Occidental Petroleum 2002 Annual Report Download - page 64

the remaining 50-percent interest. No gain or loss was recognized on this
transaction.
On November 1, 2000, Occidental agreed to farm out a partial economic
interest in its Block 15 operations in Ecuador to AEC, now EnCana, for $68
million. EnCana earns a 40-percent interest in the block and will reimburse
Occidental for certain capital costs through 2004 estimated at $110 million.
Occidental remains the operator of Block 15. The gain on this transaction was
not significant.
On November 1, 2000, Occidental completed the sale of its Durez phenolic
resins and compounding businesses and assets to Sumitomo Bakelite Co., Ltd. for
gross proceeds of approximately $150 million. There was a $13 million after-tax
gain on this transaction.
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.
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.
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.
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.
Occidental's results of operations include the operations of the Altura assets
from the date of acquisition. Pro-forma net income for the year ended December
31, 2000, including historical Altura's results as if the acquisition had
occurred on January 1, 2000, would have been $1.6
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