General

3 Months Ended

Mar. 31, 2020


NOTE 1 - GENERAL

NATURE OF OPERATIONS

In this report, "Occidental" means Occidental Petroleum Corporation, a Delaware corporation (OPC), or OPC and one or more entities in which it owns a controlling interest (subsidiaries). Occidental conducts its operations through various subsidiaries and affiliates. Occidental has made its disclosures in accordance with United States generally accepted accounting principles (GAAP) as they apply to interim reporting, and condensed or omitted, as permitted by the U.S. Securities and Exchange Commission’s rules and regulations, certain information and disclosures normally included in consolidated financial statements and the notes thereto. These unaudited consolidated condensed financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto in Occidental’s Annual Report on Form 10-K for the year ended December 31, 2019 (the 2019 Form 10-K).

In the opinion of Occidental’s management, the accompanying unaudited consolidated condensed financial statements contain all adjustments (consisting of normal recurring adjustments) necessary to fairly present Occidental’s consolidated financial position as of March 31, 2020, and December 31, 2019, and the consolidated condensed statements of operations, comprehensive income, cash flows and stockholders' equity for the three months ended March 31, 2020, and 2019. Certain data in the financial statements and notes for prior periods have been reclassified to conform to the current presentation. The income and cash flows for the periods ended March 31, 2020, and 2019, are not necessarily indicative of the income or cash flows to be expected for the full year.

THE ACQUISITION

On August 8, 2019, pursuant to the Agreement and Plan of Merger dated May 9, 2020, Occidental acquired all of the outstanding shares of Anadarko Petroleum Corporation (the Acquisition). The Acquisition added to Occidental's oil and gas portfolio, primarily in the Permian Basin, DJ Basin and Gulf of Mexico, and an interest in Western Midstream Partners, L.P. (WES). The Acquisition constituted a business combination, and under the acquisition method of accounting, the acquisition consideration is allocated to tangible and intangible assets acquired and liabilities assumed based on their fair values.

As of March 31, 2020, Occidental has substantially completed the allocation of the consideration; however, Occidental continues to gather information related to the evaluation of certain properties due to ongoing appraisal efforts. Estimates were recorded as of the Acquisition date related to these remaining items and the valuations could change as additional information is received. For the three months ended March 31, 2020 there were no material changes to the allocation presented in the 2019 Form 10-K.

Occidental expensed $148 million in acquisition-related costs for the three months ended March 31, 2020, primarily related to one-time severance costs and the accelerated vesting of certain Anadarko share-based awards for former Anadarko employees based on the terms of the underlying Acquisition agreement and existing change of control provisions within the former Anadarko employment or award agreements.

DISCONTINUED OPERATIONS

In connection with the Acquisition, Occidental entered into a purchase and sale agreement with TOTAL S.A. (Total) to sell all of the assets, liabilities, businesses, and operations of Anadarko's operations in Algeria, Ghana, Mozambique and South Africa (collectively, the Africa Assets) for $8.8 billion, subject to certain purchase price adjustments. Occidental completed the sale of the Mozambique assets in September 2019 and the South Africa assets in January 2020. The closing of the sale of the remaining Africa Assets, in Algeria and Ghana, remained conditioned on the receipt of required regulatory and government approvals, as well as other customary closing conditions. The assets and liabilities for Algeria and Ghana are presented as held for sale at March 31, 2020. The results of operations of the Africa Assets are presented as discontinued operations, see Note 3 - Dispositions and Other Transactions.

In April 2020, subsequent to communications with Algerian government officials, Occidental determined that the sale of the Algeria assets to Total will likely not be consummated. As such, beginning in the second quarter of 2020, Occidental will no longer classify the Algeria operations as a discontinued operation and will reclassify prior periods to reflect the Algerian operations as continuing operations. In addition, the carrying value of the Algeria assets will be remeasured at the lower of its fair value or the carrying amount as if depreciation, depletion and amortization (DD&A) were recorded from the date of the Acquisition. Any adjustment to reflect this remeasurement will be recorded in the second quarter of 2020.

In addition, if the Algeria asset sale is not completed, Total will not be obligated to complete the acquisition of the Ghana assets under the purchase and sale agreement; however, Occidental and Total are continuing to have discussions regarding the potential sale of the Ghana assets.

Unless otherwise indicated, information presented in the Notes to the Consolidated Condensed Financial Statements relates only to Occidental's continuing operations. Information related to discontinued operations is included in Note 3 - Dispositions and Other Transactions, and in some instances, where appropriate, is included as a separate disclosure within the individual Notes to the Consolidated Condensed Financial Statements.

SUPPLEMENTAL CASH FLOW INFORMATION

Occidental paid U.S. federal, domestic state and foreign income taxes for continuing operations of $111 million and $223 million during the three months ended March 31, 2020, and 2019, respectively. Occidental received tax refunds of $26 million and $1 million during the three months ended March 31, 2020, and 2019, respectively, related to continuing operations. Interest paid for continuing operations totaled $572 million and $114 million during the three months ended March 31, 2020, and 2019, respectively.

CASH EQUIVALENTS AND RESTRICTED CASH EQUIVALENTS

Occidental considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents or restricted cash equivalents. The cash equivalents and restricted cash equivalents balance at March 31, 2020, includes investments in government money market funds in which the carrying value approximates fair value.

The following table provides a reconciliation of cash, cash equivalents, restricted cash and restricted cash equivalents as reported at the end of the period in the Consolidated Condensed Statements of Cash Flows for the three months ended March 31, 2020, to the line items within the Consolidated Condensed Balance Sheet at March 31, 2020. There was no restricted cash or restricted cash equivalents at March 31, 2019.


millions
Cash and cash equivalents	$	2,021
Restricted cash and restricted cash equivalents	242
Cash and restricted cash included in assets held for sale	27
Restricted cash and restricted cash equivalents included in long-term receivables and other assets, net	74
Cash, cash equivalents, restricted cash, and restricted cash equivalents	$	2,364

Total restricted cash and restricted cash equivalents are primarily associated with a benefits trust for former Anadarko employees that was funded as part of the Acquisition, payments of future hard-minerals royalties conveyed, and a judicially controlled account related to a Brazilian tax dispute.

EQUITY METHOD INVESTMENT-WES

Occidental's loss of control of WES on December 31, 2019 resulted in Occidental recognizing, at fair value, an equity method investment of $5.1 billion based on the closing market price of WES. As of March 31, 2020, the carrying amount of the investment in WES was $4.8 billion. The decline in the equity method investment from December 31, 2019 to March 31, 2020 was primarily attributable to Occidental's interest in WES's approximately $400 million impairment of its goodwill. Occidental has concluded that the short-term loss in value did not meet the other-than-temporary criteria under accounting literature governing equity method investments as of March 31, 2020. However, if WES’s unit price remains significantly below its year-end 2019 unit price for a sustained period of time, Occidental would be required to reduce the carrying amount of its equity method investment in WES. WES owns gathering systems, plants and pipelines and earns revenue from fee-based and service-based contracts with Occidental and third parties which could be impacted by lower demand for oil and gas associated with the ongoing COVID-19 pandemic.

The period ended March 31, 2020, was the first quarter subsequent to the Acquisition where transactions between Occidental and WES were not eliminated upon consolidation. For the three months ended March 31, 2020 Occidental had sales of $113 million to WES and purchased $219 million and $310 million of commodities and services from WES, respectively.