NOTE 17SPIN-OFF OF CALIFORNIA RESOURCES CORPORATION

On November 30, 2014, the spin-off of Occidental’s California oil and gas operations and related assets was completed through the distribution of 81.3 percent of the outstanding shares of common stock of California Resources, creating an independent, publicly traded company. Occidental shareholders at the close of business on the record date of November 17, 2014 received 0.4 shares of California Resources for every share of Occidental common stock held. Fractional shares of California Resources were not distributed and any fractional shares otherwise issuable to an Occidental shareholder were sold on the open market on such shareholder’s behalf, and such shareholder received a cash payment with respect to the fractional share.

In connection with the spin-off, California Resources distributed to Occidental $4.95 billion in restricted cash and $1.15 billion in unrestricted cash. Occidental retained 71.5 million shares in California Resources, see Note 14. The cash distributions were issued using the proceeds from $5 billion in Senior Notes issued by California Resources in October 2014 and borrowings under California Resources’ $1.0 billion Term Loan Facility and $2.0 billion Revolving Credit Facility. As indicated by a private letter ruling from the Internal Revenue Service (IRS), the $4.95 billion distribution will be used solely to pay dividends, repurchase common stock, repay debt, or a combination of the foregoing, within eighteen months following the distribution. At December 31, 2014, the remaining balance of the restricted cash distribution was $4.0 billion and was included in the “Restricted cash” line on the consolidated balance sheet.

In order to effect the separation and govern the relationship with California Resources after the spin-off, Occidental and California Resources entered into a Separation and Distribution Agreement, a Stockholder’s and Registration Rights Agreement, a Tax Sharing Agreement, an Employee Matters Agreement, a Transition Services Agreement, an Area of Mutual Interest Agreement, a Confidentiality and Trade Secret Protection Agreement, and an Intellectual Property License Agreement.

The Separation and Distribution Agreement and related ancillary agreements govern the transfer of assets and other matters related to the spin-off. The Intellectual Property License Agreement governs the allocation of intellectual property rights and assets between California Resources and Occidental. The Confidentiality and Trade Secret Protection Agreement safeguards confidential and trade information related to Occidental from five years after the spin-off date. The Stockholder’s and Registration Rights Agreement governs, among other things, the registration of shares of California Resources. The Area of Mutual Interest Agreement governs the rights and obligations of both California Resources and Occidental for the exploration and development of oil and natural gas interests located within the United States excluding California.

The Tax Sharing Agreement governs the respective rights, responsibilities and obligations of California Resources and Occidental with respect to taxes, tax attributes, tax returns, tax proceedings and certain other tax matters. In addition, the Tax Sharing Agreement imposed certain restrictions on California Resources and its subsidiaries (including restrictions on share issuances, business combinations, sales of assets and similar transactions) that are designed to preserve the tax-free status of the distribution and certain related transactions. The Tax Sharing Agreement sets forth the obligations of California Resources and Occidental as to the filing of tax returns, the administration of tax proceedings and assistance and cooperation on tax matters.

The Employee Matters Agreement governs the compensation and employee benefit obligations with respect to the current and former employees and non-employee directors of California Resources and Occidental, and generally allocates liabilities and responsibilities relating to employee compensation, benefit plans and programs. The Employee Matters Agreement provides that employees of California Resources will no longer participate in benefit plans sponsored or maintained by Occidental. In addition, the Employee Matters Agreement provides that each of the parties will be responsible for their respective current employees and compensation plans for such current employees, and Occidental will be responsible for liabilities relating to former employees who left prior to the separation (other than in certain instances where a plan or program was sponsored by a company that became part of the California Resources group of companies at the separation). The Employee Matters Agreement sets forth the general principles relating to employee matters and also addresses any special circumstances during the transition period. The Employee Matters Agreement also provides that (i) the distribution does not constitute a change in control under existing plans, programs, agreements or arrangements, and (ii) the distribution and the assignment, transfer or continuation of the employment of employees with another entity will not constitute a severance event under the applicable plans, programs, agreements or arrangements.

The Transition Services Agreement sets forth the terms on which Occidental will provide California Resources, and California Resources will provide to Occidental, certain services or functions California Resources and Occidental historically have shared. Transition services include administrative, payroll, human resources, data processing, environmental health and safety, financial audit support, financial transaction support, information technology systems and various other corporate services. The agreement provides for the provision of specified transition services, generally for a period of up to 24 months on a cost or a cost-plus basis.

The following table presents the carrying value of major categories of assets and liabilities of California Resources immediately preceding the spin-off at November 30, 2014 and at December 31, 2013:

(in millions)	November 30, 2014		December 31, 2013
CURRENT ASSETS
Cash and cash equivalents	$	8	$	—
Accounts receivables, net	591		30
Inventories	73		75
Other current assets	22		125
Total current assets	694		230
Total property, plant, and equipment	23,257		21,065

Accumulated depreciation, depletion, and amortization	(8,079)		(6,974)
	15,178		14,091

LONG-TERM RECEIVABLES AND OTHER ASSETS, NET	112		35

TOTAL ASSETS	$	15,984	$	14,356

CURRENT LIABILITIES
Accounts payable	$	696	$	447
Accrued liabilities	182		253
Total current liabilities	878		700
LONG-TERM DEBT, NET	6,295		—
DEFERRED CREDITS AND OTHER LIABILITIES
Deferred domestic and foreign income taxes	3,227		2,904
Other	531		509
	3,758		3,413

TOTAL LIABILITIES	$	10,931	$	4,113

Sales and other operating revenues and income from discontinued operations related to California Resources were as follows:

For the years ended December 31, (in millions)	2014		2013		2012
Sales and other operating revenue from discontinued operations	$	3,951	$	4,285	$	4,072
Income from discontinued operations before-tax	1,205		1,531		1,265
Income tax expense	440		541		459
Income from discontinued operations	$	765	$	990	$	806