Occidental Petroleum 2001 Annual Report Download - page 23

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partially offset by lower worldwide crude oil prices and higher exploration
expense.
Approximately 54 percent of oil and gas sales revenues for 2001 were
attributable to oil and gas trading activity, compared with approximately 50
percent in 2000 and 43 percent in 1999. These trading activities focus on
obtaining the highest sale price available. Occidental also occasionally engages
in hedging activities for relatively small parts of its total production to
reduce exposure to price risk, thereby mitigating cash-flow volatility. Refer to
"Derivative and Hedging Activities" for a complete discussion. Other than the
positive effect on oil and gas realized prices, the results of trading
activities are not significant.
The increase in oil and gas trading revenues from 2000 to 2001 was due to a
14-percent increase in the volume of oil and gas trades and a 49-percent
increase in gas prices. The revenue was also positively affected by an increase
in the volume of Natural Gas Liquids (NGLs), although this impact was not
significant. These positive effects were partially offset by an 18-percent
decrease in oil prices associated with the trading contracts.
CHEMICAL
In millions, except as indicated 2001 2000 1999
========================================== ======== ======== ========
SEGMENT SALES $ 3,092 $ 3,795 $ 3,221
SEGMENT (LOSS) EARNINGS $ (394) $ 169 $ (37)
EARNINGS BEFORE SPECIAL ITEMS(a) $ 41 $ 293 $ 147
KEY PRODUCT INDEXES (1987 through
1990 average price = 1.0)
Chlorine 0.74 1.58 0.79
Caustic soda 1.33 0.69 0.66
Ethylene Dichloride 0.61 1.37 0.97
PVC commodity resins(c) 0.68 0.95 0.70
KEY PRODUCT VOLUMES
Chlorine (thousands of tons) 2,847 2,977 3,230
Caustic soda (thousands of tons) 2,857 3,168 3,223
Ethylene Dichloride (thousands of tons) 735 979 1,080
PVC commodity resins
(millions of pounds) 3,950 3,902 3,454
CAPITAL EXPENDITURES(b)
Basic chemicals $ 37 $ 49 $ 35
Vinyls $ 55 $ 61 $ 25
Specialty businesses $ 25 $ 41 $ 50
Other $ 3 $ 4 $ 6
------------------------------------------ -------- -------- --------
(a) Earnings before special items represents segment earnings adjusted for the
effect of certain infrequent transactions that may affect comparability
between years. Earnings before special items is not considered to be an
alternative to operating income in accordance with generally accepted
accounting principles. See "Special Items" table for a list of special
items affecting earnings.
(b) Excludes the formation of OxyVinyls and the acquisition of the balance of
INDSPEC in 1999.
(c) Product volumes produced at PolyOne facilities contributed to OxyVinyls are
excluded from the product indexes.
Earnings before special items were $41 million in 2001, compared with $293
million in 2000. The decrease in earnings before special items reflected the
impact of lower average prices for chlorine, EDC and PVC resins and a loss from
the Equistar equity investment compared with income from the prior year,
partially offset by higher prices for caustic soda and lower raw-material and
feedstock costs.
Earnings before special items were $293 million in 2000, compared with $147
million in 1999. The increase in earnings before special items primarily
reflected the impact of higher average prices for chlorine, EDC and PVC resins,
partially offset by higher raw-material and feedstock costs.
SPECIAL ITEMS
Special items are significant, infrequent items reflected in the