Lease Commitments

9 Months Ended

Sep. 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 of $56 million, compressors of $155 million, storage facilities of $297 million, office space of $417 million and other field equipment of $58 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 other real estate of $262 million, which typically are not associated with joint-interest recoveries. Office space and other 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 $325 million.

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


millions	Balance sheet location	September 30, 2020		December 31, 2019
Assets:
Operating	Operating lease assets	$	1,196	$	1,411
Finance	Property, plant and equipment	329		397
Total lease assets		$	1,525	$	1,808

Liabilities:
Current
Operating	Current operating lease liabilities	$	459	$	579
Finance	Current maturities of long-term debt	33		51
Non-current
Operating	Deferred credits and other liabilities - Operating lease liabilities	786		872
Finance	Long-term debt, net	292		347
Total lease liabilities		$	1,570	$	1,849

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


	Operating		Finance
millions	Leases (a)		Leases (b)		Total
Remainder of 2020	$	117	$	7	$	124
2021	454		35		489
2022	182		34		216
2023	110		32		142
2024	89		30		119
Thereafter	480		261		741
Total lease payments	1,432		399		1,831
Less: Interest	(187)		(74)		(261)
Total lease liabilities	$	1,245	$	325	$	1,570

(a) The weighted-average remaining lease term is 6.0 years and the weighted-average discount rate is 4.53%.

(b) The weighted-average remaining lease term is 11.8 years and the weighted-average discount rate is 3.37%.

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 September 30,				Nine months ended September 30,
Lease cost classification (a)	2020		2019		2020		2019
Operating lease costs (b)
Property, plant and equipment, net	$	24	$	139	$	153	$	321
Cost of sales	131		135		417		273
Selling, general and administrative expenses	37		26		80		61
Finance lease cost:
Amortization of ROU assets	5		5		14		11
Interest on lease liabilities	3		1		9		1
Total lease cost	$	200	$	306	$	673	$	667

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

(b) Includes short-term lease cost of $42 million and $146 million for the three and nine months ended September 30, 2020, respectively, and $139 million and $295 million for the three and nine months ended September 30, 2019, respectively. Includes variable lease cost of $11 million and $73 million for the three and nine months ended September 30, 2020, respectively, and $55 million and $115 million for the three and nine months ended September 30, 2019, respectively.


	Nine months ended September 30,
millions	2020		2019
Operating cash flows	$	401	$	164
Investing cash flows	$	59	$	83
Financing cash flows	$	15	$	11

Lease Commitments


NOTE 9 - LEASE COMMITMENTS