Occidental Petroleum 2002 Annual Report Download - page 32

gross proceeds of approximately $150 million. There was a $13 million after-tax
gain on this transaction.
GULF OF MEXICO TRANSACTIONS
On August 15, 2000, Occidental completed agreements with respect to two
transactions with Apache Corporation involving Occidental's interests in the
Continental Shelf of the Gulf of Mexico (GOM).
Occidental entered into a volumetric production payment (VPP) transaction
to deliver, over 36 months, a substantial portion of its share of the proved
developed producing gas reserves from these GOM interests to Apache amounting to
86 Bcf, for approximately $280 million. The value attributed to the production
payment was based on price curves existing at the time the transaction was
entered into. The $280 million, which represented the initial fair value of
Occidental's obligation to deliver future gas production, was deferred and is
being recognized in income as the gas is delivered. Occidental retained
ownership of the first 2.7 million barrels of oil, which is being used to pay
for the VPP production costs. Occidental believes this amount is sufficient to
cover these costs. The remaining amount of this retained interest at December
31, 2002 was 0.4 million barrels, or approximately $12 million.
Occidental also agreed to sell a 60 percent interest in the subsidiary that
holds a residual interest, post-VPP, in the GOM assets for approximately $62
million. As a result of this sale and the consequent elimination of a portion of
Occidental's responsibility for abandonment liabilities, Occidental recorded an
after-tax gain of $39 million. Approximately 70 percent of the gain was the
result of the elimination of the abandonment liability.
As part of these transactions, Apache was granted four annual call options,
each of which gives them the right to purchase for $11 million an additional 10
percent of the entity holding the residual interest in the GOM assets.
Occidental also was granted four annual put options with generally similar
provisions. Nominal value was attributed to the call and put options. Apache
exercised the call options that became available in 2001 and 2002. Gains
resulting from each exercise of the options were not material.
SALE OF PERU PROPERTIES
On May 8, 2000, Occidental completed an agreement to sell its producing
properties in Peru to Pluspetrol for $30 million. In connection with this
transaction, Occidental recorded an after-tax charge of approximately $29
million in December 1999 to write-down the properties to their fair values.
THUMS ACQUISITION
On April 24, 2000, Occidental completed the acquisition of THUMS, the field
contractor of the Long Beach Unit, an oil and gas production unit, for
approximately $68 million.
ALTURA ACQUISITION
On April 19, 2000, Occidental completed its acquisition of all of the
common interest in Altura, the largest oil producer in Texas. The acquisition
was valued at approximately $3.6 billion. Occidental paid approximately $1.2
billion to the sellers, affiliates of BP and Royal Dutch/Shell Group (Shell), to
acquire the common limited partnership interest and control of the general
partner, which manages, operates and controls 100 percent of the Altura assets.
The partnership borrowed approximately $2.4 billion, which had recourse only to
the Altura assets. The $2.4 billion loan had been completely repaid by the end
of 2001. The partnership also loaned approximately $2.0 billion to affiliates of
the sellers, evidenced by two notes, which provide credit support to the
partnership. The sellers retained a preferred limited partnership interest of
approximately $2.0 billion and were entitled to certain distributions from the
partnership. Occidental exercised an option in May 2002 to redeem the remaining
partnership interests of $2.0 billion held by affiliates of BP and Shell in
exchange for the notes receivable of $2.0 billion to the partnership.
SALE OF CANADIANOXY INVESTMENT
On April 18, 2000, Occidental completed the sale of its 29.2-percent stake
in CanadianOxy for gross proceeds of approximately $1.2 billion Canadian. This
sale resulted in a net pre-tax gain of approximately $493 million. In addition,
Occidental and CanadianOxy exchanged their respective 15-percent interests in
joint businesses of approximately equal value, resulting in Occidental owning
100 percent of an oil and gas operation in Ecuador and CanadianOxy owning 100