Occidental Petroleum 2001 Annual Report Download - page 29

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electric power from a public utility. At December 31, 2001, Ingleside LP had
approximately $178 million in debt, which is secured by its assets. Occidental
has not guaranteed this debt; however, Occidental and Conoco currently each
guarantee half of a debt service reserve amount of approximately $8.5 million.
Occidental accounts for this investment using the equity method.
EQUISTAR
Occidental has entered into an indemnity agreement with Equistar, its
29.5-percent equity investee, to contribute to Equistar an amount equal to the
lesser of approximately $420 million or the principal amount of Equistar's notes
due 2009 then outstanding, together with interest. At December 31, 2001, the
outstanding principal amount of Equistar's notes due 2009 was almost $600
million. Occidental is only required to pay this amount to Equistar if the
holders of the notes have not been able to obtain payment after having pursued
and exhausted all their remedies to compel payment by Equistar, including the
liquidation of assets. The indemnity expressly does not create any right in the
holders of the notes or any person other than Occidental, Equistar and the
partners of Equistar. Occidental may elect to terminate the indemnity in certain
circumstances.
v OIL AND GAS TRANSACTIONS
ECUADOR
In Ecuador, Occidental has a 12-percent interest in a company currently
constructing a pipeline, which is expected to be completed in 2003. Construction
of the pipeline has made it feasible for Occidental to begin developing the Eden
Yuturi field it discovered several
22
years ago in the southeastern corner of Block 15. The development of Eden
Yuturi, together with ongoing work in the western portion of the block that is
currently in production, is expected to add net incremental production of 30,000
barrels per day, all of which is expected to be shipped through the new
pipeline. Occidental has committed to make capital contributions up to its share
(approximately $148 million) of the estimated total project costs, less an
equivalent percentage (up to approximately $110 million under existing financing
arrangements) of any senior project debt incurred by the pipeline company. The
pipeline company's senior project debt is to be repaid with the proceeds of
ship-or-pay tariffs of certain upstream producers in Ecuador, including
Occidental. Under their ship-or-pay commitments, Occidental and the other
upstream producers have each assumed their respective share of project-specific
risks, including construction risk, operating risk and force-majeure risk. Under
certain circumstances, Occidental could be required to pay an advanced tariff
payment that would in turn be used by the pipeline company to service or prepay
project debt. As of December 31, 2001, Occidental has contributed $9 million to
the company. Occidental reports this investment in its consolidated financial
statements using the equity method of accounting.
ELK HILLS POWER
Occidental and Sempra Energy (Sempra) each has a 50-percent interest in Elk
Hills Power LLC, a limited liability company that is currently constructing a
gas-fired, power-generation plant in California. Occidental accounts for this
investment using the equity method. In January 2002, Elk Hills Power LLC entered
into a $400 million construction loan facility. Occidental guarantees $200
million (50 percent) of the loan facility. At January 31, 2002, approximately
$94 million of the $200 million guaranteed amount was outstanding.
v OTHER TRANSACTIONS
RECEIVABLES SALE PROGRAM
Occidental has an agreement in place to sell, under a revolving sale
program, an undivided interest in a designated pool of trade receivables. This
program is used by Occidental as a low-cost source of working capital funding.
The amount of proceeds, which totaled $360 million outstanding in each of 2001
and 2000, that Occidental has received on the sale of the undivided interest and
the related accounts receivable that have been sold, are not included in the
debt and trade receivables accounts, respectively, on Occidental's consolidated
balance sheets. Fees and expenses under this program are included in selling,
general and administrative and other operating expense. Under the program,
receivables must meet certain criteria. The program terminates upon certain