Occidental Petroleum 2014 Annual Report Download - page 139

Occidental Petroleum Corporation
January 30, 2015
Page 7
If a decline trend has been established, this trend was used as the basis for estimating future production rates.
Test data and other related information were used by Occidental to estimate the anticipated initial production rates for those
wells or locations that are not currently producing. For reserves not yet on production, sales were estimated to commence at an
anticipated date determined by Occidental. Wells or locations that are not currently producing may start producing earlier or later
than anticipated in Occidental’s estimates due to unforeseen factors causing a change in the timing to initiate production. Such
factors may include delays due to weather, the availability of rigs, the sequence of drilling, completing or recompleting wells and
constraints set by regulatory bodies.
The future production rates from wells currently on production or wells or locations that are not currently producing may be
more or less than estimated by Occidental because of changes including, but not limited to, reservoir performance, operating
conditions related to surface facilities, compression and artificial lift, pipeline capacity or other operating conditions, market demand
and allowables or other constraints set by regulatory bodies.
Reserves Derived by Occidental Through Certain Production Sharing Contracts
The reserves for certain properties located in the Middle East reviewed herein are limited to the period prior to expiration of
current contracts providing the legal right to produce or an economic interest in such production. Furthermore, properties in different
countries may be subjected to significantly varying contractual fiscal terms that affect the net revenue to Occidental for the
production of these volumes. The prices and economic return received for these net volumes can vary significantly based on the
terms of these contracts. Therefore, when applicable, Ryder Scott reviewed the fiscal terms of such contracts and discussed with
Occidental the net economic benefit attributed to such operations for the determination of the net hydrocarbon volumes and income
thereof. Occidental’s net hydrocarbon volumes for the fields reviewed in the Middle East include certain amounts corresponding to
in-country income taxes where the terms of the production sharing contract include provisions for an in-kind settlement process,
where production is immediately taken and sold to pay the local income tax for and on behalf of the contractor (in this case
Occidental). Ryder Scott has not conducted an exhaustive audit or verification of such contractual information. Neither our review
of such contractual information nor our acceptance of Occidental’s representations regarding such contractual information should
be construed as a legal opinion on this matter.
Possible Effects of Regulation on Occidental’s Estimate of Reserves
Ryder Scott did not evaluate the country and geopolitical risks in the countries where Occidental operates or has interests.
Occidental’s operations may be subject to various levels of governmental controls and regulations. These controls and regulations
may include, but may not be limited to, matters relating to land tenure and leasing, the legal rights to produce hydrocarbons
including the granting, extension or termination of production sharing contracts, the fiscal terms of various production sharing
contracts, drilling and production practices, environmental protection, marketing and pricing policies, royalties, various taxes and
levies including income tax and are subject to change from time to time. Such changes in governmental regulations and policies
may cause volumes of proved reserves actually recovered and amounts of proved income actually received to differ significantly
from the quantities estimated by Occidental as reviewed herein.
We have not made any field examination of the properties. No consideration was given in this review to potential
environmental liabilities that may exist nor to any costs for the potential liabilities to restore and clean up damages, if any, caused
by past operating practices.
RYDER SCOTT COMPANY PETROLEUM CONSULTANTS