Occidental Petroleum 2008 Annual Report Download - page 62

2006
In January 2006, Occidental completed the merger of Vintage Production, Inc. (Vintage) into a wholly owned Occidental subsidiary. As
a result, Occidental acquired assets in Argentina, California, Yemen, Bolivia and the Permian Basin in Texas. Occidental paid approximately
$1.3 billion in cash to former Vintage shareholders, issued approximately 56 million shares of Occidental common stock, which were valued
at $2.1 billion, and assumed Vintage’s debt, which had an estimated fair market value of $585 million at closing.
The acquisition was accounted for in accordance with SFAS No. 141, "Business Combinations." The results of Vintage’s operations
have been included in the consolidated financial statements since January 30, 2006. The assets acquired and liabilities assumed were
recorded at their estimated fair values at the acquisition date. The estimated fair value of PP&E consisted of $3.4 billion of proved properties
and $1.3 billion of unproved properties. No goodwill was recorded on this transaction.
Certain Vintage assets and their related liabilities were classified as held for sale as part of the allocation of the purchase price, and
were subsequently sold in 2006 for $1.0 billion with no gain or loss recorded. The results of operations for the assets that were held for sale
and sold are not included in the revenue, cost or production amounts and were treated as discontinued operations. Net revenues and pre-tax
income for discontinued operations related to these Vintage assets for the year ended December 31, 2006, were $869 million and $237
million, respectively.
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. As a result of the seizure, Occidental classified its Block 15 operations as
discontinued operations. In 2006, Occidental recorded a net after-tax charge of $296 million in discontinued operations. This amount consists
of after-tax charges for the write-off of the investment in Block 15 in Ecuador, as well as ship-or-pay obligations entered into with respect to the
Oleoducto de Crudos Pesados Ltd. (OCP) pipeline in Ecuador to ship oil produced in Block 15, partially offset by $109 million of after-tax
income from operations for the first five months of 2006.
Occidental’s Block 15 assets and liabilities are classified as assets and liabilities of discontinued operations on the consolidated
balance sheet on a retrospective application basis. At December 31, 2008 and 2007, liabilities of discontinued operations related to Ecuador
were $263 million and $292 million, respectively, which mainly consisted of the ship-or-pay obligations to the OCP pipeline. Net revenues
and pre-tax income (loss) for discontinued operations related to Ecuador for the year ended December 31, 2006 were $275 million and $(529)
million, including a pre-tax write-off of $(673) million.
In September 2006, Occidental acquired oil and gas assets located in the Permian Basin in West Texas and California from Plains for
approximately $859 million in cash.
NOTE 3 ACCOUNTING CHANGES
FUTURE ACCOUNTING CHANGES
SFAS No. 141(R)
In December 2007, the Financial Accounting Standards Board (FASB) issued SFAS No. 141(R), "Business Combinations." This
statement provides new accounting guidance and disclosure requirements for business combinations, and is effective for business
combinations which occur starting with the first fiscal year beginning on or after December 15, 2008.
SFAS No. 160
In December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in Consolidated Financial Statements." This statement
provides new accounting guidance and disclosure and presentation requirements for noncontrolling interests in an entity. SFAS No. 160 is
effective for the first fiscal year beginning on or after December 15, 2008. Occidental does not expect the effect of this statement on its
financial statements to be material.
SFAS NO. 161
In March 2008, the FASB issued SFAS No. 161, which provides new disclosure requirements for an entity’s derivative and hedging
activities. SFAS No. 161 is effective for periods beginning after November 15, 2008. Occidental does not expect the effect of this statement on
its financial statements to be material.
FSP EITF Issue No. 03-6-1
In June 2008, the FASB issued FASB Staff Position (FSP) Emerging Issues Task Force (EITF) Issue No. 03-6-1. This FSP concluded
that instruments granted in share-based payment transactions are participating securities prior to vesting and, therefore, should be included
in the earnings allocations in computing basic earnings per share (EPS) under the two-class method. This FSP is effective for financial
statements issued for fiscal years beginning after December 15, 2008 with prior period retrospective application. Occidental does not expect
the effect of this FSP on its financial statements to be material.
48
FSP SFAS No. 132(R)-1