Occidental Petroleum 2006 Annual Report Download - page 79

NOTE 14 INVESTMENTS AND RELATED-PARTY TRANSACTIONS
At December 31, 2006 and 2005, investments in unconsolidated entities comprised $498 million and $906 million of equity method investments
and $294 million and $303 million of advances to equity method investees, respectively. The remainder of the 2006 investments in unconsolidated
entities reflects available-for-sale securities.

At December 31, 2006, Occidental’s equity investments consist mainly of a 24.5-percent interest in the stock of Dolphin Energy Limited
(Dolphin Energy), and various other partnerships and joint ventures, discussed below. Equity investments paid dividends of $113 million, $161
million and $91 million to Occidental in 2006, 2005 and 2004, respectively. At December 31, 2006, cumulative undistributed earnings of equity-
method investees since acquisition were $104 million. At December 31, 2006, Occidental’s investments in equity investees exceeded the
underlying equity in net assets by $255 million, of which $135 million represents goodwill that will not be amortized and $115 million represents
intangible assets, which will be amortized over the life of the underlying assets, when placed into service.
The following table presents Occidental’s percentage interest in the summarized financial information of its equity method investments:
   
   
   
   
  
    
  
   
  
   
  
Occidental’s investment in the Dolphin Project consists of two separate economic interests: a 24.5-percent undivided interest in a Development
and Production Sharing Agreement, which is proportionately consolidated in the financial statements, and a 24.5-percent ownership interest in
the stock of Dolphin Energy, which is accounted for as an equity investment. In July 2005, Dolphin Energy entered into a bridge loan in an
amount of $2.45 billion. The proceeds of the new bridge loan were used to pay off amounts outstanding on a previous bridge loan and are being
used to fund the construction of the Dolphin Project. The new bridge loan has a term of four years, is a revolving credit facility for the first two years
and may be converted to a term loan thereafter. In September 2005, Dolphin Energy entered into an agreement with banks to provide a $1.0
billion Islamic-law-compliant facility to fund the construction of a certain portion of the Dolphin Project. This four-year financing facility is structured
as a transaction in which Dolphin Energy constructs part of the midstream portion of the Dolphin Project on behalf of a group of Islamic investors
and enters into a lease to use such assets upon construction completion. Occidental guarantees 24.5 percent of both of these obligations of Dolphin
Energy. At December 31, 2006, Occidental’s portion of the bridge loan and Islamic-law-compliant facility draw downs were $469 million and $184
million, respectively. Occidental had recorded $473 million on the balance sheet at December 31, 2006, for the combined bridge loan and Islamic-
law-compliant facility. The remaining amounts of the bridge loan and Islamic-law-compliant facility drawdowns are included in the guarantee
amounts discussed in Note 9.
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 Note 2. 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.
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