Edgar Filing: OCCIDENTAL PETROLEUM CORP /DE/

OXY 10K 12-31-2014

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K



þ 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, 2014		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		5 Greenway Plaza, Suite 110, Houston, Texas
Zip Code		77046
Registrant's telephone number, including area code		(713) 215-7000

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, $.20 par value		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. Yes þ 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 ¨ No þ

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. Yes þ 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). Yes þ 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. þ

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	þ	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 ¨ No þ

The aggregate market value of the voting common stock held by nonaffiliates of the registrant was approximately $79.8 billion, computed by reference to the closing price on the New York Stock Exchange composite tape of $102.63 per share of Common Stock on June 30, 2014. 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, 2015, there were 770,550,364 shares of Common Stock outstanding, par value $0.20 per share.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive Proxy Statement, relating to its May 1, 2015 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 and Marketing Operations...............................................................................................................................	5
	Capital Expenditures.........................................................................................................................................................	6
	Employees.........................................................................................................................................................................	6
	Environmental Regulation.................................................................................................................................................	6
	Available Information.........................................................................................................................................................	6
Item 1A	Risk Factors.............................................................................................................................................................................	6
Item 1B	Unresolved Staff Comments....................................................................................................................................................	8
Item 3	Legal Proceedings...................................................................................................................................................................	8
Item 4	Mine Safety Disclosures..........................................................................................................................................................	8
	Executive Officers....................................................................................................................................................................	9
Part II
Item 5	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities...............	10
Item 6	Selected Financial Data..........................................................................................................................................................	12
Item 7	Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A).....................................	12
	Strategy.............................................................................................................................................................................	13
	Oil and Gas Segment........................................................................................................................................................	14
	Chemical Segment............................................................................................................................................................	20
	Midstream and Marketing Segment..................................................................................................................................	21
	Segment Results of Operations.........................................................................................................................................	22
	Significant Items Affecting Earnings..................................................................................................................................	25
	Taxes.................................................................................................................................................................................	25
	Consolidated Results of Operations..................................................................................................................................	26
	Consolidated Analysis of Financial Position......................................................................................................................	27
	Liquidity and Capital Resources........................................................................................................................................	27
	Off-Balance-Sheet Arrangements......................................................................................................................................	29
	Contractual Obligations.....................................................................................................................................................	29
	Lawsuits, Claims and Contingencies.................................................................................................................................	30
	Environmental Liabilities and Expenditures.......................................................................................................................	30
	Foreign Investments..........................................................................................................................................................	32
	Critical Accounting Policies and Estimates........................................................................................................................	32
	Significant Accounting and Disclosure Changes...............................................................................................................	35
	Safe Harbor Discussion Regarding Outlook and Other Forward-Looking Data................................................................	36
Item 7A	Quantitative and Qualitative Disclosures About Market Risk..................................................................................................	36
Item 8	Financial Statements and Supplementary Data......................................................................................................................	38
	Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements.................................	38
	Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting.......................	39
	Consolidated Balance Sheets...........................................................................................................................................	40
	Consolidated Statements of Income..................................................................................................................................	42
	Consolidated Statements of Comprehensive Income.......................................................................................................	43
	Consolidated Statements of Stockholders' Equity.............................................................................................................	44
	Consolidated Statements of Cash Flows...........................................................................................................................	45
	Notes to Consolidated Financial Statements.....................................................................................................................	46
	Quarterly Financial Data (Unaudited)................................................................................................................................	77
	Supplemental Oil and Gas Information (Unaudited)..........................................................................................................	79
	Financial Statement Schedule:
	Schedule II – Valuation and Qualifying Accounts..............................................................................................................	93
Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure..................................................	94
Item 9A	Controls and Procedures.........................................................................................................................................................	94
	Management's Annual Assessment of and Report on Internal Control Over Financial Reporting.....................................	94
	Disclosure Controls and Procedures.................................................................................................................................	94
Item 9B	Other Information....................................................................................................................................................................	94
Part III
Item 10	Directors, Executive Officers and Corporate Governance......................................................................................................	95
Item 11	Executive Compensation........................................................................................................................................................	95
Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters................................	95
Item 13	Certain Relationships and Related Transactions and Director Independence........................................................................	95
Item 14	Principal Accounting Fees and Services.................................................................................................................................	95
Part IV
Item 15	Exhibits and Financial Statement Schedules..........................................................................................................................	96

Part I


ITEMS 1 AND 2	BUSINESS AND PROPERTIES

In this report, "Occidental" means Occidental Petroleum Corporation, a Delaware corporation (OPC) incorporated in 1986, or OPC and one or more entities in which it owns a controlling interest (subsidiaries). Occidental conducts its operations through various subsidiaries and affiliates. Occidental’s executive offices are located at 5 Greenway Plaza, Suite 110, Houston, Texas 77046; telephone (713) 215-7000.

GENERAL

Occidental’s principal businesses consist of three segments. The oil and gas segment explores for, develops and produces oil and condensate, natural gas liquids (NGLs) and natural gas. The chemical segment (OxyChem) mainly manufactures and markets basic chemicals and vinyls. The midstream, marketing and other segment (midstream and marketing) gathers, processes, transports, stores, purchases and markets oil, condensate, NGLs, natural gas, carbon dioxide (CO₂) and power. It also trades around its assets, including transportation and storage capacity, and trades oil, NGLs, gas and power. Additionally, the midstream and marketing segment invests in entities that conduct similar activities.

On November 30, 2014, the spin-off of Occidental's California oil and gas operations and related assets was completed through the pro rata distribution of 81.3 percent of the outstanding shares of common stock of California Resources Corporation (California Resources) to holders of Occidental common stock creating an independent, publicly traded company. The statements of income and cash flows, and supplemental oil and gas information related to California Resources have been treated as

discontinued operations for the years ended December 31, 2014, 2013 and 2012 presented in this Annual Report on Form 10-K. The assets and liabilities of California Resources were removed from Occidental's consolidated balance sheet as of November 30, 2014. Additional information related to the spin-off can be found in Item 8 Financial Statements and Supplementary Data - Note 17 to the Consolidated Financial Statements.

For information regarding Occidental's segments, geographic areas of operation and current developments, including its recent strategic review and actions related thereto, 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 Colorado, New Mexico, North Dakota and Texas. International operations are located in Bahrain, Bolivia, Colombia, Iraq, Libya, Oman, Qatar, the United Arab Emirates (UAE) and Yemen.

Proved Reserves and Sales Volumes

The table below shows Occidental’s total oil, NGLs and natural gas proved reserves and sales volumes in 2014, 2013 and 2012. See "MD&A — Oil and Gas Segment," and the information under the caption "Supplemental Oil and Gas Information" for certain details regarding Occidental’s proved reserves, the reserves estimation process, sales and production volumes, production costs and other reserves-related data.

Comparative Oil and Gas Proved Reserves and Sales Volumes

Oil, which includes condensate, and NGLs are in millions of barrels; natural gas is in billions of cubic feet (Bcf); barrels of oil equivalent (BOE) are in millions.



	2014					2013					2012
Proved Reserves	Oil	NGLs	Gas	BOE	^(a)	Oil	NGLs	Gas	BOE	^(a)	Oil	NGLs	Gas	BOE	^(a)
United States ^(b)	1,273	222	1,714	1,781		1,131	204	2,012	1,670		1,069	156	1,955	1,551
International	497	140	2,413	1,038		482	134	2,711	1,068		469	116	2,679	1,031
Total	1,770	362	4,127	2,819		1,613	338	4,723	2,738		1,538	272	4,634	2,582
Sales Volumes
United States ^(b)	67	20	173	116		64	21	193	117		61	21	207	116
International	74	2	158	102		75	3	163	105		78	3	170	110
Total	141	22	331	218		139	24	356	222		139	24	377	226

Note: The detailed proved reserves information presented in accordance with Item 1202(a)(2) to Regulation S-K under the Securities Exchange Act of 1934 (Exchange Act) is provided under the heading "Supplemental Oil and Gas Information". Proved reserves are stated on a net basis after applicable royalties.

(a)

Natural gas volumes are converted to BOE at six thousand cubic feet (Mcf) of gas per one barrel of oil. Barrels of oil equivalence does not necessarily result in price equivalence. The price of natural gas on a barrel of oil equivalent basis is currently substantially lower than the corresponding price for oil and has been similarly lower for a number of years. For example, in 2014, the average prices of West Texas Intermediate (WTI) oil and New York Mercantile Exchange (NYMEX) natural gas were $93.00 per barrel and $4.34 per Mcf, respectively, resulting in an oil to gas ratio of over 20 to 1.


(b)	Excludes proved reserves and sales volumes for California Resources which have been classified as discontinued operations.

Competition

As a producer of oil and condensate, NGLs and natural gas, Occidental competes with numerous other domestic and foreign private and government producers. Oil, NGLs and natural gas are commodities that are sensitive to prevailing global and local, current and anticipated market conditions. Occidental competes for transportation capacity and infrastructure for the delivery of its products. They are sold at current market prices or on a forward basis to refiners and other market participants. Occidental’s competitive strategy relies on increasing production through developing conventional and unconventional fields, utilizing primary and enhanced oil recovery (EOR) techniques and strategic acquisitions in areas where Occidental has a competitive advantage as a result of its current successful operations or investments in shared infrastructure. Occidental also competes to develop and produce its worldwide oil and gas reserves cost-effectively, maintain a skilled workforce and obtain quality services.

CHEMICAL OPERATIONS

General

OxyChem owns and operates manufacturing plants at 23 domestic sites in Alabama, Georgia, Illinois, Kansas, Louisiana, Michigan, New Jersey, New York, Ohio, Pennsylvania, Tennessee and Texas and at two international sites in Canada and Chile. In early 2014, OxyChem began operating a 182,500 ton-per-year chlor-alkali plant in Tennessee and, through a 50/50 joint venture with Mexichem S.A.B. de C.V., broke ground on a 1.2 billion pound-per-year ethylene cracker at the OxyChem Ingleside facility. The cracker is expected to begin operating in 2017.

Competition

OxyChem competes with numerous other domestic and foreign chemical producers. OxyChem’s market position was first or second in the United States in 2014 for the principal products it manufactures and markets. OxyChem’s competitive strategy is to be a low-cost producer of its products in order to compete on price.

OxyChem produces the following products:




Principal Products	Major Uses	Annual Capacity
Basic Chemicals
Chlorine	Raw material for ethylene dichloride (EDC), water treatment and pharmaceuticals	3.8 million tons
Caustic soda	Pulp, paper and aluminum production	4.0 million tons
Chlorinated organics	Refrigerants, silicones and pharmaceuticals	0.9 billion pounds
Potassium chemicals	Fertilizers, batteries, soaps, detergents and specialty glass	0.4 million tons
EDC	Raw material for vinyl chloride monomer (VCM)	2.1 billion pounds
Chlorinated isocyanurates	Swimming pool sanitation and disinfecting products	131 million pounds
Sodium silicates	Catalysts, 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
Vinyls
VCM	Precursor for polyvinyl chloride (PVC)	6.2 billion pounds
PVC	Piping, building materials, and automotive and medical products	3.7 billion pounds
Other Chemicals
Resorcinol	Tire manufacture, wood adhesives and flame retardant synergist	50 million pounds

MIDSTREAM AND MARKETING OPERATIONS

General

Occidental's midstream and marketing operations primarily support and enhance its oil and gas and chemicals businesses and also provide similar services for third parties.

Competition

Occidental's midstream and marketing businesses operate in competitive and highly regulated markets. Occidental's domestic pipeline business competes with other midstream transportation companies to provide transportation services. The competitive strategy of Occidental's domestic pipeline business is to ensure that

its pipeline and gathering systems connect various production areas to multiple market locations. Transportation rates are regulated and tariff-based. Occidental maximizes the value of its transportation and storage assets by marketing its own and third-party production in the oil and gas business. Other midstream and marketing operations also support Occidental's domestic and international oil and gas and chemical operations. Occidental's marketing business competes with other market participants on exchange platforms and through other bilateral transactions with direct counterparties.

The midstream and marketing operations are conducted in the locations described below:




Location	Description	Capacity
Gas Plants
Texas, New Mexico and Colorado	Occidental- and third-party-operated natural gas gathering, compression and processing systems, and CO2 processing	2.4 billion cubic feet per day
United Arab Emirates	Natural gas processing facilities for the Al Hosn gas project.	1.0 billion cubic feet per day
Pipelines
Texas, New Mexico, and Oklahoma	Common carrier oil pipeline and storage system	720,000 barrels of oil per day 6.0 million barrels of oil storage 2,900 miles of pipeline
Texas, New Mexico and Colorado	CO₂ fields and pipeline systems transporting CO₂ to oil and gas producing locations	2.4 billion cubic feet per day
Dolphin Pipeline - Qatar and United Arab Emirates	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	Equity investment in entity involved in pipeline transportation, storage, terminalling and marketing of oil, gas and related petroleum products	18,900 miles of pipeline and gathering systems ^(b) Storage for 125 million barrels of oil and other petroleum products and 97 billion cubic feet of natural gas ^(b)
Marketing and Trading
Texas and Singapore	Trades around its assets, including transportation and storage capacity, and purchases, markets and trades oil, NGLs, gas and power	Not applicable
Power Generation
Texas and Louisiana	Occidental-operated power and steam generation facilities	1,200 megawatts per hourand 1.6 million pounds of steam per hour


(a)	Pipeline currently transports 2.3 Bcf per day. Additional gas compression and customer contracts are required to reach capacity.


(b)	Amounts are gross, including interests held by third parties.

CAPITAL EXPENDITURES

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

EMPLOYEES

Occidental employed approximately 11,700 people at December 31, 2014, 7,400 of whom were located in the United States. Occidental employed approximately 7,500 people in the oil and gas and midstream and marketing segments and 3,100 people in the chemical segment. An additional 1,100 people were employed in administrative and headquarters functions. Approximately 800 U.S.-based employees and 1,200 foreign-based employees are represented by labor unions.

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 on its website at www.oxy.com:


Ø	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 Policies, board-committee charters and Code of Business Conduct.

Information contained on Occidental's website is not part of this report.

ITEM 1A RISK FACTORS

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

Occidental's financial results correlate closely to the prices it obtains for its products, particularly oil and, to a lesser extent, natural gas and NGLs, and its chemical products.

Prices for crude oil, natural gas and NGLs fluctuate widely. Historically, the markets for crude oil, natural gas, NGLs and refined products have been volatile and may continue to be volatile in the future. Prolonged or further declines in crude oil, natural gas and NGLs prices would reduce Occidental's operating results and cash flows, and could impact its future rate of growth and further impact the recoverability of the carrying value of its assets.

Prices are set by global and local market forces which are not in Occidental's control. These factors include, among others:


Ø	Worldwide and domestic supplies of, and demand for, crude oil, natural gas, NGLs and refined products.


Ø	The cost of exploring for, developing, producing, refining and marketing crude oil, natural gas, NGLs and refined products.


Ø	Operational impacts such as production disruptions, technological advances and regional market conditions, including available transportation capacity and infrastructure constraints in producing areas.


Ø	Changes in weather patterns and climatic changes.


Ø	The impacts of the members of OPEC and other producing nations to agree to and maintain production levels.


Ø	The worldwide military and political environment, uncertainty or instability resulting from an escalation or outbreak of armed hostilities or acts of terrorism in the United States, or elsewhere.


Ø	The price and availability of alternative and competing fuels.


Ø	Domestic and foreign governmental regulations and taxes.


Ø	Additional or increased nationalization and expropriation activities by foreign governments.


Ø	General economic conditions worldwide.

The long-term effects of these and other conditions on the prices of crude oil, natural gas, NGLs and refined products are uncertain. Generally, Occidental's policy is to remain exposed to market prices of commodities; however, management may elect to hedge the price risk of crude oil, natural gas, NGLs and refined products in the future.

Recent global economic and political conditions have driven oil and gas prices down significantly. These conditions may continue for an extended period. Continued reductions in commodity prices could require us to further reduce capital spending, share repurchases, debt reduction, and impair the carrying value of assets.

The prices obtained for Occidental’s chemical products correlate strongly to the health of the United States and global economies, 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 restructuring activities may affect its stock price.

Occidental has performed a strategic review of its operations, which resulted in the restructuring and the separation or divestiture of various assets. This activity and further implementation of the strategic review may affect the market value of Occidental's common stock. For example, Occidental may take different actions than expected, receive less proceeds or retain more liabilities than anticipated in connection with any divestitures.

Occidental may experience delays, cost overruns, losses or other unrealized expectations in development efforts and exploration activities.

Occidental bears the risks of equipment failures, construction delays, escalating costs or competition for services, materials, supplies or labor, property or border

disputes, disappointing drilling results or reservoir performance and other associated risks that may affect its ability to profitably grow production, replace reserves and achieve its targeted returns.

Exploration is inherently risky and is subject to delays, misinterpretation of geologic or engineering data, unexpected geologic conditions or finding reserves of disappointing quality or quantity, which may result in significant losses.

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

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

new or amended laws and regulations, or interpretations of such laws and regulations, including those related to drilling, manufacturing or production processes (including well stimulation techniques such as hydraulic fracturing and acidization), labor and employment, taxes, royalty rates, permitted production rates, entitlements, import, export and use of raw materials, equipment or products, use or increased use of land, water and other natural resources, safety, security and environmental protection, all of which may restrict or prohibit activities of Occidental or its contractors, increase Occidental's costs or reduce demand for Occidental's products;


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


Ø	development delays and cost overruns due to approval delays for, or denial of, drilling and other permits.

Occidental has and may continue to experience adverse consequences, such as risk of loss or production limitations, because certain of its international operations are located in countries affected by political instability, nationalizations, corruption, 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 or revenue comes from international sources.

Occidental's oil and gas business operates in highly competitive environments, which affect, among other things, its ability to make acquisitions to grow production and replace reserves.

Results of operations, reserves replacement and growth in oil and gas production depend, in part, on Occidental’s ability to profitably acquire additional reserves. Occidental has many competitors (including national oil companies), some of which: (i) are larger and better funded, (ii) may be willing to accept greater risks or (iii) have special competencies. Competition for reserves may make it more difficult to find attractive investment opportunities or require delay of reserve replacement efforts. In addition, during periods of low product prices, any cash conservation efforts may delay production growth and reserve replacement efforts.

Occidental’s acquisition activities also carry risks that it may: (i) not fully realize anticipated benefits due to less-than-expected reserves or production or changed circumstances, such as the deterioration of natural gas prices in recent years and the recent significant decline in oil prices; (ii) bear unexpected integration costs or experience other integration difficulties; (iii) experience share price declines based on the market’s evaluation of the activity; or (iv) assume liabilities that are greater than anticipated.

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

Reported oil and gas reserves are an estimate based on periodic review of reservoir characteristics and recoverability, including production decline rates, operating performance and economic feasibility at the prevailing commodity prices as well as capital and operating costs. If Occidental were required to make significant negative reserve revisions, its results of operations and stock price could be adversely affected.

Concerns about climate change may affect Occidental’s operations.

Occidental could face risks of project execution, increased costs and taxes and lower demand for and restrictions or prohibition on the use of its products as a result of legislation, regulations or policies that seek to control or reduce the production, use or emissions of “greenhouse gases” (GHG), to control or reduce the production or consumption of fossil fuels, or to increase the use of renewable or alternative energy sources. The uncertain outcome and timing of existing and proposed international, national and state GHG measures make it difficult to predict any business impact.

Occidental’s businesses may experience catastrophic events.

The occurrence of events, such as hurricanes, floods, droughts, earthquakes, other acts of nature, well blowouts, fires, explosions, chemical releases, industrial accidents, physical attacks and other events that cause operations to cease or be curtailed, may negatively affect Occidental’s businesses and the 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.

Cyber attacks could significantly affect Occidental.

Cyber attacks on businesses have escalated in recent years. Occidental relies on electronic systems and networks to control and manage its oil and gas, chemicals, trading and pipeline operations and has multiple layers of security to mitigate risks of cyber attack. If, however, Occidental were to experience an attack and its security measures failed, the potential consequences to its businesses and the communities in which it operates could be significant.

Occidental's oil and gas reserve additions may not continue at the same rate and may not be fully comparable to that of other companies.

Management expects improved recovery, extensions and discoveries to continue as main sources for reserve additions but factors, such as geology, government regulations and permits and the effectiveness of development plans, are partially or fully outside management's control and could cause results to differ materially from expectations.

Other risk factors.

Additional discussion of risks and uncertainties related to price and demand, litigation, environmental matters, oil and gas reserves estimation processes, impairments, derivatives, market risks and internal controls appears under the headings: "MD&A — Oil & Gas Segment — Proved Reserves" and "— Industry Outlook," "— Chemical Segment — Industry Outlook," "— Midstream and Marketing Segment — Industry Outlook," "— Lawsuits, Claims and Contingencies," "— Environmental Liabilities and Expenditures," "— Critical Accounting Policies and Estimates," "— Quantitative and Qualitative Disclosures About Market Risk," and "Management's Annual Assessment of and Report on Internal Control Over Financial Reporting."

The risks described in this report are not the only risks facing Occidental and other risks, including risks deemed immaterial, may have material adverse effects.


ITEM 1B	UNRESOLVED STAFF COMMENTS

Occidental has not received any written comments from the SEC staff that were issued 180 days or more preceding December 31, 2014 and that remain unresolved.

ITEM 3 LEGAL PROCEEDINGS

In the fourth quarter of 2014, the U.S. Department of Transportation Pipeline and Hazardous Materials Safety Administration sent a notice to an OPC subsidiary that it is seeking penalties of $165,900 related to a routine, comprehensive inspection of the subsidiary's records, procedures and facilities, covering a multi-year period. The subsidiary is contesting these penalties.

In the third quarter of 2014, the U.S. Department of Transportation Pipeline and Hazardous Materials Safety Administration sent a notice to an OPC subsidiary that it is seeking penalties of $165,600 related to a crude oil pipeline incident in Scurry County, Texas. The subsidiary is contesting these proposed penalties. In the second quarter of 2014, the U.S. Environmental Protection Agency and the Pennsylvania Department of Environmental Protection notified an OPC subsidiary that they are seeking penalties regarding the leak detection and repair program to control air emissions at a facility in Petrolia, Pennsylvania. The subsidiary is cooperating with the agencies to resolve the foregoing claim.

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

ITEM 4 MINE SAFETY DISCLOSURES

Not applicable.

EXECUTIVE OFFICERS

The current term of office of each executive officer of Occidental will expire at the May 1, 2015, organizational meeting of the Board of Directors or when a successor is selected. The following table sets forth the executive officers of Occidental:



Name Current Title	Age at February 23, 2015	Positions with Occidental and Subsidiaries and Employment History

Stephen I. Chazen Chief Executive Officer and President	68	Chief Executive Officer since 2011 and President since 2007; Chief Operating Officer, 2010-2011; Chief Financial Officer, 1999-2010; Director since 2010.


Willie C.W. Chiang Executive Vice President	54	Executive Vice President, Operations since 2012; Conoco Phillips: Senior Vice President, Refining, Marketing, Transportation and Commercial, 2011-2012; Senior Vice President, Refining, Marketing, Transportation, 2008-2011.


Vicki A. Hollub Executive Vice President	55	Executive Vice President since 2015, Vice President, 2013-2015; Occidental Oil & Gas Corporation: Oxy Oil & Gas: President - Americas since 2014, Executive Vice President - U.S. Operations, 2013-2014, Executive Vice President - California Operations, 2012-2013; Oxy Permian: President & General Manager, 2011-2012, Operations Manager, 2009-2011.


Edward A. “Sandy” Lowe Executive Vice President	63	Executive Vice President since 2015, Vice President, 2008-2015; Occidental Oil & Gas Corporation: Oxy Oil and Gas International: President since 2009, Executive Vice President, 2008-2009.


Marcia E. Backus Senior Vice President	60	Senior Vice President, General Counsel, Chief Compliance Officer and Corporate Secretary since 2015, Vice President, General Counsel and Corporate Secretary 2014, Vice President and General Counsel 2013; Vinson & Elkins: Partner, 1990-2013.


Christopher G. Stavros Senior Vice President	51	Senior Vice President & Chief Financial Officer since 2015, Executive Vice President and Chief Financial Officer 2014, Vice President, Investor Relations & Treasurer, 2012-2014, Vice President, Investor Relations, 2006-2012.


Cynthia L. Walker Senior Vice President	38	Senior Vice President, Strategy & Development since 2015, Executive Vice President, Strategy & Development 2014, Executive Vice President & Chief Financial Officer, 2012-2014; Goldman, Sachs & Co.: Managing Director, 2010-2012, Vice President, 2005-2010.


Jennifer M. Kirk Vice President	40	Vice President, Controller and Principal Accounting Officer since July 2014; Occidental Oil & Gas Corporation: Controller, 2008-2014.

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 approximately 28,000 stockholders of record at January 31, 2015, and by approximately 700,000 additional stockholders whose shares were held for them in street name or nominee accounts. The common stock is listed and traded on the New York Stock Exchange. The quarterly financial data 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 $0.72 for each quarter of 2014 ($2.88 for the year). On February 11, 2015, a quarterly dividend of $0.72 per share was declared on the common stock, payable on April 15, 2015 to stockholders of record on March 10, 2015. The current annual dividend rate of $2.88 per share has increased by 476 percent since 2002. 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.

SHARE REPURCHASE ACTIVITIES

Occidental’s share repurchase activities for the year ended December 31, 2014, were as follows:



Period	Total Number of Shares Purchased			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 2014		10,525,000			$	93.52		10,525,000
Second Quarter 2014		6,036,044	^(a)		$	99.67		5,915,000
Third Quarter 2014		4,666,976	^(a)		$	99.72		4,555,000
October 1-31, 2014		100,000			$	94.46		100,000
November 1-30, 2014		—			$	—		—
December 1-31, 2014		4,695,000			$	79.23		4,695,000
Fourth Quarter 2014		4,795,000			$	79.55		4,795,000
Total 2014		26,023,020			$	93.49		25,790,000		71,176,168	^(b)


(a)	Includes purchases from the trustee of Occidental's defined contribution savings plan that are not part of publicly announced plans or programs.


(b)	Represents the total number of shares remaining at year end under Occidental's share repurchase program of 185 million shares. The program was initially announced in 2005. 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, 2014. The graph assumes that $100 was invested at the beginning of the five-year period shown in the graph below in: (i) Occidental common stock, (ii) the stock of the companies in the S&P 500, and (iii) each of the peer group companies' common stock weighted by their relative market values within the peer group, and that all dividends were reinvested.

Occidental's peer group consists of Anadarko Petroleum Corporation, Apache Corporation, Canadian Natural Resources Limited, Chevron Corporation, ConocoPhillips, Devon Energy Corporation, EOG Resources Inc., ExxonMobil Corporation, Hess Corporation, Marathon Oil Corporation, Total S.A. and Occidental.



12/31/2009		12/31/2010		12/31/2011		12/31/2012		12/31/2013		12/31/2014
$	100	$	123	$	120	$	100	$	128	$	117

	100		113		123		126		154		144

	100		115		117		136		180		205

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 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.

_______________________


(1)	The cumulative total return of the peer group companies' common stock includes the cumulative total return of Occidental's common stock.


ITEM 6	SELECTED FINANCIAL DATA

FIVE-YEAR SUMMARY OF SELECTED FINANCIAL DATA

(in millions, except per-share amounts)



As of and for the years ended December 31,	2014			2013				2012				2011			2010
RESULTS OF OPERATIONS ^(a)
Net sales	$	19,312		$	20,170			$	20,100			$	20,001		$	16,129
Income (loss) from continuing operations	$	(130	)	$	4,932			$	3,829			$	5,527		$	3,851
Net income attributable to common stock	$	616		$	5,903			$	4,598			$	6,771		$	4,530
Basic earnings per common share from continuing operations	$	(0.18	)	$	6.12			$	4.72			$	6.79		$	4.65
Basic earnings per common share	$	0.79		$	7.33			$	5.67			$	8.32		$	5.57
Diluted earnings per common share	$	0.79		$	7.32			$	5.67			$	8.32		$	5.56

FINANCIAL POSITION ^(a)
Total assets	$	56,259		$	69,443			$	64,210			$	60,044		$	52,432
Long-term debt, net	$	6,838		$	6,939			$	7,023			$	5,871		$	5,111
Stockholders’ equity	$	34,959		$	43,372			$	40,048			$	37,620		$	32,484

MARKET CAPITALIZATION ^(b)	$	62,119		$	75,699			$	61,710			$	75,992		$	79,735

CASH FLOW FROM CONTINUING OPERATIONS
Operating:
Cash flow from operations	$	8,871		$	10,229			$	9,050			$	9,740		$	7,498
Investing:
Capital expenditures	$	(8,930	)	$	(7,357	)		$	(7,874	)		$	(5,354	)	$	(2,884	)
Cash provided (used) by all other investing activities, net	$	2,686		$	1,040			$	(1,989	)		$	(3,530	)	$	(4,476	)
Financing:
Cash dividends paid	$	(2,210	)	$	(1,553	)	^(c)	$	(2,128	)	^(c)	$	(1,436	)	$	(1,159	)
Purchases of treasury stock	$	(2,500	)	$	(943	)		$	(583	)		$	(274	)	$	(67	)
Cash provided (used) by all other financing activities, net	$	2,384		$	(437	)		$	1,865			$	535		$	2,309

DIVIDENDS PER COMMON SHARE	$	2.88		$	2.56			$	2.16			$	1.84		$	1.47

WEIGHTED AVERAGE BASIC SHARES OUTSTANDING (millions)	781			804				809				812			812

Note: Argentine operations were sold in February 2011 and are presented as discontinued operations. The statements of income and cash flows related to California Resources have been treated as discontinued operations for all years presented. The assets and liabilities of California Resources were removed from Occidental's consolidated balance sheet as of November 30, 2014.


(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)	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.


(c)	The 2012 amount includes an accelerated fourth quarter dividend payment, which normally would have been accrued as of year-end 2012 and paid in the first quarter of 2013.

ITEM 7

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (MD&A)

In this report, "Occidental" means Occidental Petroleum Corporation (OPC), or OPC and one or more entities in which it owns a controlling interest (subsidiaries). Occidental's principal businesses consist of three segments. The oil and gas segment explores for, develops and produces oil and condensate, natural gas liquids (NGLs) and natural gas. The chemical segment (OxyChem) mainly manufactures and markets basic chemicals and

vinyls. The midstream, marketing and other segment (midstream and marketing) gathers, processes, transports, stores, purchases and markets oil, condensate, NGLs, natural gas, carbon dioxide (CO₂)and power. It also trades around its assets, including transportation and storage capacity, and trades oil, NGLs, gas and power. Additionally, the midstream and marketing segment invests in entities that conduct similar activities.

STRATEGY

General

Through its operations, Occidental aims to maximize total returns to stockholders using the following strategies:


Ø	Increase oil and gas segment production through development programs focused on large, long-lived conventional and unconventional oil and gas assets with long-term growth potential, and acquisitions;


Ø	Focus on lowering finding and developing, production and maintenance costs;


Ø	Allocate and deploy capital with a focus on achieving returns well in excess of its cost of capital;


Ø	Maintain financial discipline and a strong balance sheet; and


Ø	Provide consistent dividend growth.

In conducting its business, Occidental accepts commodity, engineering and limited exploration risks. Capital is employed to operate all assets in a safe and environmentally sound manner. Occidental seeks to limit its financial and political risks.

The fourth quarter of 2014 saw a sharp decline in oil and NGLs prices. Price volatility is inherent in the oil and gas business, and in order to manage this risk, Occidental maintains a low debt to capitalization ratio and retains sufficient cash on hand. Occidental will focus on lowering its costs which over time management believes will correlate to increasing and decreasing oil prices.

With respect to the strategic initiatives announced last year, Occidental has:


Ø	Completed the separation of its California assets, leading to the creation of California Resources Corporation (California Resources), an independent, publicly traded company;


Ø	Sold its interests in the Hugoton Field, resulting in proceeds of $1.3 billion;


Ø	Sold a portion of its interest in Plains GP Holdings (Plains Pipeline) for proceeds of $1.7 billion while continuing to hold an approximate 13 percent interest; and


Ø	Sold its interest in the BridgeTex pipeline, resulting in proceeds of $1.1 billion while maintaining access to United States gulf markets through this pipeline.

As a result of these strategic initiatives, Occidental ended the year with $7.8 billion in total cash, cash equivalents and restricted cash, which exceeds its long-term debt of $6.8 billion.

The following describes the application of Occidental’s overall strategy to each of its operating segments:

Oil and Gas

The oil and gas business implements Occidental's strategy primarily by:


Ø	Operating and developing areas where reserves are known to exist and to increase production from core areas, primarily in the Permian Basin and parts of the Middle East;


Ø	Using enhanced oil recovery techniques, such as CO₂, water andsteam floods, in mature fields;


Ø	Focusing a sizable portion of Occidental's drilling activities on unconventional opportunities, primarily in the Permian Basin; and


Ø	Maintaining a disciplined approach towards domestic acquisitions and divestitures and the execution of international contracts, with an emphasis on creating value and further enhancing Occidental's existing positions.

Over the past several years, Occidental built a large portfolio of growth-oriented assets in the United States. In 2014, Occidental spent a much larger portion of its investment capital on the development of this portfolio. Acquisitions in 2014 were approximately $1.6 billion, and comprised mainly of Permian Basin properties. This acquisition activity reflects Occidental's strategy to capitalize on the opportunities presented by its existing portfolio of assets and strong balance sheet.

Management believes Occidental's oil and gas segment growth will occur primarily through exploitation and development opportunities in the Permian Basin and focused international projects in the Middle East.

Chemical

The primary objective of OxyChem is to generate cash flow in excess of its normal capital expenditure requirements and achieve above-cost-of-capital returns. The chemical segment'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, and markets both to third parties. In addition, chlorine, together with ethylene, is converted through a series of intermediate products into PVC. OxyChem's focus on chlorovinyls allows it to maximize the benefits of integration and take advantage of economies of scale. Capital is employed to sustain production capacity and to focus on projects and developments designed to improve the competitiveness of segment assets. Acquisitions and plant development opportunities may be pursued when they are expected to enhance the existing core chlor-alkali and PVC businesses or take advantage of other specific opportunities. In early 2014, OxyChem completed construction and began operating a 182,500 ton-per-year membrane chlor-alkali plant in Tennessee and, through a 50/50 joint venture with Mexichem S.A.B. de C.V., broke ground on a 1.2 billion pound-per-year ethylene cracker at the OxyChem Ingleside facility. The joint venture provides an opportunity to capitalize on the advantage that U.S. shale gas development has presented to U.S. chemical producers by providing low-cost ethane as a raw material

and is expected to begin operating in 2017. In the third quarter, OxyChem completed construction and began operating a 162,000 tons per year hydrochloric acid synthesis unit at its existing Niagara Falls, N.Y. facility.

Midstream and Marketing

The midstream and marketing segment strives to maximize realized value by optimizing use of its assets, including its transportation and storage capacity, and by providing access to multiple markets. In order to generate returns, the segment evaluates opportunities across the value chain and uses its assets to provide services to other Occidental segments as well as third parties. The segment invests in and operates gas plants, co-generation facilities, pipeline systems and storage facilities. The segment also seeks to minimize the costs of gas, power and other commodities used in Occidental's businesses, while limiting credit risk exposure. Capital is employed to sustain or, where appropriate, increase operational and transportation capacity and to improve the competitiveness of Occidental's assets. During 2014, Occidental sold its interest in BridgeTex Pipeline while retaining access to United States gulf markets through the pipeline, resulting in a $633 million pre-tax gain. The BridgeTex Pipeline transports crude oil between the Permian region and the United States gulf coast refinery markets and began service in the second half of 2014. Simultaneously with the sale of Occidental's interest in the BridgeTex Pipeline, Occidental completed the sale of a portion of its investment in Plains Pipeline, resulting in a $1.4 billion pre-tax gain.

Key Performance Indicators

General

Occidental seeks to meet its strategic goals by continually measuring its success in its key performance metrics that drive total stockholder return. In addition to production growth and capital allocation and deployment discussed above, Occidental believes the following are its most significant metrics:


Ø	Total Shareholder Return;


Ø	Return on equity (ROE) and return on capital employed (ROCE);


Ø	Dividend growth;


Ø	Segment specific measures such as per-unit profit, production cost, cash flow, finding and development costs and reserves replacement percentages; and


Ø	Health, environmental, safety and process metrics.

Debt Structure

In 2014, Occidental decreased its debt balance by $101 million. The debt-to-capitalization (debt and equity) ratio was 16 percent and 14 percent as of December 31, 2014 and 2013, respectively.

OIL AND GAS SEGMENT

Oil and gas information related to California Resources have been treated as discontinued operations for all periods presented.

Business Environment

Oil and gas prices are the major variables that drive the industry’s short- and intermediate-term financial performance. The following table presents the average daily West Texas Intermediate (WTI), Brent and New York Mercantile Exchange (NYMEX) prices for 2014 and 2013:



	2014		2013
WTI oil ($/barrel)	$	93.00	$	97.97
Brent oil ($/barrel)	$	99.51	$	108.76
NYMEX gas ($/Mcf)	$	4.34	$	3.66

The following table presents Occidental's average realized prices as a percentage of WTI, Brent and NYMEX for 2014 and 2013:



	2014		2013
Worldwide oil as a percentage of average WTI	97	%	101	%
Worldwide oil as a percentage of average Brent	91	%	91	%
Worldwide NGLs as a percentage of average WTI	40	%	39	%
Domestic natural gas as a percentage of NYMEX	91	%	88	%

Average worldwide realized oil prices fell $8.68, or 9 percent, in 2014 compared to 2013. Approximately half of Occidental’s oil production tracks world oil prices, such as Brent, and half tracks WTI. The average realized domestic natural gas price in 2014 increased 23 percent from 2013. The WTI and Brent oil price indexes declined significantly in the fourth quarter of 2014, settling at $53.27 per barrel and $57.33 per barrel, respectively, as of December 31, 2014. The WTI and Brent oil price indexes settled at $98.42 per barrel and $110.80 per barrel, respectively, as of December 31, 2013.

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.

Operations

Domestic Interests

Occidental conducts its domestic operations through land leases, subsurface mineral rights it owns or a combination of both surface land and subsurface mineral rights it owns. Occidental's domestic oil and gas leases have a primary term ranging from one to ten years, which is extended through the end of production once it commences. Of the total 4.5 million net acres in which Occidental has interests, approximately 87 percent is leased, 12 percent is owned subsurface mineral rights and 1 percent is owned land with mineral rights.

Production-Sharing Contracts (PSC)

Occidental has interests that are operated under PSCs or similar contracts in Bahrain, Iraq, Libya, Oman, Qatar and Yemen. Under such contracts, Occidental records a share of production and reserves to recover certain production costs and an additional share for profit. In addition, certain contracts in Colombia 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.

Business Review

The following chart shows Occidental’s total volumes for the last five years:

Worldwide Production Volumes

(thousands BOE/day)

Notes:


•	Excludes volumes from the Argentine operations sold in 2011 and California Resources which was separated on November 30, 2014 into a separate publicly traded company. Both operations have been reflected as discontinued operations for all applicable periods.


•	Includes Hugoton (sold in April 2014) average daily production volumes of 6MBOE, 18MBOE, 19MBOE, 20MBOE and 22MBOE for 2014, 2013, 2012, 2011 and 2010, respectively.


•	Includes average daily production of 5MBOE for 2010 related to a noncontrolling interest in a Colombian subsidiary.

United States Assets

United States


1.	Permian Basin


2.	Midcontinent and Other interests

Permian Basin

Occidental's Permian Basin production is diversified across a large number of producing areas. The basin extends throughout southwest Texas and southeast New Mexico and is one of the largest and most active oil basins in the United States, accounting for approximately 16 percent of the total United States oil production. Occidental is the largest operator and the largest producer of oil in the Permian Basin with an approximate 13 percent net share of the total oil production in the basin. Occidental also produces and processes natural gas and NGLs in the basin.

Occidental manages its Permian Basin operations through two business units: Permian Resources, which includes growth-oriented unconventional opportunities and Permian EOR (enhanced oil recovery), which utilizes enhanced oil recovery techniques such as; CO₂ floods and waterfloods. During 2014, capital efficiency efforts reduced drilling costs per well by 8 percent for the Permian Basin operations. In addition, management began transitioning to a horizontal drilling program to take advantage of shale and other unconventional opportunities. In the Permian Basin, Occidental spent over $2.6 billion of capital in 2014 with 73 percent spent on Permian Resources assets. In 2015, Permian Basin capital spending is expected to be approximately $2.2 billion. Approximately 78 percent of the total capital to be spent in the Permian Basin is planned for Permian Resources assets to focus on growing oil production.

Occidental's Permian Resources operations are among its fastest-growing assets and held approximately 2.5 million net acres at the end of 2014, including acreage with prospective resource potential. The development program, largely began in 2010, continued to increase in 2014, accounting for 280 wells drilled. In 2014, Permian Resources drilled 167 horizontal wells and expects to drill the same number of horizontal wells in 2015. Permian Resources has a sizeable inventory of wells to develop with economic returns in a low price environment. Continued completion optimization, the application of enhanced manufacturing principles, combined with expected commercial savings is expected to increase the well inventory even further. Production from this business unit comes from approximately 13,000 gross wells, of which 61 percent are operated by other producers. On a net basis,

this represents approximately 5,500 wells, of which only 22 percent are operated by others.

Permian EOR operates a combination of CO₂ floods and waterfloods which have similar development characteristics and ongoing monitoring and maintenance requirements. Due to a unique combination of characteristics, the Permian Basin has been a leader in the implementation of CO₂ enhanced oil recovery projects. The Permian Basin’s concentration of large conventional reservoirs, favorable CO₂ flooding performance and the proximity to naturally occurring CO₂ supply has resulted in decades of steady growth in enhanced oil production. With over 30 active floods and 40 years of experience, Permian EOR is the industry leader in Permian Basin CO₂ flooding.

Numerous projects have demonstrated that CO₂ injection can increase the recovery from Permian Basin reservoirs by more than 25 percent. Significant opportunity remains to expand Occidental's existing projects into new portions of reservoirs. Occidental operates reservoirs that thus far have only been water flooded, leaving opportunity for significant additional recovery with new CO₂ injection. Hence, even small improvements in recovery efficiency can add significant reserves. Technology improvements, such as the recent trend towards vertical expansion of the CO₂ flooded interval into residual oil zone targets continue to yield more recovery from existing projects. Over the last few years, Occidental has had an ongoing program of deepening wells, with 109 wells deepened in 2014 and 81 wells planned in 2015. Occidental utilizes work-over rigs to drill the extra depth into additional CO₂ floodable sections of the reservoir. These are low cost projects which can add reserves even in a low price environment. Permian EOR has a large inventory of future CO₂ projects which could be developed over the next 20 years or accelerated, depending on market conditions.

The current strategy for Permian EOR is to invest sufficient capital to maintain current production thereby providing cash flow after capital to support growth in Permian Resources. By exploiting natural synergies between Permian EOR and Permian Resources, Occidental is able to deliver unique advantages, efficiencies and expertise across its Permian Basin operations. Occidental's share of production in the Permian Basin was approximately 222,000 BOE per day in 2014 with 75,000 BOE per day coming from Permian Resources and 147,000 BOE per day from Permian EOR.

Midcontinent and Other

In April 2014, Occidental sold its Hugoton Field operations in Kansas, Oklahoma, and Colorado for $1.3 billion and recorded a pre-tax gain on the sale of $531 million.

The remaining Midcontinent and Other properties include interests in the Williston Basin, the Piceance Basin, the Eagle Ford Shale and other areas in South Texas. These properties are located in North Dakota, Colorado, and Texas. Occidental holds approximately 303,000 net acres of oil-producing and unconventional properties in the Williston Basin's Bakken, Three Forks and Pronghorn formations, as well as approximately 187,000 net acres in

the Piceance area and 174,000 net acres in South Texas, including 4,000 net acres in the Eagle Ford Shale.

In Midcontinent and Other, excluding Hugoton Field operations, Occidental drilled approximately 99 wells and produced approximately 90,000 BOE per day in 2014.

Other Developments

During the fourth quarter of 2014, commodity prices declined significantly causing Occidental to assess the carrying value of its domestic producing assets and assess development plans for its non-producing assets. In the fourth quarter of 2014, Occidental recorded pre-tax impairment charges of $2.7 billion in the Williston Basin, $904 million related to its gas and NGLs assets and $589 million for other domestic acreage. In the second quarter of 2014, Occidental also recorded a pre-tax impairment charge of $471 million for certain non-producing domestic acreage that management decided not to pursue. Any further sustained declines in commodity prices may result in additional impairments in the future.

Middle East/North Africa Assets

Middle East/North Africa


1.	Bahrain


2.	Iraq


3.	Libya


4.	Oman


5.	Qatar


6.	United Arab Emirates


7.	Yemen

Bahrain

In 2009, Occidental and other consortium members began operating the Bahrain Field under a 20-year development and production sharing agreement (DPSA). Occidental has a 48-percent working interest in the joint venture. Since handover of operations, the consortium has increased gross gas production capacity 50 percent from an initial level of 1.5 billion cubic feet per day to over 2.3 billion cubic feet per day and increased gross oil production from 26,000 barrels per day to more than 44,000 barrels per day. Occidental's share of production from Bahrain during 2014 was approximately 236 million cubic feet (MMcf) of gas per day and 4,000 barrels of oil per day.

Occidental has been pursuing opportunities to adjust terms of the DPSA to more accurately reflect current operating and economic challenges under the contract. However, Occidental has not yet been successful in obtaining these concessions. Due to deteriorating market conditions, Occidental has recorded a pre-tax impairment charge of $801 million for its investments in Bahrain.

Iraq

In 2010, Occidental and other consortium members signed a 20-year contract with the South Oil Company of Iraq to develop the Zubair Field. In 2013, the terms were improved reflecting a reduction in the targeted production level to 850,000 BOE per day and a five-year extension to 2035. Occidental's interest in this contract entitles Occidental to receive oil for cost recovery and a remuneration fee. Delays in implementation of development plans have limited the amount of production from Iraq. Occidental does not know when development activities will reach desired levels. Occidental's share of production from Iraq was approximately 13,000 BOE per day in 2014.

Libya

Occidental participates with the Libyan National Oil Company in the Sirte Basin producing operations. These agreements continue through 2032. In 2014, Occidental suspended exploration activities due to civil unrest in the country. Production disruptions continued throughout 2014 due to oil field and export terminal strikes and closures. Occidental does not know when operations will return to normal levels. The 2014 production volumes were insignificant.

Oman

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

The term for Block 9 continues through December 2015, with a 10-year extension right for certain areas, subject to government approval. The term for Block 27 expires in 2035.

A 30-year PSC for the Mukhaizna Field (Block 53) was signed with the Government of Oman in 2005, pursuant to which Occidental assumed operation of the field. By the end of 2014, Occidental had drilled more than 2,400 new wells and continued implementation of a major steamflood project. In 2014, the average gross daily production was 122,000 BOE per day, which was over 15 times higher than the production rate in September 2005 when Occidental assumed operations.

In 2008, Occidental was awarded a 20-year contract for Block 62, subject to declaration of commerciality, where it is pursuing development and exploration opportunities targeting gas and condensate resources. In 2014, Occidental signed a five year extension for the initial phase for the discovered non associated gas area (natural gas not in contact with crude oil in a reservoir) for Block 62.

Occidental's share of production from Oman was approximately 76,000 BOE per day in 2014.

Qatar

In Qatar, Occidental is the operator at 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. The terms for ISND, ISSD and Block 12 expire in 2019, 2022 and 2017, respectively.

In 2014, Occidental continued to develop the ISND field to improve ultimate recovery in all existing contract reservoirs.

Occidental's Dolphin investment comprises two separate economic interests through which Occidental owns: (i) a 24.5-percent undivided interest in the upstream operations under 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 five-year extension; and (ii) a 24.5-percent interest in the stock of Dolphin Energy Limited (Dolphin Energy), which operates a pipeline and is discussed further in "Midstream and Marketing Segment - Pipeline Transportation."

Occidental's share of production from Qatar was approximately 107,000 BOE per day in 2014.

United Arab Emirates

In 2011, Occidental acquired a 40-percent participating interest in the Al Hosn gas project, joining with the Abu Dhabi National Oil Company (ADNOC) in a 30-year joint venture agreement. Once fully operational, the project is anticipated to produce over 450 MMcf per day of natural gas and 75,000 barrels per day of NGLs and condensate, of which Occidental’s net share would be over 180 MMcf per day and 30,000 barrels per day, respectively. Initial start up of production from this project commenced in January 2015 and is proceeding as planned.

Additionally, the Al Hosn gas project includes gas processing facilities which are discussed further in "Midstream and Marketing Segment - Gas Processing Plants and CO₂ Fields and Facilities".

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

Yemen

In Yemen, Occidental owns interests in Block 10 East Shabwa Field, which extends through December 2015 with a 40.4-percent interest that includes an 11.8-percent interest held in an unconsolidated entity, and Block S-1 An Nagyah Field, which is an Occidental-operated block with a 75-percent working interest that extends into 2023.

Given the political instability and civil unrest in Yemen, production levels may be unpredictable for the remainder of the Block 10 contract term and it is unlikely the contract will be extended. Occidental's share of production from the Yemen properties was approximately 10,000 BOE per day in 2014.

Latin America Assets



		Latin America 1. Bolivia 2. Colombia

Bolivia

Occidental holds working interests in the Tarija, Chuquisaca and Santa Cruz regions of Bolivia, which produce gas. Occidental's share of production from Bolivia was 2,000 BOE per day in 2014.

Colombia

Occidental has a working interest in the La Cira-Infantas area and has operations within the Llanos Norte Basin. Occidental's interests range from 39 to 61 percent and certain interests expire between 2023 and 2030, while others extend through the economic limit of the areas. Occidental's share of production was approximately 27,000 BOE per day in 2014.

Proved Reserves

Proved oil, NGLs and gas reserves were estimated using the unweighted arithmetic average of the first-day-of-the-month price for each month within the year, unless prices were defined by contractual arrangements. Oil, NGLs and gas prices used for this purpose were based on posted benchmark prices and adjusted for price differentials including gravity, quality and transportation costs. For the 2014, 2013 and 2012 disclosures, the calculated average West Texas Intermediate oil prices were $94.99, $96.94 and $94.71 per barrel, respectively. The calculated average Brent oil prices for 2014, 2013 and 2012 disclosures were $99.51, 108.76, and $111.70 per barrel, respectively. The calculated average Henry Hub gas prices for 2014, 2013 and 2012 were $4.42, $3.65 and $2.79 per MMBtu, respectively.

Occidental had proved reserves at year-end 2014 of 2,819 million BOE, compared to the year-end 2013 amount of 2,738 million BOE. Proved reserves at year-end 2014 and 2013 consisted of, respectively, 63 percent and 59 percent oil, 13 percent and 12 percent NGLs and 24 percent and 29 percent natural gas. Proved developed reserves represented approximately 71 percent and 70 percent, respectively, of Occidental’s total proved reserves at year-end 2014 and 2013.

Occidental does not have any reserves from non-traditional sources. For further information regarding Occidental's proved reserves, see "Supplemental Oil and Gas Information" following the "Financial Statements."

Proved Reserve Additions

Occidental's total proved reserve additions from all sources were 380 million BOE in 2014, and included 337 million BOE from Occidental's development program net of revisions of prior estimates, and 43 million BOE from purchases.

The total additions were as follows:



(in millions of BOE)
Improved recovery	354
Extensions and discoveries	41
Purchases	43
Revisions of previous estimates	(58	)
Total additions	380

Occidental's ability to add reserves, other than through purchases, depends on the success of improved recovery, extension and discovery projects, each of which depends on reservoir characteristics, technology improvements and oil and natural gas prices, as well as capital and operating costs. Many of these factors are outside management’s control, and will affect whether these historical sources of proved reserve additions continue at similar levels. Occidental's 2014 development program provided approximately 265 million BOE of reserve additions domestically.

Improved Recovery

In 2014, Occidental added proved reserves of 354 million BOE from improved recovery through its EOR and infill drilling activities. Generally, the improved recovery additions in 2014 were mostly associated with the continued development of properties in the Permian Basin. These properties comprise both conventional projects, which are characterized by the deployment of EOR development methods, largely employing application of CO₂flood, waterflood or steam flood, and unconventional projects. These types of conventional EOR development methods can be applied through existing wells, though additional drilling is frequently required to fully optimize the development configuration. Waterflooding is the technique of injecting water into the formation to displace the oil to the offsetting oil production wells. The use of either CO₂ or steam flooding depends on the geology of the formation, the evaluation of engineering data, availability and cost of either CO₂ or steam and other economic factors. Both techniques work similarly to lower viscosity causing the oil to move more easily to the producing wells. Many of Occidental's projects, including unconventional projects, rely on improving permeability to increase flow in the wells. In addition, some improved recovery comes from drilling infill wells that allow recovery of reserves that would not be recoverable from existing wells.

Extensions and Discoveries

Occidental also added proved reserves from extensions and discoveries, which are dependent on successful exploration and exploitation programs. In 2014, extensions and discoveries added 41 million BOE related primarily to the recognition of proved undeveloped reserves from the Permian Basin and Oman.

Purchases of Proved Reserves

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. In 2014, Occidental added 43 million BOE through purchases of proved reserves largely consisting of domestic acquisitions mainly in the Permian Basin.

Revisions of Previous Estimates

Revisions can include upward or downward changes to previous proved reserve estimates for existing fields due to the evaluation or interpretation of geologic, production decline or operating performance data. In addition, product price changes affect proved reserves recorded by Occidental. For example, higher prices may increase the economically recoverable reserves, particularly for domestic properties, because the extra margin extends the expected life of the operations. Offsetting this effect, higher prices decrease Occidental's share of proved reserves under PSCs because less oil is required to recover costs. Conversely, when prices drop, Occidental's share of proved reserves increases for PSCs and economically recoverable reserves may drop for other operations. In 2014, revisions of previous estimates provided a decrease of 58 million BOE to proved reserves. Occidental had positive technical revisions of 7 million BOE which exclude the impact of negative revisions in Bahrain of 54 million BOE and price revisions of 11 million BOE.

Reserve estimation rules require that estimated ultimate recoveries be much more likely to increase or remain constant than to decrease as changes are made due to increased availability of technical data.

Proved Undeveloped Reserves

In 2014, Occidental had proved undeveloped reserve additions of 328 million BOE from improved recovery, extensions and discoveries and purchases. Of the total additions, 284 million BOE represented additions from improved recovery, primarily in the Permian Basin. Occidental added 15 million BOE through domestic acquisitions, mainly in the Permian Basin. Additionally, the proved undeveloped reserves increased 29 million BOE due to extensions and discoveries mainly in Oman and the Permian Basin. These proved undeveloped reserve additions were offset by transfers of 315 million BOE to the proved developed category as a result of the 2014 development programs including 214 million BOE from Al Hosn gas project reserves. Occidental incurred approximately $1.7 billion in 2014 to convert proved undeveloped reserves to proved developed reserves. Al Hosn, Permian Basin, Oman, Williston Basin and South Texas accounted for approximately 93 percent of the

reserve transfers from proved undeveloped to proved developed in 2014. A substantial portion of the proved undeveloped reserves as of December 31, 2014 was the result of the development program in the Permian Basin, which represents 55 percent of total year-end proved undeveloped reserves.

Recent global economic conditions have driven oil and gas prices down significantly. These conditions may continue for an extended period. Prolonged or further declines in commodity prices could require Occidental to further reduce capital spending, potentially impacting either the quantity or the development timing of proved undeveloped reserves.

Reserves Evaluation and Review Process

Occidental's estimates of proved reserves and associated future net cash flows as of December 31, 2014, were made by Occidental’s technical personnel and are the responsibility of management. The estimation of proved reserves is based on the requirement of reasonable certainty of economic producibility and funding commitments by Occidental to develop the reserves. This process involves reservoir engineers, geoscientists, planning engineers and financial analysts. As part of the proved reserves estimation process, all reserve volumes are estimated by a forecast of production rates, operating costs and capital expenditures. Price differentials between benchmark prices (the unweighted arithmetic average of the first-day-of-the-month price for each month within the year) and realized prices and specifics of each operating agreement are then used to estimate the net reserves. Production rate forecasts are derived by a number of methods, including estimates from decline curve analysis, type-curve analysis, material balance calculations that take into account the volumes of substances replacing the volumes produced and associated reservoir pressure changes, seismic analysis and computer simulation of the reservoir performance. These field-tested technologies have demonstrated reasonably certain results with consistency and repeatability in the formation being evaluated or in an analogous formation. Operating and capital costs are forecast using the current cost environment applied to expectations of future operating and development activities.

Net proved developed reserves are those volumes that are expected to be recovered through existing wells with existing equipment and operating methods for which the incremental cost of any additional required investment is relatively minor. Net proved undeveloped reserves are those volumes that are expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required for recompletion.

The current Senior Vice President, Reserves for Oxy Oil and Gas is responsible for overseeing the preparation of reserve estimates, in compliance with U.S. Securities and Exchange Commission (SEC) rules and regulations, including the internal audit and review of Occidental's oil and gas reserves data. The Senior Vice President has over 30 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 currently serves on 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. He is also an active member of the Joint Committee on Reserves Evaluator Training (JCORET). The Senior Vice President 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 review and approve Occidental's oil and gas reserves. The Reserves Committee reports to the Audit Committee of Occidental's Board of Directors 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 2014, Ryder Scott conducted a process review of the methods and analytical procedures utilized by Occidental’s engineering and geological staff for estimating the proved reserves volumes, preparing the economic evaluations and determining the reserves classifications as of December 31, 2014, in accordance with the SEC regulatory standards. 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 2014 year-end total proved reserves portfolio. In 2014, Ryder Scott reviewed approximately 24 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 72 percent of Occidental’s existing 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. Occidental has filed Ryder Scott's independent report as an exhibit to this Form 10-K.

Based on its reviews, including the data, technical processes and interpretations presented by Occidental, Ryder Scott has concluded that the overall procedures and methodologies Occidental utilized in estimating the proved reserves volumes, documenting the changes in reserves from prior estimates, preparing the economic evaluations and determining the reserves classifications for the reviewed properties are appropriate for the purpose thereof and comply with current SEC regulations.

Industry Outlook

The petroleum industry is highly competitive and subject to significant volatility due to various market conditions. The WTI and Brent oil price indexes declined significantly in the fourth quarter of 2014, settling at $53.27 per barrel and $57.33 per barrel from $98.42 per barrel and $110.80 per barrel, respectively, as of December 31, 2014 and 2013.

Oil prices will continue to be affected by: (i) global supply and demand, which are generally a function of global economic conditions, inventory levels, production disruptions, technological advances, regional market conditions and the actions of OPEC, other significant producers and governments; (ii) transportation capacity, infrastructure constraints, and cost in producing areas; (iii) currency exchange rates; and (iv) the effect of changes in these variables on market perceptions.

NGLs prices are related to the supply and demand for the components of products making up these liquids. Some of them more typically correlate to the price of oil while others are affected by natural gas prices as well as the demand for certain chemical products for which they are used as feedstock. In addition, infrastructure constraints magnify the pricing volatility from region to region.

Domestic natural gas prices and local differentials are strongly affected by local supply and demand fundamentals, as well as government regulations and availability of transportation capacity from producing areas.

These and other factors make it impossible to predict the future direction of oil, NGLs and domestic gas prices reliably. International gas prices are generally fixed under long-term contracts. Occidental continues to respond to economic conditions by adjusting capital expenditures in line with current economic conditions with the goal of keeping returns well above its cost of capital.

CHEMICAL SEGMENT

Business Environment

The modest pace of United States economic growth resulted in slightly higher demand for domestically produced energy and feedstocks. Chlorovinyl margins were challenged throughout the year as unprecedented unplanned and planned ethylene cracker outages significantly affected the supply of ethylene resulting in historically high ethylene prices. Chemical segment earnings, excluding asset impairments in 2014 and the gain on sale of the investment in Carbocloro in 2013, decreased in 2014, primarily due to higher energy and ethylene costs and lower chlor-alkali pricing driven by continued unfavorable supply and demand fundamentals.

Business Review

Basic Chemicals

During 2014, the United States economy continued its slow recovery with full-year growth expected to show only a slight improvement from the prior year. The improvement to the economy contributed to moderate improvements in domestic chemical demand. Despite the commissioning of three chlor-alkali plants in the U.S., including OxyChem’s 182,500 ton-per-year membrane plant in Tennessee, industry chlorine operating rates remained relatively flat

with 2013 at approximately 84 percent, which resulted in chlorine prices ending approximately 6 percent below where they began. Exports of downstream chlorine derivatives into the vinyls chain were competitive for the first half of 2014 but were negatively impacted by a significant increase in ethylene prices as third quarter supply was restricted by historically high ethylene cracker plant outages. Liquid caustic soda prices experienced downward price pressure during the first quarter as the industry absorbed the additional chlor-alkali capacity that came on-line. Export demand and pricing remains under pressure due to global over capacity and lower growth in major consuming regions such as Latin American and Asia. Businesses such as calcium chloride, potassium hydroxide and muriatic acid improved compared to 2013 as domestic demand improved and margins remained stable throughout the year.

Vinyls

Domestic PVC demand in 2014 grew by approximately 3 percent compared to 2013 as the housing and commercial construction markets continued their recovery. Despite the improvement in the domestic market, the industry operating rate decreased by slightly more than 2 percent due to a combination of industry outages early in 2014 and export demand declining by approximately 10 percent compared to the prior year. Industry margins improved in 2014 due to first quarter PVC price increases, which were partially offset by higher ethylene prices. During the first half of 2014, North America ethane-based ethylene production continued to be price advantaged over Europe and Asia, but is reaching parity with the rest of the world as the price of oil declines. Despite the year-over-year reduction in North American exports of PVC, export volumes represented nearly 30 percent of total PVC sales of North American producers. Construction commenced on the Ingleside, Texas, ethylene cracker during the first half of 2014 and commercial operations are expected to begin in early 2017.

Industry Outlook

Industry performance will depend on the health of the global economy, specifically in the housing, construction, automotive and durable goods markets. Margins also depend on market supply and demand balances and feedstock and energy prices. Long-term weakness in the petroleum industry may negatively affect the demand and pricing of a number of Occidental’s products that are consumed exclusively by industry participants.

Basic Chemicals

Occidental expects that if the United States housing, automotive and durable goods markets continue to improve, domestic demand for basic chemical products should be higher in 2015. Overall, the increase in chlor-alkali capacity may restrict significant price improvement but anticipated higher demand from strengthening global markets coupled with lower natural gas prices should allow for moderate chlorine and caustic soda margin improvement in 2015. The continued competitiveness of downstream chlorine derivatives in global markets is contingent on United States feedstock costs, primarily

natural gas and ethylene, remaining favorable compared to other feedstock costs in global markets.

Vinyls

North American demand and operating rates should improve in 2015 if growth in both housing starts and commercial construction continues. Occidental expects U.S. export demand to increase in 2015 and margins to improve over 2014.

MIDSTREAM AND MARKETING SEGMENT

Business Environment

Midstream and marketing segment earnings are affected by the performance of its marketing and trading businesses and its processing, transportation and power generation assets. The marketing and trading businesses aggregate and market Occidental's and third-party volumes, trade commodities and engage in storage activities. Marketing and trading performance is affected primarily by commodity price changes and margins in oil and gas transportation and storage programs. Processing and transportation results are affected by the volumes that are processed and transported through the segment's plants and pipelines, as well as the margins obtained on related services.

The midstream and marketing segment earnings in 2014, excluding the gains from the sales of the BridgeTex Pipeline and a portion of an investment in Plains Pipeline, were greater than 2013, reflecting higher income from the gas processing and power generation businesses, partially offset by lower marketing performance and pipeline income.

Business Review

Marketing and Trading

The marketing and trading group markets substantially all of Occidental’s oil, NGLs and gas production, trades around its assets, including its own and third party transportation and storage capacity, and engages in commodities trading. Occidental’s third-party marketing and trading activities focus on purchasing oil, NGLs and gas for resale from parties whose oil and gas supply is located near its transportation and storage assets. These purchases allow Occidental to aggregate volumes to better utilize and optimize its assets. Marketing performance in 2014 declined compared to 2013 due to lower margins on crude oil and NGLs, partially offset by higher margins in natural gas. In the second half of 2014, Occidental commenced winding down its Phibro commodity trading operations. As of year-end there was no material exposure related to Phibro’s remaining activities.

Gas Processing Plants and CO₂ Fields and Facilities

Occidental processes its and third-party domestic wet gas to extract NGLs and other gas byproducts, including CO₂, and delivers dry gas to pipelines. Margins primarily result from the difference between inlet costs of wet gas and market prices for NGLs. Occidental’s 2014 earnings from these operations increased compared to 2013, due to the multiple plant turnarounds in the Permian Basin operations during 2013.

Occidental, together with ADNOC, completed the Al Hosn gas processing facilities in Abu Dhabi at the end of 2014. The Al Hosn gas processing facilities are designed to process 1.0 bcf per day of natural gas and separate it into sales gas, condensate, NGLs and sulfur. The Al Hosn gas processing facilities includes processing and treatment facilities, sulfur recovery units, including facilities to extract sulfur from natural gas and to load and store sulfur. The project is anticipated to produce approximately 8,700 tons per day of sulfur, of which Occidental's share would be 3,500 tons of sulfur per day. The Al Hosn gas processing facilities will generate revenues from gas processing fees and the sale of sulfur.

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-diameter natural gas pipeline (Dolphin Pipeline), which transports dry natural gas from Qatar to the UAE and Oman. The Dolphin Pipeline contributes significantly to Occidental's pipeline transportation results through Occidental's 24.5-percent interest in Dolphin Energy. The Dolphin Pipeline has capacity to transport up to 3.2 Bcf of natural gas per day and currently transports approximately 2.3 Bcf per day. Dolphin Pipeline is currently expanding gas compression facilities to achieve maximum pipeline capacity. Occidental believes substantial opportunities remain to provide gas transportation to additional customers in the region to reach the full capacity of the Dolphin Pipeline and generate additional midstream revenues and cash flows.

Occidental owns an oil common carrier pipeline and storage system with approximately 2,900 miles of pipelines from southeast New Mexico across the Permian Basin of southwest Texas to Cushing, Oklahoma. The system has a current throughput capacity of about 720,000 barrels per day, 6.0 million barrels of active storage capability and 108 truck unloading facilities at various points along the system, which allow for additional volumes to be delivered into the pipeline.

During 2014, Occidental sold its interest in BridgeTex Pipeline while retaining access to United States gulf markets through the pipeline. The BridgeTex Pipeline transports crude oil between the Permian region and the United States gulf coast refinery markets and began service in the second half of 2014. Simultaneously with the sale of Occidental's interest in the BridgeTex Pipeline, Occidental completed the sale of a portion of its investment in Plains Pipeline. Following the fourth quarter 2014 sale of a portion of its investment, Occidental owns approximately 13 percent of Plains Pipeline. The Plains Pipeline investment contributed approximately 19 percent of the segment's earnings for 2014, excluding the gain from the sale.

Occidental's 2014 pipeline transportation earnings declined from 2013 due to lower income from its investment in Plains Pipeline as a result of Occidental's lower ownership interest.

Power Generation Facilities

Earnings from power and steam generation facilities are derived from sales to affiliates and third parties and the increase in earnings in 2014 compared to 2013 was due to higher margins from higher spark spreads and production.

Industry Outlook

The pipeline transportation and power generation businesses are expected to remain relatively stable. The gas processing plant operations could have volatile results depending mostly on NGLs prices, which cannot reasonably be predicted. Generally, higher NGLs prices result in higher profitability. Although the marketing and trading business in isolation can be volatile in periods of severe price swings, Occidental does not expect the volatility of these operations to be significant to the company as a whole given Occidental's framework of controls and risk management. Occidental continues to actively focus on marketing its commodity production to generate maximum value for its stakeholders.

SEGMENT RESULTS OF OPERATIONS

Segment earnings 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 statements of income and cash flows, and supplemental oil and gas information related to California Resources have been treated as discontinued operations for all periods presented. The assets and liabilities of California Resources were removed from Occidental's consolidated balance sheet as of November 30, 2014.

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,	2014			2013			2012
NET SALES ^(a)
Oil and Gas	$	13,887		$	15,008		$	14,953
Chemical	4,817			4,673			4,580
Midstream and Marketing	1,373			1,174			1,164
Eliminations ^(a)	(765		)	(685		)	(597		)
	$	19,312		$	20,170		$	20,100
EARNINGS
Oil and Gas ^(b)	$	428		$	6,411		$	5,840
Chemical^(c)	420			743			720
Midstream and Marketing ^{(d) (e)}	2,564			1,523			440
	3,412			8,677			7,000
Unallocated corporate items
Interest expense, net	(71		)	(124		)	(141		)
Income taxes	(1,685		)	(3,214		)	(2,659		)
Other ^(f)	(1,800		)	(407		)	(371		)
Income (loss) from continuing operations ^(e)	(144		)	4,932			3,829
Discontinued operations, net	760			971			769
Net Income attributable to common stock	$	616		$	5,903		$	4,598
Basic Earnings per Common Share	$	0.79		$	7.33		$	5.67


(a)	Intersegment sales eliminate upon consolidation and are generally made at prices approximating those that the selling entity would be able to obtain in third-party transactions.

(b)

The 2014 amount includes a net $5.3 billion of pre-tax charges related to the impairments of domestic and international assets, other charges and the sale of Hugoton assets. The 2013 amount includes $607 million of pre-tax charges related to the impairment of domestic non-producing acreage. The 2012 amount includes pre-tax charges of $1.7 billion for the impairment of domestic gas assets and related items.


(c)	The 2014 amount includes $149 million pre-tax charges related to impairments of chemical assets. The 2013 amount includes a $131 million pre-tax gain from the sale of an investment in Carbocloro, a Brazilian chemical facility.


(d)	The 2014 amount includes a $633 million pre-tax gain from the sale of Occidental's interest in BridgeTex Pipeline Company, LLC, and a $1.4 billion pre-tax gain from the sale of an investment in Plains Pipeline. The 2013 amount includes a $1.0 billion pre-tax gain from the sale of a portion of an investment in Plains Pipeline and other items.


(e)	Represents amounts attributable to common stock after deducting a non controlling interest amount of $14 million in 2014. The non controlling interest amount has been netted in the midstream and marketing segment earnings.

(f)

The 2014 amount includes an $805 million pre-tax charge related to the impairment of the Joslyn oil sands project and a $553 million charge related to an other than temporary loss for retained shares of California Resources. The 2013 amount includes a $55 million pre-tax charge for the estimated cost related to the employment and post-employment benefits for Occidental's former Executive Chairman and termination of certain other employees and consulting arrangements.

Oil and Gas



(in millions)	2014		2013		2012
Segment Sales	$	13,887	$	15,008	$	14,953
Segment Earnings	$	428	$	6,411	$	5,840

The following tables set forth the production and sales volumes of oil, NGLs and natural gas per day for each of the three years in the period ended December 31, 2014. The differences between the production and sales volumes per day are generally due to the timing of shipments at Occidental’s international locations where product is loaded onto tankers.



Production per Day	2014	2013	2012
United States
Oil (MBBL)
Permian Resources	43	35	36
Permian EOR	111	111	106
Midcontinent and Other	27	24	20
Total excluding Hugoton	181	170	162
Hugoton	2	6	5
Total	183	176	167
NGLs (MBBL)
Permian Resources	12	10	11
Permian EOR	30	29	28
Midcontinent and Other	12	15	14
Total excluding Hugoton	54	54	53
Hugoton	1	3	3
Total	55	57	56
Natural gas (MMCF)
Permian Resources	120	117	114
Permian EOR	38	40	41
Midcontinent and Other	301	315	347
Total excluding Hugoton	459	472	502
Hugoton	17	56	63
Total	476	528	565
Latin America
Oil (MBBL) – Colombia	27	29	29
Natural gas (MMCF) – Bolivia	11	12	13
Middle East/North Africa
Oil (MBBL)
Dolphin	7	6	8
Oman	69	66	67
Qatar	69	68	71
Other	28	39	40
Total	173	179	186
NGLs (MBBL)
Dolphin	7	7	8
Other	—	—	1
Total	7	7	9
Natural gas (MMCF)
Dolphin	143	142	163
Oman	43	51	57
Other	236	241	232
Total	422	434	452
Total Production excluding Hugoton	591	591	599
Hugoton	6	18	19
Total Production (MBOE) ^(a)	597	609	618
(See footnotes following the Average Realized Prices table)



Sales Volumes per Day	2014	2013	2012
United States
Oil (MBBL)	183	176	167
NGLs (MBBL)	55	57	56
Natural gas (MMCF)	476	528	565
Latin America
Oil (MBBL) – Colombia	29	27	28
Natural gas (MMCF) – Bolivia	11	12	13
Middle East/North Africa
Oil (MBBL)
Dolphin	7	6	8
Oman	69	68	66
Qatar	69	67	71
Other	27	38	40
Total	172	179	185
NGLs (MBBL)
Dolphin	7	7	8
Other	—	—	1
Total	7	7	9
Natural gas (MMCF)	422	434	452
Total Sales excluding Hugoton	592	590	598
Hugoton	6	18	19
Total Sales Volumes (MBOE) ^(a)	598	608	617
(See footnotes following the Average Realized Prices table)



	2014		2013		2012
Average Realized Prices
Oil Prices ($ per bbl)
United States	$	84.73	$	92.48	$	88.25
Latin America	$	88.00	$	103.21	$	98.35
Middle East/North Africa	$	96.34	$	104.48	$	108.76
Total worldwide	$	90.13	$	98.81	$	98.90
NGLs Prices ($ per bbl)
United States	$	37.79	$	38.65	$	44.06
Middle East/North Africa	$	30.98	$	33.00	$	37.74
Total worldwide	$	37.01	$	38.00	$	43.21
Gas Prices ($ per Mcf)
United States	$	3.97	$	3.22	$	2.48
Latin America	$	8.94	$	11.17	$	11.85
Total worldwide ^(a)	$	2.55	$	2.23	$	1.85


(a)	Natural gas volumes have been converted to BOE based on energy content of six Mcf of gas to one barrel of oil. Barrels of oil equivalence does not necessarily result in price equivalence.

Oil and gas segment earnings in 2014 included pre-tax charges of $5.3 billion related to the impairment of domestic and international assets and the gain from the sale of Hugoton assets and earnings in 2013 included pre-tax charges of $0.6 billion for the impairment of domestic non-producing acreage. In 2012, oil and gas segment earnings included pre-tax charges of $1.7 billion for the impairment of domestic gas assets and related items.

Domestic oil and gas segment earnings, excluding impairment and other charges in both years, were $1.9 billion in 2014 compared to $2.5 billion in 2013. The decrease in domestic earnings reflected lower crude oil and NGLs prices, higher operating costs from increased workover and maintenance activities, and higher DD&A expenses, partially offset by higher crude oil production volumes and improved realized prices for gas. International oil and gas segment earnings, excluding impairments, were $4.0 billion in 2014 and $4.6 billion in 2013. International earnings reflected lower realized crude oil prices and sales volumes, partially offset by lower operating expenses and DD&A.

Average production costs for 2014, excluding taxes other than on income, were $13.50 per BOE, compared to $12.56 per BOE for 2013. The increase in average costs reflects increased domestic activity in downhole maintenance and higher costs for purchased injectants.

Average daily oil and gas production volumes, excluding Hugoton production, were flat at 591,000 BOE in 2014 and 2013. Average domestic daily production increased by 10,000 BOE to 312,000 BOE in 2014. During this same time period, domestic daily oil production increased by over 6 percent or 11,000 barrels per day to 181,000 barrels, mainly coming from Permian Resources. International average daily production volumes decreased to 279,000 BOE in 2014 from 289,000 BOE in 2013. The decrease was primarily due to lower cost recovery barrels in Iraq and insurgent activities in Colombia, Libya and Yemen. Total company average daily sales volumes, excluding Hugoton, were 592,000 BOE in 2014 and 590,000 BOE in 2013.

Domestic oil and gas segment earnings, excluding impairments in both years, were $2.5 billion in 2013 compared to $2.2 billion in 2012. The increase in domestic earnings reflected higher crude oil and gas prices, higher crude oil volumes and lower operating costs, partially offset by higher DD&A expense. International segment earnings were $4.6 billion in 2013 and $5.5 billion in 2012. The decrease in international earnings reflected lower crude oil prices and volumes as well as higher operating costs and DD&A rates in the Middle East/North Africa.

Average daily oil and gas production volumes, excluding Hugoton, were 591,000 BOE for 2013, compared to 599,000 BOE for 2012. Occidental's 2013 average daily domestic oil and NGLs production increased by 8,000 BOE or 5 percent and 1,000 BOE, respectively, as compared to 2012 while gas production decreased by 30 MMcf or 6 percent as Occidental focused its development program on oil production. International average daily production volumes decreased to 289,000 BOE in 2013 compared to 301,000 BOE in 2012, primarily from lower cost recovery barrels from Dolphin and Oman and higher levels of insurgent activities in Libya. Average daily sales volumes, excluding Hugoton, were 590,000 BOE in 2013, compared to 598,000 BOE in 2012.

Chemical



(in millions)	2014		2013		2012
Segment Sales	$	4,817	$	4,673	$	4,580
Segment Earnings	$	420	$	743	$	720

Chemical segment earnings, excluding asset impairments of $149 million in 2014 and gain on sale of $131 million from the sale of the Carbocloro investment, were $569 million in 2014 compared to $612 million in 2013. The lower earnings in 2014 were primarily a result of lower caustic soda pricing driven by new chlor-alkali capacity in the industry and higher energy and ethylene costs, partially offset by higher PVC margins and improved volumes across most product lines.

Chemical segment earnings were $612 million in 2013, excluding the $131 million gain on sale of Carbocloro investment, compared to $720 million in 2012. The year-over-year change in chemical segment earnings reflected higher energy and ethylene costs and lower chlor-alkali and chlorinated organics pricing driven by continued unfavorable supply and demand fundamentals and reduced export demand.

Midstream, Marketing and Other



(in millions)	2014		2013		2012
Segment Sales	$	1,373	$	1,174	$	1,164
Segment Earnings	$	2,564	$	1,523	$	440

Midstream and marketing segment earnings in 2014, excluding impairments and other items and gains on sales of $2.0 billion in 2014 and $1.0 billion in 2013, were $549 million in 2014, compared to $537 million in 2013. The increase in earnings reflected higher income from the gas processing and power generation businesses, partially offset by lower marketing performance and pipeline income.

Midstream and marketing segment earnings in 2013 were $537 million, excluding the $1.0 billion pre-tax gain from the sale of a portion of an investment in Plains Pipeline and other items, compared to $396 million in 2012. The 2013 results reflected higher earnings in the pipeline and power generation businesses and improved marketing and trading performance. Marketing performance improved by $110 million, mainly as a result of capturing regional crude price differentials by utilizing new pipelines providing access to the United States gulf coast refineries. These improvements were partially offset by lower income in the gas processing business due in part to the plant turnarounds in the Permian Basin operations.

SIGNIFICANT ITEMS AFFECTING EARNINGS

The following table sets forth, for the years ended December 31, 2014, 2013, and 2012 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)	2014			2013			2012
OIL AND GAS
Hugoton sale gain	$	531		$	—		$	—
Asset impairments and related items domestic	(4,766		)	(607		)	(1,690		)
Asset impairments and related items international	(1,066		)	—			—
Total Oil and Gas	$	(5,301	)	$	(607	)	$	(1,690	)
CHEMICAL
Carbocloro sale gain	$	—		$	131		$	—
Asset impairments	(149		)	—			—
Total Chemical	$	(149	)	$	131		$	—
MIDSTREAM AND MARKETING
BridgeTex Pipeline sale gain	$	633		$	—		$	—
Plains Pipeline sale gain	1,351			1,044			—
Asset impairments and related items	31			(58		)	44
Total Midstream and Marketing	$	2,015		$	986		$	44
CORPORATE
Other than temporary loss on available for sale investment	$	(553	)	$	—		$	—
Joslyn impairment	(805		)
Spin-off costs and other related items	(61		)	—			—
Charge for former employees and consultants	—			(55		)	—
Litigation reserves	—			—			(20		)
Tax effect of pre-tax and other adjustments	927			(167		)	612
Discontinued operations, net of tax	760			971			769
Total Corporate	$	268		$	749		$	1,361

TAXES

Deferred tax liabilities, net of deferred tax assets of $1.4 billion, were $2.9 billion at December 31, 2014. The current portion of the deferred tax assets of $110 million is included in other current assets. 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)	2014			2013			2012
EARNINGS
Oil and Gas	$	428		$	6,411		$	5,840
Chemical	420			743			720
Midstream and Marketing ^(a)	2,564			1,523			440
Unallocated Corporate Items	(1,871		)	(531		)	(512		)
Pre-tax income	1,541			8,146			6,488
Income tax expense
Federal and State	(157		)	1,061			235
Foreign	1,842			2,153			2,424
Total income tax expense	1,685			3,214			2,659
Income (loss) from continuing operations^(a)	$	(144	)	$	4,932		$	3,829
Worldwide effective tax rate	109		%	40		%	41		%


(a)	Represents amounts attributable to income from continuing operations after deducting a non controlling interest amount of $14 million in 2014. The non controlling interest amount has been netted in the midstream and marketing segment earnings.

Occidental’s 2014 worldwide tax rate was 109 percent, which was higher than 2013 mainly due to an other than temporary loss on Occidental’s available for sale investment in California Resources stock and the oil and gas international asset impairments of $1.1 billion, neither of which had a tax benefit. To a lesser degree, foreign pre-tax income was proportionately higher in 2014, which is generally taxed at a higher rate than domestic pre-tax income. The 2013 worldwide tax rate was lower than 2012 due to proportionately higher domestic pre-tax income in 2013.

A deferred tax liability has not been recognized for temporary differences related to unremitted earnings of certain consolidated foreign subsidiaries, as it is Occidental’s intention, generally, to reinvest such earnings permanently. If the earnings of these foreign subsidiaries were not indefinitely reinvested, an additional deferred tax liability of approximately $140 million would be required, assuming utilization of available foreign tax credits.

CONSOLIDATED RESULTS OF OPERATIONS

Changes in components of Occidental's results of continuing operations are discussed below:

Revenue and Other Income Items



(in millions)	2014		2013		2012
Net sales	$	19,312	$	20,170	$	20,100
Interest, dividends and other income	$	130	$	107	$	80
Gain on sale of assets and equity investments	$	2,505	$	1,175	$	—

The decrease in net sales in 2014, compared to 2013, was mainly due to a significant decline in worldwide oil prices in the fourth quarter of 2014 and to a lesser extent, decline in NGLs prices, partially offset by higher domestic oil volumes and higher domestic natural gas prices.

The increase in net sales in 2013, compared to 2012, was due to improved domestic oil and gas realized prices and higher crude oil volumes, partially offset by lower international liquids volumes and oil prices.

Price and volume changes in the oil and gas segment generally represent about 70 percent of the change in oil and gas segment income which is a substantially larger portion of the overall change in net income than the chemical and midstream and marketing segments.

The 2014 gains on sale included $1.4 billion for the sale of a portion of the investment in Plains Pipeline, $633 million for the sale of BridgeTex Pipeline and $531 million for the sale of Hugoton properties. The 2013 gains on sale included $1.0 billion for the sale of a portion of the investment in Plains Pipeline and $131 million for the sale of the Carbocloro investment.

Expense Items



(in millions)	2014		2013		2012
Cost of sales	$	6,803	$	6,497	$	6,530
Selling, general and administrative and other operating expenses	$	1,503	$	1,544	$	1,366
Depreciation, depletion and amortization	$	4,261	$	4,203	$	3,585
Asset impairments and related items	$	7,379	$	621	$	1,710
Taxes other than on income	$	550	$	564	$	513
Exploration expense	$	150	$	140	$	197
Interest and debt expense, net	$	77	$	132	$	154

Cost of sales increased in 2014, compared to 2013, due to higher energy and feedstock costs in the chemical segment and increased domestic down hole maintenance activities and higher costs for purchased injectants in the oil and gas segment.

Cost of sales decreased in 2013, compared to 2012, due to lower oil and gas operating costs, partially offset by higher energy and feedstock costs in the chemical segment.

Selling, general and administrative and other operating expenses in 2014 were approximately equivalent to 2013.

Selling, general and administrative and other operating expenses increased in 2013 due to higher compensation and employee-related costs, in particular higher equity compensation due to higher stock prices, as well as the charge related to the employment and post-employment benefits for Occidental's former Executive Chairman and termination of certain other employees and consulting arrangements.

DD&A increased in each year from 2012 to 2014, generally due to higher DD&A rates and, to a lesser extent, the changes in volumes in the oil and gas segment.

Asset impairments and related items in 2014 of $7.4 billion included $2.8 billion in the Williston basin, $904 million related to Occidental's gas and NGLs assets, $889 million for other domestic acreage and $1.1 billion primarily related to operations in Bahrain and other international operations. Asset impairments also include charges for Joslyn oil sands of $805 million and an other than temporary loss of $553 million for the available for sale investment in California Resources stock. See Note 15 of the Consolidated Financial Statements.

Asset impairments and related items in 2013 of $621 million were mostly related to the impairment of certain non-producing domestic oil and gas acreage.

Asset impairments and related items in 2012 were almost all in Midcontinent, over 90 percent of which were related to natural gas properties that were acquired previously when gas prices were above $6 per Mcf.

Taxes other than on income in 2014 were approximately equivalent to 2013. From 2013 to 2012 taxes other than on income increased primarily due to rising prices.

Other Items



Income/(expense) (in millions)	2014			2013			2012
Provision for income taxes	$	(1,685	)	$	(3,214	)	$	(2,659	)
Income from equity investments	$	331		$	395		$	363
Discontinued operations, net	$	760		$	971		$	769

Provision for income taxes decreased in 2014, compared to 2013, due to lower pre-tax income, partially offset by certain nondeductible charges which increased the effective rate.

Provision for income taxes increased in 2013, compared to 2012, due to higher pre-tax income, partially offset by a slightly lower effective tax rate. The lower tax rate was due to higher proportional domestic pre-tax income in 2013, compared to 2012.

Income from equity investments decreased in 2014, compared to 2013, due to Occidental’s reduced ownership in the Plains Pipeline as portions of the investment were sold in fourth quarters of 2014 and 2013. The increase in equity income in 2013, compared to 2012, reflected higher earnings from Occidental’s equity investments in pipelines.

CONSOLIDATED ANALYSIS OF FINANCIAL POSITION

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

Balance Sheet Components



(in millions)	2014	2013
CURRENT ASSETS