Occidental Petroleum 2003 Annual Report Download - page 61

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into these transactions to diversify its petrochemicals interests. These
transactions reduced Occidental's direct exposure to petrochemicals volatility,
yet will allow it to preserve, through its Lyondell investment, an economic
upside of a recovery in the petrochemicals industry. 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 plastic calendering
operations in Brazil 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 and 2001, the discontinued
operations had revenues of $91 million and $124 million, respectively, and
pre-tax income (loss) of $(98) million and $2 million, respectively.
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 liquefied natural gas (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.
NOTE 4 ACCOUNTING CHANGES
--------------------------------------------------------------------------------
SFAS NO. 132 REVISED
In December 2003, the Financial Accounting Standards Board (FASB) issued a
revision to SFAS No. 132, "Employers Disclosures about Pensions and Other
Postretirement Benefits" to improve financial statement disclosures for defined
benefit plans. The standard requires that companies provide more details about
their plan assets, benefit obligations, cash flows and other relevant
information, such as plan assets by category. A description of investment
policies and strategies for these asset categories and target allocation
percentages or target ranges are also required in financial statements. This
statement is effective for financial statements with fiscal years ending after
December 15, 2003. Occidental adopted this statement in the fourth quarter of
2003 and provided the required disclosures in Note 13.
SFAS NO. 150
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and Equity." SFAS
No. 150 establishes accounting standards for how a company classifies and
measures financial instruments that have characteristics of liabilities and
equity. Occidental adopted the provisions of this statement on July 1, 2003. As
a result of the adoption, Occidental's mandatorily redeemable trust preferred
securities are now classified as a liability and the payments to the holders of
the securities, which were previously recorded as minority interest on the
statement of operations, are recorded as interest expense. On January 20, 2004,
all of the trust preferred securities were redeemed.
SFAS NO. 149
In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on