Occidental Petroleum 2006 Annual Report Download - page 29

Assets
See “Cash Flow Analysis” for discussion about the change in cash and cash equivalents. The increase in trade receivables is due to higher
worldwide oil prices and higher oil and gas production volumes during the fourth quarter of 2006 versus 2005. The increase in inventories is due
to an increase in materials and supplies, mainly in Oman and Colombia, and increases in chemical inventory volumes during the fourth quarter
of 2006 versus 2005. The decrease in assets of discontinued operations is due to the write-off of the investment in Block 15 in Ecuador during the
second quarter of 2006.
The decrease in long-term receivables reflects lower mark-to-market adjustments on long-term derivative financial instruments. The increase
in investments in unconsolidated entities is due to mark-to-market adjustments on the Lyondell investment, which became an available-for-sale
investment in May 2006 and additional capital investments made on the Dolphin Project during 2006, partially offset by the sale of 10 million
shares of Lyondell common stock. The increase in PP&E is due to the acquisitions of Vintage and properties from Plains completed in the first and
third quarters of 2006, respectively, and oil and gas capital expenditures during 2006.
Liabilities and Stockholders' Equity
Debt to Capitalization (a)
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The increase in current maturities of long-term debt and capital leases is due to the 4.0-percent medium-term notes, which were reclassified
from long-term to current since they mature in 2007. The increase in accounts payable is due to the Vintage acquisition, higher prices and
volumes for purchased oil in the marketing and trading operations, and higher chemical volume and feedstock price increases during 2006.
The decrease in long-term debt, net is due to various debt redemptions and repurchases throughout 2006, offset by the debt assumed in the
Vintage acquisition. The increase in deferred credits and other liabilities – income taxes is due to the additional deferred taxes recorded as part of
the Vintage acquisition purchase accounting. The increase in deferred credits and other liabilities – other is due to additional pension liabilities
recorded in connection with Occidental’s adoption of Statement of Financial Accounting Standards (SFAS) 158. The increase in long-term liabilities
of discontinued operations was due to accruing the OCP ship-or-pay obligations in Ecuador.
The increase in stockholders' equity reflects the stock issued as consideration for the Vintage acquisition and net income for 2006, partially
offset by treasury stock repurchases and dividend payments.
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At December 31, 2006, Occidental had approximately $1.6 billion in cash and short-term investments on hand. Although income and cash
flows are largely dependent on oil and gas prices and production, Occidental believes that cash and short-term investments on hand and cash
generated from operations will be sufficient to fund its operating needs, capital expenditure requirements, dividend payments, potential
acquisitions, its announced common stock repurchase program and debt repurchases. If needed, Occidental could access its existing credit
facilities.
Available but unused lines of committed bank credit totaled approximately $1.5 billion at December 31, 2006. In September 2006, Occidental
amended and restated its $1.5 billion bank credit (Credit Facility) to, among other things, lower the interest rate and extend the term to September
2011. The Credit Facility provides for the termination of the loan commitments and requires immediate repayment of any outstanding amounts if
certain events of default occur or if Occidental files for bankruptcy. Occidental had not drawn down any amounts on the Credit Facility at
December 31, 2006. None of Occidental's committed bank credits contain material adverse change (MAC) clauses or debt rating triggers that could
restrict Occidental's ability to borrow under these lines. Occidental's credit facilities and debt agreements do not contain rating triggers that could
terminate bank commitments or accelerate debt in the event of a ratings downgrade.
At December 31, 2006, under the most restrictive covenants of certain financing agreements, Occidental's capacity for additional unsecured
borrowing was approximately $44.8 billion, and the capacity for the payment of cash dividends and other distributions on, and for acquisitions of,
Occidental's capital stock was approximately $17.2 billion, assuming that such dividends, distributions and acquisitions were made without
incurring additional borrowing.
In January 2006, Occidental completed the Vintage acquisition and paid $1.3 billion in cash to former Vintage shareholders and issued
approximately 56 million shares of Occidental common stock, which were valued at $2.1 billion. In addition, Occidental assumed Vintage’s debt,
which had an estimated fair market value of $585 million at closing.
In 2006, Occidental redeemed or repurchased $274 million of this newly acquired debt, including all of its 7.875-percent Vintage senior
subordinated notes due 2011 and $74 million of its 8.25-percent Vintage senior notes due 2012. Additionally, Occidental redeemed all of its 7.375-
percent senior notes due 2008 and purchased and retired a total of $120 million of its 4-percent medium-term notes due 2007, its 4.25-percent
medium-term notes due 2010, its 6.75-percent senior notes due 2012, its 9.25-percent senior debentures due 2019, its 8.75-percent senior notes
due 2023 and its 8.45-percent senior notes due 2029.
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