Occidental Petroleum Announces Second Quarter Earnings

Occidental Petroleum Corporation (NYSE: OXY) announced net income for the second quarter 2005 of $1.536 billion ($3.82 per share), compared with $581 million ($1.48 per share) for the second quarter 2004. Included in the second quarter 2005 net income are the benefits of two previously announced transactions -- a $619 million tax benefit related to the resolution of certain IRS tax issues and an $89 million after-tax gain from the sale of 11 million shares of Lyondell Chemical Company. Core earnings for the second quarter were $851 million ($2.12 per share), compared with $584 million ($1.49 per share) for the same period in 2004.

In announcing the results, Dr. Ray R. Irani, chairman, president and chief executive officer, said, "Robust energy prices and strong chemical margins were key factors in our financial performance that drove our core earnings 46 percent higher than last year's second quarter and contributed to the strongest earnings for any six-month period in Oxy's history. We also were successful in setting the stage for future growth by concluding a new production-sharing contract to develop Oman's giant Mukhaizna oil field, reaching an agreement to resume operations in our historic contract areas in Libya and acquiring oil and gas producing properties in the Permian Basin of Texas."

Oil and Gas

Oil and gas segment earnings were $1.325 billion for the second quarter 2005, compared with $980 million for the second quarter 2004. After adjusting for a $26 million charge related to a contract settlement, core earnings were $1.351 billion for the second quarter 2005. The improvement in the second quarter 2005 earnings reflected higher worldwide crude oil and gas prices, partially offset by higher operating and exploration expenses and increased DD&A rates. Exploration expenses were higher primarily as a result of a $66 million property impairment resulting from an unsuccessful deep gas well at Elk Hills.

Chemicals

Chemical segment and core earnings were $225 million for the second quarter 2005, compared with $92 million for the second quarter 2004. The improvement in the second quarter 2005 results was due to higher margins in chlorine, caustic soda and polyvinyl chloride resulting from higher sales prices, partially offset by higher energy and feedstock costs.

Other Items

The tax benefit recorded in the second quarter was the result of a closing agreement with the IRS, which resolved certain foreign tax credit issues as part of the IRS audit of tax years 1997-2000. As a result, Occidental reversed tax reserves that were previously established for those foreign tax credit issues. This resolution did not have a significant current cash effect.

After the sale of 11 million shares, Occidental still owns 30.3 million Lyondell shares and warrants to purchase an additional 5 million shares. Occidental accounts for its Lyondell investment on the equity basis.

Six-Months Results

For the first six months of 2005, net income was $2.382 billion ($5.94 per share), compared with $1.068 billion ($2.72 per share) for the first six months of 2004.

Core earnings were $1.717 billion for 2005, compared with $1.060 billion for 2004. See the attached schedule for a reconciliation of net income to core earnings.

Worldwide production for the first six months of 2005 was 560,000 barrels of oil equivalent per day, compared to 571,000 barrels for the first six months of 2004. Horn Mountain's production for the first six months of 2005 was 16,000 barrels of oil equivalent, compared to 26,000 barrels of oil equivalent in 2004, primarily as a result of weather in the Gulf of Mexico and maintenance downtime. Compared to a year ago, production under the company's production-sharing contracts in Oman, Qatar, Yemen and Long Beach was negatively impacted by higher prices. If prices had remained at the six months 2004 levels, production in the first six months of 2005 would have been about 15,000 equivalent barrels per day higher.

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