Occidental Petroleum 2002 Annual Report Download - page 63

the UAE. Construction on the upstream production and processing facilities and
the pipeline is expected to begin in 2003 and production is scheduled to begin
in early 2006. The Dolphin partners anticipate securing project financing.
Occidental has not recorded any revenue or production costs for this project and
no oil and gas reserves have been included in its 2002 proved oil and gas
reserves.
In August 2002, Occidental and Lyondell Chemical Company completed an
agreement for Occidental to sell its 29.5-percent share of Equistar to Lyondell
and to purchase a 21-percent equity interest in Lyondell. Occidental entered
into these transactions to diversify its petrochemicals interests. These
transactions also reduced Occidental's direct exposure to petrochemicals
volatility, yet allowed it to preserve, through its Lyondell investment, an
economic upside when the petrochemicals industry recovers. In connection with
these transactions, Occidental wrote down its investment in the Equistar
partnership to fair value by recording a $412 million pre-tax charge as of
December 2001. After the write-down, the net book value of Occidental's
investment in Equistar at December 31, 2001, after considering tax effects,
approximated the fair value of the Lyondell shares Occidental expected to
receive, less transaction costs. Occidental recorded an after-tax gain of $164
million in the third quarter of 2002, as a result of closing these transactions
on August 22, 2002. Occidental's initial carrying value of the Lyondell
investment was $489 million, which represented the fair value of Lyondell's
shares at closing.
In 2002, Occidental increased its ownership in Badin Block 1 and 2R by
purchasing additional interests in these two blocks from the government of
Pakistan for approximately $72 million.
In the fourth quarter of 2002, Occidental sold its chrome business at
Castle Hayne, North Carolina for $25 million and its calendering operations
(Vulcan) for a $6 million note receivable. In the third quarter of 2002,
Occidental recorded an after-tax impairment charge of $69 million and classified
both of these businesses as discontinued operations. The fair value of these
businesses was determined by the expected sales proceeds from third party
buyers. When these transactions closed, no significant gain or loss was
recorded. For the years ended December 31, 2002, 2001 and 2000, the discontinued
operations had revenues of $91 million, $124 million and $166 million,
respectively, and pre-tax income (loss) of $(98) million, $2 million and $22
million, respectively.
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2001
On August 31, 2001, Occidental sold its interest in a subsidiary that owned
a Texas intrastate pipeline system. The entity was sold to Kinder Morgan Energy
Partners, L.P. for $360 million. Occidental recorded an after-tax loss of
approximately $272 million in connection with this transaction.
On July 10, 2001, Occidental completed the sale of its interest in the
Tangguh LNG project in Indonesia to Mitsubishi Corporation of Japan for proceeds
of $503 million. Occidental recorded an after-tax gain of approximately $399
million for this transaction.
2000
On December 4, 2000, Occidental completed an agreement with BP to obtain
BP's interest in a carbon dioxide field in New Mexico and related pipelines in
exchange for Occidental's interest in the Milne Point oil field in Alaska,
together with additional cash consideration. The BP properties acquired had a
book value of $51 million, and Occidental paid $14 million as additional
consideration. The gain on this transaction was immaterial.
On November 29, 2000, OxyChem purchased a 28.6-percent interest in OxyMar,
a Texas general partnership that owns the Ingleside, Texas VCM facility operated
by OxyChem. The interest was purchased from U.S. VCM Corporation, an affiliate
of Marubeni Corporation, which continues to own a 21.4-percent interest and
remains a 50-percent partner for corporate-governance purposes. Occidental
received approximately $37 million relating to the purchase and, as a result,
agreed to guarantee an additional $110 million of OxyMar's debt. The $37 million
was recorded as a reduction to Occidental's investment in OxyMar. OxyVinyls owns