Occidental Petroleum 2002 Annual Report Download - page 39

Download and view the complete annual report

Please find page 39 of the 2002 Occidental Petroleum annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 149

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149

steam and certain chemical raw materials. At December 31, 2002, the net present
value of the fixed and determinable portion of the obligations under these
agreements, which were used to collateralize financings of the respective
suppliers, aggregated $94 million, which was payable as follows (in millions):
2003--$21, 2004--$19, 2005--$16, 2006--$14, 2007--$11 and 2008 through
2019--$13. Fixed payments under these agreements were $27 million in 2002, $20
million in 2001 and $42 million in 2000.
Occidental has certain other commitments under contracts, guarantees and
joint ventures, and certain other contingent liabilities. Many of these
commitments, although not fixed or determinable, involve capital expenditures
and are part of the $1.3 billion capital expenditures estimated for 2003.
As discussed under "Additional Accounting Changes" (below), FIN No. 45
requires the disclosure in Occidental's financial statements of information
relating to guarantees issued by Occidental and outstanding at December 31,
2002.
These guarantees encompass performance bonds, letters of credit,
indemnities, commitments and other forms of guarantees provided by Occidental to
third parties, mainly to provide assurance that Occidental and/or its
subsidiaries and affiliates will meet their various obligations ("guarantees").
At December 31, 2002, the notional amount of the guarantees was
approximately $1 billion. Of this amount, approximately $700 million relates to
Occidental's guarantee of equity investees' debt and other commitments. An
additional $200 million relates to the LaPorte, Texas VCM plant operating lease
and other equipment leases. The foregoing items have also been discussed above
in the "Additional Considerations Regarding Funding and Liquidity" section,
specifically, the debt guarantees relating to OxyMar and Elk Hills Power, the
guarantees on debt and other commitments relating to the Ecuador pipeline and
the residual value guarantee of the LaPorte, Texas VCM plant operating lease.
The remaining $100 million relates to various indemnities and guarantees
provided to third parties.
Occidental has indemnified various parties against specified liabilities
that those parties might incur in the future in connection with purchases and
other transactions that they have entered into with Occidental. These
indemnities usually are contingent upon the other party incurring liabilities
that reach specified thresholds. As of December 31, 2002, Occidental is not
aware of circumstances that would lead to future indemnity claims against it for
material amounts in connection with these transactions.
It is impossible at this time to determine the ultimate liabilities that
OPC and its subsidiaries may incur resulting from any lawsuits, claims and
proceedings, audits, commitments, contingencies and related matters. If these
matters were to be ultimately resolved unfavorably at amounts substantially
exceeding Occidental's reserves, an outcome not currently anticipated, it is
possible that such outcome could have a material adverse effect upon
Occidental's consolidated financial position or results of operations. However,
after taking into account reserves, management does not expect the ultimate
resolution of any of these matters to have a material adverse effect upon
Occidental's consolidated financial position or results of operations.
ENVIRONMENTAL EXPENDITURES
Occidental's operations in the United States are subject to stringent
federal, state and local laws and regulations relating to improving or
maintaining the quality of the environment. Foreign operations also are subject
to environmental-protection laws. Costs associated with environmental compliance
have increased over time and are generally expected to rise in the future.
Environmental expenditures related to current operations are factored into the
overall business planning process. These expenditures are mainly considered an
integral part of production in manufacturing quality products responsive to
market demand.
ENVIRONMENTAL REMEDIATION
The laws which require or address environmental remediation may apply
retroactively to past waste disposal practices and releases. In many cases, the
laws apply regardless of fault, legality of the original activities or current
ownership or control of sites.
26