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Lease Commitments

6 Months Ended

Jun. 30, 2020


NOTE 9 - LEASE COMMITMENTS

Occidental’s operating lease agreements include leases for oil and gas exploration and development equipment, including offshore and onshore drilling rigs and storage platforms of $47 million, compressors of $133 million, storage facilities of $342 million, office space of $348 million and other field equipment of $71 million, which are recorded gross on the Consolidated Condensed Balance Sheet and in the lease cost disclosures below. Contract expiration terms generally range from two to eight years. Further, actual expenditures are netted against joint-interest recoveries on the income statement through the normal joint-interest billing process. Occidental’s leases also include pipelines, rail cars, easements, aircrafts and real estate of $219 million, which typically are not associated with joint-interest recoveries. Real estate leases have contract expiration terms ranging from one to 13 years.

Occidental’s finance lease agreements include leases for oil and gas exploration and development equipment, as well as real estate offices, compressors and field equipment of approximately $335 million.

The following table presents lease balances and their location on the Consolidated Condensed Balance Sheet at June 30, 2020, and December 31, 2019:


millions	Balance sheet location	2020		2019
Assets:
Operating	Operating lease assets	$	1,129	$	1,411
Finance	Property, plant and equipment	338		397
Total lease assets		$	1,467	$	1,808

Liabilities:
Current
Operating	Current operating lease liabilities	$	420	$	579
Finance	Current maturities of long-term debt	34		51
Non-current
Operating	Deferred credits and other liabilities - Operating lease liabilities	740		872
Finance	Long-term debt, net	301		347
Total lease liabilities		$	1,495	$	1,849

At June 30, 2020, Occidental's leases expire based on the following schedule:


	Operating		Finance
millions	Leases ^(a)		Leases ^(b)		Total
Remainder of 2020	$	239	$	17	$	256
2021	406		37		443
2022	149		34		183
2023	109		32		141
2024	87		30		117
Thereafter	405		261		666
Total lease payments	1,395		411		1,806
Less: Interest	(235)		(76)		(311)
Total lease liabilities	$	1,160	$	335	$	1,495

^(a) The weighted-average remaining lease term is 5.6 years and the weighted-average discount rate is 5.03%.

^(b) The weighted-average remaining lease term is 11.8 years and the weighted-average discount rate is 3.36%.

The following tables present Occidental's total lease cost and classifications, as well as cash paid for amounts included in the measurement of operating and finance lease liabilities:


millions	Three months ended June 30,						Six months ended June 30,
Lease cost classification ^(a)	2020		2019		2020		2019
Operating lease costs ^(b)
Property, plant and equipment, net	$	45	$	91	$	129	$	182
Cost of sales^(c)	143		61		287		138
Selling, general and administrative expenses	22		19		43		35
Finance lease cost:
Amortization of ROU assets	7		—		11		—
Interest on lease liabilities	3		—		6		—
Total lease cost	$	220	$	171	$	476	$	355

^(a)Amounts reflected are gross before joint-interest recoveries.

^(b)Includes short-term lease cost of $51 million and $70 million for the three months ended June 30, 2020, and 2019, respectively, and $105 million and $156 million for the six months ended June 30, 2020, and 2019, respectively. Includes variable lease cost of $24 million and $29 million for the three months ended June 30, 2020, and 2019, respectively, and $62 million and $60 million for the six months ended June 30, 2020, and 2019, respectively.

^(c)Operating lease costs recorded as cost of sales in oil and gas operating expenses, transportation and gathering expenses and chemical and midstream cost of sales depending on their nature.


millions	Six months ended June 30,
	2020		2019
Operating cash flows	$	270	$	95
Investing cash flows	$	49	$	44
Financing cash flows	$	12	$	—

Lease Commitments


NOTE 9 - LEASE COMMITMENTS