High energy prices and strategic actions initiated since 1997have added $1.25 per share in recurring earnings annually forOccidental Petroleum and allowed the company to pay down asignificant amount of debt this year, said CEO Ray R. Irani at thecompany’s meeting yesterday with financial analysts in New York.But its stock price remains in the basement at about $20/share wellbelow that of many of its peers.

“Based on the fact that the price-to-earnings multiple of ourstock is the lowest in the industry, we don’t believe theseintrinsic improvements are reflected in our stock price” Iranisaid.

“We’ve increased production by a compound annual rate of 6%since 1997. We’ve increased our reserves-to-production ratio by35%,” he added. Occidental’s price realization for natural gas rosefrom 91% of the Nymex average in 1997 to an estimated 96% in 2000,he said. During the same period, overhead costs were reduced bynearly 40% and operating costs declined by more than 15% below the1997 level.

“The results of what we have done to strengthen our asset mixand reduce costs is apparent in the improvement we’ve achieved inprofitability,” Irani said. “In 1999, Oxy led its competitors inoperating income per barrel of oil equivalent. This shows we haveexcellent assets with strong earnings power. The picture is muchthe same through the first nine months of 2000.”

Of the $1.25 improvement per share in recurring earnings, $1came from oil and gas operations and the remainder was from itschemicals business.

Since 1997, Occidental has sold or swapped a number of marginaloil and gas assets to concentrate on assembling a strong portfolioof large oil and gas holdings with competitive cost structures andhigh-quality, long-lived reserves in core areas in the U.S., theMiddle East and Latin America.

The company’s return on equity has risen from 11.1% in 1998 to12.5% in 1999 and an estimated 37.7% in 2000. The return on capitalemployed has increased from 7.7% in 1998 to 9.1% in 1999 and anestimated 14.8% in 2000.

When Occidental acquired Altura Energy in April 2000, Oxy’s debtrose to $9 billion from $5.4 billion at the end of 1999. But by theend of the third quarter, the company had met, three months aheadof schedule, its 2000 debt reduction goal of re-paying $2 billion.Irani said he expects additional debt reduction in the fourthquarter of $560 million, resulting in year-end 2000 total debt of$6.5 billion. The company also is anticipating additional debtreduction in 2001.

“We expect our year-end 2000 debt-to-capitalization ratio to bearound 57%,” Irani said, “as we move closer to our target in themid-40% range.” The company’s debt-to-capitalization ratio at theend of 1997 was 67%, prior to the acquisition of Elk Hills andAltura Energy.

“A debt-to-capitalization ratio in the mid-40% range and areturn on equity of 20% would result in a return on capitalemployed in the 12 to 15% range that would place Occidental amongthe top performers in the oil and gas industry,” Irani said.”That’s our primary objective. We’re striving to be one of theindustry’s best-performing companies on a consistent basis.”

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