Notes to Financial Statements
December 31, 2018
and
2017
(1)
Description of the Plan
The following description of the Occidental Petroleum Corporation Savings Plan (the Plan) provides only general information. Participants should refer to the Plan document for a more complete description of the Plan’s provisions.
(a) General
The Plan is a defined contribution plan generally available to certain employees of Occidental Petroleum Corporation (Oxy, or the employer), a Delaware corporation, and participating subsidiaries (collectively, the Company). The Plan is intended to be a tax-qualified plan containing a qualified cash or deferred arrangement and employee stock ownership plan. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended (ERISA).
(b) Plan Administration
The Plan is administered by the Pension and Retirement Trust and Investment Committee as to investment decisions and by the Pension and Retirement Plan Administrative Committee as to all matters except investment decisions (these two committees are herein referred to collectively as the Committees). Members of the Committees are selected by the board of directors of the Company (the Board). The Committees have been given all powers necessary to carry out their respective duties, including, but not limited to, the power to administer and interpret the Plan and to answer all questions affecting eligibility of participants. Bank of New York Mellon Trust Company N. A. (the Trustee) is the trustee and custodian of the trust fund, which holds all of the assets of the Plan.
(c) Contributions
Participant Contributions – Each year, participants may contribute up to the maximum contribution percentage of compensation to the Plan on a before- or after-tax basis, or in any combination thereof, subject to certain Internal Revenue Code (IRC) limitations. For
2018
and
2017
, the employee contribution percentage limits were 30% for non-Highly Compensated Employees and 15% for Highly Compensated Employees. Participants age 50 or older by the end of the Plan year were permitted to contribute additional before-tax catch-up contributions to the Plan up to $6,000 for the
2018
and
2017
Plan years. The Plan permits Roth contributions and in-plan Roth rollover contributions.
Newly eligible participants who do not affirmatively elect to opt out of making contributions are automatically enrolled in the Plan with a pre-tax contribution amount of 5% of base pay.
Employer Matching Contributions – The employer matching contributions for non-collectively bargained employees is an amount equal to 200% of a participant’s contribution up to the first 2% of eligible compensation, and 100% of the next 3% of eligible compensation. Certain collectively bargained employees also fall under this matching formula, as negotiated by their respective unions. Other collectively bargained employees received Company contributions between 50% and 100%, as negotiated by their respective unions, up to the first 6% of eligible compensation that a participant contributes to the Plan. All employer contributions are invested in the Oxy Stock Fund. All vested participants may elect to transfer their employer matching contributions to other investment funds.
(d) Participant Accounts
All participant contributions and the earnings thereon are allocated to each participant’s accounts and are invested in accordance with the participant’s investment elections in accordance with Section 404(c) of ERISA. Participants who do not make an investment election are automatically enrolled in the Plan’s qualified default investment alternative.
Each participant’s account is credited with the participant’s elected contribution, the employer’s respective matching contribution, and allocations of the respective fund’s investment income and losses, and investment manager fees. Allocations are based on participant earnings or account balances, as defined. The benefit to which a participant is entitled is the benefit that can be provided from the participant’s vested account.
(e) Vesting
Participants are vested immediately in their contributions and employer matching contributions, plus actual earnings thereon. Participants are also fully vested in dividends paid on the portion of their employer matching contributions invested in the Oxy Stock Fund.
(f) Notes Receivable From Participants
Participants may borrow from their fund accounts a minimum of $1,000 up to a maximum amount equal to the lesser of: (i) $50,000 reduced by the highest outstanding principal loan balance during the preceding 12 months, if any; (ii) 50% of their vested account balance; or (iii) an amount that would require monthly payroll deductions for repayment not greater than 25% of the participant’s monthly base compensation. Loan terms may range from one to five years for general purpose loans and six to ten years for primary residence loans. The maturity dates on currently outstanding notes receivable from participants range from January 2019 to September 2028. The loans are secured by the balance in the participant’s account at the time the loan is approved. Loan interest rates are fixed on the last day of the month prior to the calendar month in which the loan is funded and rates are reasonable compared to similar loans issued by other lenders, in accordance with the Plan. Interest rates ranged from 3% to 7% on loans outstanding as of December 31, 2018 and from 3% to 6% on loans outstanding as of December 31, 2017. Principal and interest are paid ratably through payroll deductions.
(g) Distributions
Generally, on termination of service, participants may elect to receive the vested portion of their account balance under one of the distribution options allowed by the Plan. Participants may elect to receive distributions from their vested account balance in the Oxy Stock Fund in cash or in shares of Oxy common stock.
(h) Forfeited Accounts
Forfeited nonvested accounts are used to pay reasonable costs of administering the Plan and reduce employer contributions. At December 31, 2018 and 2017, the balance of forfeited nonvested accounts totaled approximately $0 and $13,000, respectively. Increases to the forfeiture account balance are primarily related to nonvested account balances of previously terminated participants and the forfeiture of unclaimed benefits, in accordance with the plan document. These amounts are expected to be used to reduce future contributions, or reinstate account balances if such participants are located.
During 2018 and 2017, no forfeitures were utilized to reduce employer contributions.
(i) Expenses
Certain administrative fees are paid by participants through their Plan accounts. Other expenses of maintaining the Plan are paid by the Company and are excluded from these financial statements. Investment related expenses are included in net appreciation (depreciation) of fair value of investments.
(2)
Summary of Significant Accounting Policies
(a)
Basis of Accounting
The financial statements of the Plan are prepared on the accrual method of accounting.
(b)
Use of Estimates
The process of preparing financial statements in conformity with United States generally accepted accounting principles (U.S. GAAP) requires management to make informed estimates and judgments regarding certain types of financial statement balances and disclosures. Changes in facts and circumstances or discovery of new information relating to such transactions and events may result in revised estimates and judgments and actual results may differ from estimates upon settlement but generally not by material amounts. Management believes that these estimates and assumptions provide a reasonable basis for the fair presentation of the Plan’s financial statements.
(c)
Investment Valuation and Income Recognition
The Plan’s investments are reported at fair value, with the exception of fully benefit-responsive investment contracts, which are reported at contract value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. See note 3 for a discussion of fair value measurements. See note 4 for a discussion of contract value investments.
Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded on an accrual basis. Dividends are recorded on the ex-dividend date. Net appreciation (depreciation) in fair value of investments includes gains and losses on investments bought and sold as well as held during the year.
(d) Payment of Benefits
Benefits are recorded when paid.
(e) Notes Receivable From Participants
Notes receivable from participants are measured at their unpaid principal balance, plus any accrued but unpaid interest and classified as a note receivable in the accompanying statements of net assets available for benefits. Delinquent notes receivable from participants are reclassified as distributions based upon the terms of the Plan.
(f) Reclassifications
Certain amounts in prior years have been reclassified to conform to the current year’s presentation.
(g) Recently Issued Accounting Pronouncements
In February 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2017-06 “Plan Accounting: Defined Benefit Pension Plans (Topic 960); Defined Contribution Pension Plans (Topic 962); Health and Welfare Benefit Plans (Topic 965): Employee Benefit Plan Master Trust Reporting,” (ASU 2017-06). ASU 2017-06 amends the presentation and disclosure requirements for benefit plans that hold interests in master trusts. For each master trust in which a plan holds an interest, the standard requires that a plan’s interest in that master trust and any change in that interest to be presented in separate line items in the statement of net assets available for benefits and in the statement of changes in net assets available for benefits, respectively. The amendments in this standard remove the requirement to disclose the percentage interest in the master trust for plans with divided interests and will require all plans to disclose the master trust’s investments by general type and the dollar amount of the plan’s interest in each type of investment. Plans will also be required to disclose their master trust’s other asset and liability balances on a gross basis and the dollar amount of the plan’s interest in each balance. ASU 2017-06 is effective for annual periods beginning after December 15, 2018 and must be applied retrospectively to each period for which financial statements are presented. Early adoption is permitted. The Company expects the adoption of this standard to result in changes to disclosures and presentation in the financial statements and related footnotes, and we are currently evaluating the extent of these changes.
In August 2018, the FASB issued ASU 2018-13 "Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement," (ASU 2018-13). ASU 2018-13 modifies the disclosure requirements of fair value measurements in Accounting Standards Codification (ASC) Topic 820. It is effective for all reporting periods beginning after December 15, 2019, with early adoption permitted. The Company is currently evaluating the impact of the adoption of this standard.
(3)
Fair Value Measurements
Plan assets are measured at fair value, based on the priorities of the inputs to valuation techniques used to measure fair value, in a three-level fair value hierarchy: Level 1 – using quoted prices in the active markets for identical assets or liabilities; Level 2 – using observable inputs other than quoted prices for identical assets or liabilities; and Level 3 – using unobservable inputs. Transfers between levels, if any, are recognized at year end.
The following is a description of the valuation methodologies used for the Plan assets that are measured at fair value:
(a) Common Stocks and Preferred Stocks
Common stocks and preferred stocks are valued at the closing price reported on the active market on which the individual securities are traded.
(b) Mutual Funds
Generally, mutual funds are valued at the net asset value (NAV) of the shares held by the Plan. If publicly registered, the value of the mutual fund can be obtained through quoted market prices in active markets.
(c) Common/Collective Trusts and Short-Term Investment Fund
The common collective trusts and short-term investment fund are valued at the NAV of the units provided by the fund issuer. The NAV, as provided by the trustee, is used as a practical expedient to estimate fair value. The NAV is based on the fair value of the underlying investments held by the fund less liabilities.
(d) Corporate Bonds
Corporate bonds are valued using quoted market price when available. If quoted market prices are not observable, corporate bonds are valued using pricing models with market observable inputs from both active and non-active markets.
The following tables set forth by level, within the fair value hierarchy, the Plan’s assets at fair value as of December 31, 2018 and 2017 (amounts in thousands). The tables do not include the Plan’s interest in master trust accounts presented in separate individual tables (see note 6).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets at fair value as of December 31, 2018
|
|
|
|
Level 1
|
|
|
Total
|
|
Common stock
|
|
|
|
|
|
|
|
|
Occidental Petroleum Corporation
|
|
$
|
525,070
|
|
|
|
$
|
525,070
|
|
|
Mutual funds
|
|
—
|
|
|
|
—
|
|
|
Total assets the fair value hierarchy, excluding
|
|
|
|
|
|
|
|
|
Plan’s interest in master trusts, at fair value
|
|
525,070
|
|
|
|
525,070
|
|
|
|
|
|
|
|
|
|
Investments measured at NAV:
|
|
|
|
|
|
|
Common/collective trusts
|
|
—
|
|
|
|
11,969
|
|
|
Investments at fair value, excluding
|
|
|
|
|
|
|
Plan’s interest in master trusts
|
|
$
|
525,070
|
|
|
|
$
|
537,039
|
|
|
|
|
|
|
|
|
|
|
|
Assets at fair value as of December 31, 2017
|
|
|
|
Level 1
|
|
|
Total
|
|
Common stock
|
|
|
|
|
|
|
|
|
Occidental Petroleum Corporation
|
|
$
|
656,505
|
|
|
|
$
|
656,505
|
|
|
Mutual funds
|
|
725,294
|
|
|
|
725,294
|
|
|
Total assets the fair value hierarchy, excluding
|
|
|
|
|
|
|
Plan’s interest in master trusts, at fair value
|
|
1,381,799
|
|
|
|
1,381,799
|
|
|
|
|
|
|
|
|
|
Investments measured at NAV:
|
|
|
|
|
|
|
Common/collective trusts
|
|
—
|
|
|
|
520,051
|
|
|
Investments at fair value, excluding
|
|
|
|
|
|
|
Plan’s interest in master trusts
|
|
$
|
1,381,799
|
|
|
|
$
|
1,901,850
|
|
(4) Guaranteed Investment Contracts Master Trust Account
The Plan invests in a Guaranteed Investment Contracts (GIC) Master Trust Investment Account, managed by Invesco (GIC MTIA). The account’s key objectives are to provide daily liquidity at contract value for participant withdrawals and transfers in accordance with the provisions of the Plan. To accomplish these objectives, the GIC MTIA invests primarily in wrapper contracts also known as synthetic GICs.
Because the synthetic GICs are fully benefit-responsive, contract value is the relevant measure for the GIC MTIA. Contract value, as reported to the Plan by Invesco, represents contributions made under the contract, plus earnings, less participant withdrawals, and administrative expenses. Participants may ordinarily direct the withdrawal or transfer of all or a portion of their investment at contract value. Contract value for the synthetic GICs is determined based on the fair value of the underlying assets, which consist of various fixed income common/collective trust funds and an insurance company general account.
Crediting interest rate resets are applied to specific investment contracts, as determined at the time of purchase. The reset values for security-backed investment interest rates are a function of contract value, market value, yield, and duration. General account investment rates are based on a predetermined index rate of return plus a fixed-basis point spread. The relationship of future crediting rates and the adjustment to contract value reported on the statement of net assets available for benefits is provided through the mechanism of the crediting rate formula. The difference between the contract value and the fair market value of the investments of each contract is periodically amortized into each contract’s crediting rate. The key factors that influence future interest crediting rates for the synthetic GIC and the wrapper contracts include, but are not limited to, the level of market interest rates, the Plan cash flow, the investment returns generated by the fixed income investments that back the contract or the duration of the underlying investments backing the contract.
The following represents the disaggregation of contract value between types of investment contracts held by the Plan (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2018
|
|
2017
|
|
Common/collective trust
|
|
$
|
25,932
|
|
|
$
|
19,174
|
|
|
Synthetic guaranteed investment contracts
|
|
|
|
|
|
Common/collective trusts
|
|
|
|
|
|
Fixed income funds
|
|
449,177
|
|
|
424,066
|
|
|
Separate account contract
|
|
—
|
|
|
44,122
|
|
|
Total synthetic guaranteed investment contracts
|
|
449,177
|
|
|
468,188
|
|
|
|
|
|
|
|
|
Total investments
|
|
$
|
475,109
|
|
|
$
|
487,362
|
|
The Plan’s ability to receive amounts due is dependent on the issuer’s ability to meet its financial obligations. The issuer’s ability to meet its contractual obligations may be affected by future economic and regulatory developments.
There are certain events not initiated by participants that limit the ability of the GIC MTIA to transact with the synthetic GIC issuer at contract value. These events include, but are not limited to: (i) termination of the Plan, (ii) Company election to withdraw from a contract in order to change investment provider, and (iii) termination of a contract upon short notice due to the loss of the Plan’s qualified status or material and adverse changes to the Plan’s provision. The Committees are not aware of any such event being contemplated at this time.
In addition, certain events allow the issuer to terminate the contracts with the Plan and settle at an amount different from contract value. Such events include (1) a breach of material obligation under the contract, (2) a material misrepresentation, and (3) a material amendment to the agreement without the consent of the issuer.
(5) Oxy Stock Fund
The Oxy Stock Fund is a unitized stock fund which includes shares of Oxy’s common stock, valued at quoted market price, and may also include interest earning cash.
Information regarding the net assets and the significant components of the changes in net assets relating to the Oxy Stock Fund, which includes both participant-directed and non-participant-directed investments, is as follows (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2018
|
|
2017
|
|
Net assets:
|
|
|
|
|
|
|
|
Common/collective trust
|
|
$
|
11,654
|
|
|
$
|
12,478
|
|
|
Oxy common stock
|
|
525,070
|
|
|
656,505
|
|
|
Interest and dividends receivable
|
|
6,629
|
|
|
6,956
|
|
|
|
|
$
|
543,353
|
|
|
$
|
675,939
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
2018
|
|
2017
|
|
Changes in net assets:
|
|
|
|
|
|
|
|
Contributions
|
|
$
|
64,308
|
|
|
$
|
59,950
|
|
|
Investment income
|
|
26,903
|
|
|
28,273
|
|
|
Net appreciation (depreciation) in fair value of investments
|
|
(99,358
|
)
|
|
19,683
|
|
|
Transfers between funds
|
|
(78,731
|
)
|
|
(62,574
|
)
|
|
Benefits paid to participants
|
|
(45,619
|
)
|
|
(48,104
|
)
|
|
Administrative expenses
|
|
(89
|
)
|
|
(56
|
)
|
|
Changes in net assets
|
|
$
|
(132,586
|
)
|
|
$
|
(2,828
|
)
|
(6) Plan Interest in Master Trust Accounts
Effective June 29, 2018, certain investment funds available to participants were replaced and Target Date Funds, Index Funds, and Active Funds were added to the Plan investment options. In conjunction with these changes, the Occidental Petroleum Corporation Defined Contribution Plan Master Trust (DCP Master Trust) was established. The Plan and the Oxy Retirement Plan each own an undivided interest in the DCP Master Trust.
The Plan also invests in three Master Trust Investment Accounts (MTIA), a synthetic GIC fund managed by Invesco (GIC MTIA), a convertible bond fund managed by Advent Capital Management (Advent MTIA), and a small cap equity fund managed by Alliance Bernstein Institutional Investment Management (Bernstein MTIA). The Plan and the Oxy Retirement Plan each own an undivided interest in the GIC MTIA. The Plan and the Oxy Master Retirement Trust each own an undivided interest in the Advent MTIA and Bernstein MTIA.
The following table presents the Plan interest in each master trust account (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2018
|
|
2017
|
|
Plan interest in master trust accounts:
|
|
|
|
|
|
|
|
DCP Master Trust, at fair value
|
|
$
|
1,187,820
|
|
|
$
|
—
|
|
|
GIC MTIA, at contract value
|
|
327,053
|
|
|
330,851
|
|
|
Advent MTIA, at fair value
|
|
14,297
|
|
|
17,432
|
|
|
Bernstein MTIA, at fair value
|
|
83,979
|
|
|
114,567
|
|
|
Net assets
|
|
$
|
1,613,149
|
|
|
$
|
462,850
|
|
The following table presents the fair value of net assets held by the DCP Master Trust, in which the Plan owns an undivided interest (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2018
|
|
|
Assets of DCP Master Trust:
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
Investments at fair value as determined by quoted market price:
|
|
|
|
|
|
Short-term investment fund
|
|
$
|
146
|
|
|
|
Common/collective trust
|
|
1,427,485
|
|
|
|
Common stocks
|
|
2,543
|
|
|
|
Mutual funds
|
|
379,024
|
|
|
|
Total investments
|
|
1,809,198
|
|
|
|
Receivables:
|
|
|
|
|
|
Due from broker for securities sold
|
|
31
|
|
|
|
Accrued investment income
|
|
273
|
|
|
|
Total receivables
|
|
304
|
|
|
|
Total assets
|
|
1,809,502
|
|
|
|
Liabilities:
|
|
|
|
|
|
Due to broker for securities purchased
|
|
31
|
|
|
|
Total liabilities
|
|
31
|
|
|
|
Net assets of DCP Master Trust
|
|
$
|
1,809,471
|
|
|
|
Plan’s percentage interest in DCP Master Trust net assets
|
|
66
|
%
|
|
|
Plan interest in DCP Master Trust
|
|
$
|
1,187,820
|
|
|
The following table presents the changes in the net assets of the DCP Master Trust, in which the Plan owns an undivided interest, as stated in the table above (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2018
|
|
|
Net depreciation in fair value of investments:
|
|
|
|
|
|
Common/collective trust
|
|
$
|
(105,568
|
)
|
|
|
Common stocks
|
|
(694
|
)
|
|
|
Mutual funds
|
|
(41,613
|
)
|
|
|
Net depreciation
|
|
(147,875
|
)
|
|
|
Interest and dividends
|
|
7,828
|
|
|
|
Less investment expenses
|
|
(142
|
)
|
|
|
Investment income (loss)
|
|
(140,189
|
)
|
|
|
|
|
|
|
|
Transfers in
|
|
2,313,366
|
|
|
|
Transfers out
|
|
(363,706
|
)
|
|
|
Changes in net assets
|
|
$
|
1,809,471
|
|
|
The following table provides fair value measurement information for the DCP Master Trust, in which the Plan owns an undivided interest at December 31, 2018 (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets at fair value as of December 31, 2018
|
|
|
|
Level 1
|
|
Level 2
|
|
Total
|
|
Short-term investment fund
|
|
$
|
—
|
|
|
$
|
146
|
|
|
$
|
146
|
|
|
Common stocks
|
|
2,543
|
|
|
—
|
|
|
2,543
|
|
|
Mutual funds
|
|
379,024
|
|
|
—
|
|
|
379,024
|
|
|
Total assets in the fair value hierarchy
|
|
381,567
|
|
|
146
|
|
|
381,713
|
|
|
|
|
|
|
|
|
|
|
Investments measured at NAV
|
|
|
|
|
|
|
|
Common/collective trust
|
|
|
|
|
|
1,427,485
|
|
|
Total assets at fair value
|
|
$
|
381,567
|
|
|
$
|
146
|
|
|
$
|
1,809,198
|
|
The following table presents the net assets held by the GIC MTIA, in which the Plan owns an undivided interest (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2018
|
|
2017
|
|
Assets:
|
|
|
|
|
|
|
|
Investments, at contract value (see note 4):
|
|
|
|
|
|
Common/collective trusts
|
|
$
|
25,932
|
|
|
$
|
19,174
|
|
|
Synthetic guaranteed investment contracts:
|
|
|
|
|
|
Common/collective trusts - fixed income funds
|
|
449,177
|
|
|
424,066
|
|
|
Separate account contract
|
|
—
|
|
|
44,122
|
|
|
Total investments
|
|
475,109
|
|
|
487,362
|
|
|
Receivables:
|
|
|
|
|
|
Accrued investment income
|
|
45
|
|
|
21
|
|
|
Total receivables
|
|
45
|
|
|
21
|
|
|
Total assets
|
|
475,154
|
|
|
487,383
|
|
|
Liabilities:
|
|
|
|
|
|
Accrued expenses
|
|
74
|
|
|
110
|
|
|
Total liabilities
|
|
74
|
|
|
110
|
|
|
Net assets of GIC MTIA
|
|
$
|
475,080
|
|
|
$
|
487,273
|
|
|
Plan’s percentage interest in GIC MTIA net assets
|
|
69
|
%
|
|
68
|
%
|
|
Plan interest in GIC MTIA
|
|
$
|
327,053
|
|
|
$
|
330,851
|
|
The following table presents the changes in net assets of the GIC MTIA, in which the Plan owns an undivided interest, as stated in the table above (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
2018
|
|
2017
|
|
Interest Income
|
|
$
|
12,802
|
|
|
$
|
12,134
|
|
|
Less investment expenses
|
|
(450
|
)
|
|
(537
|
)
|
|
Total investment income
|
|
12,352
|
|
|
11,597
|
|
|
|
|
|
|
|
|
Transfers in
|
|
78,353
|
|
|
29,770
|
|
|
Transfers out
|
|
(102,898
|
)
|
|
(129,658
|
)
|
|
Changes in net assets
|
|
$
|
(12,193
|
)
|
|
$
|
(88,291
|
)
|
The following table presents the fair value of the net assets held by the Advent MTIA, in which the Plan owns an undivided interest (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2018
|
|
2017
|
|
Assets of Advent MTIA:
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
Investments at fair value as determined by quoted market price:
|
|
|
|
|
|
|
|
Short-term investment fund
|
|
$
|
2,773
|
|
|
$
|
4,377
|
|
|
Common/collective trust
|
|
—
|
|
|
619
|
|
|
Common stocks
|
|
7
|
|
|
—
|
|
|
Preferred stocks
|
|
2,567
|
|
|
3,210
|
|
|
Corporate bonds
|
|
46,664
|
|
|
57,128
|
|
|
Total investments
|
|
52,011
|
|
|
65,334
|
|
|
Cash and cash equivalents
|
|
298
|
|
|
1,267
|
|
|
Receivables:
|
|
|
|
|
|
|
|
Due from broker for securities sold
|
|
368
|
|
|
—
|
|
|
Accrued investment income
|
|
142
|
|
|
205
|
|
|
Foreign currency contracts
|
|
4
|
|
|
16
|
|
|
Total receivables
|
|
514
|
|
|
221
|
|
|
Total assets
|
|
52,823
|
|
|
66,822
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
Due to broker for securities sold
|
|
120
|
|
|
—
|
|
|
Accrued expenses
|
|
122
|
|
|
129
|
|
|
Payable under securities lending agreement
|
|
2,773
|
|
|
4,377
|
|
|
Foreign currency contracts
|
|
157
|
|
|
310
|
|
|
Total liabilities
|
|
3,172
|
|
|
4,816
|
|
|
Net assets of Advent MTIA
|
|
$
|
49,651
|
|
|
$
|
62,006
|
|
|
Plan’s percentage interest in Advent MTIA net assets
|
|
29
|
%
|
|
28
|
%
|
|
Plan interest in Advent MTIA
|
|
$
|
14,297
|
|
|
$
|
17,432
|
|
The following table presents the changes in the net assets of the Advent MTIA, in which the Plan owns an undivided interest, as stated in the table above (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
2018
|
|
2017
|
|
Net appreciation (depreciation) in fair value of investments:
|
|
|
|
|
|
|
|
Foreign currency transactions
|
|
$
|
615
|
|
|
$
|
—
|
|
|
Common stocks
|
|
(124
|
)
|
|
—
|
|
|
Preferred stocks
|
|
(370
|
)
|
|
208
|
|
|
Corporate bonds
|
|
(3,504
|
)
|
|
6,568
|
|
|
Net appreciation (depreciation)
|
|
(3,383
|
)
|
|
6,776
|
|
|
Interest and dividends
|
|
1,052
|
|
|
1,082
|
|
|
Less investment expenses
|
|
(461
|
)
|
|
(547
|
)
|
|
Investment income (loss)
|
|
(2,792
|
)
|
|
7,311
|
|
|
|
|
|
|
|
|
Transfers in
|
|
3,326
|
|
|
3,707
|
|
|
Transfers out
|
|
(12,889
|
)
|
|
(19,650
|
)
|
|
Changes in net assets
|
|
$
|
(12,355
|
)
|
|
$
|
(8,632
|
)
|
The following tables provide fair value measurement information for the Advent MTIA, in which the Plan owns an undivided interest at
December 31, 2018
and
2017
(amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets at fair value as of December 31, 2018
|
|
|
|
Level 1
|
|
Level 2
|
|
Total
|
|
Short-term investment fund
|
|
$
|
—
|
|
|
$
|
2,773
|
|
|
$
|
2,773
|
|
|
Common stock
|
|
7
|
|
|
—
|
|
|
7
|
|
|
Preferred stock
|
|
2,567
|
|
|
—
|
|
|
2,567
|
|
|
Corporate bonds
|
|
—
|
|
|
46,664
|
|
|
46,664
|
|
|
Foreign currency contracts
|
|
—
|
|
|
4
|
|
|
4
|
|
|
Total assets in the fair value hierarchy
|
|
2,574
|
|
|
49,441
|
|
|
52,015
|
|
|
|
|
|
|
|
|
|
|
Investments measured at NAV
|
|
|
|
|
|
|
|
Common/collective trust
|
|
|
|
|
|
—
|
|
|
Total assets at fair value
|
|
$
|
2,574
|
|
|
$
|
49,441
|
|
|
$
|
52,015
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities at fair value as of December 31, 2018
|
|
Foreign currency contracts
|
|
$
|
—
|
|
|
$
|
157
|
|
|
$
|
157
|
|
|
Total liabilities at fair value
|
|
$
|
—
|
|
|
$
|
157
|
|
|
$
|
157
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets at fair value as of December 31, 2017
|
|
|
|
Level 1
|
|
Level 2
|
|
Total
|
|
Short-term investment fund
|
|
$
|
—
|
|
|
$
|
4,377
|
|
|
$
|
4,377
|
|
|
Preferred Stock
|
|
3,210
|
|
|
—
|
|
|
3,210
|
|
|
Corporate bonds
|
|
—
|
|
|
57,128
|
|
|
57,128
|
|
|
Foreign currency contracts
|
|
—
|
|
|
16
|
|
|
16
|
|
|
Total assets in the fair value hierarchy
|
|
3,210
|
|
|
61,521
|
|
|
64,731
|
|
|
|
|
|
|
|
|
|
|
Investments measured at NAV
|
|
|
|
|
|
|
|
Common/collective trust
|
|
|
|
|
|
$
|
619
|
|
|
Total assets at fair value
|
|
$
|
3,210
|
|
|
$
|
61,521
|
|
|
$
|
65,350
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities at fair value as of December 31, 2017
|
|
Foreign currency contracts
|
|
$
|
—
|
|
|
$
|
310
|
|
|
$
|
310
|
|
|
Total liabilities at fair value
|
|
$
|
—
|
|
|
$
|
310
|
|
|
$
|
310
|
|
The Advent MTIA participated in the Trustee’s Securities Lending Program (the Securities Lending Program) for its U.S. securities held in custody at the Trustee. Under the Securities Lending Program, these securities are loaned by the Trustee to third-party broker-dealers in exchange for collateral (primarily cash), in compliance with Department of Labor’s collateral requirements. The collateral is at least 102% of the fair value of the borrowed securities. The cash received as collateral is invested in the Trustee’s Institutional Cash Reserves Fund, which is a short-term investment fund, or the Trustee’s Overnight Government Fund, which is an overnight government reverse repurchase investment fund.
The fair value of the Advent MTIA securities loaned was approximately $2,670,000 and $4,213,000 at
December 31, 2018
and
2017
, respectively. Cash collateral of approximately $2,773,000 and $4,377,000 was held at
December 31, 2018
and
2017
, respectively, with an offsetting liability. Income earned during
2018
and
2017
was approximately $25,000 and $23,000, respectively, net of bank fees of approximately $13,000 and $12,000, respectively. This income is included as interest income for the Advent MTIA.
The Advent MTIA uses foreign currency derivatives to reduce foreign currency risk. The Advent MTIA does not designate these swaps as hedging instruments. Approximately $474,000 and $110,000 net gain from these derivatives were recognized in investment income for the years ended December 31, 2018 and 2017, respectively.
The following tables show the notional amount and fixed weighted average contract rate of foreign currency swap contracts outstanding as of December 31, 2018 and 2017 (dollar amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
|
|
|
Receive U.S. Dollars
|
|
Pay U.S. Dollars
|
|
Currency
|
|
Notional
|
|
Fixed Weighted Average Contract Rate
|
|
Notional
|
|
Fixed Weighted Average Contract Rate
|
|
EUR
|
|
5,412
|
|
|
1.140818
|
|
600
|
|
|
1.141418
|
|
GBP
|
|
739
|
|
|
1.281341
|
|
|
|
|
|
HKD
|
|
19,050
|
|
|
7.828384
|
|
2,900
|
|
|
7.823295
|
|
CHF
|
|
1,188
|
|
|
0.997552
|
|
85
|
|
|
0.983400
|
|
JPY
|
|
500,950
|
|
|
112.297393
|
|
29,300
|
|
|
110.171900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
|
|
|
Receive U.S. Dollars
|
|
Pay U.S. Dollars
|
|
Currency
|
|
Notional
|
|
Fixed Weighted Average Contract Rate
|
|
Notional
|
|
Fixed Weighted Average Contract Rate
|
|
EUR
|
|
6,934
|
|
|
1.169910
|
|
|
615
|
|
|
1.178306
|
|
|
GBP
|
|
493
|
|
|
1.333740
|
|
|
|
|
|
|
CDN
|
|
1,236
|
|
|
1.288630
|
|
|
|
|
|
|
HKD
|
|
16,904
|
|
|
7.789582
|
|
|
|
|
|
|
CHF
|
|
708
|
|
|
0.994737
|
|
|
|
|
|
|
JPY
|
|
868,100
|
|
|
112.983110
|
|
|
16,000
|
|
|
113.720000
|
|
The Advent MTIA’s foreign currency swaps outstanding at December 31, 2018 have settlement dates in February 2019. Foreign currency swaps outstanding at December 31, 2017 settled in February 2018. The Advent MTIA’s derivative instruments do not require collateral by either party. All of the Advent MTIA’s derivative transactions are in the OTC market and as a result, are subject to counterparty credit risk to the extent the counterparty is unable to meet its settlement commitments. The Advent MTIA’s sole counterparty is the Bank of New York Mellon, a related party.
The following table presents the fair value of net assets held by the Bernstein MTIA, in which the Plan owns an undivided interest (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2018
|
|
2017
|
|
Assets of Bernstein MTIA:
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
Investments at fair value as determined by quoted market price:
|
|
|
|
|
|
|
|
Short-term investment fund
|
|
$
|
32,161
|
|
|
$
|
33,067
|
|
|
Common/collective trust
|
|
—
|
|
|
4,504
|
|
|
Common stocks
|
|
116,881
|
|
|
149,257
|
|
|
Total investments
|
|
149,042
|
|
|
186,828
|
|
|
Cash
|
|
—
|
|
|
—
|
|
|
Receivables:
|
|
|
|
|
|
|
|
Due from broker for securities sold
|
|
3,843
|
|
|
—
|
|
|
Accrued investment income
|
|
155
|
|
|
124
|
|
|
Total receivables
|
|
3,998
|
|
|
124
|
|
|
Total assets
|
|
153,040
|
|
|
186,952
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
Due to broker for securities purchased
|
|
—
|
|
|
—
|
|
|
Accrued investment manager fees
|
|
—
|
|
|
298
|
|
|
Payable under securities lending agreement
|
|
32,161
|
|
|
33,067
|
|
|
Other
|
|
1,716
|
|
|
—
|
|
|
Total liabilities
|
|
33,877
|
|
|
33,365
|
|
|
Net assets of Bernstein MTIA
|
|
$
|
119,163
|
|
|
$
|
153,587
|
|
|
Plan’s percentage interest in Bernstein MTIA net assets
|
|
70
|
%
|
|
75
|
%
|
|
Plan interest in Bernstein MTIA
|
|
$
|
83,979
|
|
|
$
|
114,567
|
|
The following table presents the changes in the net assets of the Bernstein MTIA, in which the Plan owns an undivided interest, as stated in the table above (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
2018
|
|
2017
|
|
Net appreciation (depreciation) in fair value of investments:
|
|
|
|
|
|
|
|
Common stocks
|
|
$
|
(24,335
|
)
|
|
$
|
12,227
|
|
|
Interest and dividends
|
|
2,005
|
|
|
1,904
|
|
|
Less investment expenses
|
|
(1,199
|
)
|
|
(1,250
|
)
|
|
Investment income (loss)
|
|
(23,529
|
)
|
|
12,881
|
|
|
|
|
|
|
|
|
Transfers in
|
|
10,928
|
|
|
7,498
|
|
|
Transfers out
|
|
(21,823
|
)
|
|
(34,790
|
)
|
|
Changes in net assets
|
|
$
|
(34,424
|
)
|
|
$
|
(14,411
|
)
|
The following table provides fair value measurement information for the Bernstein MTIA, in which the Plan owns an undivided interest at December 31, 2018 and 2017 (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets at fair value as of December 31, 2018
|
|
|
|
Level 1
|
|
Level 2
|
|
Total
|
|
Short-term investment fund
|
|
$
|
—
|
|
|
$
|
32,161
|
|
|
$
|
32,161
|
|
|
Common stocks
|
|
116,881
|
|
|
—
|
|
|
116,881
|
|
|
Total assets in the fair value hierarchy
|
|
116,881
|
|
|
32,161
|
|
|
149,042
|
|
|
|
|
|
|
|
|
|
|
Investments measured at NAV
|
|
|
|
|
|
|
|
Common/collective trust
|
|
|
|
|
|
—
|
|
|
Total assets at fair value
|
|
$
|
116,881
|
|
|
$
|
32,161
|
|
|
$
|
149,042
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets at fair value as of December 31, 2017
|
|
|
|
Level 1
|
|
Level 2
|
|
Total
|
|
Short-term investment fund
|
|
$
|
—
|
|
|
$
|
33,067
|
|
|
$
|
33,067
|
|
|
Common stocks
|
|
149,257
|
|
|
—
|
|
|
149,257
|
|
|
Total assets in the fair value hierarchy
|
|
149,257
|
|
|
33,067
|
|
|
182,324
|
|
|
|
|
|
|
|
|
|
|
Investments measured at NAV
|
|
|
|
|
|
|
|
Common/collective trust
|
|
|
|
|
|
4,504
|
|
|
Total assets at fair value
|
|
$
|
149,257
|
|
|
$
|
33,067
|
|
|
$
|
186,828
|
|
The Bernstein MTIA also participated in the Securities Lending Program for its U.S. securities held in custody at the Trustee to provide incremental income during the years ended December 31, 2018 and 2017. Details of the Securities Lending Program are discussed above.
The fair value of securities loaned was approximately $30,871,000 and $31,324,000 at December 31, 2018 and 2017, respectively. Cash collateral of approximately $32,161,000 and $33,067,000 was held at December 31, 2018 and 2017, respectively, with an offsetting liability. Income earned during 2018 and 2017 was approximately $61,000 and $64,000, respectively, net of bank fees of approximately $33,000 and $34,000, respectively. This income is included as interest income for the Bernstein MTIA.
(7) Related-Party Transactions
The Trustee and Oxy are parties in interest as defined by ERISA. The Trustee invests certain Plan assets in its Collective Short-Term Investment Fund and the Oxy Stock Fund. Such transactions qualify as party-in-interest transactions permitted by the Department of Labor regulations. Oxy paid approximately $608,000 and $988,000 on behalf of the Plan to various vendors for the Plan’s administrative expenses during
2018
and
2017
, respectively.
(8) Plan Termination
Although it has not expressed any intent to do so, Oxy has the right under the Plan’s provisions to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event of Plan termination, affected participants would become 100% vested in their employer contributions.
(9) Tax Status
The Internal Revenue Service (IRS) has determined and informed Oxy, by a letter dated September 25, 2013, that the Plan and related trust are designed in accordance with applicable sections of the IRC. Although the Plan has been amended since receiving the determination letter, the Committees, using their judgment and the advice of their advisors, believe that the Plan is currently designed and operating in a manner that preserves its tax-qualified status.
U.S. GAAP requires plan management to evaluate tax positions taken by the Plan and recognize a tax liability (or asset) if the Plan has taken an uncertain position that more likely than not would not be sustained upon examination by the IRS. The Plan is subject to routine audits by the IRS; however, there are currently no audits for any tax periods in progress.
(10) Risks and Uncertainties
The Plan invests in various types of investment securities. Investment securities are exposed to various risks, such as interest rate, market, and credit risks. Due to the level of risk associated with investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect participants’ account balances and the amounts reported in the statements of net assets available for benefits. Risks associated with the Oxy Stock Fund include those disclosed by Oxy in its annual report on Form 10-K filed with the Securities and Exchange Commission and its other public filings and disclosures.
Additionally, some mutual funds invest in the securities of foreign companies, which involve special risks and considerations not typically associated with investing in U.S. companies. These risks include devaluation of currencies, less reliable information about issuers, different securities transaction clearance and settlement practices, and possible adverse political and economic developments. Moreover, securities of many foreign companies and their markets may be less liquid and their prices more volatile than similar types of securities of comparable U.S. companies.
Certain derivative financial instruments are used by the Plan’s equity and fixed-income investment managers to remain fully invested in the asset class and to hedge currency risk.
As of
December 31, 2018
and
2017
, approximately 24% and 27%, respectively, of total Plan investments were invested in shares of Oxy common stock.
(11) Reconciliation of the Financial Statements to the Form 5500
The following is a reconciliation of net assets available for benefits per the financial statements to the Form 5500 to be filed by October 15,
2019
(amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2018
|
|
2017
|
|
Net assets available for benefits per the financial statements
|
|
$
|
2,178,671
|
|
|
$
|
2,394,296
|
|
|
Amounts allocated to withdrawing participants
|
|
(100
|
)
|
|
(589
|
)
|
|
Net assets available for benefits per the Form 5500
|
|
$
|
2,178,571
|
|
|
$
|
2,393,707
|
|
The following is a reconciliation of benefits paid to participants per the financial statements to the Form 5500 to be filed by October 15,
2019
(amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
2018
|
|
2017
|
|
Benefits paid to participants per the financial statements
|
|
$
|
204,773
|
|
|
$
|
249,361
|
|
|
Amounts allocated to withdrawing participants at December 31, 2018 and 2017
|
|
100
|
|
|
589
|
|
|
Amounts allocated to withdrawing participants at December 31, 2017 and 2016
|
|
(589
|
)
|
|
(789
|
)
|
|
Benefits paid to participants per the Form 5500
|
|
$
|
204,284
|
|
|
$
|
249,161
|
|
Amounts allocated to withdrawing participants are recorded on the Form 5500 for benefit payments that have been processed and approved for payment prior to December 31, but are not yet paid as of that date.