Occidental Petroleum 2003 Annual Report Download - page 29

(a) Includes trust preferred securities reported as current liabilities at
December 31, 2003, and excludes fair-value hedge mark-to-market adjustments
and unamortized debt discounts.
(b) Primarily includes obligations under postretirement benefit and deferred
compensation plans.
(c) Amounts are presented gross of sublease rental income.
(d) Primarily includes long-term purchase contracts and purchase orders and
contracts for goods and services used in manufacturing and producing
operations in the normal course of business. Some of these arrangements
involve take-or-pay commitments but they do not represent debt obligations.
Due to their long-term nature, purchase contracts with terms greater than 5
years are discounted using a 6-percent discount rate.
LAWSUITS, CLAIMS, COMMITMENTS, CONTINGENCIES AND RELATED MATTERS
OPC and certain of its subsidiaries have been named in a substantial number
of lawsuits, claims and other legal proceedings. These actions seek, among other
things, compensation for alleged personal injury, breach of contract, property
damage, punitive damages, civil penalties or other losses; or injunctive or
declaratory relief. OPC and certain of its subsidiaries also have been named in
proceedings under the Comprehensive Environmental Response, Compensation and
Liability Act (CERCLA) and similar federal, state and local environmental laws.
These environmental proceedings seek funding or performance of remediation and,
in some cases, compensation for alleged property damage, punitive damages and
civil penalties; however, Occidental is usually one of many companies in these
proceedings and has to date been successful in sharing response costs with other
financially sound companies. With respect to all such lawsuits, claims and
proceedings, including environmental proceedings, Occidental accrues reserves
when it is probable a liability has been incurred and the amount of loss can be
reasonably estimated.
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During the course of its operations, Occidental is subject to audit by tax
authorities for varying periods in various federal, state, local and foreign tax
jurisdictions. Taxable years prior to 1997 are closed for U.S. federal income
tax purposes. Taxable years 1997 through 2002 are in various stages of audit by
the Internal Revenue Service. Disputes arise during the course of such audits as
to facts and matters of law.
Occidental has entered into agreements providing for future payments to
secure terminal and pipeline capacity, drilling services, electrical power,
steam and certain chemical raw materials. At December 31, 2003, 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 $45 million, which was payable as follows (in millions):
2004--$12, 2005--$11, 2006--$10, 2007--$9 and 2008--$3. Fixed payments under
these agreements were $16 million in 2003, $27 million in 2002 and $20 million
in 2001.
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 $1.4 billion capital expenditures estimated for 2004, and
the $250 to $300 million estimated to be spent on the Dolphin Project in 2004.
As discussed under "Significant Accounting Changes" below, FIN 45 requires
the disclosure in Occidental's financial statements of information relating to
guarantees issued by Occidental and outstanding at December 31, 2003.
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, 2003, the notional amount of the guarantees was
approximately $500 million. Of this amount, approximately $400 million relates
to Occidental's guarantee of equity investees' debt and other commitments. The
debt guarantees relating to Elk Hills Power and the guarantees on debt and other
commitments relating to the Ecuador pipeline have been discussed above in the