# OCCIDENTAL PETROLEUM CORP /DE/ (OXY) FY 2021 MD&A

Verbatim Item 7 Management's Discussion and Analysis from OCCIDENTAL PETROLEUM CORP /DE/'s 10-K for fiscal year 2021.

SEC filing source: https://www.sec.gov/Archives/edgar/data/797468/000079746822000008/oxy-20211231.htm
Accession: 0000797468-22-000008
Filing date: 2022-02-24
Report date: 2021-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/OXY/
All MD&A years: /company/OXY/mda/
Next year: /company/OXY/mda/fy2022/ (FY 2022)

ITEM 7.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (MD&A)

The following discussion should be read together with the Consolidated Financial Statements and the Notes to Consolidated Financial Statements, which are included in this Form 10-K in Item 8 and the information set forth in Risk Factors under Part 1, Item 1A.

[[GREPCENT_TABLE]]
[["INDEX","PAGE"],["Current Business Outlook and Strategy","22"],["Oil and Gas Segment","25"],["Chemical Segment","34"],["Midstream and Marketing Segment","35"],["Segment Results of Operations and Items Affecting Comparability","37"],["Income Taxes","41"],["Consolidated Results of Operations","42"],["Liquidity and Capital Resources","44"],["Lawsuits, Claims, Commitments and Contingencies","47"],["Environmental Liabilities and Expenditures","48"],["Global Investments","50"],["Critical Accounting Policies and Estimates","51"],["Safe Harbor Discussion Regarding Outlook and Other Forward-Looking Data","55"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["OXY 2021 FORM 10-K","21"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","","MANAGEMENT\u2019S DISCUSSION AND ANALYSIS"]]
[[/GREPCENT_TABLE]]

CURRENT BUSINESS OUTLOOK AND STRATEGY

GENERAL

Occidental’s operations, financial condition, cash flows and levels of expenditures are highly dependent on oil prices and, to a lesser extent, NGL and natural gas prices, the Midland-to-Gulf-Coast oil spreads and the prices it receives for its chemical products. During 2021, as compared to 2020, the average annual price per barrel ($/Bbl) of West Texas Intermediate (WTI) crude increased to $67.91 from $39.40 and the average annual Brent price per barrel increased to $70.78 from $43.21. While the worldwide economy continues to be impacted by the ongoing effects of the COVID-19 pandemic and emergence and spread of new variants of the virus, demand for oil has returned to near pre-pandemic levels. Current uncertainty of whether oil supply will be able to sustain a continued supply response, as well as geopolitical risks, have resulted in a significant increase to benchmark oil prices. In addition, current oil prices could be negatively impacted by the emergence of new COVID-19 variants, slow vaccine distribution in developing economies or the recurrence or tightening of travel restrictions and stay-at-home orders.

STRATEGY

Occidental is focused on delivering a unique shareholder value proposition with its integrated portfolio of oil and gas, chemicals and midstream and marketing assets and its commitment to implement carbon management and storage solutions and reduce GHG emissions. Occidental conducts its operations with a focus on sustainability, health, safety, and environmental and social responsibility. Occidental aims to maximize shareholder returns through a combination of:

■Enhancing capital and operational efficiency to sustain 2021 production levels and free cash flow;

■Reducing financial leverage while maintaining a robust liquidity position;

■Returning additional capital to shareholders while continuing to reduce debt and improve Occidental’s financial position; and

■Advancing technologies and business solutions to help drive a sustainable low-carbon future.

OPERATIONAL EXCELLENCE AND CAPITAL EFFICIENCY

Occidental's operational priorities for 2021 were to sustain production in-line with its 2020 fourth quarter rate by investing $2.9 billion in capital and maintaining a majority of the cost savings achieved in 2020. Occidental adhered to its capital budget and exceeded its original 2021 production guidance by 27 thousand barrels of oil equivalent per day (Mboe/d). Occidental set new operational records and efficiency benchmarks in the Permian, Rockies, Gulf of Mexico and Oman. Additionally, OxyChem recorded its highest earnings in 30 years, largely as a result of stronger realized pricing and margins across most product lines with improved demand. With the increase in commodity prices and Occidental’s focus on its cash costs and operational efficiencies, Occidental’s higher cash flow allowed it to reduce its leverage and improve its liquidity position.

DEBT AND INTEREST RATE SWAPS

Occidental used its excess cash flow generated during 2021, coupled with divestiture proceeds, to continue to strengthen its balance sheet by reducing its debt and other financial obligations. In 2021, Occidental reduced total borrowings at face value of over $6.7 billion and retired interest rate swaps with a notional value of $750 million. The 2021 balance sheet improvement efforts have significantly reduced debt maturities in the near and medium terms, which will allow Occidental more operational flexibility and the ability to pay down additional debt in the future with a more opportunistic approach. As of December 31, 2021, Occidental had debt maturities of approximately $101 million in 2022, $465 million in 2023 and $1.7 billion in 2024. In January 2022, Occidental paid off its last 2022 maturity for $101 million.

Occidental’s $2.3 billion Zero Coupon senior notes due 2036 (Zero Coupons) can be put to Occidental in October of each year, in whole or in part, for the then accreted value of the outstanding Zero Coupons. The Zero Coupons can next be put to Occidental in October 2022, which, if put in whole, would require a payment of approximately $1.1 billion at such date. Occidental currently has the intent and ability to meet this obligation, including, if necessary, using amounts available under the revolving credit facility (RCF) should the put right be exercised.

The remaining interest rate swaps with a fair value of $428 million, net of collateral, as of December 31, 2021, have mandatory termination dates in September 2022 and 2023. The interest rate swaps’ fair value, and cash required to settle them on their termination dates, will continue to fluctuate with changes in interest rates through the mandatory termination dates.

As of December 31, 2021, all of Occidental’s Brent-priced sold calls and two way natural gas collars have expired. See Note 8 - Derivatives in the Notes to Consolidated Financial Statements in Part II Item 8 of this Form 10-K for further discussion.

[[GREPCENT_TABLE]]
[["22","OXY 2021 FORM 10-K"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","","MANAGEMENT\u2019S DISCUSSION AND ANALYSIS"]]
[[/GREPCENT_TABLE]]

DEBT RATINGS

As of the date of this filing, Occidental’s long-term debt was rated BB+ by Fitch Ratings, Ba2 by Moody’s Investors Service and BB+ by Standard and Poor’s. In January, 2022, Standard and Poor’s upgraded Occidental’s credit rating to BB+. Any downgrade in credit ratings could impact Occidental's ability to access capital markets and increase its cost of capital. Occidental’s non-investment grade debt rating may require Occidental to provide financial assurance in the form of cash, letters of credit, surety bonds or other acceptable support under certain contractual arrangements.

As of the date of this filing, Occidental has provided required financial assurance through a combination of cash, letters of credit and surety bonds. Occidental has not issued any letters of credit under the RCF or other committed facilities. For additional information, see Risk Factors in Part I, Item 1A of this Form 10-K.

SUSTAINABILITY AND ENVIRONMENTAL STEWARDSHIP STRATEGY

In 2020, Occidental was the first U.S. oil and gas company to announce goals to achieve net-zero GHG emissions for its total emissions inventory including use of sold products. These goals include achieving net-zero GHG emissions (i) from its operations and energy use before 2040, with an ambition to do so before 2035, and (ii) from the use of its sold products with an ambition to do so before 2050. In 2020, Occidental also set various interim targets, including 2025 carbon and methane intensity targets, and Occidental was also the first U.S. oil and gas company to endorse the World Bank’s initiative for zero routine flaring by 2030. In 2021, Occidental made progress on these sustainability commitments and established additional interim targets toward its net-zero goals to advance a low-carbon future.

Occidental seeks to meet its sustainability and environmental goals through its development and commercialization of technologies that lower both GHG emissions from industrial processes and existing atmospheric concentrations of CO2. Occidental believes that carbon removal technologies, including DAC and CCUS, can, with incentives necessary for their development and deployment, provide essential CO2 reductions in the medium term, while the world transitions to a lower carbon intensive economy. Occidental has undertaken the following actions, among others, toward advancing its low-carbon strategy:

■Incorporated specific GHG emissions reduction targets in its RCF and receivables securitization facility, which can impact its costs related to its borrowing facilities;

■Invested in a third party to develop a zero-emission natural gas generation demonstration facility and license the underlying technology;

■Initiated a front end engineering and design study on an industrial scale DAC facility;

■Implemented multiple programs to reduce emissions and the routine flaring of gas;

■Delivered the world’s first cargo of carbon-neutral oil in January 2021;

■Formed teams to specifically advance Occidental’s environmental, social and governance goals and associated accounting, and report to executive management; and

■Provided technical advisory services to third parties regarding their CCUS projects.

In 2022, OLCV plans to invest approximately $300 million in the development and commercialization of new technologies and low-carbon business models. In addition, Occidental plans to invest approximately $83 million in emissions reduction capital projects at its existing oil and gas, chemical and other midstream operations in 2022, such as retrofitting facilities to reduce CO2, methane and other air emissions. The future costs associated with emissions reduction, carbon removal and CCUS to meet its long-term net-zero GHG goals may be substantial and execution of its plans depends on securing financing. Occidental is pursuing multiple pathways to finance these projects including:

■Project financing with long-term carbon removal or CCUS agreements;

■Identifying business opportunities with stakeholders in carbon-intensive industries; and

■Occidental self-funding with excess cash flow.

LIQUIDITY

Occidental exited 2021 with cash and cash equivalents of $2.8 billion and total borrowings at face value of $28.5 billion. Occidental undertook the following actions to improve its liquidity position beyond the improvements provided by 2021’s strong cash flows:

■Maintained its 2021 capital budget of $2.9 billion while exceeding production guidance;

■Maintained the majority of cost savings achieved in prior years;

■Completed its large-scale asset divestiture program;

■Amended and extended the RCF to June 2025 with a fully committed borrowing capacity of $4.0 billion. The amended facility is now a Secured Overnight Financing Rate (SOFR) priced, sustainability linked loan with no material change to existing covenants; and

■Amended and extended the receivables securitization facility to December 2024 with a borrowing capacity as of the date of this filing of $400 million. The amended facility is now a SOFR-priced, sustainability linked loan.

[[GREPCENT_TABLE]]
[["OXY 2021 FORM 10-K","23"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","","MANAGEMENT\u2019S DISCUSSION AND ANALYSIS"]]
[[/GREPCENT_TABLE]]

In the current commodity price environment, Occidental intends to continue strengthening its financial position while returning additional cash to shareholders through an increase in the common dividend and a reactivated share repurchase program. Occidental expects to fund its return of capital to shareholders as well as its operational and capital requirements with cash flows from operations. Occidental will continue to evaluate the economic environment, as well as the commodity price environment, and may make further adjustments to its future levels of capital expenditures and operating and corporate costs. However, lower oil and gas prices as a result of the COVID-19 pandemic or reduced demand may result in the short or long-term reduction of Occidental’s capital expenditures and production profile. Occidental believes the long-term sustainability of the increased dividend rate, even in a lower oil and gas price environment, will be enhanced by continued deleveraging and the reactivated share repurchase program.

KEY PERFORMANCE INDICATORS

Occidental seeks to meet its strategic goals by continually measuring its success against key performance indicators that drive total stockholder return. In addition to efficient capital allocation and deployment discussed below in the section titled Oil and Gas Segment - Business Strategy, Occidental believes the following are its most significant performance indicators:

SAFETY

■Injury Incidence Rate (IIR) and Days Away Restricted Transfer (DART) rate - Occidental’s combined employee and contractor IIR is determined by multiplying the total number of Occupational Safety and Health Administration (OSHA) recordable injuries and illnesses by 200,000 and dividing that result by the total number of hours worked by all employees and contractors. The DART rate is calculated in the same manner as IIR, but uses the number of incidents that resulted in days away from work, job transfer or restricted job duties instead of the number of recordable injuries or illnesses.

OPERATIONAL

■Total spend per barrel - In 2022, Occidental will continue to focus on controlling total costs from a per-barrel perspective. Total spend per barrel is the sum of capital spending, general and administrative expenses, other operating and non-operating expenses and oil and gas lease operating costs divided by global oil, NGL and natural gas sales volumes.

■Daily production - Occidental seeks to maintain 2021 production levels.

FINANCIAL

■Cash returns on capital employed (CROCE) - CROCE is calculated as (i) the cash flows from operating activities, before changes in working capital, plus distributions from WES classified as investing cash flows, divided by (ii) the average of the opening and closing balances of total equity plus total debt.

■Reduce financial leverage.

SUSTAINABILITY AND ENVIRONMENTAL

■Specific emissions reduction, emissions intensity and zero routine flaring targets to advance our goal of net-zero operational and energy use emissions before 2040, with an ambition to achieve before 2035.

■Milestones in specific carbon removal and CCUS projects that advance our net-zero total emissions inventory, including use of sold products, with an ambition to achieve before 2050.

■Water recycling targets to reduce the use of fresh water resources and the disposal of surplus produced water.

■Facilitate deployment of carbon removal, CCUS and other solutions to advance total carbon impact past 2050.

IMPACT OF THE COVID-19 PANDEMIC

Occidental continues to focus on protecting the health and safety of its employees and contractors during the COVID-19 pandemic. New workplace safety protocols and procedures were implemented by Occidental for its offices and work sites in response to help mitigate the spread of COVID-19 and any related variants. Occidental has not incurred material costs or significant disruptions to its day-to-day operations related to the COVID-19 pandemic to date; however, the extent to which the COVID-19 pandemic could adversely affect Occidental's business, results of operations and financial condition will depend on future developments, which remain uncertain.

[[GREPCENT_TABLE]]
[["24","OXY 2021 FORM 10-K"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","","MANAGEMENT\u2019S DISCUSSION AND ANALYSIS"]]
[[/GREPCENT_TABLE]]

OIL AND GAS SEGMENT

BUSINESS STRATEGY

Occidental’s oil and gas segment focuses on long-term value creation and leadership in sustainability, health, safety and the environment. In each core operating area, Occidental’s operations benefit from scale, technical expertise, decades of high-margin inventory, environmental and safety leadership and commercial and governmental collaboration. These attributes allow Occidental to bring additional production quickly to market, extend the life of older fields at lower costs and provide low-cost returns-driven growth opportunities with advanced technology.

With the completion of the Acquisition, Occidental became one of the largest U.S. producers of liquids, which includes oil and NGL, allowing Occidental to maximize cash margins on a Bbl basis. Since the Acquisition, Occidental initially focused on its divestiture program to pay down near-term debt maturities; however, the advantages that Occidental’s portfolio provides, coupled with unmatched subsurface characterization ability and the proven ability to execute, position Occidental for full-cycle success in the years ahead. The oil and gas segment has realized synergies to deliver lower breakeven costs and generate excess free cash flow and, with the late 2021 sale of the Ghana assets, Occidental has completed its large scale asset divestiture program.

Occidental’s assets are strategically positioned to provide a future portfolio of projects that are flexible and have a mix of short-cycle and mid-cycle investment paybacks. Together with Occidental’s technical capabilities, the oil and gas segment strives to achieve low development and operating costs to maximize full-cycle value of the assets.

The oil and gas business implements Occidental’s strategy primarily by:

■Operating and developing areas where reserves are known to exist and optimizing capital intensity in core areas, primarily in the Permian Basin, DJ Basin, Gulf of Mexico, UAE, Oman and Algeria;

■Maintaining a disciplined and prudent approach to capital expenditures with a focus on high-return, short-cycle, cash-flow-generating opportunities and an emphasis on creating value and further enhancing Occidental’s existing positions;

■Focusing Occidental’s subsurface characterization and technical activities on unconventional opportunities, primarily in the Permian Basin;

■Using EOR techniques, such as CO2, water and steam floods in mature fields; and

■Focusing on cost-reduction efficiencies and innovative technologies to reduce carbon emissions.

In 2021, oil and gas capital expenditures were approximately $2.4 billion and primarily focused on Occidental’s assets in the Permian Basin, DJ Basin, Gulf of Mexico and Oman.

OIL AND GAS PRICE ENVIRONMENT

Oil and gas prices are the major variables that drive the industry’s financial performance. The following table presents the average daily WTI and Brent prices for oil and New York Mercantile Exchange (NYMEX) natural gas prices for 2021 and 2020:

[[GREPCENT_TABLE]]
[["","","2021","","2020","","% Change"],["WTI Oil ($/Bbl)","","$","67.91","","","$","39.40","","","72","%"],["Brent Oil ($/Bbl)","","$","70.78","","","$","43.21","","","64","%"],["NYMEX Natural Gas ($/Mcf)","","$","3.61","","","$","2.11","","","71","%"]]
[[/GREPCENT_TABLE]]

The following table presents Occidental’s average realized prices for continuing operations as a percentage of WTI, Brent and NYMEX for 2021 and 2020:

[[GREPCENT_TABLE]]
[["","","2021","","2020"],["Worldwide oil as a percentage of average WTI","","97","%","","95","%"],["Worldwide oil as a percentage of average Brent","","93","%","","86","%"],["Worldwide NGL as a percentage of average WTI","","44","%","","32","%"],["Worldwide NGL as a percentage of average Brent","","42","%","","29","%"],["Domestic natural gas as a percentage of NYMEX","","91","%","","56","%"]]
[[/GREPCENT_TABLE]]
/

Prices and differentials can vary significantly, even on a short-term basis, making it difficult to predict realized prices with a reliable degree of certainty.

[[GREPCENT_TABLE]]
[["OXY 2021 FORM 10-K","25"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","","MANAGEMENT\u2019S DISCUSSION AND ANALYSIS"]]
[[/GREPCENT_TABLE]]

DOMESTIC INTERESTS

BUSINESS REVIEW

Occidental conducts its domestic operations through land leases, subsurface mineral rights it owns, or a combination of both. Occidental’s domestic oil and gas leases have a primary term ranging from one to 10 years, which is extended through the end of production once it commences. Occidental has leasehold and mineral interests in 9.5 million net acres, of which approximately 52% is leased, 24% is owned subsurface mineral rights and 24% is owned land with mineral rights.

DOMESTIC ASSETS (a)

[[GREPCENT_TABLE]]
[["","1. Powder River Basin 2. DJ Basin 3. Permian Basin 4. Gulf of Mexico"]]
[[/GREPCENT_TABLE]]

(a)Map represents geographic outlines of the respective basins.

The Permian Basin

The Permian Basin extends throughout West Texas and Southeast New Mexico and is one of the largest and most active oil basins in the United States, accounting for more than 41% of total United States oil production in 2021. Overall in 2021, Occidental’s share of production in the Permian Basin was approximately 487 Mboe/d.

Occidental manages its Permian Basin operations through two business units: Permian Resources, which includes unconventional opportunities, and Permian EOR, which utilizes EOR techniques such as CO2 floods and waterfloods. Occidental has a leading position in the Permian Basin, producing approximately 9% of total oil in the basin throughout 2021. By exploiting the natural synergies between Permian Resources and Permian EOR, Occidental is able to deliver unique short- and long-term advantages, efficiencies and expertise across its Permian Basin operations.

Permian Resources unconventional oil development projects provide very short-cycle investment payback, averaging less than two years. These investments contribute cash flow, while increasing long-term value and sustainability through higher return on capital employed. Occidental’s oil and gas operations in Permian Resources include approximately 1.5 million net acres. In 2021, well design processes, technologies and logistics improvements drove increased operational efficiencies, which helped lower the overall well cost while improving recovery. Overall in 2021, Permian Resources produced from approximately 6,000 gross wells and added 222 MMboe to Occidental’s proved reserves through development and extensions of proved area.

The Permian Basin’s concentration of large conventional reservoirs, favorable CO2 flooding performance and the expansive CO2 transportation and processing infrastructure has resulted in decades of high-value enhanced oil production. With 35 active CO2 floods and over 50 years of experience, Occidental is the industry leader in Permian Basin CO2 flooding, which can increase ultimate oil recovery by 10% to 25%. Technology improvements, such as the recent trend toward vertical expansion of the CO2 flooded interval into residual oil zone targets, continue to yield more recovery from existing projects, and Permian EOR produced from approximately 14,100 gross wells in 2021.

Significant opportunities also remain to gain additional recovery by expanding Occidental’s existing CO2 projects into new portions of reservoirs that have only been water-flooded. Permian EOR has a large inventory of future CO2 projects,

[[GREPCENT_TABLE]]
[["26","OXY 2021 FORM 10-K"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","","MANAGEMENT\u2019S DISCUSSION AND ANALYSIS"]]
[[/GREPCENT_TABLE]]

which could be developed over the next 20 years or accelerated, depending on market conditions. In addition, OLCV continues making progress towards supplying anthropogenic CO2 for the purpose of CCUS in Occidental’s Permian EOR operations.

In 2021, Occidental spent approximately $1.1 billion of capital in the Permian Basin, of which approximately 93% was spent on Permian Resources assets. Also in 2021, Occidental divested of certain non-strategic assets in the Permian Resources business unit, as well as acquired additional working interests in certain assets in our Permian EOR business unit. In 2022, Occidental expects to allocate approximately $1.7 billion to $1.9 billion, or almost half of its worldwide capital budget to the Permian Basin.

Rockies and Other Domestic

Occidental was Colorado’s top oil and gas producer in 2021, with interests in approximately 600,000 net acres and net production of approximately 302 Mboe/d in 2021 in our Rockies and Other Domestic locations. Production in Colorado is derived from 2,200 operated vertical wells and 2,300 operated horizontal wells primarily focused in 400,000 net acres in the Niobrara and Codell formations. The DJ Basin provides competitive economics, low breakeven costs and free cash flow generation through Occidental’s contiguous acreage position and royalty uplift.

In the DJ Basin, horizontal drilling results in the field continue to be strong, with improved operational efficiencies in drilling and completions. In 2021, Occidental drilled 72 operated horizontal wells and completed 163 operated horizontal wells. Also, in 2021, Occidental divested of certain non-operated assets in the DJ Basin. In 2022, Occidental plans to deploy approximately $0.4 billion in total net capital spending in the Rockies and Other Domestic.

In January 2021, the COGCC adopted new regulations that impose siting requirements, or “setbacks,” on certain oil and gas drilling locations based on the distance of a proposed well pad to occupied structures. Other state agencies, including the Colorado Department of Public Health and Environment and the Colorado Air Quality Control Commission, have also updated their regulations regarding oil and gas operations. As of December 31, 2021, Occidental is fully permitted, or has submitted permit applications to applicable regulatory agencies, for all planned 2022 drilling and completions activity in the DJ Basin. As of year-end 2021, Occidental had not been denied any permits and received its first Oil & Gas Development Plan permit approval under the new COGCC regulations in the fourth quarter of 2021. Occidental has a dedicated, multidisciplinary stakeholder relations team that conducts regulatory and community outreach with respect to its permit applications and operations in Colorado. Occidental continues to have development optionality by flexing resources between the DJ Basin and other high rate-of-return projects in the Permian or Powder River Basin. Occidental’s focus for 2022 in Colorado is continuing to proactively implement Colorado’s new and updated regulatory processes and build operational inventory.

Occidental has gained efficiencies in the permitting process and will continue to look for additional opportunities to do so. As discussed above, Occidental does not anticipate significant near-term changes to our development program in the DJ Basin based on these regulations. However, if Occidental is unable to obtain new drilling permits to develop a significant portion of the company’s undeveloped acreage in the DJ Basin, the company’s DJ Basin assets may be subject to testing for impairment, and if deemed to be impaired, such impairment could be material to our financial statements.

Occidental holds approximately 5.0 million net acres in other domestic locations, which includes the Powder River Basin, North DJ Basin and Wyoming.

OFFSHORE DOMESTIC ASSETS

Gulf of Mexico

Occidental is the fourth-largest oil and gas producer in the deep-water Gulf of Mexico, operating 10 strategically located deep-water floating platforms, producing from 17 active fields while owning a working interest in 180 blocks – one of the largest portfolios in the Gulf of Mexico. Occidental further operates marine shore-bases in Galveston, Texas, and Port Fourchon, Louisiana, as well as two helicopter bases in Louisiana that are configured to support the western and eastern Gulf operations, which are located across the 600-mile platform spread as well as providing back up and redundancy to each other. A central supply chain base, with a training center, is located in Broussard, Louisiana, and the operations are supported and managed with engineering and technical staff from The Woodlands, Texas, offices.

In 2021, Occidental increased net production to 144 Mboe/d from approximately 78 gross wells, investing over $300 million in capital, primarily directed towards drilling activity in its Horn Mountain West subsea development, Lucius and Holstein facilities, using one floating drill ship and one platform rig. Occidental also progressed and accelerated key infrastructure facility projects for Horn Mountain West, Caesar-Tonga Subsea Expansion as well as initiating a major subsea-pumping project supporting the K2 Complex.

Operational excellence and efficiency was a prime initiative in 2021 for both drilling and well performance, including the implementation of several stimulations and artificial lift projects, together with optimum sequencing of platform turn-arounds, to reduce both planned and unplanned downtime for a third consecutive year. Hazard and operability studies of all 10 platforms were completed in 2021 and implementation of the resulting risk reduction projects was commenced. During 2021, all necessary regulatory permits for new wells and for existing operations were obtained timely.

[[GREPCENT_TABLE]]
[["OXY 2021 FORM 10-K","27"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","","MANAGEMENT\u2019S DISCUSSION AND ANALYSIS"]]
[[/GREPCENT_TABLE]]

The following table shows areas of continuing development in the Gulf of Mexico, along with the corresponding working interest in those areas.

[[GREPCENT_TABLE]]
[["","Working Interest"],["Horn Mountain","100","%"],["Holstein","100","%"],["Marlin","100","%"],["Lucius","64","%"],["K2 Complex","42","%"],["Caesar Tonga","34","%"],["Constellation","33","%"]]
[[/GREPCENT_TABLE]]

In 2022, Occidental expects to allocate approximately $0.5 billion in capital expenditures to continue to leverage its strategically advantaged infrastructure across the Gulf of Mexico to deliver high-margin production while seeking expansion and exploration opportunities. Occidental plans to conduct production adding activities with one floating drillship, one-to-two platform rigs with several other well service vessels. Horn Mountain West first production is scheduled for summer 2022, with Caesar-Tonga Subsea Expansion ready for first production before spring 2023. Several seismic acquisition programs are planned in 2022 to delineate and de-risk development opportunities as well as generate new opportunities that support the strategy of continued long-term production from the Gulf of Mexico.

INTERNATIONAL INTERESTS

BUSINESS REVIEW

Occidental conducts its ongoing international operations in two sub-regions: the Middle East and North Africa. Its activities include oil, NGL and natural gas production through direct working-interests, production sharing agreements (PSA) and production sharing contracts (PSC). Under the PSCs, Occidental records a share of production and reserves to recover certain development and production costs and an additional share for profit. These contracts do not transfer any right of ownership to Occidental and reserves reported from these arrangements are based on Occidental’s economic interest as defined in the contracts. Occidental’s share of production and reserves from these contracts decreases when product prices rise and increases when prices decline. Overall, Occidental’s net economic benefit from these contracts is greater when product prices are higher. Approximately $0.5 billion of Occidental’s worldwide capital budget is expected to be allocated to its international operations in 2022.

MIDDLE EAST / NORTH AFRICA ASSETS

[[GREPCENT_TABLE]]
[["","1.Algeria 2.Oman 3.Qatar 4.UAE"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["28","OXY 2021 FORM 10-K"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","","MANAGEMENT\u2019S DISCUSSION AND ANALYSIS"]]
[[/GREPCENT_TABLE]]

Algeria

Operations in Algeria involve production and development activities in 18 fields within Blocks 404A and 208, which are located in the Berkine Basin in Algeria’s Sahara Desert and are governed by an agreement between Occidental, Sonatrach and other partners. Occidental is responsible for 24.5% of the development and production costs. The El Merk Central Processing Facility (CPF) in Block 208 processes produced oil and NGL, while the Hassi Berkine South and Ourhoud CPFs in Block 404A processes produced oil. The rights to produce from the Block 404 fields expire between December 2022 and 2036 and the rights to produce from the Block 208 fields expire in 2032. In 2021, net production in Algeria was 43 Mbbl/d. Also, in 2021, Occidental signed a Heads of Agreement with Sonatrach and other partners to discuss a new 25-year PSA that would align the expiration date for all 18 fields. Discussions regarding the potential new PSA are ongoing. In the first quarter of 2022, the joint venture plans to commence a drilling program of four wells.

Oman

In Oman, Occidental is the operator of Block 9 with a 50% working interest, Block 27 with a 65% working interest, Block 53 (Mukhaizna Field) with a 47% working interest and Block 62 with a 100% working interest. Occidental additionally has interests in Blocks 30, 51, 65 and 72. Occidental holds 6.0 million gross acres and has 10,000 potential well inventory locations. In 2021, Occidentals share of production was 74 Mboe/d.

The Block 9 contract expires in 2030 and the Block 27 contract expires in 2035. Occidental’s share of production for Blocks 9 and 27 was 25 Mboe/d and 6 Mboe/d, respectively, in 2021. Occidental has produced over 718 million gross barrels from Block 9 since the beginning of its operation through successful exploration, continuous drilling improvements and EOR projects. The Mukhaizna Field contract expires in 2035 and is a major pattern steam flood project for EOR that utilizes some of the largest mechanical vapor compressors ever built. Since assuming operations in the Mukhaizna Field in 2005, Occidental has drilled over 3,560 new wells and has increased gross production by over 15-fold. Occidental’s share of production for Mukhaizna Field was 30 Mboe/d in 2021. The Block 62 contract expires in 2028 and Occidental delivered production of 12 Mboe/d in 2021. Block 65 is under the exploration phase with a 73% working interest and Occidental’s share of production in 2021 was one Mboe/d based on three oil discoveries. In 2021, Occidental invested capital of $363 million to drill 111 wells and execute facilities projects to support development and EOR activities.

In 2022, Occidental plans to invest over $0.3 billion of capital to drill 128 wells and execute required facilities projects. Occidental will continue to enhance production by adding extended and dual laterals, stimulating wells with OXY JETTING, an in-house developed stimulation technique, and expanding thermal conformance. Occidental will continue to execute projects in Oman targeting emissions reductions. Based on the successful exploration results in Block 65 for 2021, the block’s Declaration of Commerciality is planned for 2022.

Qatar

In Qatar, Occidental partners in the Dolphin Energy Project, an investment that is comprised of two separate economic interests. Occidental has a 24.5% interest in the upstream operations (Dolphin) to develop and produce NGL, natural gas and condensate from Qatar’s North Field through mid-2032. Occidental also has a 24.5% interest in DEL, which operates a pipeline and is discussed further in the midstream and marketing segment section in this Form 10-K under Pipeline. In 2021, Occidental’s net share of production from Dolphin was 40 Mboe/d.

UAE

In 2011, Occidental acquired a 40% participating interest in the Shah gas field (Al Hosn Gas), joining with the Abu Dhabi National Oil Company, which expires in 2041. In 2021, Occidental’s share of production from Al Hosn Gas was 234 million cubic feet per day (MMcf/d) of natural gas and 37 Mbbl/d of NGL and condensate. Al Hosn Gas includes gas processing facilities which are discussed further in the midstream and marketing segment section in this Form 10-K under Gas Processing, Gathering and CO2.

In 2019 and 2020, Occidental acquired 9-year exploration concessions and, subject to a declaration of commerciality, 35-year production concessions for Onshore Block 3 and Block 5, which cover an area approximately 1.5 million acres and 1.0 million acres, respectively, and are adjacent to Al Hosn Gas. In 2021, Occidental announced a multi-zone oil and gas discovery in Block 3.

In 2022, Occidental plans to continue work on an expansion project that will increase the production capacity of the Al Hosn Gas processing facilities from the current 1.28 Bcf/d to 1.45 Bcf/d in 2023 and continue further exploration activities in Onshore Block 3 and Block 5.

Ghana - Discontinued Operations

In October 2021, Occidental completed the sale of its Ghana assets. Prior to the divestiture, Ghana operations included production and development activities located offshore in the West Cape Three Point Block and the Deepwater Tano Block. Occidental’s net share of production in 2021 was 16 Mboe/d.

[[GREPCENT_TABLE]]
[["OXY 2021 FORM 10-K","29"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","","MANAGEMENT\u2019S DISCUSSION AND ANALYSIS"]]
[[/GREPCENT_TABLE]]

PROVED RESERVES

Proved oil, NGL and natural gas reserves were estimated using the unweighted arithmetic average of the first-day-of-the-month price for each month within the year, unless prices were defined by contractual arrangements. Oil, NGL and natural gas prices used for this purpose were based on posted benchmark prices and adjusted for price differentials including gravity, quality and transportation costs.

The following table shows the 2021, 2020 and 2019 calculated first-day-of-the-month average prices for both WTI and Brent oil prices, as well as the Henry Hub gas prices measured in million British thermal units (MMbtu):

[[GREPCENT_TABLE]]
[["","","2021","","2020","","2019"],["WTI Oil ($/Bbl)","","$","66.56","","","$","39.57","","","$","55.69"],["Brent Oil ($/Bbl)","","$","69.24","","","$","43.41","","","$","63.03"],["Henry Hub Natural Gas ($/MMbtu)","","$","3.60","","","$","1.98","","","$","2.58"],["Mt. Belvieu NGL ($/Bbl) (a)","","$","44.22","","","$","18.74","","","N/A"]]
[[/GREPCENT_TABLE]]

(a)Mt. Belvieu pricing was added as an NGL benchmark beginning in 2020. Prior to 2020, WTI oil was used as a benchmark for NGL.

Occidental had proved reserves from continuing operations at year-end 2021 of 3,512 MMboe, compared to the year-end 2020 amount of 2,911 MMboe. Proved developed reserves represented approximately 75% and 78% of Occidental’s total proved reserves at year-end 2021 and 2020, respectively. The following table shows the breakout of Occidental’s proved reserves from continuing operations by commodity as a percentage of total proved reserves:

[[GREPCENT_TABLE]]
[["","","2021","","2020"],["Oil","","50","%","","51","%"],["NGL","","22","%","","20","%"],["Natural gas","","28","%","","29","%"]]
[[/GREPCENT_TABLE]]

Occidental does not have any reserves from non-traditional sources. For further information regarding Occidental’s proved reserves, see the Supplemental Oil and Gas Information section in Item 8 of this Form 10-K.

CHANGES IN PROVED RESERVES

Occidental’s total proved reserves from continuing operations increased 601 MMboe in 2021, which was primarily driven by price and other revisions of 829 MMboe and extensions and discoveries of 145 MMboe. These increases were partially offset by production of 426 MMboe and asset divestitures of 11 MMboe. Changes in reserves were as follows:

[[GREPCENT_TABLE]]
[["MMboe","","2021"],["Revisions of previous estimates","","829"],["Improved recovery","","20"],["Extensions and discoveries","","145"],["Purchases","","44"],["Sales","","(11)"],["Production","","(426)"],["Total","","601"]]
[[/GREPCENT_TABLE]]

Occidental’s ability to add reserves, other than through purchases, depends on the success of infill development, extension, discovery and improved recovery projects, each of which depends on reservoir characteristics, technology improvements and oil and natural gas prices, as well as capital and operating costs. Many of these factors are outside management’s control and may negatively or positively affect Occidental’s reserves.

Revisions of Previous Estimates

Revisions can include upward or downward changes to previous proved reserve estimates for existing fields due to the evaluation or interpretation of geologic, production decline or operating performance data. In addition, product price changes affect proved reserves recorded by Occidental. For example, lower prices may decrease the economically recoverable reserves, particularly for domestic properties, because the reduced margin limits the expected life of the operations. Offsetting this effect, lower prices increase Occidental’s share of proved reserves under PSCs because more oil is required to recover costs. Conversely, when prices rise, Occidental’s share of proved reserves decreases for PSCs and economically

[[GREPCENT_TABLE]]
[["30","OXY 2021 FORM 10-K"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","","MANAGEMENT\u2019S DISCUSSION AND ANALYSIS"]]
[[/GREPCENT_TABLE]]

recoverable reserves may increase for other operations. Reserve estimation rules require that estimated ultimate recoveries be much more likely to increase or remain constant than to decrease, as changes are made due to increased availability of technical data.

In 2021, Occidental’s revisions of previous estimates of proved reserves were positive 829 MMboe, of which approximately 421 MMboe were positive price revisions. The positive price revisions were primarily associated with the Permian Basin (380 MMboe) and the DJ Basin (51 MMboe), which were partially offset by negative price revisions of 35 MMboe on international PSCs.

An additional 208 MMboe of positive revisions were related to additions associated with infill development projects, primarily in the Permian Basin (103 MMboe) and the DJ Basin (90 MMboe).

Further positive revisions of 101 MMboe were associated with updates based on reservoir performance.

The remaining revisions were associated with various other cost related revisions (57 MMboe) and management changes in development plans primarily due to higher average commodity prices compared to the prior year (42 MMboe).

Improved Recovery

In 2021, Occidental added proved reserves of 20 MMboe related to improved recovery primarily due to secondary and tertiary projects, mainly in certain international assets which accounted for approximately two-thirds of the reserve additions. These properties comprise conventional projects, which are characterized by the deployment of EOR development methods, largely employing application of CO2 flood, waterflood or steam flood. These types of conventional EOR development methods can be applied through existing wells, though additional drilling is frequently required to fully optimize the development configuration. Waterflooding is the technique of injecting water into the formation to displace the oil to the offsetting oil production wells. The use of either CO2 or steam flooding depends on the geology of the formation, the evaluation of engineering data, availability and cost of either CO2 or steam and other economic factors. Both techniques work similarly to lower viscosity causing the oil to move more easily to the producing wells.

Extensions and Discoveries

Occidental also added proved reserves from extensions and discoveries, which are dependent on successful exploration and exploitation programs. In 2021, extensions and discoveries added 145 MMboe primarily related to the recognition of proved reserves in the Permian Basin (120 MMboe) and Gulf of Mexico (10 MMboe).

Purchases of Proved Reserves

In 2021, Occidental purchased proved reserves of 44 MMboe primarily consisting of proved reserves in the Permian EOR.

Sales of Proved Reserves

In 2021, Occidental sold 11 MMboe in proved reserves, primarily related to the divestitures of certain non-strategic assets in the Permian Basin.

Proved Undeveloped Reserves

Occidental had PUD reserves at year-end 2021 of 865 MMboe, compared to the year-end 2020 amount of 645 MMboe.

Changes in PUD reserves were as follows:

[[GREPCENT_TABLE]]
[["MMboe","","2021"],["Revisions of previous estimates","","280"],["Improved recovery","","10"],["Extensions and discoveries","","60"],["Purchases","","6"],["Sales","","\u2014"],["Transfer to proved developed reserves","","(136)"],["Total","","220"]]
[[/GREPCENT_TABLE]]

Revisions of previous estimates were a positive 280 MMboe. Approximately 203 MMboe of the positive revisions were related to additions associated with infill development projects, primarily in the Permian Basin (99 MMboe) and the DJ Basin (90 MMboe). Additionally, the revisions included positive price revisions of 50 MMboe. The positive price revisions were primarily associated with the Permian Basin (48 MMboe) and the DJ Basin (8 MMboe). Further, 38 MMboe of positive revisions were related to management changes in development plans. The remaining revisions were associated with various updates based on reservoir performance.

Extensions and discoveries added 60 MMboe primarily related to the recognition of proved reserves in the Permian Basin (45 MMboe) and Gulf of Mexico (10 MMboe). Total improved recovery additions of 10 MMboe were primarily the result

[[GREPCENT_TABLE]]
[["OXY 2021 FORM 10-K","31"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","","MANAGEMENT\u2019S DISCUSSION AND ANALYSIS"]]
[[/GREPCENT_TABLE]]

of secondary and tertiary projects in international assets (9 MMboe). The 2021 additions to PUD reserves were offset by transfers to proved developed reserves. Transfers to proved developed reserves were a total of 136 MMboe. The transfers were primarily associated with the DJ Basin (70 MMboe), the Permian Basin (41 MMboe), and Gulf of Mexico (18 MMboe).

PUD reserves are supported by a five-year detailed field-level development plan, which includes the timing, location and capital commitment of the wells to be drilled. Only PUD reserves which are reasonably certain to be drilled within five years of booking and are supported by a final investment decision to drill them are included in the development plan. A portion of the PUD reserves associated with international operations are expected to be developed beyond the five years and are tied to approved long-term development projects.

In 2021, Occidental incurred approximately $0.6 billion to convert PUD reserves to proved developed reserves, and in 2021 Occidental converted approximately 15% of its PUD reserves to proved developed, when adjusted for revisions and sales. As of December 31, 2021, Occidental had 865 MMboe of PUD reserves of which 60% were associated with domestic onshore, 8% with Gulf of Mexico and 32% with international assets. Occidental’s most active development areas are located in the Permian Basin, which represented 45% of the PUD reserves as of December 31, 2021. Almost half of Occidental’s 2022 capital program of $3.9 billion to $4.3 billion is allocated to the development program in the Permian Basin. Overall, Occidental plans to spend approximately $3.0 billion over the next five years to develop its PUD reserves in the Permian Basin.

As of December 31, 2021, Occidental had 192 MMboe of pre-2017 PUD reserves that remained undeveloped. These PUD reserves relate to approved long-term development plans, 187 MMboe of which are associated with international development projects with physical limitations in existing gas processing capacity. Occidental remains committed to these projects and continues to actively progress the development of these volumes. In addition to the above, Occidental has 112 MMboe of PUD reserves that are scheduled to be developed more than five years from their initial date of booking. These PUD reserves are primarily related to approved long-term development plans with physical limitations in existing gas processing capacity, 63 MMboe of which are associated with other Permian EOR projects and 38 MMboe associated with international development projects.

RESERVES EVALUATION AND REVIEW PROCESS

Occidental’s estimates of proved reserves and associated future net cash flows as of December 31, 2021, were made by Occidental’s technical personnel and are the responsibility of management. The estimation of proved reserves is based on the requirement of reasonable certainty of economic producibility and funding commitments by Occidental to develop the reserves. This process involves reservoir engineers, geoscientists, planning engineers and financial analysts. As part of the proved reserves estimation process, all reserve volumes are estimated by a forecast of production rates, operating costs and capital expenditures. Price differentials between benchmark prices (the unweighted arithmetic average of the first-day-of-the-month price for each month within the year) and realized prices and specifics of each operating agreement are then used to estimate the net reserves. Production rate forecasts are derived by a number of methods, including estimates from decline curve analysis, type curve analysis, material balance calculations that take into account the volumes of substances replacing the volumes produced and associated reservoir pressure changes, seismic analysis and computer simulation of the reservoir performance. These reliable field-tested technologies have demonstrated reasonably certain results with consistency and repeatability in the formation being evaluated or in an analogous formation. Operating and capital costs are forecast using the current cost environment applied to expectations of future operating and development activities.

Net proved developed reserves are those volumes that are expected to be recovered through existing wells with existing equipment and operating methods for which the incremental cost of any additional required investment is relatively minor.

Net PUD reserves are those volumes that are expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required for recompletion. PUD reserves are supported by a five-year, detailed, field-level development plan, which includes the timing, location and capital commitment of the wells to be drilled. The development plan is reviewed and approved annually by senior management and technical personnel. Annually, a detailed review is performed by Occidental’s Worldwide Reserves Group and its technical personnel on a lease-by-lease basis to assess whether PUD reserves are being converted on a timely basis within five years from the initial disclosure date. Any leases not showing timely transfers from PUD reserves to proved developed reserves are reviewed by senior management to determine if the remaining reserves will be developed in a timely manner and have sufficient capital committed in the development plan. Only PUD reserves that are reasonably certain to be drilled within five years of booking and are supported by a final investment decision to drill them are included in the development plan. A portion of the PUD reserves associated with international operations are expected to be developed beyond the five years and are tied to approved long-term development plans.

The current Senior Vice President, Reserves for Oxy Oil and Gas is responsible for overseeing the preparation of reserve estimates, in compliance with SEC rules and regulations, including the internal audit and review of Occidental’s oil and gas reserves data. He has over 40 years of experience in the upstream sector of the exploration and production business and has held various assignments in North America, Asia and Europe. He is a three-time past Chair of the Society of Petroleum Engineers Oil and Gas Reserves Committee. He is an American Association of Petroleum Geologists (AAPG) Certified Petroleum Geologist and currently serves on the AAPG Committee on Resource Evaluation. He is a member of the Society of Petroleum Evaluation Engineers, the Colorado School of Mines Potential Gas Committee and the United Nations

[[GREPCENT_TABLE]]
[["32","OXY 2021 FORM 10-K"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","","MANAGEMENT\u2019S DISCUSSION AND ANALYSIS"]]
[[/GREPCENT_TABLE]]

Economic Commission for Europe Expert Group on Resource Management. He has Bachelor of Science and Master of Science degrees in geology from Emory University in Atlanta.

Occidental has a Corporate Reserves Review Committee (Reserves Committee), consisting of senior corporate officers, to review and approve Occidental’s oil and gas reserves. The Reserves Committee reports to the Audit Committee of Occidental’s Board of Directors during the year. Since 2003, Occidental has retained Ryder Scott Company, L.P. (Ryder Scott), independent petroleum engineering consultants, to review its annual oil and gas reserve estimation processes. For additional reserves information, see Supplemental Oil and Gas Information under Item 8 of this Form 10-K.

In 2021, Ryder Scott conducted a process review of the methods and analytical procedures utilized by Occidental’s engineering and geological staff for estimating the proved reserves volumes, preparing the economic evaluations and determining the reserves classifications as of December 31, 2021, in accordance with SEC regulatory standards. Ryder Scott reviewed the specific application of such methods and procedures for selected oil and gas properties considered to be a valid representation of Occidental’s 2021 year-end total proved reserves portfolio. In 2021, Ryder Scott reviewed approximately 36% of Occidental’s proved oil and gas reserves. Since being engaged in 2003, Ryder Scott has reviewed the specific application of Occidental’s reserve estimation methods and procedures for approximately 91% of Occidental’s existing proved oil and gas reserves.

Management retained Ryder Scott to provide objective third-party input on its methods and procedures and to gather industry information applicable to Occidental’s reserve estimation and reporting process. Ryder Scott has not been engaged to render an opinion as to the reasonableness of reserves quantities reported by Occidental. Occidental has filed Ryder Scott’s independent report as an exhibit to this Form 10-K.

Based on its reviews, including the data, technical processes and interpretations presented by Occidental, Ryder Scott has concluded that the overall procedures and methodologies Occidental utilized in estimating the proved reserves volumes, preparing the economic evaluations and determining the reserves classifications for the reviewed properties are appropriate for the purpose thereof and comply with current SEC regulations.

INDUSTRY OUTLOOK

The oil and gas exploration and production industry is highly competitive, is subject to significant volatility due to various market conditions and operations are highly dependent on oil prices and, to a lesser extent, NGL and natural gas prices. Oil prices increased significantly in 2021. During 2021, as compared to 2020, the average annual $/Bbl of WTI crude increased to $67.91 from $39.40 and the average annual Brent price per barrel increased to $70.78 from $43.21.

Oil prices will continue to be affected by: (i) global supply and demand, which are generally a function of global economic conditions, inventory levels, production or supply chain disruptions, technological advances, regional market conditions and the actions of OPEC, other significant producers and governments; (ii) transportation capacity, infrastructure constraints, and costs in producing areas; (iii) currency exchange rates and inflation rates; and (iv) the effect of changes in these variables on market perceptions.

NGL prices are related to the supply and demand for the components of products making up these liquids. Some of them more typically correlate to the price of oil while others are affected by natural gas prices as well as the demand for certain chemical products for which they are used as feedstock. In addition, infrastructure constraints magnify the pricing volatility from region to region.

Domestic natural gas prices and local differentials are strongly affected by local supply and demand fundamentals, as well as government regulations, global LNG demand and availability of transportation capacity from producing areas.

We expect that oil prices in the near-term will continue to be influenced by the duration and severity of the COVID-19 pandemic and its resulting impact on oil and gas supply and demand.

These and other factors make it difficult to predict the future direction of oil, NGL and domestic gas prices reliably. For purposes of the current capital plan, Occidental will continue to focus on allocating capital to its highest-return assets with the flexibility to adjust based on fluctuations in commodity prices. International gas prices are generally fixed under long-term contracts. Occidental continues to adjust capital expenditures in line with current economic conditions with the goal of keeping returns well above its cost of capital.

The timing, process and ultimate cost to transition to a lower carbon intensive economy remains largely unknown; various industry forecasts indicate a growing demand for hydrocarbons for the remainder of the current decade. Occidental believes its operational flexibility regarding its mix of short-cycle and mid-cycle projects and its knowledge and experience in CO2 separation, transportation, use, recycling and storage means that its oil and gas segment is well positioned to support Occidental’s transition to net zero as well as create opportunities in a low-carbon future.

[[GREPCENT_TABLE]]
[["OXY 2021 FORM 10-K","33"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","","MANAGEMENT\u2019S DISCUSSION AND ANALYSIS"]]
[[/GREPCENT_TABLE]]

CHEMICAL SEGMENT

BUSINESS STRATEGY

OxyChem concentrates on the chlorovinyls chain, beginning with the co-production of caustic soda and chlorine. Caustic soda and chlorine are marketed to external customers. In addition, chlorine, together with ethylene, is converted through a series of intermediate products into PVC. OxyChem seeks to be a low-cost producer in order to generate cash flow in excess of its normal capital expenditure requirements and achieve above-cost-of-capital returns. OxyChem’s focus on chlorovinyls allows it to maximize the benefits of integration and take advantage of economies of scale. Capital is employed to sustain production capacity and to focus on projects and developments designed to improve the competitiveness of segment assets. Acquisitions and plant development opportunities may be pursued when they are expected to enhance the existing core chlor-alkali and PVC businesses or take advantage of other specific opportunities. In 2021, capital expenditures for OxyChem totaled $308 million.

BUSINESS ENVIRONMENT

In 2021, the United States economic growth, estimated to be 5.6%, was significantly higher than the 3.4% contraction experienced in 2020, which resulted in higher demand for most products including caustic soda and PVC. Pricing for PVC continued to remain strong in 2021 due to increased domestic demand and record high pricing in global markets. Caustic soda prices were significantly higher in 2021, partially offset by higher energy costs.

BUSINESS REVIEW

BASIC CHEMICALS

The U.S. economic growth resulted in higher domestic demand as chlor-alkali operating rates increased compared to 2020. Liquid caustic soda and chlorine prices/margins were higher in 2021 due to strong demand in most market segments, which was partially offset by higher energy prices. Increases in prices/margins for caustic, chlorine and chlorine derivatives in 2021 versus 2020 was driven by strong demand, weather events and other supply disruptions.

VINYLS

Strong demand from the second half of 2020 continued into 2021, resulting in an 11% increase in domestic PVC demand. Housing starts, construction projects and low mortgage rates were the main catalyst driving the growth. During 2021, PVC producers were confronted with extended production outages, weather events and supply chain interruptions while PVC converters also experienced challenges due to shortages of labor, parts and raw materials. As with 2020, higher U.S. demand limited PVC availability for export markets. 2021 PVC export volume was down 32% year over year. PVC exports represented 19% of total North American production in 2021 compared to 28% in 2020.

INDUSTRY OUTLOOK

Industry performance will depend on the health of the global economy and recovery from the COVID-19 pandemic. The housing, construction and automotive markets are expected to remain strong throughout 2022. Product margins will depend on market supply and demand balances, feedstock and energy prices, supply chain interruptions, labor constraints and rising inflation rates. Further recovery in the petroleum industry should strengthen the demand/margins for some of Occidental’s products that are consumed by industry participants. U.S. commodity export markets could be impacted by the relative strength of the U.S. dollar.

BASIC CHEMICALS

Demand for basic chemicals is expected to further improve in 2022 over 2021 levels. Improvement in most market segments is expected with the anticipated improvement in the overall economy and recovering supply chains. Demand for chlorine and derivatives will improve with continued growth in the housing, general construction and automotive markets. Demand for alkali products, particularly caustic soda, will improve with growth in the pulp and paper, industrial and alumina markets. Chlor-alkali operating rates should improve moderately with higher demand and continued competitive energy and raw material pricing as compared to global feedstock costs.

VINYLS

Domestic PVC demand is expected to remain strong with further year-over-year growth in 2022. Residential construction spending and expected new infrastructure projects are forecasted to drive domestic growth in 2022. New domestic PVC capacity is expected to fully enter the market in 2022 but is not expected to have a material impact on PVC production rates due to domestic and export growth expectations.

[[GREPCENT_TABLE]]
[["34","OXY 2021 FORM 10-K"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","","MANAGEMENT\u2019S DISCUSSION AND ANALYSIS"]]
[[/GREPCENT_TABLE]]

MIDSTREAM AND MARKETING SEGMENT

BUSINESS STRATEGY

The midstream and marketing segment strives to maximize value by optimizing the use of its gathering, processing, transportation, storage and terminal commitments and by providing the oil and gas segment access to domestic and international markets. To generate returns, the segment evaluates opportunities across the value chain and uses its assets to provide services to Occidental’s subsidiaries, as well as third parties. The midstream and marketing segment operates or contracts for services on gathering systems, gas plants, co-generation facilities and storage facilities and invests in entities that conduct similar activities.

This segment also seeks to minimize the costs of gas and power used in Occidental’s various businesses. Capital is employed to sustain or expand assets to improve the competitiveness of Occidental’s businesses. In 2021, capital expenditures related to the midstream and marketing segment totaled $106 million.

Also included in the midstream and marketing segment is OLCV. OLCV seeks to leverage Occidental’s carbon management expertise through the development of CCUS projects, and invests in innovative low-carbon technologies that are expected to reduce our carbon footprint and enable others to do the same.

BUSINESS ENVIRONMENT

Midstream and marketing segment earnings are affected by the performance of its various businesses, including its marketing, gathering and transportation, gas processing and power-generation assets. The marketing business aggregates, markets and stores Occidental and third-party volumes. Marketing performance is affected primarily by commodity price changes and margins in oil and gas transportation and storage programs. The marketing business results can experience significant volatility depending on commodity prices and the Midland-to-Gulf-Coast oil spreads. In 2021, Permian to Gulf Coast transportation capacity increased as new third-party pipelines were completed. This, along with reduction in Permian Basin production, reduced the Midland-to-Gulf-Coast oil spreads. The Midland-to-Gulf-Coast oil spreads have decreased from an average of $1.43 per barrel in 2020 to $0.48 per barrel for the year ended December 31, 2021. A $0.25 change in the Midland-to-Gulf-Coast oil spreads impacts total year operating cash flows by approximately $65 million. Gas gathering, processing and transportation results are affected by fluctuations in commodity prices and the volumes that are processed and transported through the segment’s plants, as well as the margins obtained on related services from investments in which Occidental has an equity interest. The 2021 increases in NGL prices and sulfur prices positively impacted the gas processing business.

BUSINESS REVIEW

MARKETING

The marketing group markets substantially all of Occidental’s oil, NGL and natural gas production and optimizes its transportation and storage capacity. Occidental’s third-party marketing activities focus on purchasing oil, NGL and gas for resale from parties whose oil and gas supply is located near its transportation and storage assets. These purchases allow Occidental to aggregate volumes to better utilize and optimize its assets. In 2021, compared to the prior year, marketing results were favorable due to the rising crude oil price environment and its impact on export sales.

DELIVERY AND TRANSPORTATION COMMITMENTS

Occidental has made long-term commitments to certain refineries and other buyers to deliver oil, NGL and natural gas. The total amount contracted to be delivered is approximately 92 MMbbl of oil through 2025, 731 MMbbl of NGL through 2029 and 764 Bcf of gas through 2029. The price for these deliveries is set at the time of delivery of the product.

Occidental has pipeline take-or-pay capacity of approximately 800 thousand barrels per day (Mbbl/d) to the Gulf Coast, leased storage capacity of approximately 10 MMbbl and capacity at the Ingleside Crude terminal of approximately 525 Mbbl/d.

PIPELINE

Occidental’s pipeline business mainly consists of its 24.5% ownership interest in DEL. DEL owns and operates a 230-mile-long, 48-inch-diameter natural gas pipeline (Dolphin Pipeline), which transports dry natural gas from Qatar to the UAE and Oman. The Dolphin Pipeline has capacity to transport up to 3.2 Bcf/d and currently transports approximately 2.0 Bcf/d and up to 2.2 Bcf/d in the summer months.

GAS PROCESSING, GATHERING AND CO2

Occidental processes its and third-party domestic wet gas to extract NGL and other gas byproducts, including CO2 and delivers dry gas to pipelines. Margins primarily result from the difference between inlet costs of wet gas and market prices for NGL.

As of December 31, 2021, Occidental owned all of the 2.2% non-voting general partner interest and 49.7% of the limited partner units in WES. On a combined basis, with its 2% non-voting limited partner interest in Western Midstream Operating, LP (WES Operating), Occidental's total effective economic interest in WES and its subsidiaries was 51.8%. See Note 1 - Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements in Part II Item 8 of this Form

[[GREPCENT_TABLE]]
[["OXY 2021 FORM 10-K","35"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","","MANAGEMENT\u2019S DISCUSSION AND ANALYSIS"]]
[[/GREPCENT_TABLE]]

10-K for more information regarding Occidental’s equity method investment in WES. WES owns gathering systems, plants and pipelines and earns revenue from fee-based and service-based contracts with Occidental and third parties.

Occidental’s 40% participating interest in Al Hosn Gas also includes sour gas processing facilities that are designed to process 1.28 Bcf/d of natural gas and separate it into salable gas, condensate, NGL and sulfur. In 2021, the project produced 640 MMcf/d of natural gas, 100 Mbbl/d of NGL and condensate, and 11,700 tons/d of sulfur, of which Occidental’s net share was 256 MMcf/d of natural gas, 40 Mbbl/d of NGL and condensate and 4,700 tons/d of sulfur.

In 2021, compared to the prior year, gas processing, gathering and CO2 results increased primarily due to higher sulfur and NGL prices.

POWER GENERATION FACILITIES

Earnings from power and steam generation facilities are derived from sales to affiliates and third parties.

LOW-CARBON VENTURES

OLCV was formed to execute on Occidental’s vision to reduce global emissions and provide a more sustainable future through the development of low-carbon energy and products. OLCV capitalizes on Occidental’s extensive experience in utilizing CO2 in its development of CCUS projects and providing services to third parties to facilitate the implementation of their CCUS projects. Moreover, OLCV is fostering new technologies, including DAC and low-carbon power sources, and business models with the potential to position Occidental as a leader in the production of low-carbon oil and products.

Occidental has developed standards and protocols recognized by the EPA for monitoring, reporting and verifying the amount, safety and permanence of CO2 stored through secure geologic sequestration. Occidental holds the nation’s first two EPA-approved monitoring, reporting and verification (MRV) plans for geologic sequestration through EOR production and obtained a third MRV plan in 2021.

OLCV is currently conducting front-end engineering design work and feasibility studies on a number of projects to capture and sequester CO2, either from the atmosphere or from industrial point sources. In 2022, OLCV plans to invest approximately $300 million to pursue various projects.

The profitability of sequestration projects is dependent upon the costs of developing, building and operating sequestration infrastructure, demand for sequestration services from emitters and the availability of certain tax attributes and credits generated from the capture and storage of CO2.

INDUSTRY OUTLOOK

Midstream and marketing segment results can experience volatility depending on the Midland-to-Gulf-Coast oil spreads, commodity price changes and demand impacting export sales. To a lesser extent, declines in commodity prices, including NGL and sulfur prices, reduce the results for the gas processing business.

At the end of 2021, the U.S. experienced economy-wide cost increases, which could increase the cost of sequestration projects. Occidental saw increased interest from third parties in providing sequestration services during the year. Additionally, grants, credits and other tax-advantaged low-carbon attributes continue to be actively discussed at both state and federal levels. These trends are expected to continue, which Occidental believes will enhance the economics of sequestration projects.

[[GREPCENT_TABLE]]
[["36","OXY 2021 FORM 10-K"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","","MANAGEMENT\u2019S DISCUSSION AND ANALYSIS"]]
[[/GREPCENT_TABLE]]

SEGMENT RESULTS OF OPERATIONS AND ITEMS AFFECTING COMPARABILITY

SEGMENT RESULTS OF OPERATIONS

Segment earnings exclude income taxes, interest income, interest expense, environmental remediation expenses, unallocated corporate expenses and discontinued operations, but include gains and losses from divestitures of segment assets and income from the segments’ equity investments. Seasonality is not a primary driver of changes in Occidental’s consolidated quarterly earnings during the year.

The following table sets forth the sales and earnings of each operating segment and corporate items for the years ended December 31:

[[GREPCENT_TABLE]]
[["millions, except per share amounts","","2021","","2020","","2019"],["NET SALES (a)"],["Oil and gas","","$","18,941","","","$","13,066","","","$","13,941"],["Chemical","","5,246","","","3,733","","","4,102"],["Midstream and marketing","","2,863","","","1,768","","","4,132"],["Eliminations","","(1,094)","","","(758)","","","(1,264)"],["Total","","$","25,956","","","$","17,809","","","$","20,911"],["SEGMENT RESULTS AND EARNINGS"],["Domestic","","$","2,900","","","$","(8,758)","","","$","838"],["International","","1,497","","","(742)","","","1,851"],["Exploration","","(252)","","","(132)","","","(169)"],["Oil and gas","","4,145","","","(9,632)","","","2,520"],["Chemical","","1,544","","","664","","","799"],["Midstream and marketing","","257","","","(4,175)","","","241"],["Total","","$","5,946","","","$","(13,143)","","","$","3,560"],["Unallocated corporate items"],["Interest expense, net","","(1,614)","","","(1,424)","","","(1,002)"],["Income tax benefit (expense)","","(915)","","","2,172","","","(861)"],["Other","","(627)","","","(1,138)","","","(2,204)"],["Income (loss) from continuing operations","","$","2,790","","","$","(13,533)","","","$","(507)"],["Discontinued operations, net","","(468)","","","(1,298)","","","(15)"],["Net income (loss)","","2,322","","","(14,831)","","","(522)"],["Less: Net income attributable to noncontrolling interests","","\u2014","","","\u2014","","","(145)"],["Less: Preferred stock dividends","","(800)","","","(844)","","","(318)"],["Net income (loss) attributable to common stockholders","","$","1,522","","","$","(15,675)","","","$","(985)"],["Net income (loss) attributable to common stockholders\u2014basic","","$","1.62","","","$","(17.06)","","","$","(1.22)"],["Net income (loss) attributable to common stockholders\u2014diluted","","$","1.58","","","$","(17.06)","","","$","(1.22)"]]
[[/GREPCENT_TABLE]]

(a)Intersegment sales eliminate upon consolidation and are generally made at prices approximating those that the selling entity would be able to obtain in third-party transactions.

[[GREPCENT_TABLE]]
[["OXY 2021 FORM 10-K","37"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","","MANAGEMENT\u2019S DISCUSSION AND ANALYSIS"]]
[[/GREPCENT_TABLE]]

ITEMS AFFECTING COMPARABILITY

OIL AND GAS SEGMENT

Results of Operations

[[GREPCENT_TABLE]]
[["millions","","2021","","2020","","2019"],["Segment Sales","","$","18,941","","","$","13,066","","","$","13,941"],["Segment Results (a)"],["Domestic","","$","2,900","","","$","(8,758)","","","$","838"],["International","","1,497","","","(742)","","","1,851"],["Exploration","","(252)","","","(132)","","","(169)"],["Total","","$","4,145","","","$","(9,632)","","","$","2,520"],["Items affecting comparability"],["Asset impairments and related items - domestic (b)","","$","(282)","","","$","(5,904)","","","$","(288)"],["Asset impairments and related items - international (c)","","$","\u2014","","","$","(1,195)","","","$","(39)"],["Asset sale gains (losses), net - domestic (d)","","$","27","","","$","(1,275)","","","$","475"],["Asset sale losses, net - international (e)","","$","43","","","$","(353)","","","$","\u2014"],["Oil, natural gas and CO2 mark-to-market gains (losses)","","$","(280)","","","$","1,090","","","$","(15)"],["Rig terminations and other - domestic","","$","\u2014","","","$","(59)","","","$","\u2014"],["Rig terminations and other - international","","$","\u2014","","","$","(13)","","","$","\u2014"]]
[[/GREPCENT_TABLE]]

(a)Results included significant items affecting comparability discussed in the footnotes below.

(b)The 2021 amount included $282 million of asset impairments primarily related to undeveloped leases that either expired or were set to expire in the near-term where Occidental had no plans to pursue exploration activities. The 2020 amount included pre-tax impairments of $4.5 billion primarily related to domestic onshore unproved acreage as well as $1.3 billion primarily related to other domestic onshore assets and the Gulf of Mexico. The 2019 amount included $285 million of impairment and related charges associated with domestic undeveloped leases that were set to expire in the near-term, where Occidental had no plans to pursue exploration activities.

(c)The 2020 amount included $1.2 billion of impairment and related charges associated with Occidental’s proved properties in Algeria and Oman. The 2019 amount related to Occidental’s mutually agreed early termination of certain Qatar concessions.

(d)The 2021 amount included $27 million in post-closing consideration earned from 2020 asset sales as a result of certain production and pricing targets being met. The 2020 amount included a $440 million loss on the sale of Occidental’s mineral and fee surface acres in Wyoming, Colorado and Utah and losses of $820 million related to the sale of non-core, largely non-operated acreage in the Permian Basin. The 2019 amount included gain on the sale of a portion of Occidental’s joint venture with ECOPETROL S.A. (Ecopetrol) and a loss on sale of real estate assets.

(e)The 2021 amount primarily included $55 million in post-closing consideration earned from 2020 asset sales as a result of certain production and pricing targets being met, The 2020 amount included a loss on the sale of Occidental’s Colombia assets of $353 million.

[[GREPCENT_TABLE]]
[["38","OXY 2021 FORM 10-K"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","","MANAGEMENT\u2019S DISCUSSION AND ANALYSIS"]]
[[/GREPCENT_TABLE]]

The following table sets forth the average realized prices for oil, NGL and natural gas from ongoing operations for each of the three years in the period ended December 31, 2021, and includes a year-over-year change calculation:

[[GREPCENT_TABLE]]
[["","","2021","","Year over Year Change","","2020 (a)","","Year over Year Change","","2019 (a)"],["Average Realized Prices"],["Oil ($/Bbl)"],["United States","","$","66.39","","","82","%","","$","36.39","","","(33)","%","","$","54.31"],["International","","$","65.08","","","57","%","","$","41.50","","","(33)","%","","$","62.00"],["Total worldwide","","$","66.14","","","77","%","","$","37.34","","","(34)","%","","$","56.26"],["NGL ($/Bbl)"],["United States","","$","30.62","","","156","%","","$","11.98","","","(25)","%","","$","16.03"],["International","","$","26.13","","","61","%","","$","16.22","","","(26)","%","","$","21.85"],["Total worldwide","","$","30.01","","","139","%","","$","12.58","","","(27)","%","","$","17.20"],["Natural Gas ($/Mcf)"],["United States","","$","3.30","","","180","%","","$","1.18","","","(10)","%","","$","1.31"],["International","","$","1.69","","","1","%","","$","1.67","","","1","%","","$","1.66"],["Total worldwide","","$","2.87","","","119","%","","$","1.31","","","(10)","%","","$","1.45"]]
[[/GREPCENT_TABLE]]

(a)2020 and 2019 average realized prices have been adjusted to reflect the exclusion of Colombia, which was sold in 2020.

Domestic oil and gas results, excluding significant items affecting comparability, increased in 2021 compared to 2020 primarily due to higher realized oil, NGL and natural gas prices, partially offset by higher DD&A rates and overall lower oil volumes, primarily in the Permian Basin and DJ Basin.

International oil and gas results, excluding significant items affecting comparability, increased in 2021 compared to 2020 primarily due to higher oil prices partially offset by lower oil volumes.

Production

The following table sets forth the production volumes of oil, NGL and natural gas per day from ongoing operations for each of the three years in the period ended December 31, 2021, and includes a year-over-year change calculation:

[[GREPCENT_TABLE]]
[["Production per Day, Ongoing Operations (Mboe/d)","","2021","","Year over Year Change","","2020","","Year over Year Change","","2019"],["United States"],["Permian","","487","","","(15)","%","","575","","","13","%","","509"],["Rockies & Other Domestic","","302","","","(9)","%","","332","","","126","%","","147"],["Gulf of Mexico","","144","","","11","%","","130","","","124","%","","58"],["Total","","933","","","(10)","%","","1,037","","","45","%","","714"],["International"],["Algeria & Other International","","44","","","(2)","%","","45","","","88","%","","24"],["Al Hosn Gas","","76","","","(3)","%","","78","","","(5)","%","","82"],["Dolphin","","40","","","(9)","%","","44","","","5","%","","42"],["Oman","","74","","","(13)","%","","85","","","(4)","%","","89"],["Total","","234","","","(7)","%","","252","","","6","%","","237"],["Total Production from Ongoing Operations","","1,167","","","(9)","%","","1,289","","","36","%","","951"],["Operations exited (a)","","16","","","(72)","%","","58","","","(26)","%","","78"],["Total Production (Mboe/d) (b)","","1,183","","","(12)","%","","1,347","","","31","%","","1,029"]]
[[/GREPCENT_TABLE]]

(a)Operations exited include the Ghana assets (sold in October 2021), the Colombia onshore assets (sold in December 2020) and the Qatar Idd El Shargi Fields (exited in 2019).

(b)Natural gas volumes have been converted to Boe based on energy content of six Mcf of gas to one barrel of oil. Boe equivalent does not necessarily result in price equivalency. Please refer to the Supplemental Oil and Gas Information (unaudited) section of this Form 10-K for additional information on oil and gas production and sales.

[[GREPCENT_TABLE]]
[["OXY 2021 FORM 10-K","39"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","","MANAGEMENT\u2019S DISCUSSION AND ANALYSIS"]]
[[/GREPCENT_TABLE]]

Average daily production volumes from ongoing operations decreased in 2021 compared to 2020 primarily due to maintaining capital expenditures at a level to sustain production at the rate Occidental exited 2020.

Lease Operating Expense

The following table sets forth the average lease operating expense per Boe from ongoing operations for each of the three years in the period ended December 31, 2021:

[[GREPCENT_TABLE]]
[["","","2021","","2020","","2019"],["Average lease operating expense per Boe","","$","7.58","","","$","6.38","","","$","9.07"]]
[[/GREPCENT_TABLE]]

Average lease operating expense per Boe increased in 2021 compared to 2020 primarily as a result of higher maintenance, support and workover costs in the Gulf of Mexico, including additional costs associated with platforms reaching the end of their useful life, as well as higher energy and purchase injectant costs in the Permian, partially offset by continued operational efficiencies which decreased down hole maintenance and workover and support costs in the Permian.

CHEMICAL SEGMENT

[[GREPCENT_TABLE]]
[["millions","","2021","","2020","","2019"],["Segment Sales","","$","5,246","","","$","3,733","","","$","4,102"],["Segment Results","","$","1,544","","","$","664","","","$","799"]]
[[/GREPCENT_TABLE]]

Chemical segment results increased in 2021 compared to 2020 due to improved demand due to improved U.S. economic growth and higher prices across most product lines, including caustic soda and PVC, partially offset by higher raw material costs, primarily ethylene and energy.

MIDSTREAM AND MARKETING SEGMENT

[[GREPCENT_TABLE]]
[["millions","","2021","","2020","","2019"],["Segment Sales","","$","2,863","","","$","1,768","","","$","4,132"],["Segment Results (a)","","$","257","","","$","(4,175)","","","$","241"],["Items affecting comparability"],["Asset sales gains (losses) and others, net (b)","","$","124","","","$","(46)","","","$","114"],["Goodwill impairments and other charges (c)","","$","(21)","","","$","(4,194)","","","$","(1,002)"],["Derivative gains (losses), net (d)","","$","(252)","","","$","97","","","$","(184)"]]
[[/GREPCENT_TABLE]]

(a)Results included significant items affecting comparability discussed in the footnotes below.

(b)The 2021 amount included a $102 million gain from the sale of 11.5 million limited partner units in WES. The 2020 amount represented a loss on the exchange of WES common units to retire a $260 million note. The 2019 amount represented a $114 million gain on the sale of an equity investment in Plains All American Pipeline, L.P. and Plains GP Holdings, L.P. (together, Plains).

(c)The 2020 amount included a $2.7 billion other-than-temporary impairment of the equity investment in WES and $1.4 billion of impairments related to the write-off of goodwill and a loss from an equity investment related to WES’ write-off of its goodwill. The 2019 amount included a $1 billion charge as a result of recording Occidental’s investment in WES at fair value as of December 31, 2019 upon the loss of control.

(d)The 2019 amount represented a $30 million mark-to-market gain on an interest rate swap for WES and other derivative mark-to-market activity.

Midstream and marketing segment results, excluding items affecting comparability, increased in 2021 compared to 2020, primarily due to improved marketing results from higher crude oil prices and higher sulfur prices at Al Hosn Gas.

[[GREPCENT_TABLE]]
[["40","OXY 2021 FORM 10-K"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","","MANAGEMENT\u2019S DISCUSSION AND ANALYSIS"]]
[[/GREPCENT_TABLE]]

CORPORATE

Significant corporate items include the following:

[[GREPCENT_TABLE]]
[["millions","","2021","","2020","","2019"],["Items Affecting Comparability"],["Anadarko acquisition-related costs (a)","","$","(153)","","","$","(339)","","","$","(1,647)"],["Bridge loan financing fees (a)","","$","\u2014","","","$","\u2014","","","$","(122)"],["Acquisition-related pension & termination benefits (a)","","$","\u2014","","","$","114","","","$","37"],["Interest rate swap gains (losses), net (b)","","$","122","","","$","(428)","","","$","122"],["Early debt extinguishment expenses and other","","$","(118)","","","$","\u2014","","","$","(22)"],["Warrants gains, net (b)","","$","\u2014","","","$","5","","","$","81"]]
[[/GREPCENT_TABLE]]

(a)See Note 5 - Acquisitions, Divestitures and Other Transactions in the Notes to Consolidated Financial Statements in Part II Item 8 of this Form 10-K for more information.

(b)See Note 8 - Derivatives in the Notes to the Consolidated Financial Statements in Part II Item 8 of this Form 10-K for more information.

INCOME TAXES

Total deferred tax assets, after valuation allowance, were $3.5 billion and $4.3 billion as of December 31, 2021 and 2020, respectively. Occidental expects to realize the recorded deferred tax assets, net of any allowances, through future operating income and reversal of temporary differences. The total deferred tax liabilities were $10.5 billion and $11.4 billion as of December 31, 2021 and 2020, respectively. The decrease in net deferred tax liability in 2021 compared to 2020 was primarily driven by the impact of lower capital spending and domestic asset impairments for which Occidental does not receive an immediate tax benefit, partially offset by the utilization of net operating losses and other tax attributes.

LEGAL ENTITY REORGANIZATION

In order to align Occidental’s legal entity structure with the nature of its business activities after completing the acquisition of Anadarko and subsequent large scale post-Acquisition divestiture program, management has undertaken a legal entity reorganization that is expected to be completed in the first quarter of 2022.

As a result of this legal entity reorganization, management will make an adjustment to the tax basis in a portion of its operating assets, thus reducing Occidental’s deferred tax liabilities. Accordingly, in the first quarter of 2022, Occidental will record a one-time non-cash tax benefit that is currently estimated not to exceed $2.6 billion, in connection with this reorganization. The timing of any reduction in Occidental’s future cash taxes as a result of this legal entity reorganization will be dependent on a number of factors, including prevailing commodity prices, capital activity level and production mix. Occidental will complete its review of its tax basis calculations, fair value assessments and other information and will finalize the adjustment to its deferred tax liabilities during the first quarter of 2022.

WORLDWIDE EFFECTIVE TAX RATE

The following table sets forth the calculation of the worldwide effective tax rate for income from continuing operations:

[[GREPCENT_TABLE]]
[["millions","","2021","","2020","","2019"],["SEGMENT RESULTS"],["Oil and gas","","$","4,145","","","$","(9,632)","","","$","2,520"],["Chemical","","1,544","","","664","","","799"],["Midstream and marketing","","257","","","(4,175)","","","241"],["Unallocated corporate items","","(2,241)","","","(2,562)","","","(3,206)"],["Income (loss) from continuing operations before taxes","","$","3,705","","","$","(15,705)","","","$","354"],["Income tax benefit (expense)"],["Federal and state","","(247)","","","2,607","","","34"],["Foreign","","(668)","","","(435)","","","(895)"],["Total income tax benefit (expense)","","(915)","","","2,172","","","(861)"],["Income (loss) from continuing operations","","$","2,790","","","$","(13,533)","","","$","(507)"],["Worldwide effective tax rate","","25","%","","14","%","","243","%"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["OXY 2021 FORM 10-K","41"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","","MANAGEMENT\u2019S DISCUSSION AND ANALYSIS"]]
[[/GREPCENT_TABLE]]

In 2021, Occidental’s worldwide effective tax rate was 25%, which was higher than the U.S. statutory rate of 21% due to higher tax rates in the foreign jurisdictions in which Occidental operates, partially offset by the tax impact of business credits, state tax revaluations and other domestic tax benefits.

In 2020, Occidental’s worldwide effective tax rate was 14%, which was largely a result of the impairment of the WES goodwill and certain international assets for which Occidental received no tax benefit and higher-taxed international operations which generally caused Occidental’s tax rate to vary significantly from the U.S. corporate tax rate.

CONSOLIDATED RESULTS OF OPERATIONS

REVENUE AND OTHER INCOME ITEMS

[[GREPCENT_TABLE]]
[["millions","","2021","","2020","","2019"],["Net sales","","$","25,956","","","$","17,809","","","$","20,911"],["Interest, dividends and other income","","$","166","","","$","118","","","$","217"],["Gains (losses) on sale of assets, net","","$","192","","","$","(1,666)","","","$","622"]]
[[/GREPCENT_TABLE]]

NET SALES

Price and volume changes generally represent the majority of the change in the oil and gas and chemical segments sales. Midstream and marketing sales generally represent the margins earned by the marketing business at it strives to optimize the use of its transportation, storage and terminal commitments to provide access to domestic and international markets and, to a lesser extent, NGL and sulfur revenues from the gas processing business.

The increase in net sales in 2021 compared to 2020 was primarily due to higher realized commodity prices, which were partially offset by lower oil volumes. Chemical sales increased primarily due to higher prices and volumes across all product lines, specifically PVC, VCM and caustic due to increased domestic demand and record high pricing in global markets. Midstream and marketing sales improved due to the rising crude oil price environment and its impact on export sales and higher realized sulfur prices at Al Hosn Gas.

GAINS (LOSSES) ON SALE OF ASSETS, NET

The 2021 gains on sales of assets, net, was primarily comprised of a gain from the sale of limited partner units of WES in the first quarter of 2021 as well as post-closing consideration earned on 2020 asset sales as a result of certain production and pricing targets being met. Losses on asset sales in 2020 included $820 million related to the sale of certain non-core, largely non-operated acreage in the Permian Basin, $440 million related to the sale of 4.5 million mineral acres and 1 million fee surface acres located in Wyoming, Colorado and Utah, $353 million related to the sale of the Colombia onshore assets and a loss of $46 million related to an exchange of 27.9 million WES limited partner units to retire a $260 million note payable to WES.

EXPENSE ITEMS

[[GREPCENT_TABLE]]
[["millions","","2021","","2020","","2019"],["Oil and gas operating expense","","$","3,160","","","$","3,065","","","$","3,282"],["Transportation and gathering expense","","$","1,419","","","$","1,600","","","$","635"],["Chemical and midstream cost of sales","","$","2,772","","","$","2,408","","","$","2,791"],["Purchased commodities","","$","2,308","","","$","1,395","","","$","1,679"],["Selling, general and administrative","","$","863","","","$","864","","","$","893"],["Other operating and non-operating expense","","$","1,065","","","$","884","","","$","1,421"],["Depreciation, depletion and amortization","","$","8,447","","","$","8,097","","","$","6,140"],["Asset impairments and other charges","","$","304","","","$","11,083","","","$","1,361"],["Taxes other than on income","","$","1,005","","","$","622","","","$","840"],["Anadarko Acquisition-related costs","","$","153","","","$","339","","","$","1,647"],["Exploration expense","","$","252","","","$","132","","","$","247"],["Interest and debt expense, net","","$","1,614","","","$","1,424","","","$","1,066"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["42","OXY 2021 FORM 10-K"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","","MANAGEMENT\u2019S DISCUSSION AND ANALYSIS"]]
[[/GREPCENT_TABLE]]

OIL AND GAS OPERATING EXPENSE

Oil and gas operating expense increased in 2021 from the prior year, primarily as a result of higher maintenance, support and workover costs in the Gulf of Mexico, including additional costs associated with platforms reaching the end of their useful life, as well as higher energy and purchase injectant costs in the Permian, partially offset by continued operational efficiencies which decreased down hole maintenance and workover and support costs in the Permian.

TRANSPORTATION AND GATHERING EXPENSE

Transportation and gathering expense decreased in 2021 from the prior year, primarily as a result of lower domestic oil and gas production volumes.

CHEMICAL AND MIDSTREAM COST OF SALES

Chemical and midstream cost of sales increased in 2021 from the prior year, primarily due to higher ethylene and energy costs in the chemical segment and higher energy costs in the midstream segment.

PURCHASED COMMODITIES

Purchased commodities increased in 2021 largely as a result of higher crude oil prices on third-party crude purchases related to the midstream and marketing segment.

OTHER OPERATING AND NON-OPERATING EXPENSE

Other operating and non-operating expense increased in 2021 from the prior year, primarily due to a net gain in 2020 related to the settlement, curtailment and special termination benefits on pension plans acquired in the Acquisition.

DEPRECIATION, DEPLETION AND AMORTIZATION

Depreciation, depletion and amortization (DD&A) expense increased in 2021 from the prior year, primarily due to higher DD&A rates primarily in the onshore U.S. domestic assets. As a result of Occidental's mid-year reserve review undertaken in the second quarter of 2021, DD&A rates for the second half of 2021 were lower compared to the first half of 2021 due to increased proved reserves primarily related to positive price revisions. Proved oil, NGL and natural gas reserves were estimated during this mid-year review using the unweighted arithmetic average of the first-day-of-the-month price for each month for the twelve months ended June 30, 2021, unless prices were defined by contractual arrangements.

ASSET IMPAIRMENTS AND OTHER CHARGES

In 2021, asset impairments and other charges of $304 million were mainly comprised of the impairment of undeveloped leases that either expired or were set to expire in the near-term where Occidental had no plans to pursue exploration activities. In 2020, asset impairments and other charges included pre-tax impairments of $4.5 billion primarily related to domestic onshore unproved acreage as well as $1.3 billion primarily related to other domestic onshore assets and the Gulf of Mexico. In addition there were $931 million of impairment and related charges associated with Occidental’s proved properties in Algeria to remeasure the Algeria oil and gas properties to their fair value. Also for the midstream and marketing segment, there were pre-tax impairment charges of $2.7 billion other-than-temporary impairment of the equity investment in WES and $1.2 billion of impairments related to the write-off of goodwill. In 2021, impairments included $276 million related to undeveloped leases that either expired or were set to expire in the near-term, where Occidental had no plans to pursue exploration activities.

TAXES OTHER THAN ON INCOME

Taxes other than on income in 2021 increased from the prior year, primarily due to higher production taxes, which are directly tied to higher commodity prices.

OTHER ITEMS

[[GREPCENT_TABLE]]
[["Income (expense) millions","","2021","","2020","","2019"],["Gains (losses) on interest rate swaps and warrants","","$","122","","","$","(423)","","","$","233"],["Income from equity investments","","$","631","","","$","370","","","$","373"],["Income tax benefit (expense)","","$","(915)","","","$","2,172","","","$","(861)"]]
[[/GREPCENT_TABLE]]

GAINS (LOSSES) ON INTEREST RATE SWAPS AND WARRANTS

Gains on interest rate swaps in 2021 were due to an increase in the floating reference rate of interest rate swaps.

INCOME FROM EQUITY INVESTMENTS

Income from equity investments in 2021 increased as a result of higher earnings from WES as income from equity earnings in 2020 included a loss of $240 million related to WES’s write-off of its goodwill.

[[GREPCENT_TABLE]]
[["OXY 2021 FORM 10-K","43"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","","MANAGEMENT\u2019S DISCUSSION AND ANALYSIS"]]
[[/GREPCENT_TABLE]]

INCOME TAX BENEFIT (EXPENSE)

Income tax expense increased in 2021 from the prior year, as a result of higher pre-tax income, which was primarily related to higher commodity prices.

LOSS FROM DISCONTINUED OPERATIONS, NET

Discontinued operations, net, primarily included a $437 million after-tax loss contingency associated with Occidental’s former operations in Ecuador, see Note - 13 Lawsuits, Claims, Commitments and Contingencies in the Notes to Consolidated Financial Statements in Part ii Item 8 of this Form 10-K for more information. In addition, discontinued operations, net was associated with operations in Ghana which were sold in October 2021.

LIQUIDITY AND CAPITAL RESOURCES

CASH ON HAND

As of December 31, 2021, Occidental had approximately $2.8 billion in cash and cash equivalents. A substantial majority of this cash is held and available for use in the United States.

SOURCES AND USES OF CASH

In the current commodity price environment, Occidental expects to fund its operational and capital requirements as well as return capital to its shareholders via an increase in common dividends and a reactivated share repurchase program with cash flows from operations. Sustained strength in commodity prices and the resultant cash flow generated will also allow Occidental to continue to strengthen its balance sheet by reducing debt and other financial obligations. Occidental currently expects its operational cash flows and cash on hand to be sufficient to meet its current debt maturities and other obligations for the next 12 months from the date of this filing. Should commodity prices return to their 2020 lows, Occidental’s $4.0 billion RCF, receivables securitization facility and access to capital markets are available to meet its ongoing capital needs, purchase obligations, near-term debt maturities and other liabilities and financial obligations, if required.

Occidental’s 2022 capital budget is $3.9 billion to $4.3 billion, of which only a small percentage is allocated to non-cancellable commitments.

As of December 31, 2021, Occidental had $101 million in current maturities of long-term debt through December 31, 2022, and an additional $465 million in long-term obligations due in 2023. The current maturities of long-term debt were paid in January 2022.

As of December 31, 2021, Occidental had $268 million in non-cancelable lease payments due in 2022, and an additional $212 million in non-cancelable lease payments due in 2023.

Dividends on common and preferred stock were $839 million for the year ended December 31, 2021.

Occidental is party to various purchase agreements that are not accounted for as leases or otherwise accrued as liabilities as of December 31, 2021. These agreements consist primarily of obligations to secure terminal, pipeline and processing capacity, purchase services used in the normal course of business including transporting and disposing of produced water, purchase goods used in the production of finished goods including certain chemical raw materials and power and agreements relating to equipment maintenance and service. The amounts that will be paid for such outstanding off-balance sheet purchase obligations as of December 31, 2021 are $3.0 billion in 2022, $4.3 billion in 2023 and 2024, $2.6 billion in 2025 and 2026 and $2.6 billion in 2027 and thereafter.

SHARE REPURCHASE PROGRAM

On February 10, 2022, the Board of Directors authorized a new share repurchase program with a maximum dollar limit of $3 billion and no set term limits, which supersedes the previously authorized share repurchase program.

[[GREPCENT_TABLE]]
[["44","OXY 2021 FORM 10-K"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","","MANAGEMENT\u2019S DISCUSSION AND ANALYSIS"]]
[[/GREPCENT_TABLE]]

The following table summarizes and cross-references Occidental’s contractual obligations and indicates on- and off-balance sheet obligations as of December 31, 2021. Commitments related to held for sale assets are excluded.

[[GREPCENT_TABLE]]
[["millions","","","Payments Due by Year"],["Total","","2022","","2023 and 2024","","2025 and 2026","","2027 and thereafter"],["On-Balance Sheet"],["Current portion of long-term debt (Note 6) (a)","$","101","","","$","101","","","$","\u2014","","","$","\u2014","","","$","\u2014"],["Long-term debt (Note 6) (a)","28,392","","","\u2014","","","2,191","","","5,264","","","20,937"],["Expected interest payments on long-term debt","17,087","","","1,448","","","2,835","","","2,513","","","10,291"],["Leases (Note 7) (b)","1,560","","","268","","","393","","","297","","","602"],["Asset retirement obligations (Note 1)","4,026","","","339","","","906","","","569","","","2,212"],["Other long-term liabilities (c)","3,183","","","1","","","861","","","299","","","2,022"],["Off-Balance Sheet"],["Purchase obligations (d)","12,463","","","3,033","","","4,291","","","2,571","","","2,568"],["Total","$","66,812","","","$","5,190","","","$","11,477","","","$","11,513","","","$","38,632"]]
[[/GREPCENT_TABLE]]

(a)Excluded unamortized debt discount and interest.

(b)Occidental is the lessee under various agreements for real estate, equipment, plants and facilities.

(c)Included long term obligations and current portions of long term obligations under postretirement benefits, accrued transportation commitments, ad valorem taxes and other accrued liabilities.

(d)Amounts included payments which will become due under long-term agreements to purchase goods and services used in the normal course of business to secure terminal, pipeline and processing capacity, CO2, electrical power, steam and certain chemical raw materials including but not limited to capital commitments. Amounts excluded certain product purchase obligations related to marketing activities for which there are no minimum purchase requirements or the amounts are not fixed or determinable. Long-term purchase contracts were discounted at a 4.99% discount rate.

DEBT ACTIVITY

Occidental recently completed its large scale asset divestiture program and used the net proceeds from asset sales and free cash flow to repay near and medium-term debt maturities. During 2021, through repayments and cash tenders Occidental reduced its face value of borrowings by $6.7 billion from $35.2 billion as of December 31, 2020, to $28.5 billion as of December 31, 2021.

In January 2022, Occidental used cash on hand to repay of $101 million in outstanding 2.600% senior notes due April 2022, which were called in December 2021. Subsequent to the repayment of this note, there are no remaining 2022 debt maturities.

In the fourth quarter of 2021, Occidental completed a cash tender offer for outstanding senior notes with a face value of $1.5 billion and maturities ranging from 2024 to 2049 and called and repaid $627 million of senior notes due 2022. In the third quarter of 2021, Occidental completed a cash tender for outstanding senior notes with a face value of $3.0 billion and maturities ranging from 2022 through 2026, paid $224 million of senior notes upon maturity and fully retired $1.1 billion of floating interest rate notes due August 2022. In the first quarter of 2021, Occidental repaid $174 million of debt upon maturity.

In December 2021, Occidental entered into the Second Amended and Restated Credit Agreement on its existing $5.0 billion RCF in which the total commitment was decreased to $4.0 billion, the London Interbank Offered Rate (LIBOR) benchmark was changed to SOFR, an environmental key performance indicator was added with regard to scope 1 and 2 GHG emissions from worldwide operated assets, making this a sustainability-linked loan, and the facility maturity date was extended to June 30, 2025. As of December 31, 2021, under the most restrictive covenants of its financing agreements, Occidental had substantial capacity for additional unsecured borrowings, the payment of cash dividends and other distributions on, or acquisitions of, Occidental common stock.

See Note 6 - Long-Term Debt in the Notes to Consolidated Financial Statements in Part II Item 8 of this Form 10-K for more information related to Occidental’s debt issuance and repayments.

GUARANTEES

Occidental has entered into various guarantees, indemnities and commitments provided by Occidental to third parties, mainly to provide assurance that Occidental or its consolidated subsidiaries or affiliates will meet their various obligations.

[[GREPCENT_TABLE]]
[["OXY 2021 FORM 10-K","45"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","","MANAGEMENT\u2019S DISCUSSION AND ANALYSIS"]]
[[/GREPCENT_TABLE]]

CASH FLOW ANALYSIS

CASH PROVIDED BY OPERATING ACTIVITIES

[[GREPCENT_TABLE]]
[["millions","","2021","","2020","","2019"],["Operating cash flow from continuing operations","","$","10,253","","","$","3,842","","","$","7,336"],["Operating cash flow from discontinued operations, net of taxes","","181","","","113","","","39"],["Net cash provided by operating activities","","$","10,434","","","$","3,955","","","$","7,375"]]
[[/GREPCENT_TABLE]]

Cash provided by operating activities increased in 2021 compared to 2020, primarily due to higher commodity prices, especially for oil, as average WTI and Brent prices increased by 72% and 64%, respectively. The chemical segment also generated substantial operating cash flows largely due to higher demand for most chemical products including caustic soda and PVC and higher pricing relative to 2020. The overall increase in operating cash flows was partially offset by an increase in working capital related to receivables, which increased largely as a result of higher commodity prices.

CASH USED BY INVESTING ACTIVITIES

[[GREPCENT_TABLE]]
[["millions","","2021","","2020","","2019"],["Capital expenditures"],["Oil and gas","","$","(2,409)","","","$","(2,208)","","","$","(5,512)"],["Chemical","","(308)","","","(255)","","","(267)"],["Midstream and marketing","","(106)","","","(50)","","","(461)"],["Corporate","","(47)","","","(22)","","","(127)"],["Total","","$","(2,870)","","","$","(2,535)","","","$","(6,367)"],["Changes in capital accrual","","97","","","(519)","","","(249)"],["Purchase of businesses and assets, net","","(431)","","","(114)","","","(28,088)"],["Proceeds from sale of assets and equity investments, net","","1,624","","","2,281","","","6,143"],["Other investing activities, net","","406","","","109","","","(291)"],["Investing cash flows from continuing operations","","$","(1,174)","","","$","(778)","","","$","(28,852)"],["Investing cash flows from discontinued operations","","(79)","","","(41)","","","(175)"],["Net cash used by investing activities","","$","(1,253)","","","$","(819)","","","$","(29,027)"]]
[[/GREPCENT_TABLE]]

Cash flows used by investing activities increased by $434 million in 2021 compared to 2020. In 2020, Occidental reduced capital spending in response to the COVID-19 pandemic and targeted its capital spend in 2021 to maintain Q4 production and other maintenance capital for operating segments. Additionally, Occidental completed its major divestiture plans, reducing proceeds from asset sales year over year. See Note 5 - Acquisitions, Divestitures and Other Transactions in the Notes to Consolidated Financial Statements in Part II Item 8 of this Form 10-K for a listing of assets and equity investments sold in 2021, 2020 and 2019. In addition, Occidental received a $450 million return of investment from DEL, which is being presented in other investing activities, net, and acquired an additional working interests in certain assets in the Permian Basin and the Gulf of Mexico for approximately $360 million.

CASH PROVIDED (USED) BY FINANCING ACTIVITIES

[[GREPCENT_TABLE]]
[["millions","","2021","","2020","","2019"],["Financing cash flows from continuing operations","","$","(8,564)","","","$","(4,508)","","","$","22,196"],["Financing cash flows from discontinued operations","","(8)","","","(8)","","","(3)"],["Net cash provided (used) by financing activities","","$","(8,572)","","","$","(4,516)","","","$","22,193"]]
[[/GREPCENT_TABLE]]

Cash used by financing activities increased by $4.0 billion compared to 2020 primarily due to the 2021 debt tenders and repayments. See Note 6 - Long-Term Debt in the Notes to Consolidated Financial Statements in Part II Item 8 of this Form 10-K for more information related to Occidental’s debt issuance and repayments. In addition, cash used by financing activities reflected cash dividend payments of $839 million on preferred and common stock and $815 million paid in advance of the mandatory termination dates of interest rate swaps during the third quarter of 2021.

[[GREPCENT_TABLE]]
[["46","OXY 2021 FORM 10-K"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","","MANAGEMENT\u2019S DISCUSSION AND ANALYSIS"]]
[[/GREPCENT_TABLE]]

LAWSUITS, CLAIMS, COMMITMENTS AND CONTINGENCIES

LEGAL MATTERS

Occidental or certain of its subsidiaries are involved, in the normal course of business, in lawsuits, claims and other legal proceedings that seek, among other things, compensation for alleged personal injury, breach of contract, property damage or other losses, punitive damages, civil penalties or injunctive or declaratory relief. Occidental or certain of its subsidiaries also are involved in proceedings under Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) and similar federal, state, local and international environmental laws. These environmental proceedings seek funding or performance of remediation and, in some cases, compensation for alleged property damage, punitive damages, civil penalties and injunctive relief. Usually Occidental or such subsidiaries are among many companies in these environmental proceedings and have to date been successful in sharing response costs with other financially sound companies. Further, some lawsuits, claims and legal proceedings involve acquired or disposed assets with respect to which a third party or Occidental retains liability or indemnifies the other party for conditions that existed prior to the transaction.

In accordance with applicable accounting guidance, Occidental accrues reserves for outstanding lawsuits, claims and proceedings when it is probable that a liability has been incurred and the liability can be reasonably estimated. Reserves for matters, other than for environmental remediation and the arbitration award disclosed below, that satisfy this criteria as of December 31, 2021 and 2020, were not material to Occidental’s Consolidated Balance Sheets.

In 2016, Occidental received payments from the Republic of Ecuador of approximately $1.0 billion pursuant to a November 2015 arbitration award for Ecuador’s 2006 expropriation of Occidental’s Participation Contract for Block 15. The awarded amount represented a recovery of 60% of the value of Block 15. In 2017, Andes Petroleum Ecuador Ltd. (Andes) filed a demand for arbitration, claiming it is entitled to a 40% share of the judgment amount obtained by Occidental. Occidental contends that Andes is not entitled to any of the amounts paid under the 2015 arbitration award because Occidental’s recovery was limited to Occidental’s own 60% economic interest in the block. On March 26, 2021, the arbitration tribunal issued an award in favor of Andes and against Occidental Exploration and Production Company (OEPC) in the amount of $391 million plus interest. In June 2021, OEPC filed a motion to vacate the award due to concerns regarding the validity of the award. In addition, OEPC has made a demand for significant additional claims not addressed by the arbitration tribunal that OEPC has against Andes relating to Andes' 40% share of costs, liabilities, losses and expenses due under the farmout agreement and joint operating agreement to which Andes and OEPC are parties. In December 2021, the U.S. District Court Southern District of New York confirmed the arbitration award, plus prejudgment interest, in the aggregate amount of $558 million. OEPC has appealed the judgement.

In August 2019, Sanchez Energy Corporation and certain of its affiliates (Sanchez) filed voluntary petitions for reorganization under Chapter 11 of the United States Bankruptcy Code. Sanchez is a party to agreements with Anadarko as a result of its 2017 purchase of Anadarko's Eagle Ford Shale assets. Sanchez attempted to reject some of the agreements related to the purchase of Anadarko’s Eagle Ford Shale assets (the Bankruptcy Litigation). If Sanchez was permitted to reject certain of those agreements, then Anadarko may owe deficiency payments to various third parties. In December 2021, Occidental and certain of its affiliates entered into an agreement to resolve the Bankruptcy Litigation. Occidental recorded a contingency reserve as of September 30, 2021, associated with the settlement.

If unfavorable outcomes of these matters were to occur, future results of operations or cash flows for any particular quarterly or annual period could be materially adversely affected. Occidental’s estimates are based on information known about the legal matters and its experience in contesting, litigating and settling similar matters. Occidental reassesses the probability and estimability of contingent losses as new information becomes available.

TAX MATTERS

During the course of its operations, Occidental is subject to audit by tax authorities for varying periods in various federal, state, local and international tax jurisdictions. Tax years through 2017 for U.S. federal income tax purposes have been audited by the IRS pursuant to its Compliance Assurance Program and subsequent taxable years are currently under review. Tax years through 2012 have been audited for state income tax purposes. Significant audit matters in international jurisdictions have been resolved through 2010. During the course of tax audits, disputes have arisen and other disputes may arise as to facts and matters of law.

For Anadarko, its taxable years through 2014 and tax year 2016 for U.S. federal tax purposes have been audited by the IRS. Tax years through 2008 have been audited for state income tax purposes. There is one outstanding significant tax matter in an international jurisdiction related to a discontinued operation. As stated above, during the course of tax audits, disputes have arisen and other disputes may arise as to facts and matters of law.

Other than the matter discussed below, Occidental believes that the resolution of these outstanding tax matters would not have a material adverse effect on its consolidated financial position or results of operations.

Anadarko received an $881 million tentative refund in 2016 related to its $5.2 billion Tronox Adversary Proceeding settlement payment in 2015. In September 2018, Anadarko received a statutory notice of deficiency from the IRS disallowing the net operating loss carryback and rejecting Anadarko’s refund claim. As a result, Anadarko filed a petition with the U.S. Tax Court to dispute the disallowances in November 2018. The case was in the IRS appeals process until the second

[[GREPCENT_TABLE]]
[["OXY 2021 FORM 10-K","47"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","","MANAGEMENT\u2019S DISCUSSION AND ANALYSIS"]]
[[/GREPCENT_TABLE]]

quarter of 2020; however, it has since been returned to the U.S. Tax Court, where a trial date has been set for July 2022 and Occidental expects to continue pursuing resolution.

In accordance with ASC 740’s guidance on the accounting for uncertain tax positions, Occidental has recorded no tax benefit on the tentative cash tax refund of $881 million. As a result, should Occidental not ultimately prevail on the issue, there would be no additional tax expense recorded relative to this position for financial statement purposes other than future interest. However, in that event, Occidental would be required to repay approximately $1 billion in federal taxes, $27 million in state taxes and accrued interest of $314 million. A liability for this amount plus interest is included in deferred credits and other liabilities-other.

INDEMNITIES TO THIRD PARTIES

Occidental, its subsidiaries, or both, have indemnified various parties against specified liabilities those parties might incur in the future in connection with purchases and other transactions that they have entered into with Occidental. These indemnities usually are contingent upon the other party incurring liabilities that reach specified thresholds. As of December 31, 2021, Occidental is not aware of circumstances that it believes would reasonably be expected to lead to indemnity claims that would result in payments materially in excess of reserves.

ENVIRONMENTAL LIABILITIES AND EXPENDITURES

Occidental’s operations are subject to stringent federal, state, local and international laws and regulations related to improving or maintaining environmental quality. The laws that require or address environmental remediation, including CERCLA and similar federal, state, local and international laws, may apply retroactively and regardless of fault, the legality of the original activities or the current ownership or control of sites. Occidental or certain of its subsidiaries participate in or actively monitor a range of remedial activities and government or private proceedings under these laws with respect to alleged past practices at operating, closed and third-party sites. Remedial activities may include one or more of the following: investigation involving sampling, modeling, risk assessment or monitoring; cleanup measures including removal, treatment or disposal; or operation and maintenance of remedial systems. The environmental proceedings seek funding or performance of remediation and, in some cases, compensation for alleged property damage, punitive damages, civil penalties, injunctive relief and government oversight costs.

ENVIRONMENTAL REMEDIATION

As of December 31, 2021, Occidental participated in or monitored remedial activities or proceedings at 165 sites. The following table presents Occidental’s current and non-current environmental remediation liabilities as of December 31, 2021 and 2020, the current portion of which is included in accrued liabilities ($155 million in 2021 and $123 million in 2020) and the remainder in deferred credits and other liabilities - environmental remediation liabilities ($0.9 billion in 2021 and $1.0 billion in 2020).

Occidental’s environmental remediation sites are grouped into four categories: National Priorities List (NPL) sites listed or proposed for listing by the EPA on the CERCLA NPL and three categories of non-NPL sites — third-party sites, Occidental-operated sites and closed or non-operated Occidental sites.

[[GREPCENT_TABLE]]
[["","","2021","","2020"],["millions, except number of sites","","Number of Sites","","Remediation Balance","","Number of Sites","","Remediation Balance"],["NPL sites","","30","","","$","427","","","35","","","$","447"],["Third-party sites","","69","","","273","","","69","","","293"],["Occidental-operated sites","","15","","","122","","","17","","","144"],["Closed or non-operated Occidental sites","","51","","","277","","","49","","","267"],["Total","","165","","","$","1,099","","","170","","","$","1,151"]]
[[/GREPCENT_TABLE]]

As of December 31, 2021, Occidental’s environmental liabilities exceeded $10 million each at 20 of the 165 sites described above and 96 of the sites had liabilities from $0 to $1 million each. As of December 31, 2021, two sites — the Maxus Energy Corporation (Maxus)-indemnified Diamond Alkali Superfund Site and a landfill in Western New York — accounted for 96% of its liabilities associated with NPL sites. 14 of the 30 NPL sites are indemnified by Maxus.

Five of the 69 third-party sites — a Maxus-indemnified chrome site in New Jersey, a former copper mining and smelting operation in Tennessee, a former oil field and a landfill in California and an active refinery in Louisiana where Occidental reimburses the current owner for certain remediation activities — accounted for 75% of Occidental’s liabilities associated with these sites. Nine of the 69 third-party sites are indemnified by Maxus.

Four sites — oil and gas operations in Colorado and chemical plants in Kansas, Louisiana and Texas — accounted for 69% of the liabilities associated with the Occidental-operated sites. Ten other sites — a landfill in Western New York, a

[[GREPCENT_TABLE]]
[["48","OXY 2021 FORM 10-K"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","","MANAGEMENT\u2019S DISCUSSION AND ANALYSIS"]]
[[/GREPCENT_TABLE]]

former refinery in Oklahoma, former chemical plants in California, Delaware, Michigan, New York, Ohio, Tennessee and Washington, and a closed coal mine in Pennsylvania — accounted for 75% of the liabilities associated with closed or non-operated Occidental sites.

Environmental remediation liabilities vary over time depending on factors such as acquisitions or divestitures, identification of additional sites and remedy selection and implementation. Occidental recorded environmental remediation expenses of $28 million, $36 million and $112 million for the years ended December 31, 2021, 2020 and 2019, respectively. Environmental remediation expenses primarily relate to changes to existing conditions from past operations. Based on current estimates, Occidental expects to expend funds corresponding to approximately 40% of the year-end remediation balance over the next three to four years with the remainder over the subsequent 10 or more years. Occidental believes its range of reasonably possible additional losses beyond those amounts currently recorded for environmental remediation for all of its environmental sites could be up to $1.3 billion.

MAXUS ENVIRONMENTAL SITES

When Occidental acquired Diamond Shamrock Chemicals Company (DSCC) in 1986, Maxus, a subsidiary of YPF S.A., agreed to indemnify Occidental for a number of environmental sites, including the Diamond Alkali Superfund Site (Site) along a portion of the Passaic River. On June 17, 2016, Maxus and several affiliated companies filed for Chapter 11 bankruptcy in Federal District Court in the State of Delaware. Prior to filing for bankruptcy, Maxus defended and indemnified Occidental in connection with clean-up and other costs associated with the sites subject to the indemnity, including the Site.

In March 2016, the EPA issued a Record of Decision (ROD) specifying remedial actions required for the lower 8.3 miles of the Lower Passaic River. The ROD does not address any potential remedial action for the upper nine miles of the Lower Passaic River or Newark Bay. During the third quarter of 2016, and following Maxus’s bankruptcy filing, Occidental and the EPA entered into an Administrative Order on Consent (AOC) to complete the design of the proposed clean-up plan outlined in the ROD with an estimated cost of $165 million. The EPA announced that it will pursue similar agreements with other potentially responsible parties.

Occidental has accrued a reserve relating to its estimated allocable share of the costs to perform the design and remediation called for in the AOC and the ROD, as well as for certain other Maxus-indemnified sites. Occidental's accrued estimated environmental reserve does not consider any recoveries for indemnified costs. Occidental’s ultimate share of this liability may be higher or lower than the reserved amount, and is subject to final design plans and the resolution of Occidental's allocable share with other potentially responsible parties. Occidental continues to evaluate the costs to be incurred to comply with the AOC and the ROD and to perform remediation at other Maxus-indemnified sites in light of the Maxus bankruptcy and the share of ultimate liability of other potentially responsible parties. In June 2018, Occidental filed a complaint under CERCLA in Federal District Court in the State of New Jersey against numerous potentially responsible parties for reimbursement of amounts incurred or to be incurred to comply with the AOC and the ROD, or to perform other remediation activities at the Site.

In September 2021, the EPA issued a ROD with an estimated cost of $441 million for an interim remedy plan for the upper nine miles of the Lower Passaic River. At this time, Occidental’s role or responsibilities under this ROD, and those of other potentially responsible parties, have not been determined with the EPA. Discussions between Occidental and the EPA are ongoing about this ROD.

In June 2017, the court overseeing the Maxus bankruptcy approved a Plan of Liquidation (Plan) to liquidate Maxus and create a trust to pursue claims against current and former parents YPF and each of its respective subsidiaries and affiliates (YPF) and Repsol, S.A. and each of its respective subsidiaries and affiliates (Repsol), as well as others to satisfy claims by Occidental and other creditors for past and future cleanup and other costs. In July 2017, the court-approved Plan became final and the trust became effective. The trust is pursuing claims against YPF, Repsol and others and is expected to distribute assets to Maxus' creditors in accordance with the trust agreement and Plan. In June 2018, the trust filed its complaint against YPF and Repsol in Delaware bankruptcy court asserting claims based upon, among other things, fraudulent transfer and alter ego. During 2019, the bankruptcy court denied Repsol's and YPF's motions to dismiss the complaint as well as their motions to move the case away from the bankruptcy court. Discovery remains ongoing.

[[GREPCENT_TABLE]]
[["OXY 2021 FORM 10-K","49"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","","MANAGEMENT\u2019S DISCUSSION AND ANALYSIS"]]
[[/GREPCENT_TABLE]]

ENVIRONMENTAL COSTS

Occidental’s environmental costs, some of which include estimates, are presented below for each segment for each of the years ended December 31:

[[GREPCENT_TABLE]]
[["millions","","2021","","2020","","2019"],["Operating Expenses"],["Oil and gas","","$","267","","","$","176","","","$","174"],["Chemical","","88","","","73","","","80"],["Midstream and marketing","","6","","","4","","","12"],["Total","","$","361","","","$","253","","","$","266"],["Capital Expenditures"],["Oil and gas","","$","87","","","$","74","","","$","109"],["Chemical","","66","","","40","","","34"],["Midstream and marketing","","1","","","1","","","4"],["Total","","$","154","","","$","115","","","$","147"],["Remediation Expenses"],["Corporate","","$","28","","","$","36","","","$","112"]]
[[/GREPCENT_TABLE]]

Operating expenses are incurred on a continual basis. Capital expenditures relate to longer-lived improvements in properties currently operated by Occidental. Remediation expenses relate to existing conditions from past operations.

GLOBAL INVESTMENTS

A portion of Occidental’s assets are located outside North America. The following table shows the geographic distribution of Occidental’s assets as of December 31, 2021, at both the segment and consolidated level related to Occidental’s ongoing operations:

[[GREPCENT_TABLE]]
[["millions","Oil and gas","","Chemical","","Midstream and marketing","","Corporate and other","","Total Consolidated"],["North America"],["United States","$","51,805","","","$","4,465","","","$","7,761","","","$","3,101","","","$","67,132"],["Canada","\u2014","","","121","","","62","","","\u2014","","","183"],["Middle East","3,475","","","\u2014","","","3,205","","","\u2014","","","6,680"],["North Africa and Other","852","","","85","","","104","","","\u2014","","","1,041"],["Consolidated","$","56,132","","","$","4,671","","","$","11,132","","","$","3,101","","","$","75,036"]]
[[/GREPCENT_TABLE]]

For the year ended December 31, 2021, net sales outside North America totaled $4.2 billion, or approximately 16% of total net sales.

[[GREPCENT_TABLE]]
[["50","OXY 2021 FORM 10-K"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","","MANAGEMENT\u2019S DISCUSSION AND ANALYSIS"]]
[[/GREPCENT_TABLE]]

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The process of preparing financial statements in accordance with United States Generally Accepted Accounting Principles (GAAP) requires Occidental’s management to make informed estimates and judgments regarding certain items and transactions. Changes in facts and circumstances or discovery of new information may result in revised estimates and judgments and actual results may differ from these estimates upon settlement but generally not by material amounts. The selection and development of these policies and estimates have been discussed with the Audit Committee of the Board of Directors. Occidental considers the following to be its most critical accounting policies and estimates that involve management’s judgment.

OIL AND GAS PROPERTIES

The carrying value of Occidental’s property, plant and equipment (PP&E) represents the cost incurred to acquire or develop the asset, including any asset retirement obligations (AROs) and capitalized interest, net of DD&A and any impairment charges. For assets acquired in a business combination, PP&E cost is based on fair values at the acquisition date. AROs and interest costs incurred in connection with qualifying capital expenditures are capitalized and amortized over the useful lives of the related assets.

Occidental uses the successful efforts method to account for its oil and gas properties. Under this method, Occidental capitalizes costs of acquiring properties, costs of drilling successful exploration wells and development costs. The costs of exploratory wells are initially capitalized pending a determination of whether proved reserves have been found. If proved reserves have been found, the costs of exploratory wells remain capitalized. For exploratory wells that find reserves that cannot be classified as proved when drilling is completed, costs continue to be capitalized as suspended exploratory drilling costs if there have been sufficient reserves found to justify completion as a producing well and sufficient progress is being made in assessing the economic and operating viability of the project. At the end of each quarter, management reviews the status of all suspended exploratory drilling costs in light of ongoing exploration activities, in particular, whether Occidental is making sufficient progress in its ongoing exploration and appraisal efforts or, in the case of discoveries requiring government sanctioning, analyzing whether development negotiations are underway and proceeding as planned. If management determines that future appraisal drilling or development activities are unlikely to occur, associated suspended exploratory well costs are expensed.

Occidental expenses annual lease rentals, the costs of injectants used in production and geological and geophysical costs as incurred for exploration activities.

Occidental determines depreciation and depletion of oil and gas producing properties by the unit-of-production method. It amortizes leasehold acquisition costs over total proved reserves and capitalized development and successful exploration costs over proved developed reserves. As a result of Occidental's mid-year reserve review undertaken in the second quarter of 2021, DD&A rates for the second half of 2021 were lower compared to the first half of 2021 due to increased proved reserves primarily related to positive price revisions. Proved oil, NGL and natural gas reserves were estimated during this mid-year review using the unweighted arithmetic average of the first-day-of-the-month price for each month for the twelve months ended June 30, 2021, unless prices were defined by contractual arrangements.

Proved oil and gas reserves are those quantities of oil and gas which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible—from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and government regulations—prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation.

Several factors could change Occidental’s proved oil and gas reserves. For example, Occidental receives a share of production from PSCs to recover its costs and generally an additional share for profit. Occidental’s share of production and reserves from these contracts decreases when product prices rise and increases when prices decline. Generally, Occidental’s net economic benefit from these contracts is greater at higher product prices. In other cases, particularly with long-lived properties, lower product prices may lead to a situation where production of a portion of proved reserves becomes uneconomical. For such properties, higher product prices typically result in additional reserves becoming economical. Estimation of future production and development costs is also subject to change partially due to factors beyond Occidental’s control, such as energy costs and inflation or deflation of oil field service costs. These factors, in turn, could lead to changes in the quantity of proved reserves. Additional factors that could result in a change of proved reserves include production decline rates and operating performance differing from those estimated when the proved reserves were initially recorded. Changes in the political and regulatory climate could lead to decreases in proved reserves as development horizons may be extended into the future.

Occidental performs impairment tests with respect to its proved properties whenever events or circumstances indicate that the carrying value of property may not be recoverable. If there is an indication the carrying amount of the asset may not be recovered due to significant and prolonged declines in current and forward prices, significant changes in reserve estimates, changes in management’s plans or other significant events, management will evaluate the property for impairment. Under the successful efforts method, if the sum of the undiscounted cash flows is less than the carrying value of the proved property, the carrying value is reduced to estimated fair value and reported as an impairment charge in the

[[GREPCENT_TABLE]]
[["OXY 2021 FORM 10-K","51"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","","MANAGEMENT\u2019S DISCUSSION AND ANALYSIS"]]
[[/GREPCENT_TABLE]]

period. Individual proved properties are grouped for impairment purposes at the lowest level for which there are identifiable cash flows unless observable and comparable transactions are available. The fair value of impaired assets is typically determined based on the present value of expected future cash flows using discount rates believed to be consistent with those used by market participants. The impairment test incorporates a number of assumptions involving expectations of future cash flows which can change significantly over time. These assumptions include estimates of future production, product prices, contractual prices, estimates of risk-adjusted oil and gas proved and unproved reserves and estimates of future operating and development costs. It is reasonably possible that prolonged declines in commodity prices, reduced capital spending in response to lower prices or increases in operating costs could result in impairments.

For impairment testing, unless prices are contractually fixed, Occidental uses observable forward strip prices for oil and natural gas prices when projecting future cash flows. Future operating and development costs are estimated using the current cost environment applied to expectations of future operating and development activities to develop and produce oil and gas reserves. Market prices for oil, NGL and natural gas have been volatile and may continue to be volatile in the future. Changes in global supply and demand, transportation capacity, currency exchange rates, applicable laws and regulations and the effect of changes in these variables on market perceptions could impact current forecasts. Future fluctuations in commodity prices could result in estimates of future cash flows to vary significantly.

Net capitalized costs attributable to unproved properties were $14.8 billion as of December 31, 2021, and $18.6 billion as of December 31, 2020. The unproved amounts are not subject to DD&A until they are classified as proved properties. Individually insignificant unproved properties are combined and amortized on a group basis based on factors such as lease terms, success rates and other factors to provide for full amortization upon lease expiration or abandonment.

Significant unproved properties, primarily as a result of the Acquisition, are assessed individually for impairment and when events or circumstances indicate that the carrying value of property may not be recovered a valuation allowance is provided if an impairment is indicated. Occidental periodically reviews significant unproved properties for impairments; numerous factors are considered, including but not limited to, availability of funds for future exploration and development activities, current exploration and development plans, favorable or unfavorable exploration activity on the property or the adjacent property, geologists’ evaluation of the property, the current and projected political and regulatory climate, contractual conditions and the remaining lease term for the properties. If an impairment is indicated, Occidental will first determine whether a comparable transaction for similar properties or implied acreage valuation derived from domestic onshore market participants is available and will adjust the carrying amount of the unproved property to its fair value using the market approach. In situations where the market approach is not observable and unproved reserves are available, undiscounted future net cash flows used in the impairment analysis are determined based on managements’ risk adjusted estimates of unproved reserves, future commodity prices and future costs to produce the reserves. If undiscounted future net cash flows are less than the carrying value of the property, the future net cash flows are discounted and compared to the carrying value for determining the amount of the impairment loss to record. Occidental utilizes the same assumptions and methodology discussed above for cash flows associated with proved properties.

PROVED RESERVES

Occidental estimates its proved oil and gas reserves according to the definition of proved reserves provided by the SEC and Financial Accounting Standards Board. This definition includes oil, NGL and natural gas that geological and engineering data demonstrate with reasonable certainty to be economically producible in future periods from known reservoirs under existing economic conditions, operating methods, government regulations, etc. (at prices and costs as of the date the estimates are made). Prices include consideration of price changes provided only by contractual arrangements and do not include adjustments based on expected future conditions. For reserves information, see the Supplemental Information on Oil and Gas Exploration and Production Activities under Item 8 of this Form 10-K.

Engineering estimates of the quantities of proved reserves are inherently imprecise and represent only approximate amounts because of the judgments involved in developing such information. Occidental’s estimates of proved reserves are made using available geological and reservoir data as well as production performance data. The reliability of these estimates at any point in time depends on both the quality and quantity of the technical and economic data and the efficiency of extracting and processing the hydrocarbons. These estimates are reviewed annually by internal reservoir engineers and revised, either upward or downward, as warranted by additional data. Revisions are necessary due to changes in, among other things, development plans, reservoir performance, prices, economic conditions and governmental restrictions as well as changes in the expected recovery associated with infill drilling. Decreases in prices, for example, may cause a reduction in some proved reserves due to reaching economic limits at an earlier projected date. A material adverse change in the estimated volume of proved reserves could have a negative impact on DD&A and could result in property impairments.

The most significant ongoing financial statement effect from a change in Occidental’s oil and gas reserves or impairment of its proved properties would be to the DD&A rate. For example, a 5% increase or decrease in the amount of oil and gas reserves would change the DD&A rate by approximately $0.65/Bbl, which would increase or decrease pre-tax income by approximately $275 million annually at current production rates.

[[GREPCENT_TABLE]]
[["52","OXY 2021 FORM 10-K"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","","MANAGEMENT\u2019S DISCUSSION AND ANALYSIS"]]
[[/GREPCENT_TABLE]]

FAIR VALUES

Occidental estimates fair-value of long-lived assets for impairment testing, assets and liabilities acquired in a business combination or exchanged in non-monetary transactions, pension plan assets and initial measurements of AROs.

Accounting for the acquisition of a business requires the allocation of the purchase price to the various assets and liabilities of the acquired business and recording deferred taxes for any differences between the allocated values and tax basis of assets and liabilities. Any excess of the purchase price over the amounts assigned to assets and liabilities is recorded as goodwill. The purchase price allocation is accomplished by recording each asset and liability at its estimated fair value.

Occidental primarily applies the market approach for recurring fair value measurements, maximizes its use of observable inputs and minimizes its use of unobservable inputs. When estimating the fair values of assets acquired and liabilities assumed, Occidental must apply various assumptions.

FINANCIAL ASSETS AND LIABILITIES

Occidental utilizes published prices or counterparty statements for valuing the majority of its financial assets and liabilities measured and reported at fair value. In addition to using market data, Occidental makes assumptions in valuing its assets and liabilities, including assumptions about the risks inherent in the inputs to the valuation technique. For financial assets and liabilities carried at fair value, Occidental measures fair value using the following methods:

■Occidental values exchange-cleared commodity derivatives using closing prices provided by the exchange as of the balance sheet date. These derivatives are classified as using quoted prices in active markets for the assets or liabilities (Level 1).

■Over-the-Counter (OTC) bilateral financial commodity contracts, international exchange contracts, options and physical commodity forward purchase and sale contracts are generally classified as using observable inputs other than quoted prices for the assets or liabilities (Level 2) and are generally valued using quotations provided by brokers or industry-standard models that consider various inputs, including quoted forward prices for commodities, time value, volatility factors, credit risk and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Substantially all of these inputs are observable in the marketplace throughout the full term of the instrument and can be derived from observable data or are supported by observable prices at which transactions are executed in the marketplace.

■Occidental values commodity derivatives based on a market approach that considers various assumptions, including quoted forward commodity prices and market yield curves. The assumptions used include inputs that are generally unobservable in the marketplace or are observable but have been adjusted based upon various assumptions and the fair value is designated as using unobservable inputs (Level 3) within the valuation hierarchy.

■Occidental values debt using market-observable information for debt instruments that are traded on secondary markets. For debt instruments that are not traded, the fair value is determined by interpolating the value based on debt with similar terms and credit risk.

NON-FINANCIAL ASSETS

Occidental uses market-observable prices for assets when comparable transactions can be identified that are similar to the asset being valued. When Occidental is required to measure fair value and there is not a market-observable price for the asset or for a similar asset then the cost or income approach is used depending on the quality of information available to support management’s assumptions. The cost approach is based on management’s best estimate of the current asset replacement cost. The income approach is based on management’s best assumptions regarding expectations of future net cash flows and the expected cash flows are discounted using a commensurate risk-adjusted discount rate. Such evaluations involve significant judgment. The results are based on expected future events or conditions such as sales prices, estimates of future oil and gas production or throughput, development and operating costs and the timing thereof, economic and regulatory climates and other factors, most of which are often outside of management’s control. However, assumptions used reflect a market participant’s view of long-term prices, costs and other factors and are consistent with assumptions used in Occidental’s business plans and investment decisions.

ENVIRONMENTAL LIABILITIES AND EXPENDITURES

Environmental expenditures that relate to current operations are expensed or capitalized as appropriate. Occidental records environmental liabilities and related charges and expenses for estimated remediation costs that relate to existing conditions from past operations when environmental remediation efforts are probable and the costs can be reasonably estimated. In determining the environmental remediation liability and the range of reasonably possible additional losses, Occidental refers to currently available information, including relevant past experience, remedial objectives, available technologies, applicable laws and regulations and cost-sharing arrangements. Occidental bases its environmental remediation liabilities on management’s estimate of the most likely cost to be incurred, using the most cost-effective technology reasonably expected to achieve the remedial objective. Occidental periodically reviews its environmental remediation liabilities and adjusts them as new information becomes available. Occidental generally records reimbursements or recoveries of environmental remediation costs in income when received, or when receipt of recovery is

[[GREPCENT_TABLE]]
[["OXY 2021 FORM 10-K","53"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","","MANAGEMENT\u2019S DISCUSSION AND ANALYSIS"]]
[[/GREPCENT_TABLE]]

highly probable.

Many factors could affect Occidental’s future remediation costs and result in adjustments to its environmental remediation liabilities and the range of reasonably possible additional losses. The most significant are: (1) cost estimates for remedial activities may vary from the initial estimate; (2) the length of time, type or amount of remediation necessary to achieve the remedial objective may change due to factors such as site conditions, the ability to identify and control contaminant sources or the discovery of additional contamination; (3) a regulatory agency may ultimately reject or modify Occidental’s proposed remedial plan; (4) improved or alternative remediation technologies may change remediation costs; (5) laws and regulations may change remediation requirements or affect cost sharing or allocation of liability; and (6) changes in allocation or cost-sharing arrangements may occur.

Certain sites involve multiple parties with various cost-sharing arrangements, which fall into the following three categories: (1) environmental proceedings that result in a negotiated or prescribed allocation of remediation costs among Occidental and other alleged potentially responsible parties; (2) oil and gas ventures in which each participant pays its proportionate share of remediation costs reflecting its working interest; or (3) contractual arrangements, typically relating to purchases and sales of properties, in which the parties to the transaction agree to methods of allocating remediation costs. In these circumstances, Occidental evaluates the financial viability of other parties with whom it is alleged to be jointly liable, the degree of their commitment to participate and the consequences to Occidental of their failure to participate when estimating Occidental’s ultimate share of liability. Occidental records its environmental remediation liabilities at its expected net cost of remedial activities and, based on these factors, believes that it will not be required to assume a share of liability of such other potentially responsible parties in an amount materially above amounts reserved.

In addition to the costs of investigations and cleanup measures, which often take in excess of 10 years at CERCLA NPL sites, Occidental’s environmental remediation liabilities include management’s estimates of the costs to operate and maintain remedial systems. If remedial systems are modified over time in response to significant changes in site-specific data, laws, regulations, technologies or engineering estimates, Occidental reviews and adjusts its environmental remediation liabilities accordingly.

If Occidental were to adjust the balance of its environmental remediation liabilities based on the factors described above, the amount of the increase or decrease would be recognized in earnings. For example, if the balance were reduced by 10%, Occidental would record a pre-tax gain of $110 million. If the balance were increased by 10%, Occidental would record an additional remediation expense of $110 million.

INCOME TAXES

Occidental files various U.S. federal, state and foreign income tax returns. The impact of changes in tax regulations are reflected when enacted. In general, deferred federal, state and foreign income taxes are provided on temporary differences between the financial statement carrying amounts of assets and liabilities and their respective tax basis. Occidental routinely assesses the realizability of its deferred tax assets. If Occidental concludes that it is more likely than not that some of the deferred tax assets will not be realized, the tax asset is reduced by a valuation allowance. Occidental recognizes a tax benefit from an uncertain tax position when it is more likely than not that the position will be sustained upon examination, based on the technical merits of the position. The tax benefit recorded is equal to the largest amount that is greater than 50% likely to be realized through final settlement with a taxing authority. Interest and penalties related to unrecognized tax benefits are recognized in income tax expense (benefit). See Note 10 - Income Taxes in the Notes to Consolidated Financial Statements in Part II Item 8 of this Form 10-K.

LOSS CONTINGENCIES

Occidental is involved, in the normal course of business, in lawsuits, claims and other legal proceedings and audits. Occidental accrues reserves for these matters when it is probable that a liability has been incurred and the liability can be reasonably estimated. In addition, Occidental discloses, in aggregate, its exposure to loss in excess of the amount recorded on the balance sheet for these matters if it is reasonably possible that an additional material loss may be incurred. Occidental reviews its loss contingencies on an ongoing basis.

Loss contingencies are based on judgments made by management with respect to the likely outcome of these matters and are adjusted as appropriate. Management’s judgments could change based on new information, changes in, or interpretations of, laws or regulations, changes in management’s plans or intentions, opinions regarding the outcome of legal proceedings or other factors. See Note 13 - Lawsuits, Claims, Commitments and Contingencies in the Notes to Consolidated Financial Statements in Part II Item 8 of this Form 10-K for additional information.

[[GREPCENT_TABLE]]
[["54","OXY 2021 FORM 10-K"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","","MANAGEMENT\u2019S DISCUSSION AND ANALYSIS"]]
[[/GREPCENT_TABLE]]

SAFE HARBOR DISCUSSION REGARDING OUTLOOK AND OTHER FORWARD-LOOKING DATA

Portions of this report contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, and they include, but are not limited to: any projections of earnings, revenue or other financial items or future financial position or sources of financing; any statements of the plans, strategies and objectives of management for future operations or business strategy; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing. Words such as “estimate,” “project,” “predict,” “will,” “would,” “should,” “could,” “may,” “might,” “anticipate,” “plan,” “intend,” “believe,” “expect,” “aim,” “goal,” “target,” “objective,” "commit," "advance," “likely” or similar expressions that convey the prospective nature of events or outcomes are generally indicative of forward-looking statements. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this report. Unless legally required, Occidental does not undertake any obligation to update, modify or withdraw any forward-looking statements as a result of new information, future events or otherwise.

Although Occidental believes that the expectations reflected in any of its forward-looking statements are reasonable, actual results may differ from anticipated results, sometimes materially. In addition, historical, current and forward-looking sustainability-related statements may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve and assumptions that are subject to change in the future. Factors that could cause results to differ from those projected or assumed in any forward-looking statement include, but are not limited to: the scope and duration of the COVID-19 pandemic and ongoing actions taken by governmental authorities and other third parties in response to the pandemic; Occidental’s indebtedness and other payment obligations, including the need to generate sufficient cash flows to fund operations; Occidental’s ability to successfully monetize select assets and repay or refinance debt and the impact of changes in Occidental’s credit ratings; assumptions about energy markets; global and local commodity and commodity-futures pricing fluctuations; supply and demand considerations for, and the prices of, Occidental’s products and services; actions by OPEC and non-OPEC oil producing countries; results from operations and competitive conditions; future impairments of our proved and unproved oil and gas properties or equity investments, or write-downs of productive assets, causing charges to earnings; unexpected changes in costs; availability of capital resources, levels of capital expenditures and contractual obligations; the regulatory approval environment, including Occidental's ability to timely obtain or maintain permits or other governmental approvals, including those necessary for drilling and/or development projects; Occidental's ability to successfully complete, or any material delay of, field developments, expansion projects, capital expenditures, efficiency projects, acquisitions or dispositions; risks associated with acquisitions, mergers and joint ventures, such as difficulties integrating businesses, uncertainty associated with financial projections, projected synergies, restructuring, increased costs and adverse tax consequences; uncertainties and liabilities associated with acquired and divested properties and businesses; uncertainties about the estimated quantities of oil, NGL and natural gas reserves; lower-than-expected production from development projects or acquisitions; Occidental’s ability to realize the anticipated benefits from prior or future streamlining actions to reduce fixed costs, simplify or improve processes and improve Occidental’s competitiveness; exploration, drilling and other operational risks; disruptions to, capacity constraints in, or other limitations on the pipeline systems that deliver Occidental’s oil and natural gas and other processing and transportation considerations; general economic conditions, including slowdowns, domestically or internationally, and volatility in the securities, capital or credit markets; inflation; governmental actions, war and political conditions and events; legislative or regulatory changes, including changes relating to hydraulic fracturing or other oil and natural gas operations, retroactive royalty or production tax regimes, deep-water and onshore drilling and permitting regulations and environmental regulation (including regulations related to climate change); environmental risks and liability under federal, regional, state, provincial, tribal, local and international environmental laws and regulations (including remedial actions); Occidental's ability to recognize intended benefits from its business strategies and initiatives, such as OLCV or announced GHG emissions reduction targets or net-zero goals; potential liability resulting from pending or future litigation; disruption or interruption of production or manufacturing or facility damage due to accidents, chemical releases, labor unrest, weather, power outages, natural disasters, cyber-attacks or insurgent activity; the creditworthiness and performance of Occidental's counterparties, including financial institutions, operating partners and other parties; failure of risk management; Occidental’s ability to retain and hire key personnel; supply, transportation, and labor constraints; reorganization or restructuring of Occidental’s operations; changes in state, federal or international tax rates; and actions by third parties that are beyond Occidental's control.

Additional information concerning these and other factors that may cause Occidental’s results of operations and financial position to differ from expectations can be found in Item 1A, “Risk Factors” and elsewhere in this Form 10-K, as well as in Occidental’s other filings with the SEC, including Occidental’s Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

[[GREPCENT_TABLE]]
[["OXY 2021 FORM 10-K","55"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","","QUANTITATIVE AND QUALITATIVE DISCLOSURES"]]
[[/GREPCENT_TABLE]]