Dailystocks.com - Ticker-based level links to all the information for the Stocks you own. Portal for Daytrading and Finance and Investing Web Sites
DailyStocks.com
What's New
Site Map
Help
FAQ
Log In
Home Quotes/Data/Chart Warren Buffett Fund Letters Ticker-based Links Education/Tips Insider Buying Index Quotes Forums Finance Site Directory
OTCBB Investors Daily Glossary News/Edtrl Company Overviews PowerRatings China Stocks Buy/Sell Indicators Company Profiles About Us
Nanotech List Videos Magic Formula Value Investing Daytrading/TA Analysis Activist Stocks Wi-fi List FOREX Quote ETF Quotes Commodities
Make DailyStocks Your Home Page AAII Ranked this System #1 Since 1998 Bookmark and Share


Welcome!
Welcome to the investing community at DailyStocks where we believe we have some of the most intelligent investors around. While we have had an online presence since 1997 as a portal, we are just beginning the forums section now. Our moderators are serious investors with MBA and CFAs with practical experience wwell-versed in fundamental, value, or technical investing. We look forward to your contribution to this community.

Recent Topics
Article by DailyStocks_admin    (09-30-08 06:33 AM)

The Daily Magic Formula Stock for 09/30/2008 is Occidental Petroleum Corp. According to the Magic Formula Investing Web Site, the ebit yield is 19% and the EBIT ROIC is 25-50 %.

Dailystocks.com only deals with facts, not biased journalism. What is a better way than to go to the SEC Filings? It's not exciting reading, but it makes you money. We cut and paste the important information from SEC filings for you to get started on your research on a specific company.


Dailystocks.com makes NO RECOMMENDATIONS whatsoever, and provides this for informational purpose only.

BUSINESS OVERVIEW

GENERAL

Occidental’s principal businesses consist of two industry segments operated by OPC's subsidiaries and affiliates. The subsidiaries and other affiliates in the oil and gas segment explore for, develop, produce and market crude oil, natural gas liquids (NGL) and natural gas. The subsidiaries and other affiliates in the chemical segment (OxyChem) manufacture and market basic chemicals, vinyls and performance chemicals. For financial information by segment and by geographic area, see Note 15 to the Consolidated Financial Statements of Occidental (Consolidated Financial Statements).

For information regarding Occidental's current developments, see the information in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (MD&A) section of this report.

OIL AND GAS OPERATIONS

General

Occidental’s domestic oil and gas operations are located at the Permian Basin in west Texas and New Mexico, Elk Hills and other locations in California, the Hugoton field in Kansas and Oklahoma, Utah and western Colorado. International operations are located in Argentina, Bolivia, Colombia, Libya, Oman, Qatar, the United Arab Emirates (UAE) and Yemen. For additional information regarding Occidental's oil and gas segment, see the information under the caption “Oil and Gas Segment” in the MD&A section of this report.

Proved Reserves, Production and Properties

The table below shows Occidental’s total oil and natural gas proved reserves and production in 2007, 2006 and 2005. See the MD&A section of this report, Note 16 to the Consolidated Financial Statements and the information under the caption “Supplemental Oil and Gas Information” in Item 8 of this report for certain details regarding Occidental’s oil and gas proved reserves, the estimation process and production by country. On May 1, 2007, Occidental reported to the United States Department of Energy on Form EIA-28 proved oil and gas reserves at December 31, 2006. The amounts reported were the same as those reported in Occidental’s 2006 Annual Report.

Competition and Sales and Marketing

As a producer of crude oil and natural gas, Occidental competes with numerous other domestic and foreign private and government producers. Crude oil and natural gas are commodities that are sensitive to prevailing global and, in certain cases, local conditions of supply and demand and are sold at “spot” or contract prices or on futures markets to refiners and other market participants. Occidental competes by developing and producing its worldwide oil and gas reserves cost-effectively and acquiring rights to explore in areas with known oil and gas deposits. Occidental also competes by increasing production through enhanced oil recovery projects in mature and underdeveloped fields and making strategic acquisitions. Occidental focuses its operations in its core areas of the United States, the Middle East/North Africa and Latin America.

CHEMICAL OPERATIONS

General

OxyChem manufactures and markets basic chemicals, vinyls and performance chemicals. For additional information regarding Occidental’s chemical segment, see the information under the caption “Chemical Segment” in the MD&A section of this report.

Products and Properties

CAPITAL EXPENDITURES

For information on capital expenditures, see the information under the heading “Capital Expenditures” in the MD&A section of this report.

EMPLOYEES

Occidental employed approximately 9,700 people at December 31, 2007, 6,600 of whom were located in the United States. Occidental employed approximately 5,200 people in oil and gas operations and 3,100 people in chemical operations. An additional 1,400 people were employed in administrative and headquarters functions. Approximately 800 United States-based employees and 150 foreign-based employees are represented by labor unions.

Occidental has a long-standing policy to provide fair and equal employment opportunities to all people without regard to race, color, religion, ethnicity, gender, national origin, disability, age, sexual orientation, veteran status or any other legally impermissible factor. Occidental maintains diversity and outreach programs.

ENVIRONMENTAL REGULATION

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

CEO BACKGROUND

SPENCER ABRAHAM, 55
Since September 2005, Mr. Abraham has been Chairman and Chief Executive Officer of The Abraham Group, a business consulting firm based in Washington, D.C., and since 2005, has been a distinguished visiting fellow at the Hoover Institution, a public policy research center headquartered at Stanford University and devoted to the study of politics, economics and political economy as well as international affairs. He served as the Secretary of Energy, United States Department of Energy, from 2001 through January 2005. Prior to that, he was a United States Senator, representing the State of Michigan from 1995 to 2001. From 1993 to 1994, he was of counsel to the law firm of Miller, Canfield, Paddock & Stone. He was a co-chairman of the National Republican Congressional Committee from 1991 to 1993 and Chairman of the Michigan Republican Party from 1983 to 1991. Mr. Abraham holds a juris doctorate degree from Harvard Law School. Mr. Abraham also is a director of ICx Technologies and serves as the non-executive chairman of AREVA, Inc., the U.S. subsidiary of the French-owned nuclear company, and Green Rock Energy.
Director since 2005.
Member of the Charitable Contributions Committee, Environmental, Health and Safety Committee, and Executive Compensation and Human Resources Committee.


RONALD W. BURKLE, 55
Mr. Burkle is the managing partner and majority owner of The Yucaipa Companies, a private investment firm that invests primarily its own capital and that he co-founded in 1986. He is a trustee of the John F. Kennedy Center for the Performing Arts, a trustee of the J. Paul Getty Trust and a member of the Board of the Carter Center. Mr. Burkle also is a director of KB Home and Yahoo!.
Director since 1999.
Member of the Dividend Committee.


JOHN S. CHALSTY, 74
Mr. Chalsty is a principal and has served as Chairman of Muirfield Capital Management LLC, an asset management firm, since 2002. He served as Senior Advisor to Credit Suisse First Boston during 2001, was Chairman of Donaldson, Lufkin & Jenrette, Inc., an investment banking firm, from 1996 through 2000 and served as its President and Chief Executive Officer from 1986 to 1996. Mr. Chalsty is a Trustee Emeritus of Columbia University and President of Lincoln Center Theatre.
Director since 1996.
Member of the Audit Committee, Corporate Governance, Nominating and Social Responsibility Committee, Dividend Committee, Executive Committee, and Executive Compensation and Human Resources Committee (Chair).


EDWARD P. DJEREJIAN, 69
Ambassador Djerejian has been founding director of the James A. Baker III Institute for Public Policy at Rice University since 1994. Before that, he had a career in foreign service that included serving as United States Ambassador to Israel from 1993 to 1994, as Assistant Secretary of State for Near Eastern Affairs from 1991 to 1993 and as United States Ambassador to the Syrian Arab Republic from 1988 to 1991. Ambassador Djerejian also is a director of Baker Hughes, Inc. and Global Industries, Ltd.
Director since 1996.
Member of the Charitable Contributions Committee, Corporate Governance, Nominating and Social Responsibility Committee, and Environmental, Health and Safety Committee.


JOHN E. FEICK, 64
Mr. Feick is the Chairman and a major stockholder of Matrix Solutions Inc., a provider of environmental remediation and reclamation services. He was President and Chief Executive Officer of Matrix from 1995 to 2003. He also is Chairman and a partner in Kemex Engineering Services, Ltd., which offers engineering and design services to the petrochemical, refining and gas processing industries. He was President and Chief Operating Officer of Novacor Chemicals, a subsidiary of Nova Corporation, from 1984 to 1994. Mr. Feick also is a director of Fort Chicago Energy Partners LP.
Director since 1998.
Member of the Audit Committee, Dividend Committee, Environmental, Health and Safety Committee, and Executive Committee.



DR. RAY R. IRANI, 73
Dr. Irani has been Chairman and Chief Executive Officer of Occidental since 1990. He was Chief Operating Officer from 1984 to 1990. He was Chairman of the Board of Directors of Canadian Occidental Petroleum Ltd. (now Nexen Inc.) from 1987 to 1999. Dr. Irani also is a director of Wynn Resorts, Limited and TCW Group.
Director since 1984.
Member of the Dividend Committee and Executive Committee (Chair).



IRVIN W. MALONEY, 77
From 1992 until his retirement in 1998, Mr. Maloney was President and Chief Executive Officer of Dataproducts Corporation, which designs, manufactures and markets printers and supplies for computers.
Director since 1994.
Member of the Audit Committee, Charitable Contributions Committee, Executive Committee, and Executive Compensation and Human Resources Committee.

AVEDICK B. POLADIAN, 56
Since 2006, Mr. Poladian has been the Chief Operating Officer of Lowe Enterprises, Inc., a diversified national real estate company active in commercial, residential and hospitality property investment, management and development. He was Executive Vice President, Chief Financial Officer and Chief Administrative Officer for Lowe from 2003 to 2006. Mr. Poladian was with Arthur Andersen from 1974 to 2002 and is a certified public accountant. He is on the board of the YMCA of Metropolitan Los Angeles and a former Trustee of Loyola Marymount University. Mr. Poladian also is a director of California Pizza Kitchen and Western Asset Funds (Western Asset Income Fund, Western Asset Premier Bond Fund and Western Asset Funds, Inc.).
Nominee.



RODOLFO SEGOVIA, 71
Mr. Segovia is on the Executive Committee of Inversiones Sanford, a diversified investment group with emphasis in petrochemicals, specialty chemicals and plastics with which he has been affiliated since 1965. A former President of the Colombian national oil company (Ecopetrol) as well as Minister and Senator of the Republic of Colombia, he has been President and Chief Executive Officer of polyvinyl chloride and polypropylene companies. Mr. Segovia is a Trustee of the University of the Andes and serves as an advisor to the Martindale Center of Lehigh University, where he served as a visiting professor.
Director since 1994.
Member of the Charitable Contributions Committee, Corporate Governance, Nominating and Social Responsibility Committee, Environmental, Health and Safety Committee (Chair), Executive Committee, and Executive Compensation and Human Resources Committee.



AZIZ D. SYRIANI, 65
Mr. Syriani has served since 2002 as the President and Chief Executive Officer of The Olayan Group, a diversified trading, services and investment organization with activities and interests in the Middle East and elsewhere. From 1978 until 2002, he served as the President and Chief Operating Officer of The Olayan Group. Mr. Syriani also is a director of The Credit Suisse Group. He was Chairman of the Audit Committee of The Credit Suisse Group from April 2002 until April 2004, and since April 2004, has been Chairman of its Compensation Committee.
Director since 1983.
Lead Independent Director since 1999.
Member of the Audit Committee (Chair), Corporate Governance, Nominating and Social Responsibility Committee, Dividend Committee, and Executive Committee.



ROSEMARY TOMICH, 70
Miss Tomich has been owner of the Hope Cattle Company since 1958 and the A. S. Tomich Construction Company since 1970. Additionally, she is Chairman of the Board of Directors and Chief Executive Officer of Livestock Clearing, Inc. and was a founding director of the Palm Springs Savings Bank. Miss Tomich serves on the Advisory Board of the University of Southern California Marshall School of Business and the Board of Councillors for the School of Letters and Sciences at the University of Southern California and is a Trustee Emeritus of the Salk Institute.
Director since 1980.
Member of the Audit Committee, Charitable Contributions Committee (Chair), Corporate Governance, Nominating and Social Responsibility Committee (Chair), Environmental, Health and Safety Committee, Executive Committee, and Executive Compensation and Human Resources Committee.



WALTER L. WEISMAN, 72
Since 1988, Mr. Weisman has been involved in private investments and volunteer activities. Prior to 1988, he was Chairman and Chief Executive Officer of American Medical International, a multinational hospital firm. Mr. Weisman also is a director of Fresenius Medical Care AG and Vice Chairman and Lead Director of Maguire Properties, Inc. He is past Chairman and a life trustee of the Los Angeles County Museum of Art, Vice Chairman of the Board of the California Institute of Technology, Chairman of the Board of the Sundance Institute and a Trustee of the Samuel H. Kress Foundation.
Director since 2002.
Member of the Corporate Governance, Nominating and Social Responsibility Committee, Dividend Committee, and Environmental, Health and Safety Committee.

MANAGEMENT DISCUSSION FROM LATEST 10K

STRATEGY

General

In this report, "Occidental" refers to Occidental Petroleum Corporation, a Delaware corporation (OPC), and/or one or more entities in which it owns a majority voting interest (subsidiaries). Occidental’s business is divided into two segments conducted through oil and gas subsidiaries and their affiliates and chemical subsidiaries and their affiliates. Occidental aims to generate superior total returns to stockholders using the following strategy:

Ø


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

Ø


Maintain financial discipline and a strong balance sheet; and

Ø


Manage the chemical segment to provide cash in excess of normal capital expenditures.

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

At Occidental, maintaining financial discipline means investing capital in projects that management expects will generate above-cost-of-capital returns throughout the business cycle. During periods of high commodity prices, Occidental expects to use most of its cash flow after capital expenditures to enhance stockholders' returns by continuing its program for evaluating dividend increases and potential stock repurchases.

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

Oil and Gas

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

Ø


Continuing to add commercial reserves through a combination of focused exploration and development programs conducted in and around Occidental’s core areas, which are the United States, the Middle East/North Africa and Latin America;

Ø


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

Ø


Maintaining a disciplined approach in buying and selling assets at attractive prices.

Over the past several years, Occidental has strengthened its asset base within each of the core areas. Occidental has invested in, and disposed of, assets with the goal of raising the average performance and potential of its assets. See "Oil and Gas Segment — Business Review" for a discussion of these changes.

In addition, Occidental has continued to make capital contributions and investments in the Dolphin Project in Qatar and the United Arab Emirates (UAE), the Mukhaizna project in Oman, and Libya for continued growth opportunities.

Occidental’s overall performance during the past several years reflects the successful implementation of its strategy to enhance the development of mature fields, beginning with the acquisition of the Elk Hills oil and gas field in California in 1998, followed by a series of purchases in the Permian Basin in west Texas and New Mexico and the integration of Vintage Petroleum, Inc. (Vintage) and Plains Exploration and Production Company (Plains) operations acquired in 2006.

At the end of 2007, the Elk Hills and Permian assets made up 66 percent of Occidental’s consolidated proven oil reserves and 44 percent of its consolidated proven gas reserves. On a barrels of oil equivalent (BOE) basis, these assets accounted for 61 percent of Occidental’s consolidated reserves. In 2007, the combined production from these assets averaged approximately 286,000 barrels of oil equivalent (BOE) per day.

OxyChem’s strategy is to be a low-cost producer in order to maximize its cash flow generation. OxyChem concentrates on the chlorovinyls chain beginning with chlorine, which is coproduced with caustic soda, after which chlorine and ethylene are converted through a series of intermediate products into PVC. OxyChem's focus on chlorovinyls permits it to take advantage of economies of scale.

Key Performance Indicators

General

Occidental seeks to ensure that it meets its strategic goals by continuously measuring its success in maintaining below average debt levels and top quartile performance compared to its peers in:

Ø


Total return to stockholders;

Ø


Return on equity;

Ø


Return on capital employed; and

Ø


Other segment-specific measurements such as profit per unit produced, cost to produce each unit, cash flow per unit, cost to find and develop new reserves, reserves replacement percentage and other similar measures.

Debt Structure

Occidental’s year-end 2007 total debt-to-capitalization ratio declined to 7 percent from 36 percent at the end of 2003. During that time, Occidental has reduced its debt over 60 percent while increasing its stockholders' equity by 186 percent.

Since the second quarter of 2005, Occidental’s long-term senior unsecured debt has been rated A- by Standard and Poor’s Corporation, A3 by Moody’s Investors Service (Moody's), and A(Low) by Dominion Bond Rating Service. In July 2007, Fitch Ratings upgraded Occidental's long-term senior unsecured debt rating from A- to A. In December 2007, Moody's and Standard and Poor's raised their outlook on Occidental's credit ratings from stable to positive. A security rating is not a recommendation to buy, sell or hold securities, may be subject to revision or withdrawal at any time by the assigning rating organization and should be evaluated independently of any other rating.

Occidental has focused on achieving top quartile return on equity. In 2007, Occidental's return on equity was 26 percent and the three-year average return on equity was 29 percent. During the same three-year period, Occidental increased its stockholders’ equity by 115 percent and its annual dividend by 82 percent while its stock price increased by 164 percent.

OIL AND GAS SEGMENT

Business Environment

Oil and gas prices are the major variables that drive the industry’s short and intermediate term financial performance. Average yearly oil prices strengthened in 2007 over 2006 levels and ended the year higher than 2006 year-end levels. During 2007, Occidental experienced an improvement in its price differential between the average West Texas Intermediate (WTI) price and Occidental's realized prices. Occidental’s realized price as a percentage of WTI was approximately 90 percent and 87 percent for 2007 and 2006, respectively. Prices and differentials can vary significantly, even on a short-term basis, making it difficult to forecast realized prices. The average WTI market price for 2007 was $72.32 per barrel compared with $66.23 per barrel in 2006. Occidental's average realized price for oil in 2007 was $64.77 per barrel, compared with $57.81 per barrel in 2006.

The average New York Mercantile Exchange (NYMEX) domestic natural gas prices decreased approximately 9 percent from 2006. For 2007, NYMEX gas prices averaged $7.12/Mcf compared with $7.82/Mcf for 2006.

Acquisitions and Dispositions

In June 2007, Occidental completed a fair value exchange in which BP p.l.c. (BP) acquired Occidental's oil and gas interests in Horn Mountain and received cash. Occidental acquired oil and gas interests in the Permian Basin and a gas processing plant in Texas from BP. Occidental also sold its oil and gas interests in Pakistan to BP. As a result of these transactions, both the Horn Mountain and Pakistan operations were classified as discontinued operations for all periods presented. The twelve months of 2007 include after-tax gains of $230 million related to these transactions.

In January 2007, Occidental sold its 50-percent joint venture interest in Russia for an after-tax gain of approximately $412 million.

Permian Basin

The Permian Basin extends throughout southwest Texas and southeast New Mexico and is one of the largest and most active oil basins in the United States, with the entire basin accounting for approximately 19 percent of the total United States oil production. Occidental is the largest producer in the Permian Basin with an approximate 16-percent net share of the total Permian Basin oil production. Occidental also produces and processes natural gas and natural gas liquids (NGL) in the Permian Basin.

A significant portion of Occidental's Permian Basin interests were obtained through the acquisition of Altura Energy Ltd. in 2000. Additional acquisitions of oil and gas producing property interests were subsequently made. Occidental's total share of Permian Basin oil, gas and NGL production averaged approximately 198,000 BOE per day in 2007. At the end of 2007, Occidental's Permian Basin properties had 1.2 billion BOE in proved reserves.

Occidental's Permian Basin production is diversified across a large number of producing areas. In 2007, Wasson San Andres was Occidental's largest Permian producing field with an average of approximately 38,000 BOE per day of production and with 311 million BOE of proved reserves at year-end. This field represents 19 percent of Occidental's 2007 daily Permian Basin production and 26 percent of its year-end Permian Basin proved reserves.

Occidental’s interests in the Permian Basin offer additional development and exploitation potential. During 2007, Occidental drilled approximately 225 wells on its operated properties and participated in additional wells drilled on outside-operated interests. Occidental conducted significant development activity on nine carbon dioxide (CO 2 ) projects during 2007, including implementation of new floods and expansion of existing CO 2 floods. Occidental also focused on improving the performance of existing wells. Occidental had an average of 127 well service units working in the Permian area during 2007 performing well maintenance and workovers.

Approximately 60 percent of Occidental’s Permian Basin oil production is from fields that actively employ the application of CO 2 flood technology, an enhanced oil recovery (EOR) technique. This involves injecting CO 2 into oil reservoirs where it acts as a solvent, causing the oil to flow more freely into producing wells. These CO 2 flood operations make Occidental a world leader in the application of this technology.

California

Elk Hills

Occidental's interest at Elk Hills includes the Elk Hills oil and gas field in the southern portion of California’s San Joaquin Valley, which it operates with an approximately 78-percent interest, and other non-unit properties. The Elk Hills field is the largest producer of gas in California. Oil and gas production in 2007 from the Elk Hills properties was approximately 88,000 BOE per day. During 2007, Occidental continued to perform infill drilling, field extensions and recompletions identified by advanced reservoir characterization techniques, resulting in 246 new wells being drilled and 507 wells being worked over. At the end of 2007, the Elk Hills properties had an estimated 519 million BOE of proved reserves.

Vintage Production California

In 2006, Occidental combined its California properties acquired from Vintage and Plains with existing California properties (excluding the Elk Hills, THUMS and Tidelands Oil Production Company (Tidelands) properties). The combined properties produce oil and gas from more than 50 fields, located mainly in the Ventura, San Joaquin and Sacramento basins.

Oil and gas production from Vintage Production California in 2007 averaged approximately 22,000 BOE per day. At the end of 2007, the combined properties had an estimated 138 million BOE of proved reserves.

THUMS and Tidelands

Occidental owns THUMS, which conducts the field operations for an oil production unit offshore Long Beach, California. Occidental acquired Tidelands in 2006. Tidelands is the contract operator for an onshore oil production unit in Long Beach, California. Occidental's share of production and reserves from both properties is subject to contractual arrangements similar to a production sharing contract (PSC), whereby Occidental’s share of production and reserves vary inversely with oil prices. These contracts do not transfer any right of ownership to Occidental and reserves reported from these arrangements are based on Occidental’s economic interest as defined in the contracts.

For 2007, Occidental's production from THUMS averaged 20,000 BOE per day and proved reserves totaled 97 million BOE at year-end.

Hugoton and Other

Occidental owns a large concentration of gas reserves, production interests and royalty interests in the Hugoton area of Kansas and Oklahoma.

Occidental also has over 29,000 net acres in the Piceance Basin in western Colorado. During 2007, Occidental drilled 56 wells in the basin.

In 2007, Occidental’s Hugoton and other operations produced approximately 30,000 BOE per day. At December 31, 2007, proved reserves totaled 154 million BOE from Hugoton and other operations.

Middle East/North Africa

Dolphin Project

Occidental's investment in the Dolphin Project, which was acquired in 2002, consists of two separate economic interests held through two separate legal entities. One entity, OXY Dolphin E&P, LLC, owns a 24.5-percent undivided interest in the assets and liabilities associated with a Development and Production Sharing Agreement (DPSA) with the Government of Qatar to develop and produce natural gas and NGLs in Qatar’s North Field for 25 years from the start of production, with a provision to request a 5-year extension. This undivided interest is proportionately consolidated in Occidental's financial statements.

A second entity, OXY Dolphin Pipeline, LLC, owns 24.5 percent of the stock of Dolphin Energy Limited (Dolphin Energy), and is recorded as an equity investment.

Dolphin Energy is the operator under the DPSA on behalf of the three DPSA participants, including Occidental. Dolphin Energy owns and operates a 230-mile-long, 48-inch natural gas pipeline, which transports dry natural gas from Qatar to the UAE. The transportation of gas through the pipeline started in the first quarter of 2007 using third-party natural gas and production under the DPSA began in July 2007 from Qatar’s North Field replacing the third-party natural gas. These contracts do not transfer any right of ownership to Occidental and reserves reported from these arrangements are based on Occidental’s economic interest as defined in the contracts. Occidental’s share of production was approximately 36,000 BOE per day in the fourth quarter of 2007 with production expected to increase to approximately 55,000 BOE per day in 2008. At December 31, 2007, Occidental’s share of proved oil and gas reserves from the Dolphin Project was 234 million BOE.

The Dolphin Project is expected to cost approximately $5.7 billion in total, including investments in the local UAE eastern gas distribution system, the Al Ain-Fujairah and Taweelah-Fujairah pipelines, which were added to improve the natural gas distribution system but were not contained in the original scope of the Dolphin Project. Occidental expects to invest approximately $1.4 billion of this total, with $1.1 billion invested as of December 31, 2007.

At the end of 2007, all offshore facilities within the original scope of the project have been completed along with construction of three of the four trains in the onshore gas processing and compression plant at Ras Laffan. The fourth train is expected to be completed in the first quarter of 2008.

The pipeline has a capacity to transport up to 3.2 billion cubic feet (Bcf) of natural gas per day. Demand for natural gas in the UAE and Oman continues to grow and Dolphin Energy’s customers have requested additional gas supplies. To help fulfill this growing demand, Dolphin Energy will continue to pursue an agreement to secure an additional supply of gas from Qatar.

Qatar

In addition to the Dolphin Project, Occidental participates in two production projects in Qatar: Idd El Shargi North Dome (ISND) and Idd El Shargi South Dome (ISSD). In 2007, Occidental continued development of the ISND and ISSD fields to recover additional reserves through advanced drilling techniques and waterflood expansion. Capital expenditures in Qatar for the ISND and ISSD projects were $237 million in 2007.

In October 2007, Occidental acquired Anadarko Petroleum Corporation’s 92.5-percent interest in an exploration and production sharing agreement covering Blocks 12 and 13 located offshore Qatar. Block 13 is an exploration block.

These projects do not transfer any right of ownership to Occidental and reserves reported from these arrangements are based on Occidental’s economic interest as defined in the contracts. Occidental’s production from Block 12, ISND and ISSD averaged 48,000 BOE in 2007. Proved reserves reported for these properties totaled 128 million BOE at December 31, 2007.

Yemen

Occidental owns contractual interests in three producing blocks in Yemen, including a 38-percent direct-working interest in the Masila field, a 40.4-percent interest in the East Shabwa field, comprising a 28.6-percent direct-working interest and an 11.8-percent equity interest in an unconsolidated entity, and a 75-percent interest in Block S-1, which was part of the Vintage acquisition. In addition, Occidental owns an 80-percent working interest in Block 20 and is currently awaiting final approval from the Yemen government for a 75-percent working interest in Block 75.

These contracts do not transfer any right of ownership to Occidental and reserves reported from these arrangements are based on Occidental’s economic interest as defined in the contracts.

At December 31, 2007, production from the Yemen properties was 27,000 BOE per day and proved reserves totaled 24 million BOE.

Oman

In Oman, Occidental is the operator of Block 9 and Block 27, with a 65-percent working interest in each, Block 53, with a 45-percent working interest, and Block 54, with a 70-percent working interest. Occidental’s share of production from Blocks 9, 27 and 53 averaged 25,000 BOE per day in 2007.

The Block 9 agreement provides for two 10-year extensions and Occidental and its partner agreed with the Government of Oman to the first 10-year extension through December 7, 2015.

Occidental and its partners signed a 30-year PSC for the Mukhaizna field (Block 53) with the Government of Oman in 2005. In September 2005, Occidental assumed operations of the Mukhaizna field. The Mukhaizna field, located in Oman’s south central interior, was discovered in 1975 and was brought into production in 2000. By the end of 2007, Occidental had drilled over 175 new wells and continued implementation of a major pattern steam flood project. As of year-end 2007, the exit rate of gross daily production had nearly tripled from the production rate of September 2005. Occidental plans to steadily increase production through continued expansion of the steam flood project.

The exploitation term for Block 27 is 30 years beginning in September 2005. Occidental and its partners began production in June 2006.

Occidental and its partners signed a new PSC for Block 54 with the Government of Oman in June 2006 with an initial exploration phase of four years.

These contracts do not transfer any right of ownership to Occidental and reserves reported from these arrangements are based on Occidental’s economic interest as defined in the contracts.

Occidental’s proved reserves for all the Oman properties totaled 65 million BOE at December 31, 2007.

Libya

In 2005, Occidental signed an agreement with the Libya National Oil Corporation (NOC) which allowed it to re-enter the country and participate in exploration and production operations in the Sirte Basin, which it left in 1986 pursuant to United States law. This re-entry agreement allowed Occidental to return to its Libyan operations on generally the same terms in effect when activities were suspended. Occidental’s rights in the producing fields extend through 2009 and early 2010. These contracts do not transfer any right of ownership to Occidental and reserves reported from these arrangements are based on Occidental’s economic interest as defined in the contracts. Production during 2007 averaged 22,000 BOE per day. At year-end 2007, proved reserves reported for Occidental’s Libya assets totaled 16 million BOE.

MANAGEMENT DISCUSSION FOR LATEST QUARTER

Consolidated Results of Operations

Occidental (which means Occidental Petroleum Corporation (OPC) and/or one or more entities in which it owns a majority voting interest) reported net income for the first six months of 2008 of $4.1 billion, on net sales of $13.1 billion, compared with net income of $2.6 billion, on net sales of $8.4 billion for the same period of 2007. Diluted earnings per common share were $5.01 and $3.11 for the first six months of 2008 and 2007, respectively. Occidental reported net income for the second quarter of 2008 of $2.3 billion, on net sales of $7.1 billion, compared with net income of $1.4 billion, on net sales of $4.4 billion for the same period of 2007. Diluted earnings per common share were $2.78 for the second quarter of 2008, compared with diluted earnings per share of $1.68 for the same period of 2007.

Net income for the three and six months ended June 30, 2008, compared to the same periods of 2007, reflected higher crude oil and natural gas prices, higher oil and gas production and lower exploration expense, which were partially offset by higher depreciation, depletion and amortization (DD&A) rates and operating expenses.

Net income for the three and six months ended June 30, 2007, included a $284 million pre-tax gain from the sale of Lyondell Chemical Company (Lyondell) common stock. Net income for the first six months of 2007 also included a $167 million pre-tax interest charge for the partial repurchase of various debt issues in the open market, a $412 million after-tax gain from the sale of Occidental's Russian joint venture interest and a $109 million after-tax gain from certain litigation settlements. Discontinued operations for the three and six months ended June 30, 2007 includes a $116 million gain from the sale of Pakistan operations to BP p.l.c. (BP), a $107 million gain from the swap of the Horn Mountain operations to BP and the results of operations for Pakistan and Horn Mountain through the disposal date.

Selected Income Statement Items

The increases in net sales of $2.7 billion and $4.7 billion for the three and six months ended June 30, 2008, respectively, compared with the same periods of 2007, reflected higher worldwide crude oil and natural gas prices and higher oil and gas production. The decrease in interest, dividends and other income of $108 million for the six months ended June 30, 2008, compared with the same period of 2007, reflected $112 million of after-tax gains from certain litigation settlements in 2007. For the three and six months ended June 30, 2007, gains on disposition of assets included a $284 million pre-tax gain from the sale of Lyondell common stock and a $23 million pre-tax gain from the sale of miscellaneous domestic oil and gas interests. For the six months ended June 30, 2007, gains on dispositions of assets also included an after-tax gain of $412 million from the sale of Occidental's Russian joint venture interest.

The increases in cost of sales of $476 million and $887 million for the three and six months ended June 30, 2008, respectively, compared with the same periods of 2007, reflected higher DD&A rates and higher oil and gas ad valorem taxes and field operating costs. The increases in selling, general and administrative and other operating expenses of $92 million and $156 million for the three and six months ended June 30, 2008, respectively, compared with the same periods of 2007, reflected higher stock-based incentive compensation expenses due to the increase in stock price and other oil and gas costs. Environmental remediation expenses for the six months ended June 30, 2007 included a $47 million pre-tax charge for plant closure and related environmental remediation reserve. Interest and debt expense for the six months ended June 30, 2007, included $167 million of pre-tax interest charges for the purchase of various debt issues in the open market. Discontinued operations for the three and six months ended June 30, 2007 included a $116 million gain from the sale of Pakistan operations to BP, a $107 million gain from the swap of the Horn Mountain operations to BP and the results of operations for Pakistan and Horn Mountain through the disposal date.

Selected Analysis of Financial Position

The increase in receivables, net of $1.9 billion at June 30, 2008, compared with December 31, 2007, reflected higher crude oil and natural gas prices during the second quarter of 2008 compared to the fourth quarter of 2007. The increase in investments in unconsolidated entities of $111 million at June 30, 2008, compared with December 31, 2007, reflected the 2008 acquisition of an equity investment and the increase in equity income from the Dolphin pipeline investment, partially offset by sales of certain investments in unconsolidated entities. The increase in property, plant and equipment of $3.2 billion at June 30, 2008, compared with December 31, 2007, was due to capital expenditures, the purchase of oil and gas interests from Plains Exploration & Production Company (Plains) and the signature bonus from the Libya contracts, partially offset by DD&A.

The increase of $963 million in accounts payable at June 30, 2008, compared to December 31, 2007, was mainly due to higher crude oil and natural gas prices in the marketing and trading operations during the second quarter of 2008 compared to fourth quarter of 2007. The increase in accrued liabilities of $696 million at June 30, 2008, compared to December 31, 2007, was mainly due to higher mark-to-market adjustments on derivative instruments and the accrual of the current portion of the signature bonus for the Libya agreements signed in June 2008. The increase in domestic and foreign income taxes payable – current of $367 million at June 30, 2008, compared to December 31, 2007, was due to an increase in income during the second quarter of 2008 compared to the fourth quarter of 2007. The increase in deferred credits and other liabilities – other of $696 million at June 30, 2008, compared to December 31, 2007, was due to higher mark-to-market adjustments on derivative instruments and the accrual of the noncurrent portion of the signature bonus for the Libya agreements. The increase in stockholders' equity of $2.3 billion at June 30, 2008, compared to December 31, 2007, reflected net income for the six months ended June 30, 2008, partially offset by 2008 year-to-date treasury stock repurchases of approximately 11.4 million shares, dividend payments and unrealized mark-to-market adjustments on derivative instruments.

Segment Operations

Occidental conducts its continuing operations through three operating segments: (1) oil and gas, (2) chemical and (3) midstream, marketing and other activities. The oil and gas segment explores for, develops and produces crude oil, natural gas and natural gas liquids (NGLs). The chemical segment manufactures and markets basic chemicals, vinyls and performance chemicals. The midstream, marketing and other segment gathers, processes, transports, stores and markets crude oil, natural gas, NGLs and carbon dioxide (CO 2 ) production, and generates electricity at various facilities.

Occidental changed its alignment of operating segments at the beginning of 2008. In previous years, oil and gas and a portion of the midstream, marketing and other activities were reported as a single oil and gas segment and some of the corporate-directed midstream, marketing and other activities were reported under corporate and other. In the last two years, the Dolphin Project (Dolphin) pipeline began transporting natural gas to the United Arab Emirates and Occidental acquired one common carrier pipeline system in the Permian Basin, various gas processing plants and the remaining ownership interest in a cogeneration facility. The addition of these activities to the existing midstream and marketing infrastructure caused management to realign its operating segments in order to increase its focus on its midstream, marketing and other activities on a stand-alone basis. All segment information for prior periods has been revised to retrospectively reflect the current segment reporting structure. The change to segment reporting has no effect on Occidental's reported consolidated earnings.

Significant Items Affecting Earnings

Worldwide Effective Tax Rate

Oil and gas segment earnings for the three and six months ended June 30, 2008 were $3.8 billion and $6.7 billion, respectively, compared with $1.7 billion and $3.5 billion of segment earnings for the same periods of 2007. Oil and gas segment earnings for the three and six months ended June 30, 2007 included a $23 million pre-tax gain from the sale of miscellaneous domestic oil and gas interests and an after-tax gain of $3 million from certain litigation settlements. Oil and gas earnings for the six months ended June 30, 2007 also included an after-tax gain of $412 million from the sale of Occidental's Russian joint venture interest and an after-tax gain of $109 million from certain litigation settlements. The increase in oil and gas segment earnings for the three and six months ended June 30, 2008, compared to the same periods in 2007, reflected increases from higher crude oil and natural gas prices, higher oil and gas production and lower exploration expense, partially offset by increased DD&A rates and higher operating expenses.

Occidental's realized oil price for the second quarter of 2008 was $110.12 per barrel compared to $59.11 per barrel for the second quarter of 2007. Domestic realized gas prices increased from $7.07 per MCF in the second quarter of 2007 to $9.99 per MCF for the second quarter of 2008. A change of 50 cents per million BTUs in NYMEX gas prices impacts quarterly oil and gas segment earnings by approximately $25 million, while a $1.00 per-barrel change in oil prices has a quarterly pre-tax impact of approximately $37 million.

The increase in production for the three and six months ended June 30, 2008, compared to the same periods of 2007, was primarily due to the Dolphin project which began production in the third quarter of 2007 and from the recently acquired domestic assets, partially offset by lower volumes from Argentina due to a labor dispute in May 2008 and lower production from Occidental's production sharing contracts due to the effects of higher prices.

Average production cost for the first six months of 2008 was $14.08 per BOE compared to the average annual 2007 production cost of $12.33 per BOE. The increase was a result of higher production and ad valorem taxes and higher other field operating costs.

In June 2008, Occidental signed an agreement with a third party to construct a west Texas hydrocarbon gas processing plant and pipeline infrastructure that will provide carbon dioxide (CO 2 ) for Occidental's enhanced oil recovery projects in the Permian Basin. Occidental will own and operate the new facility and pipeline system and is expected to incur capital expenditures of approximately $1.1 billion on this project over several years.

On June 23, 2008, Occidental signed the previously announced 30-year agreements with the Libyan National Oil Company (NOC) to upgrade its existing petroleum contracts. Total expected capital investment is estimated to be $5 billion over the next five years, of which Occidental's portion will be approximately $1.9 billion. NOC will contribute 50 percent, Occidental will contribute 37.5 percent and its partner will contribute 12.5 percent of the development capital. Under these contracts, Occidental and its partner will pay a signature bonus of $1 billion, of which Occidental's share, 75 percent, is $750 million, payable over a three-year period. Occidental and its partner made the first payment of $600 million, of which Occidental's share was $450 million, in June 2008. The remaining annual payments of $200 million, of which Occidental's share is $150 million, are due in each of the next two years. The new agreements allow NOC and Occidental to design and implement major field redevelopment and exploration programs in the Sirte Basin.

In February 2008, Occidental purchased from Plains Exploration & Production Company a 50-percent interest in oil and gas properties in the Permian Basin and Colorado. The purchase price of approximately $1.5 billion was paid in cash.

Chemical Segment

Chemical segment earnings for the three and six months ended June 30, 2008 were $144 million and $323 million, respectively, compared with $158 million and $295 million for the same periods of 2007. The decrease in chemical segment earnings for the three months ended June 30, 2008, compared with the same period of 2007, was due to lower volumes and margins for chlorine and polyvinyl chloride, partially offset by higher margins for caustic soda. The increase in chemical segment earnings for the six months ended June 30, 2008, compared with the same period of 2007, reflected higher margins for caustic soda, partially offset by lower margins for polyvinyl chloride.

Midstream, Marketing and Other Segment

Midstream, marketing and other segment earnings for the three and six months ended June 30, 2008 were $161 million and $284 million, compared with $25 million and $143 million for the same periods of 2007. Midstream, marketing and other segment earnings for the three and six months ended June 30, 2008, reflected higher income from Occidental's investment in the Dolphin pipeline, which became operational in the second half of 2007, and higher NGL margins in the gas processing business. Positive mark-to-market adjustments and improved margins in marketing also contributed to segment earnings during the second quarter of 2008.

Corporate

In the six month period ended June 30, 2007, Occidental recorded $167 million of pre-tax interest charges for the purchase of various debt issues in the open market and a $47 million pre-tax charge for a plant closure and related environmental remediation reserve.

In the second quarter of 2007, Occidental sold 18.6 million shares of Lyondell common stock and recorded a pre-tax gain of $284 million. Occidental sold its remaining 2.4 million shares in July 2007.

Liquidity and Capital Resources

Occidental's net cash provided by operating activities was $5.0 billion for the first six months of 2008, compared with $2.9 billion for the same period of 2007. The increase in operating cash flow in 2008, compared to 2007, reflected the effect of several drivers. The most important drivers were higher oil and natural gas prices and production. In the first six months of 2008, compared to the same period in 2007, Occidental's realized oil price was higher by 77 percent and Occidental's realized natural gas price increased 35 percent in the U.S., where approximately 70 percent of Occidental's natural gas was produced. Oil and gas production increased nearly 7 percent in the first six months of 2008, compared to the same period in 2007, mainly due to the start-up of the Dolphin Project in the second half of 2007.

Occidental's net cash used by investing activities was $4.3 billion for the first six months of 2008, compared with $833 million for the same period of 2007. The 2008 amount included cash payment for the acquisition of oil and gas interests from Plains of $1.5 billion and the first payment of the signature bonus under the Libya agreements of $450 million. The 2007 amount included cash proceeds of $485 million received from the sale of a joint venture interest in Russia, $598 million from the sale of Lyondell common stock and $250 million from the sale of short-term investments. The 2007 amount also included cash paid for the acquisitions of various oil and gas interests, a common carrier pipeline system and a gas processing plant in Texas totaling $445 million. Capital expenditures for the first six months of 2008 were $2.0 billion, including $1.6 billion for oil and gas. Capital expenditures for the first six months of 2007 were $1.6 billion, including $1.5 billion for oil and gas.

Occidental's net cash used by financing activities was $1.2 billion in the first six months of 2008, compared with $1.9 billion for the same period of 2007. The 2008 amount includes $860 million of cash paid for repurchases of 11.1 million shares of Occidental's common stock at an average price of $77.82 per share and dividend payments of $413 million. The weighted average basic shares outstanding for the six months of 2008 totaled 822.5 million and the weighted average diluted shares outstanding totaled 826.9 million. At June 30, 2008, there were 818.1 million basic shares outstanding and the diluted shares were 822.4 million. Share repurchases will continue to be funded solely from available cash from operations. The 2007 amount includes $552 million of cash paid for repurchases of Occidental's common stock, $1.1 billion of net debt payments which included the purchase of various debt issues in the open market and $371 million of dividend payments.

Available but unused lines of committed bank credit totaled approximately $1.5 billion at June 30, 2008, and cash and cash equivalents totaled $1.5 billion on the June 30, 2008 balance sheet.

At June 30, 2008, under the most restrictive covenants of certain financing agreements, Occidental's capacity for additional unsecured borrowing was approximately $60.7 billion, and the capacity for the payment of cash dividends and other distributions on, and for acquisitions of, Occidental's capital stock was approximately $23.1 billion, assuming that such dividends, distributions and acquisitions were made without incurring additional borrowing. Since year-end 2007, Occidental's long-term senior unsecured debt has been upgraded from A- to A by Standard and Poor's Corporation and from A (low) to A by Dominion Bond Rating Service.

Occidental currently expects to spend approximately $4.7 billion on its 2008 capital spending program. Although its income and cash flows are largely dependent on oil and gas prices and production, Occidental believes that cash on hand and cash generated from operations will be sufficient to fund its operating needs, capital expenditure requirements, dividend payments and anticipated acquisitions.

CONF CALL

Christopher Stavros

Thanks very much, Sheryl and good morning everyone. I'd like to welcome you to Occidental second quarter 2008 earnings conference call. Joining us on the call from Los Angeles are Dr. Ray Irani, Oxy's Chairman and CEO; Steve Chazen, our President and CFO; and Casey Olson, Oxy's President of Oil and Gas in the Eastern Hemisphere. In a moment, I'll be passing the call over to Dr. Irani who will highlight some of Oxy's recent announcements and future development opportunities. Steve Chazen will then review our second quarter and six month financial results and will also provide greater detail on our plans for increased capital spending, oil and gas drilling activity and our outlook for growing our oil and gas production through the remainder of the decade.

Our earnings press release investor relations supplemental schedules in the conference call presentation slides, which refer to Steve's remarks can be downloaded off of our website at www.oxy.com. And I'll now turn the call over to Dr. Irani. Dr. Irani, please go ahead.

Ray Irani

Thank you, Chris and good morning everybody. Today, we are very pleased to announce a record second quarter with net income of $2.3 billion, a 63% increase compared to the second quarter of 2007. Net income for the first six months of 2008 was $4.1 billion, an increase of 58% over the comparable six month period last year. These results reflect, not only, the strong oil and natural gas prices which have generally benefited the industry but also the increase production across Oxy's operations. Comparing the first six months of this year to the first six months of 2007, our total worldwide production has increased by about 7% to an average daily production of 598,000 BOE per day despite the labor dispute in Argentina during May, which is now settled.

Very shortly, Steve, will discuss our results in more detail. But first, I'd like to mention some recent developments that will enable us to further expand our worldwide production and create additional value for Oxy's stockholders. As most of you are aware, the majority of Oxy's production is in the United States which last year provides a 63% of our total production and 35% of our proven reserves. We are the leading oil producer in Permian Basin in South West Texas and South East New Mexico with production at a rate of about 200,000 barrels of oil equivalents per day. In California, we are the largest natural gas producers, the third largest oil producer, and in total our current net total production in California averages a 126,000 barrels of oil (inaudible) per day. And we have stated repeatedly, that our long-term strategy is to maintain the U.S production to be over 50% of worldwide production and to have reserves well over 50% of the total, and so we intend to strengthen Oxy's net North America position even further.

We are making a significant effort to increase North America production with strategic acquisitions and increased billing. In the coming months, we will increase our 2008 capital expenditure budget to a total of $4.7 billion. This year, we plan on building and pre-completing approximately 400 wells located in each of our key business areas throughout the United States, namely, the Permian Basin in Texas and New Mexico, the Piceance Basin in Northwest Colorado and our California operations, and, we're also increasing building activity in Argentina, Colombia, and Libya.

The primary means of increasing production is through enhance oil recovery, including carbon dioxide flooding in which Oxy is an industry leader. We are now able to apply this technology to wells, which at lower oil prices, previously, were not economical to operate with EOR. And so consequently, these wells had what I would call low laying fruits [ph]. To enhance our position in CO2 oil recovery, last month we announced that we will develop a hydrocarbon gas processing plant and related pipeline infrastructure in West Texas that would provide a new source of CO2 for EOR at our existing properties in the Permian Basin. The project is expected to add approximately 500 million barrels to our industry leading reserves in the Permian over the next five years at a very attractive cost all from assets we currently own. This additional CO2 supply will enable us to expand production in the Permian by a minimum of 50,000 barrels of oil a day within the next five years.

Adding further to our North American assets, last month we agreed to purchase a 15% interest in the Total operated Joslyn oil sands project in Alberta, Canada. As you may know, this is one of the premier oil sands project in the world with over 8 billion barrel of hydro carbon in place. We estimate recoverable reserves net to Oxy to be about 370 million barrels. We expect to spend about $2 billion over the next few years to develop these reserves in Canada with production targeted to begin in 2014.

While we are emphasizing Oxy's North American operations, we continue to pursue our long-term strategy to grow the business at a faster pace in the Middle East and to pursue opportunities that meet our stringent standards for financial return. Last month, I joined with officials from the Libyan national oil company to formally sign new 30 year agreements upgrading our existing petroleum contracts in Libya covering fields with approximately 2.5 billion barrels of the recoverable high quality oil reserves. The new contracts would increase our profits from Libya immediately and allow us to increase production for the future.

Also significant for Oxy's continued potential growth in the Middle East long-term is our pre-qualification by the government of Iraq to participate in discussions to develop a number of that country's most prolific oil fields. As you are aware, development of these massive fields is a critical engine of growth for the Iraqi national economy. Depending on the security situation in Iraq, which is fluid, there is a possibility of projects being finalized by late next year. With the first two quarters of 2008 not concluded, we are pleased with Oxy's success and growth in light of the excellent additions to our asset portfolio and promising projects and pipelines, we expect 2008 to be another outstanding year for Oxy. And I'd now like to turn the call over to Steve Chazen.

Steve Chazen

Thank you, Ray. Core results for the quarter were a record $2.3 billion, or $2.79 per diluted share, compared to $943 million, or $1.12 per diluted share, in the second quarter of 2007. Second quarter core results superseded the previous records set in the first quarter by 26%.

Here's the segment breakdown for the second quarter. Oil and gas second quarter of 2008 segment earnings were $3.8 billion, compared to about $1.7 billion for the second quarter of 2007. Oil and gas core results for the second quarter of 2007 were about $1.6 billion after excluding gains from sale of oil and gas interest last year.

The following account for the increase in oil and gas earnings between these quarters. Higher worldwide oil and gas price realizations result in an increase of $2.2 billion of earnings, over the comparable period last year. Oxy's average realized crude oil price of 2008 second quarter was $110.12 per barrel, an increase of 86% in the comparable period in 2007. Oxy's domestic average realized gas price for the quarter was $9.99 per MCF, compared with $7.07 per MCF in the second quarter of 2007.

Worldwide oil and gas production in the second quarter of 2008 averaged 588,000 barrels of oil equivalent per day. An increase of over 5% comparable to 558,000 BOE production second quarter of last year. The bulk of production proven result of 46,000 BOE a day from the Dolphin project began production in third quarter of 2007 from the recently acquired domestic assets partially offset by 15,000 barrel a day in lower volumes from Argentine operations due a the strike in the Santa Cruz province in May of this year which I will discuss later and lower production of 19,000 BOE per day caused by higher oil prices affecting our production sharing contracts.

Dolphin contribute to $101 million to after-tax income during the second quarter on sales volume of 46,000 BOE a day. Dolphin's sales volume decreased in the first quarter of 2008 due to the effect of higher prices on our production sharing contracts which have reached the cost recovery ceiling for this year. Exploration expenses, $58 million on the quarter.

Oil and gas cash production cost for six months of 2008 were $14.08 a barrel, compared with last year's cost of $12.33 a barrel. Approximately 47% of the increase relate to increased energy cost. The increase reflected higher production and ad valorem taxes in field operating cost. Additional 17% of the increase was caused by the production— effective production sharing contracts.

The back-half of the year, we are boosting our expensed work over activity by 65% nor the increased production in the current high product price environment. Chemical segment earnings for the second quarter of 2008 were a $144 million. Chemicals earned a $158 million in last year's second quarter. Midstream segment earnings for the second quarter of 2008 were a $161 million, increase of a $136 million in the second quarter of 2007 results. Improvement was due to higher pipeline income from Dolphin, higher NGO margins in the Gas Processing business, and improved margins in the marketing side. Positive mark-to-market adjustments also contributed to pipeline and storage earnings during the second quarter of 2008. The worldwide effective tax rate was 42% to the second quarter of 2008.

Now let me – now turn to Oxy's performance during the first six months. Net income was about $4.1 billion, or $5.01 per diluted share, for the first six months of 2008, compared with about 2.6 billion, or $3.11 per diluted share, for the same period last year.

Six months 2008 reported net income was another record and was 58% higher than the first six months of 2007, the former record. Income for the first six months of 2007 included 893 million net of tax, the items noted on the scheduled reconciling our net income to core results.

Capital spending for the quarter was 1.1 billion and $2 billion for the first six months. Cash flow from operations for the six months was $5 billion. We used 2 billion of the company's cash flow to fund capital expenditures, $2.3 billion for acquisitions, which included a $450 million payment for the Libya contract bonus, and $415 million to pay dividends. We used $816 million to repurchase 11.1 million common shares in the average price of $77.82 a share. These outflows decreased our $2 billion cash balance the end of last year by 500 million to 1.5 billion in June 30th. That was 1.8 billion at the end of June which is unchanged from year-end.

The weighted average basic shares outstanding for the six months were 822.5 million, and the weighted average diluted shares outstanding were 826.9 million. At June 30th, there were 818.1 million basic shares outstanding and the diluted share amount was approximately 822.4. The Board has authorized repurchase an additional 20 million in shares, which brings the total remaining share repurchase authorization to 35.2 million. Oxy's 2008 annualized return on equity was 35%, with annualized return on capital employed of 32%.

As we look ahead in the current quarter with regard to prices, $1 per barrel change in oil price impacts oil and gas quarterly earnings before income taxes by about $37 million. The sensitivity includes the impact of Dolphin. We also included as a production sharing contract price impact of approximately 300 barrels per day. Assuming a $0.50 per million BTUs in domestic gas prices is a $25 million impact on quarterly earnings before income taxes.

Additionally, we expect exploration expenses to be about $90 to $110 million for seismic and drilling for exploration programs. We expect Chemical Segment earnings in the third quarter to be similar this second quarter results, with a range of $135 to $150 million. Weakness in the construction and housing market continue to impact domestic demand, while higher feedstock of energy cost have reduced margins. These factors have been partially offset by higher cost accelerated prices and higher polyvinyl export volumes. Despite difficult economic conditions, the concerns over export opportunities over the balance of the year, we believe these range of earnings is highly likely. We expect our combined worldwide tax rate in the third quarter remain at 42%, our second quarter U.S. and foreign tax rates included in the investor relations supplement.

Now, turning to our capital spending program. We expect to increase our 2008 capital spending estimate to $4.7 billion which is an increase of $700 million or 17%. This additional money we'll use to drill 254 new wells to complete 145 additional capital workovers. Overall, this represents a 16% increase in new wells and a 12% increase in capital workovers. Scheduled detail in this increased capital activity in 2008 is included in the Investor Relations slides.

Majority of the activity will be in California where we're adding six additional drilling rigs. We will expanding our rig fleet in the Elk Hills area by five, drilling additional 100 wells, mostly in shallow zones. We've added 50 capital workovers to our activity in the second half of the year. We are doubling the exploration wells in Elk Hills area to 20. In other California areas, we're expanding existing developments.

We are also adding six drilling rigs in Latin America, where in Argentina we'll be increasing drilling to offset the impact of the recent strike, during which, we could not engage in any drilling activities. We are also carrying out an extensive workover program in Argentina. In Colombia, we are expanding our drilling in the LCI field. In the Middle East, North Africa, additional wells are being drilled in the Masila area in Yemen. In Libya, we'll be drilling four additional exploratory wells, three of which are within the new contract area. Finally, we are increasing our midstreams spending primarily for the construction of new West Texas Gas Processing Plant and related pipeline which was announced at the end of June.

As we look at future production, we expect oil and gas production to be in the range of 590 to 600,000 barrels a day during the third quarter, at approximately $125 oil price. The strike in Argentina's Santa Cruz province lasted approximately five weeks. We're folded [ph] and complete shutdown of all production and drilling activities in that region. Production is back to approximately pre-strike levels. In addition, drilling activity expect to increase in second half of the year with additional rigs that are being deployed. As a result, the Argentine production is expect to increase by about 19,000 BOE a day from second quarter of levels. With this production, we expect to be 8,000 barrels a day in the third quarter with liftings of only about 5,000 BOE a day. The new contract terms reduced the company's share of production, offset by a reduction in tax rates which results in much more favorable earnings, perhaps two to three times existing levels.

Other operations expect to have an increase in production. Shown in the investor relations slides a table which provides daily production rate forecast for the first– using the first six months of this year as a base. Production expect to be 610,000 barrels a day in the second half of the year of 2008 and total growth of 2008 will be 6%. Due to higher price that we've lost 13,000 barrels a day which is about 2% of our production versus our original initial $80 WT outlook from production sharing contracts.

Production is expect8 to be 650,000 barrels a day in 2009, and 705,000 barrels a day in 2010. Our growth rate for both years would be 8% per year. Accumulative growth rate for the three-year period is 7.3%. These estimates are all based on a WTI price of $111 consistent with the first six months of 2008. At this price level, for every $5 change in WTI production will be an inversely impacted by about 1,500 barrels a day. Recognizing the likelihood for fluctuations in project timing, expect the range of 600 to 620,000 barrels a day for the last six months of this year, 640 to 670,000 BOE per day in 2009 and 609 to 720,000 BOE a day in 2010. Turning to the individual areas, we expect an increased production by expanding our drilling program in Elk Hills and surrounding areas; in plays such as the Antelope Shale and deeper pay zones where we have had recent exploration successes. We are also planning various to enhanced oil recovery projects, such as the expansion of the successful Eastern shallow oil zone waterflood.

In Ventura County California, we have an active drilling exploitation program in a deeper pay horizon beneath an existing successful waterflood, which is also being enhanced. In a Wilmington field Long Beach, we are trying to drill several delineation wells as a follow-up to a deeper exploration success.

In the Midcontinent/Rockies area, we expect to double our gas production exit rate in Piceance Basin by the end year from the current levels of 40 million a day to 80 million a day, as a result of 2008 drilling program, and to a 100 million a day in 2009 through an expanded development program. In conjunction with the increased production, we are retrofitting our Conn Creek gas plant compression facility to double its capacity to 80 million a day by year-end and to increase it to 100 million a day next year. We currently have 40 million a day of gas transportation capacity out of the Rockies. Based on contracts and placements, we'll increase capacity to 100 million a day this year and expect to finalize agreements for additional 50 million a day by 2011.

Our joint venture with Plains is also expanding its drilling activity in the Basin, which should increase production that currently have 26 million a day to 36 million a day by the end of the year and 44 million a day next – by 2010. In addition, we are pursuing oil exploration activity in Utah, which we expect to add to our production in that region.

In the Permian Basin, our ongoing drilling program is being accelerated around several place, take advantage of the exploitation opportunity from acquisitions over the last few years. We will expand our workover activity significantly by increasing our service rigs from 155 to 175 within the next few months.

We are increasing our CO2 flood program through additional resources from Bravo Dome, together with the drilling program and workover activity, is expect to increase out production over the next two years by about 10,000 barrels a day. By 2010, we should also see a positive impact on our production additional CO2 resources in the recently announced SandRidge transactions which will enable us to increase our production by a minimum of 50,000 barrels a day within the next five years.

In Latin America, our near field exploration program in Argentina continuous to be successful. This has enabled us to identify multiple new drilling locations in addition those in our current program. We will achieve significant production growth by expanding our drilling in these areas and other areas with the addition of five – hot five high performance rigs. In Columbia, we expect that th LCI will largely offset the natural decline to Cano Limon.

Moving to the Middle East, North Africa, and Dolphin, the higher prices and success realized to date have resulted in a very rapid pace of cost recovery. Consequently, at a $111 oil price, we will realize fuel barrels production going into the future. Libya's net production will decline as a result of the new contract which took into effect at the end of the second quarter. Based on current pricing, we expect earnings to increase two or three times under the new contract. As a result of our increased capital development program, production will increase over the nine – next five years to former levels with much improved profits.

In Oman, development efforts in the giant Mukhaizna steam flood are on track and we expect to exit 2008 at the gross level approximately 50,000 barrels a day. Large scale drilling activity in the range of 200 wells per year coupled with the introduction of multiple water treatment facilities to supply the steam generators, allow us increase gross production the rate of 100,000 barrels a day by year end – by year end 2009 and a 115,000 barrels per day by year end 2010. We expect our net production in Oman to double by 2010 to around 54,000 barrels a day.

In Qatar, we have agreed with the government on a third phase development plan to the ISND field. This phase entails about 70 low risk, infill drilling projects, as well as further platform and pipeline enhancements over 2008 to '10 time frame. A third drilling rig has recently been added to perform a large number of rate enhancing workover projects in ISND, and further development drilling activity is expected at the Al-Rayyan Field beginning in late 2008 and 2009. We expect this additional development activities to increase Oxy's net production in Qatar by as much as 20% over by 2008 over 2008 – by 2010 over 2008 levels. Yemen's production reflects a base decline in the Masila field. It's important to note that this forecast is based on existing projects and does not contemplate any new projects or future acquisitions. Copy of the press release in our schedules are available on our website or through the Edgar [ph] system. We are now ready to take your questions.

SHARE THIS PAGE:  Add to Delicious Delicious  Share    Bookmark and Share



 
Icon Legend Permissions Topic Options
You can comment on this topic
Print Topic

Email Topic

16196 Views