019 primarily relate to a separation program initiated in conjunction with the Acquisition and the freezing of benefit accruals for Anadarko employees.
(b) Net periodic benefit costs related to pension benefits excluding settlement, curtailment and special termination benefits were immaterial for the three months ended September 30, 2020.
The increase in contributions is primarily due to distributions from the Anadarko supplemental plans related to the severance program described above. Occidental is reimbursed for a majority of these contributions from a trust for former Anadarko employees. Occidental is deferring all required contributions to the qualified defined benefit plans as permitted by the CARES Act.
|
|
|
NOTE 13 - EARNINGS PER SHARE AND STOCKHOLDERS' EQUITY
|
The following table presents the calculation of basic and diluted net income (loss) attributable to common stockholders per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
September 30,
|
|
Nine months ended
September 30,
|
millions except per-share amounts
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
Net income (loss) from continuing operations
|
|
$
|
(3,655)
|
|
|
$
|
(737)
|
|
|
$
|
(12,384)
|
|
|
$
|
529
|
|
Income (loss) from discontinued operations
|
|
80
|
|
|
(15)
|
|
|
(1,335)
|
|
|
(15)
|
|
Net income (loss)
|
|
(3,575)
|
|
|
(752)
|
|
|
(13,719)
|
|
|
514
|
|
Less: Net income attributable to noncontrolling interest
|
|
—
|
|
|
(42)
|
|
|
—
|
|
|
(42)
|
|
Less: Preferred stock dividends
|
|
(203)
|
|
|
(118)
|
|
|
(644)
|
|
|
(118)
|
|
Net income (loss) attributable to common stock
|
|
$
|
(3,778)
|
|
|
$
|
(912)
|
|
|
$
|
(14,363)
|
|
|
$
|
354
|
|
Less: Net income allocated to participating securities
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1)
|
|
Net income (loss) attributable to common stock, net of participating securities
|
|
(3,778)
|
|
|
(912)
|
|
|
(14,363)
|
|
|
353
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of basic shares
|
|
929.3
|
|
845.7
|
|
913.9
|
|
781.1
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to common stockholders per share—basic
|
|
$
|
(4.07)
|
|
|
$
|
(1.08)
|
|
|
$
|
(15.72)
|
|
|
$
|
0.45
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to common stock, net of participating securities
|
|
(3,778)
|
|
|
(912)
|
|
|
(14,363)
|
|
|
353
|
|
|
|
|
|
|
|
|
|
|
Weighted-average number of basic shares
|
|
929.3
|
|
|
845.7
|
|
|
913.9
|
|
|
781.1
|
|
Dilutive securities
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1.1
|
|
Total diluted weighted-average common shares
|
|
929.3
|
|
|
845.7
|
|
|
913.9
|
|
|
782.2
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to common stockholders per share—diluted
|
|
$
|
(4.07)
|
|
|
$
|
(1.08)
|
|
|
$
|
(15.72)
|
|
|
$
|
0.45
|
|
For the three and nine months ended September 30, 2020, the Berkshire Warrants, Common Stock Warrants, and options covering approximately 200 million shares of Occidental common stock were excluded from the diluted shares as their effect would have been anti-dilutive.
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. Dividends on the Preferred Stock accrue on the face value at a rate per annum of 8 percent, but will be paid only when, as and if declared by Occidental’s Board of Directors. The Board of Directors will assess market conditions and Occidental's financial position on a quarterly basis to determine whether the dividend on the Preferred Stock will be paid in shares of common stock, in cash or a combination of shares of common stock and cash. 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 percent. Following the payment in full of any accrued but unpaid dividends, the dividend rate will remain at 9 percent per annum. If preferred dividends are not paid in full, Occidental is prohibited from paying dividends on common stock. On October 15, 2020, Occidental paid $200 million cash in Preferred Stock dividends.
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.
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".
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.
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, 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. 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 September 30, 2020
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
2,989
|
|
|
$
|
937
|
|
|
$
|
364
|
|
|
$
|
(182)
|
|
|
$
|
4,108
|
|
Income (loss) from continuing operations before income taxes
|
|
$
|
(1,072)
|
|
|
$
|
178
|
|
|
$
|
(2,791)
|
|
|
$
|
(373)
|
|
|
$
|
(4,058)
|
|
Income tax benefit (d)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
403
|
|
|
403
|
|
Income (loss) from continuing operations
|
|
$
|
(1,072)
|
|
|
$
|
178
|
|
|
$
|
(2,791)
|
|
|
$
|
30
|
|
|
$
|
(3,655)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, 2019
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
3,993
|
|
|
$
|
1,071
|
|
|
$
|
1,163
|
|
|
$
|
(368)
|
|
|
$
|
5,859
|
|
Income (loss) from continuing operations before income taxes
|
|
$
|
268
|
|
|
$
|
207
|
|
|
$
|
400
|
|
|
$
|
(1,449)
|
|
|
$
|
(574)
|
|
Income tax expense
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(163)
|
|
|
(163)
|
|
Income (loss) from continuing operations
|
|
$
|
268
|
|
|
$
|
207
|
|
|
$
|
400
|
|
|
$
|
(1,612)
|
|
|
$
|
(737)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
millions
|
|
Oil and
Gas (a)
|
|
Chemical
|
|
Midstream and Marketing (b)
|
|
Corporate and Eliminations (c)
|
|
Total
|
Nine months ended September 30, 2020
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
10,089
|
|
|
$
|
2,745
|
|
|
$
|
1,358
|
|
|
$
|
(543)
|
|
|
$
|
13,649
|
|
Income (loss) from continuing operations before income taxes
|
|
$
|
(8,570)
|
|
|
$
|
472
|
|
|
$
|
(4,085)
|
|
|
$
|
(2,097)
|
|
|
$
|
(14,280)
|
|
Income tax benefit (d)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,896
|
|
|
1,896
|
|
Income (loss) from continuing operations
|
|
$
|
(8,570)
|
|
|
$
|
472
|
|
|
$
|
(4,085)
|
|
|
$
|
(201)
|
|
|
$
|
(12,384)
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30, 2019
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
9,062
|
|
|
$
|
3,128
|
|
|
$
|
2,888
|
|
|
$
|
(795)
|
|
|
$
|
14,283
|
|
Income (loss) from continuing operations before income taxes
|
|
$
|
1,478
|
|
|
$
|
680
|
|
|
$
|
1,010
|
|
|
$
|
(1,945)
|
|
|
$
|
1,223
|
|
Income tax expense
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(694)
|
|
|
(694)
|
|
Income (loss) from continuing operations
|
|
$
|
1,478
|
|
|
$
|
680
|
|
|
$
|
1,010
|
|
|
$
|
(2,639)
|
|
|
$
|
529
|
|
(a) Includes $795 million in net asset sale losses for the three and nine months ended September 30, 2020. Additionally, for the nine months ended September 30, 2020, includes $7.0 billion related to asset impairments and other charges partially offset by a $1.1 billion gain on the oil collars and calls.
(b) Includes $2.7 billion of other-than-temporary impairment of WES equity investment for the three and nine months ended September 30, 2020. Additionally, for the nine months ended September 30, 2020, includes $1.4 billion of impairments related to the write-off of goodwill and a loss from an equity investment related to WES's write-off of its goodwill.
(c) Includes $302 million in expenses related to Anadarko acquisition-related costs and a $577 million loss on interest rate swaps for the nine months ended September 30, 2020.
(d) Includes a valuation allowance on tax assets of $37 million for the three and nine months ended September 30, 2020.