Edgar Filing: OCCIDENTAL PETROLEUM CORP /DE/

form10k-2009.htm

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


Form 10-K

R Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934			£ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 2009			For the transition period from to

Commission File Number 1-9210

Occidental Petroleum Corporation
(Exact name of registrant as specified in its charter)

State or other jurisdiction of incorporation or organization			Delaware
I.R.S. Employer Identification No.			95-4035997
Address of principal executive offices			10889 Wilshire Blvd., Los Angeles, CA
Zip Code			90024
Registrant's telephone number, including area code			(310) 208-8800

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class			Name of Each Exchange on Which Registered
9 1/4% Senior Debentures due 2019			New York Stock Exchange
Common Stock			New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. R YES £ NO Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act: (Note: Checking the box will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Exchange Act from their obligations under those Sections). £ YES R NO Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. R YES £ NO Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or such shorter period as the registrant was required to submit and post files). R YES £ NO			Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. R Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. (See definition of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act). Large Accelerated Filer R Accelerated Filer £ Non-Accelerated Filer £ Smaller Reporting Company £ Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2). £ YES R NO The aggregate market value of the voting common stock held by nonaffiliates of the registrant was approximately $52.73 billion, computed by reference to the closing price on the New York Stock Exchange composite tape of $65.81 per share of Common Stock on June 30, 2009. Shares of Common Stock held by each executive officer and director have been excluded from this computation in that such persons may be deemed to be affiliates. This determination of potential affiliate status is not a conclusive determination for other purposes.

At January 31, 2010, there were 811,955,959 shares of Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive Proxy Statement, filed in connection with its May 7, 2010, Annual Meeting of Stockholders, are incorporated by reference into Part III.

TABLE OF CONTENTS
		Page
Part I
Items 1 and 2	Business and Properties	3
	General	3
	Oil and Gas Operations	3
	Chemical Operations	4
	Midstream, Marketing and Other Operations	5
	Capital Expenditures	5
	Employees	5
	Environmental Regulation	5
	Available Information	5
Item 1A	Risk Factors	6
Item 1B	Unresolved Staff Comments	7
Item 3	Legal Proceedings	7
Item 4	Submission of Matters to a Vote of Security Holders	7
	Executive Officers	7
Part II
Item 5	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	8
Item 6	Selected Financial Data	10
Item 7 and 7A	Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A)	10
	Strategy	10
	Oil and Gas Segment	13
	Chemical Segment	18
	Midstream, Marketing and Other Segment	18
	Segment Results of Operations	19
	Significant Items Affecting Earnings	21
	Taxes	21
	Consolidated Results of Operations	22
	Consolidated Analysis of Financial Position	23
	Liquidity and Capital Resources	23
	Off-Balance-Sheet Arrangements	25
	Contractual Obligations	25
	Lawsuits, Claims, Commitments, Contingencies and Related Matters	25
	Environmental Liabilities and Expenditures	26
	Foreign Investments	27
	Critical Accounting Policies and Estimates	28
	Significant Accounting and Disclosure Changes	31
	Derivative Activities and Market Risk	31
	Safe Harbor Discussion Regarding Outlook and Other Forward-Looking Data	33
Item 8	Financial Statements and Supplementary Data	34
	Management's Annual Assessment of and Report on Internal Control Over Financial Reporting	34
	Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements	35
	Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting	36
	Consolidated Statements of Income	37
	Consolidated Balance Sheets	38
	Consolidated Statements of Stockholders’ Equity	40
	Consolidated Statements of Comprehensive Income	40
	Consolidated Statements of Cash Flows	41
	Notes to Consolidated Financial Statements	42
	Quarterly Financial Data (Unaudited)	69
	Supplemental Oil and Gas Information (Unaudited)	71
	Financial Statement Schedule:
	Schedule II – Valuation and Qualifying Accounts	84
Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	85
Item 9A	Controls and Procedures	85
	Disclosure Controls and Procedures	85
Part III
Item 10	Directors, Executive Officers and Corporate Governance	85
Item 11	Executive Compensation	85
Item 12	Security Ownership of Certain Beneficial Owners and Management	85
Item 13	Certain Relationships and Related Transactions and Director Independence	85
Item 14	Principal Accountant Fees and Services	85

Part IV
Item 15	Exhibits and Financial Statement Schedules	86

Part I

Items 1 And 2 Business and Properties

In this report, "Occidental" refers to Occidental Petroleum Corporation, a Delaware corporation (OPC), and/or one or more entities in which it owns a majority voting interest (subsidiaries). Occidental conducts its operations through various oil and gas; chemical; midstream, marketing and other subsidiaries and affiliates. Occidental’s executive offices are located at 10889 Wilshire Boulevard, Los Angeles, California 90024; telephone (310) 208-8800.

General

Occidental’s principal businesses consist of three segments. The oil and gas segment explores for, develops, produces and markets crude oil, including natural gas liquids (NGLs) and condensate, as well as natural gas. The chemical segment (OxyChem) manufactures and markets basic chemicals, vinyls and other chemicals. The midstream, marketing and other segment (midstream and marketing) gathers, treats, processes, transports, stores, purchases and markets crude oil (including NGLs and condensate), natural gas, carbon dioxide (CO2) and power. It also trades around its assets, including pipelines and storage capacity, and trades commodities and securities. Unless otherwise indicated hereafter, discussion of oil or oil and liquids refers to crude oil, NGLs and condensate.

For information regarding Occidental's current developments, segments and geographic areas, see the information in the "Management’s Discussion and Analysis of Financial Condition and Results of Operations" (MD&A) section of this report and Note 16 to the Consolidated Financial Statements.

Oil and Gas Operations

General

Occidental’s domestic oil and gas operations are located in Texas, New Mexico, California, Kansas, Oklahoma, Utah and Colorado. International operations are located in Argentina, Bahrain, Bolivia, Colombia, Libya, Oman, Qatar, the United Arab Emirates (UAE) and Yemen.

Proved Reserves and Sales Volumes

The table below shows Occidental’s total oil and natural gas proved reserves and sales volumes in 2009, 2008 and 2007. See "MD&A — Oil and Gas Segment," and the information under the caption "Supplemental Oil and Gas Information" for certain details regarding Occidental’s oil and gas proved reserves, the reserves estimation process, sales volumes, production costs and other reserves-related data.


Comparative Oil and Gas Proved Reserves and Sales Volumes
Oil in millions of barrels; natural gas in billions of cubic feet; barrels of oil equivalent (BOE) in millions of barrels of oil equivalent
	2009					2008					2007
Proved Reserves	Oil	(a)	Gas	BOE	(b)	Oil	(a)	Gas	BOE	(b)	Oil	(a)	Gas	BOE	(b)
United States	1,606		2,799	2,072		1,547		3,153	2,073		1,707		2,672	2,152
International	760		2,358	1,153		663		1,448	904		517		1,171	712
Total	2,366		5,157	3,225	(c)	2,210		4,601	2,977	(c)	2,224		3,843	2,864	(c)
Sales Volumes
United States	99		232	137		96		215	132		95		216	131
International	80		106	98		73		92	88		69		45	77
Total	179		338	235		169		307	220		164		261	208

(a)	Includes NGLs and condensate.
(b)	Natural gas volumes have been converted to BOE based on energy content of six thousand cubic feet (Mcf) of gas to one barrel of oil.
(c)	Stated on a net basis after applicable royalties. Includes proved reserves related to production-sharing contracts (PSCs) and other similar economic arrangements of 1.1 billion BOE in 2009, 825 million BOE (MMBOE) in 2008 and 601 MMBOE in 2007.

Competition and Sales and Marketing

As a producer of oil and natural gas, Occidental competes with numerous other domestic and foreign private and government producers. Oil and natural gas are commodities that are sensitive to prevailing global and, in certain cases, local conditions of supply and demand and are sold at "spot" or contract prices or through the futures markets to refiners and other market participants. Occidental competes by developing and producing its worldwide oil and gas reserves cost-effectively and acquiring rights to explore and develop in areas with known oil and gas deposits. Occidental also competes by increasing production through enhanced oil recovery projects in mature and underdeveloped fields and making strategic acquisitions.

Chemical Operations

OxyChem manufactures and markets basic chemicals, vinyls and other chemicals.

OxyChem owns and operates manufacturing plants at 22 domestic sites in Alabama, Georgia, Illinois, Kansas, Louisiana, Michigan, New Jersey, New York, Ohio, Pennsylvania and Texas, at two international sites in Canada and Chile and has interests in a Brazilian joint venture. OxyChem produces the following products:


Principal Products	Major Uses	Annual Capacity


Basic Chemicals

Chlorine	Chlorovinyl chain and water treatment	4.0 million tons (a)


Caustic Soda	Pulp, paper and aluminum production	4.2 million tons (a)


Chlorinated organics	Silicones, paint stripping, pharmaceuticals and refrigerants	0.9 billion pounds


Potassium chemicals	Glass, fertilizers, cleaning products and rubber	0.4 million tons


Ethylene dichloride (EDC)	Raw material for vinyl chloride monomer (VCM)	2.4 billion pounds (a)


Vinyls


VCM	Precursor for polyvinyl chloride (PVC)	6.2 billion pounds


PVC	Piping, medical, building materials and automotive products	3.7 billion pounds


Other Chemicals


Chlorinated isocyanurates	Swimming pool sanitation and disinfecting products	131 million pounds


Resorcinol	Tire manufacture, wood adhesives and flame retardant synergist	50 million pounds


Sodium silicates	Soaps, detergents and paint pigments	0.6 million tons


Calcium chloride	Ice melting, dust control, road stabilization and oil field services	0.7 million tons

(a)	Includes gross capacity of a joint venture in Brazil, owned 50 percent by Occidental.

Midstream, Marketing and Other Operations

The midstream and marketing segment gathers, treats, processes, transports, stores, purchases and markets crude oil (including NGLs and condensate), natural gas, CO2 and power. It also trades around its assets, including pipelines and storage capacity, and trades commodities and securities.

Below is a description of midstream and marketing operations:


Location	Description	Capacity

Gas Plants

California, Colorado and Permian Basin	Occidental-operated and third-party-operated gas gathering, treating, compression and processing systems, and CO2 processing	1.958 billion cubic feet per day


Pipelines

Permian Basin and Oklahoma	Common carrier oil pipeline and storage system	365,000 barrels of oil per day 5.8 million barrels of oil storage 2,760 miles of pipeline


Colorado, New Mexico and Texas - CO2 fields and pipelines	CO2 fields and pipeline systems transporting CO2 to oil and gas producing locations	1.625 billion cubic feet per day


Qatar - Dolphin Pipeline	24.5% equity investment in a natural gas pipeline	3.2 billion cubic feet of natural gas per day (a)


Western and Southern United States and Canada	Minority investment in entity involved in pipeline transportation, storage and marketing of oil, gas and related petroleum products	16,000 miles of pipeline and gathering systems (b) 85 million barrels of liquid storage (b)


Marketing and Trading

Texas, Connecticut, United Kingdom, Singapore and other	Trades around its assets and purchases, markets and trades oil, gas, power, other commodities and securities	Not applicable


Power Generation

California, Texas and Louisiana	Occidental-operated power and steam generation facilities and 50% equity investment in a power generation facility	1,800 megawatts per hour (c) and 1.6 million pounds of steam per hour (c)

(a)	Capacity requires additional gas compression and customer contracts.
(b)	Amounts are gross, including interests held by third parties.
(c)	Includes gross capacity of a joint venture in California, owned 50 percent by Occidental.

Capital Expenditures

For information on capital expenditures, see the information under the heading "Liquidity and Capital Resources — Capital Expenditures" in the MD&A section of this report.

Employees

Occidental employed approximately 10,100 people at December 31, 2009, 7,000 of whom were located in the United States. Occidental employed approximately 6,100 people in the oil and gas and midstream and marketing segments and 3,000 people in the chemical segment. An additional 1,000 people were employed in administrative and headquarters functions. Approximately 900 U.S.-based employees and 200 foreign-based employees are represented by labor unions.

Occidental has a long-standing strict policy to provide fair and equal employment opportunities to all applicants and employees.

Environmental Regulation

For environmental regulation information, including associated costs, see the information under the heading "Environmental Liabilities and Expenditures" in the MD&A section of this report and "Risk Factors."

Available Information

Occidental makes the following information available free of charge through its web site at www.oxy.com:

Forms 10-K, 10-Q, 8-K and amendments to these forms as soon as reasonably practicable after they are electronically filed with, or furnished to, the Securities and Exchange Commission (SEC);

	Ø	Other SEC filings, including Forms 3, 4 and 5; and

	Ø	Corporate governance information, including its corporate governance guidelines, board-committee charters and Code of Business Conduct. (See Part III Item 10 of this report for further information.)

Information contained on Occidental's web site is not part of this annual report.

Item 1A

Risk Factors

Volatile global and local commodity pricing strongly affects Occidental’s results of operations.

Occidental’s financial results typically correlate closely to the prices it obtains for its products.

Changes in consumption patterns, global and local economic conditions, inventory levels, production disruptions, the actions of OPEC, currency exchange rates, market speculation, worldwide drilling and exploration activities, weather, geophysical and technical limitations and other matters may affect the supply and demand dynamics of oil and gas, contributing to price volatility.

Demand and, consequently, the price obtained for Occidental’s chemical products correlate strongly to the health of the United States and global economy, as well as chemical industry expansion and contraction cycles. Occidental also depends on feedstocks and energy to produce chemicals, which are commodities subject to significant price fluctuations.

Occidental’s oil and gas business operates in highly competitive environments, which affect, among other things, its results of operations and its ability to grow production and replace reserves.

Growth in Occidental’s oil and gas production and results of operations depends, in part, on its ability to profitably acquire, develop or find additional reserves. Occidental replaces significant amounts of its reserves through acquisitions, exploration and large development projects. Occidental has many competitors (including national oil companies), some of which are larger and better funded, may be willing to accept greater risks or have special competencies. Competition for reserves may make it more difficult to find attractive investment opportunities or require delay of expected reserve replacement efforts. Cash conservation considerations during periods of low product prices may delay production growth and reserve replacement efforts.

Governmental actions, political instability and labor unrest may affect Occidental’s results of operations.

Occidental’s businesses are subject to the decisions of many governments and political interests. As a result, Occidental faces risks of:

	Ø	new or amended laws and regulations, including those related to taxes, royalty rates, profit repatriation, permitted production rates, import, export and use of equipment, safety, security and environmental protection, all of which may increase costs or reduce the demand for Occidental's products;

	Ø	reduction of entitlements to produce oil and gas; and

	Ø	refusal or delay in the extension or grant of exploration, production or development contracts.

Occidental may experience adverse consequences, such as risk of loss or production limitations, because certain of its foreign operations are located in countries occasionally affected by political instability, armed conflict, terrorism, insurgency, civil unrest, security problems, labor unrest, OPEC production restrictions, equipment import restrictions and sanctions. Exposure to such risks may increase if a greater percentage of Occidental’s future oil and gas production comes from foreign sources.

Occidental’s oil and gas reserves are based on professional judgments and may be subject to revision.

Calculations of oil and gas reserves depend on estimates concerning reservoir characteristics and recoverability, as well as capital and operating costs. If Occidental were required to make unanticipated significant negative reserve revisions, its results of operations and stock price could be adversely affected.

Occidental may incur significant losses in exploration activities or delays or cost overruns in development efforts.

Exploration is inherently risky. Exploration and development activities are subject to misinterpretation of geologic or engineering data, unexpected geologic conditions or finding reserves of disappointing quality or quantity, which may result in significant losses. Occidental bears the risks of project delays and cost overruns due to equipment failures, approval delays, construction delays, escalating costs for materials and labor, border disputes and other associated risks in its development efforts.

Occidental faces risks associated with its mergers and acquisitions.

Occidental's merger and acquisition activities carry risks that it may not fully realize anticipated benefits.

Concerns about climate change or energy dependence may affect Occidental’s operations or results of operations.

There is an ongoing scientific effort to assess and quantify the effects of climate change and the potential human influences on climate. Related efforts by various U.S. and foreign jurisdictions to propose or adopt legislation, regulations or policies, some of which have been adopted, seek to control or reduce emissions of “greenhouse gases” or consumption of fossil fuels. Although the effect of these efforts on Occidental is uncertain, Occidental faces risks of delays in new or expanded development projects, increases in taxes, increases in costs to produce and reductions in the demand for, and restrictions on the use of, its products.

Occidental’s businesses may experience catastrophic events.

The occurrence of events, such as earthquakes, hurricanes, floods, well blowouts, fires, explosions, chemical releases, industrial accidents, and other events that cause operations to cease or be curtailed, may affect Occidental’s businesses and communities in which it operates. Third-party insurance may not provide adequate coverage or Occidental may be self-insured with respect to the related losses.

Other risk factors.

Additional discussion of risks related to oil and gas reserve estimation processes, price and demand, litigation, environmental matters, foreign operations, impairments, derivatives and market risks appears under the headings: "MD&A — Oil & Gas Segment —Proved Reserves" and "— Industry Outlook," "Chemical Segment — Industry Outlook," "Midstream, Marketing and Other Segment — Industry Outlook," "Lawsuits, Claims, Commitments, Contingencies and Related Matters," "Environmental Liabilities and Expenditures," "Foreign Investments," "Critical Accounting Policies and Estimates," and "Derivative Activities and Market Risk."

Item 1B

Unresolved Staff Comments

None.

Item 3

Legal Proceedings

For information regarding legal proceedings, see the information under the caption, "Lawsuits, Claims, Commitments, Contingencies and Related Matters" in the MD&A section of this report and in Note 9 to the Consolidated Financial Statements.

An OPC subsidiary has reached a settlement in connection with a previously disclosed matter for less than $200,000 with the Colorado Department of Public Health and Environment to voluntarily resolve alleged violations relating to air permitting and emissions at its Garfield County, Colorado operations.

Item 4

Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of Occidental’s security holders during the fourth quarter of 2009.

Executive Officers

The current term of employment of each executive officer of Occidental will expire at the May 7, 2010 organizational meeting of the Board of Directors or when a successor is selected. The following table sets forth the executive officers and significant employees of Occidental:

Name	Age at February 25, 2010	Positions with Occidental and Subsidiaries and Five-Year Employment History
Dr. Ray R. Irani	75	Chairman and Chief Executive Officer since 1990; Director since 1984; Member of Executive Committee and Dividend Committee; 2005-2007, President.
Stephen I. Chazen	63	President since 2007; Chief Financial Officer since 1999; 2005-2007, Senior Executive Vice President; 1994-2004, Executive Vice President, Corporate Development.
Donald P. de Brier	69	Executive Vice President, General Counsel and Secretary since 1993.
James M. Lienert	57	Executive Vice President — Finance and Planning since 2006; 2004-2006, Vice President; Occidental Chemical Corporation: 2004-2006, President; 2000-2002, Senior Vice President, Basic Chemicals; OxyVinyls: 2002-2004, Senior Vice President.
Martin A. Cozyn	49	Executive Vice President, Human Resources since 2008; Nortel Networks Corp.: 2005-2008, Vice President, Global Human Resources; 2002-2004, Vice President, Global Operations HR & Talent Strategy.
William E. Albrecht	58	Vice President since 2008; Occidental Oil and Gas Corporation (OOGC): President — Oxy Oil & Gas, USA since 2008; 2007-2008, Vice President, California Operations; Noble Royalties, Inc.: 2006-2007, President of Acquisitions and Divestitures; EOG Resources, Inc.: 1998-2006, Vice President of Acquisitions and Engineering.
Edward A. "Sandy" Lowe	58	Vice President since 2009; OOGC: President — Oxy Oil & Gas, International Production since 2009; 2008-2009, Executive Vice President — Oxy Oil & Gas, International Production and Engineering; 2008, Executive Vice President — Oxy Oil & Gas, Major Projects; Dolphin Energy Ltd.: 2002-2007, Executive Vice President and General Manager.
Roy Pineci	47	Vice President, Controller and Principal Accounting Officer since 2008; 2007-2008, Senior Vice President, Finance — Oil and Gas; 2005-2007, Vice President — Internal Audit; KPMG LLP: 2002-2005, Partner.
Robert J. Williams	50	Vice President and Treasurer since 2009; Washington Mutual: 2005-2009, Senior Vice President and Corporate Treasurer; Sun Trust Bank: 1985-2005, Senior Vice President.
B. Chuck Anderson	50	President of Occidental Chemical Corporation since 2006; 2004-2006, Executive Vice President — Chlorovinyls; 2002-2004, Senior Vice President — Basic Chemicals; 2000-2002, President — OxyVinyls.

Part II

Item 5

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Trading Price Range and Dividends

This section incorporates by reference the quarterly financial data appearing under the caption "Quarterly Financial Data (Unaudited)" after the Notes to the Consolidated Financial Statements and the information appearing under the caption "Liquidity and Capital Resources" in the MD&A section of this report. Occidental’s common stock was held by 37,280 stockholders of record at December 31, 2009, and by approximately 463,000 additional stockholders whose shares were held for them in street name or nominee accounts. The common stock is listed and traded principally on the New York Stock Exchange. The quarterly financial data, which are included in this report after the Notes to the Consolidated Financial Statements, set forth the range of trading prices for the common stock as reported on the composite tape of the New York Stock Exchange and quarterly dividend information.

The quarterly dividends declared on the common stock were $0.32 per share for the first quarter of 2009 and $0.33 for the last three quarters of 2009 ($1.31 for the year). On February 11, 2010, a quarterly dividend of $0.33 per share ($1.32 on an annualized basis) was declared on the common stock, payable on April 15, 2010 to stockholders of record on March 11, 2010. The declaration of future dividends is a business decision made by the Board of Directors from time to time, and will depend on Occidental’s financial condition and other factors deemed relevant by the Board.

Securities Authorized for Issuance under Equity Compensation Plans

All of Occidental's equity compensation plans for its employees and non-employee directors, pursuant to which options, rights or warrants or other equity awards may be granted, have been approved by the stockholders. Occidental has established several Plans that allow it to issue stock-based awards in the form of options, restricted stock units, stock appreciation rights, performance stock awards, total shareholder return incentives and dividend equivalents. These include the 1995 Incentive Stock Plan (1995 ISP), 2001 Incentive Compensation Plan (2001 ICP), Phantom Share Unit Awards Plan and the 2005 Long-Term Incentive Plan (2005 LTIP). No further awards will be granted under the 1995 ISP and 2001 ICP; however, certain 1995 ISP and 2001 ICP award grants were outstanding at December 31, 2009. An aggregate of 66 million shares of Occidental common stock are reserved for issuance under the 2005 LTIP.

The following is a summary of the shares reserved for issuance as of December 31, 2009, pursuant to outstanding options, rights or warrants or other equity awards granted under Occidental’s equity compensation plans:

a)	Number of securities to be issued upon exercise of outstanding options, warrants and rights	b)	Weighted-average exercise price of outstanding options, warrants and rights	c)	Number of securities remaining available for future issuance under equity compensation plans (excluding securities in column (a))


2,412,576		$30.40		54,208,930 *

* Includes, with respect to:

Ÿ	the 1995 Incentive Stock Plan, 5,602 shares reserved for issuance pursuant to deferred stock unit awards;

Ÿ	the 2001 Incentive Compensation Plan, 11,931 shares reserved for issuance pursuant to deferred stock unit awards and 1,197 shares reserved for issuance as dividend equivalents on deferred stock unit awards; and

Ÿ	the 2005 Long-Term Incentive Plan, 636,034 shares at maximum payout level (318,017 at target level) reserved for issuance pursuant to outstanding performance stock awards, 61,405 shares reserved for issuance pursuant to restricted stock unit awards and 2,952,779 shares at maximum payout level (1,700,390 at target level) reserved for issuance pursuant to total stockholder return incentive awards.

Of the 50,533,604 shares that are not reserved for issuance under the 2005 Long-Term Incentive Plan, approximately 43.2 million shares are available for issuance after giving effect to the provision of the plan that each award, other than options and stock appreciation rights, must be counted against the number of shares available for issuance as three shares for every one share covered by the award. Subject to this share count requirement, not more than the approximate 43.2 million shares may be issued or reserved for issuance for options, rights, warrants and other forms of stock compensation.

Share Repurchase Activities

Occidental’s share repurchase activities for the year ended December 31, 2009 were as follows:

Period	Total Number of Shares Purchased (a)	Average Price Paid per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet be Purchased Under the Plans or Programs
First Quarter 2009	142,625	$62.16	—
Second Quarter 2009	—	—	—
Third Quarter 2009	273,508	$74.47	—
October 1 - 31, 2009	129,501	$84.00	—
November 1 - 30, 2009	—	—	—
December 1 - 31, 2009	—	—	—
Fourth Quarter 2009	129,501	$84.00	—
Total 2009	545,634	$73.51	—	27,155,575	(b)

(a)	Purchased from the trustee of Occidental's defined contribution savings plan.
(b)	Occidental has had a 95 million share authorization in place since 2008 for its share repurchase program; however, the program does not obligate Occidental to acquire any specific number of shares and may be discontinued at any time.

Performance Graph

The following graph compares the yearly percentage change in Occidental’s cumulative total return on its common stock with the cumulative total return of the Standard & Poor's 500 Stock Index (S&P 500) and with that of Occidental’s peer group over the five-year period ended on December 31, 2009. The graph assumes that $100 was invested in Occidental common stock, in the stock of the companies in the S&P 500 and in a portfolio of the common stock of the peer group companies weighted by their relative market values each year and that all dividends were reinvested.

Occidental's peer group consists of Anadarko Petroleum Corporation, Apache Corporation, BP p.l.c., Chevron Corporation, ConocoPhillips, Devon Energy Corporation, ExxonMobil Corporation, Royal Dutch Shell plc and Occidental.

12/31/04		12/31/05	12/31/06	12/31/07	12/31/08	12/31/09
	$100	$139	$173	$277	$220	$304
	100	116	144	181	137	148
	100	105	121	128	81	102
The information provided in this Performance Graph shall not be deemed "soliciting material" or "filed" with the Securities and Exchange Commission or subject to Regulation 14A or 14C under the Securities Exchange Act of 1934 (Exchange Act), other than as provided in Item 201 to Regulation S-K under the Exchange Act, or subject to the liabilities of Section 18 of the Exchange Act and shall not be deemed incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act except to the extent Occidental specifically requests that it be treated as soliciting material or specifically incorporates it by reference.

Item 6

Selected Financial Data

Five-Year Summary of Selected Financial Data
Dollar amounts in millions, except per-share amounts


As of and for the years ended December 31,	2009			2008			2007			2006			2005

results of operations (a)
Net sales	$	15,403		$	24,217		$	18,784		$	17,175		$	14,153
Income from continuing operations (b)	$	2,927		$	6,839		$	5,078		$	4,202		$	4,838
Net income attributable to common stock	$	2,915		$	6,857		$	5,400		$	4,191		$	5,293
Basic earnings per common share from
continuing operations (c)	$	3.60		$	8.35		$	6.06		$	4.91	(d)	$	5.97	(d)
Basic earnings per common share (c)	$	3.59		$	8.37		$	6.45		$	4.90	(d)	$	6.53	(d)
Diluted earnings per common share (c)	$	3.58		$	8.34		$	6.42		$	4.86	(d)	$	6.45	(d)

financial position (a)
Total assets	$	44,229		$	41,537		$	36,519		$	32,431		$	26,170
Long-term debt, net	$	2,557		$	2,049		$	1,741		$	2,619		$	2,873
Stockholders’ equity	$	29,159		$	27,325		$	22,858		$	19,604		$	15,442

market capitalization (e)	$	66,050		$	48,607		$	63,573		$	41,013		$	32,121

cash flow
Cash provided by operating activities	$	5,813		$	10,652		$	6,798		$	6,353		$	5,337
Capital expenditures	$	(3,581	)	$	(4,664	)	$	(3,360	)	$	(2,857	)	$	(2,200	)
Cash (used) provided by all other investing activities, net	$	(1,746	)	$	(4,665	)	$	285		$	(1,433	)	$	(906	)
Cash dividends paid	$	(1,063	)	$	(940	)	$	(765	)	$	(646	)	$	(483	)
Cash (used) provided by all other financing activities, net	$	30		$	(570	)	$	(2,333	)	$	(2,266	)	$	(759	)

dividends per common share	$	1.31		$	1.21		$	0.94		$	0.80	(d)	$	0.645	(d)

weighted average basic shares outstanding (thousands)		811,305			817,635			834,932			852,550	(d)		806,600	(d)

(a)	See the MD&A section of this report and the Notes to Consolidated Financial Statements for information regarding acquisitions and dispositions, discontinued operations and other items affecting comparability.
(b)	Represent amounts attributable to common stock after deducting noncontrolling interest amounts of $51 million in 2009, $116 million in 2008, $75 million in 2007, $111 million in 2006 and $74 million in 2005.
(c)	Represent amounts attributable to common stock after deducting noncontrolling interest amounts.
(d)	Amounts have been adjusted to reflect a two-for-one stock split in the form of a stock dividend to stockholders on August 1, 2006.
(e)	Market capitalization is calculated by multiplying the year-end total shares of common stock outstanding, net of shares held as treasury stock, by the year-end closing stock price.

Item 7 and 7A

Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A)

Strategy

General

In this report, "Occidental" refers to Occidental Petroleum Corporation (OPC), and/or one or more entities in which it owns a majority voting interest (subsidiaries). Occidental's principal businesses consist of three industry segments operated by OPC's subsidiaries and affiliates. The oil and gas segment explores for, develops, produces and markets crude oil, including natural gas liquids (NGLs) and condensate, as well as natural gas. The chemical segment (OxyChem) manufactures and markets basic chemicals, vinyls and other chemicals. The midstream, marketing and other segment (midstream and marketing) gathers, treats, processes, transports, stores, purchases and markets crude oil (including NGLs and condensate), natural gas, carbon dioxide (CO2) and power. It also trades around its assets, including pipelines and storage capacity, and trades commodities and securities. Unless otherwise indicated hereafter, discussion of oil or oil and liquids refers to crude oil, NGLs and condensate. In addition, discussions of oil and gas production or volumes, in general, refer to sales volumes unless context requires or it is indicated otherwise.

Occidental aims to generate superior total returns to stockholders using the following strategies:

Ø	Focus on large, long-lived oil and gas assets with long-term growth potential;

Ø	Maintain financial discipline and a strong balance sheet;

Ø	Manage the chemical segment to provide cash in excess of normal capital expenditures; and

Ø	Manage the midstream and marketing segment to generate returns in excess of Occidental's cost of capital.

Occidental prefers to own large, long-lived "legacy" oil and gas assets, like those in California and the Permian Basin, that tend to have enhanced secondary and tertiary recovery opportunities and economies of scale that lead to cost-effective production. Management expects such assets to contribute substantially to earnings and cash flow after invested capital.

At Occidental, maintaining financial discipline means investing capital in projects that management expects will generate above-cost-of-capital returns through their life cycle. Occidental expects to use most of any excess cash flow after capital expenditures to enhance stockholders' returns through dividend increases, acquisition opportunities and potential stock repurchases.

The chemical business is not managed with a growth strategy but to generate cash flow exceeding its normal capital expenditure requirements. Capital is employed to operate the chemical business in a safe and environmentally sound way, to sustain production capacity and to focus on projects designed to improve the competitiveness of these assets. Asset acquisitions may be pursued when they are expected to enhance the existing core chlor-alkali and polyvinyl chloride (PVC) businesses or take advantage of other specific opportunities.

The midstream and marketing segment is managed to generate returns on capital invested in excess of Occidental's cost of capital. In order to generate these returns, the segment provides low cost services to other segments as well as to third parties and operates gas plants, oil, gas and CO2 pipeline systems and storage facilities. In addition, the marketing and trading group markets Occidental's and third-party oil and gas, trades around the midstream and marketing segment assets and engages in commodities and securities trading. Capital is employed to operate those facilities in a safe and environmentally sound way, to sustain or, where appropriate, increase operational capacity and to improve the competitiveness of Occidental's assets.

Oil and Gas

Segment Earnings

($ millions)

The oil and gas business seeks to add new oil and natural gas reserves at a pace ahead of production while minimizing costs incurred for finding and development. The oil and gas business implements this strategy within the limits of the overall corporate strategy primarily by:

Ø	Adding commercial reserves through a combination of focused exploration and development programs conducted in Occidental's core areas, which are the United States, the Middle East/North Africa and Latin America;

Ø	Pursuing commercial opportunities in core areas to enhance the development of mature fields with large volumes of remaining oil by applying appropriate technology and advanced reservoir-management practices; and

Ø	Maintaining a disciplined approach to acquisitions and divestitures with an emphasis on transactions at attractive prices.

Over the past several years, Occidental has strengthened its asset base within its core areas. Occidental has invested in, and disposed of, assets with the goal of raising the average performance and potential of its assets.

Occidental has continued to make capital contributions and investments in the Middle East/North Africa and expects continued production growth in the Mukhaizna project in Oman. In April 2009, Occidental and its partners signed a Development and Production Sharing Agreement (DPSA) with the National Oil and Gas Authority of Bahrain for further development of the Bahrain Field. The DPSA became effective in December 2009. In the first quarter of 2010, Occidental and its partners signed a technical service contract with the government of Iraq to develop the Zubair Field in Iraq.

In addition, in the past several years Occidental has acquired the operations of Vintage Petroleum, Inc. (Vintage) and other properties in California, the Piceance Basin and the Permian Basin. In July 2009, Occidental announced a significant discovery of oil and gas in Kern County, California.

At the end of 2009, the Elk Hills area and Permian properties' proved reserves made up 56 percent of Occidental's proved oil reserves and 35 percent of its proved gas reserves. On a barrels of oil equivalent (BOE) basis, these proved reserves accounted for 51 percent of Occidental's proved reserves. In 2009, the combined production from these assets was approximately 45 percent of total Occidental production.

Chemical

Segment Earnings

($ millions)

OxyChem’s strategy is to be a low-cost producer in order to maximize its cash flow generation. OxyChem concentrates on the chlorovinyls chain beginning with chlorine, which is co-produced with caustic soda, both of which are marketed to third parties. In addition, chlorine, together with ethylene, is converted through a series of intermediate products into PVC. OxyChem's focus on chlorovinyls permits it to maximize the benefits of integration and allows it to take advantage of economies of scale.

Midstream, Marketing and Other

Segment Earnings

($ millions)

The midstream and marketing segment is managed to generate returns on capital invested in excess of Occidental's cost of capital. In order to generate these returns, the segment provides low cost services to other segments as well as to third parties and operates gas plants, oil, gas and CO2 pipeline systems and storage facilities. In addition, the marketing and trading group markets Occidental's and third-party oil and gas, trades around the midstream and marketing segment assets and engages in commodities and securities trading. In marketing its own production and third party purchases, Occidental attempts to maximize realized prices and margins and limit credit risk exposure. In commodities and securities trading, Occidental seeks to generate gains using net long positions.

Key Performance Indicators

General

Occidental seeks to ensure that it meets its strategic goals by continuously measuring its success in maintaining below-average debt levels, delivering returns in excess of its cost of capital and achieving top-quartile performance compared to its peers in:

Ø	Total return to stockholders;

Ø	Return on equity (ROE);

Ø	Return on capital employed (ROCE); and

Ø	Other segment-specific measures such as per-unit profit, production cost, cash flow, and finding and development cost, reserves replacement percentage and others.

During the three-year period from 2007 to 2009, Occidental increased its dividend rate by 50 percent while its stock price increased by 67 percent.

Occidental has delivered high levels of return even after considering the challenging 2009 business environment and while increasing stockholders' equity by 7 percent for 2009 and 49 percent for the three-year period from 2007 to 2009.

	Annual 2009 (a)	Three-Year Annual Average 2007 - 2009 (b)
ROE	10.3%	20.4%
ROCE	9.6%	18.8%

(a)	The ROE and ROCE for 2009 were calculated by dividing Occidental's 2009 net income attributable to common stock (taking into account cost of capital for ROCE) by its average equity and capital employed, respectively, during 2009.
(b)	The three-year average ROE and ROCE were calculated by dividing Occidental's average net income attributable to common stock (taking into account cost of capital for ROCE) over the three-year period 2007-2009 by its average equity and capital employed, respectively, over the same period.

Debt Structure

Occidental’s year-end 2009 total debt-to-capitalization ratio declined to 9 percent from 16 percent at the end of 2005. During that time, Occidental has reduced its debt by 7 percent while increasing its stockholders' equity by 89 percent.

Since 2007, Occidental’s long-term senior unsecured debt has been rated A by Fitch Ratings. In 2008, Occidental's long-term senior unsecured debt was upgraded from A- to A by Standard and Poor's Ratings Services, from A3 to A2 by Moody's Investors Service and from A(low) to A by DBRS. A security rating is not a recommendation to buy, sell or hold securities, may be subject to revision or withdrawal at any time by the assigning rating organization and should be evaluated independently of any other rating.

Oil and Gas Segment

Business Environment

Oil and gas prices are the major variables that drive the industry’s short and intermediate term financial performance. Average oil prices were lower in 2009 than 2008, caused by a steep price decline in the last half of 2008, which resulted in significantly lower average prices in the first half of 2009 followed by steadily increasing prices in the second half of 2009 that did not reach the highs of 2008. West Texas Intermediate (WTI) was $79.36 and $44.60 per barrel as of December 31, 2009 and 2008, respectively. The average WTI spot market price for 2009 was $61.80 per barrel compared with $99.65 per barrel in 2008. Occidental’s realized price for crude oil as a percentage of average WTI prices was approximately 91 percent and 89 percent for 2009 and 2008, respectively. Prices and differentials can vary significantly, even on a short-term basis, making it impossible to predict realized prices with a reliable degree of certainty.

The average New York Mercantile Exchange (NYMEX) domestic natural gas price in 2009 decreased approximately 53 percent from 2008. For 2009, the gas spot price averaged $4.20 per thousand cubic feet (Mcf) compared with $9.01 per Mcf for 2008, but was $5.57 per Mcf as of December 31, 2009.

Business Review

All sales, production and reserves volumes are net to Occidental unless otherwise specified.

Worldwide Sales Volumes

(thousands BOE/day)

In April 2009, Occidental and its partners signed a DPSA with the National Oil and Gas Authority of Bahrain for further development of the Bahrain Field. The DPSA became effective in December 2009. A joint operating company formed by Occidental and its partners will serve as operator for the project.

In 2009, Occidental acquired various additional properties in California and the Permian Basin.

Production-Sharing Contracts (PSC)

Occidental conducts its operations in Bahrain, Libya, Oman, Yemen and Qatar, including Dolphin, under PSCs. Under such contracts, Occidental receives a share of production and reserves to recover its costs and an additional share for profit. In addition, Occidental's share of production and reserves from operations in Long Beach, California and certain contracts in Latin America are subject to contractual arrangements similar to a PSC. These contracts do not transfer any right of ownership to Occidental and reserves reported from these arrangements are based on Occidental’s economic interest as defined in the contracts. Occidental’s share of production and reserves from these contracts decreases when product prices rise and increases when prices decline. Overall, Occidental’s net economic benefit from these contracts is greater when product prices are higher.

United States

1. Permian

2. Elk Hills and other interests

3. Long Beach

4. Midcontinent Gas

Permian

Occidental's Permian production is diversified across a large number of producing areas in the Permian Basin. The Permian Basin extends throughout southwest Texas and southeast New Mexico and is one of the largest and most active oil basins in the United States, with the entire basin accounting for approximately 19 percent of the total United States crude oil production. Occidental is the largest producer of crude oil in the Permian Basin with an approximate 16-percent net share of the total production. Occidental also produces and processes natural gas and NGLs in the Permian Basin.

In the past several years, Occidental increased its Permian interests through various property acquisitions. Occidental's total share of Permian oil and gas production was approximately 201,000 BOE per day in 2009. At the end of 2009, Occidental's Permian properties had 1.1 billion BOE in proved reserves.

Starting in 2010, Permian non-associated gas assets will be included as part of the Midcontinent Gas operations. Permian's production is expected to shift from 84 percent liquids and 16 percent gas, to 89 percent liquids and 11 percent, mostly associated, gas.

Occidental’s interests in Permian offer additional development and exploitation potential. During 2009, Occidental drilled approximately 120 wells on its operated properties and participated in additional wells drilled on third-party-operated properties. Occidental conducted development activity on six CO2 projects during 2009. Occidental also focused on improving the performance of existing wells. Occidental had an average of 71 equivalent well service units working in the Permian area during 2009 performing well maintenance and workovers.

Approximately 58 percent of Occidental’s Permian oil production is from fields that actively employ the application of CO2 flood technology, an enhanced oil recovery (EOR) technique. This technique involves injecting CO2 into oil reservoirs where it acts as a solvent, causing the oil to flow more freely into producing wells. These CO2 flood operations make Occidental a world leader in the application of this technology.

Occidental’s policy regarding tertiary recovery is to capitalize costs, such as CO2, when they support development of proved reserves and otherwise generally expense these costs. In 2009, Occidental capitalized approximately 50 percent of the costs of CO2 injected in Permian. Over the years, as the CO2 program matures, a smaller portion of the injected CO2 results in the development of proved reserves. In 2010, Occidental will begin expensing 100 percent of the CO2 injected, in order to better reflect the current nature of the CO2 program. In 2009, $69 million of CO2 costs were capitalized.

California

Occidental's California operations consist of holdings in the Elk Hills area, the Wilmington Field in Long Beach and other interests in the Ventura, San Joaquin and Sacramento basins.

Occidental's interest in the Elk Hills area includes the Elk Hills oil and gas field in the southern portion of California’s San Joaquin Valley, which it operates with an approximate 78-percent interest, along with other adjacent properties. The Elk Hills Field is the largest producer of gas and NGLs in California. During 2009, Occidental continued to perform infill drilling, field extensions and recompletions identified by advanced reservoir characterization techniques, resulting in 124 new wells being drilled and 388 wells being worked over.

In July 2009, Occidental announced that it had made a significant discovery of oil and gas in Kern County, California. The bulk of the discovery’s producing zones are conventional oil and gas bearing formations with approximately two-thirds of the discovery believed to be natural gas. At the end of 2009, Occidental was producing approximately 32,000 gross BOE per day from 15 wells in this multi-pay zone discovery area. Occidental’s interest in the discovery area is approximately 80 percent.

Occidental also owns interests in California properties in the Ventura, San Joaquin and Sacramento basins, other than Elk Hills. The combined properties produce oil and gas from more than 50 fields.

Occidental holds approximately 1.3 million acres of net fee minerals and leaseholds in California, which have been acquired in the last few years.

Occidental conducts both onshore and offshore operations in the Wilmington Field. Occidental's share of production and reserves from these properties is subject to contractual arrangements similar to a PSC.

Occidental's total share of oil and gas production in California was approximately 135,000 BOE per day in 2009. At the end of 2009, Occidental's properties in California had 780 million BOE in proved reserves.

Midcontinent Gas

Occidental owns 737,000 acres in a large concentration of gas reserves, production interests and royalty interests in Kansas and Oklahoma. Occidental also has over 935,000 net acres in western Colorado, New Mexico, Texas and Utah where it completed a total of 23 wells in 2009.

In 2009, Occidental’s Midcontinent Gas operations produced approximately 41,000 BOE per day. At December 31, 2009, proved reserves for these operations totaled 191 million BOE.

Starting in 2010, Occidental will combine most of its gas production in the midcontinent region of the United States into a single business unit called Midcontinent Gas, in order to take advantage of common development methods and production optimization opportunities. This business unit will include the Hugoton Field, the Piceance Basin as well as the bulk of Permian non-associated gas assets, which were included as part of Permian for 2009. As a result, Midcontinent Gas’ production is expected to be approximately 75 percent gas and 25 percent liquids.

Middle East/North Africa

1. Qatar

2. Yemen

3. Oman

4. Libya

5. Bahrain

6. United Arab Emirates

Qatar

Occidental operates three offshore projects in Qatar: Idd El Shargi North Dome (ISND) and Idd El Shargi South Dome (ISSD), with a 100-percent working interest in each, and Al Rayyan (Block 12), with a 92.5-percent working interest. In addition, Occidental also holds interests in Dolphin.

In 2008, Occidental received approval from the Government of Qatar for the third phase of field development of the ISND Field focusing on continued development of mature reservoirs, while further delineating and developing less mature reservoirs. Drilling under this phase is expected to be completed during 2010.

Occidental's investment in Dolphin, which was acquired in 2002, consists of two separate economic interests through which Occidental owns (i) a 24.5-percent undivided interest in the assets and liabilities associated with a DPSA with the Government of Qatar to develop and produce natural gas and NGLs in Qatar’s North Field through mid-2032, with a provision to request a 5-year extension; and (ii) a 24.5-percent interest in the stock of Dolphin Energy Limited (Dolphin Energy), which is discussed further in "Midstream, Marketing and Other Segment – Pipeline Transportation."

Occidental's share of production from all of its operations in Qatar was approximately 105,000 BOE per day in 2009.

Yemen

Occidental owns contractual interests in three producing blocks in Yemen, including a 38-percent working interest in the Masila Field, which expires in December 2011, a 40.4-percent interest, including an 11.8-percent interest held in an unconsolidated entity, in the East Shabwa Field, and a 75-percent working interest in Block S-1, which Occidental operates.

Occidental's share of production from the Yemen properties was 29,000 BOE per day in 2009.

Oman

In Oman, Occidental is the operator of Block 9 and Block 27, with a 65-percent working interest in each, Block 53, with a 45-percent working interest, and Block 62, with a 48-percent working interest.

Occidental and its partners signed a 30-year PSC for the Mukhaizna Field (Block 53) with the Government of Oman in 2005. In September 2005, Occidental assumed operations of the Mukhaizna Field. By the end of 2009, Occidental had drilled over 665 new wells and continued implementation of a major pattern steam flood project. As of year-end 2009, the exit rate of gross daily production was over 10 times higher than the production rate in September 2005, reaching nearly 90,000 BOE per day. Occidental plans to steadily increase production through continued expansion of the steam flood project.

The term for Block 9 is through December 2015, with a potential 10-year extension. The term for Block 27 is through September 2035. Occidental and its partners began production in June 2006.

Occidental was awarded Block 62 in November 2008 under a 20-year contract, subject to declaration of commerciality prior to December 2010. Block 62 is comprised of both development and exploration opportunities targeting gas and condensate resources.

Occidental's share of production from the Oman properties was approximately 43,000 BOE per day in 2009, and proved reserves totaled 173 million BOE as of December 31, 2009.

Libya

In 2005, Occidental signed an agreement with the Libyan National Oil Corporation (NOC) that allowed it to re-enter the country and participate in exploration and production operations in the Sirte Basin, which it left in 1986 pursuant to United States law. This re-entry agreement allowed Occidental to return to its Libyan operations on generally the same terms in effect when activities were suspended.

In June 2008, Occidental and its partner signed new agreements with NOC to upgrade its existing contracts for up to 30 years.

Occidental's share of production during 2009 was approximately 7,000 BOE per day.

Bahrain

In December 2009, Occidental and its partners began operating the Bahrain Field. Occidental has a 48-percent interest in the joint venture. Gross oil production from the Bahrain Field is expected to more than double to approximately 75,000 barrels per day within five years and grow to a peak level of more than 100,000 barrels per day thereafter. Gas production capacity is expected to grow from 1.7 billion cubic feet (Bcf) per day in late 2009 to over 2.5 Bcf per day under the field development plan.

United Arab Emirates

Occidental conducts a majority of its Middle East business development activities through its office in the United Arab Emirates, which also provides various support functions for Occidental’s Middle East/North Africa oil and gas operations.

Latin America

1. Argentina

2. Bolivia

3. Colombia

Argentina

The Argentina assets consist of 23 concessions located in the San Jorge Basin in southern Argentina and the Cuyo and Neuquén Basins in western Argentina. Occidental operates 19 of the concessions with a 100-percent working interest.

During 2009, Occidental drilled 107 new wells and performed a number of recompletions and well repairs. Occidental plans to increase production through drilling and waterflooding.

Occidental's concessions in Argentina expire at various dates through 2017. Occidental is pursuing opportunities to extend the terms of its concessions in the Santa Cruz province of Argentina. However, in the event Occidental is unsuccessful in obtaining these extensions, Occidental will reevaluate its operations and investments in the country, which may result in decreases in future investment capital allocated to its operations in Argentina and further impairments of its existing investments. In the fourth quarter of 2009,

Occidental recorded a pre-tax impairment charge of $170 million for the impairment of certain other Argentine producing properties.

Occidental’s share of production from Argentina was approximately 42,000 BOE per day in 2009.

Bolivia

In 2006, Occidental acquired working interests in four blocks located in the Tarija, Chuquisaca and Santa Cruz regions of Bolivia as part of the Vintage acquisition. At the end of 2006, Occidental signed two new operation contracts with commercial terms that provide Bolivia with greater operational control and control over the commercialization of hydrocarbons. These contracts went into effect in May 2007.

Colombia

Occidental is the operator under four contracts within the Llanos Norte Basin: the Cravo Norte, Rondón, Cosecha, and Chipirón Association Contracts. Occidental’s working interests under these four contracts are 39 percent, 44 percent, 53 percent and 61 percent, respectively. Colombia's national oil company, Ecopetrol, operates the Caño Limón-Coveñas oil pipeline and marine-export terminal. The pipeline transports oil produced from the Llanos Norte Basin for export to international markets.

Occidental also holds a 48-percent working interest in the La Cira-Infantas Field, which is located in the Middle-Magdalena Basin. Production from the field is transported by Ecopetrol through its pipeline and sold to Ecopetrol.

Occidental's share of 2009 production from its Colombia operations was approximately 39,000 BOE per day.

Proved Reserves

For further information regarding Occidental's proved reserves, see "Supplemental Oil and Gas Information" following the "Financial Statements."

Occidental had proved reserves at year-end 2009 of 3,225 million BOE, as compared with the year-end 2008 amount of 2,977 million BOE. Proved reserves consisted of 73 percent oil and 27 percent natural gas. Proved developed reserves represented approximately 77 percent of Occidental’s total proved reserves at year-end 2009 compared to 74 percent at year-end 2008.

Proved Reserve Additions

Occidental's total proved reserve additions from all sources were 483 million BOE in 2009. The total additions were as follows:

In millions of BOE
Revisions of previous estimates			58
Improved recovery			173
Extensions and discoveries			92
Purchases			160
Total additions			483

Occidental's ability to add reserves depends on the success of improved recovery, extension and discovery projects, each of which depend on reservoir characteristics, technology improvements, oil and natural gas prices, as well as capital and operating costs. Many of these factors are outside of management’s control, and will affect whether or not these historical sources of proved reserve additions continue at similar levels.

Revisions of Previous Estimates

In 2009, Occidental’s revisions of previous estimates provided net additions of 58 million BOE to proved reserves. The additions included a net positive effect from PSCs in the Middle East/North Africa. Domestic positive oil price-related revisions were more than offset by negative gas price-related revisions, as well as other changes in the United States and Argentina.

Oil price changes affect proved reserves recorded by Occidental. For example, when oil prices increase, less oil volume is required to recover costs under PSCs, which would result in a reduction of Occidental’s share of proved reserves. Conversely, when oil prices drop, Occidental’s share of proved reserves would increase for these PSCs. Oil and natural gas price changes also tend to affect the economic lives of proved reserves, primarily in domestic properties, in a manner partially offsetting the PSC reserve volume changes. Apart from the effects of product prices, Occidental believes its approach to interpreting technical data regarding proved oil and gas reserves makes it more likely that future proved reserve revisions will be positive rather than negative.

Improved Recovery

In 2009, Occidental added proved reserves of 173 million BOE through EOR activities, mainly in California, Permian and Oman, through the Mukhaizna project. These improved recovery additions were attributable to EOR techniques, such as CO2, water and steam injection programs, as well as Occidental’s ongoing development programs.

Extensions and Discoveries

Occidental also obtains reserve additions from extensions and discoveries, which are dependent on successful exploitation programs. In 2009, extensions and discoveries added 92 million BOE of proved reserves, mainly in the Kern County, California discovery area, with smaller additions internationally.

Purchases and Divestitures of Proved Reserves

In 2009, Occidental added proved reserves of 160 million BOE (there were no divestitures of proved reserves in 2009), largely consisting of the Bahrain Field redevelopment project and several domestic acquisitions in California and the Permian Basin. Occidental continues to add reserves through acquisitions when properties are available at prices it deems reasonable. As market conditions change, the available supply of properties may increase or decrease accordingly.

Proved Undeveloped Reserves

In 2009, Occidental had proved undeveloped reserves additions of 232 million BOE from improved recovery, extensions and discoveries and purchases, primarily in Bahrain, California, Oman, mainly related to the Mukhaizna project, Colombia and Permian. These proved undeveloped reserve additions were offset by reserves transfers of 161 million BOE to the proved developed category as a result of the 2009 development programs. Permian, Oman, Colombia and California accounted for approximately 80 percent of the reserves transfers from proved undeveloped to proved developed in 2009. Proved undeveloped reserve additions will require incurrence of additional future development costs.

Reserves Evaluation and Review Process

Occidental’s estimates of proved reserves and associated future net cash flows as of December 31, 2009 were made solely by Occidental’s technical personnel and are the responsibility of management. The current Senior Director of Worldwide Reserves and Reservoir Engineering is responsible for overseeing the preparation of reserve estimates, including the internal audit and review of Occidental's oil and gas reserves data. The Senior Director has over 28 years of experience in the upstream sector of the exploration and production business, and has held various assignments in North America, Asia and Europe. He is a three-time past Chair of the Society of Petroleum Engineers Oil and Gas Reserves Committee. He is an American Association of Petroleum Geologists (AAPG) Certified Petroleum Geologist and the current Chair of the AAPG Committee on Resource Evaluation. He is a member of the Society of Petroleum Evaluation Engineers, the Colorado School of Mines Potential Gas Committee and the UNECE Expert Group on Resource Classification. The Senior Director has Bachelor of Science and Master of Science degrees in geology from Emory University in Atlanta.

Occidental has a Corporate Reserves Review Committee (Reserves Committee) consisting of senior corporate officers, to monitor and review Occidental's oil and gas reserves. The Reserves Committee reports to the Audit Committee of Occidental's Board of Directors periodically during the year. Since 2003, Occidental has retained Ryder Scott Company, L.P. (Ryder Scott), independent petroleum engineering consultants, to review its annual oil and gas reserve estimation processes.

In 2009, Ryder Scott compared Occidental’s methods and procedures for estimating oil and gas reserves to generally accepted industry standards and reviewed certain pertinent facts interpreted and assumptions made in estimating the proved reserves volumes, preparing the economic evaluations and determining reserves classifications. Ryder Scott reviewed the specific application of such methods and procedures for selected oil and gas properties considered to be a valid representation of Occidental’s total reserves portfolio. In 2009, Ryder Scott reviewed approximately 20 percent of Occidental’s proved oil and gas reserves. Since being engaged in 2003, Ryder Scott has reviewed the specific application of Occidental’s reserve estimation methods and procedures for approximately 71 percent of Occidental’s proved oil and gas reserves. Management retains Ryder Scott to provide objective third-party input on its methods and procedures and to gather industry information applicable to Occidental’s reserve estimation and reporting process. Ryder Scott has not been engaged to render an opinion as to the reasonableness of reserves quantities reported by Occidental.

Based on its reviews, including the data, technical processes and interpretations presented by Occidental, Ryder Scott has concluded that the overall procedures and methodologies utilized in determining the proved reserves for the reviewed properties as estimated by Occidental are reasonable and consistent with generally accepted industry standards and comply with current Securities and Exchange Commission (SEC) standards.

Industry Outlook

The petroleum industry is highly competitive and subject to significant volatility due to numerous market forces affecting supply and demand. Worldwide oil prices experienced a high degree of volatility during 2009 and 2008. WTI settled at $145.31 per barrel on July 3, 2008, up from $95.98 per barrel as of December 31, 2007, and then dropped to $44.60 per barrel at the end of 2008. WTI generally increased in 2009, settling at $79.36 per barrel as of December 31, 2009. While many factors precipitated these price fluctuations, the worldwide drop in demand for oil caused by the global economic slowdown appears to have been the major contributor to the significant and steady drop in oil prices during the second half of 2008 through the first half of 2009.

Oil prices will continue to be affected by global demand, which is generally a function of global economic conditions, as well as the actions of OPEC, other significant producers and governments. These factors make it impossible to predict the future direction of oil prices reliably. Occidental continued to adjust to economic conditions by reducing its operating expenses and adjusting capital expenditures with the goal of keeping returns well above its cost of capital.

Natural gas prices have continued to stay at relatively low levels in 2009, especially in the U.S. midcontinent region. In the fourth quarter of 2009, Occidental started a program to complete approximately 130 previously drilled wells in this region. Occidental is also planning to implement a drilling program in 2010 with two rigs. An additional rig may be deployed later in the year depending on market conditions. Occidental believes that it needs a larger margin between natural gas prices and development and production costs to substantially increase its drilling activity in the U.S. midcontinent region.

While local supply and demand fundamentals, as well as government regulations and availability of transportation capacity from producing areas, are decisive factors affecting domestic natural gas prices over the long term, futures prices can be volatile, making it impossible to forecast prices reliably.

Chemical Segment

Business Environment

The decrease in 2009 chemical segment earnings reflects lower prices and volumes for chlorine, caustic soda, PVC and vinyl chloride monomer (VCM) due to the global economic slowdown, partially offset by lower feedstock and energy costs.

Business Review

Basic Chemicals

During 2009, domestic industry production of chlorine declined by 11 percent compared to 2008 as a result of poor global economic conditions, primarily in the manufacturing and housing sectors. U.S. demand and pricing for caustic soda collapsed early in 2009 as record domestic prices attracted more imports and the alumina and pulp and paper industries reduced caustic consumption due to deteriorating demand for their products. Chlorine prices increased steadily throughout the year as industry participants attempted to reverse shrinking margins. Late in 2009, supply and demand became more balanced, evidenced by the stabilization of both chlorine and caustic pricing.

Vinyls

Domestic demand for PVC in 2009 was 7 percent below 2008 as a result of the continued slump in housing, commercial construction and automotive industries. This decline was largely offset by exports, which were up 33 percent in 2009 over 2008, resulting in only a one-percent reduction in overall PVC demand. Compared to 2008, PVC prices decreased and chlorine costs increased to more than offset a 42-percent decrease in ethylene costs.

Industry Outlook

Future performance will depend on the recovery of domestic housing and construction markets, global economic recovery, the competitiveness of the U.S. in world markets and feedstock and energy pricing.

Basic Chemicals

Demand for basic chemical products is expected to improve slightly in 2010 as the U.S. housing, automotive and durable goods sectors begin to recover from the significant drop in demand experienced in 2008 and 2009. Margins are anticipated to be similar to 2009 as pricing for chlorine is expected to remain strong while pricing for caustic soda is projected to begin to improve as the economy improves. However, operating rates will continue to be challenged throughout the year if demand remains suppressed in chlorine, vinyls and various chlorine-derivative markets.

Vinyls

Industry-wide PVC operating rates are expected to be higher in 2010 as a result of improving economic conditions, both domestically and globally. In addition, exports are expected to remain strong due to raw material cost advantages compared to other vinyls-producing regions.

Midstream, Marketing and Other Segment

Business Environment

The midstream and marketing segment earnings decrease reflects lower marketing income and lower margins in the gas processing business.

Business Review

Oil and Gas Marketing and Trading

The marketing and trading group markets substantially all of Occidental’s oil and gas production. Marketing and trading earnings are affected primarily by margins in oil and gas transportation and storage programs. In 2009, the marketing and trading group earnings declined due to lower marketing margins and lower trading income.

On December 31, 2009, Occidental completed the acquisition of interests in Phibro LLC (Phibro), primarily a commodities investor, from Citigroup Inc.

Gas Processing Plants and CO2 Fields and Facilities

Occidental processes its and third-party domestic wet gas to extract NGLs and other gas by-products, including CO2, and deliver dry gas to pipelines. Margins result from the difference between inlet costs of gas and market prices for NGLs.

In 2008, Occidental signed an agreement for a third party to construct a gas processing plant that will provide CO2 for Occidental’s EOR projects in the Permian Basin. Occidental will own and operate the new facility, which is approximately half completed with the remaining portions expected to be completed through 2010 and 2011. Occidental is in the process of arranging for a third party to provide transportation capacity from the plant to its Permian Basin production areas.

Occidental’s 2009 earnings from these operations declined due to lower gas processing margins.

Pipeline Transportation

Margin and cash flow from pipeline transportation operations mainly reflect volumes shipped. Dolphin Energy owns and operates a 230-mile-long, 48-inch natural gas pipeline (Dolphin Pipeline), which transports dry natural gas from Qatar to the UAE. Through its 24.5-percent interest in Dolphin Energy, the Dolphin Pipeline investment contributes significantly to Occidental's pipeline transportation results. Production of natural gas and NGLs under the DPSA from Qatar's North Field began during mid-2007 and, since mid-2008, production has been at full capacity of the Dolphin plant. The Dolphin Pipeline has a capacity to transport up to 3.2 Bcf of natural gas per day and currently transports approximately 2 Bcf per day. Demand for natural gas in the UAE and Oman has grown and Dolphin Energy’s customers have requested additional gas supplies. To help fulfill this growing demand, Dolphin Energy will continue to pursue an agreement to secure an additional supply of gas from Qatar.

In 2009, Occidental purchased additional interests in the General Partner of Plains All-American Pipeline, L.P. Occidental now owns approximately 22 percent of this entity. Occidental’s 2009 pipeline transportation earnings improved due to increased earnings from the Dolphin Pipeline investment and domestic pipeline operations.

Power Generation Facilities

Earnings from power generation facilities represent the sales of steam and power to affiliates and third parties. Occidental’s 2009 earnings from these facilities decreased due to lower margins between the selling prices of power and steam and the cost of gas used in their production.

Industry Outlook

The pipeline transportation and power generation businesses are expected to remain relatively stable. The gas processing plant operations, which generate most of their income by separating and marketing liquids from wet gas, could have volatile results depending on NGL prices, which cannot be predicted. Generally, higher NGL prices result in higher profitability. The trading and marketing business is inherently volatile. The Phibro acquisition will likely add to this volatility. Based on its framework of controls and risk management systems, Occidental does not expect the volatility of these operations to be significant to the company as a whole.

Segment Results of Operations

Net income and income from continuing operations represent amounts attributable to common stock.

Segment earnings generally exclude income taxes, interest income, interest expense, environmental remediation expenses, unallocated corporate expenses and discontinued operations, but include gains and losses from dispositions of segment assets and income from the segments' equity investments. Seasonality is not a primary driver of changes in Occidental's consolidated quarterly earnings during the year.

The following table sets forth the sales and earnings of each operating segment and corporate items:

In millions, except per share amounts

For the years ended December 31,	2009			2008			2007
net sales (a)
Oil and Gas	$	11,598		$	18,187		$	13,304
Chemical		3,225			5,112			4,664
Midstream, Marketing and Other		1,016			1,598			1,388
Eliminations (a)		(436	)		(680	)		(572	)
	$	15,403		$	24,217		$	18,784
earnings (loss)
Oil and Gas (b,c)	$	4,735		$	10,651		$	7,957
Chemical (d)		389			669			601
Midstream, Marketing and Other		235			520			367
		5,359			11,840			8,925
Unallocated corporate items
Interest expense, net (e)		(109	)		(26	)		(199	)
Income taxes (f)		(1,918	)		(4,629	)		(3,507	)
Other (g)		(405	)		(346	)		(141	)
Income from continuing operations (b)		2,927			6,839			5,078
Discontinued operations, net (h)		(12	)		18			322
Net Income (b)	$	2,915		$	6,857		$	5,400

Basic Earnings per Common Share	$	3.59		$	8.37		$	6.45

(a)	Intersegment sales are generally made at prices approximately equal to those that the selling entity is able to obtain in third-party transactions and eliminate upon consolidation.
(b)	Oil and gas segment earnings, income from continuing operations and net income represent amounts attributable to common stock after deducting noncontrolling interest amounts of $51 million, $116 million and $75 million for 2009, 2008 and 2007, respectively.
(c)	The 2009 amount includes a $170 million fourth quarter pre-tax charge for asset impairments of certain Argentine producing properties and an $8 million pre-tax charge for the termination of rig contracts. The 2008 amount includes a $599 million pre-tax charge for asset impairments, including undeveloped acreage in Argentina and Yemen and domestic producing properties, and a $58 million pre-tax charge for the termination of rig contracts. The 2007 amount includes an after-tax gain of $412 million from the sale of Occidental's interest in a Russian joint venture, an after-tax gain of $112 million from certain litigation settlements, a pre-tax gain of $103 million from the sale of exploration properties, a pre-tax gain of $35 million from the sale of miscellaneous domestic oil and gas interests and a $74 million pre-tax charge for exploration impairments.
(d)	The 2008 amount includes a pre-tax charge of $90 million for plant closure and impairments.
(e)	The 2007 amount includes $167 million of interest charges to redeem or purchase and retire various debt issues.
(f)	The 2009 and 2008 amount includes tax benefits of $87 million and $148 million resulting from relinquishment of exploration properties, respectively.
(g)	The 2009 amount includes a $40 million pre-tax charge related to severance and a $15 million pre-tax charge for railcar leases. The 2007 amount includes a $326 million pre-tax gain from the sale of Occidental’s remaining investment in Lyondell Chemical Company (Lyondell), a $47 million pre-tax charge for a plant closure and related environmental remediation reserve and a $25 million pre-tax severance charge.
(h)	In June 2007, Occidental completed an exchange of oil and gas interests in Horn Mountain with BP p.l.c. (BP) for oil and gas interests in the Permian Basin and a gas processing plant in Texas. Occidental also sold its oil and gas interests in Pakistan to BP. The 2007 amount includes after-tax income of $326 million related to these transactions and their operating results.

Oil and Gas

Dollars in millions, except as indicated
For the years ended December 31,	2009		2008		2007
Segment Sales	$	11,598	$	18,187	$	13,304
Segment Earnings	$	4,735	$	10,651	$	7,957

The following tables set forth the sales volumes and production of oil and liquids and natural gas per day for each of the three years in the period ended December 31, 2009. The differences between the sales volumes and production per day are generally due to the timing of shipments at Occidental’s international locations where product is loaded onto tankers. Sale at these locations is not recognized until title passes.


Sales Volumes per Day	2009		2008		2007
United States
Oil and liquids (MBBL)
California		93		89		89
Permian		168		168		167
Midcontinent Gas		10		6		4
Total		271		263		260
Natural gas (MMCF)
California		250		235		254
Permian		199		181		186
Midcontinent Gas		186		171		153
Total		635		587		593
Latin America
Crude oil (MBBL)
Argentina		37		32		32
Colombia (a)		39		37		37
Total		76		69		69
Natural gas (MMCF)
Argentina		30		21		22
Bolivia		16		21		18
Total		46		42		40
Middle East/North Africa
Oil and liquids (MBBL)
Oman		39		23		20
Dolphin		21		21		4
Qatar		48		47		48
Yemen		29		23		27
Libya		7		15		22
Total		144		129		121
Natural gas (MMCF)
Oman		22		24		30
Dolphin		213		184		51
Bahrain		10		―		―
Total		245		208		81
Total Sales Volumes (MBOE) (b)		645		601		570

(See footnotes following the Average Sales Price table)

Production per Day	2009		2008		2007
United States
Oil and liquids (MBBL)		271		263		260
Natural gas (MMCF)		635		587		593
Latin America
Crude oil (MBBL)
Argentina		36		34		33
Colombia (a)		39		38		36
Total		75		72		69
Natural gas (MMCF)		46		42		40
Middle East/North Africa
Oil and liquids (MBBL)
Oman		39		23		19
Dolphin		22		20		5
Qatar		48		47		47
Yemen		28		23		27
Libya		6		15		21
Total		143		128		119
Natural gas (MMCF)		245		208		81
Total Production (MBOE) (b)		643		603		567

(See footnotes following the Average Sales Price table)

	2009		2008		2007
Average Sales Prices
Crude Oil Prices ($ per bbl)
United States	$	56.74	$	91.16	$	65.67
Latin America	$	49.43	$	70.53	$	56.66
Middle East/North Africa	$	58.75	$	94.70	$	69.24
Total worldwide	$	55.97	$	88.26	$	64.77
Gas Prices ($ per Mcf)
United States	$	3.46	$	8.03	$	6.53
Latin America	$	3.01	$	4.43	$	2.66
Total worldwide	$	2.79	$	6.10	$	5.68
Expensed Exploration (c)	$	267	$	327	$	364
Capital Expenditures
Development	$	2,586	$	3,563	$	2,676
Exploration	$	153	$	258	$	156
Other	$	45	$	24	$	33

(a)	Excludes sales and production volumes related to the noncontrolling interest in a Colombian subsidiary.
(b)	Natural gas volumes have been converted to BOE based on energy content of six Mcf of gas to one barrel of oil.
(c)	Includes dry hole write-offs and lease impairments of $212 million in 2009, $325 million in 2008 and $247 million in 2007.

Oil and gas segment earnings in 2009 were $4.7 billion, compared to $10.7 billion in 2008. The decrease in segment earnings reflects lower average crude oil and natural gas prices, partially offset by increased oil and gas production, lower operating costs and lower production and ad valorem taxes. Oil and gas segment earnings in 2009 included a $170 million pre-tax charge for impairments of certain Argentine producing properties and an $8 million pre-tax charge for the termination of rig contracts.

Oil and gas segment earnings in 2008 were $10.7 billion, compared to $8.0 billion in 2007. The increase in segment earnings reflects higher average oil and natural gas prices and increased oil and gas volumes, which were offset by higher operating expenses and production taxes and increased depreciation, depletion and amortization (DD&A) rates. Oil and gas segment earnings in 2008 included pre-tax foreign exchange gains of $74 million, a pre-tax charge of $599 million for asset impairments consisting of undeveloped acreage in Argentina and Yemen and impairments of producing properties in the U.S. and a pre-tax charge of $58 million for termination of rig contracts.

Average production costs for 2009, excluding taxes other than on income, were $10.37 per BOE, compared to the average 2008 production cost of $12.13 per BOE. The decreases resulted from lower maintenance and workover costs.

Chemical

In millions	2009		2008		2007
Segment Sales	$	3,225	$	5,112	$	4,664
Segment Earnings	$	389	$	669	$	601
Capital Expenditures	$	205	$	240	$	245

Chemical segment earnings were $389 million for the twelve months of 2009 compared to $669 million for the twelve months of 2008. The decrease in 2009 results reflects lower volumes and prices for chlorine, caustic soda, PVC and VCM due to the economic slowdown, partially offset by lower feedstock and energy costs.

Chemical segment earnings in 2008 were $669 million, compared to $601 million in 2007. The increase in segment earnings was primarily due to higher caustic soda margins, partially offset by lower volumes in chlorine, caustic soda and PVC and a $90 million charge for plant closure and impairments.

Midstream, Marketing and Other

In millions	2009		2008		2007
Segment Sales	$	1,016	$	1,598	$	1,388
Segment Earnings	$	235	$	520	$	367
Capital Expenditures	$	554	$	492	$	243

Midstream and marketing segment earnings in 2009 were $235 million, compared to $520 million in 2008. The 2009 results reflect lower marketing income and lower margins in gas processing.

The increase in segment earnings in 2008, compared to 2007, reflects higher income from the Dolphin Pipeline and higher margins in gas processing.

Significant Items Affecting Earnings

The following table sets forth, for the years ended December 31, 2009, 2008 and 2007, the effects of significant transactions and events affecting Occidental’s earnings that vary widely and unpredictably in nature, timing and amount:

Significant Items Affecting Earnings

Benefit (Charge) (in millions)	2009			2008			2007
oil and gas
Asset impairments	$	(170	)	$	(599	)	$	(74	)
Rig contract terminations		(8	)		(58	)		—
Gain on sale of a Russian joint venture (a)		—			—			412
Legal settlements (a)		—			—			112
Gain on sale of exploration properties		—			—			103
Gain on sale of oil and gas interests		—			—			35
Total Oil and Gas	$	(178	)	$	(657	)	$	588
chemical
Plant closure and impairments	$	—		$	(90	)	$	—
Total Chemical	$	—		$	(90	)	$	—
midstream, marketing and other
No significant items affecting earnings	$	—		$	—		$	—
Total Midstream, Marketing and Other	$	—		$	—		$	—
corporate
Gain on sale of Lyondell shares	$	—		$	—		$	326
Debt purchase expense		—			—			(167	)
Facility closure		—			—			(47	)
Severance charge		(40	)		—			(25	)
Railcar leases		(15	)		—			—
Tax effect of pre-tax adjustments		77			238			(2	)
Discontinued operations, net of tax		(12	)		18			322
Total Corporate	$	10		$	256		$	407

(a)

Amounts shown after tax.

Taxes

Deferred tax liabilities, net of deferred tax assets of $1.5 billion, were $2.8 billion at December 31, 2009. The current portion of the deferred tax assets of $280 million is included in prepaid expenses and other. The deferred tax assets, net of allowances, are expected to be realized through future operating income and reversal of temporary differences.

Worldwide Effective Tax Rate

The following table sets forth the calculation of the worldwide effective tax rate for income from continuing operations:

In millions	2009			2008			2007
EARNINGS
Oil and Gas	$	4,735		$	10,651		$	7,957
Chemical		389			669			601
Midstream, Marketing and Other		235			520			367
Unallocated Corporate Items		(514	)		(372	)		(340	)
Pre-tax income		4,845			11,468			8,585

Income tax expense
Federal and State		686			2,188			1,558
Foreign		1,232			2,441			1,949
Total		1,918			4,629			3,507

Income from continuing operations	$	2,927		$	6,839		$	5,078

Worldwide effective tax rate		40%			40%			41%

Occidental’s 2009 worldwide tax rate was 40 percent, which is comparable to 2008 and 2007.

Consolidated Results of Operations

The changes in the following components of Occidental's results of operations are discussed below:

Selected Revenue and Other Income Items

In millions	2009		2008		2007
Net sales	$	15,403	$	24,217	$	18,784
Interest, dividends and other income	$	118	$	236	$	355
Gains on disposition of assets, net	$	10	$	27	$	874

The decrease in net sales in 2009, compared to 2008, was caused by lower oil and gas and chemical product prices, partially offset by higher volumes. Of the price-related decrease in sales, approximately 90 percent was associated with oil and gas. The increase in net sales in 2008, compared to 2007, reflects higher average oil and natural gas prices and higher oil and gas volumes, including increased volumes from Dolphin, offset by lower volumes from PSCs and the new Libya contract.

The decrease in interest, dividends and other income in 2009, compared to 2008, reflects lower interest income due to lower cash balances and interest rates. Interest, dividends and other income in 2007 included gains related to litigation settlements of $112 million.

Gains on disposition of assets, net in 2007, included a $326 million gain from the sale of 21 million shares of Lyondell, a $412 million gain from the sale of Occidental’s interest in a Russian joint venture and a gain of $103 million from the sale of exploration properties in West Africa.

Selected Expense Items

In millions	2009		2008		2007
Cost of sales (a)	$	5,360	$	7,423	$	6,454
Selling, general and administrative and other operating expenses	$	1,350	$	1,257	$	1,320
Depreciation, depletion and amortization	$	3,117	$	2,710	$	2,379
Taxes other than on income	$	433	$	588	$	414
Exploration expense	$	267	$	327	$	364
Charges for impairments	$	170	$	647	$	58
Interest and debt expense, net	$	140	$	129	$	339

(a)

Excludes DD&A of $3,067 million in 2009, $2,664 million in 2008 and $2,338 million in 2007.

Cost of sales decreased in 2009, compared to 2008, mainly due to lower chemicals volumes and lower feedstock and energy costs, which collectively represented approximately 73 percent of the decrease. The remaining portion of the decrease was due to lower oil and gas and midstream and marketing operating costs.

Cost of sales increased in 2008, compared to 2007, due to higher oil and natural gas volumes, as well as higher maintenance, workover, field operating and feedstock costs.

Selling, general and administrative and other operating expenses increased in 2009, compared to 2008, due to lower foreign exchange gains, increased severance expense and idling fees for rigs.

Selling, general and administrative and other operating expenses decreased in 2008, compared to 2007, due to a decrease in equity compensation expense and foreign exchange gains of $91 million, which were partially offset by rig contract termination charges of $58 million.

DD&A increased in 2009, compared to 2008, due to higher DD&A rates and higher volumes from Argentina, Oman and the U.S.

DD&A increased in 2008, compared to 2007, due to the increase in sales volumes, mainly from Dolphin, and higher DD&A rates caused by the cost of new proved reserve additions being higher than the existing average rates, especially in Latin America and the Middle East/North Africa. The 2008 amount also included a charge of $42 million for domestic asset impairments.

Taxes, other than on income, decreased mainly due to lower production taxes in Permian and Midcontinent Gas resulting from lower prices in 2009, compared to 2008, and lower ad valorem taxes due to decreased property values in 2009, compared to 2008.

The increase in taxes other than on income in 2008, compared to 2007, reflects higher production taxes resulting from higher net sales as well as an increase in ad valorem taxes due to increases in oil and gas property values.

Exploration expense decreased in 2009, compared to 2008, due to lower international exploration activities, partially offset by a higher success rate in California exploration activities.

Exploration expense decreased in 2008, compared to 2007, due to decreases in Colombia and Middle East/North Africa. The 2007 amount included expenses for exploration properties in West Africa, which were sold in the third quarter of 2007.

Charges for impairments in 2009 related to certain Argentine producing properties, while these charges in 2008 related to undeveloped acreage in Argentina and Yemen and chemical plant closure and impairments.

Interest and debt expense, net increased in 2009, compared to 2008, due to higher debt levels during 2009 compared to 2008, partially offset by lower interest rates.

Interest and debt expense in 2007 included debt repayment expenses of $167 million. Excluding the effect of the 2007 debt repayment charges, interest expense decreased in 2008, compared to 2007, due to lower average debt levels and lower effective interest rates.

Selected Other Items

(Income)/expense (in millions)	2009			2008			2007
Provision for income taxes	$	1,918		$	4,629		$	3,507
Income from equity investments	$	(227	)	$	(213	)	$	(82	)
Discontinued operations, net	$	(12	)	$	18		$	322
Net income attributable to noncontrolling interest	$	(51	)	$	(116	)	$	(75	)

Provision for domestic and foreign income taxes decreased in 2009, compared to 2008, due to lower income before taxes in 2009. The worldwide effective tax rate in 2009 was comparable to 2008. The increase in the provision for income taxes in 2008, compared to 2007, was due to higher income before taxes in 2008. The 2008 worldwide effective tax rate was comparable to 2007.

The increase in income from equity investments in 2008, compared to 2007, was due to higher income from the Dolphin Pipeline.

Discontinued operations in 2007 included after-tax income of $326 million for the operations of Horn Mountain and Pakistan that were sold as part of a series of transactions with BP as well as the results of operations of these assets before disposal.

Net income attributable to noncontrolling interest decreased in 2009, compared to 2008, due to lower net income in Colombia resulting from lower oil prices.

Consolidated Analysis of Financial Position

The changes in the following components of Occidental’s balance sheet are discussed below:

Selected Balance Sheet Components

In millions	2009		2008
CURRENT ASSETS
Cash and cash equivalents	$	1,230	$	1,777
Trade receivables, net		4,142		3,117
Marketing and trading assets and other		1,203		1,012
Inventories		1,081		958
Prepaid expenses and other		430		308
Total current assets	$	8,086	$	7,172
Investments in unconsolidated entities	$	1,732	$	1,263
Property, plant and equipment, net	$	33,645	$	32,266
Long-term receivables and other assets, net	$	766	$	836