|
Delaware
|
95-4035997
|
|
(State or other jurisdiction of
|
(I.R.S. Employer
|
|
incorporation or organization)
|
Identification No.)
|
|
10889 Wilshire Boulevard
|
|
|
Los Angeles, California
|
90024
|
|
(Address of principal executive offices)
|
(Zip Code)
|
|
Class
|
Outstanding at June 30, 2012 |
|
||
|
Common stock $.20 par value
|
809,947,385 shares |
|
PAGE
|
||||
|
Part I
|
Financial Information
|
|||
|
Item 1.
|
Financial Statements (unaudited)
|
|||
|
Consolidated Condensed Balance Sheets —
|
||||
|
June 30, 2012 and December 31, 2011
|
2
|
|||
|
Consolidated Condensed Statements of Income —
|
||||
|
Three and six months ended June 30, 2012 and 2011
|
4
|
|||
|
Consolidated Condensed Statements of Comprehensive Income —
|
||||
|
Three and six months ended June 30, 2012 and 2011
|
5
|
|||
|
Consolidated Condensed Statements of Cash Flows —
|
||||
| Six months ended June 30, 2012 and 2011 | 6 | |||
|
Notes to Consolidated Condensed Financial Statements
|
7
|
|||
|
Item 2.
|
Management’s Discussion and Analysis of Financial
|
|||
|
Condition and Results of Operations
|
19
|
|||
|
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk
|
27
|
||
|
Item 4.
|
Controls and Procedures
|
28
|
||
|
Part II
|
Other Information
|
|||
|
Item 1.
|
Legal Proceedings
|
29
|
||
|
Item 2.
|
Share Repurchase Activities
|
29
|
||
| Item 4. | Mine Safety Disclosures | 29 | ||
|
Item 6.
|
Exhibits
|
30
|
||
|
Item 1.
|
Financial Statements (unaudited)
|
|
2012
|
2011
|
||||||
|
ASSETS
|
|||||||
|
CURRENT ASSETS
|
|||||||
|
Cash and cash equivalents
|
$
|
4,410
|
$
|
3,781
|
|||
|
Trade receivables, net
|
4,959
|
5,395
|
|||||
|
Marketing and trading assets and other
|
911
|
916
|
|||||
|
Inventories
|
1,499
|
1,069
|
|||||
|
Prepaid expenses and other
|
354
|
381
|
|||||
|
Total current assets
|
12,133
|
11,542
|
|||||
|
INVESTMENTS IN UNCONSOLIDATED ENTITIES
|
1,972
|
2,072
|
|||||
|
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation, depletion and amortization of $25,805 at June 30, 2012 and $23,687 at December 31, 2011
|
49,397
|
45,684
|
|||||
|
LONG-TERM RECEIVABLES AND OTHER ASSETS, NET
|
781
|
746
|
|||||
|
TOTAL ASSETS
|
$
|
64,283
|
$
|
60,044
|
|||
|
The accompanying notes are an integral part of these consolidated financial statements.
|
|||||||
|
2012
|
2011
|
||||||
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|||||||
|
CURRENT LIABILITIES
|
|||||||
|
Accounts payable
|
$
|
5,453
|
$
|
5,304
|
|||
|
Accrued liabilities
|
2,434
|
2,533
|
|||||
|
Domestic and foreign income taxes
|
―
|
110
|
|||||
|
Total current liabilities
|
7,887
|
7,947
|
|||||
|
LONG-TERM DEBT, NET
|
7,620
|
5,871
|
|||||
|
DEFERRED CREDITS AND OTHER LIABILITIES
|
|||||||
|
Deferred and other domestic and foreign income taxes
|
5,644
|
4,846
|
|||||
|
Other
|
3,582
|
3,760
|
|||||
|
9,226
|
8,606
|
||||||
|
STOCKHOLDERS' EQUITY
|
|||||||
|
Common stock, at par value
|
177
|
177
|
|||||
|
Treasury stock
|
(4,660
|
)
|
(4,502
|
)
|
|||
|
Additional paid-in capital
|
7,371
|
7,286
|
|||||
|
Retained earnings
|
37,152
|
35,142
|
|||||
|
Accumulated other comprehensive loss
|
(490
|
)
|
(483
|
)
|
|||
|
Total stockholders’ equity
|
39,550
|
37,620
|
|||||
|
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
|
$
|
64,283
|
$
|
60,044
|
|||
|
The accompanying notes are an integral part of these consolidated financial statements.
|
|||||||
|
Three months ended
|
Six months ended
|
||||||||||||
|
June 30
|
June 30
|
||||||||||||
|
2012
|
2011
|
2012
|
2011
|
||||||||||
|
REVENUES AND OTHER INCOME
|
|||||||||||||
|
Net sales
|
$
|
5,768
|
$
|
6,173
|
$
|
12,036
|
$
|
11,899
|
|||||
|
Interest, dividends and other income
|
24
|
35
|
38
|
66
|
|||||||||
|
Gains on disposition of assets, net
|
―
|
―
|
1
|
22
|
|||||||||
|
5,792
|
6,208
|
12,075
|
11,987
|
||||||||||
|
COSTS AND OTHER DEDUCTIONS
|
|||||||||||||
|
Cost of sales
|
3,060
|
2,720
|
6,010
|
5,246
|
|||||||||
|
Selling, general and administrative and other operating expenses
|
335
|
388
|
769
|
829
|
|||||||||
|
Taxes other than on income
|
167
|
162
|
341
|
313
|
|||||||||
|
Exploration expense
|
96
|
62
|
194
|
146
|
|||||||||
|
Interest and debt expense, net
|
28
|
27
|
58
|
242
|
|||||||||
|
3,686
|
3,359
|
7,372
|
6,776
|
||||||||||
|
Income before income taxes and other items
|
2,106
|
2,849
|
4,703
|
5,211
|
|||||||||
|
Provision for domestic and foreign income taxes
|
875
|
1,111
|
2,014
|
2,165
|
|||||||||
|
Income from equity investments
|
(101
|
)
|
(81
|
)
|
(203
|
)
|
(178
|
)
|
|||||
|
Income from continuing operations
|
1,332
|
1,819
|
2,892
|
3,224
|
|||||||||
|
Discontinued operations, net
|
(4
|
)
|
(2
|
)
|
(5
|
)
|
142
|
||||||
|
NET INCOME
|
$
|
1,328
|
$
|
1,817
|
$
|
2,887
|
$
|
3,366
|
|||||
|
BASIC EARNINGS PER COMMON SHARE
|
|||||||||||||
|
Income from continuing operations
|
$
|
1.64
|
$
|
2.23
|
$
|
3.56
|
$
|
3.96
|
|||||
|
Discontinued operations, net
|
―
|
―
|
(0.01
|
)
|
0.18
|
||||||||
|
BASIC EARNINGS PER COMMON SHARE
|
$
|
1.64
|
$
|
2.23
|
$
|
3.55
|
$
|
4.14
|
|||||
|
DILUTED EARNINGS PER COMMON SHARE
|
|||||||||||||
|
Income from continuing operations
|
$
|
1.64
|
$
|
2.23
|
$
|
3.56
|
$
|
3.96
|
|||||
|
Discontinued operations, net
|
―
|
―
|
(0.01
|
)
|
0.17
|
||||||||
|
DILUTED EARNINGS PER COMMON SHARE
|
$
|
1.64
|
$
|
2.23
|
$
|
3.55
|
$
|
4.13
|
|||||
|
DIVIDENDS PER COMMON SHARE
|
$
|
0.54
|
$
|
0.46
|
$
|
1.08
|
$
|
0.92
|
|||||
|
The accompanying notes are an integral part of these consolidated financial statements.
|
|||||||||||||
|
Three months ended
|
Six months ended
|
||||||||||||
|
June 30
|
June 30
|
||||||||||||
|
2012
|
2011
|
2012
|
2011
|
||||||||||
|
Net income
|
$
|
1,328
|
$
|
1,817
|
$
|
2,887
|
$
|
3,366
|
|||||
|
Other comprehensive income (loss) items:
|
|||||||||||||
|
Foreign currency translation adjustments
|
(12
|
)
|
7
|
(8
|
)
|
13
|
|||||||
|
Pension and postretirement adjustments (a)
|
8
|
7
|
13
|
14
|
|||||||||
|
Unrealized (losses) gains on derivatives (b)
|
(2
|
)
|
21
|
12
|
(4
|
)
|
|||||||
|
Reclassification of realized losses (gains) on derivatives and other (c)
|
4
|
35
|
(24
|
)
|
49
|
||||||||
|
Other comprehensive income (loss), net of tax
|
(2
|
)
|
70
|
(7
|
)
|
72
|
|||||||
|
Comprehensive income
|
$
|
1,326
|
$
|
1,887
|
$
|
2,880
|
$
|
3,438
|
|||||
|
(a)
|
Net of tax (expense) of $(5) and $(4) for the three months ended June 30, 2012 and 2011, respectively, and $(8) for each of the six month periods ended June 30, 2012 and 2011.
|
|
|
(b)
|
Net of tax (expense)/benefit of zero and $(13) for the three months ended June 30, 2012 and 2011, respectively, and $(8) and $2 for the six months ended June 30, 2012 and 2011.
|
|
|
(c)
|
Net of tax (expense)/benefit of $(2) and $(19) for the three months ended June 30, 2012 and 2011, respectively, and $15 and $(27) for the six months ended June 30, 2012 and 2011.
|
|
2012
|
2011
|
||||||
|
CASH FLOW FROM OPERATING ACTIVITIES
|
|||||||
|
Net income
|
$
|
2,887
|
$
|
3,366
|
|||
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|||||||
|
Discontinued operations, net
|
5
|
(142
|
)
|
||||
|
Depreciation, depletion and amortization of assets
|
2,172
|
1,729
|
|||||
|
Deferred income tax provision
|
794
|
517
|
|||||
|
Other noncash charges to income
|
110
|
205
|
|||||
|
Gains on disposition of assets, net
|
(1
|
)
|
(22
|
)
|
|||
|
Undistributed earnings from equity investments
|
(8
|
)
|
(25
|
)
|
|||
|
Dry hole and impairment expense
|
166
|
94
|
|||||
|
Changes in operating assets and liabilities, net
|
16
|
(125
|
)
|
||||
|
Other operating, net
|
(166
|
)
|
(25
|
)
|
|||
|
Operating cash flow from continuing operations
|
5,975
|
5,572
|
|||||
|
Operating cash flow from discontinued operations, net of taxes
|
(17
|
)
|
(8
|
)
|
|||
|
Net cash provided by operating activities
|
5,958
|
5,564
|
|||||
|
CASH FLOW FROM INVESTING ACTIVITIES
|
|||||||
|
Capital expenditures
|
(5,125
|
)
|
(2,958
|
)
|
|||
|
Payments for purchases of assets and businesses
|
(1,081
|
)
|
(3,905
|
)
|
|||
|
Sales of assets, net
|
5
|
45
|
|||||
|
Other, net
|
39
|
(43
|
)
|
||||
|
Investing cash flow from continuing operations
|
(6,162
|
)
|
(6,861
|
)
|
|||
|
Investing cash flow from discontinued operations
|
―
|
2,570
|
|||||
|
Net cash used by investing activities
|
(6,162
|
)
|
(4,291
|
)
|
|||
|
CASH FLOW FROM FINANCING ACTIVITIES
|
|||||||
|
Proceeds from long-term debt
|
1,736
|
―
|
|||||
|
Proceeds from short-term borrowings, net
|
―
|
500
|
|||||
|
Payments of long-term debt
|
―
|
(1,523
|
)
|
||||
|
Proceeds from issuance of common stock
|
58
|
5
|
|||||
|
Purchases of treasury stock
|
(152
|
)
|
(43
|
)
|
|||
|
Distributions to noncontrolling interest
|
―
|
(121
|
)
|
||||
|
Cash dividends paid
|
(813
|
)
|
(685
|
)
|
|||
|
Other, net
|
4
|
10
|
|||||
|
Net cash provided (used) by financing activities
|
833
|
(1,857
|
)
|
||||
|
Increase (decrease) in cash and cash equivalents
|
629
|
(584
|
)
|
||||
|
Cash and cash equivalents—beginning of period
|
3,781
|
2,578
|
|||||
|
Cash and cash equivalents—end of period
|
$
|
4,410
|
$
|
1,994
|
|||
|
The accompanying notes are an integral part of these consolidated financial statements.
|
|||||||
|
1.
|
General
|
|
In these unaudited consolidated condensed financial statements, "Occidental" means Occidental Petroleum Corporation, a Delaware corporation (OPC), or OPC and one or more entities in which it owns a controlling interest (subsidiaries). Occidental has made its disclosures in accordance with United States generally accepted accounting principles as they apply to interim reporting, and condensed or omitted, as permitted by the Securities and Exchange Commission’s rules and regulations, certain information and disclosures normally included in consolidated financial statements and the notes. The consolidated condensed financial statements should be read in conjunction with the consolidated financial statements and the notes thereto in Occidental’s Annual Report on Form 10-K for the year ended December 31, 2011.
|
|
|
In the opinion of Occidental’s management, the accompanying consolidated condensed financial statements contain all adjustments (consisting of normal recurring adjustments) necessary to fairly present Occidental’s consolidated financial position as of June 30, 2012, and the consolidated statements of income, comprehensive income and cash flows for the three and six months ended June 30, 2012 and 2011, as applicable. The income and cash flows for the periods ended June 30, 2012 and 2011 are not necessarily indicative of the income or cash flows to be expected for the full year.
|
|
|
Certain financial statements and notes for the prior year have been reclassified to conform to the 2012 presentation.
|
|
|
2.
|
Asset Acquisitions, Dispositions and Other Transactions
|
|
During the six months ended June 30, 2012, Occidental paid approximately $1.0 billion for domestic oil and gas properties, mainly in the Williston Basin, South Texas and the Permian Basin.
|
|
|
In June 2012, Occidental issued $1.75 billion of debt which comprised $1.25 billion of 2.70-percent senior unsecured notes due 2023 and $500 million of 1.50-percent senior unsecured notes due 2018. Occidental received net proceeds of approximately $1.74 billion. Interest on the notes will be payable semi-annually in arrears in February and August of each year for both series of notes.
|
|
|
3.
|
Accounting and Disclosure Changes
|
|
Fair Value Measurements – Beginning in the quarter ended March 31, 2012, Occidental enhanced its fair value measurement application and disclosures as a result of adopting new requirements issued by the Financial Accounting Standards Board in May 2011. The new rules include revisions to the standards for the use of fair value measurements and additional disclosures for: (i) all transfers between Level 1 and Level 2 of the fair value hierarchy; (ii) Level 3 measurements; and (iii) hierarchy classifications used for assets and liabilities whose fair value is disclosed only in the footnotes. The new rules did not have a material impact on Occidental.
|
|
|
4.
|
Supplemental Cash Flow Information
|
|
Occidental paid United States federal, state and foreign income taxes for continuing operations of approximately $1.3 billion and $1.6 billion during the six months ended June 30, 2012 and 2011, respectively. Interest paid totaled approximately $95 million and $236 million (including $154 million for early debt extinguishment premium) for the six months ended June 30, 2012 and 2011, respectively.
|
|
5.
|
Inventories
|
|
A portion of inventories is valued under the LIFO method. The valuation of LIFO inventory for interim periods is based on Occidental’s estimates of year-end inventory levels and costs. Inventories as of June 30, 2012, and December 31, 2011, consisted of the following (in millions):
|
|
2012
|
2011
|
||||||||||
|
Raw materials
|
$
|
65
|
$
|
69
|
|||||||
|
Materials and supplies
|
534
|
443
|
|||||||||
|
Finished goods
|
998
|
655
|
|||||||||
|
1,597
|
1,167
|
||||||||||
|
LIFO reserve
|
(98
|
)
|
(98
|
)
|
|||||||
|
Total
|
$
|
1,499
|
$
|
1,069
|
|||||||
|
6.
|
Environmental Liabilities and Expenditures
|
|
Occidental’s operations are subject to stringent federal, state, local and foreign laws and regulations related to improving or maintaining environmental quality. Occidental’s environmental compliance costs have generally increased over time and are expected to rise in the future. Occidental factors environmental expenditures for its operations into its business planning process as an integral part of producing quality products responsive to market demand.
|
|
|
The laws that require or address environmental remediation, including the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) and similar federal, state, local and foreign laws, may apply retroactively and regardless of fault, the legality of the original activities or the current ownership or control of sites. OPC or certain of its subsidiaries participate in or actively monitor a range of remedial activities and government or private proceedings under these laws with respect to alleged past practices at operating, closed and third-party sites. Remedial activities may include one or more of the following: investigation involving sampling, modeling, risk assessment or monitoring; cleanup measures including removal, treatment or disposal; or operation and maintenance of remedial systems. The environmental proceedings seek funding or performance of remediation and, in some cases, compensation for alleged property damage, punitive damages, civil penalties, injunctive relief and government oversight costs.
|
|
|
As of June 30, 2012, Occidental participated in or monitored remedial activities or proceedings at 164 sites. The following table presents Occidental’s environmental remediation reserves as of June 30, 2012, the current portion of which is included in accrued liabilities ($79 million) and the remainder in deferred credits and other liabilities — other ($257 million). The reserves are grouped as environmental remediation sites listed or proposed for listing by the United States Environmental Protection Agency on the CERCLA National Priorities List (NPL sites) and three categories of non-NPL sites — third-party sites, Occidental-operated sites and closed or non-operated Occidental sites.
|
|
Number of Sites
|
Reserve Balance
(in millions)
|
|||||||||
|
NPL sites
|
37
|
$
|
56
|
|||||||
|
Third-party sites
|
76
|
82
|
||||||||
|
Occidental-operated sites
|
22
|
114
|
||||||||
|
Closed or non-operated Occidental sites
|
29
|
84
|
||||||||
|
Total
|
164
|
$
|
336
|
|||||||
|
As of June 30, 2012, Occidental’s environmental reserves exceeded $10 million at 10 of the 164 sites described above, and 114 of the sites had reserves from zero to $1 million each. Occidental expects to expend funds corresponding to approximately half of the current environmental reserves at the sites described above over the next four years and the balance at these sites over the subsequent 10 or more years. Occidental believes its range of reasonably possible additional losses beyond those liabilities recorded for environmental remediation at these sites could be up to $370 million. The status of Occidental’s involvement with the sites and related significant assumptions have not changed materially since December 31, 2011. For management’s opinion with respect to environmental matters, refer to Note 7.
|
|
|
7.
|
Lawsuits, Claims, Commitments and Other Contingencies
|
|
OPC or certain of its subsidiaries are involved, in the normal course of business, in lawsuits, claims and other legal proceedings that seek, among other things, compensation for alleged personal injury, breach of contract, property damage or other losses, punitive damages, civil penalties or injunctive or declaratory relief. OPC or certain of its subsidiaries also have been involved in proceedings under CERCLA and similar federal, state, local and foreign environmental laws. These environmental proceedings seek funding or performance of remediation and, in some cases, compensation for alleged property damage, punitive damages, civil penalties and injunctive relief; however, Occidental or such subsidiaries are usually among many companies in these proceedings and have to date been successful in sharing response costs with other financially sound companies. Occidental accrues reserves for currently outstanding lawsuits, claims and proceedings when it is probable that a liability has been incurred and the liability can be reasonably estimated. Occidental has disclosed its reserve balance for environmental matters. Reserve balances for other matters as of June 30, 2012, and December 31, 2011, were not material to Occidental's consolidated balance sheets. Occidental also evaluates the amount of reasonably possible losses that it could incur as a result of the matters mentioned above. Occidental has disclosed its range of reasonably possible additional losses for sites where it is a participant in environmental remediation. Occidental believes that other reasonably possible losses that it could incur in excess of reserves accrued on the balance sheet would not be material to its consolidated financial position or results of operations.
|
|
|
During the course of its operations, Occidental is subject to audit by tax authorities for varying periods in various federal, state, local and foreign tax jurisdictions. While the audits of corporate tax returns for taxable years through 2009 have concluded for United States federal income tax purposes, subsequent taxable years, including the current year, are under various stages of review by the United States Internal Revenue Service pursuant to its Compliance Assurance Program. Taxable years from 2000 through the current year remain subject to examination by foreign and state government tax authorities in certain jurisdictions. In certain of these jurisdictions, tax authorities are in various stages of auditing Occidental’s income taxes. During the course of tax audits, disputes have arisen and other disputes may arise as to facts and matters of law. Occidental believes that the resolution of outstanding tax matters would not have a material adverse effect on its consolidated financial position or results of operations.
|
|
|
OPC, its subsidiaries or both have indemnified various parties against specified liabilities that those parties might incur in the future in connection with purchases and other transactions that they have entered into with Occidental. These indemnities usually are contingent upon the other party incurring liabilities that reach specified thresholds. As of June 30, 2012, Occidental is not aware of circumstances that it believes would reasonably be expected to lead to indemnity claims that would result in payments materially in excess of reserves.
|
|
8.
|
Retirement Plans and Postretirement Benefits
|
|
The following table sets forth the components of the net periodic benefit costs for Occidental’s defined benefit pension and postretirement benefit plans for the three and six months ended June 30, 2012 and 2011 (in millions):
|
|
Three months ended June 30
|
2012
|
2011
|
|||||||||||||||
|
Net Periodic Benefit Costs
|
Pension
Benefit
|
Postretirement
Benefit
|
Pension
Benefit
|
Postretirement
Benefit
|
|||||||||||||
|
Service cost
|
$
|
3
|
$
|
6
|
$
|
5
|
$
|
5
|
|||||||||
|
Interest cost
|
7
|
11
|
8
|
12
|
|||||||||||||
|
Expected return on plan assets
|
(8
|
)
|
―
|
(8
|
)
|
―
|
|||||||||||
|
Recognized actuarial loss
|
5
|
9
|
3
|
7
|
|||||||||||||
|
Total
|
$
|
7
|
$
|
26
|
$
|
8
|
$
|
24
|
|||||||||
|
Six months ended June 30
|
2012
|
2011
|
|||||||||||||||
|
Net Periodic Benefit Costs
|
Pension
Benefit
|
Postretirement
Benefit
|
Pension
Benefit
|
Postretirement
Benefit
|
|||||||||||||
|
Service cost
|
$
|
6
|
$
|
13
|
$
|
10
|
$
|
11
|
|||||||||
|
Interest cost
|
14
|
22
|
15
|
23
|
|||||||||||||
|
Expected return on plan assets
|
(16
|
)
|
―
|
(16
|
)
|
―
|
|||||||||||
|
Recognized actuarial loss
|
10
|
17
|
6
|
15
|
|||||||||||||
|
Total
|
$
|
14
|
$
|
52
|
$
|
15
|
$
|
49
|
|||||||||
|
Occidental contributed approximately $2 million in each of the three-month periods ended June 30, 2012 and 2011, and approximately $3 million and $4 million in the six-month periods ended June 30, 2012 and 2011, respectively, to its defined benefit pension plans.
|
|
|
9.
|
Fair Value Measurements
|
|
Occidental has categorized its assets and liabilities that are measured at fair value, based on the priority of the inputs to the valuation techniques, in a three-level fair value hierarchy: Level 1 ― using quoted prices in active markets for identical assets or liabilities; Level 2 ― using observable inputs other than quoted prices for identical assets or liabilities; and Level 3 ― using unobservable inputs. Transfers between levels, if any, are recognized at the end of each reporting period.
|
|
|
Fair Values ― Recurring
|
|
|
Occidental primarily applies the market approach for recurring fair value measurements, maximizes its use of observable inputs and minimizes its use of unobservable inputs. Occidental utilizes the mid-point price between bid and ask prices for valuing the majority of its assets and liabilities measured and reported at fair value. In addition to using market data, Occidental makes assumptions in valuing its assets and liabilities, including assumptions about the risks inherent in the inputs to the valuation technique. For assets and liabilities carried at fair value, Occidental measures fair value using the following methods:
|
|
Commodity derivatives ― Occidental values exchange-cleared commodity derivatives using closing prices provided by the exchange as of the balance sheet date. These derivatives are classified as Level 1. Over-the-Counter (OTC) financial commodity contracts, foreign exchange contracts, options and physical commodity forward purchase and sale contracts, including contracts that meet the accounting definition of an embedded derivative, are generally valued using quotations provided by brokers or industry-standard models that consider various inputs, including quoted forward prices for commodities, time value, volatility factors, credit risk and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Substantially all of these inputs are observable in the marketplace throughout the full term of the instrument, can be derived from observable data or are supported by observable prices at which transactions are executed in the marketplace. Occidental generally classifies these measurements as Level 2.
|
||
|
Occidental generally uses an income approach to measure fair value when there is not a market-observable price for an identical or similar asset or liability. This approach utilizes management’s assumptions regarding expectations of projected cash flows, and discounts the expected cash flows using a risk-adjusted risk-free discount rate.
|
||
|
The following tables provide fair value measurement information for such assets and liabilities that are measured on a recurring basis as of June 30, 2012, and December 31, 2011 (in millions):
|
||
|
Fair Value Measurements at
June 30, 2012 Using
|
||||||||||||||||
|
Description
|
Level 1
|
Level 2
|
Level 3
|
Netting and
Collateral
|
(a)
|
Total Fair
Value
|
||||||||||
|
Assets:
|
||||||||||||||||
|
Commodity derivatives
|
$
|
684
|
$
|
745
|
$
|
―
|
$
|
(1,197
|
)
|
$
|
232
|
|||||
|
Liabilities:
|
||||||||||||||||
|
Commodity derivatives
|
$
|
627
|
$
|
893
|
$
|
―
|
$
|
(1,272
|
)
|
$
|
248
|
|||||
|
Fair Value Measurements at
December 31, 2011 Using
|
||||||||||||||||
|
Description
|
Level 1
|
Level 2
|
Level 3
|
Netting and
Collateral
|
(a)
|
Total Fair
Value
|
||||||||||
|
Assets:
|
||||||||||||||||
|
Commodity derivatives
|
$
|
310
|
$
|
640
|
$
|
―
|
$
|
(758
|
)
|
$
|
192
|
|||||
|
Liabilities:
|
||||||||||||||||
|
Commodity derivatives
|
$
|
311
|
$
|
652
|
$
|
―
|
$
|
(782
|
)
|
$
|
181
|
|||||
|
(a)
|
Represents the impact of netting assets, liabilities and collateral when a legal right of offset exists.
|
|
Fair Values - Nonrecurring
|
|
|
During the three and six months ended June 30, 2012 and 2011, Occidental did not have any assets or liabilities measured at fair value on a non-recurring basis.
|
|
|
Other Financial Instruments
|
|
|
The carrying amounts of cash and cash equivalents and other on-balance-sheet financial instruments, other than fixed-rate debt, approximate fair value. The cost, if any, to terminate off-balance-sheet financial instruments is not significant. Occidental estimates the fair value of fixed-rate debt based on the quoted market prices for those instruments or on quoted market yields for similarly rated debt instruments, taking into account such similar instruments’ maturities. The estimated fair values of Occidental’s debt, as of June 30, 2012, and December 31, 2011, which were classified as Level 1, were approximately $8.2 billion and $6.4 billion, compared to carrying values of $7.6 billion and $5.9 billion, respectively.
|
|
|
10.
|
Derivatives
|
|
Derivatives are carried at fair value and on a net basis when a legal right of offset exists with the same counterparty. Occidental applies hedge accounting when transactions meet specified criteria for such treatment and management elects to do so. If a derivative does not qualify or is not designated and documented as a cash-flow hedge, any fair value gains or losses are recognized in earnings in the current period.
|
|
|
Through its marketing and trading activities and within its established policy controls and procedures, Occidental uses a variety of derivative instruments to improve realized prices for its oil and gas. Additionally, Occidental’s Phibro trading unit engages in trading activities using derivatives for the purpose of generating profits mainly from market price changes of commodities. In the past, Occidental has also used derivatives to reduce its exposure to price volatility on a small portion of its oil and gas production.
|
|
|
Cash-Flow Hedges
|
|
|
Through December 31, 2011, Occidental held a series of collar agreements for 12,000 barrels of oil per day of its existing domestic production that qualified as cash-flow hedges at a weighted-average strike price that ranged from $32.92 to $46.35.
|
|
|
In 2009, Occidental entered into financial swap agreements related to the sale of a portion of its existing natural gas production from the Rocky Mountain region of the United States that qualified as cash-flow hedges and terminated as of March 31, 2012. These swap agreements hedged the sale of 50 million cubic feet of natural gas per day at an average strike price of $6.07.
|
|
|
Occidental’s marketing and trading operations store natural gas purchased from third parties at Occidental’s North American leased storage facilities. Derivative instruments are used to fix margins on the future sales of the stored volumes through March 31, 2013. As of June 30, 2012, and December 31, 2011, Occidental had approximately 17 billion cubic feet and 25 billion cubic feet of natural gas held in storage, respectively. As of June 30, 2012, and December 31, 2011, Occidental had cash-flow hedges for the forecast sale, to be settled by physical delivery, of approximately 23 billion cubic feet and 35 billion cubic feet of this stored natural gas, respectively.
|
|
The following table presents the pre-tax gains and losses recognized in, and reclassified from, Accumulated Other Comprehensive Income (AOCI) and recognized in income (net sales), including any hedge ineffectiveness, for derivative instruments classified as cash-flow hedges for the three and six months ended June 30, 2012 and 2011 (in millions):
|
|
Periods ended June 30
|
||||||||||||||
|
Three Months
|
Six Months
|
|||||||||||||
|
Commodity Contracts – cash-flow hedges
|
2012
|
2011
|
2012
|
2011
|
||||||||||
|
Unrealized gains (losses) recognized in AOCI
|
$
|
(2
|
)
|
$
|
34
|
$
|
20
|
$
|
(6
|
)
|
||||
|
Losses (gains) reclassified into income
|
$
|
6
|
$
|
54
|
$
|
(39
|
)
|
$
|
76
|
|||||
|
Gains recognized in income – ineffective portion
|
$
|
―
|
$
|
1
|
$
|
―
|
$
|
―
|
||||||
|
The following table summarizes net after-tax derivative activity recorded in AOCI for the three and six months ended June 30, 2012 and 2011 (in millions):
|
|
Periods ended June 30
|
||||||||||||||
|
Three Months
|
Six Months
|
|||||||||||||
|
2012
|
2011
|
2012
|
2011
|
|||||||||||
|
Beginning balance ― AOCI
|
$
|
(13
|
)
|
$
|
(122
|
)
|
$
|
1
|
$
|
(111
|
)
|
|||
|
Unrealized gains (losses) recognized in AOCI
|
(2
|
)
|
21
|
12
|
(4
|
)
|
||||||||
|
Losses (gains) reclassified to income
|
4
|
35
|
(24
|
)
|
49
|
|||||||||
|
Ending balance ― AOCI
|
$
|
(11
|
)
|
$
|
(66
|
)
|
$
|
(11
|
)
|
$
|
(66
|
)
|
||
|
Occidental expects that during the next twelve months an insignificant amount of net after-tax derivative losses included in AOCI, based on their valuation as of June 30, 2012, will be reclassified into income.
|
|
|
Derivatives Not Designated as Hedging Instruments
|
|
|
Occidental’s third-party marketing and trading activities focus on purchasing oil, natural gas liquids (NGLs) and gas for resale from partners, producers and third parties whose oil and gas supply is located near its midstream and marketing assets, such as pipelines, processing plants and storage facilities. These purchases allow Occidental to aggregate volumes to maximize prices received for Occidental’s production. The third-party marketing and trading purchase and sales contracts generally approximate each other with respect to aggregate volumes and terms. In addition, Occidental’s Phibro trading unit’s strategy is to profit from market price changes using derivatives not designated as hedging instruments.
|
|
The following table presents gross volumes of Occidental’s commodity derivatives contracts not designated as hedging instruments as of June 30, 2012, and December 31, 2011:
|
|
Volumes
|
|||||||
|
Commodity
|
2012
|
2011
|
|||||
|
Sales contracts related to Occidental’s production
|
|||||||
|
Oil (million barrels)
|
14
|
9
|
|||||
|
Third-party marketing and trading activities
|
|||||||
|
Purchase contracts
|
|||||||
|
Oil (million barrels)
|
158
|
109
|
|||||
|
Natural gas (billion cubic feet)
|
342
|
481
|
|||||
|
Precious metals (million troy ounces)
|
1
|
4
|
|||||
|
Sales contracts
|
|||||||
|
Oil (million barrels)
|
152
|
109
|
|||||
|
Natural gas (billion cubic feet)
|
451
|
723
|
|||||
|
Precious metals (million troy ounces)
|
―
|
1
|
|||||
|
In addition, Occidental typically has certain other commodity trading contracts, such as agricultural products, power and other metals as well as foreign exchange contracts. These contracts were not material to Occidental as of June 30, 2012, and December 31, 2011.
|
|
|
For third-party marketing and trading activities, a substantial portion of sales contracts are typically fulfilled by purchase contracts with substantially identical terms entered into within a short time. For a substantial portion of the sales commitments not satisfied by such contracts as of June 30, 2012, Occidental entered into offsetting contracts after June 30, 2012. Occidental believes it has the ability to fulfill any remaining portion through its equity production or through additional third-party purchases.
|
|
|
Approximately $86 million of losses and $77 million of gains from derivatives not designated as hedging instruments were recognized in net sales for the three months ended June 30, 2012 and 2011, respectively. Approximately $35 million of losses and $106 million of gains from derivatives not designated as hedging instruments were recognized in net sales for the six months ended June 30, 2012 and 2011, respectively.
|
|
Fair Value of Derivatives
|
|
|
The following table presents the gross fair value of Occidental’s outstanding derivatives as of June 30, 2012, and December 31, 2011 (in millions):
|
|
Asset Derivatives
|
Liability Derivatives
|
|||||||||||
|
June 30, 2012
|
Balance Sheet Location
|
Fair Value
|
Balance Sheet Location
|
Fair Value
|
||||||||
|
Cash-flow hedges (a)
|
||||||||||||
|
Commodity contracts
|
Marketing and trading assets and other
|
$
|
4
|
Accrued liabilities
|
$
|
1
|
||||||
|
Derivatives not designated as hedging instruments (a)
|
||||||||||||
|
Commodity contracts
|
Marketing and trading assets and other
|
1,369
|
Accrued liabilities
|
1,465
|
||||||||
|
Long-term receivables and other assets, net
|
56
|
Deferred credits and other liabilities
|
54
|
|||||||||
|
1,425
|
1,519
|
|||||||||||
|
Total gross fair value
|
1,429
|
1,520
|
||||||||||
|
Less: counterparty netting and cash collateral (b)
|
(1,197
|
)
|
(1,272
|
)
|
||||||||
|
Total net fair value of derivatives
|
$
|
232
|
$
|
248
|
||||||||
|
Asset Derivatives
|
Liability Derivatives
|
|||||||||||
|
December 31, 2011
|
Balance Sheet Location
|
Fair Value
|
Balance Sheet Location
|
Fair Value
|
||||||||
|
Cash-flow hedges (a)
|
||||||||||||
|
Commodity contracts
|
Marketing and trading assets and other
|
$
|
41
|
Accrued liabilities
|
$
|
5
|
||||||
|
Long-term receivables and other assets, net
|
3
|
Deferred credits and other liabilities
|
―
|
|||||||||
|
44
|
5
|
|||||||||||
|
Derivatives not designated as hedging instruments (a)
|
||||||||||||
|
Commodity contracts
|
Marketing and trading assets and other
|
835
|
Accrued liabilities
|
887
|
||||||||
|
Long-term receivables and other assets, net
|
71
|
Deferred credits and other liabilities
|
71
|
|||||||||
|
906
|
958
|
|||||||||||
|
Total gross fair value
|
950
|
963
|
||||||||||
|
Less: counterparty netting and cash collateral (c)
|
(758
|
)
|
(782
|
)
|
||||||||
|
Total net fair value of derivatives
|
$
|
192
|
$
|
181
|
||||||||
|
(a)
|
Fair values are presented at gross amounts, including when the derivatives are subject to master netting arrangements and qualify for net presentation in the consolidated balance sheet.
|
||
|
(b)
|
As of June 30, 2012, collateral received of $66 million has been netted against derivative assets and collateral paid of $141 million has been netted against derivative liabilities.
|
||
|
(c)
|
As of December 31, 2011, collateral received of $42 million has been netted against derivative assets and collateral paid of $66 million has been netted against derivative liabilities.
|
|
See Note 9 for fair value measurement disclosures on derivatives.
|
|
Credit Risk
|
|
|
A substantial portion of Occidental’s derivative transaction volume is executed through exchange-traded contracts, which are subject to nominal credit risk as a significant portion of these transactions are executed on a daily margin basis. Collateral of $51 million and $173 million deposited by Occidental for such contracts with clearing houses and brokers, which has not been reflected in the derivative fair value tables, is included in the marketing and trading assets and other balance as of June 30, 2012, and December 31, 2011, respectively.
|
|
|
Occidental executes the rest of its derivative transactions in the over-the-counter (OTC) market. Occidental is subject to counterparty credit risk to the extent the counterparty to the derivatives is unable to meet its settlement commitments. Occidental manages this credit risk by selecting counterparties that it believes to be financially strong, by spreading the credit risk among many such counterparties, by entering into master netting arrangements with the counterparties and by requiring collateral, as appropriate. Occidental actively monitors the creditworthiness of each counterparty and records valuation adjustments to reflect counterparty risk, if necessary.
|
|
|
Certain of Occidental's OTC derivative instruments contain credit-risk-contingent features, primarily tied to credit ratings for Occidental or its counterparties, which may affect the amount of collateral that each would need to post. As of June 30, 2012 and December 31, 2011, Occidental had a net liability of $32 million and $58 million, respectively, which are net of collateral posted of $73 million and $27 million, respectively. Occidental believes that if it had received a one-notch reduction in its credit ratings, it would not have resulted in a material change in its collateral-posting requirements as of June 30, 2012, and December 31, 2011.
|
|
|
11.
|
Industry Segments
|
|
Occidental conducts its operations through three segments: (1) oil and gas; (2) chemical; and (3) midstream, marketing and other (midstream and marketing). The oil and gas segment explores for, develops and produces oil and condensate, NGLs and natural gas. The chemical segment mainly manufactures and markets basic chemicals and vinyls. The midstream and marketing segment gathers, treats, processes, transports, stores, purchases and markets oil, condensate, NGLs, natural gas, carbon dioxide (CO2) and power. It also trades around its assets, including pipelines and storage capacity, and trades oil, NGLs, gas and other commodities.
|
|
|
Earnings of industry segments 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.
|
|
The following tables present Occidental’s industry segment and corporate disclosures (in millions):
|
|
Midstream,
|
Corporate
|
||||||||||||||||
|
Marketing
|
and
|
||||||||||||||||
|
Oil and Gas
|
Chemical
|
and Other
|
Eliminations
|
Total
|
|||||||||||||
|
Three months ended
|
|||||||||||||||||
|
June 30, 2012
|
|||||||||||||||||
|
Net sales
|
$
|
4,495
|
$
|
1,172
|
$
|
262
|
$
|
(161
|
) (a)
|
$
|
5,768
|
||||||
|
Pretax operating profit (loss)
|
$
|
2,043
|
$
|
194
|
$
|
77
|
$
|
(107
|
) (b)
|
$
|
2,207
|
||||||
|
Income taxes
|
―
|
―
|
―
|
(875
|
) (c)
|
(875
|
)
|
||||||||||
|
Discontinued operations, net
|
―
|
―
|
―
|
(4
|
)
|
(4
|
)
|
||||||||||
|
Net income (loss)
|
$
|
2,043
|
$
|
194
|
$
|
77
|
$
|
(986
|
)
|
$
|
1,328
|
||||||
|
Three months ended
|
|||||||||||||||||
|
June 30, 2011
|
|||||||||||||||||
|
Net sales
|
$
|
4,591
|
$
|
1,325
|
$
|
441
|
$
|
(184
|
) (a)
|
$
|
6,173
|
||||||
|
Pretax operating profit (loss)
|
$
|
2,624
|
$
|
253
|
$
|
187
|
$
|
(134
|
) (b)
|
$
|
2,930
|
||||||
|
Income taxes
|
―
|
―
|
―
|
(1,111
|
) (c)
|
(1,111
|
)
|
||||||||||
|
Discontinued operations, net
|
―
|
―
|
―
|
(2
|
)
|
(2
|
)
|
||||||||||
|
Net income (loss)
|
$
|
2,624
|
$
|
253
|
$
|
187
|
$
|
(1,247
|
)
|
$
|
1,817
|
||||||
|
Midstream,
|
Corporate
|
||||||||||||||||
|
Marketing
|
and
|
||||||||||||||||
|
Oil and Gas
|
Chemical
|
and Other
|
Eliminations
|
Total
|
|||||||||||||
|
Six months ended
|
|
|
|
|
|
||||||||||||
|
June 30, 2012
|
|
|
|||||||||||||||
|
Net sales
|
$
|
9,397
|
$
|
2,320
|
$
|
655
|
$
|
(336
|
) (a)
|
$
|
12,036
|
||||||
|
Pretax operating profit (loss)
|
$
|
4,547
|
$
|
378
|
$
|
208
|
$
|
(227
|
) (b)
|
$
|
4,906
|
||||||
|
Income taxes
|
―
|
―
|
―
|
(2,014
|
) (c)
|
(2,014
|
)
|
||||||||||
|
Discontinued operations, net
|
―
|
―
|
―
|
(5
|
)
|
(5
|
)
|
||||||||||
|
Net income (loss)
|
$
|
4,547
|
$
|
378
|
$
|
208
|
$
|
(2,246
|
)
|
$
|
2,887
|
||||||
|
Six months ended
|
|||||||||||||||||
|
June 30, 2011
|
|||||||||||||||||
|
Net sales
|
$
|
8,958
|
$
|
2,490
|
$
|
853
|
$
|
(402
|
) (a)
|
$
|
11,899
|
||||||
|
Pretax operating profit (loss)
|
$
|
5,092
|
$
|
472
|
$
|
301
|
$
|
(476
|
) (b)
|
$
|
5,389
|
||||||
|
Income taxes
|
―
|
―
|
―
|
(2,165
|
) (c)
|
(2,165
|
)
|
||||||||||
|
Discontinued operations, net
|
―
|
―
|
―
|
142
|
(d)
|
142
|
|||||||||||
|
Net income (loss)
|
$
|
5,092
|
$
|
472
|
$
|
301
|
$
|
(2,499
|
)
|
$
|
3,366
|
||||||
|
(a)
|
Intersegment sales eliminate upon consolidation and are generally made at prices approximately equal to those that the selling entity would be able to obtain in third-party transactions.
|
||
|
(b)
|
Includes unallocated net interest expense (including the early debt extinguishment costs of $163 million for the six months ended June 30, 2011), administration expense, environmental remediation and other pre-tax items.
|
||
|
(c)
|
Includes all foreign and domestic income taxes from continuing operations.
|
||
|
(d)
|
Reflects an after-tax gain from the sale of the Argentine operations.
|
|
12.
|
Earnings Per Share
|
|
Occidental’s instruments containing rights to nonforfeitable dividends granted in stock-based payment transactions are considered participating securities prior to vesting, and, therefore, have been included in the earnings allocations in computing basic and diluted EPS under the two-class method.
|
|
|
Basic EPS was computed by dividing net income, net of participating securities, by the weighted-average number of common shares outstanding during each period, net of treasury shares and including vested but unissued shares and share units. The computation of diluted EPS reflects the additional dilutive effect of stock options and unvested stock awards.
|
|
|
The following table presents the calculation of basic and diluted EPS for the three and six months ended June 30, 2012 and 2011:
|
|
Periods Ended June 30
|
||||||||||||||
|
Three months
|
Six months
|
|||||||||||||
|
(in millions, except per-share amounts)
|
2012
|
2011
|
2012
|
2011
|
||||||||||
|
Basic EPS
|
||||||||||||||
|
Income from continuing operations
|
$
|
1,332
|
$
|
1,819
|
$
|
2,892
|
$
|
3,224
|
||||||
|
Discontinued operations, net
|
(4
|
)
|
(2
|
)
|
(5
|
)
|
142
|
|||||||
|
Net income
|
1,328
|
1,817
|
2,887
|
3,366
|
||||||||||
|
Less: Net income allocated to participating securities
|
(2
|
)
|
(3
|
)
|
(4
|
)
|
(6
|
)
|
||||||
|
Net income, net of participating securities
|
$
|
1,326
|
$
|
1,814
|
$
|
2,883
|
$
|
3,360
|
||||||
|
Weighted average number of basic shares
|
810.3
|
812.5
|
810.4
|
812.5
|
||||||||||
|
Basic EPS
|
$
|
1.64
|
$
|
2.23
|
$
|
3.55
|
$
|
4.14
|
||||||
|
Diluted EPS
|
||||||||||||||
|
Net income, net of participating securities
|
$
|
1,326
|
$
|
1,814
|
$
|
2,883
|
$
|
3,360
|
||||||
|
Weighted average number of basic shares
|
810.3
|
812.5
|
810.4
|
812.5
|
||||||||||
|
Dilutive effect of potentially dilutive securities
|
0.7
|
0.8
|
0.8
|
0.8
|
||||||||||
|
Total diluted weighted average common shares
|
811.0
|
813.3
|
811.2
|
813.3
|
||||||||||
|
Diluted EPS
|
$
|
1.64
|
$
|
2.23
|
$
|
3.55
|
$
|
4.13
|
||||||
|
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
|
Periods Ended June 30
|
|||||||||||||
|
Three Months
|
Six Months
|
||||||||||||
|
2012
|
2011
|
2012
|
2011
|
||||||||||
|
Net Sales (a)
|
|||||||||||||
|
Oil and Gas
|
$
|
4,495
|
$
|
4,591
|
$
|
9,397
|
$
|
8,958
|
|||||
|
Chemical
|
1,172
|
1,325
|
2,320
|
2,490
|
|||||||||
|
Midstream, Marketing and Other
|
262
|
441
|
655
|
853
|
|||||||||
|
Eliminations
|
(161
|
)
|
(184
|
)
|
(336
|
)
|
(402
|
)
|
|||||
|
$
|
5,768
|
$
|
6,173
|
$
|
12,036
|
$
|
11,899
|
||||||
|
Segment Earnings (b)
|
|||||||||||||
|
Oil and Gas
|
$
|
2,043
|
$
|
2,624
|
|
$
|
4,547
|
$
|
5,092
|
||||
|
Chemical
|
194
|
253
|
378
|
472
|
|||||||||
|
Midstream, Marketing and Other
|
77
|
187
|
208
|
301
|
|||||||||
|
2,314
|
3,064
|
5,133
|
5,865
|
||||||||||
|
Unallocated Corporate Items (b)
|
|||||||||||||
|
Interest expense, net
|
(25
|
)
|
(22
|
)
|
(53
|
)
|
(236
|
)
|
|||||
|
Income taxes
|
(875
|
)
|
(1,111
|
)
|
(2,014
|
)
|
(2,165
|
)
|
|||||
|
Other expense, net
|
(82
|
)
|
(112
|
)
|
(174
|
)
|
(240
|
)
|
|||||
|
Income from continuing operations
|
1,332
|
1,819
|
|
2,892
|
3,224
|
||||||||
|
Discontinued operations, net (c)
|
(4
|
)
|
(2
|
)
|
(5
|
)
|
142
|
||||||
|
Net income
|
$
|
1,328
|
$
|
1,817
|
$
|
2,887
|
$
|
3,366
|
|||||
|
(a)
|
Intersegment sales eliminate upon consolidation and are generally made at prices approximately equal to those that the selling entity would be able to obtain in third-party transactions.
|
|
|
(b)
|
Refer to “Significant Transactions and Events Affecting Earnings,” “Oil and Gas Segment,” “Chemical Segment,” “Midstream, Marketing and Other Segment” and “Corporate” discussions that follow.
|
|
|
(c)
|
The six months ended June 30, 2011 amount reflects an after-tax gain from the sale of the Argentine operations.
|
|
Periods Ended June 30
|
|||||||||||||
|
Three Months
|
Six Months
|
||||||||||||
|
2012
|
2011
|
2012
|
2011
|
||||||||||
|
Oil & Gas
|
|||||||||||||
|
Libya exploration write-off
|
$
|
―
|
$
|
―
|
$
|
―
|
$
|
(35
|
)
|
||||
|
Gain on sale of Colombian pipeline interest
|
―
|
―
|
―
|
22
|
|||||||||
|
Foreign tax
|
―
|
―
|
―
|
(29
|
)
|
||||||||
|
Total Oil and Gas
|
$
|
―
|
$
|
―
|
$
|
―
|
$
|
(42
|
)
|
||||
|
Chemical
|
|||||||||||||
|
No significant items affecting earnings
|
$
|
―
|
$
|
―
|
$
|
―
|
$
|
―
|
|||||
|
Total Chemical
|
$
|
―
|
$
|
―
|
$
|
―
|
$
|
―
|
|||||
|
Midstream, Marketing and Other
|
|||||||||||||
|
No significant items affecting earnings
|
$
|
―
|
$
|
―
|
$
|
―
|
$
|
―
|
|||||
|
Total Midstream, Marketing and Other
|
$
|
―
|
$
|
―
|
$
|
―
|
$
|
―
|
|||||
|
Corporate
|
|||||||||||||
|
Premium on debt extinguishments
|
$
|
―
|
$
|
―
|
$
|
―
|
$
|
(163
|
)
|
||||
|
State income tax charge
|
―
|
―
|
―
|
(33
|
)
|
||||||||
|
Tax effect of pre-tax adjustments
|
―
|
―
|
―
|
50
|
|||||||||
|
Discontinued operations, net*
|
(4
|
)
|
(2
|
)
|
(5
|
)
|
142
|
||||||
|
Total Corporate
|
$
|
(4
|
)
|
$
|
(2
|
)
|
$
|
(5
|
)
|
$
|
(4
|
)
|
|
|
Total
|
$
|
(4
|
)
|
$
|
(2
|
)
|
$
|
(5
|
)
|
$
|
(46
|
)
|
|
|
Periods Ended June 30
|
|||||||||||||
|
Three Months
|
Six Months
|
||||||||||||
|
2012
|
2011
|
2012
|
2011
|
||||||||||
|
Oil & Gas earnings
|
$
|
2,043
|
$
|
2,624
|
$
|
4,547
|
$
|
5,092
|
|||||
|
Chemical earnings
|
194
|
253
|
378
|
472
|
|||||||||
|
Midstream, Marketing and Other earnings
|
77
|
187
|
208
|
301
|
|||||||||
|
Unallocated corporate items
|
(107
|
)
|
(134
|
)
|
(227
|
)
|
(476
|
)
|
|||||
|
Pre-tax income
|
2,207
|
2,930
|
4,906
|
5,389
|
|||||||||
|
Income tax expense
|
|||||||||||||
|
Federal and state
|
254
|
557
|
700
|
927
|
|||||||||
|
Foreign
|
621
|
554
|
1,314
|
1,238
|
|||||||||
|
Total
|
875
|
1,111
|
2,014
|
2,165
|
|||||||||
|
Income from continuing operations
|
$
|
1,332
|
$
|
1,819
|
$
|
2,892
|
$
|
3,224
|
|||||
|
Worldwide effective tax rate
|
40%
|
38%
|
41%
|
40%
|
|||||||||
|
Periods Ended June 30
|
||||||||||||
|
Three Months
|
Six Months
|
|||||||||||
|
Production per Day
|
2012
|
2011
|
2012
|
2011
|
||||||||
|
Oil (MBBL)
|
||||||||||||
|
United States
|
249
|
226
|
246
|
224
|
||||||||
|
Middle East/North Africa
|
181
|
177
|
186
|
195
|
||||||||
|
Latin America (a)
|
31
|
30
|
27
|
31
|
||||||||
|
NGLs (MBBL)
|
||||||||||||
|
United States
|
73
|
71
|
73
|
65
|
||||||||
|
Middle East/North Africa
|
9
|
11
|
9
|
10
|
||||||||