Edgar Filing: OCCIDENTAL PETROLEUM CORP /DE/

Document

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K



þ 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, 2016	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		5 Greenway Plaza, Suite 110, Houston, Texas
Zip Code		77046
Registrant's telephone number, including area code		(713) 215-7000

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, $0.20 par value		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 þ 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 þ

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 þ 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 þ 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. þ

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	þ	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 þ

The aggregate market value of the voting common stock held by nonaffiliates of the registrant was approximately $57.5 billion, computed by reference to the closing price on the New York Stock Exchange composite tape of $75.56 per share of Common Stock on June 30, 2016. 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, 2017, there were 764,291,301 shares of Common Stock outstanding, par value $0.20 per share.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive Proxy Statement, relating to its May 12, 2017 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 and Marketing Operations...............................................................................................................................	5
	Capital Expenditures.........................................................................................................................................................	6
	Employees........................................................................................................................................................................	6
	Environmental Regulation.................................................................................................................................................	6
	Available Information.........................................................................................................................................................	6
Item 1A	Risk Factors............................................................................................................................................................................	6
Item 1B	Unresolved Staff Comments...................................................................................................................................................	8
Item 3	Legal Proceedings..................................................................................................................................................................	8
Item 4	Mine Safety Disclosures.........................................................................................................................................................	8
	Executive Officers...................................................................................................................................................................	9
Part II
Item 5	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities..............	10
Item 6	Selected Financial Data..........................................................................................................................................................	12
Item 7	Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A).....................................	12
	Strategy.............................................................................................................................................................................	13
	Oil and Gas Segment........................................................................................................................................................	14
	Chemical Segment............................................................................................................................................................	20
	Midstream and Marketing Segment..................................................................................................................................	20
	Segment Results of Operations and Significant Items Affecting Earnings........................................................................	21
	Taxes.................................................................................................................................................................................	26
	Consolidated Results of Operations.................................................................................................................................	26
	Consolidated Analysis of Financial Position......................................................................................................................	28
	Liquidity and Capital Resources.......................................................................................................................................	28
	Off-Balance-Sheet Arrangements.....................................................................................................................................	30
	Contractual Obligations.....................................................................................................................................................	30
	Lawsuits, Claims and Contingencies................................................................................................................................	30
	Environmental Liabilities and Expenditures......................................................................................................................	31
	Foreign Investments.........................................................................................................................................................	32
	Critical Accounting Policies and Estimates.......................................................................................................................	32
	Significant Accounting and Disclosure Changes...............................................................................................................	36
	Safe Harbor Discussion Regarding Outlook and Other Forward-Looking Data................................................................	36
Item 7A	Quantitative and Qualitative Disclosures About Market Risk..................................................................................................	36
Item 8	Financial Statements and Supplementary Data.....................................................................................................................	38
	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 Operations...........................................................................................................................	42
	Consolidated Statements of Comprehensive Income.......................................................................................................	43
	Consolidated Statements of Stockholders' Equity.............................................................................................................	44
	Consolidated Statements of Cash Flows..........................................................................................................................	45
	Notes to Consolidated Financial Statements....................................................................................................................	46
	Quarterly Financial Data (Unaudited)................................................................................................................................	77
	Supplemental Oil and Gas Information (Unaudited).........................................................................................................	79
	Financial Statement Schedule:
	Schedule II – Valuation and Qualifying Accounts..............................................................................................................	95
Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.................................................	96
Item 9A	Controls and Procedures........................................................................................................................................................	96
	Management's Annual Assessment of and Report on Internal Control Over Financial Reporting....................................	96
	Disclosure Controls and Procedures.................................................................................................................................	96
Item 9B	Other Information....................................................................................................................................................................	96

Part III
Item 10	Directors, Executive Officers and Corporate Governance......................................................................................................	97
Item 11	Executive Compensation........................................................................................................................................................	97
Item 12	Security Ownership of Certain Beneficial Owners and Management ....................................................................................	97
Item 13	Certain Relationships and Related Transactions and Director Independence.......................................................................	97
Item 14	Principal Accounting Fees and Services................................................................................................................................	97

Part IV
Item 15	Exhibits and Financial Statement Schedules.........................................................................................................................	97

Part I

ITEMS 1 AND 2 BUSINESS AND PROPERTIES

In this report, "Occidental" means Occidental Petroleum Corporation, a Delaware corporation (OPC) incorporated in 1986, 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 5 Greenway Plaza, Suite 110, Houston, Texas 77046; telephone (713) 215-7000.

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 and marketing segment 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. Additionally, the midstream and marketing segment invests in entities that conduct similar activities.

For information regarding Occidental's segments, geographic areas of operation and current developments, including strategies and actions related thereto, 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 upstream oil and gas operations are located in New Mexico and Texas. International operations are located in Bolivia, Colombia, Oman, Qatar and the United Arab Emirates (UAE).

Proved Reserves and Sales Volumes

The table below shows Occidental’s total oil, NGLs and natural gas proved reserves and sales volumes in 2016, 2015 and 2014. 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.

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 local, current and anticipated market conditions. Occidental competes for transportation capacity and infrastructure for the delivery of its products. 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 fields, utilizing primary and enhanced oil recovery (EOR) techniques and strategic acquisitions in areas where Occidental has a competitive advantage as a result of its current successful operations or investments in shared infrastructure. Occidental also competes to develop and produce its worldwide oil and gas reserves cost-effectively, maintain a skilled workforce and obtain quality services.

Comparative Oil and Gas Proved Reserves and Sales Volumes

Oil, which includes condensate, and NGLs are in millions of barrels; natural gas is in billions of cubic feet (Bcf); barrels of oil equivalent (BOE) are in millions.



	2016					2015					2014 ^(a)
Proved Reserves	Oil	NGLs	Gas	BOE	^(b)	Oil	NGLs	Gas	BOE	^(b)	Oil	NGLs	Gas	BOE	^(b)
United States	960	219	1,045	1,353		915	186	1,019	1,271		1,273	222	1,714	1,781
International	397	201	2,729	1,053		394	144	2,349	929		497	140	2,413	1,038
Total	1,357	420	3,774	2,406		1,309	330	3,368	2,200		1,770	362	4,127	2,819
Sales Volumes
United States	69	19	132	110		73	20	155	119		67	20	173	116
International	74	11	217	121		86	7	205	127		74	2	158	102
Total	143	30	349	231		159	27	360	246		141	22	331	218

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 under the heading "Supplemental Oil and Gas Information". Proved reserves are stated on a net basis after applicable royalties.


(a)	Excludes proved reserves and sales volumes for Occidental's California oil and gas operations, which were transferred to California Resources Corporation (California Resources) in November 2014, and has been treated as discontinued operations.

(b)

Natural gas volumes are converted to BOE at six thousand cubic feet (Mcf) of gas per 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 for a number of years. For example, in 2016, the average prices of West Texas Intermediate (WTI) oil and New York Mercantile Exchange (NYMEX) natural gas were $43.32 per barrel and $2.42 per Mcf, respectively, resulting in an oil to gas ratio of 18 to 1.

CHEMICAL OPERATIONS

General

OxyChem owns and operates manufacturing plants at 23 domestic sites in Alabama, Georgia, Illinois, Kansas, Louisiana, Michigan, New Jersey, New York, Ohio, Pennsylvania, Tennessee and Texas and at two international sites in Canada and Chile. In early 2014, OxyChem, through a 50/50 joint venture with Mexichem S.A.B. de C.V., broke ground on a 1.2 billion pound-per-year ethylene cracker at the OxyChem Ingleside facility. The cracker remains on budget and on schedule and is expected to begin operating in early 2017. OxyChem has announced a $145 million expansion of its manufacturing plant in Geismar, Louisiana. The project will produce an OxyChem patented new raw material used in making next-generation, climate-friendly refrigerants with a low global warming and

ozone depletion potential. Construction work has begun with an anticipated completion date in late 2017.

Competition

OxyChem competes with numerous other domestic and foreign chemical producers. OxyChem’s market position was first or second in the United States in 2016 for the principal basic chemical’s products it manufactures and markets as well as for Vinyl Chloride Monomer (VCM). OxyChem ranks in the top three producers of Poly Vinyl Chloride (PVC) in the United States. 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	3.6 million tons
Caustic soda	Pulp, paper and aluminum production	3.7 million tons
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)	2.1 billion pounds
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

MIDSTREAM AND MARKETING OPERATIONS

General

Occidental's midstream and marketing operations primarily support and enhance its oil and gas and chemicals businesses and also provide similar services for third parties.

Competition

Occidental's midstream and marketing businesses operate in competitive and highly regulated markets. Occidental's domestic pipeline business competes with other midstream transportation companies to provide transportation services. The competitive strategy of

Occidental's domestic pipeline business is to ensure that its pipeline and gathering systems connect various production areas to multiple market locations. Transportation rates are regulated and tariff-based. Other midstream and marketing operations also support Occidental's domestic and international oil and gas and chemical operations. Occidental's marketing business competes with other market participants on exchange platforms and through other bilateral transactions with direct counterparties. Occidental maximizes the value of its transportation and storage assets by marketing its own and third-party production in the oil and gas business.

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



Location	Description	Capacity
Gas Plants
Texas, New Mexico and Colorado	Occidental and third-party-operated natural gas gathering, compression and processing systems, and CO₂ processing and capturing	2.5 Bcf per day

Texas	50/50 non-controlling interest in gas processing facility (cryogenic plant with acid gas treating capability)	0.2 Bcf per day

United Arab Emirates	Natural gas processing facilities for Al Hosn Gas	1.1 Bcf per day

Pipelines
Texas, New Mexico, and Oklahoma	Common carrier oil pipeline and storage system	720,000 barrels of oil per day 7.1 million barrels of oil storage 2,900 miles of pipeline

Texas, New Mexico and Colorado	CO₂ fields and pipeline systems transporting CO₂ to oil and gas producing locations	2.4 Bcf per day

Dolphin Pipeline - Qatar and United Arab Emirates	Equity investment in a natural gas pipeline	3.2 Bcf of natural gas per day

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	19,200 miles of active crude oil and NGL pipelines and gathering systems.(a) 142 million barrels of crude oil, refined products and NGL storage capacity and 97 Bcf of natural gas storage working capacity.(a)

Ingleside Crude Terminal
Texas	Oil pipeline, terminal, and storage system	300,000 barrels of oil per day 2.1 million barrels of oil storage

Power Generation
Texas and Louisiana	Occidental-operated power and steam generation facilities	1,200 megawatts and 1.6 million pounds of steam per hour


(a)	Amounts are gross, including interests held by third parties.

CAPITAL EXPENDITURES

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

EMPLOYEES

Occidental employed approximately 11,000 people at December 31, 2016, 7,000 of whom were located in the United States. Occidental employed approximately 7,000 people in the oil and gas and midstream and marketing segments and 3,000 people in the chemical segment. An additional 1,000 people were employed in administrative and headquarters functions. Approximately 700 U.S.-based employees and 1,000 foreign-based employees are represented by labor unions.

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 Policies, board-committee charters and Code of Business Conduct.

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

ITEM 1A RISK FACTORS

Volatile global and local commodity pricing strongly affect 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 NGLs, and its chemical products.

Prices for crude oil, natural gas and NGLs fluctuate widely. Historically, the markets for crude oil, natural gas, NGLs and refined products have been volatile and may continue to be volatile in the future. Prolonged or further declines in crude oil, natural gas and NGLs prices would continue to reduce Occidental's operating results and cash flows, and could impact its future rate of growth and further impact the recoverability of the carrying value of its assets.

Prices are set by global and local market forces which are not in Occidental's control. These factors include, among others:


Ø	Worldwide and domestic supplies of, and demand for, crude oil, natural gas, NGLs and refined products.


Ø	The cost of exploring for, developing, producing, refining and marketing crude oil, natural gas, NGLs and refined products.


Ø	Operational impacts such as production disruptions, technological advances and regional market conditions, including available transportation capacity and infrastructure constraints in producing areas.


Ø	Changes in weather patterns and climatic changes.


Ø	The impacts of the members of OPEC and other producing nations that may agree to and maintain production levels.


Ø	The worldwide military and political environment, uncertainty or instability resulting from an escalation or outbreak of armed hostilities or acts of terrorism in the United States, or elsewhere.


Ø	The price and availability of alternative and competing fuels.


Ø	Domestic and foreign governmental regulations and taxes.


Ø	Additional or increased nationalization and expropriation activities by foreign governments.


Ø	General economic conditions worldwide.

The long-term effects of these and other conditions on the prices of crude oil, natural gas, NGLs and refined products are uncertain. Generally, Occidental's practice is to remain exposed to market prices of commodities; however, management may elect to hedge the price risk of crude oil, natural gas, NGLs and refined products in the future.

Global economic and political conditions have driven oil and gas prices down significantly since 2014. These conditions may continue for an extended period. Declines in commodity prices could require Occidental to reduce capital spending and impair the carrying value of assets.

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

Occidental bears the risks of equipment failures, construction delays, escalating costs or competition for services, materials, supplies or labor, property or border disputes, disappointing drilling results or 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 and 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 federal, state, local and foreign 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 well stimulation techniques such as hydraulic fracturing and acidization), labor and employment, taxes, royalty rates, permitted production rates, entitlements, import, export and use of raw materials, equipment or products, use or increased use of land, water and other natural resources, safety, security and environmental protection, all of which may restrict or prohibit activities of Occidental or its contractors, increase Occidental's costs or reduce demand for Occidental's products.


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


Ø	Development delays and cost overruns due to approval delays for, or denial of, drilling and other permits and authorizations.

In addition, Occidental has and may continue to experience adverse consequences, such as risk of loss or production limitations, because certain of its international operations are located in countries affected by political instability, nationalizations, corruption, 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 or revenue comes from international sources.

Occidental's oil and gas business operates in highly competitive environments, which affect, among other things, its ability to make acquisitions to grow production and replace reserves.

Results of operations, reserves replacement and growth in oil and gas production depend, in part, on Occidental’s ability to profitably acquire 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. In addition, during periods of low product prices, any cash conservation efforts may delay production growth and reserve replacement efforts.

Occidental’s acquisition activities also 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 in recent years and the more recent significant decline in crude oil prices; (ii) bear unexpected integration costs or experience other integration difficulties; (iii) experience share price declines based on the market’s evaluation of the activity; or (iv) assume liabilities that are greater than anticipated.

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

Reported oil and gas reserves are an estimate based on periodic review of reservoir characteristics and recoverability, including production decline rates, operating performance and economic feasibility at the prevailing commodity prices, assumptions concerning future crude oil and natural gas prices, future operating costs and capital expenditures, as well as assumed effects of regulation by governmental agencies. The procedures and methods for estimating the reserves by our internal engineers were reviewed by independent petroleum consultants; however, there are inherent uncertainties in estimating reserves. Actual production, revenues, and expenditures with respect to our reserves may vary from estimates, and the variance may be material. If Occidental were required to make significant negative reserve revisions, its results of operations and stock price could be adversely affected. In addition, the discounted cash flows included in this Form 10-K should not be construed as the fair value of the reserves attributable to our properties. The estimated discounted future net cash flows from proved reserves are based on an unweighted 12-month average first-day-of-the-month prices in accordance with SEC regulations. Actual future prices and costs may differ materially from SEC regulation-compliant prices used for purposes of estimating future discounted net cash flows from proved reserves.

Concerns about climate change and further regulation of greenhouse gas emissions may adversely affect Occidental’s operations or results.

Continuing political and social attention to the issue of climate change has resulted in both existing and pending international agreements and national, regional and local legislation and regulatory programs to reduce greenhouse gas emissions. These and other government actions relating to greenhouse gas emissions could require Occidental to incur increased operating and maintenance costs, such as costs to purchase and operate emissions control systems, to acquire emissions allowances or comply with new regulatory or reporting requirements, or they could promote the use of alternative sources of energy and thereby decrease demand for oil, natural gas and other products that Occidental’s businesses produce. Any such legislation or regulatory programs could also increase the cost of consuming, and thereby reduce demand for, oil, natural gas and other products produced by Occidental’s businesses. Consequently, government actions designed to reduce emissions of greenhouse gases could have an adverse effect on Occidental’s business, financial condition and results of operations.

It is difficult to predict the timing and certainty of such government actions and the ultimate effect on Occidental, which could depend on, among other things, the type and extent of greenhouse gas reductions required, the availability and price of emissions allowances or credits, the availability and price of alternative fuel sources, the energy sectors covered, and Occidental’s ability to recover the costs incurred through its operating agreements or the pricing of the company’s oil, natural gas and other products.

Occidental’s businesses may experience catastrophic events.

The occurrence of events such as hurricanes, floods, droughts, earthquakes or other acts of nature, well blowouts, fires, explosions, chemical releases, crude oil releases, material or mechanical failure, 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 digital systems, related infrastructure, technologies and networks to run its business and to control and manage its oil and gas, chemicals, marketing and pipeline operations. Use of the internet, cloud services and other public networks exposes Occidental’s business to cyber-attacks that attempt to gain unauthorized access to data and systems, release confidential information, corrupt data and disrupt critical systems and operations. Even though Occidental has implemented controls and multiple layers of security to mitigate the risks of a cyber-attack, there can be no assurance that such cyber security measures will be sufficient to prevent security breaches from occurring. While we have experienced cyber-attacks in the past, we have not suffered any material losses. However, if in the future our cyber security measures are compromised or prove insufficient, the potential consequences to Occidental’s businesses and the communities in which it operates could be significant. As cyber-attacks continue to evolve in magnitude and sophistication, we may be required to expend additional resources in order to continue to enhance our cyber security measures and to investigate and remediate any digital systems, related infrastructure, technologies, and network security vulnerabilities.

Occidental's oil and gas reserve additions may not continue at the same rate and a failure to replace reserves may negatively affect our business.

Unless we conduct successful exploration or development activities, acquire properties containing proved reserves, or both, proved reserves will generally decline. Management expects improved recovery, extensions and discoveries to continueas main sources for reserve additions but factors, such as geology, government regulations and permits and the effectiveness of development plans, are partially or fully outside management's control and could cause results to differ materially from expectations.

Other risk factors.

Additional discussion of risks and uncertainties related to price and demand, litigation, environmental matters, oil and gas reserves estimation processes, 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 and Marketing Segment — Industry Outlook," "— Lawsuits, Claims and Contingencies," "— Environmental Liabilities and Expenditures," "— Critical Accounting Policies and Estimates," "— Quantitative and Qualitative Disclosures About 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

None.

ITEM 3 LEGAL PROCEEDINGS

In the fourth quarter of 2014, the U.S. Department of Transportation Pipeline and Hazardous Materials Safety Administration sent a notice to an OPC subsidiary that it is seeking penalties of $165,900 related to a routine, comprehensive inspection of the subsidiary's records, procedures and facilities, covering a multi-year period. The subsidiary contested the penalties and is awaiting a decision.

In the third quarter of 2014, the U.S. Department of Transportation Pipeline and Hazardous Materials Safety Administration sent a notice to an OPC subsidiary that it is seeking penalties of $165,600 related to a crude oil pipeline incident in Scurry County, Texas. The subsidiary contested the penalties and is awaiting a decision.

For information regarding other legal proceedings, see the information under the caption "Lawsuits, Claims and 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 office of each executive officer of Occidental will expire at the May 12, 2017 meeting of the Board of Directors or when a successor is selected. The following table sets forth the executive officers of Occidental:



Name Current Title	Age at February 23, 2017	Positions with Occidental and Subsidiaries and Employment History

Vicki Hollub Chief Executive Officer and President	57	President, Chief Executive Officer and Director since April 2016; President, Chief Operating Officer and Director, 2015-2016; Senior Executive Vice President and President, Oxy Oil and Gas, 2015; Executive Vice President and President Oxy Oil and Gas - Americas, 2014-2015; Vice President and Executive Vice President, U.S. Operations, Oxy Oil and Gas, 2013-2014; Executive Vice President - California Operations, 2012-2013; Oxy Permian CO₂ President and General Manager, 2011-2012.


Joseph C. Elliott Senior Vice President	59	Senior Vice President since December 2016; President - Oxy Oil & Gas Domestic since June 2015; President and General Manager - Permian Resources Midland, 2014-2015; Manager Operations/Well Construction - Permian Resources, 2013-2014; Manager Operations - South Texas, 2011-2013.


Edward A. “Sandy” Lowe Executive Vice President	65	Executive Vice President since 2015; Group Chairman - Middle East since 2016; Senior Vice President, 2008-2015; President - Oxy Oil & Gas International, 2009-2016.


Glenn M. Vangolen Senior Vice President	58	Senior Vice President - Business Support since February 2015; Executive Vice President - Business Support, 2014-2015; Senior Vice President - Oxy Oil & Gas Middle East, 2010-2014.


Marcia E. Backus Senior Vice President	62	Senior Vice President, General Counsel and Chief Compliance Officer since December 2016; Senior Vice President, General Counsel, Chief Compliance Officer and Corporate Secretary, 2015-2016; Vice President, General Counsel and Corporate Secretary, 2014-2015; Vice President and General Counsel, 2013-2014; Vinson & Elkins: Partner, 1990-2013.


Christopher G. Stavros Senior Vice President	53	Senior Vice President since 2015; Chief Financial Officer since 2014; Executive Vice President, 2014-2015; Vice President, Investor Relations and Treasurer, 2012-2014; Vice President, Investor Relations, 2006-2012.


Jennifer M. Kirk Vice President	42	Vice President, Controller and Principal Accounting Officer since 2014; Controller, Occidental Oil and Gas Corporation, 2012-2014; Finance Director, 2008-2012.

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 26,000 stockholders of record at January 31, 2017, and by approximately 700,000 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 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.

Dividends declared on the common stock were $0.75 for the first and second quarter of 2016 and $0.76 for the third and fourth quarter ($3.02 for the year). On February 16, 2017, a quarterly dividend of $0.76 per share was declared on the common stock, payable on April 14, 2017, to stockholders of record on March 10, 2017. The current annual dividend rate of $3.04 per share has increased by over 500 percent since 2002. 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 35 million, of which approximately 4.5 million had been reserved for issuance through December 31, 2016. 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))

6,220,291 ⁽¹⁾		79.98 ⁽²⁾		25,267,667 ⁽³⁾


(1)	Includes shares reserved to be issued pursuant to stock options (Options), 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 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 stock appreciation rights (SARs) and Options) to be counted as if three shares were issued in determining the number of shares that are 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, depending on the award type, 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 canceled, 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, 2016, were as follows:



Period	Total Number of Shares Purchased			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 2016		103,371	^(a)		$	70.63		—
Second Quarter 2016		96,449	^(a)		$	76.06		—
Third Quarter 2016		96,151	^(a)		$	70.50		—
October 1 - 31, 2016		—			$	—		—
November 1 - 30, 2016		—			$	—		—
December 1 - 31, 2016		—			$	—		—
Fourth Quarter 2016		—			$	—		—
Total 2016		295,971	^(a)		$	72.36		—		63,756,544	^(b)


(a)	Represents purchases from the trustee of Occidental's defined contribution savings plan that are not part of publicly announced plans or programs.


(b)	Represents the total number of shares remaining at year end under Occidental's share repurchase program of 185 million shares. The program was initially announced in 2005. 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), which Occidental is included in, and with that of Occidental’s peer group over the five-year period ended on December 31, 2016. 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, Marathon Oil Corporation, Total S.A. and Occidental.



12/31/2011		12/31/2012		12/31/2013		12/31/2014		12/31/2015		12/31/2016
$	100	$	84	$	107	$	98	$	85	$	94

	100		102		125		117		95		120

	100		116		154		175		177		198

The information provided in this Performance Graph shall not be deemed "soliciting material" or "filed" with the SEC 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

(in millions, except per-share amounts)



As of and for the years ended December 31,	2016			2015			2014			2013				2012
RESULTS OF OPERATIONS ^(a)
Net sales	$	10,090		$	12,480		$	19,312		$	20,170			$	20,100
Income (loss) from continuing operations	$	(1,002	)	$	(8,146	)	$	(130	)	$	4,932			$	3,829
Net income (loss) attributable to common stock	$	(574	)	$	(7,829	)	$	616		$	5,903			$	4,598
Basic earnings (loss) per common share from continuing operations	$	(1.31	)	$	(10.64	)	$	(0.18	)	$	6.12			$	4.72
Basic earnings (loss) per common share	$	(0.75	)	$	(10.23	)	$	0.79		$	7.33			$	5.67
Diluted earnings (loss) per common share	$	(0.75	)	$	(10.23	)	$	0.79		$	7.32			$	5.67

FINANCIAL POSITION ^(a)
Total assets	$	43,109		$	43,409		$	56,237		$	69,415			$	64,175
Long-term debt, net	$	9,819		$	6,855		$	6,816		$	6,911			$	6,988
Stockholders’ equity	$	21,497		$	24,350		$	34,959		$	43,372			$	40,048

MARKET CAPITALIZATION ^(b)	$	54,437		$	51,632		$	62,119		$	75,699			$	61,710

CASH FLOW FROM CONTINUING OPERATIONS
Operating:
Cash flow from continuing operations	$	2,519		$	3,254		$	8,871		$	10,229			$	9,050
Investing:
Capital expenditures	$	(2,717	)	$	(5,272	)	$	(8,930	)	$	(7,357	)		$	(7,874	)
Cash provided (used) by all other investing activities, net	$	(2,025	)	$	(151	)	$	2,686		$	1,040			$	(1,989	)
Financing:
Cash dividends paid	$	(2,309	)	$	(2,264	)	$	(2,210	)	$	(1,553	)	^(c)	$	(2,128	)	^(c)
Purchases of treasury stock	$	(22	)	$	(593	)	$	(2,500	)	$	(943	)		$	(583	)
Cash provided (used) by all other financing activities, net	$	2,722		$	4,341		$	2,384		$	(437	)		$	1,865

DIVIDENDS PER COMMON SHARE	$	3.02		$	2.97		$	2.88		$	2.56			$	2.16

WEIGHTED AVERAGE BASIC SHARES OUTSTANDING (millions)	764			766			781			804				809

Note: The statements of income and cash flows related to California Resources have been treated as discontinued operations for all periods presented. The assets and liabilities of California Resources were removed from Occidental's consolidated balance sheet as of November 30, 2014.


(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)	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.


(c)	The 2012 amount includes an accelerated fourth quarter dividend payment, which normally would have been accrued as of year-end 2012 and paid in the first quarter of 2013.

ITEM 7

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. 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 and marketing segment 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. Additionally, the midstream and marketing segment invests in entities that conduct similar activities.

STRATEGY

General

Through its operations, Occidental aims to maximize Total Shareholder Return through a combination of:


Ø	Consistent dividend growth;


Ø	Value growth through oil and gas development that meets above cost-of-capital returns (ROE and ROCE) and return targets of greater than 15 percent and 20 percent for domestic and international projects, respectively;


Ø	Target growth rates of 5 percent to 8 percent average per year over the long-term; and


Ø	Maintain a strong balance sheet.

In conducting its business, Occidental accepts commodity, engineering and limited exploration risks. Capital is employed to operate all assets in a safe and environmentally sound manner. Occidental seeks to limit its financial and political risks.

Price volatility is inherent in the oil and gas business. In 2016, Occidental continued to experience a challenging price environment with low oil, natural gas and NGLs prices. In order to manage this risk, Occidental strives to retain sufficient cash on hand and may access capital markets, as necessary.

In connection with Occidental's strategic review initiatives, Occidental:


Ø	Acquired producing and non-producing leasehold acreage, CO₂ properties and related infrastructure in the Permian Basin, which leverages existing infrastructure and operational synergies; and


Ø	Completed its exit of non-core operations in the Piceance Basin, Bahrain, Iraq, Libya and Yemen.

The following describes the application of Occidental’s overall strategy for each of its operating segments:

Oil and Gas

The oil and gas business implements Occidental's strategy primarily by:


Ø	Operating and developing areas where reserves are known to exist and to increase production from core areas, primarily in the Permian Basin, Colombia, Oman, Qatar and UAE;


Ø	Focusing on cost-reduction efficiencies, improvement in new well productivity and better base management to reduce total spend per barrel;


Ø	Using enhanced oil recovery techniques, such as CO₂, water and steam floods, in mature fields;


Ø	Focusing many of Occidental's subsurface characterization and technical activities on unconventional opportunities, primarily in the Permian Basin. This focus is in support of a sizable capital program within these developments; and


Ø	Maintaining a disciplined and prudent approach with capital expenditures to focus on returns and maintain

discipline, with an emphasis on creating value and further enhancing Occidental's existing positions.

In 2016, oil and gas capital expenditures were approximately $2.0 billion, and were mainly comprised of expenditures in the Permian Basin and the Middle East. This activity reflects Occidental's strategy to focus on achieving returns above the cost of capital even in a low price environment.

Management believes Occidental's oil and gas segment growth will occur primarily through exploitation and development opportunities in the Permian Basin and Colombia and focused international projects in the Middle East.

Chemical

The primary objective of OxyChem is to generate cash flow in excess of its normal capital expenditure requirements and achieve above-cost-of-capital returns. The chemical segment's strategy is to be a low-cost producer in order to maximize its cash flow generation. OxyChem concentrates on the chlorovinyls chain beginning with chlorine, which is co-produced with caustic soda, and markets both to external customers. In addition, chlorine, together with ethylene, is converted through a series of intermediate products into polyvinyl chloride (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. In early 2014, OxyChem, through a 50/50 joint venture with Mexichem S.A.B. de C.V., broke ground on a 1.2 billion pound-per-year ethylene cracker at the OxyChem Ingleside facility. The joint venture provides an opportunity to capitalize on the advantage that U.S. shale gas development has presented to U.S. chemical producers by providing low-cost ethane as a raw material. The joint venture will provide OxyChem with an ongoing source of ethylene, significantly reducing OxyChem's reliance on third-party ethylene suppliers. The construction of the ethylene cracker remains on budget and on schedule and is expected to begin operating in early 2017. In 2016, capital expenditures for OxyChem totaled $324 million. Additionally, $160 million was spent on the Mexichem joint venture. In the first quarter of 2016, OxyChem sold its Occidental Tower building in Dallas for a pre-tax gain of approximately $57 million and a non-core specialty chemicals business for a pre-tax gain of approximately $31 million. In 2016, OxyChem announced a $145 million expansion of its manufacturing plant in Geismar, Louisiana. The project will produce an OxyChem patented new raw material used in making next-generation, climate-friendly refrigerants with a low global warming and ozone depletion potential. Construction work has begun with an anticipated completion date in late 2017.

Midstream and Marketing

The midstream and marketing segment strives to maximize realized value by optimizing use of its assets, including its transportation and storage capacity, and by providing access to multiple markets. In order to generate returns, the segment evaluates opportunities across the value chain and uses its assets to provide services to other Occidental segments as well as third parties. The segment invests in and operates pipeline systems, gas plants, co-generation facilities, and storage facilities. The segment also seeks to minimize the costs of gas, power and other commodities used in Occidental's businesses, while limiting credit risk exposure. Capital is employed to sustain or, where appropriate, increase operational and transportation capacity and to improve the competitiveness of Occidental's assets. In 2016, capital expenditures totaled $358 million related to Permian Basin gas processing and gathering infrastructure, Al Hosn Gas and the Ingleside Crude Terminal.

Key Performance Indicators

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	Health, environmental, safety and process metrics;


Ø	Total Shareholder Return, including funding the dividend;


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


Ø	Specific measures such as total spend per barrel, per-unit profit, production cost, cash flow, finding and development costs and reserves replacement percentages.

OIL AND GAS SEGMENT

Business Environment

Oil and gas prices are the major variables that drive the industry’s financial performance. The following table presents the average daily West Texas Intermediate (WTI), Brent and New York Mercantile Exchange (NYMEX) prices for 2016 and 2015:



	2016		2015
WTI oil ($/barrel)	$	43.32	$	48.80
Brent oil ($/barrel)	$	45.04	$	53.64
NYMEX gas ($/Mcf)	$	2.42	$	2.75

The following table presents Occidental's average realized prices as a percentage of WTI, Brent and NYMEX for 2016 and 2015:



	2016		2015
Worldwide oil as a percentage of average WTI	89	%	97	%
Worldwide oil as a percentage of average Brent	86	%	88	%
Worldwide NGLs as a percentage of average WTI	34	%	33	%
Worldwide NGLs as a percentage of average Brent	33	%	30	%
Domestic natural gas as a percentage of NYMEX	79	%	78	%

Average WTI and Brent oil price indexes declined 11 percent and 16 percent, from $48.80 and $53.64 in 2015 to $43.32 and $45.04 in 2016, respectively. Average worldwide realized oil prices fell $8.37, or 18 percent, in 2016 compared to 2015. However, the WTI and Brent oil price indexes increased significantly in the fourth quarter of 2016, closing at $53.72 per barrel and $56.82 per barrel, respectively, as of December 31, 2016, well above the 2016 average prices. The average realized domestic natural gas price in 2016 decreased 12 percent from 2015. Average NYMEX natural gas prices declined 12 percent, from $2.75 in 2015 to $2.42 in 2016.

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.

The decline in oil and gas prices during 2016 and 2015, as well as the decision to sell or exit non-core assets, caused Occidental to assess the carrying value of all of its oil and gas producing assets and assess development plans for its non-producing assets. In 2016, impairment and related charges were immaterial. In 2015, Occidental recorded total pre-tax impairment and related charges of $3.5 billion for its domestic assets and $5.0 billion for its international assets. To assess carrying value of its oil and gas assets, Occidental uses oil and gas price curves settled on the last trading day of each quarter. While oil and gas future prices were increasing at the end of 2016 any future sustained declines in commodity prices may result in additional impairments in the future.

Operations

2016 Developments

In March 2016, Occidental completed the sale of its Piceance Basin operations in Colorado for approximately $153 million resulting in a pre-tax gain of $121 million.

In September 2016, Occidental completed the sale of its South Texas Eagle Ford non-operated properties for $63 million resulting in a pre-tax gain of $59 million.

In October 2016, Occidental acquired producing and non-producing leasehold acreage in the Permian Basin. This acquisition includes 35,000 net acres in Reeves and Pecos counties, Texas, in the Southern Delaware Basin, in areas where Occidental currently operates or has working interests. Separately, Occidental also acquired working interests in several producing oil and gas properties with CO₂ floods and related EOR infrastructure, increasing Occidental's ownership in several properties where it is currently the operator or an existing working interest partner. The total purchase price for these

transactions was approximately $2.0 billion.

In 2016, Occidental completed its exit of non-core operations in Bahrain, Iraq, Libya and Yemen.

Business Review

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 it commences. Of the total 3.6 million net acres in which Occidental has interests, approximately 84 percent is leased, 15 percent is owned subsurface mineral rights and 1 percent is owned land with mineral rights.

The following charts show Occidental’s domestic total production volumes for the last five years:

Domestic Production Volumes

(thousands BOE/day)

Notes:


•	Excludes volumes from California Resources, which was separated on November 30, 2014, and included as discontinued operations for all applicable periods.


•	Operations sold include Piceance (sold in March 2016), Williston (sold in November 2015) and Hugoton (sold in April 2014)

United States Assets

United States


1.	Permian Basin


2.	South Texas and Other interests

Permian Basin

Occidental's Permian Basin production is diversified across a large number of producing areas. The basin extends throughout west Texas and southeast New Mexico and is one of the largest and most active oil basins in the United States, accounting for approximately 16 percent of the total United States oil production. Occidental is the largest operator and the largest producer of oil in the Permian Basin with an approximate 12 percent net share of the total oil production in the basin. Occidental also produces and processes natural gas and NGLs in the basin.

Occidental manages its Permian Basin operations through two business units: Permian Resources, which includes growth-oriented unconventional opportunities and Permian EOR, which utilizes enhanced oil recovery techniques such as CO₂floods and waterfloods. During 2016, the Permian operations focused on full cycle value through capital efficiency, reduced operating expense, improved base production and new well productivity. In the Permian Basin, Occidental spent over $1.2 billion of capital in 2016, with 60 percent spent on Permian Resources assets. In 2017, Occidental expects to allocate approximately one third of the 2017 capital budget to Permian Resources for focused development areas in the Midland and Delaware Basins and approximately 10 to 15 percent to Permian EOR in order to add to existing facilities to increase CO₂production and injection capacity for future projects.

Occidental's Permian Resources operations are among its fastest growing assets with over 11,650 drilling locations in its horizontal inventory located in the Midland and Delaware sub-basins. This inventory was developed using data gathered from appraisal efforts, and development drilling, along with offset operators drilling activities. As of year end, approximately 650 of these drilling locations represented proved reserves. Continued wellbore placement and completion optimization through advanced subsurface characterization and the application of enhanced manufacturing principles, combined with projected commercial savings, are expected to increase the well inventory even further. The development program, which largely began in 2010, continued in 2016. In 2016, Permian Resources drilled 63 horizontal wells. Production from Permian Resources comes from approximately 5,550 net wells, of which 23 percent are operated by other operators. These investments in Permian wells operated by others allows Occidental to access and leverage additional data in the same areas where it is operating. By analyzing the operated by others data with the significant amount of data Occidental has gathered, its Permian operations are able to use the information to aid in reducing operating expenses, gain drilling and completions efficiencies, increase the productivity of its wells and improve the base production. In 2016, Permian Resources added 92 million BOE to Occidental's proved reserves.

Permian EOR operates a combination of CO₂ floods and waterfloods, which have similar development characteristics and ongoing monitoring and maintenance requirements. Due to a unique combination of characteristics, the Permian Basin has been a leader in the

implementation of CO₂ enhanced oil recovery projects. The Permian Basin’s concentration of large conventional reservoirs, favorable CO₂ flooding performance and the proximity to naturally occurring CO₂ supply has resulted in decades of steady growth in enhanced oil production. With 31 active floods and over 40 years of experience, Permian EOR is the industry leader in Permian Basin CO₂ flooding.

Occidental is an industry leader in applying this technology, which can increase ultimate oil recovery by 10 to 25 percent in the fields where it is employed. Significant opportunity remains to expand Occidental's existing projects into new portions of reservoirs that thus far have only been water-flooded, leaving opportunity for significant additional recovery with new CO₂ injection. Even small improvements in recovery efficiency can add significant reserves. Technology improvements, such as the recent trend towards vertical expansion of the CO₂ flooded interval into residual oil zone targets continue to yield more recovery from existing projects. Over the last few years, Occidental has had an ongoing program of deepening wells, with 125 wells deepened in 2016 and 100 wells planned for 2017. Occidental utilizes workover rigs to drill the extra depth into additional CO₂ floodable sections of the reservoir. These are low cost projects that can add reserves even in a low price environment. Permian EOR has a large inventory of future CO₂ projects which could be developed over the next 20 years or accelerated, depending on market conditions. In 2016, Permian EOR had its largest improved recovery additions in more than 10 years adding 72 million BOE to Occidental's proved reserves, primarily as a result of executing CO₂ flood development projects and expansions as well as extending the approved CO₂slug size of current floods.

The current strategy for Permian EOR is to invest sufficient capital to maintain current production and provide cash flow. By exploiting natural synergies between Permian EOR and Permian Resources, Occidental is able to deliver unique advantages, efficiencies and expertise across its Permian Basin operations. Occidental's share of production in the Permian Basin was approximately 269,000 BOE per day in 2016 with 124,000 BOE per day coming from Permian Resources and 145,000 BOE per day from Permian EOR.

South Texas and Other

Occidental holds approximately 178,000 net acres in South Texas. Occidental's share of production in South Texas and Other was approximately 33,000 BOE per day.

International Interests

Production-Sharing Contracts

Occidental's interests in Oman and Qatar are subject to production sharing contracts (PSC). Under such contracts, Occidental records a share of production and reserves to recover certain production costs and an additional share for profit. In addition, 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.

The following charts show Occidental’s international production volumes for the last five years:

International Production Volumes

(thousands BOE/day)

Notes:


•	Operations sold or exited include Bahrain, Iraq, Libya and Yemen.

Middle East Assets

Middle East


1.	Qatar


2.	United Arab Emirates


3.	Oman

Oman

In Oman, Occidental is the operator of Block 9 with a 50-percent working interest, Block 27 with a 65-percent working interest, Block 53 with a 45-percent working interest; and Block 62, with an 80-percent working interest.

In December 2015, the existing production sharing contract for Block 9 expired and Occidental agreed to operate Block 9 under modified operating terms until a new contract is approved. The Block 9 Exploration and Production Sharing Agreement 15-year extension was signed in January 2017 and will be effective upon ratification through Royal Decree. In 2016, the average gross production from Block 9 was 94,000 BOE per day. The term for Block 27 expires in 2035.

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 2016, Occidental had drilled more than 2,900 new wells and continued implementation of a major steamflood project. In 2016, the average gross daily production was 127,000 BOE per day, including a record fourth quarter production of 133,000 BOE per day, which was approximately 16 times higher than the production rate in September 2005 when Occidental assumed operations.

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 natural gas and condensate resources. In 2014, Occidental signed a five-year extension for the initial phase for the discovered non associated gas area (natural gas not in contact with crude oil in a reservoir) for Block 62. Production commenced in January 2016.

In 2016, Occidental achieved record production in Oman, and Occidental's share of production averaged 96,000 BOE per day in 2016.

Qatar

In Qatar, Occidental is the operator of the offshore fields 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 and ISSD expire in 2019 and 2022, respectively. The term for Block 12 expires on May 31, 2017 and this contract will not be extended. Production from Block 12 was not significant.

Occidental has continued to successfully implement large scale water flooding projects combined with state of the art horizontal drilling, advanced completion techniques as well as utilizing extensive automated artificial lift systems that are significantly extending the life of the field. Since the commencement of its operations in 1994, Occidental has boosted the production from the Idd El Shargi fields by over 400 percent with current gross oil rates of around 95,000 BOE per day. The ISSD field recently demonstrated encouraging results and is achieving record levels of production. Despite complex marine operations, Occidental is recognized as the lowest cost in country oil operator.

Occidental also holds the Dolphin investment that is comprised of two separate economic interests through which Occidental owns: (i) a 24.5-percent undivided interest in the upstream operations under a Development and Production Sharing Agreement with the Government of Qatar to develop and produce natural gas, NGLs and condensate 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 operates a pipeline and is discussed further in "Midstream and Marketing Segment - Pipeline Transportation."

Occidental's share of production from Qatar was approximately 108,000 BOE per day in 2016.

United Arab Emirates

In 2011, Occidental acquired a 40-percent participating interest in Al Hosn Gas, joining with the Abu Dhabi National Oil Company (ADNOC) in a 30-year joint venture agreement. In 2016, Al Hosn Gas gross production

exceeded expectations, producing over 570 MMcf per day of natural gas and 95,000 barrels per day of NGLs and condensate in its highest month of production. Occidental’s share of production from Al Hosn Gas was 190 MMcf per day of natural gas and 32,000 barrels per day of NGLs and condensate in 2016.

Additionally, Al Hosn Gas includes gas processing facilities which are discussed further in "Midstream and Marketing Segment - Gas Processing Plants and CO₂Fields and Facilities".

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 oil and gas operations.

Latin America Assets



		Latin America 1. Colombia

Colombia

Occidental has working interests in the La Cira-Infantas and Teca areas and has operations within the Llanos Norte Basin. Occidental's interests range from 39 to 61 percent and certain interests expire between 2023 and 2038, while others extend through the economic limit of the areas. In 2016, Occidental started a thermal recovery pilot at the Teca heavy oil field and the initial results are better than anticipated. Production began from these pilots in 2016. Occidental's share of production from Colombia was approximately 33,000 BOE per day in 2016.

Occidental also holds working interests in the Tarija, Chuquisaca and Santa Cruz regions of Bolivia, which produce gas. Occidental's share of production from Bolivia was 1,000 BOE per day in 2016.

Proved Reserves

Proved oil, NGLs 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, NGLs and natural 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 2016, 2015 and 2014 disclosures, the calculated average West Texas Intermediate oil prices

were $42.75, $50.28 and $94.99 per barrel, respectively. The calculated average Brent oil prices for 2016, 2015 and 2014 disclosures were $44.49, $55.57 and $99.51, per barrel, respectively. The calculated average Henry Hub gas prices for 2016, 2015 and 2014 were $2.55, $2.66 and $4.42 per MMBtu, respectively.

Occidental had proved reserves at year-end 2016 of 2,406 million BOE, compared to the year-end 2015 amount of 2,200 million BOE. Proved reserves at year-end 2016 and 2015 consisted of, respectively, 56 percent and 59 percent oil, 17 percent and 15 percent NGLs and 27 percent and 26 percent natural gas. Proved developed reserves represented approximately 77 percent and 79 percent, respectively, of Occidental’s total proved reserves at year-end 2016 and 2015.

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."

Changes in Proved Reserves

Occidental's total proved reserves increased 206 million BOE in 2016, which included additions of 187 million BOE from Occidental's development program.

Changes in reserves were as follows:



(in millions of BOE)	2016
Revisions of previous estimates	159
Improved recovery	185
Extensions and discoveries	2
Purchases	137
Sales	(46	)
Production	(231	)
Total	206

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 management’s control, and may negatively or positively affect Occidental's reserves.

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, lower prices may decrease the economically recoverable reserves, particularly for domestic properties, because the reduced margin limits the expected life of the operations. Offsetting this effect, lower prices increase Occidental's share of proved reserves under PSCs because more oil is required to recover costs. Conversely, when prices rise, Occidental's share of proved reserves decreases for PSCs and economically recoverable reserves may increase for other operations. In 2016, positive revisions of 159 million BOE were primarily due to technical revisions in Al Hosn Gas and price

revisions in Oman due to the PSC impact, partially offset by negative domestic price revisions.

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.

Improved Recovery

In 2016, Occidental added proved reserves of 185 million BOE mainly associated with the Permian Basin and Oman operations. These properties comprise both conventional projects, which are characterized by the deployment of EOR development methods, largely employing application of CO₂flood, waterflood or steam flood, and unconventional projects. These types of conventional EOR development methods can be applied through existing wells, though additional drilling is frequently 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. The use of either CO₂ or steam flooding depends on the geology of the formation, the evaluation of engineering data, availability and cost of either CO₂ or steam and other economic factors. Both techniques work similarly to lower viscosity causing the oil to move more easily to the 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 added proved reserves from extensions and discoveries, which are dependent on successful exploration and exploitation programs. In 2016, extensions and discoveries added 2 million BOE related primarily to the recognition of proved developed reserves in Oman.

Purchases of Proved Reserves

Occidental continues to seek opportunities 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 2016, Occidental purchased 137 million BOE of proved reserves in the Permian Basin, which mainly came from acquisitions made in October 2016.

Sales of Proved Reserves

In 2016, Occidental sold 46 million BOE in proved reserves mainly related to Libya and Piceance.

Proved Undeveloped Reserves

In 2016, Occidental had proved undeveloped reserve additions of 195 million BOE mainly from Permian Basin improved recovery and purchases. These proved undeveloped reserve additions were partially offset by transfers of 66 million BOE to the proved developed category as a result of the 2016 development programs

and 47 million BOE of negative price and price related revisions. Permian Basin and Oman accounted for approximately 89 percent of the reserve transfers from proved undeveloped to proved developed in 2016. Occidental incurred approximately $0.5 billion in 2016 to convert proved undeveloped reserves to proved developed reserves. A substantial portion of the proved undeveloped reserves as of December 31, 2016, was the result of the development program in the Permian Basin, which represents 75 percent of total year-end proved undeveloped reserves.

Reserves Evaluation and Review Process

Occidental's estimates of proved reserves and associated future net cash flows as of December 31, 2016, 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 reserve 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 U.S. Securities and Exchange Commission (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. 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 2016, Ryder Scott conducted a process review of the 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, 2016, in accordance with the 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 2016 year-end total proved reserves portfolio. In 2016, Ryder Scott reviewed approximately 18 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 80 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, documenting the changes in reserves from prior estimates, preparing the economic evaluations and determining the reserves classifications 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 various market conditions. Average annual WTI and Brent oil price indexes for 2016 were below the 2015 averages, but ended the year higher, closing at $53.72 per barrel and $56.82 per barrel, respectively, as of December 31, 2016. Commodity prices remained relatively constant in early 2017.

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) transportation capacity, infrastructure constraints, and cost in producing areas; (iii) currency exchange rates; and (iv) the effect of changes in these variables on market perceptions.

NGLs 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.

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 make it impossible to predict the future direction of oil, NGLs and domestic gas prices reliably. International gas prices are generally fixed under long-term contracts. Occidental continues to respond 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.

CHEMICAL SEGMENT

Business Environment

Although United States economic growth in 2016 lagged behind that of 2015, demand for domestically produced energy and feedstocks remained fairly constant as natural gas and ethylene pricing was lower on average than in 2015. Historically high planned and unplanned ethylene outages, resulting in price volatility within the spot market, and rising energy costs in the last half of 2016 put pressure on chemical margins. The impact of energy and feedstock costs was partially offset by the end of 2016 as tighter supply in the caustic soda and PVC markets resulted in improved margins.

Business Review

Basic Chemicals

In 2016, the United States economic growth rate was expected to be below the 2.6 percent experienced in 2015. The lower than expected U.S. growth rate tempered domestic demand as the 2016 industry chlorine operating rate increased by only 1 percent, to 84 percent, resulting in only a moderate improvement in chlorine pricing. Exports of downstream chlorine derivatives into the vinyls chain were relatively strong in 2016 as United States ethylene and energy costs were advantaged over global pricing. Liquid caustic soda prices improved both domestically and globally in the last three quarters of 2016 as new capacity growth in the United States slowed.

Vinyls

Demand for domestic and export PVC improved year- over-year 4.1 percent and 4.2 percent, respectively. Domestic demand was driven by construction as housing starts continued their year-over-year increase and rising home values drove increased home remodeling. Export volume remains a significant portion of PVC sales representing over 30 percent of total North American

producer’s production. PVC industry operating rates in 2016 were approximately 2.3 percent higher than 2015. Industry PVC margins declined slightly in 2016 compared to 2015, as PVC pricing decreased with lower ethylene pricing.

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. Long-term weakness in the petroleum industry may negatively affect the demand and pricing of a number of Occidental’s products that are consumed by industry participants. Further strengthening of the U.S. dollar may cause headwinds in the U.S. commodity export market.

Basic Chemicals

Continued improvement in the United States housing, automotive and durable goods markets should drive a moderate increase in domestic demand for basic chemical products in 2017. Export demand for caustic is also expected to remain firm in 2017. Overall, the low chlor-alkali operating rates driven by capacity increases over the last few years should improve as the pace of expansions have slowed considerably both domestically and globally. Improved 2016 margins from historically low values in 2015 are expected to continue as long as United States feedstock costs, primarily natural gas and ethylene, remain favorable compared to global feedstock costs. Businesses such as calcium chloride and muriatic acid continue to be challenged but are expected to improve as oil prices rise.

Vinyls

North American demand should improve slightly in 2017 over 2016 levels as growth in construction spending continues with further upside potential driven by new infrastructure projects. North American operating rates are expected to remain relatively flat with 2016 but margins should improve as demand in the United States strengthens.

MIDSTREAM AND MARKETING SEGMENT

Business Environment

Midstream and marketing segment earnings are affected by the performance of its marketing business and its processing, transportation and power generation assets. The marketing business aggregates and markets Occidental's and third-party volumes and engages in storage activities. Marketing performance is affected primarily by commodity price changes and margins in oil and gas transportation and storage programs. Processing and transportation results are affected by the volumes that are processed 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 2016 were significantly higher than those in 2015, primarily due to impairments taken in 2015. Excluding the 2015 impairments, 2016 earnings were lower because of

unfavorable contract pricing on long-term supply agreements as well as unfavorable Permian to Gulf Coast differentials, decreased throughput and lower realized NGLs pricing.

Business Review

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 2.2 Bcf per day, and up to 2.5 Bcf per day in the summer. Dolphin Pipeline is currently expanding gas compression facilities to achieve maximum pipeline capacity. Occidental believes substantial opportunities remain to provide gas transportation to additional customers in the region to reach the full capacity of the Dolphin Pipeline and generate additional midstream revenues and cash flows.

Occidental owns an oil common carrier pipeline and storage system with approximately 2,900 miles of pipelines from southeast New Mexico across the Permian Basin in west Texas to Cushing, Oklahoma. The system has a current throughput capacity of about 720,000 barrels per day, 7.1 million barrels of active storage capability and 128 truck unloading facilities at various points along the system, which allow for additional volumes to be delivered into the pipeline.

Occidental's 2016 pipeline transportation earnings declined from 2015 due to lower throughput volumes.

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 2016 earnings from these operations decreased compared to 2015 due to lower realized NGL pricing.

Occidental, together with ADNOC, developed Al Hosn Gas in Abu Dhabi, of which Occidental has a 40-percent participating interest. Al Hosn Gas is designed to process 1.0 Bcf per day of natural gas and separate it into sales gas, condensate, NGLs and sulfur. The processing facilities include processing and treatment facilities, sulfur recovery units, including facilities to extract sulfur from natural gas and to load and store sulfur. The facilities produce approximately 10,000 tons per day of sulfur, of which approximately 4,000 tons is Occidental's share. Al Hosn Gas facilities generates revenues from gas processing fees and the sale of sulfur. The decrease in 2016 earnings compared to 2015 was primarily due to lower sulfur pricing.

Power Generation Facilities

Earnings from power and steam generation facilities are derived from sales to affiliates and third parties. The

increase in earnings in 2016 compared to 2015 was a result of higher production due to fewer outages.

Marketing

The marketing group markets substantially all of Occidental’s oil, NGLs and gas production, as well as trades around its assets, including its own and third party transportation and storage capacity. Occidental’s third-party marketing 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 better utilize and optimize its assets. Marketing performance in 2016 declined compared to 2015 due to unfavorable Permian to Gulf Coast crude oil price differentials.

Industry Outlook

The pipeline transportation and power generation businesses are expected to remain relatively stable. Marketing results can have significant volatile results depending on significant price swings, as well as Permian to Gulf Coast crude oil differentials. Occidental continues to actively focus on marketing its commodity production to generate maximum value for its stakeholders. The gas processing plant operations could have volatile results depending mostly on NGLs prices, which cannot reasonably be predicted. Generally, higher NGLs prices result in higher profitability.

SEGMENT RESULTS OF OPERATIONS AND SIGNIFICANT ITEMS AFFECTING EARNINGS

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 statements of income and cash flows, and supplemental oil and gas information related to California Resources have been treated as discontinued operations for the year ended December 31, 2014. The assets and liabilities of California Resources were removed from Occidental's consolidated balance sheet as of November 30, 2014 because of the spin-off from Occidental.

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,	2016			2015			2014
NET SALES ^(a)
Oil and Gas	$	6,377		$	8,304		$	13,887
Chemical	3,756			3,945			4,817
Midstream and Marketing	684			891			1,373
Eliminations ^(a)	(727		)	(660		)	(765		)
	$	10,090		$	12,480		$	19,312
SEGMENT RESULTS AND EARNINGS
Domestic	$	(1,552	)	$	(4,151	)	$	(2,381	)
Foreign	965			(3,747		)	2,935
Exploration	(49		)	(162		)	(126		)
Oil and Gas ^(b,c,d)	(636		)	(8,060		)	428
Chemical^(e)	571			542			420
Midstream and Marketing ^(f,g)	(381		)	(1,194		)	2,564
	(446		)	(8,712		)	3,412
Unallocated corporate items
Interest expense, net	(275		)	(141		)	(71		)
Income taxes	662			1,330			(1,685		)
Other ^(h)	(943		)	(623		)	(1,800		)
Income (loss) from continuing operations ⁽ⁱ⁾	(1,002		)	(8,146		)	(144		)
Discontinued operations, net ^(j)	428			317			760
Net Income attributable to common stock	$	(574	)	$	(7,829	)	$	616
Basic Earnings per Common Share	$	(0.75	)	$	(10.23	)	$	0.79

See footnotes following significant transactions and events affecting Occidental's earnings.

The following table sets forth significant transactions and events affecting Occidental’s earnings that vary widely and unpredictably in nature, timing and amount.



Benefit (Charge) (in millions)	2016			2015			2014
OIL AND GAS
Asset sales gains ^(b)	$	107		$	10		$	531
Asset impairments and related items domestic ^(c)	(1		)	(3,457		)	(4,766		)
Asset impairments and related items international ^(d)	(70		)	(5,050		)	(1,066		)
Total Oil and Gas	$	36		$	(8,497	)	$	(5,301	)
CHEMICAL
Asset sales gains ^(e)	$	88		$	98		$	—
Asset impairments and related items	—			(121		)	(149		)
Total Chemical	$	88		$	(23	)	$	(149	)
MIDSTREAM AND MARKETING
Asset sale gains ^(f)	$	—		$	—		$	1,984
Asset impairments and related items ^(g)	(160		)	(1,259		)	31
Total Midstream and Marketing	$	(160	)	$	(1,259	)	$	2,015
CORPORATE
Asset sale losses	$	—		$	(8	)	$	—
Asset impairments ^(h)	(619		)	(235		)	(1,358		)
Severance, spin-off and other	—			(118		)	(61		)
Tax effect of pre-tax and other adjustments	424			1,903			927
Discontinued operations, net of tax ^(j)	428			317			760
Total Corporate	$	233		$	1,859		$	268
TOTAL	$	197		$	(7,920	)	$	(3,167	)


(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)	The 2016 gain on sale of assets included the sale of Piceance and South Texas oil and gas properties. The 2014 amount represented the gain on sale of the Hugoton properties.

(c)

The 2015 amount included approximately $1.6 billion of impairment and related charges associated with non-core domestic oil and gas assets in the Williston Basin (sold in November 2015) and Piceance Basin sold in March 2016. The remaining 2015 charges were mainly associated with the decline in commodity prices and management changes to future development plans. The 2014 amount was mainly comprised of impairment and related charges on the Williston and Piceance assets.


(d)	The 2016 amount included a net charge of $61 million related to the sale of Libya and exit from Iraq. The 2015 amount included impairment and related charges of approximately $1.7 billion for operations where Occidental exited or reduced its involvement in and $3.4 billion related to the decline in commodity prices.


(e)	The 2016 amount included the gain on sale of the Occidental Tower in Dallas and a non-core specialty chemicals business. The 2015 amount represented a gain on sale of an idled facility.


(f)	The 2014 amount included a $633 million gain on sale of Occidental’s interest in BridgeTex Pipeline Company, LLC, and a $1.4 billion gain on sale of a portion of Occidental’s investment in Plains Pipeline.


(g)	The 2016 amount included charges related to the termination of crude oil supply contracts.The 2015 amount included an impairment charge of $814 million related to the Century gas processing plant as a result of SandRidge’s inability to provide volumes to the plant and meet its contractual obligations to deliver CO₂.

(h)

The 2016 amount included charges of $541 million related to a reserve for doubtful accounts and $78 million loss on the distribution of the remaining CRC stock. The 2015 amount included a $227 million other-than-temporary loss on Occidental’s investment in California Resources. The 2014 amount included an $805 million impairment charge for the Joslyn oil sand project and a $553 million other-than-temporary loss on the investment in California Resources.


(i)	Represents amounts attributable to income from continuing operations after deducting a non controlling interest amount of $14 million in 2014. The non controlling interest amount has been netted in the midstream and marketing segment earnings.


(j)	The 2016 and 2015 amounts included gains related to the Ecuador settlement. See Note 2 of the consolidated financial statements. The 2014 amount included the results of Occidental's California operations.

Oil and Gas



(in millions)	2016			2015			2014
Segment Sales	$	6,377		$	8,304		$	13,887
Segment Results
Domestic	$	(1,552	)	$	(4,151	)	$	(2,381	)
Foreign	965			(3,747		)	2,935
Exploration	(49		)	(162		)	(126		)
	$	(636	)	$	(8,060	)	$	428

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, 2016. 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 (MBOE)	2016	2015	2014
United States
Permian Resources	124	110	75
Permian EOR	145	145	147
South Texas and Other	33	73	96
Total	302	328	318
Latin America	34	37	29
Middle East/North Africa
Al Hosn	64	35	—
Dolphin	43	41	38
Oman	96	89	76
Qatar	65	66	69
Other	26	72	67
Total	294	303	250
Total Production (MBOE) ^(a)	630	668	597

(See footnote following the Average Realized Prices table)



Production per Day from Ongoing Operations (MBOE)	2016	2015	2014
United States
Permian Resources	124	110	75
Permian EOR	145	145	147
South Texas and Other	31	42	52
Total	300	297	274
Latin America	34	37	29
Middle East/North Africa
Al Hosn	64	35	—
Dolphin	43	41	38
Oman	96	89	76
Qatar	65	66	69
Total	268	231	183
Total Production Ongoing Operations	602	565	486
Sold domestic operations	2	31	44
Sold or Exited MENA operations	26	72	67
Total Production (MBOE) ^(a)	630	668	597

(See footnote following the Average Realized Prices table)



Production per Day by Products	2016	2015	2014
United States
Oil (MBBL)
Permian Resources	77	71	43
Permian EOR	108	110	111
South Texas and Other	4	21	29
Total	189	202	183
NGLs (MBBL)
Permian Resources	21	16	12
Permian EOR	27	29	30
South Texas and Other	5	10	13
Total	53	55	55
Natural gas (MMCF)
Permian Resources	158	137	120
Permian EOR	59	37	38
South Texas and Other	144	250	318
Total	361	424	476
Latin America
Oil (MBBL) – Colombia	33	35	27
Natural gas (MMCF) – Bolivia	8	10	11
Middle East/North Africa
Oil (MBBL)
Al Hosn	12	7	—
Dolphin	7	7	7
Oman	77	82	69
Qatar	65	66	69
Other	7	32	28
Total	168	194	173
NGLs (MBBL)
Al Hosn	20	10	—
Dolphin	8	8	7
Total	28	18	7
Natural gas (MMCF)
Al Hosn	190	109	—
Dolphin	166	158	143
Oman	115	44	43
Other	114	237	236
Total	585	548	422
Total Production (MBOE) ^(a)	630	668	597

(See footnote following the Average Realized Prices table)



Production per Day by Products from Ongoing Operations	2016	2015	2014
United States
Oil (MBBL)
Permian Resources	77	71	43
Permian EOR	108	110	111
South Texas and Other	4	6	7
Total	189	187	161
NGLs (MBBL)
Permian Resources	21	16	12
Permian EOR	27	29	30
South Texas and Other	5	7	9
Total	53	52	51
Natural gas (MMCF)
Permian Resources	158	137	120
Permian EOR	59	37	38
South Texas and Other	133	173	210
Total	350	347	368
Latin America
Oil (MBBL) – Colombia	33	35	27
Natural gas (MMCF) – Bolivia	8	10	11
Middle East/North Africa
Oil (MBBL)
Al Hosn	12	7	—
Dolphin	7	7	7
Oman	77	82	69
Qatar	65	66	69
Total	161	162	145
NGLs (MBBL)
Al Hosn	20	10	—
Dolphin	8	8	7
Total	28	18	7
Natural gas (MMCF)
Al Hosn	190	109	—
Dolphin	166	158	143
Oman	115	44	43
Total	471	311	186
Total Production Ongoing Operations	602	565	486
Sold domestic operations	2	31	44
Sold or Exited MENA operations	26	72	67
Total Production (MBOE) ^(a)	630	668	597

(See footnote following the Average Realized Prices table)



Sales Volumes per Day by Products	2016	2015	2014
United States
Oil (MBBL)	189	202	183
NGLs (MBBL)	53	55