Edgar Filing: OCCIDENTAL PETROLEUM CORP /DE/

form10k-2011.htm

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

R Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934		£ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 2011		For the transition period from to

Commission File Number 1-9210

Occidental Petroleum Corporation

(Exact name of registrant as specified in its charter)

State or other jurisdiction of incorporation or organization		Delaware
I.R.S. Employer Identification No.		95-4035997
Address of principal executive offices		10889 Wilshire Blvd., Los Angeles, CA
Zip Code		90024
Registrant's telephone number, including area code		(310) 208-8800

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class		Name of Each Exchange on Which Registered
9 1/4% Senior Debentures due 2019		New York Stock Exchange
Common Stock		New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes R No £

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act: (Note: Checking the box will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Exchange Act from their obligations under those Sections). Yes £ No R

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes R No £

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or such shorter period as the registrant was required to submit and post files). Yes R No £

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. R

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. (See definition of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act).

	Large Accelerated Filer	R	Accelerated Filer	£
	Non-Accelerated Filer	£	Smaller Reporting Company	£

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2). Yes £ No R

The aggregate market value of the voting common stock held by nonaffiliates of the registrant was approximately $83.2 billion, computed by reference to the closing price on the New York Stock Exchange composite tape of $104.04 per share of Common Stock on June 30, 2011. Shares of Common Stock held by each executive officer and director have been excluded from this computation in that such persons may be deemed to be affiliates. This determination of potential affiliate status is not a conclusive determination for other purposes.

At January 31, 2012, there were 811,055,632 shares of Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive Proxy Statement, filed in connection with its May 4, 2012 Annual Meeting of Stockholders, are incorporated by reference into Part III.

TABLE OF CONTENTS
	Page
Part I
Items 1 and 2	Business and Properties	3
	General	3
	Oil and Gas Operations	3
	Chemical Operations	4
	Midstream, Marketing and Other Operations	5
	Capital Expenditures	5
	Employees	5
	Environmental Regulation	5
	Available Information	5
Item 1A	Risk Factors	6
Item 1B	Unresolved Staff Comments	7
Item 3	Legal Proceedings	7
	Executive Officers	7
Part II
Item 5	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	8
Item 6	Selected Financial Data	10
Item 7 and 7A	Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A)	10
	Strategy	10
	Oil and Gas Segment	13
	Chemical Segment	18
	Midstream, Marketing and Other Segment	19
	Segment Results of Operations	20
	Significant Items Affecting Earnings	22
	Taxes	22
	Consolidated Results of Operations	22
	Consolidated Analysis of Financial Position	23
	Liquidity and Capital Resources	24
	Off-Balance-Sheet Arrangements	26
	Contractual Obligations	26
	Lawsuits, Claims and Other Contingencies	26
	Environmental Liabilities and Expenditures	27
	Foreign Investments	28
	Critical Accounting Policies and Estimates	28
	Significant Accounting and Disclosure Changes	31
	Derivative Activities and Market Risk	31
	Safe Harbor Discussion Regarding Outlook and Other Forward-Looking Data	33
Item 8	Financial Statements and Supplementary Data	34
	Management's Annual Assessment of and Report on Internal Control Over Financial Reporting	34
	Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements	34
	Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting	35
	Consolidated Balance Sheets	36
	Consolidated Statements of Income	38
	Consolidated Statements of Comprehensive Income	39
	Consolidated Statements of Stockholders' Equity	39
	Consolidated Statements of Cash Flows	40
	Notes to Consolidated Financial Statements	41
	Quarterly Financial Data (Unaudited)	69
	Supplemental Oil and Gas Information (Unaudited)	71
	Financial Statement Schedule:
	Schedule II – Valuation and Qualifying Accounts	84
Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	85
Item 9A	Controls and Procedures	85
	Disclosure Controls and Procedures	85
Part III
Item 10	Directors, Executive Officers and Corporate Governance	85
Item 11	Executive Compensation	85
Item 12	Security Ownership of Certain Beneficial Owners and Management	85
Item 13	Certain Relationships and Related Transactions and Director Independence	85
Item 14	Principal Accountant Fees and Services	85

Part IV
Item 15	Exhibits and Financial Statement Schedules	86

Part I

Items 1 And 2 Business and Properties

In this report, "Occidental" refers to 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’s executive offices are located at 10889 Wilshire Boulevard, Los Angeles, California 90024; telephone (310) 208-8800.

General

Occidental’s principal businesses consist of three segments. The oil and gas segment explores for, develops and produces oil and condensate, natural gas liquids (NGLs) and natural gas. The chemical segment (OxyChem) mainly manufactures and markets basic chemicals and vinyls. The midstream, marketing and other segment (midstream and marketing) gathers, treats, processes, transports, stores, purchases and markets oil, condensate, NGLs, natural gas, carbon dioxide (CO2) and power. It also trades around its assets, including pipelines and storage capacity, and trades oil, NGLs, gas and other commodities.

For information regarding Occidental's current developments, segments and geographic areas, see the information in the "Management’s Discussion and Analysis of Financial Condition and Results of Operations" (MD&A) section of this report and Note 16 to the Consolidated Financial Statements.

Oil and Gas Operations

General

Occidental’s domestic oil and gas operations are located mainly in California, Colorado, Kansas, Montana, New Mexico, North Dakota, Oklahoma, Texas, Utah and West Virginia. International operations are located in Bahrain, Bolivia, Colombia, Iraq, Libya, Oman, Qatar, the United Arab Emirates (UAE) and Yemen. Occidental sold its Argentine operations in February 2011 and has classified them as discontinued operations on a retrospective application basis.

Proved Reserves and Sales Volumes

The table below shows Occidental’s total oil, NGLs and natural gas proved reserves and sales volumes in 2011, 2010 and 2009. See "MD&A — Oil and Gas Segment," and the information under the caption "Supplemental Oil and Gas Information" for certain details regarding Occidental’s proved reserves, the reserves estimation process, sales and production volumes, production costs and other reserves-related data.


Comparative Oil and Gas Proved Reserves and Sales Volumes
Oil, which includes condensate, and NGLs in millions of barrels; natural gas in billions of cubic feet; barrels of oil equivalent (BOE) in millions of barrels of oil equivalent

	2011						2010						2009
Proved Reserves	Oil		NGLs	Gas	BOE	(a)	Oil		NGLs	Gas	BOE	(a)	Oil		NGLs	Gas	BOE	(a)
United States	1,526		225	3,365	2,313		1,460		237	3,034	2,203		1,385		221	2,799	2,072
International (b)	482	(c)	55	1,958	863	(c)	552	(c)	61	2,104	964	(c)	589	(d)	68	2,228	1,028	(d)
Total	2,008		280	5,323	3,176	(e)	2,012		298	5,138	3,167	(e)	1,974		289	5,027	3,100	(e)
Sales Volumes
United States	84		25	285	156		80		19	247	140		81		18	232	137
International (b)	80		4	162	111		83	(d)	5	172	117	(d)	65	(d)	4	95	85	(d)
Total	164		29	447	267		163		24	419	257		146		22	327	222

(a)	Natural gas volumes have been converted to BOE based on energy content of six thousand cubic feet (Mcf) of gas to one barrel of oil. Barrels of oil equivalence does not necessarily result in price equivalence. The price of natural gas on a barrel of oil equivalent basis is currently substantially lower than the corresponding price for oil and has been similarly lower over the recent past.
(b)	Excludes volumes from the Argentine operations sold in February 2011 and classified as discontinued operations.
(c)	Excludes the former noncontrolling interest in a Colombian subsidiary because on December 31, 2010, Occidental restructured its Colombian operations to take a direct working interest in the related assets.
(d)	Includes the noncontrolling interest in a Colombian subsidiary.
(e)	Stated on a net basis after applicable royalties. Includes proved reserves related to production-sharing contracts (PSCs) and other similar economic arrangements of 1.0 billion BOE in 2011, 1.1 billion BOE in 2010 and 1.1 billion BOE in 2009.

Competition and Sales and Marketing

As a producer of oil and condensate, NGLs and natural gas, Occidental competes with numerous other domestic and foreign private and government producers. Oil, NGLs and natural gas are commodities that are sensitive to prevailing global and, in certain cases local, current and anticipated market conditions. They are sold at current market prices or on a forward basis to refiners and other market participants. Occidental’s competitive strategy relies on increasing production through strategic acquisitions and enhanced oil recovery projects in mature and underdeveloped fields. Occidental also competes to develop and produce its worldwide oil and gas reserves cost-effectively and obtain the required labor and services.

Chemical Operations

OxyChem owns and operates manufacturing plants at 22 domestic sites in Alabama, Georgia, Illinois, Kansas, Louisiana, Michigan, New Jersey, New York, Ohio, Pennsylvania and Texas and at two international sites in Canada and Chile and has interests in a Brazilian joint venture.

In 2011, OxyChem announced plans to build a 182,500-ton-per-year membrane chlor-alkali plant in Tennessee, which it expects to begin operating in 2013.

OxyChem competes with numerous other domestic and foreign chemical producers. For every product it manufactures and markets, OxyChem’s market position is first or second in the United States and first, second or third in the world. OxyChem’s competitive strategy is to be a low-cost producer of its products in order to compete on price.

OxyChem produces the following products:

Principal Products	Major Uses	Annual Capacity
Basic Chemicals
Chlorine	Raw material for ethylene dichloride (EDC), water treatment and pharmaceuticals	4.0 million tons (a)
Caustic Soda	Pulp, paper and aluminum production	4.2 million tons (a)
Chlorinated organics	Refrigerants, silicones and pharmaceuticals	0.9 billion pounds
Potassium chemicals	Fertilizers, batteries, soaps, detergents and specialty glass	0.4 million tons
EDC	Raw material for vinyl chloride monomer (VCM)	2.4 billion pounds (a)
Chlorinated isocyanurates	Swimming pool sanitation and disinfecting products	131 million pounds
Sodium silicates	Catalysts, soaps, detergents and paint pigments	0.6 million tons
Calcium chloride	Ice melting, dust control, road stabilization and oil field services	0.7 million tons
Vinyls
VCM	Precursor for polyvinyl chloride (PVC)	6.2 billion pounds
PVC	Piping, building materials, and automotive and medical products	3.7 billion pounds
Other Chemicals
Resorcinol	Tire manufacture, wood adhesives and flame retardant synergist	50 million pounds

(a)	Includes gross capacity of a joint venture in Brazil, owned 50 percent by Occidental.

Midstream, Marketing and Other Operations

The midstream and marketing operations are conducted in the locations described below:

Location	Description	Capacity
Gas Plants
California, Colorado and Permian Basin	Occidental-operated and third-party-operated gas gathering, treating, compression and processing systems, and CO2 processing	2.6 billion cubic feet per day
Pipelines
Permian Basin and Oklahoma	Common carrier oil pipeline and storage system	365,000 barrels of oil per day 5.8 million barrels of oil storage 2,700 miles of pipeline
Colorado, New Mexico and Texas - CO2 fields and pipelines	CO2 fields and pipeline systems transporting CO2 to oil and gas producing locations	1.945 billion cubic feet per day
Dolphin Pipeline - Qatar and United Arab Emirates	Equity investment in a natural gas pipeline	3.2 billion cubic feet of natural gas per day (a)
Western and Southern United States and Canada	Equity investment in entity involved in pipeline transportation, storage, terminalling and marketing of oil, gas and related petroleum products	16,000 miles of pipeline and gathering systems (b) Storage for 100 million barrels of oil and other petroleum products and 76 billion cubic feet of natural gas (b)
Marketing and Trading
Texas, Connecticut, United Kingdom, Singapore and other	Trades around its assets and purchases, markets and trades oil, gas, power and other commodities	Not applicable
Power Generation
California, Texas and Louisiana	Occidental-operated power and steam generation facilities	1,800 megawatts per hour and 1.6 million pounds of steam per hour

(a)	Capacity requires additional gas compression and customer contracts.
(b)	Amounts are gross, including interests held by third parties.

Capital Expenditures

For information on capital expenditures, see the information under the heading "Liquidity and Capital Resources” in the MD&A section of this report.

Employees

Occidental employed approximately 11,300 people at December 31, 2011, 8,000 of whom were located in the United States. Occidental employed approximately 7,200 people in the oil and gas and midstream and marketing segments and 3,000 people in the chemical segment. An additional 1,100 people were employed in administrative and headquarters functions. Approximately 800 U.S.-based employees and 200 foreign-based employees are represented by labor unions.

Occidental has a long-standing strict policy to provide fair and equal employment opportunities to all applicants and employees.

Environmental Regulation

For environmental regulation information, including associated costs, see the information under the heading "Environmental Liabilities and Expenditures" in the MD&A section of this report and "Risk Factors."

Available Information

Occidental makes the following information available free of charge on its website at www.oxy.com:

Ø	Forms 10-K, 10-Q, 8-K and amendments to these forms as soon as reasonably practicable after they are electronically filed with, or furnished to, the Securities and Exchange Commission (SEC);

Ø	Other SEC filings, including Forms 3, 4 and 5; and

Ø	Corporate governance information, including its corporate governance guidelines, board-committee charters and Code of Business Conduct. (See Part III, Item 10, of this report for further information.)

Information contained on Occidental's web site is not part of this report.

Item 1A Risk Factors

Volatile global and local commodity pricing strongly affects Occidental’s results of operations.

Occidental’s financial results correlate closely to the prices it obtains for its products, particularly oil and gas.

Changes in consumption patterns, global and local economic conditions, inventory levels, production disruptions, the actions of OPEC, currency exchange rates, worldwide drilling and exploration activities, technological developments, weather, geophysical and technical limitations and other matters affect the supply and demand dynamics of oil and gas, which, along with the effect of changes in market perceptions, contribute to price unpredictability and volatility.

Demand and, consequently, the price obtained for Occidental’s chemical products correlate strongly to the health of the United States and global economies, as well as chemical industry expansion and contraction cycles. Occidental also depends on feedstocks and energy to produce chemicals, which are commodities subject to significant price fluctuations.

Occidental’s oil and gas business operates in highly competitive environments, which affect, among other things, its results of operations and its ability to grow production and replace reserves.

Results of operations, reserves replacement and growth in oil and gas production depend, in part, on Occidental’s ability to profitably acquire, develop or find additional reserves. Occidental has many competitors (including national oil companies), some of which are: (i) larger and better funded, (ii) may be willing to accept greater risks or (iii) have special competencies. Competition for reserves may make it more difficult to find attractive investment opportunities or require delay of reserve replacement efforts. During periods of low product prices, any cash conservation efforts may delay production growth and reserve replacement efforts.

Occidental may experience delays, cost overruns, losses or unrealized expectations in development efforts and exploration activities.

Occidental bears the risks of development delays and cost overruns due to approval delays for drilling and other permits, equipment failures, construction delays, escalating costs or competition for services, materials, supplies or labor, property or border disputes, disappointing reservoir performance and other associated risks that may affect its ability to profitably grow production, replace reserves and achieve its targeted returns.

Exploration is inherently risky. Exploration is subject to delays, misinterpretation of geologic or engineering data, unexpected geologic conditions or finding reserves of disappointing quality or quantity, which may result in significant losses.

Governmental actions and political instability may affect Occidental’s results of operations.

Occidental’s businesses are subject to the decisions of many governments and political interests. As a result, Occidental faces risks of:

Ø	new or amended laws and regulations, or interpretations of such laws and regulations, including those related to labor and employment, taxes, royalty rates, permitted production rates, drilling, manufacturing or production processes (including hydraulic fracturing), entitlements, import, export and use of equipment, use of land, water and other natural resources, safety, security and environmental protection, all of which may increase Occidental’s costs or reduce the demand for its products; and

Ø	refusal or delay in the extension or grant of exploration, development or production contracts.

Occidental may experience adverse consequences, such as risk of loss or production limitations, because certain of its foreign operations are located in countries occasionally affected by political instability, armed conflict, terrorism, insurgency, civil unrest, security problems, labor unrest, OPEC production restrictions, equipment import restrictions and sanctions. Exposure to such risks may increase if a greater percentage of Occidental’s future oil and gas production comes from foreign sources.

Occidental faces risks associated with its acquisitions and divestitures.

Occidental’s acquisition and divestiture activities carry risks that it may: (i) not fully realize anticipated benefits due to less-than-expected reserves or production or changed circumstances, such as product prices; (ii) bear unexpected integration costs or experience other integration difficulties; (iii) experience share price declines based on the market’s evaluation of the activity; or (iv) assume or retain liabilities that are greater than anticipated.

Occidental’s oil and gas reserves are based on professional judgments and may be subject to revision.

Calculations of oil and gas reserves depend on estimates concerning reservoir characteristics and recoverability, including production decline rates and operating performance, as well as capital and operating costs. If Occidental were required to make unanticipated significant negative reserve revisions, its results of operations and stock price could be adversely affected.

Concerns about climate change may affect Occidental’s operations.

There is an ongoing effort to assess and quantify the effects of climate change and the potential human influences on climate. The U.S. federal government and the states of California and New Mexico have adopted, and other jurisdictions are considering, legislation, regulations or policies that seek to control or reduce the production, use or emissions of “greenhouse gases” (GHG), to control or reduce the production or consumption of fossil fuels, and to increase the use of renewable or alternative energy sources. California’s cap-and-trade program is moving into the implementation phase. The U.S. Environmental Protection Agency has begun to regulate certain GHG emissions from both stationary and mobile sources. The uncertain outcome and timing of existing and proposed international, national and state measures make it difficult to predict their business impact. However, Occidental could face risks of delays in development projects, increases in costs and taxes and reductions in the demand for and restrictions on the use of its products as a result of ongoing GHG reduction efforts.

Occidental’s businesses may experience catastrophic events.

The occurrence of events, such as earthquakes, hurricanes, floods, well blowouts, fires, explosions, chemical releases, industrial accidents, physical or cyber attacks and other events that cause operations to cease or be curtailed, may negatively affect Occidental’s businesses and the communities in which it operates. Third-party insurance may not provide adequate coverage or Occidental may be self-insured with respect to the related losses.

Other risk factors.

Additional discussion of risks related to oil and gas reserves estimation processes, price and demand, litigation, environmental matters, foreign operations, impairments, derivatives and market risks appears under the headings: "MD&A — Oil & Gas Segment — Proved Reserves" and "— Industry Outlook," "— Chemical Segment — Industry Outlook," "— Midstream, Marketing and Other Segment — Industry Outlook," "— Consolidated Results of Operations," "— Lawsuits, Claims and Other Contingencies," "— Environmental Liabilities and Expenditures," "— Foreign Investments," "— Critical Accounting Policies and Estimates," and "— Derivative Activities and Market Risk."

Item 1B Unresolved Staff Comments

Occidental has no unresolved SEC staff comments that have been outstanding more than 180 days at December 31, 2011.

Item 3 Legal Proceedings

For information regarding legal proceedings, see the information under the caption, "Lawsuits, Claims and Other Contingencies" in the MD&A section of this report and in Note 9 to the Consolidated Financial Statements.

Executive Officers

The current term of employment of each executive officer of Occidental will expire at the May 4, 2012, organizational meeting of the Board of Directors or when a successor is selected. The following table sets forth the executive officers of Occidental:

Name	Age at February 23, 2012	Positions with Occidental and Subsidiaries and Employment History
Stephen I. Chazen	65	Chief Executive Officer since 2011 and President since 2007; 2010-2011, Chief Operating Officer; 1999-2010, Chief Financial Officer; 2005-2007, Senior Executive Vice President; Director since 2010.
Dr. Ray R. Irani	77	Executive Chairman since 2011; 1990-2011, Chairman and Chief Executive Officer; 2005-2007, President; Director since 1984.
Donald P. de Brier	71	Executive Vice President, General Counsel and Secretary since 1993.
James M. Lienert	59	Executive Vice President and Chief Financial Officer since 2010; 2006-2010, Executive Vice President — Finance and Planning.
William E. Albrecht	60	Vice President since 2008; Occidental Oil and Gas Corporation (OOGC): President — Oxy Oil & Gas, Americas since 2011; OOGC: President — Oxy Oil & Gas, USA 2008-2011; 2007-2008, Vice President, California Operations; Noble Royalties, Inc.: 2006-2007, President of Acquisitions and Divestitures.
Edward A. "Sandy" Lowe	60	Vice President since 2008; OOGC: President — Oxy Oil & Gas, International Production since 2009; 2008-2009, Executive Vice President — Oxy Oil & Gas, International Production and Engineering; 2008, Executive Vice President — Oxy Oil & Gas, Major Projects; Dolphin Energy Ltd.: 2002-2007, Executive Vice President and General Manager.
Roy Pineci	49	Vice President, Controller and Principal Accounting Officer since 2008; 2007-2008, Senior Vice President, Finance — Oil and Gas; 2005-2007, Vice President — Internal Audit.
B. Chuck Anderson	52	President of Occidental Chemical Corporation since 2006.

Part II

Item 5

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Trading Price Range and Dividends

This section incorporates by reference the quarterly financial data appearing under the caption "Quarterly Financial Data (Unaudited)" after the Notes to the Consolidated Financial Statements and the information appearing under the caption "Liquidity and Capital Resources" in the MD&A section of this report. Occidental’s common stock was held by 33,819 stockholders of record at December 31, 2011, and by approximately 475,000 additional stockholders whose shares were held for them in street name or nominee accounts. The common stock is listed and traded on the New York Stock Exchange. The quarterly financial data, which are included in this report after the Notes to the Consolidated Financial Statements, set forth the range of trading prices for the common stock as reported on the composite tape of the New York Stock Exchange and quarterly dividend information.

The quarterly dividends declared on the common stock were $0.46 for all quarters of 2011 ($1.84 for the year). On February 9, 2012, a quarterly dividend of $0.54 per share was declared on the common stock, payable on April 15, 2012 to stockholders of record on March 9, 2012. The declaration of future dividends is a business decision made by the Board of Directors from time to time, and will depend on Occidental’s financial condition and other factors deemed relevant by the Board.

Securities Authorized for Issuance under Equity Compensation Plans

All of Occidental's equity compensation plans for its employees and non-employee directors have been approved by the stockholders. The aggregate number of shares of Occidental common stock authorized for issuance under such plans was approximately 66 million as of December 31, 2011. The following is a summary of the securities reserved for issuance under such plans:

a)	Number of securities to be issued upon exercise of outstanding options, warrants and rights		b)	Weighted-average exercise price of outstanding options, warrants and rights		c)	Number of securities remaining available for future issuance under equity compensation plans (excluding securities in column (a))
782,213 (1)			$26.34			52,029,976 (2)

(1)

20,403 shares reserved for issuance pursuant to deferred stock unit awards and 1,845 shares reserved for issuance as dividend equivalents on deferred stock unit awards; and

(2)

Of these shares, depending on the type of award granted, approximately 8.8 million to 26.3 million shares were available at December 31, 2011 for grants of future awards. The number available is less than 52 million shares because a plan provision requires each share covered by an award (other than options and stock appreciation rights) to be counted as three shares against the number of shares available for future awards. Applying this provision to the remaining 52 million shares, approximately 26 million shares have been reserved for currently outstanding but unvested awards and for previously vested and issued shares. The available share number varies because options and stock appreciation rights reduce the shares remaining for future awards only by the number of shares issuable under the award (rather than three times that number). Failure of currently outstanding awards to vest would increase the shares available for future awards by three times the number of shares covered by such awards. For example, if all awards that are currently outstanding failed to vest, approximately 39 million shares would be available for grants of future awards.

Share Repurchase Activities

Occidental’s share repurchase activities for the year ended December 31, 2011, were as follows:

Period	Total Number of Shares Purchased (a)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
First Quarter 2011	129,521	$	103.07	—
Second Quarter 2011	264,560	$	112.90	—
Third Quarter 2011	2,100,000	$	77.57	2,100,000
October 1 - 31, 2011	564,772	$	77.66	420,000
November 1 - 30, 2011	180,182	$	95.69	70,000
December 1 - 31, 2011	80,000	$	88.22	80,000
Fourth Quarter 2011	824,954	$	82.62	570,000
Total 2011	3,319,035	$	82.64	2,670,000	24,485,575	(b)

(a)	Includes shares purchased from the trustee of Occidental's defined contribution savings plan that are not part of publicly announced plans or programs.
(b)	Occidental has had a 95 million share repurchase program authorized since 2008; however, the program does not obligate Occidental to acquire any specific number of shares and may be discontinued at any time.

Performance Graph

The following graph compares the yearly percentage change in Occidental’s cumulative total return on its common stock with the cumulative total return of the Standard & Poor's 500 Stock Index (S&P 500) and with that of Occidental’s peer groups over the five-year period ended on December 31, 2011. The graph assumes that $100 was invested at the beginning of the five-year period shown in the graph below in (i) Occidental common stock, (ii) in the stock of the companies in the S&P 500 and (iii) in each of the current and prior peer group companies' common stock weighted by their relative market values within the respective peer groups and that all dividends were reinvested.

In 2011, Occidental revised its current peer group due to a significant decrease in market capitalization and restructuring of a previously included entity. Prior to the revision, Occidental's peer group consisted of Anadarko Petroleum Corporation, Apache Corporation, Canadian Natural Resources Limited, Chevron Corporation, ConocoPhillips, Devon Energy Corporation, EOG Resources Inc., ExxonMobil Corporation, Hess Corporation, Marathon Oil Corporation, Royal Dutch Shell plc and Occidental. Occidental's current peer group consists of Anadarko Petroleum Corporation, Apache Corporation, Canadian Natural Resources Limited, Chevron Corporation, ConocoPhillips, Devon Energy Corporation, EOG Resources Inc., ExxonMobil Corporation, Hess Corporation, Royal Dutch Shell plc, Total S.A. and Occidental.

12/31/06		12/31/07	12/31/08	12/31/09	12/31/10	12/31/11
	$100	$160	$127	$176	$216	$210
	100	129	97	104	122	136
	100	128	96	104	119	130
	100	105	66	84	97	99

	The information provided in this Performance Graph shall not be deemed "soliciting material" or "filed" with the Securities and Exchange Commission or subject to Regulation 14A or 14C under the Securities Exchange Act of 1934 (Exchange Act), other than as provided in Item 201 to Regulation S-K under the Exchange Act, or subject to the liabilities of Section 18 of the Exchange Act and shall not be deemed incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act except to the extent Occidental specifically requests that it be treated as soliciting material or specifically incorporates it by reference.

	(1)	The cumulative total return of the peer group companies' common stock includes the cumulative total return of Occidental's common stock.

Item 6 Selected Financial Data

Five-Year Summary of Selected Financial Data
Dollar amounts in millions, except per-share amounts


As of and for the years ended December 31,	2011			2010			2009			2008			2007
results of operations (a)
Net sales	$	23,939		$	19,045		$	14,814		$	23,713		$	18,323
Income from continuing operations (b)	$	6,640		$	4,569		$	3,151		$	7,183		$	5,072
Net income attributable to common stock	$	6,771		$	4,530		$	2,915		$	6,857		$	5,400
Basic earnings per common share from continuing operations (b)	$	8.16		$	5.62		$	3.88		$	8.77		$	6.06
Basic earnings per common share (b)	$	8.32		$	5.57		$	3.59		$	8.37		$	6.45
Diluted earnings per common share (b)	$	8.32		$	5.56		$	3.58		$	8.34		$	6.42

financial position (a)
Total assets	$	60,044		$	52,432		$	44,229		$	41,537		$	36,519
Long-term debt, net	$	5,871		$	5,111		$	2,557		$	2,049		$	1,741
Stockholders’ equity	$	37,620		$	32,484		$	29,159		$	27,325		$	22,858

market capitalization (c)	$	75,992		$	79,735		$	66,050		$	48,607		$	63,573

cash flow
Operating:
Cash provided by operating activities	$	12,281		$	9,566		$	5,946		$	10,765		$	6,831
Investing:
Capital expenditures	$	(7,518	)	$	(3,940	)	$	(3,245	)	$	(4,126	)	$	(3,038	)
Cash used by all other investing activities, net	$	(2,385	) (d)	$	(5,355	)	$	(2,221	)	$	(5,314	)	$	(70	)
Financing:
Cash dividends paid	$	(1,436	)	$	(1,159	)	$	(1,063	)	$	(940	)	$	(765	)
Cash provided (used) by all other financing activities, net	$	261		$	2,242		$	30		$	(570	)	$	(2,333	)

dividends per common share	$	1.84		$	1.47		$	1.31		$	1.21		$	0.94

weighted average basic shares outstanding (thousands)		812,075			812,472			811,305			817,635			834,932

Note: Argentine operations were sold in February 2011 and have been reflected as discontinued operations for all periods.

(a)	See the MD&A section of this report and the Notes to Consolidated Financial Statements for information regarding acquisitions and dispositions, discontinued operations and other items affecting comparability.
(b)	Represent amounts attributable to common stock after deducting noncontrolling interest amounts of $72 million in 2010, $51 million in 2009, $116 million in 2008 and $75 million in 2007. There were no noncontrolling interests in 2011.
(c)	Market capitalization is calculated by multiplying the year-end total shares of common stock outstanding, net of shares held as treasury stock, by the year-end closing stock price.
(d)	Includes $2.6 billion of cash received from the sale of the Argentine operations.

Item 7 and 7A

Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A)

Strategy

General

In this report, "Occidental" refers to Occidental Petroleum Corporation (OPC), or OPC and one or more entities in which it owns a controlling interest (subsidiaries). Occidental's principal businesses consist of three segments operated by OPC's subsidiaries and affiliates. The oil and gas segment explores for, develops and produces oil and condensate, NGLs and natural gas. The chemical segment mainly manufactures and markets basic chemicals and vinyls. The midstream, marketing and other segment gathers, treats, processes, transports, stores, purchases and markets oil, condensate, NGLs, natural gas, CO2 and power. It also trades around its assets, including pipelines and storage capacity, and trades oil, NGLs, gas and other commodities.

Occidental aims to maximize total returns to stockholders using the following strategies:

Ø	Grow oil and gas production through development programs focused on large, long-lived oil and gas assets with long-term growth potential, and acquisitions;
Ø	Allocate and deploy capital with a focus on achieving returns well in excess of Occidental's cost-of-capital;
Ø	Provide consistent dividend growth; and
Ø	Maintain financial discipline and a strong balance sheet.

Occidental prefers to seek growth of oil and gas production by holding large, long-lived "legacy" oil and gas assets, like those in California and the Permian Basin, that tend to have enhanced secondary and tertiary recovery opportunities and economies of scale that lead to cost-effective production. Capital is employed to operate segment assets in a safe and environmentally sound manner. Management expects such assets to contribute substantially to earnings and cash flow after invested capital. Management currently believes its growth will be most strongly affected by the success of the development plans for its California prospects, the Permian development program, Oman and the Shah Gas Field development project in Abu Dhabi.

The primary objective of the chemical business is to generate cash flow in excess of its normal capital expenditure requirements and achieve above-cost-of-capital returns. Capital is employed to operate the chemical business in a safe and environmentally sound manner, to sustain production capacity and to focus on projects designed to improve the competitiveness of these assets. Acquisitions may be pursued when they are expected to enhance the existing core chlor-alkali and PVC businesses or take advantage of other specific opportunities.

The midstream and marketing segment is also managed to generate returns on capital employed in excess of Occidental's cost of capital. In marketing its own production and third-party purchases, Occidental attempts to maximize realized prices and margins and limit credit risk exposure. In commodities trading, Occidental seeks to generate gains using net-long positions. Capital is employed to operate segment assets in a safe and environmentally sound manner, to sustain or, where appropriate, increase operational capacity and to improve the competitiveness of Occidental's assets.

Occidental maintains financial discipline by prioritizing the uses of its cash flows in the following order:

Ø	Maintenance capital
Ø	Dividends
Ø	Growth capital
Ø	Acquisitions
Ø	Share repurchases

Oil and Gas

Segment Earnings

($ millions)

The oil and gas business seeks to increase its oil and gas production profitably and add new reserves at a pace ahead of production while minimizing costs incurred for finding and development of such reserves. The oil and gas business implements this strategy within the limits of the overall corporate strategy primarily by:

Ø	Deploying capital to fully develop areas where proved reserves exist and increase production from mature fields by applying appropriate technology and advanced reservoir-management practices;
Ø	Adding reserves through a combination of focused exploration and development programs conducted in Occidental's core areas, which are the United States, the Middle East/North Africa and Latin America; and
Ø	Maintaining a disciplined approach to acquisitions and divestitures with an emphasis on transactions at attractive prices.

Over the past several years, Occidental has strengthened its asset base within its core areas. Occidental has invested in, and disposed of, assets with the goal of raising the average performance and potential of its assets.

In the first quarter of 2011, Occidental sold its Argentine oil and gas operations for after-tax proceeds of approximately $2.6 billion. In 2011, Occidental also completed the acquisition of producing properties in South Texas for approximately $1.8 billion and acquired other domestic oil and gas assets, which included properties in California, as well as the Permian and Williston Basins for approximately $2.6 billion.

Internationally, Occidental acquired a 40-percent participating interest in the Shah Gas Field development project in Abu Dhabi, which is operated by Abu Dhabi Gas Development Company Limited (Al Hosn Gas Project), in the first quarter of 2011. Occidental partnered with the Abu Dhabi National Oil Company in a 30-year joint venture agreement for the $10 billion project, of which Occidental’s portion is approximately $4 billion. In May 2011, Occidental paid approximately $500 million for its share of pre-acquisition development expenditures. Approximately $460 million of this amount related to expenditures recorded in the midstream and marketing segment.

In addition, Occidental continues to deploy significant capital to its core operations in the Permian Basin and California, as well as in Iraq, Oman and Qatar, to increase production from these assets.

Chemical

Segment Earnings

($ millions)

OxyChem’s strategy is to be a low-cost producer in order to maximize its cash flow generation. OxyChem concentrates on the chlorovinyls chain beginning with chlorine, which is co-produced with caustic soda, both of which are marketed to third parties. In addition, chlorine, together with ethylene, is converted through a series of intermediate products into PVC. OxyChem's focus on chlorovinyls allows it to maximize the benefits of integration and take advantage of economies of scale.

Midstream, Marketing and Other

Segment Earnings

($ millions)

The midstream and marketing segment is managed to generate returns on capital invested in excess of Occidental's cost of capital. In order to generate these returns, the segment provides low-cost services to other segments and operates and invests in gas plants and oil, gas, NGLs and CO2 pipeline systems and storage facilities. It also provides similar services to third parties. In addition, the marketing and trading group markets Occidental's and third-party oil and gas, trades around the midstream and marketing segment assets and engages in commodities trading.

Key Performance Indicators

General

Occidental seeks to meet its strategic goals by continuously measuring its success in its key performance metrics, which ultimately drives total stockholder return. Occidental believes the following are the most significant metrics that maximize total stockholder return:

Ø	Dividend growth;
Ø	Production growth in the oil and gas segment;
Ø	Return on equity (ROE) and return on capital employed (ROCE).

In addition, Occidental monitors other segment-specific measures such as per-unit profit, production cost, cash flow, finding and development cost and others.

Occidental's oil and gas production has grown a cumulative 15 percent for the three-year period from 2008 through 2011. Based on the $2.16 per share annual dividend rate announced in February 2012, Occidental’s dividend rate has increased by 332 percent in 10 years. While Occidental's stockholders' equity increased by 16 percent for 2011 and 29 percent for the three-year period from 2009 through 2011, it continued to deliver above-cost-of-capital returns as follows:

	Annual 2011 (a)	Three-Year Annual Average 2009 - 2011 (b)
ROE	19.3%	15.0%
ROCE	17.2%	13.5%

(a)	The ROE and ROCE for 2011 were calculated by dividing Occidental's 2011 net income attributable to common stock (taking into account after-tax cost of capital for ROCE) by its average equity and capital employed, respectively, during 2011.
(b)	The three-year average ROE and ROCE were calculated by dividing Occidental's average net income attributable to common stock (taking into account after-tax cost of capital for ROCE) over the three-year period 2009-2011 by its average equity and capital employed, respectively, over the same period.

As a result, through December 31, 2011, Occidental’s total stockholder return has been 110 percent over the past five years and 769 percent over the past 10 years.

Debt Structure

Occidental’s year-end 2011 total debt-to-capitalization (debt and equity) ratio was 13 percent. In the first quarter of 2011, Occidental redeemed $1.4 billion of senior notes. Occidental issued $2.15 billion of senior unsecured notes in the third quarter of 2011.

Occidental has a $2.0 billion bank credit facility (2011 Credit Facility). The interest rate on any borrowings under the 2011 Credit Facility is based in part on Occidental’s senior debt ratings. Occidental’s long-term senior unsecured debt was rated A by Fitch Ratings, Standard and Poor’s Ratings and DBRS. Occidental’s long-term unsecured debt was rated A2 by Moody’s Investors Service. A security rating is not a recommendation to buy, sell or hold securities, may be subject to revision or withdrawal at any time by the assigning rating organization and should be evaluated independently of any other rating.

Oil and Gas Segment

Business Environment

Oil and gas prices are the major variables that drive the industry’s short- and intermediate-term financial performance. Average oil prices were higher in 2011 than 2010. The average daily per barrel WTI and Brent market prices, respectively, for 2011 were $95.12 and $110.90, compared with $79.53 and $79.61 in 2010. Approximately 60 percent of Occidental’s oil production tracks world oil prices, such as Brent, and 40 percent is indexed to WTI. Occidental’s average realized price for oil as a percentage of average WTI and Brent prices was approximately 103 percent and 88 percent for 2011, and 95 percent and 94 percent for 2010, respectively. Occidental's average realized price for NGLs as a percentage of average WTI price was approximately 56 percent and 57 percent for 2011 and 2010, respectively.

The average daily New York Mercantile Exchange (NYMEX) domestic natural gas price in 2011 decreased approximately 8 percent from 2010. For 2011, the price averaged $4.11 per Mcf compared with $4.49 per Mcf for 2010, and was $2.99 per Mcf as of December 31, 2011.

Prices and differentials can vary significantly, even on a short-term basis, making it impossible to predict realized prices with a reliable degree of certainty.

Operations

Domestic Interests

Occidental conducts its domestic operations through land leases, subsurface mineral rights it owns or a combination of both surface land and subsurface mineral rights it owns. Occidental's domestic oil and gas leases have a primary term ranging from one to ten years, which are extended through the end of production once production commences. Of the total 7.4 million net acres domestically where Occidental conducts its operations, 73 percent is leased, 26 percent represents owned subsurface mineral rights and for 1 percent it owns both land and the mineral rights.

Production-Sharing Contracts (PSC)

Occidental has interests in Bahrain, Iraq, Libya, Oman, Yemen and Qatar, including Dolphin, that are operated under PSCs or similar contracts. Under such contracts, Occidental receives a share of production and reserves to recover its costs and an additional share for profit. In addition, Occidental's share of production and reserves from operations in Long Beach, California, and certain contracts in Colombia are subject to contractual arrangements similar to a PSC. These contracts do not transfer any right of ownership to Occidental and reserves reported from these arrangements are based on Occidental’s economic interest as defined in the contracts. Occidental’s share of production and reserves from these contracts decreases when product prices rise and increases when prices decline. Overall, Occidental’s net economic benefit from these contracts is greater when product prices are higher.

Business Review

The following chart shows Occidental’s total volumes for the last five years:

Worldwide Sales Volumes

(thousands BOE/day)

Notes:
*	Includes average sales volumes per day of 4 thousand barrels (mbbl), 6 mbbl, 6 mbbl and 5 mbbl for 2010, 2009, 2008 and 2007, respectively, related to the noncontrolling interest in a Colombian subsidiary.
*	Excludes average sales volumes per day of 5 thousand barrels of oil equivalent (MBOE), 43 MBOE, 42 MBOE, 36 MBOE and 36 MBOE for 2011, 2010, 2009, 2008 and 2007, respectively, related to the Argentine operations sold in February 2011 and classified as discontinued operations.

United States Assets


		United States 1. Permian 2. Elk Hills and other California interests 3. Midcontinent and Other Interests

Permian

Occidental's Permian production is diversified across a large number of producing areas in the Permian Basin. The Permian Basin extends throughout southwest Texas and southeast New Mexico and is one of the largest and most active oil basins in the United States, with the entire basin accounting for approximately 16 percent of the total United States oil production. Occidental is the largest producer of oil in the Permian Basin with an approximate 15-percent net share of the total production. Occidental also produces and processes natural gas and NGLs in the Permian Basin.

In the past several years, including 2011, Occidental increased its Permian interests through various acquisitions.

Occidental’s interests in Permian offer additional development and exploitation potential. During 2011, Occidental drilled approximately 409 wells on its operated properties and participated in additional wells drilled on third-party-operated properties. Occidental also focused on improving the performance of existing wells.

Approximately 64 percent of Occidental’s Permian oil production is from fields that actively employ the application of CO2 flood technology, an enhanced oil recovery (EOR) technique. This technique involves injecting CO2 into oil reservoirs where it causes the oil to flow more freely into producing wells. These CO2 flood operations make Occidental a world leader in the application of this technology. During 2011, Occidental’s non-CO2 operations increased their development program, which accounted for more than half of the wells drilled in Permian.

Occidental's total share of production in Permian was approximately 198,000 BOE per day in 2011.

California

Occidental's California operations consist of holdings in the Elk Hills area, the Wilmington and other fields in the Los Angeles basin and interests in the Ventura, San Joaquin and Sacramento basins. Occidental's properties in California consist of more than 90 fields.

Occidental's interests in the Elk Hills area include the Elk Hills oil and gas field in the southern portion of California’s San Joaquin Valley, which it operates with an approximate 78-percent interest, along with other adjacent properties. The Elk Hills Field is the largest producer of gas and NGLs in California. During 2011, Occidental continued to invest in the Elk Hills area, performing infill drilling, field extensions and recompletions identified by advanced reservoir characterization techniques, resulting in approximately 330 new wells being drilled.

Occidental began construction of a new gas processing plant in the Elk Hills area in 2010, which is expected to be completed in 2012.

Occidental holds approximately 1.7 million acres in California, the vast majority of which are net fee mineral interests. As a result, Occidental has a substantial inventory of properties available for future development and exploitation in conventional areas, as well as unconventional prospects, such as shale. In all of California during 2011, Occidental drilled approximately 675 wells and performed approximately 500 workovers.

Occidental's share of production and reserves from its operations in the Wilmington Field is subject to contractual arrangements similar to a PSC.

Occidental's total share of production in California was approximately 138,000 BOE per day in 2011.

Midcontinent and Other

The Midcontinent properties, which include interests in the Hugoton Field and the Piceance Basin, are located in Colorado, Utah, Kansas and Oklahoma. Occidental holds over 2.4 million net acres in the midcontinent region, which includes 1.4 million acres in a large concentration of gas reserves and production and royalty interests in the Hugoton area located in Kansas and Oklahoma, and approximately 1.0 million acres in Colorado and Utah.

Other interests are located in North Dakota, Montana, South Texas and West Virginia. In January 2011, Occidental completed the acquisition of producing properties in South Texas. Occidental holds approximately 138,000 net acres in South Texas. Occidental also holds approximately 277,000 net acres of oil producing and prospective unconventional properties in North Dakota’s Williston Basin, including acreage in the Bakken and Three Forks formations. A substantial portion of this acreage was purchased in 2011 and 2010. In addition, Occidental holds 229,000 net acres in West Virginia.

In Midcontinent and Other, Occidental drilled approximately 270 wells and produced approximately 92,000 BOE per day in 2011. Occidental expects to reduce drilling activity for gas wells in 2012.

Middle East/North Africa Assets


		Middle East/North Africa 1. Bahrain 2. Iraq 3. Libya 4. Oman 5. Qatar 6. United Arab Emirates 7. Yemen

Bahrain

In 2009, Occidental and its partners began operating the Bahrain Field under a 20-year development and production sharing agreement (DPSA). Occidental has a 48-percent working interest in the joint venture. Since handover of operations, Occidental and its partners have increased gross gas production capacity more than 40 percent from an initial level of 1.5 billion cubic feet per day to over 2.1 billion cubic feet per day and increased gross oil production by 60 percent from 26,000 barrels per day to 42,000 barrels per day. Occidental plans to continue growing gross gas production capacity to over 2.3 billion cubic feet per day and gross oil production to over 75,000 barrels. Occidental's share of production from Bahrain during 2011 was approximately 173 million cubic feet (MMcf) of gas and 4,000 barrels of oil per day.

Iraq

In 2010, Occidental and its partners signed a 20-year contract with the South Oil Company of Iraq to develop the Zubair Field. Occidental has a 23.44-percent interest in this contract, which entitles Occidental to receive oil for cost recovery and a remuneration fee, as a result of having achieved an initial gross production threshold of approximately 180,000 BOE per day in 2010. Occidental and its partners plan to increase production to a contractually targeted production level of 1.2 million BOE per day by 2016 and maintain this level of production for seven years. Occidental's share of production in Iraq was approximately 7,000 BOE per day in 2011.

Libya

Occidental, under agreements with the Libyan National Oil Corporation, participates in Sirte Basin producing operations. These agreements continue through 2032.

In early 2011, Occidental ceased exploration activities and its participation in production operations in Libya due to civil unrest in the country and United States sanctions. The United States government lifted its sanctions in September 2011 and Occidental resumed its participation in the producing operations at that time. Occidental Libya’s 2011 and 2010 production volumes were approximately 4,000 and 13,000 BOE per day, representing less than 1 percent and 2 percent, respectively, of Occidental’s worldwide volumes.

Oman

In Oman, Occidental is the operator of Block 9 and Block 27, with a 65-percent working interest in each block; Block 53, with a 45-percent working interest; and Block 62, with a 48-percent working interest.

Occidental and its partners signed a 30-year PSC for the Mukhaizna Field (Block 53) with the Government of Oman in 2005, pursuant to which Occidental assumed operations of the field. By the end of 2011, Occidental had drilled over 1,400 new wells and continued implementation of a major steam flood project. As of year-end 2011, the exit rate of gross daily production was over 16 times higher than the production rate in September 2005, reaching 124,000 BOE per day. Occidental plans to steadily increase production through continued expansion of the steam flood project.

The term for Block 9 is through December 2015, with a potential 10-year extension. The term for Block 27 is through September 2035.

In 2008, Occidental was awarded a 20-year contract for Block 62, subject to declaration of commerciality, where it is pursuing development and exploration opportunities targeting gas and condensate resources.

Occidental's share of production from the Oman properties was approximately 76,000 BOE per day in 2011.

Qatar

Occidental operates three offshore projects in Qatar: Idd El Shargi North Dome (ISND) and Idd El Shargi South Dome (ISSD), with a 100-percent working interest in each project, and Al Rayyan (Block 12), with a 92.5-percent working interest. The terms for ISND, ISSD and Block 12 extend through 2019, 2022 and 2017, respectively.

In 2011, Occidental received approval from the Government of Qatar for the fourth phase of field development of the ISND Field, focusing on continued development of mature reservoirs while further delineating and developing less mature reservoirs. Drilling under this phase is planned to be completed in 2012. Occidental also received approval for field development plans for ISSD and Al Rayyan, which would include additional drilling through 2013.

Occidental also has an investment in Dolphin, which was acquired in 2002, consisting of two separate economic interests through which Occidental owns: (i) a 24.5-percent undivided interest in the operations under a DPSA with the Government of Qatar to develop and produce natural gas and NGLs in Qatar’s North Field through mid-2032, with a provision to request a five-year extension; and (ii) a 24.5-percent interest in the stock of Dolphin Energy Limited (Dolphin Energy), which is discussed further in "Midstream, Marketing and Other Segment – Pipeline Transportation."

Occidental's share of production from all of its operations in Qatar was approximately 126,000 BOE per day in 2011.

United Arab Emirates

In the first quarter of 2011, Occidental acquired a 40-percent participating interest in the Al Hosn Gas Project. Occidental partnered with the Abu Dhabi National Oil Company in a 30-year joint venture agreement for the project. The project is anticipated to produce over 500 MMcf per day of natural gas, of which Occidental’s net share would be over 200 MMcf per day. In addition, the project is expected to produce over 50,000 barrels per day of NGLs and condensates, of which Occidental’s net share would be over 20,000 barrels per day. Occidental’s 2011 capital expenditures for this project were approximately $460 million, with an additional $500 million paid for Occidental's share of pre-acquisition development expenditures. A substantial portion of the total expenditures to date have been incurred in connection with plants and facilities, which are included in the midstream and marketing segment. As the development project progresses, higher portions of the capital will be spent to drill wells, which will be reflected in the oil and gas segment. Occidental believes that its share of remaining capital until production from the field begins (expected to be in 2014), will be approximately $3 billion.

Occidental conducts a majority of its Middle East business development activities through its office in Abu Dhabi, which also provides various support functions for Occidental’s Middle East/North Africa oil and gas operations.

Yemen

Occidental owns contractual interests in two producing blocks in Yemen, Block 10 East Shabwa Field with a 40.4-percent interest that includes an 11.8-percent interest held in an unconsolidated entity, and Block S-1 An Nagyah Field, which is an Occidental-operated block with a 75-percent working interest. Occidental’s working interests in the Block 14 Masila Field expired in December 2011.

Occidental's share of production from the Yemen properties was approximately 27,000 BOE per day in 2011, which included nearly 11,000 BOE per day from the Masila Field.

Latin America Assets

Latin America

1. Bolivia

2. Colombia

Bolivia

Occidental holds working interests in four blocks located in the Tarija, Chuquisaca and Santa Cruz regions of Bolivia.

Colombia

Occidental is the operator under four contracts within the Llanos Norte Basin: the Cravo Norte, Rondón, Cosecha and Chipirón association contracts. Occidental’s working interests under these four contracts are 39 percent, 44 percent, 53 percent and 61 percent, respectively. Occidental also holds a 48-percent working interest in the La Cira-Infantas Field, which is located in the Middle-Magdalena Basin. Occidental's share of 2011 production from its Colombian operations was approximately 29,000 BOE per day.

Proved Reserves

For further information regarding Occidental's proved reserves, see "Supplemental Oil and Gas Information" following the "Financial Statements."

Occidental had proved reserves at year-end 2011 of 3,176 million BOE, as compared with the year-end 2010 amount of 3,167 million BOE. Proved reserves at year-end 2011 and 2010 consisted of, respectively, 63 percent and 64 percent oil, 9 percent and 9 percent NGLs and 28 percent and 27 percent natural gas. Proved developed reserves represented approximately 76 percent of Occidental’s total proved reserves at year-end 2011 and 2010.

Proved Reserve Additions

Occidental's total proved reserve additions from all sources were 276 million BOE in 2011. The total additions were as follows:

In millions of BOE
Improved recovery	264
Extensions and discoveries	25
Purchases	201
Revisions of previous estimates	(214	)
Total additions	276

Occidental's ability to add reserves, other than through purchases, depends on the success of improved recovery, extension and discovery projects, each of which depends on reservoir characteristics, technology improvements, oil and natural gas prices, as well as capital and operating costs. Many of these factors are outside of management’s control, and will affect whether or not these historical sources of proved reserve additions continue at similar levels.

Revisions of Previous Estimates

Revisions can include upward or downward changes to previous proved reserves estimates for existing fields due to the evaluation of existing or new geologic, production decline or operating performance data, or changes in prices and costs that are used in reserves estimations. In 2011, revisions of previous estimates provided a net 214 million BOE reduction to reserves.

Oil price changes affect proved reserves recorded by Occidental. For example, when oil prices increase, less oil volume is required to recover costs under PSCs, which results in a reduction of Occidental’s share of proved reserves. Conversely, when oil prices drop, Occidental’s share of proved reserves increases for these PSCs. Oil and natural gas price changes also affect the economic lives of proved reserves, primarily in domestic properties, in a manner offsetting these PSC effects, because higher prices result in longer reservoir lives and more reserves.

In 2011, Occidental’s domestic reserves had a positive price-related revision as a result of higher oil prices, net of negative revisions in certain properties resulting from lower gas prices during the year. International reserves had negative price adjustments due to high oil prices. Price adjustments for the company as a whole were negative. If the currently prevailing natural gas prices stay at depressed levels for an extended period, domestic gas reserves could experience a further negative price revision at the end of 2012.

Other revisions outside the United States were largely in Libya and Iraq. In Libya, the revision was the result of the current situation in the country where development plans for proved undeveloped reserves have not yet been put into effect. In Iraq, a slower than

expected pace of the development resulted in a revision to the proved undeveloped reserves. In both countries, Occidental expects that these reserves will be reinstated as the development plans progress. Other revisions internationally were caused by the performance of previously drilled wells.

In the United States, other revisions were caused by performance issues related to wells drilled in prior periods. The revisions involved several properties where wells experienced higher than expected decline rates. Sizable portions of these revisions were transferred from the proved category to probable, possible and contingent categories.

Apart from the effects of product prices, Occidental believes its approach to interpreting technical data regarding proved oil and gas reserves makes it more likely that future proved reserve revisions will be positive rather than negative.

Improved Recovery

In 2011, Occidental added proved reserves of 264 million BOE from improved recovery through its EOR and infill drilling activities. Generally, the improved recovery additions in 2011 were associated with the continued development of properties in California, Permian, Williston, Oman, Colombia and Bahrain. These properties are generally characterized by the deployment of secondary and tertiary development projects, largely employing application of waterflood (secondary), steamflood (tertiary) or CO2 (secondary or tertiary) injection. These development projects are often applied through existing wells, though additional drilling may be required to fully optimize the development configuration. Waterflooding is the technique of injecting water into the formation to displace the oil to the offsetting oil production wells. Steamflooding is the technique of injecting steam into the formation to lower oil viscosity so that it flows more freely into producing wells. This process is applied in areas where the oil is too viscous to be effectively moved with water. CO2 flooding involves injecting CO2 into oil reservoirs where it causes the oil to flow more freely into producing wells. In addition, some improved recovery comes from drilling infill wells that allow recovery of reserves that would not be recoverable from existing wells.

Extensions and Discoveries

Occidental also obtained reserve additions from extensions and discoveries, which are dependent on successful exploration and exploitation programs. In 2011, extensions and discoveries added 25 million BOE.

Purchases and Divestitures of Proved Reserves

Occidental continues to add reserves through acquisitions when properties are available at prices it deems reasonable. As market conditions change, the available supply of properties may increase or decrease accordingly. In 2011, Occidental added 201 million BOE through purchases of proved reserves largely consisting of several domestic acquisitions in South Texas, the Permian Basin and California.

Proved Undeveloped Reserves

In 2011, Occidental had proved undeveloped reserves additions of 307 million BOE from improved recovery, extensions and discoveries and purchases. Of the total additions, 186 million BOE represented additions from improved recovery, primarily in California, Permian, Williston, Oman, Colombia, Bahrain and Qatar. Occidental added 106 million BOE through purchases of proved undeveloped reserves domestically in South Texas, the Permian Basin and California. These proved undeveloped reserve additions were offset by reserves transfers of 178 million BOE to the proved developed category as a result of the 2011 development programs. Occidental incurred approximately $2.7 billion in 2011 to convert proved undeveloped reserves to proved developed reserves. Permian, California, Midcontinent, Oman, Qatar and Bahrain accounted for approximately 89 percent of the reserves transfers from proved undeveloped to proved developed in 2011. Costs to develop proved undeveloped reserves have increased over time and costs of transfers to proved developed reserves may continue to increase.

Reserves Evaluation and Review Process

Occidental’s estimates of proved reserves and associated future net cash flows as of December 31, 2011, were made by Occidental’s technical personnel and are the responsibility of management. The estimation of proved reserves is based on the requirement of reasonable certainty of economic producibility and funding commitments by Occidental toward the development of reserves. This process involves reservoir engineers, geoscientists, planning engineers and financial analysts. As part of the proved reserves estimation process, all reserves volumes are estimated by a forecast of production rates, operating costs and capital expenditures. Price differentials between benchmark prices (the unweighted arithmetic average of the first-day-of-the-month price for each month within the year) and realized prices and specifics of each operating agreement are then used to estimate the net reserves. Production rate forecasts are derived by a number of methods, including estimates from decline curve analysis, type-curve analysis, material balance calculations that take into account the volumes of substances replacing the volumes produced and associated reservoir pressure changes, seismic analysis and computer simulation of the reservoir performance. These field-tested technologies have demonstrated reasonably certain results with consistency and repeatability in the formation being evaluated or in an analogous formation. Operating and capital costs are forecast using the current cost environment applied to expectations of future operating and development activities.

Net proved developed reserves are those volumes that are expected to be recovered through existing wells with existing equipment and operating methods for which the incremental cost of any additional required investment is relatively minor. Net proved undeveloped reserves are those volumes that are expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required for recompletion.

The current Senior Director of Worldwide Reserves and Reservoir Engineering is responsible for overseeing the preparation of reserve estimates, in compliance with SEC rules and regulations, including the internal audit and review of Occidental's oil and gas reserves data. The Senior Director has over 30 years of experience in the upstream sector of the exploration and production

business, and has held various assignments in North America, Asia and Europe. He is a three-time past Chair of the Society of Petroleum Engineers Oil and Gas Reserves Committee. He is an American Association of Petroleum Geologists (AAPG) Certified Petroleum Geologist and currently serves on the AAPG Committee on Resource Evaluation. He is a member of the Society of Petroleum Evaluation Engineers, the Colorado School of Mines Potential Gas Committee and the UNECE Expert Group on Resource Classification. He is also an active member of the Joint Committee on Reserves Evaluator Training (JCORET). The Senior Director has Bachelor of Science and Master of Science degrees in geology from Emory University in Atlanta.

Occidental has a Corporate Reserves Review Committee (Reserves Committee) consisting of senior corporate officers to monitor, review and approve Occidental's oil and gas reserves. The Reserves Committee reports to the Audit Committee of Occidental's Board of Directors during the year. Since 2003, Occidental has retained Ryder Scott Company, L.P. (Ryder Scott), independent petroleum engineering consultants, to review its annual oil and gas reserve estimation processes.

In 2011, Ryder Scott conducted a process review of Occidental’s methods and analytical procedures utilized by Occidental’s engineering and geological staff for estimating the proved reserves volumes, preparing the economic evaluations and determining the reserves classifications as of December 31, 2011, in accordance with the U.S. Securities and Exchange Commission (SEC) regulatory standards. Ryder Scott reviewed the specific application of such methods and procedures for selected oil and gas properties considered to be a valid representation of Occidental’s 2011 year-end total proved reserves portfolio. In 2011, Ryder Scott reviewed approximately 20 percent of Occidental’s proved oil and gas reserves. Since being engaged in 2003, Ryder Scott has reviewed the specific application of Occidental’s reserve estimation methods and procedures for approximately 76 percent of Occidental’s existing proved oil and gas reserves. Management retains Ryder Scott to provide objective third-party input on its methods and procedures and to gather industry information applicable to Occidental’s reserve estimation and reporting process. Ryder Scott has not been engaged to render an opinion as to the reasonableness of reserves quantities reported by Occidental. Occidental has filed Ryder Scott's independent report as an exhibit to this Form 10-K.

Based on its reviews, including the data, technical processes and interpretations presented by Occidental, Ryder Scott has concluded that the overall procedures and methodologies Occidental utilized in estimating the proved reserves volumes for the reviewed properties are appropriate for the purpose thereof, and comply with current SEC regulations.

Industry Outlook

The petroleum industry is highly competitive and subject to significant volatility due to numerous current and anticipated market conditions. The WTI and Brent oil price indexes generally increased throughout 2011, settling at $98.83 per barrel and $107.38 per barrel as of December 31, 2011.

Oil prices will continue to be affected by (i) global supply and demand, which is generally a function of global economic conditions, inventory levels, production disruptions, currency exchange rates, and the actions of OPEC, other significant producers and governments, and (ii) the effect of changes in these variables on market perceptions. These factors make it impossible to predict the future direction of oil prices reliably. Occidental continues to adjust to economic conditions by adjusting capital expenditures in line with current economic conditions with the goal of keeping returns well above its cost of capital.

NGL prices are related to the supply and demand for the components of products making up these liquids. Some of them more typically correlate to the price of oil while others are affected by natural gas prices as well as the demand for certain chemical products for which they are used as feedstock. In addition, infrastructure constraints magnify the pricing volatility from region to region. The volatility in all of these markets makes it impossible to predict NGL prices reliably.

Domestic natural gas prices and local differentials are strongly affected by local supply and demand fundamentals, as well as government regulations and availability of transportation capacity from producing areas. These and other factors can cause prices to be volatile, making it impossible to forecast gas prices reliably.

Chemical Segment

Business Environment

Chemical segment earnings increased in 2011 as certain economies continued to recover from the global economic downturn. Higher margins across most product lines were achieved as prices more than offset higher feedstock costs.

Business Review

Basic Chemicals

During 2011, United States and international manufacturing sectors continued to recover from the global economic downturn resulting in strong demand and pricing for basic chemical products. Industry chlorine production increased by 2 percent, compared to 2010, as chlorine demand in emerging economies continued to outpace United States demand. Exports of downstream chlorine derivatives remained competitive in offshore markets as a result of the North America feedstock cost advantages, which are driven mostly by natural gas prices. Pricing for liquid caustic soda improved each quarter of 2011 partly as a result of major global events, including the devastating tsunami in Japan, which led to an increase in exports of 7 percent over 2010. Chlorine prices remained steady throughout the year, and began to decrease during the fourth quarter due to seasonal slowdowns, which negatively impacted overall chlorine demand.

Vinyls

Year-over-year domestic vinyls demand fell 3.6 percent due to the persistent low demand from the housing and commercial construction markets. Consequently, domestic operating rates in 2011 were down 1 percent compared to 2010, and margins also decreased in 2011. In addition, ethylene costs, which contribute significantly to feedstock costs, increased

globally in 2011. However, North American-produced ethylene continues to cost significantly less compared to costs in Europe and Asia, giving North American vinyl products an advantage in global markets. As a result, Occidental's vinyl exports in 2011 were 19 percent higher compared to 2010.

Industry Outlook

Future performance will depend on the recovery of domestic housing and construction markets, positive global economic activity, and the cost competitiveness of United States feedstock and energy pricing compared to global markets.

Basic Chemicals

Occidental expects that if the United States housing, automotive and durable goods sectors continue to improve, it should experience higher domestic demand for basic chemical products in 2012. With the stronger demand, chlorine and caustic soda margins would be expected to generally remain at 2011 levels. The continued competitiveness of downstream chlorine derivatives in global markets is contingent on United States feedstock costs remaining favorable compared to other global markets.

Vinyls

If the United States economy continues to improve, domestic demand for vinyls and operating rates would also be expected to improve in 2012, which should result in better domestic margins. Occidental expects export demand to remain firm, but for margins to be challenged as North American ethylene producers operate near capacity reducing the United States cost advantages compared to other vinyl producing regions of the world.

Midstream, Marketing and Other Segment

Business Environment

Midstream and marketing segment earnings are affected by the performance of its marketing and trading businesses and its processing and transportation assets. The marketing and trading businesses earn margins from trading oil, gas and other commodities, marketing the oil and gas segment's products and storage activity. Earnings related to processing and transportation are affected by the volumes that are processed at, and transported through, the segment's plants and pipelines, as well as the margins obtained on related services.

The midstream and marketing segment earnings were modestly lower in 2011, compared to 2010, reflecting lower marketing and trading income, partially offset by higher pipeline income.

Business Review

Oil and Gas Marketing and Trading

The marketing and trading group markets substantially all of Occidental’s oil, NGLs and gas production, trades around the midstream and marketing segment assets and engages in commodities trading. Occidental’s third-party marketing and trading activities focus on purchasing oil, NGLs and gas for resale from partners, producers and third parties whose oil and gas supply is located near its midstream and marketing assets, such as pipelines, processing plants and storage facilities. These purchases allow Occidental to aggregate volumes to maximize prices received for Occidental’s production. In addition, Occidental’s Phibro trading unit's strategy is to profit from market price changes. Marketing and trading earnings are affected primarily by commodity price changes and margins in oil and gas transportation and storage programs. In 2011, the marketing and trading group earnings decreased due to lower trading results.

Gas Processing Plants and CO2 Fields and Facilities

Occidental processes its and third-party domestic wet gas to extract NGLs and other gas by-products, including CO2, and delivers dry gas to pipelines. Margins primarily result from the difference between inlet costs of wet gas and market prices for NGLs. Occidental’s 2011 earnings from these operations improved compared to 2010, due to higher gas processing volumes and higher NGL prices.

Pipeline Transportation

Margin and cash flow from pipeline transportation operations mainly reflect volumes shipped. Dolphin Energy owns and operates a 230-mile-long, 48-inch diameter natural gas pipeline (Dolphin Pipeline), which transports dry natural gas from Qatar to the UAE. Through its 24.5-percent interest in Dolphin Energy, the Dolphin Pipeline investment contributes significantly to Occidental's pipeline transportation results. The Dolphin Pipeline has a capacity to transport up to 3.2 Bcf of natural gas per day and currently transports approximately 2.3 Bcf per day. Demand for natural gas in the UAE and Oman has grown and Dolphin Energy’s customers have requested additional gas supplies. To help fulfill this growing demand, Dolphin Energy will continue to pursue an agreement to secure an additional supply of gas from Qatar.

Occidental owns an oil-gathering, common carrier pipeline and storage system with approximately 2,700 miles of pipelines from southeast New Mexico across the Permian Basin of southwest Texas to Cushing, Oklahoma. The system has a current throughput capacity of about 365,000 barrels per day, 5.8 million barrels of active storage capability as well as 64 truck unloading facilities at various points along the system, which allow for additional volumes to be delivered into the pipeline.

Occidental owns approximately 35 percent of the General Partner of Plains All-American Pipeline, L.P. (Plains Pipeline), an oil and gas pipeline transportation, storage, terminalling and marketing entity.

Occidental’s 2011 pipeline transportation earnings improved due to better revenues and margins from all of these assets.

Power Generation Facilities

Earnings from power generation facilities are derived from the sales of steam and power to affiliates and third parties. Occidental’s 2011 earnings from these facilities were flat compared to 2010. On December 31, 2010, Occidental completed its acquisition of the remaining 50-percent joint-venture interest in Elk Hills Power, LLC (EHP), a limited liability company that operates a gas-fired power-generation plant in California, bringing Occidental's total ownership to 100 percent.

Industry Outlook

The pipeline transportation and power generation businesses are expected to remain relatively stable. The gas processing plant operations could have volatile results depending mostly on NGL prices, which cannot be predicted. Generally, higher NGL prices result in higher profitability. The trading and marketing business is inherently volatile. Based on its framework of controls and risk management systems, Occidental does not expect the volatility of these operations to be significant to the company as a whole.

Segment Results of Operations

Segment earnings exclude income taxes, interest income, interest expense, environmental remediation expenses, unallocated corporate expenses and discontinued operations, but include gains and losses from dispositions of segment assets and income from the segments' equity investments. Seasonality is not a primary driver of changes in Occidental's consolidated quarterly earnings during the year.

The following table sets forth the sales and earnings of each operating segment and corporate items:

In millions, except per share amounts
For the years ended December 31,	2011			2010			2009
net sales (a)
Oil and Gas	$	18,419		$	14,276		$	11,009
Chemical		4,815			4,016			3,225
Midstream, Marketing and Other		1,447			1,471			1,016
Eliminations (a)		(742	)		(718	)		(436	)
	$	23,939		$	19,045		$	14,814
earnings
Oil and Gas (b,c)	$	10,241		$	7,151		$	5,097
Chemical		861			438			389
Midstream, Marketing and Other		448			472			235
		11,550			8,061			5,721
Unallocated corporate items
Interest expense, net (d)		(284	)		(93	)		(102	)
Income taxes (e)		(4,201	)		(2,995	)		(2,063	)
Other (f)		(425	)		(404	)		(405	)
Income from continuing operations (b)		6,640			4,569			3,151
Discontinued operations, net (g)		131			(39	)		(236	)
Net Income (b)	$	6,771		$	4,530		$	2,915

Basic Earnings per Common Share	$	8.32		$	5.57		$	3.59

(a)	Intersegment sales eliminate upon consolidation and are generally made at prices approximately equal to those that the selling entity would be able to obtain in third-party transactions.
(b)	Oil and gas segment earnings, income from continuing operations and net income represent amounts attributable to common stock after deducting noncontrolling interest amounts of $72 million and $51 million for 2010 and 2009, respectively.
(c)	The 2011 amount includes pre-tax charges of $35 million related to exploration write-offs in Libya and $29 million related to a Colombian net worth tax, and a pre-tax gain for sale of an interest in a Colombian pipeline of $22 million. The 2010 amount includes a $275 million pre-tax charge for asset impairments, predominately of gas properties in the Rocky Mountain region. The 2009 amount includes an $8 million pre-tax charge for the termination of rig contracts.
(d)	The 2011 amount includes a pre-tax charge of $163 million related to the premium on debt extinguishment.
(e)	The 2011 amount includes a net $21 million charge for out-of-period state income taxes. The 2010 amount includes an $80 million benefit related to foreign tax credit carryforwards. The 2009 amount includes tax benefits of $87 million resulting from relinquishment of exploration properties.
(f)	The 2009 amount includes a $40 million pre-tax charge related to severance and a $15 million pre-tax charge for railcar leases.
(g)	The 2011 amount includes a $144 million after-tax gain from the sale of the Argentine operations. The 2009 amount includes an after-tax charge of $111 million for asset impairments of certain Argentine producing properties.

Oil and Gas

Dollars in millions, except as indicated	2011		2010		2009
Segment Sales	$	18,419	$	14,276	$	11,009
Segment Earnings	$	10,241	$	7,151	$	5,097

The following tables set forth the production and sales volumes of oil, NGLs and natural gas per day for each of the three years in the period ended December 31, 2011. The differences between the production and sales volumes per day are generally due to the timing of shipments at Occidental’s international locations where product is loaded onto tankers.


Production per Day	2011		2010		2009
United States
Oil (MBBL)
California		80		76		76
Permian		134		136		141
Midcontinent and Other		16		7		6
Total		230		219		223
NGLs (MBBL)
California		15		16		17
Permian		38		29		27
Midcontinent and Other		16		7		4
Total		69		52		48
Natural gas (MMCF)
California		260		280		250
Permian		157		199		199
Midcontinent and Other		365		198		186
Total		782		677		635
Latin America (a)
Oil (MBBL) – Colombia (b)		29		37		45
Natural gas (MMCF) – Bolivia		15		16		16
Middle East/North Africa
Oil (MBBL)
Bahrain		4		3		―
Dolphin		9		11		15
Iraq		7		3		―
Libya		4		12		10
Oman		67		62		50
Qatar		73		76		79
Yemen		27		31		34
Total		191		198		188
NGLs (MBBL)
Dolphin		10		13		11
Libya		―		1		1
Total		10		14		12
Natural gas (MMCF)
Bahrain		173		169		10
Dolphin		199		236		257
Oman		54		48		49
Total		426		453		316
Total Production (MBOE) (a,c)		733		711		677
(See footnotes following the Average Sales Price table)

Sales Volumes per Day	2011		2010		2009
United States
Oil (MBBL)		230		219		223
NGLs (MBBL)		69		52		48
Natural gas (MMCF)		782		677		635
Latin America (a)
Oil (MBBL) – Colombia (b)		29		36		45
Natural gas (MMCF) – Bolivia		15		16		16
Middle East/North Africa
Oil (MBBL)
Bahrain		4		3		―
Dolphin		9		12		14
Iraq		3		―		―
Libya		4		12		12
Oman		69		61		50
Qatar		73		76		79
Yemen		27		30		35
Total		189		194		190
NGLs (MBBL)
Dolphin		10		12		11
Libya		―		1		―
Total		10		13		11
Natural gas (MMCF)		426		453		316
Total Sales Volumes (MBOE) (a,c)		731		705		678
(See footnotes following the Average Sales Price table)

	2011		2010		2009
Average Sales Prices
Oil Prices ($ per bbl)
United States	$	92.80	$	73.79	$	56.74
Latin America (a)	$	97.16	$	75.29	$	55.89
Middle East/North Africa	$	104.34	$	76.67	$	58.75
Total worldwide (a)	$	97.92	$	75.16	$	57.31
NGL Prices ($ per bbl)
United States	$	59.10	$	48.86	$	37.26
Middle East/North Africa	$	32.09	$	30.64	$	21.88
Total worldwide	$	55.53	$	45.08	$	34.27
Gas Prices ($ per Mcf)
United States	$	4.06	$	4.53	$	3.46
Latin America (a)	$	10.11	$	7.73	$	5.70
Total worldwide (a)	$	3.01	$	3.11	$	2.83
Expensed Exploration (d)	$	258	$	262	$	254
Capital Expenditures
Development	$	5,686	$	2,955	$	2,274
Exploration	$	421	$	194	$	132
Other	$	38	$	17	$	42

(a)	For all periods presented, excludes volumes and amounts from the Argentine operations sold in February 2011 and classified as discontinued operations.
(b)	Includes production volumes per day of 5 mbbl and 6 mbbl for the years ended December 31, 2010 and 2009, respectively, related to the noncontrolling interest in a Colombian subsidiary. Includes sales volumes per day of 4 mbbl and 6 mbbl for the years ended December 31, 2010 and 2009, respectively, related to the noncontrolling interest in a Colombian subsidiary.
(c)	Natural gas volumes have been converted to BOE based on energy content of six Mcf of gas to one barrel of oil.
(d)	Includes dry hole write-offs and lease impairments of $160 million in 2011, $139 million in 2010 and $200 million in 2009. The 2011 amount includes a $35 million Libya exploration write-off.

Oil and gas segment earnings in 2011 were $10.2 billion compared to $7.2 billion in 2010. The increase reflected higher oil and NGL prices and volumes, partially offset by higher depreciation, depletion and amortization (DD&A) rates and higher operating costs, including higher field support, workover and well maintenance expenses driven by Occidental’s program to increase production at current high oil prices.

Daily oil and gas production volumes were 733,000 BOE for 2011, compared with 711,000 BOE for 2010. The increase was mainly due to acquisitions in South Texas, California and the Williston Basin, including the effect of post-acquisition capital investment, and higher production in Oman’s Mukhaizna Field and Iraq, which were partially offset by lower production in Libya. Production was negatively impacted in the Middle East/North Africa, Colombia and Long Beach by higher year-over-year average oil prices affecting PSCs by 18,000 BOE per day. Daily sales volumes were 731,000 BOE in the twelve months of 2011, compared with 705,000 BOE for 2010.

Oil and gas segment earnings in 2010 were $7.2 billion compared to $5.1 billion in 2009. The increase reflected higher average worldwide oil, NGL and domestic natural gas prices and higher volumes, partially offset by higher operating expenses partly resulting from fully expensing CO2, higher field support and workover expenses and higher DD&A rates.

Daily oil and gas production volumes were 711,000 BOE for 2010, compared with 677,000 BOE for 2009. The increase was mainly due to the new production in Bahrain, higher production in the Mukhaizna Field in Oman, and gas production from domestic assets, which were partially offset by a decline in Colombia. Production was negatively impacted in the Middle East/North Africa, Long Beach and Colombia by higher year-over-year average oil prices affecting PSCs by 16,000 BOE per day. Daily sales volumes were 705,000 BOE in the twelve months of 2010, compared with 678,000 BOE for 2009.

Oil and gas segment earnings in 2011 include pre-tax charges of $35 million related to exploration write-offs in Libya and $29 million related to Colombia net worth tax, as well as a pre-tax gain for sale of an interest in a Colombian pipeline of $22 million.

Oil and gas segment earnings in 2010 included a pre-tax charge of $275 million for asset impairments, predominately of gas properties in the Rocky Mountain region. Oil and gas segment earnings in 2009 included an $8 million pre-tax charge for the termination of rig contracts.

Average production costs for 2011, excluding taxes other than on income, were $12.84 per BOE, compared to $10.19 for 2010. The increase resulted from higher workover and well maintenance activity driven by Occidental’s program to increase production at current increased oil prices. We expect further increases in the activity level in 2012.

Chemical

In millions	2011		2010		2009
Segment Sales	$	4,815	$	4,016	$	3,225
Segment Earnings	$	861	$	438	$	389
Capital Expenditures	$	234	$	237	$	205

Chemical segment earnings were $861 million in 2011, compared to $438 million in 2010. The 2011 results reflected strong export sales and higher margins resulting from higher demand across most products.

Chemical segment earnings were $438 million in 2010, compared to $389 million in 2009. The increase in 2010 reflected improved market conditions, particularly for exports, driven by favorable feedstock costs in North America compared to Europe and Asia. Vinyls exports in 2010 were 125 percent higher compared to 2009.

Midstream, Marketing and Other

In millions	2011		2010		2009
Segment Sales	$	1,447	$	1,471	$	1,016
Segment Earnings	$	448	$	472	$	235
Capital Expenditures	$	1,089	$	501	$	554

Midstream and marketing segment earnings in 2011 were $448 million, compared to $472 million in 2010. The 2011 results reflected lower marketing and trading income, partially offset by higher pipeline income.

Midstream and marketing segment earnings in 2010 were $472 million, compared to $235 million in 2009. The 2010 results reflected higher margins in the marketing and trading and gas processing businesses and increased earnings in the pipeline business.

Significant Items Affecting Earnings

The following table sets forth, for the years ended December 31, 2011, 2010 and 2009, significant transactions and events affecting Occidental’s earnings that vary widely and unpredictably in nature, timing and amount:

Significant Items Affecting Earnings

Benefit (Charge) (in millions)	2011			2010			2009
oil and gas
Libya exploration write-off	$	(35	)	$	―		$	―
Gains on sale of Colombian pipeline interest		22			―			―
Foreign tax		(29	)		―			―
Asset impairments		―			(275	)		―
Rig contract terminations		―			―			(8	)
Total Oil and Gas	$	(42	)	$	(275	)	$	(8	)
chemical
No significant items affecting earnings	$	―		$	―		$	―
Total Chemical	$	―		$	―		$	―

midstream, marketing and other
No significant items affecting earnings	$	―		$	―		$	―
Total Midstream, Marketing and Other	$	―		$	―		$	―
corporate
Premium on debt extinguishments	$	(163	)	$	―		$	―
State income tax charge		(33	)		―			―
Severance charge		―			―			(40	)
Railcar leases		―			―			(15	)
Foreign tax credit carry-forwards		―			80			―
Tax effect of pre-tax adjustments		50			100			22
Discontinued operations, net of tax (a)		131			(39	)		(236	)

Total Corporate	$	(15	)	$	141		$	(269	)

(a)

The 2011 amount includes a $144 million after-tax gain from the sale of the Argentine operations. The 2009 amount includes an after-tax charge of $111 million for asset impairments of certain Argentine producing properties.

Taxes

Deferred tax liabilities, net of deferred tax assets of $1.9 billion, were $4.7 billion at December 31, 2011. The current portion of the deferred tax assets of $200 million is included in prepaid expenses and other. The deferred tax assets, net of allowances, are expected to be realized through future operating income and reversal of temporary differences.

Worldwide Effective Tax Rate

The following table sets forth the calculation of the worldwide effective tax rate for income from continuing operations:

In millions	2011			2010			2009
EARNINGS
Oil and Gas	$	10,241		$	7,151		$	5,097
Chemical		861			438			389
Midstream, Marketing and Other		448			472			235
Unallocated Corporate Items		(709	)		(497	)		(507	)
Pre-tax income		10,841			7,564			5,214

Income tax expense
Federal and State		1,795			1,087			686
Foreign		2,406			1,908			1,377
Total		4,201			2,995			2,063

Income from continuing operations	$	6,640		$	4,569		$	3,151

Worldwide effective tax rate		39%			40%			40%

Occidental’s 2011 worldwide tax rate was 39 percent, slightly lower than 2010 and 2009 due to higher proportionate domestic pre-tax income in 2011. The 2011 income tax expense included a net $21 million charge for out-of-period state income taxes. The 2010 income tax expense included an $80 million benefit related to foreign tax credit carryforwards. The 2009 income tax expense included a tax benefit of $87 million resulting from relinquishments of exploration properties.

Consolidated Results of Operations

Changes in components of Occidental's results of operations are discussed below:

Selected Revenue and Other Income Items

In millions	2011		2010		2009
Net sales	$	23,939	$	19,045	$	14,814
Interest, dividends and other income	$	165	$	111	$	118

The increase in net sales in 2011, compared to 2010, was due to higher oil and NGL prices, higher oil and gas segment volumes and higher sales, including higher export sales, across most chemical products. Price and volume increases in the oil and gas segment represented approximately 84 percent of the overall increase while chemical segment price and volume increases represented 16 percent of the increase.

The increase in net sales in 2010, compared to 2009, was primarily due to higher oil, NGLs, gas and chemical product prices and volumes. Price and volume increases in the oil and gas segment represented approximately 71 percent of the overall increase, chemical volume and price increases represented 19 percent and midstream and marketing represented the remaining increase.

Selected Expense Items

In millions	2011		2010		2009
Cost of sales (a)	$	7,385	$	6,112	$	5,105
Selling, general and administrative and other operating expenses	$	1,523	$	1,396	$	1,300
Depreciation, depletion and amortization	$	3,591	$	3,153	$	2,687
Taxes other than on income	$	605	$	484	$	425
Exploration expense	$	258	$	262	$	254
Charges for impairments	$	―	$	275	$	―
Interest and debt expense, net	$	298	$	116	$	133

(a)

Excludes DD&A of $3,584 million in 2011, $3,145 million in 2010 and $2,643 million in 2009.

Cost of sales increased in 2011, compared to 2010, due to higher oil and gas volumes, higher oil and gas operating costs, mostly resulting from higher workover and well maintenance activity and higher feedstock costs in the chemical segment.

Cost of sales increased in 2010, compared to 2009, due to higher oil and gas production costs, partly resulting from the effects of fully expensing CO2 costs in 2010, as well as higher field operating, workover and well maintenance costs, and higher volumes; and higher chemical volumes, energy and feedstock costs.

Selling, general and administrative and other operating expenses increased in 2011 due to higher headcount and environmental remediation expense and the Colombia net worth tax.

Selling, general and administrative and other operating expenses increased in 2010, compared to 2009, due to higher compensation costs, in particular, equity compensation expense due to higher stock prices in 2010.

DD&A increased in 2011, compared to 2010, due to higher DD&A rates and volumes in the oil and gas segment. The DD&A rate is expected to further increase in 2012.

DD&A increased in 2010, compared to 2009, due to higher DD&A rates and volumes, including a full year of operations in Bahrain.

Taxes other than on income increased in 2011, compared to 2010, due to higher realized domestic oil prices and volumes and higher domestic ad valorem taxes resulting from increased property values.

Taxes other than on income increased in 2010, compared to 2009, due to higher production taxes for Permian and Midcontinent resulting from higher realized domestic oil and natural gas prices and higher ad valorem taxes in Permian resulting from increased property values.

Exploration expense was comparable for 2011, 2010 and 2009.

Charges for impairments in 2010 predominately related to gas properties in the Rocky Mountain region.

Interest and debt expense, net, increased in 2011, compared to 2010, mainly due to the $163 million early debt extinguishment charge recorded in the first quarter of 2011.

Interest and debt expense, net, decreased in 2010, compared to 2009, due to lower average interest rates during 2010.

Selected Other Items

(Income)/expense (in millions)	2011			2010			2009
Provision for income taxes	$	4,201		$	2,995		$	2,063
Income from equity investments	$	(382	)	$	(277	)	$	(227	)
Discontinued operations, net	$	(131	)	$	39		$	236
Net income attributable to noncontrolling interest	$	―		$	72		$	51

Provision for domestic and foreign income taxes increased in 2011, compared to 2010, due to higher pre-tax income, partially offset by a slightly lower effective tax rate. The lower tax rate is due to higher proportionate domestic pre-tax income in 2011, compared to 2010.

Provision for domestic and foreign income taxes increased in 2010, compared to 2009, due to higher income before taxes in 2010. The worldwide effective tax rate in 2010 was comparable to 2009. The 2010 income tax expense included an $80 million benefit related to foreign tax credit carryforwards.

Income from equity investments increased in 2011, compared to 2010, due to an additional investment in the Plains Pipeline in late 2010 and its higher earnings.

Discontinued operations, net, in 2011 primarily reflected the $144 million after-tax gain recorded from the sale of the Argentine operations.

Discontinued operations, net, in 2010 primarily reflected the after-tax losses in the Argentine operations held for sale. The 2009 amount included after-tax impairment charges of $111 million for producing properties in Argentina.

There was no noncontrolling interest in 2011 due to the restructuring of Occidental’s Colombian operations to take a direct working interest in the related assets as of December 31, 2010.

Consolidated Analysis of Financial Position

The changes in the following components of Occidental’s balance sheet are discussed below:

Selected Balance Sheet Components

In millions	2011		2010
CURRENT ASSETS
Cash and cash equivalents	$	3,781	$	2,578
Trade receivables, net		5,395		5,032
Marketing and trading assets and other		916		900
Assets of discontinued operations		―		2,861
Inventories		1,069		1,041
Prepaid expenses and other		381		647
Total current assets	$	11,542	$	13,059
Investments in unconsolidated entities	$	2,072	$	2,039
Property, plant and equipment, net	$	45,684	$	36,536
Long-term receivables and other assets, net	$	746	$	798

CURRENT LIABILITIES
Accounts payable	$	5,304	$	4,646
Accrued liabilities		2,440		2,397
Domestic and foreign income taxes		110		170
Liabilities of discontinued operations		93		612
Total current liabilities	$	7,947	$	7,825
Long-term debt, net	$	5,871	$	5,111
Deferred credits and other liabilities-income taxes	$	4,846	$	3,445
Deferred credits and other liabilities-other	$	3,662	$	3,452
Long-term liabilities of discontinued operations	$	98	$	115
Stockholders’ equity	$	37,620	$	32,484

Assets

See "Liquidity and Capital Resources — Cash Flow Analysis" for discussion about the change in cash and cash equivalents.

The increase in trade receivables, net, was due to higher oil and NGL prices and volumes in the fourth quarter of 2011, compared to the fourth quarter of 2010. The decrease in assets of discontinued operations was due to the sale of Occidental’s Argentine operations, which closed in February 2011. The decrease in prepaid expenses and other reflected the closing of the South Texas acquisition in January 2011, for which a deposit was made in 2010.

The increase in PP&E, net, was due to capital expenditures and the acquisitions of oil and gas properties, partially offset by DD&A.

Liabilities and Stockholders' Equity

The increase in the accounts payable and accrued liabilities balances reflected higher capital expenditures during the fourth quarter of 2011 compared to the fourth quarter of 2010. The decrease in liabilities of discontinued operations was due to the sale of Occidental’s Argentine operations.

The increase in long-term debt, net, was due to the issuance of $2.15 billion of senior unsecured notes in August 2011, partially offset by the redemption of $1.4 billion of senior notes in March 2011.

The increase in deferred credits and other liabilities – income taxes was due to higher capital expenditures in 2011. The increase in deferred credits and other liabilities – other reflected the long-term portion of liabilities related to the higher asset retirement obligations. The increase in stockholders’ equity reflected net income for 2011, partially offset by dividend payments and treasury stock purchases.

Liquidity and Capital Resources

At December 31, 2011, Occidental had approximately $3.8 billion in cash on hand, a substantial majority of which is held domestically. Income and cash flows are largely dependent on oil and gas prices and sales volumes. Occidental believes that cash on hand and cash generated from operations will be sufficient to fund its operating needs and planned capital expenditures, dividends and any debt payments.

Occidental's available but unused committed bank credit was $2.0 billion at December 31, 2011. In October 2011, Occidental entered into a new five-year $2.0 billion bank credit facility (2011 Credit Facility), which replaced its previous $1.4 billion bank credit facility (2006 Credit Facility), which was scheduled to expire in September 2012. The 2011 Credit Facility provides for the termination of loan commitments and requires immediate repayment of any outstanding amounts if certain events of default occur or if Occidental files for bankruptcy. Up to $1.0 billion of the 2011 Credit Facility is available in the form of letters of credit. Occidental did not draw down any amounts under the 2011 Credit Facility or the 2006 Credit Facility during 2011.

The 2011 Credit Facility and other debt agreements do not contain material adverse change clauses or debt ratings triggers that could restrict Occidental's ability to borrow or permit the lenders to terminate their commitments or accelerate debt. Borrowings under the 2011 Credit Facility bear interest at various benchmark rates, including LIBOR, plus a margin based on Occidental's senior debt ratings. Additionally, Occidental paid prorated annual facility fees of 0.10 percent and 0.05 percent, respectively, in 2011 on the total commitment amounts of the 2011 Credit Facility and the 2006 Credit Facility based on Occidental’s senior debt ratings.

Occidental has a shelf registration statement that facilitates issuing senior debt securities. In August 2011, Occidental issued $2.15 billion of debt under this shelf, which comprised $1.25 billion of 1.75-percent senior unsecured notes due 2017 and $900 million of 3.125-percent senior unsecured notes due 2022. Occidental received net proceeds of approximately $2.1 billion. Interest on the notes will be payable semiannually in arrears in February and August of each year for both series of notes.

In March 2011, Occidental redeemed all $1.0 billion of its outstanding 7-percent senior notes due 2013 and all $368 million of its outstanding 6.75-percent senior notes due 2012. Occidental recorded a $163 million pre-tax charge related to this redemption in the first quarter of 2011.

Occidental, from time to time, may access and has accessed debt markets for long-term and short-term funding for general corporate purposes, including acquisitions. At this time, Occidental does not anticipate any needs for such funding.

As of December 31, 2011, under the most restrictive covenants of its financing agreements, Occidental had substantial capacity for additional unsecured borrowings, the payment of cash dividends and other distributions on, or acquisitions of, Occidental stock.

Cash Flow Analysis

In millions		2011			2010			2009
Net cash provided by operating activities		$	12,281		$	9,566		$	5,946

The most important sources of the increase in operating cash flow in 2011, compared to 2010, were higher worldwide oil and NGLs prices and volumes.

In 2011, compared to 2010, Occidental’s global realized oil and NGL prices increased 30 percent and 23 percent, respectively. In 2011, Occidental’s oil and NGL production accounted for 71 percent of its total net sales. In 2011, oil volumes increased, compared to 2010, mainly due to acquisitions in California and the Williston Basin, including the effect of post-acquisition capital investment, and higher production in Oman’s Mukhaizna Field and Iraq, which were partially offset by lower production in Libya. Increases in field support, workover and well maintenance costs in 2011, compared to 2010, partially offset the increases in prices and volumes.

Other cost elements, such as labor costs and overhead, are not significant drivers of changes in cash flow because they are relatively stable within a narrow range over the short to intermediate term. Changes in these costs had a much smaller effect on cash flow than oil and NGL prices and volumes.

The increase in operating cash flows in 2011, compared to 2010, also reflected high chemical product prices and margins for most products.

The most important sources of the increase in operating cash flow in 2010, compared to 2009, were higher worldwide oil and domestic natural gas prices and

volumes. In 2010, compared to 2009, Occidental’s global realized oil and United States natural gas prices for continuing operations each increased by 31 percent. In 2010, Occidental's United States gas production represented approximately 59 percent of its worldwide natural gas production. Occidental’s 2010 oil and gas sales volumes increased, compared to 2009, mainly due to the new production from Bahrain and higher production in the Mukhaizna Field in Oman and higher domestic gas production, partially offset by a decline in Colombia. Increases in field support, workover and well maintenance costs in 2010, compared to 2009, partially offset the increases in prices and volumes.

The increase in operating cash flows in 2010, compared to 2009, also reflected higher chemical product prices for PVC, VCM, ethylene dichloride (EDC) and chlorine, which resulted in higher margins. In addition, all chemical product volumes increased in 2010, compared to 2009, due to improved market conditions, particularly for exports. The 2010 operating cash flows also reflected higher margins in the marketing and trading and gas processing businesses and increased earnings in the pipeline business.

In general, the overall impact of the chemical and midstream and marketing segments’ margins was less significant than the changes in oil and gas segment prices because the chemical and midstream and marketing segments' earnings and cash flows are significantly smaller than those for the oil and gas segment.

Other non-cash charges to income in 2011, 2010 and 2009 included charges for stock-based compensation plans and asset retirement obligation accruals. The 2010 amount included a $275 million charge for asset impairments, predominately of gas properties in the Rocky Mountain region.

Operating cash flows for discontinued operations include the Argentine operations through the date they were sold in February 2011. The 2009 amounts included after-tax charges of $111 million for asset impairments of certain Argentine producing properties.

In millions	2011			2010			2009
Capital expenditures
Oil and Gas	$	(6,145	)	$	(3,166	)	$	(2,448	)
Chemical		(234	)		(237	)		(205	)