Edgar Filing: OCCIDENTAL PETROLEUM CORP /DE/

OXY 10K 12-31-2012

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, 2012		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 $68.1 billion, computed by reference to the closing price on the New York Stock Exchange composite tape of $85.77 per share of Common Stock on June 30, 2012. 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, 2013, there were 805,515,153 shares of Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive Proxy Statement, relating to its May 3, 2013 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
Item 4	Mine Safety Disclosures........................................................................................................................................................	7
	Executive Officers...................................................................................................................................................................	8
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..........................................................................................................................................................	11
Item 7 and 7A	Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A).....................................	11
	Strategy.............................................................................................................................................................................	12
	Oil and Gas Segment........................................................................................................................................................	13
	Chemical Segment............................................................................................................................................................	19
	Midstream, Marketing and Other Segment........................................................................................................................	20
	Segment Results of Operations.........................................................................................................................................	21
	Significant Items Affecting Earnings..................................................................................................................................	24
	Taxes.................................................................................................................................................................................	24
	Consolidated Results of Operations..................................................................................................................................	24
	Consolidated Analysis of Financial Position......................................................................................................................	25
	Liquidity and Capital Resources........................................................................................................................................	26
	Off-Balance-Sheet Arrangements......................................................................................................................................	28
	Contractual Obligations.....................................................................................................................................................	28
	Lawsuits, Claims and Contingencies.................................................................................................................................	29
	Environmental Liabilities and Expenditures.......................................................................................................................	29
	Foreign Investments..........................................................................................................................................................	30
	Critical Accounting Policies and Estimates........................................................................................................................	30
	Significant Accounting and Disclosure Changes...............................................................................................................	34
	Derivative Activities and Market Risk.................................................................................................................................	34
	Safe Harbor Discussion Regarding Outlook and Other Forward-Looking Data................................................................	36
Item 8	Financial Statements and Supplementary Data......................................................................................................................	37
	Management's Annual Assessment of and Report on Internal Control Over Financial Reporting.....................................	37
	Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements.................................	38
	Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting.......................	39
	Consolidated Balance Sheets...........................................................................................................................................	40
	Consolidated Statements of Income..................................................................................................................................	42
	Consolidated Statements of Comprehensive Income.......................................................................................................	43
	Consolidated Statements of Stockholders' Equity.............................................................................................................	43
	Consolidated Statements of Cash Flows...........................................................................................................................	44
	Notes to Consolidated Financial Statements.....................................................................................................................	45
	Quarterly Financial Data (Unaudited)................................................................................................................................	73
	Supplemental Oil and Gas Information (Unaudited)..........................................................................................................	75
	Financial Statement Schedule:
	Schedule II – Valuation and Qualifying Accounts..............................................................................................................	87
Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure..................................................	88
Item 9A	Controls and Procedures........................................................................................................................................................	88
	Disclosure Controls and Procedures.................................................................................................................................	88
Item 9B	Other Information....................................................................................................................................................................	88
Part III
Item 10	Directors, Executive Officers and Corporate Governance......................................................................................................	88
Item 11	Executive Compensation........................................................................................................................................................	88
Item 12	Security Ownership of Certain Beneficial Owners and Management.....................................................................................	89
Item 13	Certain Relationships and Related Transactions and Director Independence........................................................................	89
Item 14	Principal Accountant Fees and Services.................................................................................................................................	89
Part IV
Item 15	Exhibits and Financial Statement Schedules..........................................................................................................................	89

Part I


ITEMS 1 AND 2	BUSINESS AND PROPERTIES

In this report, "Occidental" means Occidental Petroleum Corporation, a Delaware corporation (OPC), or OPC and one or more entities in which it owns a controlling interest (subsidiaries). Occidental conducts its operations through various subsidiaries and affiliates. Occidental’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, processes, transports, stores, purchases and markets oil, condensate, NGLs, natural gas, carbon dioxide (CO₂) and power. It also trades around its assets, including transportation and storage capacity, and trades oil, NGLs, gas and other commodities. The segment also invests in entities that conduct similar activities.

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, New Mexico, North Dakota, Oklahoma, Texas and West Virginia. International operations are located in Bahrain, Bolivia, Colombia, Iraq, Libya, Oman, Qatar, the United Arab Emirates (UAE) and Yemen.

Proved Reserves and Sales Volumes

The table below shows Occidental’s total oil, NGLs and natural gas proved reserves and sales volumes in 2012, 2011 and 2010. 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 (Bcf); barrels of oil equivalent (BOE) in millions.



	2012					2011					2010
Proved Reserves	Oil	NGLs	Gas	BOE	^(a)	Oil	NGLs	Gas	BOE	^(a)	Oil	NGLs	Gas	BOE	^(a)
United States	1,567	216	2,889	2,265		1,526	225	3,365	2,313		1,460	237	3,034	2,203
International ^(b,c)	469	116	2,679	1,031		482	55	1,958	863		552	61	2,104	964
Total	2,036	332	5,568	3,296	^(d)	2,008	280	5,323	3,176	^(d)	2,012	298	5,138	3,167	^(d)
Sales Volumes
United States	93	27	300	170		84	25	285	156		80	19	247	140
International ^(b,c)	78	3	170	110		80	4	162	111		83	5	172	117
Total	171	30	470	280		164	29	447	267		163	24	419	257

Note: The detailed proved reserves information presented in accordance with Item 1202(a)(2) to Regulation S-K under the Securities Exchange Act of 1934 (Exchange Act) is provided on pages 75-78.

(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. For example, in 2012, the average prices of West Texas Intermediate (WTI) oil and New York Mercantile Exchange (NYMEX) natural gas were $94.21 per barrel and $2.81 per Mcf, respectively, resulting in an oil to gas ratio of over 30.


(b)	Excludes volumes from the Argentine operations sold in February 2011 and classified as discontinued operations.


(c)	Reserves exclude 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. The 2010 sales volumes include the noncontrolling interest in the Colombian subsidiary, while the 2012 and 2011 sales volumes exclude such amounts.


(d)	Stated on a net basis after applicable royalties. Includes proved reserves related to production-sharing contracts (PSCs) and other similar economic arrangements of 0.9 billion BOE in 2012, 1.0 billion BOE in 2011 and 1.1 billion BOE in 2010.

Competition

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 developing conventional and unconventional mature and underdeveloped fields, enhanced oil recovery (EOR) projects and strategic acquisitions. Occidental also competes to develop and produce its worldwide oil and gas reserves cost-effectively and obtain qualified labor and services.

CHEMICAL OPERATIONS

General

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. It also has an interest in a Brazilian joint venture.

Competition

OxyChem competes with numerous other domestic and foreign chemical producers. For every product it manufactures and markets, OxyChem’s market position was first or second in the United States and first, second or third in the world in 2012. 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 AND MARKETING OPERATIONS

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




Location	Description	Capacity
Gas Plants
California, Texas, New Mexico and Colorado	Occidental- and third-party-operated natural gas gathering, compression and processing systems, and CO₂ processing	3.1 billion cubic feet per day
Pipelines
Texas, New Mexico 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
Texas, New Mexico and Colorado	CO₂ fields and pipeline systems transporting CO₂ to oil and gas producing locations	2.4 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	18,800 miles of pipeline and gathering systems ^(b) Storage for 135 million barrels of oil and other petroleum products and 93 billion cubic feet of natural gas^(b)
Marketing and Trading
Texas, Connecticut, United Kingdom, Singapore and other	Trades around its assets, including transportation and storage capacity, and purchases, markets and trades oil, NGLs, 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)	Pipeline currently transports 2.3 Bcf per day. Additional gas compression and customer contracts are required to reach capacity.


(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 12,300 people at December 31, 2012, 8,700 of whom were located in the United States. Occidental employed approximately 8,000 people in the oil and gas and midstream and marketing segments and 3,000 people in the chemical segment. An additional 1,300 people were employed in administrative and headquarters functions. Approximately 800 U.S.-based employees and 700 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 website 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, to a lesser extent, natural gas and its chemical products.

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, transportation bottlenecks 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, reserve 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: (i) are 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:

new or amended laws and regulations, or interpretations of such laws and regulations, including those related to drilling, manufacturing or production processes (including hydraulic fracturing), labor and employment, taxes, royalty rates, permitted production rates, 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 of, 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 the deterioration of natural gas prices over the last few years; (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.

Reported oil and gas reserves are an estimate based on engineers' periodic review of reservoir characteristics and recoverability, including production decline rates, operating performance and economic feasibility at the prevailing commodity prices as well as capital and operating costs. If Occidental were required to make significant negative reserve revisions, its results of operations and stock price could be adversely affected.

Concerns about climate change may affect Occidental’s operations.

The U.S. federal government and the state of California 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. For example, California’s cap-and-trade program currently applies to Occidental's operations in the state. 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 project execution, higher costs and taxes and lower 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 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.

Cyber attacks could significantly affect Occidental.

Cyber attacks on businesses have escalated in recent years. Occidental relies on electronic systems and networks to control and manage its oil and gas, chemicals, trading and pipeline operations and has multiple layers of security to mitigate risks of cyber attack. If, however, Occidental were to experience an attack and its security measures failed, the potential consequences to its businesses and the communities in which it operates could be significant. In 2009 and 2010, Occidental experienced a cyber attack on its email system, which had no effect on its operations, financial systems or reputation.

Other risk factors.

Additional discussion of risks and uncertainties related to price and demand, litigation, environmental matters, oil and gas reserves estimation processes, foreign operations, impairments, derivatives, market risks and internal controls 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," "— Derivative Activities and Market Risk," and "Management's Annual Assessment of and Report on Internal Control Over Financial Reporting."

The risks described in this report are not the only risks facing Occidental and other risks, including risks deemed immaterial, may have material adverse effects.


ITEM 1B	UNRESOLVED STAFF COMMENTS

Occidental has no unresolved SEC staff comments that have been outstanding more than 180 days at December 31, 2012.

ITEM 3 LEGAL PROCEEDINGS

A subsidiary of OPC reached a settlement in principle in January 2013 with the Louisiana Department of Environmental Quality regarding penalties associated with certain self-disclosed air emissions and permit deviations. Under the proposed settlement, the subsidiary will pay administrative penalties and an additional amount to fund air quality modeling as a supplemental environmental project.

The New Mexico Environment Department asserted a penalty claim on April 6, 2012, against an OPC subsidiary for alleged notification, permitting and emissions violations of the New Mexico Air Quality Control Act at a facility in Lea County, New Mexico. The subsidiary is evaluating this claim.

Although the matters described above are reportable events, their financial impact is expected to be insignificant.

For information regarding other 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.

ITEM 4 MINE SAFETY DISCLOSURES

Not applicable.

EXECUTIVE OFFICERS

The current term of employment of each executive officer of Occidental will expire at the May 3, 2013, 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 26, 2013	Positions with Occidental and Subsidiaries and Employment History

Stephen I. Chazen	66	Chief Executive Officer since 2011 and President since 2007; 2010-2011, Chief Operating Officer; 1999-2010, Chief Financial Officer; Director since 2010.


Dr. Ray R. Irani	78	Executive Chairman since 2011; 1990-2011, Chairman and Chief Executive Officer; Director since 1984.


Cynthia L. Walker	36	Executive Vice President and Chief Financial Officer since 2012; Goldman, Sachs & Co.: 2010-2012, Managing Director; 2005-2010, Vice President.


Donald P. de Brier	72	Corporate Executive Vice President and Corporate Secretary since 2012; 1993-2012, Executive Vice President, General Counsel and Secretary.


William E. Albrecht	61	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.


Edward A. "Sandy" Lowe	61	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.


Willie C.W. Chiang	52	Executive Vice President, Operations since 2012; ConocoPhillips: 2011-2012, Senior Vice President, Refining, Marketing, Transportation and Commercial; 2008-2011, Senior Vice President, Refining, Marketing and Transportation.


James M. Lienert	60	Executive Vice President — Business Support since 2012; 2010-2012, Executive Vice President and Chief Financial Officer; 2006-2010, Executive Vice President — Finance and Planning.


John C. Ale	58	Vice President and General Counsel since 2012; Skadden, Arps, Slate, Meagher & Flom LLP: 2002-2012, Partner.


Roy Pineci	50	Vice President, Controller and Principal Accounting Officer since 2008; 2007-2008, Senior Vice President, Finance — Oil and Gas.


B. Chuck Anderson	53	Vice President since 2012; 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 approximately 32,200 stockholders of record at December 31, 2012, and by approximately 494,000 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 $0.54 for each quarter of 2012 ($2.16 for the year). On February 14, 2013, a quarterly dividend of $0.64 per share was declared on the common stock, payable on April 15, 2013 to stockholders of record on March 8, 2013. 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 stock-based 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 is approximately 66 million, of which approximately 15 million had been issued through December 31, 2012. The following is a summary of the securities available 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))

3,502,857 ⁽¹⁾		31.88 ⁽²⁾		19,251,258 ⁽³⁾


(1)	Includes shares reserved to be issued pursuant to stock options (Options), stock appreciation rights (SARs) and performance-based awards. Shares for performance-based awards are included assuming maximum payout, but may be paid out at lesser amounts, or not at all, according to achievement of performance goals.


(2)	Price applies only to the Options and SARs included in column (a). Exercise price is not applicable to the other awards included in column (a).

(3)

A plan provision requires each share covered by an award (other than Options and SARs) to be counted as if three shares were issued in determining the number of shares that otherwise would have been available for future awards. Accordingly, the number of shares available for future awards may be less than the amount shown depending on the type of award granted. Additionally, under the plan, the amount shown may increase by the number of shares currently unvested or forfeitable, or three times that number as applicable, that (i) fail to vest, (ii) are forfeited or cancelled, or (iii) correspond to the portion of any stock-based awards settled in cash.

SHARE REPURCHASE ACTIVITIES

Occidental’s share repurchase activities for the year ended December 31, 2012, 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 2012		144,542		$	104.84		—
Second Quarter 2012		1,760,000		$	81.19		1,760,000
Third Quarter 2012		583,072		$	86.58		470,000
October 1-31, 2012		620,000		$	80.24		620,000
November 1-30, 2012		2,860,000		$	75.90		2,860,000
December 1-31, 2012		1,520,000		$	74.92		1,520,000
Fourth Quarter 2012		5,000,000		$	76.14		5,000,000
Total 2012		7,487,614		$	78.69		7,230,000		17,255,575 ^(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 group over the five-year period ended on December 31, 2012. 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) the stock of the companies in the S&P 500 and (iii) each of the peer group companies' common stock weighted by their relative market values within the peer group, and that all dividends were reinvested.

Occidental's 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.



12/31/2007		12/31/2008		12/31/2009		12/31/2010		12/31/2011		12/31/2012
$	100	$	79	$	110	$	135	$	131	$	110

	100		75		82		93		102		104

	100		63		80		92		94		109

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 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,	2012				2011				2010			2009			2008
RESULTS OF OPERATIONS ^(a)
Net sales	$	24,172			$	23,939			$	19,045		$	14,814		$	23,713
Income from continuing operations ^(b)	$	4,635			$	6,640			$	4,569		$	3,151		$	7,183
Net income attributable to common stock	$	4,598			$	6,771			$	4,530		$	2,915		$	6,857
Basic earnings per common share from continuing operations ^(b)	$	5.72			$	8.16			$	5.62		$	3.88		$	8.77
Basic earnings per common share ^(b)	$	5.67			$	8.32			$	5.57		$	3.59		$	8.37
Diluted earnings per common share ^(b)	$	5.67			$	8.32			$	5.56		$	3.58		$	8.34

FINANCIAL POSITION ^(a)
Total assets	$	64,210			$	60,044			$	52,432		$	44,229		$	41,537
Long-term debt, net	$	7,023			$	5,871			$	5,111		$	2,557		$	2,049
Stockholders’ equity	$	40,048			$	37,620			$	32,484		$	29,159		$	27,325

MARKET CAPITALIZATION ^(c)	$	61,710			$	75,992			$	79,735		$	66,050		$	48,607

CASH FLOW
Operating:
Cash provided by operating activities	$	11,312			$	12,281			$	9,566		$	5,946		$	10,765
Investing:
Capital expenditures	$	(10,226	)		$	(7,518	)		$	(3,940	)	$	(3,245	)	$	(4,126	)
Cash used by all other investing activities, net	$	(2,429	)		$	(2,385	)	^(d)	$	(5,355	)	$	(2,221	)	$	(5,314	)
Financing:
Cash dividends paid	$	(2,128	)	^(e)	$	(1,436	)		$	(1,159	)	$	(1,063	)	$	(940	)
Cash provided (used) by all other financing activities, net	$	1,282			$	261			$	2,242		$	30		$	(570	)

DIVIDENDS PER COMMON SHARE	$	2.16			$	1.84			$	1.47		$	1.31		$	1.21

WEIGHTED AVERAGE BASIC SHARES OUTSTANDING (thousands)	809,345				812,075				812,472			811,305			817,635

Note: Argentine operations were sold in February 2011 and have been reflected as discontinued operations for all applicable 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 and $116 million in 2008. There were no noncontrolling interests in 2012 and 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.


(e)	Includes the accelerated fourth quarter 2012 dividend payment, which normally would have been accrued as of year end but paid in the first quarter of the following year.

ITEM 7 AND 7A

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (MD&A)

In this report, "Occidental" means 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, 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, processes, transports, stores, purchases and markets oil, condensate, NGLs, natural gas, carbon dioxide (CO₂)and power. It also trades around its assets, including transportation and storage capacity, and trades oil, NGLs, gas and other commodities. The segment also invests in entities that conduct similar activities.

STRATEGY

General

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 conventional and unconventional 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.

In conducting its business, Occidental accepts commodity, engineering and limited exploration risks. Occidental seeks to limit its financial and political risks.

Occidental prioritizes the use of its cash flows in the following order:


Ø	Maintenance capital


Ø	Dividends


Ø	Growth capital


Ø	Acquisitions


Ø	Share repurchases

Capital is employed to operate all assets in a safe and environmentally sound manner. Management aims to develop Occidental's assets in a manner that they would contribute substantially to earnings and cash flow after invested capital. The following describes the application of Occidental's overall strategy to each of its operating segments.

Oil and Gas

Segment Earnings

($ millions)

Occidental prefers to hold 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. Occidental also focuses a portion of its drilling activities on unconventional shale opportunities.

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 reserves are known to 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 2012, Occidental paid approximately $2.3 billion for domestic oil and gas properties in the Permian Basin, the Williston Basin, California and South Texas.

Management currently believes Occidental's growth will be most strongly affected by the success of the development plans for its Permian, California and Oman assets and the Al Hosn gas project in Abu Dhabi where it continues to deploy significant capital. Occidental's oil and gas production has grown approximately five percent annually during the three-year period ended December 31, 2012.

Chemical

Segment Earnings

($ millions)

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. The chemical segment's (OxyChem) 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, and markets both 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. Capital is employed to sustain production capacity and to focus on projects and developments designed to improve the competitiveness of segment assets. Acquisitions and plant development opportunities may be pursued when they are expected to enhance the existing core chlor-alkali and PVC businesses or take advantage of other specific opportunities. During 2012, OxyChem began construction of a chlor-alkali plant in Tennessee, which it expects to begin operating in the fourth quarter of 2013.

Midstream and Marketing

Segment Earnings

($ millions)

The midstream and marketing segment is managed to generate returns on capital employed in excess of Occidental's cost of capital. In order to generate these returns, the segment evaluates opportunities across the value chain and uses its assets to provide services to other segments and third parties. In marketing its own and third-party production, Occidental strives to maximize realized value using its assets, including transportation and storage capacity. In commodities trading, Occidental seeks to generate gains using net-long positions. The segment invests in and operates gas plants, co-generation facilities, pipeline systems and storage facilities. The segment also seeks to minimize the costs of gas, power and other commodities used in Occidental's businesses and to limit credit risk exposure. Capital is employed to sustain or, where appropriate, increase operational capacity and to improve the competitiveness of Occidental's assets. Occidental and Magellan Midstream Partners, L.P. are proceeding with the construction of the BridgeTex Pipeline which will transport crude oil between the Permian region and the Gulf Coast refinery markets and is expected to begin service in mid-2014.

Key Performance Indicators

General

Occidental seeks to meet its strategic goals by continually measuring its success in its key performance metrics that drive total stockholder return. In addition to production growth and capital allocation and deployment discussed above, Occidental believes the following are its most significant metrics:


Ø	Cash margin per barrel;


Ø	Free-cash-flow yield;


Ø	Dividend growth;


Ø	Return on equity (ROE) and return on capital employed (ROCE).

Occidental also monitors other segment-specific indicators such as per-unit profit, production costs and finding and development costs, as well as health, environmental and safety measures, like the number of recordable injuries, and others.

Based on the $2.56 per share annual dividend rate announced in February 2013, Occidental’s dividend rate has increased by 412 percent since 2002. While its stockholders' equity increased by 6 percent for 2012 and 37 percent for the three-year period from 2010 through 2012, Occidental continued to deliver above-cost-of-capital returns as follows:



	Annual 2012 ^(a)	Three-Year Annual Average 2010 - 2012 ^(b)
ROE	14.6%	15.2%
ROE	{11.8%}	15.2%
ROCE	12.6%	13.5%
ROCE	{10.3%}	13.5%

(a)

The top figures for ROE and ROCE for 2012 were calculated by dividing Occidental's 2012 income after removing the effect of Significant Items Affecting Earnings described on page 24 (while adding back after-tax interest expense for the ROCE calculation) by its average equity and capital employed, respectively, during 2012. We provide this adjusted measure because we believe it would be useful to investors in evaluating and comparing Occidental's performance between periods, not as a substitute for the measure calculated using net income. The bottom figure is the same calculation but using net income attributable to common stock in the numerator (while adding back after-tax interest expense for the ROCE calculation).


(b)	The three-year average ROE and ROCE were calculated by dividing Occidental's average net income attributable to common stock (while adding back after-tax interest expense for the ROCE calculation) over the three-year period 2010-2012 by its average equity and capital employed, respectively, over the same period.

Debt Structure

Occidental issued $1.75 billion of senior unsecured notes in the second quarter of 2012 for general corporate purposes including ordinary course working capital increases, acquisitions, stock repurchases, retirement of debt and other business opportunities. As a result of Occidental’s commitment to financial discipline, its year-end 2012 total debt-to-capitalization (debt and equity) ratio was 16 percent.

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. The following table presents the average daily West Texas Intermediate (WTI), Brent and New York Mercantile Exchange (NYMEX) prices for 2012 and 2011:



	2012		2011
WTI oil ($/barrel)	$	94.21	$	95.12
Brent oil ($/barrel)	$	111.70	$	110.90
NYMEX gas ($/Mcf)	$	2.81	$	4.11

The following table presents Occidental's average realized prices as a percentage of WTI, Brent and NYMEX for 2012 and 2011:



	2012		2011
Worldwide oil as a percentage of average WTI	106	%	103	%
Worldwide oil as a percentage of average Brent	89	%	88	%
Worldwide NGLs as a percentage of average WTI	48	%	58	%
Domestic natural gas as a percentage of NYMEX	93	%	99	%

Average realized oil prices were slightly higher in 2012 than 2011. Approximately 60 percent of Occidental’s oil production tracks world oil prices, such as Brent, and 40 percent tracks WTI. The average realized domestic natural gas price in 2012 decreased 35 percent from 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 is extended through the end of production once production commences. Of the total 8.1 million net acres in which Occidental has interests, approximately 74 percent is leased, 25 percent is owned subsurface mineral rights and 1 percent is owned land with mineral rights.

Production-Sharing Contracts (PSC)

Occidental has interests that are operated under PSCs or similar contracts in Bahrain, Iraq, Libya, Oman, Qatar and Yemen. Under such contracts, Occidental records a share of production and reserves to recover certain production 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 Production Volumes

(thousands BOE/day)

Notes:


•	Includes average production volumes per day of 5 thousand barrels (mbbl), 6 mbbl and 6 mbbl for 2010, 2009 and 2008, respectively, related to the noncontrolling interest in a Colombian subsidiary.


•	Excludes volumes from the Argentine operations sold in February 2011 and classified as discontinued operations.

United States Assets

United States


1.	Permian


2.	California


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, accounting for approximately 15 percent of the total United States oil production.

Occidental is the largest producer of oil in the Permian Basin with an approximate 16 percent net share of the total oil production. Occidental also produces and processes natural gas and NGLs in the Permian Basin. Occidental continued to increase its Permian interests in 2012 through various acquisitions, a significant portion of which related to its non-CO₂operations which comprised approximately 1.5 million net acres at the end of 2012.

Approximately 60 percent of Occidental’s Permian oil production is from fields that actively employ 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.

Occidental’s interests in Permian offer significant additional development and exploitation potential. During 2012, Occidental drilled approximately 550 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.

Occidental's Permian non-CO₂operations are among its fastest growing assets. Since beginning significant delineation and development efforts in 2010, production from these operations has increased by more than 25 percent. The development program continued to increase in 2012 accounting for more than 300 of the wells drilled in Permian.

Occidental's share of production in Permian was approximately 207,000 BOE per day in 2012.

California

Occidental's California operations include interests in the Elk Hills area, the Wilmington and other fields in the Los Angeles Basin and the Ventura, San Joaquin and Sacramento Basins. Occidental has properties in more than 125 fields in California, an increase from 2011 resulting from various property acquisitions in 2012.

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 2012, 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 320 new wells being drilled.

Occidental began operating a new gas processing plant in Elk Hills in 2012 with capacity to handle 200 million cubic feet per day.

Occidental's share of production in California was approximately 148,000 BOE per day in 2012.

Occidental holds approximately 2.1 million net acres in California, the large 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. Occidental drilled approximately 760 wells in California during 2012.

Midcontinent and Other

The Midcontinent and Other properties include interests in the Hugoton Field, the Piceance Basin, the Williston Basin, the Marcellus Shale in the Appalachian Basin, the Eagle Ford Shale and other areas in South Texas. These properties are located in Kansas, Oklahoma, Colorado, North Dakota, West Virginia and Texas. Occidental holds over 2.3 million net acres in the Midcontinent region, which includes 1.4 million net acres in a large concentration of gas reserves and production and royalty interests in the Hugoton area and approximately 0.4 million net acres in the Piceance area. Occidental also holds approximately 160,000 net acres in South Texas, including 4,000 net acres in the Eagle Ford Shale, which was acquired in 2012. In addition, Occidental holds approximately 341,000 net acres of oil producing and prospective unconventional properties in the Williston Basin's Bakken and Three Forks formations. In addition, Occidental holds approximately 235,000 net acres in West Virginia.

In Midcontinent and Other, Occidental drilled approximately 260 wells and produced approximately 110,000 BOE per day in 2012.

Other Developments

Management conducted a review of Occidental’s portfolio of oil and gas assets in the fourth quarter of 2012 and concluded that, given the current and anticipated natural gas pricing environment and the effect of reserve revisions from price changes and well performance, certain of its domestic natural gas producing properties had become impaired. Occidental also concluded that certain projects had become uneconomical and that it would not pursue them. As a result, Occidental recorded pre-tax impairment charges of $1.7 billion, almost all of which were for certain assets in Midcontinent, over 90 percent of which were related to natural gas properties that were acquired more than four years ago on average when gas prices were more than $6 per Mcf.

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 other consortium members 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, the consortium has increased gross gas production capacity more than 60 percent from an initial level of 1.5 billion cubic feet per day to over 2.4 billion cubic feet per day and increased gross oil production from 26,000 barrels per day to 42,000 barrels per day. The consortium plans to continue growing gross gas production capacity to over 2.7 billion cubic feet per day and gross oil production to over 75,000 barrels per day. Occidental's share of production from Bahrain during 2012 was approximately 232 million cubic feet (MMcf) per day of gas and 4,000 barrels of oil per day.

Iraq

In 2010, Occidental and other consortium members 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 in 2010. The consortium plans 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 from Iraq was approximately 11,000 BOE per day in 2012.

Libya

Occidental participates with subsidiaries of the Libyan National Oil Company in Sirte Basin producing operations. These agreements continue through 2032. The 2012 production volume was approximately 12,000 BOE per day.

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.

A 30-year PSC for the Mukhaizna Field (Block 53) was signed with the Government of Oman in 2005, pursuant to which Occidental assumed operation of the field. By the end of 2012, Occidental had drilled almost 1,800 new wells and continued implementation of a major steamflood project. In 2012, the average gross daily production was 120,000 BOE per day, which was over 15 times higher than the production rate in September 2005.

The term for Block 9 continues through 2015, with a 10-year extension right for certain areas. The term for Block 27 expires in 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 Oman was approximately 76,000 BOE per day in 2012.

Qatar

In Qatar, Occidental is the operator at Idd El Shargi North Dome (ISND) and Idd El Shargi South Dome (ISSD), with a 100-percent working interest in each, and Al Rayyan (Block 12), with a 92.5-percent working interest. The terms for ISND, ISSD and Block 12 expire in 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. Occidental also received approval for field development plans for ISSD and Al Rayyan, which include additional drilling through 2013.

Occidental's Dolphin investment comprises two separate economic interests through which Occidental owns: (i) a 24.5-percent undivided interest in the upstream 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 Qatar was approximately 114,000 BOE per day in 2012.

United Arab Emirates

In the first quarter of 2011, Occidental acquired a 40-percent participating interest in the Al Hosn gas project, joining with the Abu Dhabi National Oil Company (ADNOC) in a 30-year joint venture agreement. 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 2012 capital expenditures for this project were approximately $1.2 billion. A substantial portion of the total expenditures to date has been incurred in connection with plants and facilities and is included in the midstream and marketing segment. As the development progresses, higher portions of the capital expenditures will be spent to drill wells, which will be reflected in the oil and gas segment. Occidental believes that its share of total 2013 capital for the project will be approximately $1.1 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

In Yemen, Occidental owns interests in: Block 10 East Shabwa Field, which extends through 2015 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 that extends into 2023.

Occidental's share of production from the Yemen properties was approximately 14,000 BOE per day in 2012.

Latin America Assets



		Latin America 1. Bolivia 2. Colombia

Bolivia

Occidental holds working interests in the Tarija, Chuquisaca and Santa Cruz regions of Bolivia, which produce gas.

Colombia

Occidental has a working interest in the La Cira-Infantas area and has operations within the Llanos Norte Basin. Occidental's interests range from 39 to 61 percent and certain interests expire between 2023 and 2030, while others extend through the economic limit of the areas. Occidental's share of production was approximately 29,000 BOE per day in 2012.

Proved Reserves

Proved oil, NGL and gas reserves were estimated using the unweighted arithmetic average of the first-day-of-the-month price for each month within the year, unless prices were defined by contractual arrangements. Oil, NGL and gas prices used for this purpose were based on posted benchmark prices and adjusted for price differentials including gravity, quality and transportation costs. For the 2012, 2011 and 2010 disclosures, the calculated average West Texas Intermediate oil prices were $94.71, $96.19 and $79.43 per barrel, respectively. The calculated average Henry Hub gas prices for 2012, 2011 and 2010 disclosures were $2.79, $4.04 and $4.39 per MMBtu, respectively.

Occidental had proved reserves at year-end 2012 of 3,296 million BOE, as compared with the year-end 2011 amount of 3,176 million BOE. Proved reserves at year-end 2012 and 2011 consisted of, respectively, 62 percent and 63 percent oil, 10 percent and 9 percent NGLs and 28 percent and 28 percent natural gas. Proved developed reserves represented approximately 73 percent and 76 percent, respectively, of Occidental’s total proved reserves at year-end 2012 and 2011.

Occidental does not have any reserves from non-traditional sources. For further information regarding Occidental's proved reserves, see "Supplemental Oil and Gas Information" following the "Financial Statements."

Proved Reserve Additions

Occidental's total proved reserve additions from all sources were 400 million BOE in 2012. The total additions were as follows:



In millions of BOE
Improved recovery	257
Extensions and discoveries	232
Purchases	94
Revisions of previous estimates	(183	)
Total additions	400

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 and 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 these historical sources of proved reserve additions continue at similar levels.

Improved Recovery

In 2012, Occidental added proved reserves of 257 million BOE from improved recovery through its EOR and infill drilling activities. Generally, the improved recovery additions in 2012 were associated with the continued development of properties in California, Permian, South Texas and Oman. These properties comprise both conventional projects, which are characterized by the deployment of EOR development methods, largely employing application of waterflood, steamflood or CO₂injection, and unconventional projects. These types of conventional EOR development methods 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. Many of Occidental's projects, including unconventional projects, rely on improving permeability to increase flow in the 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 2012, extensions and discoveries added 232 million BOE, a substantial majority of which is attributable to the

recognition of initial proved undeveloped reserves from the Al Hosn gas project.

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 2012, Occidental added 94 million BOE through purchases of proved reserves largely consisting of several domestic acquisitions in the Permian Basin, California, Williston Basin and South Texas.

Revisions of Previous Estimates

Revisions can include upward or downward changes to previous proved reserve estimates for existing fields due to the evaluation or interpretation of geologic, production decline or operating performance data. In addition, product price changes affect proved reserves recorded by Occidental. For example, higher prices may increase the economically recoverable reserves, particularly for domestic properties, because the extra margin extends the expected life of the operations. Offsetting this effect, higher prices decrease Occidental's share of proved reserves under PSCs because less oil is required to recover costs. Conversely, when prices drop, Occidental's share of proved reserves increases for PSCs and economically recoverable reserves may drop for other operations. In 2012, revisions of previous estimates provided a net 183 million BOE reduction to proved reserves.

In 2012, revisions related to price for the company as a whole were negative. A substantial majority of such revisions related to Occidental's domestic gas reserves and resulted from lower domestic gas prices. These lower prices and the resulting changes in Occidental's plans for drilling on gas properties constituted a majority of its total revisions. To the extent gas prices recover in the future, a portion of these reserves will be reinstated. If natural gas prices decrease further for an extended period, domestic gas reserves could experience additional negative price revisions.

Other negative revisions were mainly due to reservoir performances in Elk Hills and Midcontinent and Other. 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.

Reserve estimation rules require that estimated ultimate recoveries be much more likely to increase or remain constant than to decrease as changes are made due to increased availability of technical data. As a result, apart from the effect of product prices, it is generally more likely that future proved reserve revisions will be positive in aggregate over time rather than negative.

Proved Undeveloped Reserves

In 2012, Occidental had proved undeveloped reserve additions of 443 million BOE from improved recovery, extensions and discoveries and purchases. Of the total additions, 171 million BOE represented additions from

improved recovery, primarily in California, Permian, South Texas and Oman. Occidental added 46 million BOE through purchases of proved undeveloped reserves domestically in the Permian and Williston Basins and California. Additionally, the proved undeveloped reserves increased due to extensions and discoveries mainly from the Al Hosn gas project. These proved undeveloped reserve additions were offset by transfers of 229 million BOE to the proved developed category as a result of the 2012 development programs and by revisions of 98 million BOE, which is included in total revisions discussed above. These revisions were in the same locations as those discussed above and factors that caused them were substantially the same as those that caused the changes to total proved reserves. Occidental incurred approximately $3.4 billion in 2012 to convert proved undeveloped reserves to proved developed reserves. Permian, Bahrain, California, Oman and Williston accounted for approximately 86 percent of the reserves transfers from proved undeveloped to proved developed in 2012. Costs to develop proved undeveloped reserves have increased over time and 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, 2012, 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 to develop the 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 Vice President, Reserves for Oxy Oil and Gas 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 Vice President 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 Vice President 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 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 2012, 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, 2012, 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 2012 year-end total proved reserves portfolio. In 2012, 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 70 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 have fluctuated throughout 2012, settling at $91.82 per barrel and $111.11 per barrel as of December 31, 2012.

Oil prices will continue to be affected by (i) global supply and demand, which are generally a function of global economic conditions, inventory levels, production disruptions, technological advances, regional market conditions and the actions of OPEC, other significant producers and governments, (ii) currency exchange rates and (iii) 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 predict domestic gas prices reliably. International gas prices are generally fixed under long-term contracts.

CHEMICAL SEGMENT

Business Environment

Chemical segment earnings decreased in 2012, notably because margins were lower across most product lines as price and volume declines more than offset lower feedstock costs. While the overall United States economy experienced modest growth, the lower margins were primarily due to weaker economic conditions in Europe and Asia, and increased competitive activity from these regions.

Business Review

Basic Chemicals

During 2012, United States manufacturing sectors experienced weak growth much of the year, resulting in soft domestic demand and pricing for basic chemical products. Industry chlorine production decreased by approximately 2 percent, compared to 2011. Chlorine prices decreased throughout the year due to lower chlorine demand caused by the slowdown of the Chinese economy and the European debt crisis. Exports of downstream chlorine derivatives into the vinyls chain 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 began 2012 generally

soft because the markets anticipated increasing supply due to the improving United States economy. Prices improved in the last two quarters of 2012 as a result of favorable global caustic soda supply and demand balances, resulting in prices finishing slightly above the prior year level. Businesses such as calcium chloride and potassium hydroxide were also negatively impacted by a mild winter and drought conditions in the United States.

During 2012, OxyChem began construction of a 182,500-ton-per-year membrane chlor-alkali plant in Tennessee, which it expects to begin operating in the fourth quarter of 2013.

Vinyls

Demand in the domestic housing and commercial construction markets increased, resulting in a year-over-year domestic vinyl demand increase of approximately 8 percent in 2012. The higher domestic demand combined with a modest growth in exports contributed to an approximately 4-percent industry-wide increase in domestic operating rates compared to 2011. Industry margins also increased in 2012 due to a combination of higher PVC selling prices and lower ethylene costs. Ethylene costs, which are a significant component of PVC feedstock costs, increased outside North America in 2012 due to the greater dependence on naphtha-based production versus ethane in the United States. North American-produced ethylene continues to be cost-competitive versus prices in Europe and Asia, giving North American vinyl products an advantage in global markets. Industry-wide North American exports of PVC accounted for greater than 35 percent of the total sales of North American producers.

Industry Outlook

Industry performance will depend on the health of the global economy, specifically in the housing, construction, automotive and durable goods markets. Margins also depend on market supply and demand balances and feedstock and energy prices.

Basic Chemicals

Occidental expects that if the United States housing, automotive and durable goods markets continue to improve, domestic demand for basic chemical products should be higher in 2013. With improving demand, chlorine and caustic soda margins would be expected to remain at least at 2012 levels. The continued competitiveness of downstream chlorine derivatives in global markets is contingent on United States feedstock costs, primarily natural gas and ethylene, remaining favorable compared to other global markets.

Vinyls

North American demand and operating rates for vinyls should improve further in 2013 if growth of housing starts and commercial construction continues. Occidental expects export demand to remain firm and industry margins to improve as operating rates increase.

MIDSTREAM AND MARKETING SEGMENT

Business Environment

Midstream and marketing segment earnings are affected by the performance of its marketing and trading businesses and its processing, transportation and power generation assets. The marketing and trading businesses aggregate and market Occidental's and third-party volumes, trade oil, gas and other commodities and engage in storage activities. 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 in 2012 were comparable to 2011 and reflected improved marketing and trading performance offset by lower gas processing margins.

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 its assets, including transportation and storage capacity, and engages in commodities trading. Occidental’s third-party marketing and trading activities focus on purchasing oil, NGLs and gas for resale from parties whose oil and gas supply is located near its transportation and storage assets. These purchases allow Occidental to aggregate volumes to improve marketing earnings. In addition, Occidental’s Phibro trading unit's strategy is to profit from market price changes. Marketing and trading performance is affected primarily by commodity price changes and margins in oil and gas transportation and storage programs. The marketing and trading group's earnings increased in 2012.

Gas Processing Plants and CO₂ Fields and Facilities

Occidental processes its and third-party domestic wet gas to extract NGLs and other gas byproducts, 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 2012 earnings from these operations decreased compared to 2011, which reflected lower NGL prices.

Occidental, together with ADNOC, is constructing a gas plant and facilities as part of the Al Hosn gas project in Abu Dhabi, which is expected to be operational in 2014.

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 and Oman. The Dolphin Pipeline contributes significantly to Occidental's pipeline transportation results through Occidental's 24.5-percent interest in Dolphin Energy. The Dolphin Pipeline has 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 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 and 85 truck unloading facilities at various points along the system, which allow for additional volumes to be delivered into the pipeline.

Occidental owns 35 percent of the general partner of Plains All-American Pipeline, L.P. (Plains Pipeline), a publicly traded oil and gas pipeline transportation, storage, terminalling and marketing entity in the western and southern United States and Canada. The Plains Pipeline contributed over 20 percent of the segment's earnings for 2012.

Occidental and Magellan Midstream Partners, L.P. are proceeding with the construction of the BridgeTex Pipeline, which is expected to begin service in mid-2014. The approximately 450-mile-long pipeline will be capable of transporting approximately 300,000 barrels per day of crude oil between the Permian region (Colorado City, TX) and the Gulf Coast refinery markets. The BridgeTex Pipeline project also includes construction of approximately 2.6 million barrels of oil storage in aggregate.

Occidental's 2012 pipeline transportation earnings improved due to higher volumes and pricing, and higher income from Plains Pipeline, partially offset by lower earnings from the Dolphin Pipeline.

Power Generation Facilities

Earnings from power and steam generation facilities are derived from sales to affiliates and third parties and are generally not material.

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. Based on its framework of controls and risk management systems, however, Occidental does not expect the volatility of these operations to be significant to the company as a whole. Although the marketing and the trading businesses individually can cause volatility, the operations together tend to offset each other, significantly reducing the overall volatility of the midstream and marketing segment.

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,	2012			2011			2010
NET SALES ^(a)
Oil and Gas	$	18,906		$	18,419		$	14,276
Chemical	4,580			4,815			4,016
Midstream and Marketing	1,399			1,447			1,471
Eliminations ^(a)	(713		)	(742		)	(718		)
	$	24,172		$	23,939		$	19,045
EARNINGS
Oil and Gas ^(b,c)	$	7,095		$	10,241		$	7,151
Chemical	720			861			438
Midstream and Marketing	439			448			472
	8,254			11,550			8,061
Unallocated corporate items
Interest expense, net ^(d)	(117		)	(284		)	(93		)
Income taxes ^(e)	(3,118		)	(4,201		)	(2,995		)
Other	(384		)	(425		)	(404		)
Income from continuing operations ^(b)	4,635			6,640			4,569
Discontinued operations, net ^(f)	(37		)	131			(39		)
Net Income ^(b)	$	4,598		$	6,771		$	4,530
Basic Earnings per Common Share	$	5.67		$	8.32		$	5.57


(a)	Intersegment sales eliminate upon consolidation and are generally made at prices approximating 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 a noncontrolling interest amount of $72 million for 2010.

(c)

The 2012 amount includes pre-tax charges of $1.7 billion for the impairment of domestic gas assets and related items. 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 the 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.


(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.


(f)	The 2011 amount includes a $144 million after-tax gain from the sale of the Argentine operations.

Oil and Gas

Dollars in millions, except as indicated



	2012			2011		2010
Segment Sales	$	18,906		$	18,419	$	14,276
Segment Earnings	$	7,095	^(a)	$	10,241	$	7,151


(a)	Includes pre-tax charges of $1.7 billion for the impairment of domestic gas assets and related items.

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, 2012. 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	2012	2011	2010
United States
Oil (MBBL)
California	88	80	76
Permian	142	134	136
Midcontinent and Other	25	16	7
Total	255	230	219
NGLs (MBBL)
California	17	15	16
Permian	39	38	29
Midcontinent and Other	17	16	7
Total	73	69	52
Natural gas (MMCF)
California	256	260	280
Permian	155	157	199
Midcontinent and Other	410	365	198
Total	821	782	677
Latin America ^(a)
Oil (MBBL) – Colombia ^(b)	29	29	37
Natural gas (MMCF) – Bolivia	13	15	16
Middle East/North Africa
Oil (MBBL)
Bahrain	4	4	3
Dolphin	8	9	11
Oman	67	67	62
Qatar	71	73	76
Other	36	38	46
Total	186	191	198
NGLs (MBBL)
Dolphin	8	10	13
Other	1	—	1
Total	9	10	14
Natural gas (MMCF)
Bahrain	232	173	169
Dolphin	163	199	236
Oman	57	54	48
Total	452	426	453
Total Production (MBOE) ^(a,c)	766	733	711
(See footnotes following the Average Sales Price table)



Sales Volumes per Day	2012	2011	2010
United States
Oil (MBBL)	255	230	219
NGLs (MBBL)	73	69	52
Natural gas (MMCF)	819	782	677
Latin America ^(a)
Oil (MBBL) – Colombia ^(b)	28	29	36
Natural gas (MMCF) – Bolivia	13	15	16
Middle East/North Africa
Oil (MBBL)
Bahrain	4	4	3
Dolphin	8	9	12
Oman	66	69	61
Qatar	71	73	76
Other	36	34	42
Total	185	189	194
NGLs (MBBL)
Dolphin	8	10	12
Other	1	—	1
Total	9	10	13
Natural gas (MMCF)	452	426	453
Total Sales Volumes (MBOE) ^(a,c)	764	731	705
(See footnotes following the Average Sales Prices table)



	2012		2011		2010
Average Sales Prices
Oil Prices ($ per bbl)
United States	$	93.72	$	92.80	$	73.79
Latin America ^(a)	$	98.35	$	97.16	$	75.29
Middle East/North Africa	$	108.76	$	104.34	$	76.67
Total worldwide ^(a)	$	99.87	$	97.92	$	75.16
NGL Prices ($ per bbl)
United States	$	46.07	$	59.10	$	48.86
Middle East/North Africa	$	37.74	$	32.09	$	30.64
Total worldwide	$	45.18	$	55.53	$	45.08
Gas Prices ($ per Mcf)
United States	$	2.62	$	4.06	$	4.53
Latin America ^(a)	$	11.85	$	10.11	$	7.73
Total worldwide ^(a)	$	2.06	$	3.01	$	3.11
Expensed Exploration	$	345	$	258	$	262
Capital Expenditures
Development	$	7,554	$	5,686	$	2,955
Exploration	$	622	$	421	$	194
Other	$	44	$	38	$	17


(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 and sales volumes per day of 5 mbbl and 4 mbbl, respectively, for the year ended December 31, 2010, 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.

Oil and gas segment earnings in 2012 were $7.1 billion compared to $10.2 billion in 2011. The decrease reflected asset impairments and related items, lower NGL and natural gas prices, and higher depreciation depletion and amortization (DD&A) rates, maintenance activity and field support costs and exploration expense, partially offset by higher oil prices and domestic volumes.

Average production costs for 2012, excluding taxes other than on income, were $14.99 per BOE, compared to $12.84 per BOE for 2011. The increase reflected higher maintenance activities and field support costs. The fourth quarter of 2012 production costs were $14.95 per barrel, which was $1.04 per barrel lower than the third quarter of 2012 level. These reductions occurred during the course of the fourth quarter, and the 2012 year-end exit rate on a per barrel basis was lower than the fourth quarter 2011 average and well below the fourth quarter 2012 level. These reductions are expected to continue into 2013, reflecting planned improvements in operational efficiencies over many cost categories.

Average daily oil and gas production volumes were 766,000 BOE for 2012, compared to 733,000 BOE for 2011. Occidental's domestic production increased by 9 percent, while total company production increased by 5 percent. Dolphin's full cost recovery of pre-startup capital, which reduced production, was the only operation where PSCs and similar contracts had an appreciable effect on 2012 production volumes. Average daily sales volumes were 764,000 BOE in the twelve months of 2012, compared with 731,000 BOE for the same period in 2011.

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 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.

Average 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 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. Average 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 2012 included pre-tax charges of $1.7 billion for the impairment of domestic gas assets and related items.

Oil and gas segment earnings in 2011 included 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.

Chemical



In millions	2012		2011		2010
Segment Sales	$	4,580	$	4,815	$	4,016
Segment Earnings	$	720	$	861	$	438
Capital Expenditures	$	357	$	234	$	237

Chemical segment earnings were $720 million in 2012, compared to $861 million in 2011. The reduction was primarily the result of lower margins due to weaker economic conditions in Europe and Asia and increased competitive activity from these regions. The calcium chloride and potassium hydroxide businesses were also negatively impacted by a mild winter and drought conditions in the United States.

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.

The increase in the chemical capital expenditures was mostly due to the new chlor-alkali plant.

Midstream, Marketing and Other



In millions	2012		2011		2010
Segment Sales	$	1,399	$	1,447	$	1,471
Segment Earnings	$	439	$	448	$	472
Capital Expenditures	$	1,558	$	1,089	$	501

Midstream and marketing segment earnings in 2012 were $439 million, compared to $448 million in 2011. The 2012 results reflected lower gas processing earnings and improved marketing and trading performance.

Midstream and marketing segment earnings in 2011 were $448 million, compared to $472 million in 2010. The 2011 results reflected lower gas processing margins, partially offset by improved marketing and trading performance.

The increase in the midstream and marketing capital expenditures was almost entirely due to the Al Hosn gas project.

SIGNIFICANT ITEMS AFFECTING EARNINGS

The following table sets forth, for the years ended December 31, 2012, 2011 and 2010, 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)	2012			2011			2010
OIL AND GAS
Asset impairments and related items	$	(1,731	)	$	—		$	(275	)
Libya exploration write-off	—			(35		)	—
Gains on sale of Colombian pipeline interest	—			22			—
Foreign tax	—			(29		)	—
Total Oil and Gas	$	(1,731	)	$	(42	)	$	(275	)
CHEMICAL
No significant items affecting earnings	$	—		$	—		$	—
Total Chemical	$	—		$	—		$	—
MIDSTREAM AND MARKETING
No significant items affecting earnings	$	—		$	—		$	—
Total Midstream and Marketing	$	—		$	—		$	—
CORPORATE
Litigation reserves	$	(20	)	$	—		$	—
Premium on debt extinguishments	—			(163		)	—
State income tax charge	—			(33		)	—
Foreign tax credit carry-forwards	—			—			80
Tax effect of pre-tax adjustments	636			50			100
Discontinued operations, net of tax ^(a)	(37		)	131			(39		)
Total Corporate	$	579		$	(15	)	$	141


(a)	The 2011 amount includes a $144 million after-tax gain from the sale of the Argentine operations.

TAXES

Deferred tax liabilities, net of deferred tax assets of $2.0 billion, were $5.8 billion at December 31, 2012. The current portion of the deferred tax assets of $250 million is included in other current assets. 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	2012			2011			2010
EARNINGS
Oil and Gas	$	7,095		$	10,241		$	7,151
Chemical	720			861			438
Midstream and Marketing	439			448			472
Unallocated Corporate Items	(501		)	(709		)	(497		)
Pre-tax income	7,753			10,841			7,564
Income tax expense
Federal and State	694			1,795			1,087
Foreign	2,424			2,406			1,908
Total income tax expense	3,118			4,201			2,995
Income from continuing operations	$	4,635		$	6,640		$	4,569
Worldwide effective tax rate	40		%	39		%	40		%

Occidental’s 2012 worldwide tax rate was 40 percent, slightly higher than 2011 and comparable to 2010 due to higher proportionate foreign pre-tax income in 2012. 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.

A deferred tax liability has not been recognized for temporary differences related to unremitted earnings of certain consolidated foreign subsidiaries as it is Occidental’s intention, generally, to reinvest such earnings permanently. If the earnings of these foreign subsidiaries were not indefinitely reinvested, the additional deferred tax liability required would be immaterial, assuming utilization of available foreign tax credits.

CONSOLIDATED RESULTS OF OPERATIONS

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

Selected Revenue and Other Income Items



In millions	2012		2011		2010
Net sales	$	24,172	$	23,939	$	19,045
Interest, dividends and other income	$	81	$	180	$	112

The increase in net sales in 2012, compared to 2011, was due to higher oil volumes and prices, partially offset by lower gas and NGL prices and lower prices and volumes across most chemical products.

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 changes in the oil and gas segment generally represent a substantially larger portion of the overall change in net sales than the chemical and midstream and marketing segments.

Selected Expense Items



In millions	2012		2011		2010
Cost of sales ^(a)	$	7,844	$	7,385	$	6,112
Selling, general and administrative and other operating expenses	$	1,602	$	1,523	$	1,396
Depreciation, depletion and amortization	$	4,511	$	3,591	$	3,153
Taxes other than on income	$	680	$	605	$	484
Exploration expense	$	345	$	258	$	262
Asset impairments and related items	$	1,751	$	—	$	275
Interest and debt expense, net	$	130	$	298	$	116


(a)	Excludes DD&A of $4,504 million in 2012, $3,584 million in 2011 and $3,145 million in 2010.

Cost of sales increased in 2012, compared to 2011, due to higher oil and gas volumes and operating costs, mostly resulting from higher maintenance activity and field support costs, partially offset by lower feedstock and energy costs in the chemical segment.

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.

Selling, general and administrative and other operating expenses increased in 2012 due to higher headcount, partially offset by lower equity compensation expense and the Colombia net worth tax which increased the 2011 costs.