3. Accounting and Disclosure Changes
In March, April, and May of 2016, the Financial Accounting Standards Board ("FASB") amended revenue recognition rules clarifying several aspects of the new revenue recognition standard, previously issued in May 2014. Occidental is currently evaluating the impact of these rules on its financial statements.
In March 2016, the FASB issued rules affecting entities that issue share-based payment awards to their employees. These rules are designed to simplify several aspects of accounting for share-based payment award transactions, including: (1) accounting and cash flow classification for excess tax benefits and deficiencies, (2) forfeitures, and (3) tax withholding requirements and cash flow classification. The rules were adopted for the second quarter of 2016 and did not have a material impact on Occidental's financial statements upon adoption.
In March 2016, the FASB issued an update to eliminate the requirement to retrospectively adopt the equity method of accounting if an investment qualifies for use of the equity method as a result of an increase in the level of ownership or degree of influence. The update requires that the equity method investor add the cost of acquiring the additional interest and adopt the equity method of accounting as of the date the investment becomes qualified for equity method accounting. The rules become effective for the interim and annual periods beginning after December 15, 2016. The rules do not have a material impact on Occidental's financial statements upon adoption.
In March 2016, the FASB issued rules clarifying that a change in one of the parties to a derivative contract that is part of a hedge accounting relationship does not, by itself, require dedesignation of that relationship, as long as all other hedge accounting criteria continue to be met. The rules become effective for the interim and annual periods beginning after December 15, 2016. Occidental is currently evaluating the impact of these rules on its financial statements.
In February 2016, the FASB issued rules in which lessees will recognize most leases, including operating leases, on-balance sheet. These new rules will significantly increase reported assets and liabilities. The rules become effective for interim and annual periods beginning after December 15, 2018. Occidental is currently evaluating the impact of these rules on its financial statements.
In April 2015, the FASB issued rules simplifying the presentation of debt issuance costs. The new rules require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. Occidental adopted these rules retrospectively as of January 1, 2016. The rules do not have a material impact on Occidental's financial statements.
4. Supplemental Cash Flow Information
Occidental paid foreign, state and federal income taxes of $288 million and $638 million during the six months ended
June 30, 2016
and
2015
, respectively. During the second quarter of 2016, Occidental received federal income tax refunds of $302 million as a result of the carryback of net operating losses generated in 2015. Interest paid totaled $154 million and $108 million in each of the six months ended
June 30, 2016
and
2015
, respectively.
5. Inventories
A portion of inventories is valued under the LIFO method. The valuation of LIFO inventory for interim periods is based on Occidental’s estimates of year-end inventory levels and costs. Inventories as of
June 30, 2016
, and
December 31, 2015
, consisted of the following (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
Raw materials
|
|
$
|
73
|
|
|
$
|
73
|
|
|
Materials and supplies
|
|
502
|
|
|
568
|
|
|
Finished goods
|
|
381
|
|
|
395
|
|
|
|
|
956
|
|
|
1,036
|
|
|
|
|
|
|
|
|
Revaluation to LIFO
|
|
(50
|
)
|
|
(50
|
)
|
|
Total
|
|
$
|
906
|
|
|
$
|
986
|
|
|
6. Environmental Liabilities and Expenditures
Occidental’s operations are subject to stringent federal, state, local and foreign laws and regulations related to improving or maintaining environmental quality.
The laws that require or address environmental remediation, including the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) and similar federal, state, local and foreign laws, may apply retroactively and regardless of fault, the legality of the original activities or the current ownership or control of sites. OPC or certain of its subsidiaries participate in or actively monitor a range of remedial activities and government or private proceedings under these laws with respect to alleged past practices at operating, closed and third-party sites. Remedial activities may include one or more of the following: investigation involving sampling, modeling, risk assessment or monitoring; cleanup measures including removal, treatment or disposal of hazardous substances; or operation and maintenance of remedial systems. These environmental proceedings seek funding or performance of remediation and, in some cases, compensation for alleged property damage, punitive damages, civil penalties, injunctive relief and government oversight costs.
As of
June 30, 2016
, Occidental participated in or monitored remedial activities or proceedings at 145 sites. The following table presents Occidental’s environmental remediation reserves as of
June 30, 2016
, the current portion of which is included in accrued liabilities ($70 million) and the remainder in deferred credits and other liabilities — other ($309 million). The reserves are grouped as environmental remediation sites listed or proposed for listing by the United States Environmental Protection Agency on the CERCLA National Priorities List (NPL sites) and three categories of non-NPL sites — third-party sites, Occidental-operated sites and closed or non-operated Occidental sites.
|
|
|
|
|
|
|
|
|
|
|
|
Number of Sites
|
|
Reserve Balance
(in millions)
|
|
|
|
|
|
|
|
NPL sites
|
|
33
|
|
|
$
|
27
|
|
|
Third-party sites
|
|
65
|
|
|
128
|
|
|
Occidental-operated sites
|
|
17
|
|
|
102
|
|
|
Closed or non-operated Occidental sites
|
|
30
|
|
|
122
|
|
|
Total
|
|
145
|
|
|
$
|
379
|
|
|
As of
June 30, 2016
, Occidental’s environmental reserves exceeded
$10 million
each at 11 of the 145 sites described above, and 94 of the sites each had reserves of $1 million or less. Based on current estimates, Occidental expects to expend funds corresponding to approximately half of the current environmental reserves at the sites described above over the next
three
to
four
years and the balance at these sites over the subsequent
10
or more years.
Due to the uncertainties surrounding the Maxus-indemnified sites described further under Note 7,
Lawsuits, Claims, Commitments and Contingencies
, Occidental is currently unable to estimate an amount of reasonably possible losses
associated with these sites. For all other sites, Occidental believes its estimable range of reasonably possible additional losses beyond those liabilities recorded for environmental remediation at these sites could be up to $370 million. For additional information regarding environmental matters, refer to Note 7.
7. Lawsuits, Claims, Commitments and Contingencies
OPC or certain of its subsidiaries are involved, in the normal course of business, in lawsuits, claims and other legal proceedings that seek, among other things, compensation for alleged personal injury, breach of contract, property damage or other losses, punitive damages, civil penalties, or injunctive or declaratory relief. OPC or certain of its subsidiaries also are involved in proceedings under CERCLA and similar federal, state, local and foreign environmental laws. These environmental proceedings seek funding or performance of remediation and, in some cases, compensation for alleged property damage, punitive damages, civil penalties and injunctive relief. Usually OPC or such subsidiaries are among many companies in these environmental proceedings and have to date been successful in sharing response costs with other financially sound companies. Further, some lawsuits, claims and legal proceedings involve acquired or disposed assets with respect to which a third party or Occidental retains liability or indemnifies the other party for conditions that existed prior to the transaction.
During 2014, a New Jersey state court approved Occidental's settlement with the State of New Jersey (the State) to resolve claims asserted by the State against Occidental arising from Occidental’s acquisition of Diamond Shamrock Chemicals Company (DSCC) in 1986. Pursuant to the settlement agreement (the State Settlement), Occidental paid the State $190 million in 2015. As part of the State Settlement, Occidental agreed, under certain circumstances, to perform or fund future work on behalf of the State along a portion of the Passaic River. The State Settlement does not cover any potential Occidental share of costs associated with the EPA’s proposed clean-up plan of the Passaic River as set out in its March 4, 2016 Record of Decision (ROD). During the second quarter of 2016, the EPA sent Occidental a draft Administrative Order on Consent to complete the design of the proposed clean-up plan outlined in the ROD. Negotiations with the EPA are ongoing.
When Occidental acquired DSCC, Maxus Energy Corporation (Maxus), currently a subsidiary of YPF S.A. (YPF), agreed to a broad indemnity for a number of environmental sites, including the Diamond Alkali Superfund Site, which is at issue in the State Settlement and the ROD. As a result, Occidental has been pursuing Maxus and its parent company, YPF, as the alter ego of Maxus, to recover the costs paid by Occidental under the State Settlement and other indemnified costs. Trial on Occidental’s claims against Maxus and YPF was scheduled to begin on June 21, 2016. On June 17, 2016, Maxus and several affiliated companies filed for Chapter 11 bankruptcy in Federal District Court in the State of Delaware. Occidental is continuing to pursue claims against Maxus and YPF in the bankruptcy court and other appropriate forums. Prior to filing for bankruptcy, Maxus defended and indemnified Occidental in connection with federal clean-up and other costs associated with the Diamond Alkali Superfund Site and other sites.
Occidental accrues reserves for outstanding lawsuits, claims and proceedings when it is probable that a liability has been incurred and the liability can be reasonably estimated. Occidental has disclosed its reserve balances for environmental matters that satisfy this criteria. Reserve balances for other non-environmental matters that satisfy this criteria as of June 30, 2016 and December 31, 2015 were not material to Occidental's consolidated balance sheets.
Occidental also evaluates the amount of reasonably possible losses that it could incur as a result of outstanding lawsuits, claims and proceedings and has disclosed its estimable range of reasonably possible additional losses for sites where it is a participant in environmental remediation. Occidental believes that other reasonably possible losses for non-environmental matters that it could incur in excess of reserves accrued on the balance sheet would not be material to its consolidated financial position or results of operations. Occidental's potential obligations for the Maxus-indemnified sites described above, including any potential share of costs associated with the ROD for the Passaic River, are not currently included in such estimates, as the amounts cannot be reasonably estimated at this time for several reasons, including, but not limited to, the existence of other potentially responsible parties, the presence of contaminants of concern that are not associated with DSCC or Occidental's operations, the inherent uncertainties in estimating clean-up costs and the Maxus bankruptcy filing.
During the course of its operations, Occidental is subject to audit by tax authorities for varying periods in various federal, state, local and foreign tax jurisdictions. Although taxable years through 2009 for United States federal income tax purposes have been audited by the United States Internal Revenue Service (IRS) pursuant to its Compliance Assurance Program, subsequent taxable years are currently under review. Additionally, in December 2012, Occidental
Fair Values — Nonrecurring
During the three and six months ended June 30, 2016, Occidental did not have any assets or liabilities measured at fair value on a nonrecurring basis. The following table provides fair value measurement for such proved domestic and international oil and gas properties that are measured on a nonrecurring basis as of December 31, 2015. The impairment tests, including the fair value estimation, incorporated a number of assumptions involving expectations of future cash flows. These assumptions included estimates of future product prices, which Occidental based on forward price curves as of balance sheet date and, where applicable, contractual prices, estimates of oil and gas reserves, estimates of future expected operating and development costs, and a risk adjusted discount rate of 8 to 20 percent. These properties were impacted by persistently low worldwide oil and natural gas prices and changing development plans. Occidental used the income approach to measure the fair value of these properties, using inputs categorized as Level 3 in the fair value hierarchy.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
Fair Value Measurements at December 31, 2015 Using
|
|
Net
Book Value
|
|
Total Pre-tax
(Non-cash) Impairment Loss
|
|
|
|
|
|
|
|
|
|
Description
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
(a)
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
Impaired proved oil and gas assets - international
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,666
|
|
|
$
|
7,359
|
|
|
$
|
4,693
|
|
Impaired proved oil and gas assets - domestic
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
625
|
|
|
$
|
1,655
|
|
|
$
|
1,030
|
|
Impaired Midstream assets
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
50
|
|
|
$
|
891
|
|
|
$
|
841
|
|
Impaired Chemical property, plant, and equipment
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3
|
|
|
$
|
124
|
|
|
$
|
121
|
|
(a) Amount represents net book value at date of assessment.
Other Financial Instruments
The carrying amounts of cash and cash equivalents and other on-balance-sheet financial instruments, other than long-term fixed-rate debt, approximate fair value. The cost, if any, to terminate Occidental's off-balance-sheet financial instruments is not significant. Occidental estimates the fair value of fixed-rate debt based on the quoted market prices for those instruments or on quoted market yields for similarly rated debt instruments, taking into account such instruments’ maturities. The estimated fair value of Occidental’s debt as of
June 30, 2016
,and
December 31, 2015
, was $9.1 billion and $8.4 billion, respectively, and its carrying value net of unamortized discount as of June 30, 2016 and December 31, 2015, was $8.3 billion. The majority of Occidental's debt is classified as Level 1, with $273 million classified as Level 2.
10. Derivatives
Derivatives are carried at fair value and on a net basis when a legal right of offset exists with the same counterparty. Occidental applies hedge accounting when transactions meet specified criteria for cash-flow hedge treatment and management elects and documents such treatment. Otherwise, any fair value gains or losses are recognized in earnings in the current period.
Occidental uses a variety of derivative instruments, including cash-flow hedges and derivative instruments not designated as hedging instruments, to obtain average prices for the relevant production month and to improve realized prices for oil and gas. Occidental only occasionally hedges its oil and gas production, and, when it does, the volumes are usually insignificant.
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
In this report, “Occidental” means Occidental Petroleum Corporation (OPC), or OPC and one or more entities in which it owns a controlling interest (subsidiaries). Portions of this report contain forward-looking statements and involve risks and uncertainties that could materially affect expected results of operations, liquidity, cash flows and business prospects. Actual results may differ from anticipated results, sometimes materially, and reported results should not be considered an indication of future performance. Factors that could cause results to differ include, but are not limited to: global commodity pricing fluctuations; supply and demand considerations for Occidental’s products; higher-than-expected costs; the regulatory approval environment; reorganization or restructuring of Occidental’s operations; not successfully completing, or any material delay of, field developments, expansion projects, capital expenditures, efficiency projects, acquisitions or dispositions; uncertainties about the estimated quantities of oil and natural gas reserves; lower-than-expected production from development projects or acquisitions; exploration risks; general economic slowdowns domestically or internationally; political conditions and events; liability under environmental regulations including remedial actions; litigation; disruption or interruption of production or manufacturing or facility damage due to accidents, chemical releases, labor unrest, weather, natural disasters, cyber attacks or insurgent activity; failure of risk management; changes in law or regulations; or changes in tax rates. Words such as “estimate,” “project,” “predict,” “will,” “would,” “should,” “could,” “may,” “might,” “anticipate,” “plan,” “intend,” “believe,” “expect,” “aim,” “goal,” “target,” “objective,” “likely” or similar expressions that convey the prospective nature of events or outcomes generally indicate forward-looking statements. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this report. Unless legally required, Occidental does not undertake any obligation to update any forward-looking statements, as a result of new information, future events or otherwise. Material risks that may affect Occidental’s results of operations and financial position appear in Part I, Item 1A “Risk Factors” of Occidental's Annual Report on Form 10-K for the year ended December 31, 2015 (the 2015 Form 10-K).
Consolidated Results of Operations
Occidental reported a net loss from continuing operations of $136 million for the second quarter of 2016 on net sales of $2.5 billion, compared to net income from continuing operations of $180 million on net sales of $3.5 billion for the second quarter of 2015. Diluted loss per share from continuing operations was $0.18 for the second quarter of 2016, compared to diluted earnings of $0.23 per share for the second quarter of 2015.
Occidental reported a net loss from continuing operations of $496 million for the first six months of 2016 on net sales of $4.7 billion, compared to a net loss of $35 million on net sales of $6.6 billion for the same period in 2015. Diluted loss per share from continuing operations was $0.65 per share for the first six months of 2016, compared to a loss per share of $0.04 for the same period of 2015. Income from discontinued operations was $435 million or $0.57 per share for the first six months of 2016, compared with a loss of $7 million or $0.01 per share for the same period of 2015.
The net losses from continuing operations in the three and six months ended June 30, 2016, when compared to the same periods in 2015, reflect the impact of lower realized commodity prices in the oil and gas and chemical segments and lower marketing margins due to unfavorable Permian to Gulf Coast differentials. The lower prices were partially offset by lower per-barrel operating costs and lower chemical raw material and energy costs. Income from discontinued operations for the six months ended June 30, 2016, resulted from the settlement from the Republic of Ecuador under a November 2015 arbitration award.
Selected Statements of Operations Items
Net sales decreased for the
three
and six months ended June 30, 2016, compared to the same periods in 2015, due to lower realized commodity prices. Gain (loss) on sale of assets, net, for the six months ended June 30, 2016, primarily reflected a gain on the sale
of the Piceance Basin operations in Colorado of $121 million and a gain on the sale of the Occidental Tower building in Dallas of $57 million.
Compared to the same periods in 2015, cost of sales for the three and six months ended
June 30, 2016
reflected lower oil and gas production costs, mainly from maintenance and support activities and lower raw material and energy costs for the chemical business.
Asset impairments and related items for the six months ended June 30, 2016, reflected impairment charges of $78 million related to the special stock dividend of California Resources shares. Asset impairments and related items
for the six months ended June 30, 2015, reflected impairment charges for Occidental's South Texas Eagle Ford non-operated properties, investments in Yemen, mark-to-market losses on a CO
2
purchase contract and rig idling and termination fees.
Lower taxes other than on income for the three and six months ended June 30, 2016, compared to the same periods of 2015, reflected lower production and ad valorem taxes, which are mostly tied to oil and gas prices.
Higher interest and debt expense, net for the three and six months ended June 30, 2016, compared to the same periods of 2015, reflected lower capitalized interest as well as additional interest accrued for senior notes issued in April 2016 and a premium on the early retirement in May 2016 of the $1.25 billion of 1.75-percent senior notes due February 2017.
The domestic and foreign income tax benefit for the three and six months ended
June 30, 2016
, compared to income tax provisions in the same periods of 2015, are due to higher pre-tax operating losses in
2016
compared to
2015
and the relinquishment of foreign exploration blocks.
Selected Analysis of Financial Position
See “Liquidity and Capital Resources” for a discussion about the changes in cash and cash equivalents and restricted cash.
The increase in trade receivables, net, at June 30, 2016, compared to December 31, 2015, was due to an increase in oil and gas realized prices. The decrease in assets held for sale and available for sale investment reflect the sale of Piceance operations in Colorado and the Occidental Tower in Dallas, and the distribution of Occidental's remaining California Resources common stock to its shareholders. The increase in investments in unconsolidated entities is primarily a result of capital contributions associated with the joint venture for the ethylene cracker at the OxyChem Ingleside facility. The decrease in property, plant and equipment, net, is primarily the result of DD&A, offset partially by Occidental's capital spending of $1.2 billion in the first half of 2016.
Current maturities of long-term debt at June 30, 2016, decreased from December 31, 2015, due to the payments of $700 million 2.5-percent senior notes due February 2016 and $750 million 4.125-percent senior notes due June 2016. The increase in long-term debt, net since December 31, 2015 is the result of the issuance of $2.75 billion of senior notes in April 2016, partially offset by the early redemption in May 2016 of $1.25 billion 1.75-percent senior notes due February 2017.
The decrease in accrued liabilities at June 30, 2016, is due to first quarter payments of ad-valorem taxes. Liabilities of assets held for sale as of June 30, 2016, decreased due to the sale of Piceance operations in Colorado.
Segment Operations
Occidental conducts its operations through three segments: (1) oil and gas; (2) chemical; and (3) midstream and marketing. The oil and gas segment explores for, develops and produces oil and condensate, NGLs and natural gas. The chemical segment mainly manufactures and markets basic chemicals and vinyls. The midstream and marketing segment gathers, processes, transports, stores, purchases and markets oil, condensate, NGLs, natural gas, CO
2
and power. It also trades around its assets, including transportation and storage capacity. Additionally, the midstream and marketing segment invests in entities that conduct similar activities.
The following table sets forth the sales and earnings of each operating segment and corporate items for the
three
and six months ended
June 30, 2016
and 2015 (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
Net Sales
(a)
|
|
|
|
|
|
|
|
|
|
Oil and Gas
|
|
$
|
1,625
|
|
|
$
|
2,342
|
|
|
$
|
2,900
|
|
|
$
|
4,351
|
|
|
Chemical
|
|
908
|
|
|
1,030
|
|
|
1,798
|
|
|
2,030
|
|
|
Midstream and Marketing
|
|
141
|
|
|
294
|
|
|
274
|
|
|
491
|
|
|
Eliminations
|
|
(143
|
)
|
|
(197
|
)
|
|
(318
|
)
|
|
(314
|
)
|
|
|
|
$
|
2,531
|
|
|
$
|
3,469
|
|
|
$
|
4,654
|
|
|
$
|
6,558
|
|
|
Segment Results
(b)
|
|
|
|
|
|
|
|
|
|
Oil and Gas
|
|
$
|
(117
|
)
|
|
$
|
355
|
|
|
$
|
(602
|
)
|
|
$
|
89
|
|
|
Chemical
|
|
88
|
|
|
136
|
|
|
302
|
|
|
275
|
|
|
Midstream and Marketing
|
|
(58
|
)
|
|
87
|
|
|
(153
|
)
|
|
72
|
|
|
|
|
(87
|
)
|
|
578
|
|
|
(453
|
)
|
|
436
|
|
|
Unallocated Corporate Items
(b)
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
(84
|
)
|
|
(7
|
)
|
|
(141
|
)
|
|
(35
|
)
|
|
Income tax benefit (provision)
|
|
96
|
|
|
(324
|
)
|
|
299
|
|
|
(305
|
)
|
|
Other expense, net
|
|
(61
|
)
|
|
(67
|
)
|
|
(201
|
)
|
|
(131
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
(136
|
)
|
|
180
|
|
|
(496
|
)
|
|
(35
|
)
|
|
Discontinued operations, net
|
|
(3
|
)
|
|
(4
|
)
|
|
435
|
|
|
(7
|
)
|
|
Net Income (loss)
|
|
$
|
(139
|
)
|
|
$
|
176
|
|
|
$
|
(61
|
)
|
|
$
|
(42
|
)
|
|
(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) Refer to “Significant Transactions and Events Affecting Earnings,” “Oil and Gas Segment,” “Chemical Segment,” “Midstream and Marketing Segment” and "Corporate" discussions that follow.
Significant Transactions and Events Affecting Earnings
The following table sets forth significant transactions and events affecting Occidental’s earnings that vary widely and unpredictably in nature, timing and amount for the
three
and six months ended
June 30, 2016
and 2015 (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
|
Oil and Gas
|
|
|
|
|
|
|
|
|
Asset sales gains and other
|
|
$
|
—
|
|
|
$
|
18
|
|
|
$
|
23
|
|
|
$
|
5
|
|
Asset impairments and related items - Domestic
|
|
—
|
|
|
14
|
|
|
—
|
|
|
(250
|
)
|
Asset impairments and related items - International
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
(47
|
)
|
Total Oil and Gas
|
|
$
|
—
|
|
|
$
|
31
|
|
|
$
|
23
|
|
|
$
|
(292
|
)
|
|
|
|
|
|
|
|
|
|
Chemical
|
|
|
|
|
|
|
|
|
Asset sales gains
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
88
|
|
|
$
|
—
|
|
Total Chemical
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
88
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
Midstream and Marketing
|
|
|
|
|
|
|
|
|
Total Midstream and Marketing
|
|
$
|
—
|
|
|
$
|
3
|
|
|
$
|
—
|
|
|
$
|
(7
|
)
|
|
|
|
|
|
|
|
|
|
Corporate
|
|
|
|
|
|
|
|
|
Asset impairments and related items
|
|
—
|
|
|
—
|
|
|
(78
|
)
|
|
—
|
|
Spin-off costs and related items
|
|
—
|
|
|
(6
|
)
|
|
—
|
|
|
(20
|
)
|
Asset sales losses
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(11
|
)
|
Tax effect of pre-tax adjustments
(a)
|
|
—
|
|
|
(13
|
)
|
|
33
|
|
|
99
|
|
Discontinued operations, net
(b)
|
|
(3
|
)
|
|
(4
|
)
|
|
435
|
|
|
(7
|
)
|
Total Corporate
|
|
$
|
(3
|
)
|
|
$
|
(23
|
)
|
|
$
|
390
|
|
|
$
|
61
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(3
|
)
|
|
$
|
11
|
|
|
$
|
501
|
|
|
$
|
(238
|
)
|
(a) The 2016 amount included benefits for the relinquishment of foreign exploration blocks.
(b) Amounts shown after tax.
Worldwide Effective Tax Rate
T
he following table sets forth the calculation of the worldwide effective tax rate for income from continuing operations for the
three
and six months ended
June 30, 2016
and
2015
(in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
|
Oil and Gas results
|
|
$
|
(117
|
)
|
|
$
|
355
|
|
|
$
|
(602
|
)
|
|
$
|
89
|
|
Chemical results
|
|
88
|
|
|
136
|
|
|
302
|
|
|
275
|
|
Midstream and Marketing results
|
|
(58
|
)
|
|
87
|
|
|
(153
|
)
|
|
72
|
|
Unallocated corporate items
|
|
(145
|
)
|
|
(74
|
)
|
|
(342
|
)
|
|
(166
|
)
|
Pre-tax income (loss)
|
|
(232
|
)
|
|
504
|
|
|
(795
|
)
|
|
270
|
|
|
|
|
|
|
|
|
|
|
Income tax benefit (provision)
|
|
|
|
|
|
|
|
|
Federal and state
|
|
234
|
|
|
47
|
|
|
525
|
|
|
172
|
|
Foreign
|
|
(138
|
)
|
|
(371
|
)
|
|
(226
|
)
|
|
(477
|
)
|
Total
|
|
96
|
|
|
(324
|
)
|
|
299
|
|
|
(305
|
)
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
$
|
(136
|
)
|
|
$
|
180
|
|
|
$
|
(496
|
)
|
|
$
|
(35
|
)
|
|
|
|
|
|
|
|
|
|
Worldwide effective tax rate
|
|
41
|
%
|
|
64
|
%
|
|
38
|
%
|
|
113
|
%
|
Occidental's worldwide effective tax rate of 38 percent for the six months ended June 30, 2016 is lower than the comparative period of 2015 due to the mix of domestic operating losses and foreign operating income, as well as the current year domestic tax benefit associated with the relinquishment of foreign exploration blocks. Excluding the impact of asset sales and other nonrecurring items, Occidental's worldwide effective tax rate for the six months ended June 30, 2016 would be 32 percent.
Oil and Gas Segment
The following tables set forth the production and sales volumes of oil, NGLs and natural gas per day for the three and six months ended
June 30, 2016
and
2015
. The differences between the production and sales volumes per day are generally due to the timing of shipments at Occidental’s international locations where the product is loaded onto tankers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
|
Production Volumes per Day
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
Oil (MBBL)
|
|
|
|
|
|
|
|
|
|
United States
|
|
190
|
|
|
205
|
|
|
193
|
|
|
201
|
|
|
Middle East/North Africa
|
|
168
|
|
|
188
|
|
|
175
|
|
|
189
|
|
|
Latin America
|
|
34
|
|
|
40
|
|
|
36
|
|
|
39
|
|
|
NGLs (MBBL)
|
|
|
|
|
|
|
|
|
|
United States
|
|
52
|
|
|
55
|
|
|
54
|
|
|
55
|
|
|
Middle East/North Africa
|
|
30
|
|
|
12
|
|
|
26
|
|
|
11
|
|
|
Natural Gas (MMCF)
|
|
|
|
|
|
|
|
|
|
United States
|
|
357
|
|
|
437
|
|
|
372
|
|
|
441
|
|
|
Middle East/North Africa
|
|
708
|
|
|
498
|
|
|
648
|
|
|
488
|
|
|
Latin America
|
|
8
|
|
|
10
|
|
|
8
|
|
|
11
|
|
|
Total Production Volumes (MBOE)
(a)
|
|
653
|
|
|
658
|
|
|
655
|
|
|
652
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
|
Sales Volumes per Day
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
Oil (MBBL)
|
|
|
|
|
|
|
|
|
|
United States
|
|
190
|
|
|
205
|
|
|
193
|
|
|
201
|
|
|
Middle East/North Africa
|
|
172
|
|
|
192
|
|
|
177
|
|
|
188
|
|
|
Latin America
|
|
38
|
|
|
35
|
|
|
36
|
|
|
35
|
|
|
NGLs (MBBL)
|
|
|
|
|
|
|
|
|
|
United States
|
|
52
|
|
|
55
|
|
|
54
|
|
|
55
|
|
|
Middle East/North Africa
|
|
29
|
|
|
12
|
|
|
25
|
|
|
11
|
|
|
Natural Gas (MMCF)
|
|
|
|
|
|
|
|
|
|
United States
|
|
357
|
|
|
437
|
|
|
372
|
|
|
441
|
|
|
Middle East/North Africa
|
|
708
|
|
|
498
|
|
|
648
|
|
|
488
|
|
|
Latin America
|
|
8
|
|
|
10
|
|
|
8
|
|
|
11
|
|
|
Total Sales Volumes (MBOE)
(a
)
|
|
660
|
|
|
657
|
|
|
656
|
|
|
647
|
|
|
(See footnote following the table below)
The following tables set forth the production and sales volumes of ongoing operations for oil, NGLs and natural gas per day for the three and six months ended
June 30, 2016
and
2015
, this excludes operations sold, exited or exiting.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
|
Production Volumes per Day
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
Oil (MBBL)
|
|
|
|
|
|
|
|
|
|
United States
(b)
|
|
190
|
|
|
188
|
|
|
193
|
|
|
184
|
|
|
Middle East/North Africa
(c)
|
|
162
|
|
|
157
|
|
|
162
|
|
|
154
|
|
|
Latin America
|
|
34
|
|
|
40
|
|
|
36
|
|
|
39
|
|
|
NGLs (MBBL)
|
|
|
|
|
|
|
|
|
|
United States
(b)
|
|
52
|
|
|
51
|
|
|
53
|
|
|
51
|
|
|
Middle East/North Africa
|
|
30
|
|
|
12
|
|
|
26
|
|
|
11
|
|
|
Natural Gas (MMCF)
|
|
|
|
|
|
|
|
|
|
United States
(b)
|
|
357
|
|
|
357
|
|
|
350
|
|
|
358
|
|
|
Middle East/North Africa
(c)
|
|
481
|
|
|
258
|
|
|
420
|
|
|
246
|
|
|
Latin America
|
|
8
|
|
|
10
|
|
|
8
|
|
|
11
|
|
|
Total Production Ongoing Operations (MBOE)
|
|
609
|
|
|
552
|
|
|
599
|
|
|
542
|
|
|
Operations Sold, Exited and Exiting
|
|
44
|
|
|
106
|
|
|
56
|
|
|
110
|
|
|
Total Production Volumes (MBOE)
(a)
|
|
653
|
|
|
658
|
|
|
655
|
|
|
652
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
|
Sales Volumes per Day
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
Oil (MBBL)
|
|
|
|
|
|
|
|
|
|
United States
(b)
|
|
190
|
|
|
188
|
|
|
193
|
|
|
184
|
|
|
Middle East/North Africa
(d)
|
|
166
|
|
|
157
|
|
|
164
|
|
|
156
|
|
|
Latin America
|
|
38
|
|
|
35
|
|
|
36
|
|
|
35
|
|
|
NGLs (MBBL)
|
|
|
|
|
|
|
|
|
|
United States
(b)
|
|
52
|
|
|
51
|
|
|
53
|
|
|
51
|
|
|
Middle East/North Africa
|
|
29
|
|
|
12
|
|
|
25
|
|
|
11
|
|
|
Natural Gas (MMCF)
|
|
|
|
|
|
|
|
|
|
United States
(b)
|
|
357
|
|
|
357
|
|
|
350
|
|
|
358
|
|
|
Middle East/North Africa
(d)
|
|
481
|
|
|
258
|
|
|
420
|
|
|
246
|
|
|
Latin America
|
|
8
|
|
|
10
|
|
|
8
|
|
|
11
|
|
|
Total Sales Ongoing Operations (MBOE)
|
|
616
|
|
|
547
|
|
|
600
|
|
|
540
|
|
|
Operations Sold, Exited and Exiting
|
|
44
|
|
|
110
|
|
|
56
|
|
|
107
|
|
|
Total Sales Volumes (MBOE)
(a
)
|
|
660
|
|
|
657
|
|
|
656
|
|
|
647
|
|
|
Note
: MBBL represents thousand barrels. MMCF represents million cubic feet.
(a) Natural gas volumes have been converted to thousands of barrels of oil equivalent (MBOE) based on energy content of six million cubic feet (MMCF) of gas to one thousand barrels of oil (MBOE). Barrels of oil equivalence does not necessarily result in price equivalence.
(b) Excludes 17 MBBL, 4 MBBL and 80 MMCF of oil, NGLs and gas for the three months ended June 30, 2015 related to Williston and Piceance. Excludes 22 MMCF of gas for the six months ended June 30, 2016, related to Piceance and 17 MBBL, 4 MBBL and 83 MMCF of oil, NGLs, and gas for the six months ended June 30, 2015, related to Williston and Piceance.
(c) Excludes 6 MBBL and 227 MMCF of oil and gas for the three months ended June 30, 2016 and 31 MMBL and 240 MMCF of oil and gas for the three months ended June 30, 2015, related to Bahrain, Iraq and Yemen. Excludes 13 MBBL and 228 MMCF of oil and gas for the six months ended June 30, 2016, and 35 MMBL and 242 MMCF of oil and gas for the six months ended June 30, 2015, related to Bahrain, Iraq and Yemen.
(d) Excludes 6 MBBL and 227 MMCF of oil and gas for the three months ended June 30, 2016 and 35 MMBL and 240 MMCF of oil and gas for the three months ended June 30, 2015, related to Bahrain, Iraq and Yemen. Excludes 13 MBBL and 228 MMCF of oil and gas for the six months ended June 30, 2016, and 32 MMBL and 242 MMCF of oil and gas for the six months ended June 30, 2015, related to Bahrain, Iraq and Yemen.
The following tables present information about Occidental's average realized prices and index prices for the
three
and six months ended
June 30, 2016
and
2015
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
|
Average Realized Prices
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
Oil ($/BBL)
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
41.43
|
|
|
$
|
52.64
|
|
|
$
|
35.33
|
|
|
$
|
48.25
|
|
|
Middle East/North Africa
|
|
$
|
37.80
|
|
|
$
|
56.48
|
|
|
$
|
33.66
|
|
|
$
|
55.27
|
|
|
Latin America
|
|
$
|
39.26
|
|
|
$
|
55.19
|
|
|
$
|
33.72
|
|
|
$
|
51.43
|
|
|
Total Worldwide
|
|
$
|
39.66
|
|
|
$
|
54.55
|
|
|
$
|
34.46
|
|
|
$
|
51.60
|
|
|
NGLs ($/BBL)
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
14.25
|
|
|
$
|
17.32
|
|
|
$
|
12.04
|
|
|
$
|
17.32
|
|
|
Middle East/North Africa
|
|
$
|
15.21
|
|
|
$
|
21.38
|
|
|
$
|
14.38
|
|
|
$
|
21.46
|
|
|
Total Worldwide
|
|
$
|
14.59
|
|
|
$
|
18.06
|
|
|
$
|
12.80
|
|
|
$
|
18.01
|
|
|
Natural Gas ($/MCF)
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
1.46
|
|
|
$
|
2.09
|
|
|
$
|
1.48
|
|
|
$
|
2.29
|
|
|
Latin America
|
|
$
|
3.36
|
|
|
$
|
5.49
|
|
|
$
|
3.76
|
|
|
$
|
4.98
|
|
|
Total Worldwide
|
|
$
|
1.26
|
|
|
$
|
1.48
|
|
|
$
|
1.26
|
|
|
$
|
1.57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
|
Average Index Prices
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
WTI oil ($/BBL)
|
|
$
|
45.59
|
|
|
$
|
57.94
|
|
|
$
|
39.52
|
|
|
$
|
53.29
|
|
|
Brent oil ($/BBL)
|
|
$
|
46.97
|
|
|
$
|
63.50
|
|
|
$
|
41.03
|
|
|
$
|
59.33
|
|
|
NYMEX gas ($/MCF)
|
|
$
|
1.97
|
|
|
$
|
2.73
|
|
|
$
|
2.02
|
|
|
$
|
2.90
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Realized Prices as Percentage of Average Index Prices
|
|
Three months ended June 30
|
|
Six months ended June 30
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
Worldwide oil as a percentage of average WTI
|
|
87
|
%
|
|
94
|
%
|
|
87
|
%
|
|
97
|
%
|
|
Worldwide oil as a percentage of average Brent
|
|
84
|
%
|
|
86
|
%
|
|
84
|
%
|
|
87
|
%
|
|
Worldwide NGLs as a percentage of average WTI
|
|
32
|
%
|
|
31
|
%
|
|
32
|
%
|
|
34
|
%
|
|
Domestic natural gas as a percentage of average NYMEX
|
|
74
|
%
|
|
77
|
%
|
|
73
|
%
|
|
79
|
%
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Oil and gas segment losses were $117 million for the second quarter of 2016, compared with segment earnings of $355 million for the second quarter of 2015. The decrease in earnings was mainly due to lower commodity prices for all products, partially offset by lower operating costs.
Total average daily production volumes were 653,000 BOE for the second quarter of 2016 compared to 658,000 BOE for the second quarter of 2015. Occidental completed the sale of the Piceance Basin assets on March 1, 2016, and continues to reduce its exposure to non-core operations in the Middle East/North Africa, including Bahrain, Iraq and Yemen. These domestic and international operations produced average daily volumes of 44,000 BOE and 106,000 BOE in the second quarters of 2016 and 2015, respectively. For the second quarter of 2016, total company average daily oil and gas production volumes for ongoing operations increased by 57,000 barrels of oil equivalent (BOE) to 609,000 BOE from 552,000 BOE in the second quarter of 2015. Compared to the second quarter of 2015, domestic average daily production for ongoing operations increased by 4,000 BOE to 302,000 BOE in the second quarter of 2016 with Permian Resources increasing by 17,000 BOE, which was partially offset by lower natural gas and NGL production in South Texas. International average daily production for ongoing operations increased to 307,000 BOE in the second quarter of 2016 from 254,000 BOE in the second quarter of 2015. The increase in international production is primarily attributable to Al Hosn, which was not fully operational in the second quarter of 2015, in addition to Oman's Block 62 production which commenced in 2016.
Worldwide commodity prices for the second quarter of 2016 were lower than the second quarter of 2015. The average quarterly WTI and Brent prices decreased to $45.59 per barrel and $46.97 per barrel, respectively, for the second
quarter of 2016, compared to $57.94 per barrel and $63.50 per barrel, respectively, for the second quarter of 2015. Worldwide realized crude oil prices declined by 27 percent to $39.66 per barrel for the second quarter of 2016, compared to $54.55 per barrel in the second quarter of 2015. Worldwide realized NGL prices decreased by 19 percent to $14.59 per barrel in the second quarter of 2016, compared to $18.06 per barrel in the second quarter of 2015. Domestic realized natural gas prices decreased by 30 percent in the second quarter of 2016 to $1.46 per MCF, compared to $2.09 per MCF in the second quarter of 2015.
Oil and gas segment losses were $602 million for the first six months of 2016, compared with segment earnings of $89 million for the same period of 2015. The decrease in earnings was mainly due to lower commodity prices, partially offset by lower operating costs.
Total average daily production volumes for the first six months of 2016 and 2015 were 655,000 BOE and 652,000 BOE, respectively. For the first six months of 2016 and 2015, non-core operations produced average daily volumes of 56,000 BOE and 110,000 BOE, respectively. For the first six months of 2016, total company average daily oil and gas production volumes for ongoing operations increased by 57,000 barrels of oil equivalent (BOE) to 599,000 BOE from 542,000 BOE for the first six months of 2015. Domestic average daily production for ongoing operations increased by 9,000 BOE for the first six months of 2016 as compared to the first six months of 2015 with Permian Resources increasing by 23,000 BOE, which was partially offset by lower natural gas and NGL production in South Texas. International average daily production increased to 295,000 BOE for the first six months of 2016 from 247,000 BOE for the first six months 2015. The increase in international production mainly comes from Al Hosn, which was not fully operational in the first half of 2015.
Worldwide commodity prices for the first six months of 2016 were lower than the same period of 2015. Worldwide realized crude oil prices declined by 33 percent to $34.46 per barrel for the first six months of 2016, compared to $51.60 per barrel for the same period of 2015. Worldwide realized NGL prices decreased by 29 percent to $12.80 per barrel for the first six months of 2016, compared to $18.01 per barrel for the same period of 2015. Domestic realized natural gas prices decreased by 35 percent for the first six months of 2016 to $1.48 per MCF, compared to $2.29 per MCF for the same period of 2015.
Occidental’s financial results correlate closely to the prices it obtains for its products. The weak price environment continues to significantly impact earnings as compared to the same period in 2015. Further declines in these commodity prices may result in additional impairments to reduce the carrying value of Occidental’s oil and gas properties as well as reducing the amount of these commodities that can be produced economically and the quantity and present value of proved reserves.
The calculated average first-day-of-the-month West Texas Intermediate oil price and Henry Hub natural gas price were $40.54 per barrel and $2.25 per MMBtu, respectively, for the first seven months of 2016 as compared to $50.28 per barrel and $2.66 per MMBtu for the twelve months of 2015. To the extent that commodity prices remain at current or lower levels throughout 2016, a portion of proved reserves could be deemed uneconomic and no longer classified as proved.
Chemical Segment
Chemical segment earnings for the three and six months ended
June 30, 2016
, were
$88 million
and $302 million, respectively, compared to $136 million and $275 million for the same period of 2015. Excluding gains of $88 million for the sale of chemical assets in the first six months of 2016, the lower earnings in 2016 compared to the same period in 2015 reflected lower average sales prices for most product lines and lower demand for calcium chloride, partially offset with lower ethylene and energy costs.
Midstream and Marketing Segment
Midstream and marketing losses were
$58 million
and $153 million for the three and six months ended June 30, 2016, respectively, compared to segment earnings of
$87 million
and $72 million for the same periods of 2015. The lower results reflected lower marketing margins due to unfavorable Permian to Gulf Coast differentials.
Liquidity and Capital Resources
At
June 30, 2016
, Occidental had $3.8 billion in cash. Income and cash flows are largely dependent on the oil and gas segment's realized prices, sales volumes and operating costs. In the first six months of 2016, Occidental significantly reduced its capital expenditures compared to the prior year period. With a continued reduction in capital expenditures and forecasted operational improvements, Occidental expects to fund its liquidity needs, including future dividend payments, through cash on hand, cash generated from operations, monetization of non-core assets or investments and, if necessary, through future borrowings or proceeds from other forms of capital issuance.
Net cash provided by operating activities was $
1.8 billion
and $1.4 billion for the six months ended
June 30, 2016
and 2015, respectively. The 2016 amount includes $0.9 billion in operating cash flows from discontinued operations related to the Ecuador settlement. Cash flows were negatively impacted by significantly lower realized prices for all oil and natural gas commodities in the first half of 2016 as compared to the same period in 2015; however, operating cost reductions as well as cash receipts of $882 million for the Ecuador settlement and $302 million of federal income tax refunds more than offset the effect of lower commodity prices. The impact of the chemical and the midstream and marketing segments on overall cash flows is typically less significant than the impact of the oil and gas segment because the chemical and midstream and marketing segments are significantly smaller. The $0.5 billion decrease of working capital was related to the cyclical payments of property taxes and employee costs, payment of liabilities accrued at year-end related to exited or exiting international operations, and decreases in inventory and receivables.
Occidental’s net cash used by investing activities was $1.3 billion for the first six months of 2016, compared to
$3.9 billion
for the same period of 2015. Capital expenditures for the first six months of
2016
were $1.2 billion of which $0.9 billion was for the oil and gas segment, compared to $3.1 billion for the first six months of 2015 of which $2.7 billion was for the oil and gas segment. The change in capital accrual for both periods reflected amounts paid in the first half of the current year related to capital expenditures incurred and accrued in the fourth quarter of the preceding year. Capital expenditures have been significantly reduced in response to the current commodity price environment.
Occidental’s net cash provided by financing activities was $66 million for the first six months of
2016
, compared to $1.5 billion for the same period of
2015
. Restricted cash of $1.2 billion and $1.6 billion was used to pay dividends and repay debt in the first six months of 2016 and 2015, respectively. In the first six months of 2016 and 2015, Occidental issued $2.75 billion and $1.5 billion of senior notes, respectively. In the first six months of 2016, Occidental repaid $700 million of 2.5-percent senior notes due February 2016 and $750 million of 4.125-percent senior notes due June 2016, and early redeemed $1.25 billion of 1.75-percent senior notes due February 2017.
As of
June 30, 2016
, Occidental was in compliance with all covenants of its financing agreements and had substantial capacity for additional unsecured borrowings, the payment of cash dividends and other distributions on, or acquisitions of, Occidental stock.
Environmental Liabilities and Expenditures
Occidental’s operations are subject to stringent federal, state, local and foreign laws and regulations related to improving or maintaining environmental quality. Occidental’s environmental compliance costs have generally increased over time and are expected to rise in the future. Occidental factors environmental expenditures for its operations into its business planning process as an integral part of producing quality products responsive to market demand.
The laws that require or address environmental remediation, including CERCLA and similar federal, state, local and foreign laws, may apply retroactively and regardless of fault, the legality of the original activities or the current ownership or control of sites. OPC or certain of its subsidiaries participate in or actively monitor a range of remedial activities and government or private proceedings under these laws with respect to alleged past practices at operating, closed and third-party sites. Remedial activities may include one or more of the following: investigation involving sampling, modeling, risk assessment or monitoring; cleanup measures including removal, treatment or disposal of hazardous substances; or operation and maintenance of remedial systems. These environmental proceedings seek funding or performance of remediation and, in some cases, compensation for alleged property damage, punitive damages, civil penalties, injunctive relief and government oversight costs.
Refer to Note 6,
Environmental Liabilities and Expenditures,
in the
Notes to the Consolidated Condensed Financial Statements
in Part I Item 1 of this Form 10-Q and to the
Environmental Liabilities and Expenditures
section of
Management’s Discussion and Analysis of Financial Condition and Results of Operation
s in the 2015 Form 10-K for additional information regarding Occidental’s environmental expenditures.
Lawsuits, Claims, Commitments and Contingencies
Occidental accrues reserves for outstanding lawsuits, claims and proceedings when it is probable that a liability has been incurred and the liability can be reasonably estimated. Occidental has disclosed its reserve balances for environmental matters. Reserve balances for other matters as of
June 30, 2016
, and
December 31, 2015
, were not material to Occidental's consolidated balance sheets. Occidental also evaluates the amount of reasonably possible losses that it could incur as a result of the matters mentioned above. Occidental has disclosed its range of reasonably possible additional losses for sites where it is a participant in environmental remediation. Occidental believes that other reasonably possible losses which it could incur in excess of reserves accrued on the balance sheet would not be material to its consolidated financial position or results of operations. For further information, see Note 7,
Lawsuits, Claims, Commitments and Contingencies,
in the
Notes to Consolidated Condensed Financial Statements
in Part I Item 1 of this Form 10-Q.
Recently Adopted Accounting and Disclosure Changes
See Note 3,
Accounting and Disclosure Changes,
in the
Notes to Condensed Consolidated Financial Statements
in Part I Item 1 of this Form 10-Q
.
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
For the three and six months ended
June 30, 2016
, there were no material changes in the information required to be provided under Item 305 of Regulation S-K included under Item 7A, "Quantitative and Qualitative Disclosures About Market Risk" in the 2015 Form 10-K.
Item 4.
Controls and Procedures
Occidental's President and Chief Executive Officer and its Senior Vice President and Chief Financial Officer supervised and participated in Occidental's evaluation of its disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based upon that evaluation, Occidental's President and Chief Executive Officer and Senior Vice President and Chief Financial Officer concluded that Occidental's disclosure controls and procedures were effective as of
June 30, 2016
.
There has been no change in Occidental's internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) during the first six months of 2016 that has materially affected, or is reasonably likely to materially affect, Occidental's internal control over financial reporting.