Occidental Petroleum Corporation was incorporated in 1986 in Delaware, and produces oil, condensate, NGL, and natural gas. The Company conducts its exploration and production activities in the United States, the Middle East, and Latin America. Internationally, Occidental conducts operations in Oman, United Arab Emirates (UAE), Qatar, and Colombia. Occidental employed approximately 14,400 people in 2019 with 10,000 employees located in the United States, 10,400 people in the oil and gas and marketing and midstream segments and 3,000 people in the chemical segment.
Occidental’s principal businesses consist of three reporting segments: oil and gas, chemical, and marketing and midstream. The oil and gas segment explores for, develops, and produces oil and condensate, natural gas liquids (NGL) and natural gas. The chemical segment (OxyChem) mainly manufactures and markets basic chemicals and vinyls. The marketing and midstream segment purchases, markets, gathers, processes, transports and stores oil, condensate, NGL, natural gas, carbon dioxide (CO2) and power.
On August 8, 2019, pursuant to the Agreement and Plan of Merger, Occidental acquired all of the outstanding shares of Anadarko while Anadarko continues as the surviving entity and as a wholly-owned subsidiary of Occidental. In connection with the Acquisition, Occidental agreed to sell to TOTAL S.A. (Total) all of the assets, liabilities, businesses and operations of Anadarko’s operations in Algeria, Ghana, Mozambique and South Africa.
According to the Company´s Annual Report, the increase in total net sales of 14% from $17.8 million in 2018 to $20.4 million in 2019 was primarily due to higher domestic volumes related to the Acquisition, which added approximately $3.5 billion in net sales as well as increased production activity in Occidental’s Permian Resources operations. The increase in net sales of 43% in 2018 compared to 2017, from $12.5 million in 2017 to $17.8 in 2018, was mainly due to higher oil prices and higher domestic oil volumes, as well as higher marketing margins in the marketing and midstream segment due to improved Midland-to-Gulf Coast spreads and higher realized caustic soda prices in the chemical segment.
The increase in oil and gas net sales of 29% from $10.4 million in 2018 to $13.4 million in 2019 was primarily due to higher oil, NGL and natural gas sales volumes, mostly due to added production from the Acquisition and increased production in the legacy Occidental Permian Resources operations.The increase in oil and gas total net sales of 33% in 2018 compared to 2017, from $7.9 million in 2017 to $10.4in 2018, was primarily due to an increase in average domestic realized oil prices, higher volumes and lower DD&A rates.
International oil and gas results decreased from $1.9 million in 2018 to $1.7 million in 2019, due to lower volumes from the expiration of the ISND contract and early termination of the ISSD contract, as well as a decrease in realized oil prices in Latin America and the Middle East. The increase in International oil and gas results from $1.8 million in 2018 compared to $1.9 million in 2017 was primarily due to an increase in realized oil prices in Latin America and the Middle East, respectively.
Average daily production volumes from ongoing operations increased by 92% in 2019, compared to 2018, primarily due to 264 MBOE/d in acquired production from the Anadarko Acquisition, including production in the DJ Basin, in the Gulf of Mexico and in the Delaware Basin, as well as to improved Permian Resources operations as a result of increased drilling and well productivity. Average daily production volumes from ongoing operations increased in 2018 by 26% compared to 2017, primarily due to higher Permian Resources production, which increased by 52% from the prior year, due to developmental drilling activity and improved well performance.
Chemical segment sales decreased by 12% from $4.7 million in 2018 to $4.1 million in 2019 due to lower realized caustic soda prices and lower domestic demand across many product lines. The 2019 earnings of $0.8 million in 2019 decreased by 32% compared to $1.2 million in 2018, and reflected fees received under a pipeline easement agreement that was executed during the first quarter of 2019. Chemical segment sales, as well as chemical segment earnings, increased in 2018 compared to 2017 by 6% and 41% respectively, due to significant improvements in realized caustic soda pricing, strong margins and demand across many product lines and lower ethylene costs, slightly offset by decreased caustic soda export volumes. The 2018 earnings also benefited from the full-year equity contributions from the joint venture ethylene cracker in Ingleside, Texas, and additional earning contributions from the Geismar, Louisiana plant expansion to produce 4CPe.
Marketing and midstream segment earnings, excluding items affecting comparability, decreased in 2019 compared to 2018 by 92% from $2.8 million in 2018 to $0.2 million in 2019, primarily due to lower marketing margins from the decrease in the Midland-to-Gulf Coast spreads by approximately $4.00 per barrel and lower pipeline income, due to the 2018 sales of the Centurion pipeline and the Ingleside Crude Oil Terminal. Marketing and midstream segment earnings increased in 2018 compared to 2017 and amounted $2.8 million in 2018 compared to $0.09 million in 2017, due to higher marketing margins from improved Midland-to-Gulf Coast spreads and higher gas plant income due to higher domestic NGL prices and higher sulphur prices in connection with Al Hosn Gas sulphur sales.
Oil and gas operating expense increased in 2019 by 17% compared to 2018, primarily due to higher oil and gas production costs for surface operations and maintenance due to increased activity mainly related to acquired operations as part of the Anadarko Acquisition. Oil and gas operating expense increased in 2018 by 13% compared to 2017, primarily due to higher oil and
gas production costs for surface operations and downhole maintenance due to increased activity in the Permian Basin, as well as an increase in purchased CO2 injectant.
Transportation expense increased in 2019 by 308% from the previous year, primarily due to increased oil sales volumes, mainly driven by added production and the fulfilment of additional capacity commitments related to the Anadarko Acquisition. Transportation expense decreased in 2018 by 13% compared to 2017, due to the 2018 sale of the Centurion Pipeline common carrier oil pipeline and storage system and the Ingleside Crude Terminal.
Chemical and midstream cost of sales decreased slightly in 2019 from the previous year, primarily due to favourable raw material costs in the chemical segment. Chemical and midstream cost of sales also decreased slightly in 2018 from the previous year, primarily due to lower gas plant and maintenance expenses in the midstream segment.
Cash provided by operating activities decreased by $294 million from $7.7 million in 2018 to $7.4 million in 2019, reflecting Anadarko Acquisition related costs, higher interest expense, and slightly lower oil prices. Cash provided by operating activities increased by $2.8 billion in 2018 compared to 2017, reflecting higher realized worldwide oil and NGL prices, which increased by 24% and 21%, respectively, as well as a 25% increase in domestic oil volumes. Operating cash flows in 2018 also benefited from higher marketing margins in the marketing and midstream segment due to improved Midland-to-Gulf Coast spreads and higher chemical margins from significant improvements in caustic soda prices.