LEASE COMMITMENTS

12 Months Ended

Dec. 31, 2022

Leases [Abstract]

LEASE COMMITMENTS

NOTE 7 - LEASE COMMITMENTS

Occidental identifies leases through its accounts payable and contract monitoring processes. Lease assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Lease assets include the lease liability, upfront payments and costs incurred to execute the lease and are amortized on a straight-line basis over the lease term. Occidental assesses the likelihood of exercising renewal, termination and purchase options to determine the lease term. Occidental uses its incremental borrowing rate at commencement date to determine the present value of lease payments. The incremental borrowing rate is the rate of interest that Occidental would pay to borrow an amount equal to the lease payments over a similar term on a collateralized basis in a similar economic environment. Certain leases include variable lease payments based on the underlying asset’s operations that are not included in the lease asset and liability.

Occidental has operating leases for oil and gas exploration and development equipment, including office space of $352 million, offshore and onshore drilling rigs of $169 million, compressors of $113 million and $60 million consisting of storage facilities and other field equipment. Operating lease terms generally range from one to eight years. Operating leases also include pipelines, rail cars, easements, aircraft and real estate of $236 million. These operating leases have contract expiration terms ranging from one to 10 years.

Occidental’s finance leases include compressors of $378 million, real estate offices of $266 million and $45 million consisting of drilling rigs, vehicles and aircraft leases.

The following table presents lease balances and their classification on the Consolidated Balance Sheets as of December 31:

millions	Balance sheet classification	2022		2021
Assets:
Operating	Operating lease assets	$	903	$	726
Finance	Property, plant and equipment	686		581
Total lease assets		$	1,589	$	1,307
Liabilities:
Current
Operating	Current operating lease liabilities	$	273	$	186
Finance	Current maturities of long-term debt	143		85
Non-current
Operating	Deferred credits and other liabilities - Operating lease liabilities	657		585
Finance	Long-term debt, net	546		504
Total lease liabilities		$	1,619	$	1,360

As of December 31, 2022, Occidental’s outstanding lease payments, excluding variable component, consisted of the following:

millions	Operating Leases (a)		Finance Leases (b)		Total
2023	$	287	$	146	$	433
2024	226		109		335
2025	108		95		203
2026	89		84		173
2027	81		66		147
Thereafter	250		277		527
Total lease payments	1,041		777		1,818
Less: Interest	(111)		(88)		(199)
Total lease liabilities	$	930	$	689	$	1,619

(a)The weighted-average remaining lease term is 5.4 years and the weighted-average discount rate is 3.84%.

(b)The weighted-average remaining lease term is 7.7 years and the weighted-average discount rate is 3.05%.

The following tables present Occidental’s total lease cost classifications for operating and finance lease liabilities for the years ended December 31:

millions
Lease cost classification (a)	2022		2021
Operating lease costs (b)
Property, plant and equipment, net	$	246	$	222
Operating expense and cost of sales	234		487
Selling, general and administrative expenses	78		109
Finance lease cost
Amortization of ROU assets	83		39
Interest on lease liabilities	20		13
Total lease cost	$	661	$	870

(a)Amounts reflected are gross before joint-interest recoveries. Lease payments are reduced by joint-interest recoveries on the income statement through the joint-interest billing process.

(b)Included short-term lease cost of $184 million and $238 million and variable lease cost of $101 million and $120 million for the years ended December 31, 2022 and 2021, respectively.

The following tables present Occidental’s total cash paid for operating and finance lease liabilities for the years ended December 31

millions	2022		2021
Operating cash flows	$	211	$	401
Investing cash flows	$	81	$	73
Financing cash flows	$	83	$	39

LEASE COMMITMENTS

NOTE 7 - LEASE COMMITMENTS

Occidental identifies leases through its accounts payable and contract monitoring processes. Lease assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Lease assets include the lease liability, upfront payments and costs incurred to execute the lease and are amortized on a straight-line basis over the lease term. Occidental assesses the likelihood of exercising renewal, termination and purchase options to determine the lease term. Occidental uses its incremental borrowing rate at commencement date to determine the present value of lease payments. The incremental borrowing rate is the rate of interest that Occidental would pay to borrow an amount equal to the lease payments over a similar term on a collateralized basis in a similar economic environment. Certain leases include variable lease payments based on the underlying asset’s operations that are not included in the lease asset and liability.

Occidental has operating leases for oil and gas exploration and development equipment, including office space of $352 million, offshore and onshore drilling rigs of $169 million, compressors of $113 million and $60 million consisting of storage facilities and other field equipment. Operating lease terms generally range from one to eight years. Operating leases also include pipelines, rail cars, easements, aircraft and real estate of $236 million. These operating leases have contract expiration terms ranging from one to 10 years.

Occidental’s finance leases include compressors of $378 million, real estate offices of $266 million and $45 million consisting of drilling rigs, vehicles and aircraft leases.

The following table presents lease balances and their classification on the Consolidated Balance Sheets as of December 31:

millions	Balance sheet classification	2022		2021
Assets:
Operating	Operating lease assets	$	903	$	726
Finance	Property, plant and equipment	686		581
Total lease assets		$	1,589	$	1,307
Liabilities:
Current
Operating	Current operating lease liabilities	$	273	$	186
Finance	Current maturities of long-term debt	143		85
Non-current
Operating	Deferred credits and other liabilities - Operating lease liabilities	657		585
Finance	Long-term debt, net	546		504
Total lease liabilities		$	1,619	$	1,360

As of December 31, 2022, Occidental’s outstanding lease payments, excluding variable component, consisted of the following:

millions	Operating Leases (a)		Finance Leases (b)		Total
2023	$	287	$	146	$	433
2024	226		109		335
2025	108		95		203
2026	89		84		173
2027	81		66		147
Thereafter	250		277		527
Total lease payments	1,041		777		1,818
Less: Interest	(111)		(88)		(199)
Total lease liabilities	$	930	$	689	$	1,619

(a)The weighted-average remaining lease term is 5.4 years and the weighted-average discount rate is 3.84%.

(b)The weighted-average remaining lease term is 7.7 years and the weighted-average discount rate is 3.05%.

The following tables present Occidental’s total lease cost classifications for operating and finance lease liabilities for the years ended December 31:

millions
Lease cost classification (a)	2022		2021
Operating lease costs (b)
Property, plant and equipment, net	$	246	$	222
Operating expense and cost of sales	234		487
Selling, general and administrative expenses	78		109
Finance lease cost
Amortization of ROU assets	83		39
Interest on lease liabilities	20		13
Total lease cost	$	661	$	870

(a)Amounts reflected are gross before joint-interest recoveries. Lease payments are reduced by joint-interest recoveries on the income statement through the joint-interest billing process.

(b)Included short-term lease cost of $184 million and $238 million and variable lease cost of $101 million and $120 million for the years ended December 31, 2022 and 2021, respectively.

The following tables present Occidental’s total cash paid for operating and finance lease liabilities for the years ended December 31

millions	2022		2021
Operating cash flows	$	211	$	401
Investing cash flows	$	81	$	73
Financing cash flows	$	83	$	39