Occidental Petroleum Announces Record 2005 Earnings

Occidental Petroleum Corporation (NYSE:OXY) announced net income for the fourth quarter 2005 of $1.152 billion ($2.84 per share), compared with $742 million ($1.86 per share) for the fourth quarter 2004. Core earnings for the fourth quarter were $1.158 billion ($2.86 per share), compared with $680 million ($1.70 per share) for the same period in 2004.

Net income for the twelve months 2005 was $5.281 billion ($13.09 per share), compared with $2.568 billion ($6.49 per share) for the twelve months 2004. Core income was $3.964 billion ($9.83 per share) for 2005, compared with $2.499 billion ($6.32 per share) for 2004. See the attached schedules for a reconciliation of net income to core earnings for the fourth quarter and twelve months.

In announcing the results, Dr. Ray R. Irani, chairman, president and chief executive officer, said, "Occidental's strong fourth quarter operational and financial performance capped off the third consecutive year in which net income and operating cash flow reached new highs. Net income for the quarter was up by 55 percent, compared to the fourth quarter of 2004. Worldwide production which averaged 589,000 barrels of oil equivalent per day, an increase of 4.8 percent from the third quarter, was the highest quarterly production rate in Occidental's history. The production exit rate for the month of December was 596,000 barrels of oil equivalent per day.

In addition to record financial results, 2005 was notable for a number of important achievements that we expect to contribute to future production and earnings growth. We were the first U.S. oil company to return to Libya since the lifting of U.S. sanctions, and we are currently the largest holder of Libyan oil and gas exploration and production acreage. We enhanced our industry-leading position in the Permian Basin in Texas and New Mexico through a series of producing property acquisitions. We expanded our presence in Oman and our core area of the Middle East by winning an interest in the development of the giant Mukhaizna oil field. We also announced our plan to acquire Vintage Petroleum in a transaction aimed at strengthening the company's prospects for material growth in Latin America, California and the Middle East. The acquisition was approved by Vintage shareholders and completed in January 2006. We continued strengthening our balance sheet, which led each of the four major rating agencies to upgrade our credit rating to the "single A" level. A strong balance sheet allows us to compete for large international growth projects."

Oil and Gas

Oil and gas segment earnings were $1.859 billion for the fourth quarter 2005, compared with $1.179 billion for the fourth quarter 2004, an increase of over 57 percent. The fourth quarter 2005 included a $9 million insurance premium increase related to Hurricane Rita in the Gulf of Mexico. After adjusting for the impact of this increase, core earnings were $1.868 billion for the quarter. The improvement in the fourth quarter 2005 core earnings included $759 million from higher worldwide crude oil and gas prices and $148 million from higher crude oil and natural gas sales volumes, partially offset by higher operating, exploration, and other costs, and increased DD&A rates.

Chemicals

Chemical segment earnings were $165 million for the fourth quarter 2005, compared with $125 million for the fourth quarter 2004. The fourth quarter 2005 included a $6 million charge due to higher insurance premiums directly related to Hurricane Rita in the Gulf of Mexico. After adjusting for the impact of this increase, core earnings were $171 million for the fourth quarter 2005, compared with $125 million for last year's fourth quarter, an increase of 37 percent.

The improvement in the fourth quarter 2005 core earnings was due to contributions from the chlor-alkali operations acquired from Vulcan, higher margins in chlorine, caustic soda and polyvinyl chloride resulting from higher sales prices, partially offset by higher energy and feedstock costs.

Twelve-Month Results

Net income for the twelve months of 2005 was $5.281 billion and core income was $3.964 billion. Oil and gas core income of $6.337 billion increased 48 percent from the preceding year. The increase was due to higher worldwide crude oil and gas prices and sales volumes; partially offset by higher exploration expense, operating costs and increased DD&A rates. Chemical core income of $777 million increased 88 percent from the preceding year. The increase was due to higher margins resulting from higher prices in chlorine, caustic soda and polyvinyl chloride; partially offset by higher energy and feedstock costs.

The 2005 net income includes the effects of several significant items related to investments -- a $463 million after-tax gain resulting from Valero's acquisition of Premcor and subsequent sale of Valero shares received, and an $89 million after-tax gain from the sale of 11 million shares of Lyondell Chemical Company stock; taxes -- a $619 million tax benefit related to the resolution of certain IRS tax issues and a $335 million tax benefit due to the reversal of tax reserves no longer required; and a $98 million after-tax charge from the write-off of certain chemical plants.

Net income for the twelve months of 2004 was $2.568 billion and core income was $2.499 billion. The 2004 net income included two significant items -- $77 million after-tax income due to the increase in the carrying value of the investment in Lyondell, resulting from Lyondell's issuing additional shares pursuant to their acquisition of Millennium Chemical Company, and $47 million of tax benefits related to the resolution of certain IRS tax issues.

Production

Worldwide production for the fourth quarter of 2005 averaged 589,000 barrels of oil equivalent (BOE) per day, compared with 558,000 BOE per day for the fourth quarter of 2004. Daily production in the fourth quarter of 2005 increased by 5.6 percent over last year. December 2005 production averaged 596,000 BOE per day. The fourth quarter of 2005 included production of 29,000 BOE per day from the 2005 Permian acquisitions and 24,000 BOE per day from Libya. 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 fourth quarter 2004 levels, production in the fourth quarter of 2005 would have been about 9,000 BOE per day higher.

Worldwide production for the twelve months of 2005 averaged 568,000 BOE per day, slightly higher than the 566,000 BOE per day for the twelve months of 2004. Horn Mountain's daily production for the twelve months of 2005 was 14,000 BOE per day, compared with 21,000 BOE per day in 2004; 3,000 BOE per day of the decline was the result of weather in the Gulf of Mexico and scheduled maintenance downtime. The impact of higher prices resulted in lower production under the company's production-sharing contracts in Oman, Qatar, Yemen and Long Beach of about 11,000 BOE per day. The twelve months of 2005 included production of 17,000 BOE per day from the 2005 Permian acquisitions and 8,000 BOE per day from Libya.

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