Occidental Petroleum 2006 Annual Report Download - page 31

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The 2006 amount includes the cash payments associated with the acquisition of Vintage and the property acquisition from Plains, partially
offset by cash proceeds from the Vintage assets subsequently sold and from the sale of Lyondell shares.
The 2005 amount includes the cash payments for several Permian Basin acquisitions, the acquisition of the Vulcan chlor-alkali manufacturing
facilities and the payments to re-enter Libya and to assume operations of the Mukhaizna field in Oman. These were partially offset by the cash
proceeds from the sale of the Premcor-Valero shares and the Lyondell shares.
The 2004 amount includes the purchase of a pipeline and gathering system in the Permian Basin and a $204 million advance to the Elk Hills
Power LLC (EHP) equity investment, which EHP used to repay a portion of its debt.
Also, see the "Capital Expenditures" section below.
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The 2006 amount consists of $1.5 billion of cash paid for Occidental’s stock repurchase plan and net debt payments of approximately $900
million.
The 2005 amount includes net debt payments of approximately $900 million.
The 2004 amount includes $466 million paid to redeem the trust preferred securities in January 2004 and $159 million paid to redeem
Occidental's 6.5-percent senior notes.
Occidental paid common stock dividends of $646 million in 2006, $483 million in 2005 and $424 million in 2004.
Capital Expenditures
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   
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Occidental’s capital spending estimate for 2007 is approximately $3.3 to $3.4 billion. Most of the capital spending will be allocated to oil and gas
exploration, production and development activities for the Oman Mukhaizna project, the Vintage properties in Argentina and California, Libya,
Qatar, the Permian Basin and Elk Hills.
Commitments at December 31, 2006, for major capital expenditures during 2007 and thereafter were approximately $787 million. Occidental
will fund these commitments and capital expenditures with cash from operations.
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In the course of its business activities, Occidental pursues a number of projects and transactions to meet its core business objectives. The
accounting and financial statement treatment of these transactions is a result of the varying methods of funding employed. Occidental also makes
commitments on behalf of unconsolidated entities. These transactions, or groups of transactions, are recorded in compliance with GAAP and,
unless otherwise noted, are not reflected on Occidental’s balance sheets. The following is a description of the business purpose and nature of
these transactions.
Dolphin Project
See "Oil and Gas Segment — Business Review — Middle East/North Africa — Dolphin Project" and "Liquidity and Capital Resources" for
further information.
Ecuador
In Ecuador, Occidental has a 14-percent interest in the OCP oil export pipeline. As of December 31, 2006, Occidental’s net investment in and
advances to the project totaled $72 million. Occidental reports this investment in its consolidated financial statements using the equity method of
accounting. The project was funded in part by senior project debt. The senior project debt is to be repaid with the proceeds of ship-or-pay tariffs of
certain upstream producers in Ecuador. In May 2006, Ecuador terminated Occidental’s contract for the operation of Block 15, which comprised all of
its oil-producing operations in the country, and seized Occidental’s Block 15 assets. Occidental’s guarantee of its share of the ship-or-pay
obligations provides the lenders the right to require Occidental to make an advance tariff payment as a result of the expropriation. At December 31,
2006, the total pre-tax advance tariff payment of approximately $95 million was accrued in Occidental’s consolidated financial statements, and was
included in the net after-tax charge of $296 million discussed in the “Business Review – Latin America – Ecuador” section. This advance tariff
would be used by the pipeline company to service or prepay project debt. At December 31, 2006, Occidental also had obligations relating to
performance bonds totaling $14 million.
Leases
Occidental has entered into various operating-lease agreements, mainly for railcars, power plants, manufacturing facilities and office space.
Occidental leases assets when it offers greater operating flexibility. Lease payments are expensed mainly as cost of sales. See the Contractual
Obligations table below.
Guarantees
Occidental has entered into various guarantees including performance bonds, letters of credit, indemnities, commitments and other forms of
guarantees provided by Occidental to third parties, mainly to provide assurance that OPC or its subsidiaries and affiliates will meet their various
obligations (guarantees).
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