Occidental Petroleum 2001 Annual Report Download - page 14

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STRATEGIC OVERVIEW AND REVIEW OF BUSINESS RESULTS - 1999 - 2001
STRATEGY
Occidental's overall strategy to add value for shareholders consists of
three basic elements:
>> Shift corporate assets to large, long-lived oil and gas assets with growth
potential
>> Maintain financial discipline and strengthen the balance sheet
>> Harvest cash from chemicals
Implementation of this strategy included divesting interests in the natural
gas pipeline segment and buying large "legacy" oil and gas assets in California
and Texas that are expected to provide stable production, strong earnings and
cash flow and a solid platform for new growth initiatives.
At Occidental, financial discipline means prudently investing capital in
projects that are expected to produce superior returns while strengthening the
balance sheet to reduce both risk and earnings volatility.
The chemicals business is being used to provide free cash flow.
SPECIFIC ACTIONS
OIL AND GAS
The oil and gas business strategy has three parts that, together, are
focused on adding new oil and natural gas reserves at a pace well ahead of
production, while simultaneously keeping finding and development costs among the
lowest in the industry.
>> Continue to add commercial reserves in and around core areas in the U.S.,
Middle East and Latin America through a combination of focused exploration
and development programs.
>> Pursue commercial opportunities with host governments in core areas to
enhance the development of mature fields with large volumes of remaining
oil in place by applying appropriate technology and innovative
reservoir-management practices.
>> Maintain a disciplined approach in buying and selling assets at attractive
prices.
Occidental's oil and gas business is currently concentrated in five U.S.
states and nine foreign countries.
The asset mix within each of these areas has been strengthened by the sale
of properties with low or no current return and investment in assets with much
higher performance potential. The results of these changes are discussed below
in "Business Review - Oil & Gas."
CHEMICAL
Occidental conducts its chemical operations through Occidental Chemical
Corporation and its various subsidiaries and affiliates (collectively, OxyChem).
OxyChem focuses on the chlorovinyls chain where it begins with ethylene and
chlorine, which is co-produced with caustic soda, and converts them through a
series of intermediate products into PVC. In order to strengthen its position
along the chlorovinyls chain, Occidental entered into a major business alliance
in 1999, a vinyls partnership with Geon (now known as PolyOne) named OxyVinyls,
LP (OxyVinyls).
CORPORATE
In July 2001, Occidental sold its interests in a subsidiary that owned a
Texas intrastate pipeline and its interest in a liquefied natural gas (LNG)
project in Indonesia. After-tax proceeds of approximately $750 million from
these transactions were used to reduce debt.
In April 2000, Occidental sold its interest in Canadian Occidental
Petroleum Ltd., renamed Nexen Inc. (CanadianOxy or Nexen). After-tax proceeds,
together with tax benefits from the disposition of oil-producing properties in
Peru, totaling $700 million were used to reduce debt following the Altura
acquisition.
Occidental received $775 million from Chevron in a litigation settlement in
November 1999, which was used mainly to reduce high-cost debt.