Occidental Petroleum 2002 Annual Report Download - page 25

In millions 2002 2001 2000
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NET CASH (USED)PROVIDED $ (456) $ (1,814) $ 579
The 2002 amount reflects the net $179 million buyout of the natural gas
delivery commitment and $72 million of net proceeds from the issuance of a
subsidiary's preferred stock.
The 2001 amount reflects the repayment of $2.3 billion of long-term and
non-recourse debt, partially offset by proceeds of $861 million from new
long-term debt.
The 2000 amount reflects the proceeds from the $2.4 billion non-recourse
debt, partially offset by repayments of $1.4 billion on the long-term and
non-recourse debt. The 2000 amount also includes the first year of purchases
made to satisfy delivery commitments under the natural gas delivery commitment
that was signed in 1998.
Occidental paid common stock dividends of $375 million in 2002, $372
million in 2001 and $369 million in 2000.
Occidental has a centralized cash-management system that funds the working
capital and capital expenditure requirements of its various subsidiaries. There
are no provisions under existing debt agreements that significantly restrict
Occidental's ability to move funds among operating entities.
ADDITIONAL CONSIDERATIONS REGARDING FUNDING AND LIQUIDITY
In the course of its business activities, Occidental pursues a number of
projects and transactions to meet its core business objectives. The accounting
and financial statement treatment of these transactions is a result of the
varying methods of funding employed. Occidental also makes commitments on behalf
of unconsolidated entities. These transactions, or groups of transactions, are
recorded in compliance with generally accepted accounting principles and, unless
otherwise noted, are not reflected on Occidental's balance sheets. The following
is a description of the business purpose and nature of these transactions.
* OIL AND GAS TRANSACTIONS
ECUADOR
In Ecuador, Occidental has a 12-percent interest in a company currently
constructing an oil export pipeline, which is expected to be completed in 2003.
Construction of the pipeline has made it feasible for Occidental to develop the
Eden Yuturi field it discovered several 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 in 2004, all of which is
expected to be transported through the new pipeline. Occidental has committed to
make capital contributions up to its share (currently estimated to be
approximately $64 million) of the estimated total project capital requirements.
As of December 31, 2002, Occidental has
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contributed $9 million to the project. Occidental reports this investment in its
consolidated statements using the equity method of accounting.
The project is being funded in part by senior project debt. The 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. Occidental would be required to make an
advance tariff payment in the event of termination of the agreement authorizing
the pipeline company to build the pipeline, prolonged delay in project
completion, prolonged force majeure, upstream expropriation events, bankruptcy
of the pipeline company or its parent company, abandonment of the project,
termination of an investment guarantee agreement with Ecuador, or certain
defaults by Occidental. This advance tariff would be used by the pipeline
company to service or prepay project debt. Occidental's obligation relating to