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Occidental Petroleum Corporation (OXY - Analyst Report) reported second-quarter 2013 pro forma earnings of $1.58 per share, missing the Zacks Consensus Estimate by 3 cents and the prior-year level by 6 cents.

On a GAAP basis, the company's quarterly earnings per share were $1.64, flat with the year-ago earnings. The variance between pro forma and GAAP earnings was due to a 6 cents after-tax gain.

Total Revenue

Occidental Petroleum reported quarterly revenues of $5,962 million, beating the Zacks Consensus Estimate by $13 million. Revenues increased 3.4% year over year due to higher contribution from all the segments.

Production, Sales and Realized Price

Occidental Petroleum's average daily production volumes were 772 thousand barrels of oil equivalents (MBoe), up 0.8% from 766 MBoe a year ago. The growth was primarily attributable to a rise in production at California and the Permian operations.

During the quarter, daily oil and gas sales volumes increased 0.7% year over year to 764 MBoe.

Realized price for crude oil decreased to $97.91 per barrel from the prior-year level of $99.34 per barrel. Realized worldwide natural gas liquids (NGL) prices were down 7.8% year over year to $38.78 per barrel. Domestic gas prices increased 83% year over year to $3.82 per thousand cubic feet (Mcf).

Segment Earnings

Oil and Gas: Quarterly earnings from this segment were $2.1 billion, up 5% year over year due to improved liquids volumes, increased domestic realized prices for oil and natural gas, and lower operating expenses.

Chemicals: The segment's quarterly earnings were $144 million versus $194 million a year ago. A 25.8% year-over-year drop was primarily due to decline in caustic soda export volumes, and increase in energy and feedstock costs.

Midstream, Marketing and Other: Segmental earnings were $48 million, down 37.7% year over year due to weak results from marketing and trading operations.

Financial Update

Occidental Petroleum's cash from operations during the first six months of 2013 totaled $2.7 billion compared with $2.9 billion in the year-ago comparable period.

In second-quarter 2013, the company's capital expenditure was $2.2 billion compared with $2.7 billion a year ago.

Total long-term debt as of Jun 30, 2013 was $7,626 million compared with $7,623 million as of Dec 31, 2012. The company's total debt-to-capitalization ratio at quarter-end was 15%, one percent down from Dec 31, 2012 level.

Our Take

Though earnings missed the Zacks Consensus Estimate, Occidental Petroleum reported favorable revenues in second-quarter primarily due to strong performance by its domestic operations and rise in domestic natural gas prices.

Occidental Petroleum also undertaken several cost-cutting measures, including planned turnarounds in the Permian, primarily to manage higher international operating expenses.

However, risks associated with the damage of oil exploration and production infrastructure, delay in drilling and development activities, and over-reliance on the crude oil price movement may to some extent challenge the company's future performance.

Occidental Petroleum Corporation currently has a Zacks Rank #3 (Hold).

Los Angeles, Calif.-based Occidental Petroleum along with its subsidiaries operates as an oil and gas exploration and production company. Other players from the sector – Murphy Oil Corporation (MUR - Analyst Report), Marathon Oil Corporation (MRO - Analyst Report) and Penn Virginia Corporation (PVA - Snapshot Report) – are yet to announce their quarterly results.

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