Occidental Petroleum 2006 Annual Report Download - page 27
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The increase in interest, dividends and other income in 2006, compared to 2005, is primarily due to a $108 million gain related to litigation
settlements and interest income earned on a higher level of cash and cash equivalents.
The increase in interest, dividends and other income in 2005, compared to 2004, reflects higher interest income earned on a higher level of
cash and cash equivalents.
Gains on disposition of assets, net in 2006, includes a gain of $90 million from the sale of 10 million shares of Lyondell stock.
Gain on disposition of assets, net in 2005 includes a gain of $726 million resulting from Valero’s acquisition of Premcor and the subsequent
sale of all of the Valero shares received and a gain of $140 million on the sale of 11 million shares of Lyondell stock.
Selected Expense Items
Cost of sales increased in 2006, compared to 2005, due to higher oil and gas production, maintenance, workover and utility costs and higher
ad valorem and export taxes.
Cost of sales increased in 2005, compared to 2004, mainly due to higher oil and gas production costs and higher energy and feedstock costs.
Selling, general and administrative and other operating expenses increased in 2006, compared to 2005, due to higher oil and gas production
taxes and increases in share-based and incentive compensation expense.
Selling, general and administrative and other operating expenses increased in 2005, compared to 2004, due to the chemical plant write-offs
and writedowns in 2005, higher costs in oil and gas, including higher production-related taxes, and increases in share-based compensation
expense.
DD&A increased in 2006, compared to 2005, due to increased production, mainly from the Vintage acquisition and higher costs of new reserve
additions resulting in a higher DD&A rate.
DD&A increased in 2005, compared to 2004, due to higher costs of new reserve additions resulting in a higher DD&A rate.
The increase in exploration expense in 2005, compared to 2004, was due mostly to higher dry hole write-offs and impairment costs and higher
seismic and geological and geophysical costs.
Interest and debt expense in 2006, 2005 and 2004 included pre-tax debt repayment expenses of $35 million, $42 million and $17 million,
respectively. Excluding the effects of these debt repayment charges, interest expense increased in 2005, compared to 2004, due to higher interest
rates which were partially offset by lower debt levels.
Selected Other Items
The increase in the provision for income taxes in 2006, compared to 2005, was due to an increase in income before taxes in 2006, a $335
million 2005 tax benefit due to the reversal of tax reserves no longer required, and a $619 million 2005 tax benefit related to the resolution of
certain IRS tax issues.
The decrease in income from equity investments in 2006, compared to 2005, is mainly due to the change in Occidental’s accounting for its
Lyondell shares from equity method to available-for-sale investment in May 2006.
The increase in income from equity investments in 2005, compared to 2004, was due to improved results from the Lyondell equity investment
and higher income from a Russian oil and gas equity investee.
The gain on Lyondell stock issuance in 2004 represents Occidental's share of the increase in Lyondell's net equity resulting from Lyondell's
issuance of stock to purchase Millennium.
The changes in the following components of Occidental’s balance sheet are discussed below:
Selected Balance Sheet Components