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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2004

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ___________

Commission file number 1-9210

---------------------

OCCIDENTAL PETROLEUM CORPORATION
(Exact name of registrant as specified in its charter)

DELAWARE 95-4035997
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

10889 WILSHIRE BOULEVARD
LOS ANGELES, CALIFORNIA 90024
(Address of principal executive offices) (Zip Code)

(310) 208-8800
(Registrant's telephone number, including area code)

---------------------

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [X] No [ ]

Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.

Class Outstanding at June 30, 2004
------------------------------- ----------------------------
Common stock $.20 par value 391,698,256 shares



OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES


CONTENTS



PAGE

PART I FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Condensed Balance Sheets --
June 30, 2004 and December 31, 2003 2

Consolidated Condensed Statements of Operations --
Three and six months ended June 30, 2004 and 2003 4

Consolidated Condensed Statements of Cash Flows --
Six months ended June 30, 2004 and 2003 5

Notes to Consolidated Condensed Financial Statements 6

Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13

Item 3. Quantitative and Qualitative Disclosures About Market Risk 23

Item 4. Controls and Procedures 23

PART II OTHER INFORMATION

Item 1. Legal Proceedings 24

Item 4. Submission of Matters to a Vote of Security-Holders 24

Item 6. Exhibits and Reports on Form 8-K 25



1



PART I FINANCIAL INFORMATION


ITEM 1. FINANCIAL STATEMENTS


OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
JUNE 30, 2004 AND DECEMBER 31, 2003
(Amounts in millions)



2004 2003
================================================================================ ========== ==========

ASSETS

CURRENT ASSETS

Cash and cash equivalents $ 383 $ 683

Receivables, net 1,995 1,154

Inventories 449 510

Prepaid expenses and other 133 127
---------- ----------

Total current assets 2,960 2,474


LONG-TERM RECEIVABLES, net 225 264



INVESTMENTS IN UNCONSOLIDATED ENTITIES 1,503 1,155



PROPERTY, PLANT AND EQUIPMENT, net of accumulated
depreciation, depletion and amortization of $8,089 at
June 30, 2004 and $7,467 at December 31, 2003 14,339 14,005



OTHER ASSETS 318 270



---------- ----------
$ 19,345 $ 18,168
================================================================================ ========== ==========

The accompanying notes are an integral part of these financial statements.


2



OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
JUNE 30, 2004 AND DECEMBER 31, 2003
(Amounts in millions)



2004 2003
================================================================================ ========== ==========

LIABILITIES AND EQUITY

CURRENT LIABILITIES
Current maturities of long-term debt and capital lease liabilities $ 182 $ 23
Accounts payable 1,279 909
Accrued liabilities 965 978
Domestic and foreign income taxes 298 163
Trust preferred securities -- 453
---------- ----------

Total current liabilities 2,724 2,526
---------- ----------

LONG-TERM DEBT, net of current maturities and unamortized discount 3,788 3,993
---------- ----------



DEFERRED CREDITS AND OTHER LIABILITIES
Deferred and other domestic and foreign income taxes 1,111 1,001
Other 2,375 2,407
---------- ----------

3,486 3,408
---------- ----------


MINORITY INTEREST 341 312
---------- ----------


STOCKHOLDERS' EQUITY
Common stock, at par value 78 77
Additional paid-in capital 4,437 4,272
Retained earnings 4,382 3,530
Accumulated other comprehensive income 109 50
---------- ----------
9,006 7,929
---------- ----------
$ 19,345 $ 18,168
================================================================================ ========== ==========

The accompanying notes are an integral part of these financial statements.


3



OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2004 AND 2003
(Amounts in millions, except per-share amounts)



Three Months Ended Six Months Ended
June 30 June 30
------------------------ ------------------------
2004 2003 2004 2003
=============================================================== ========== ========== ========== ==========

REVENUES
Net sales $ 2,750 $ 2,266 $ 5,330 $ 4,637
Interest, dividends and other income 19 17 41 51
Gains on disposition of assets, net -- 22 1 22
---------- ---------- ---------- ----------
2,769 2,305 5,372 4,710
---------- ---------- ---------- ----------
COSTS AND OTHER DEDUCTIONS
Cost of sales 1,467 1,264 2,873 2,562
Selling, general and administrative and other
operating expenses 239 250 465 437
Environmental remediation -- 13 -- 13
Exploration expense 40 29 94 57
Interest and debt expense, net 62 59 133 190
---------- ---------- ---------- ----------
1,808 1,615 3,565 3,259
---------- ---------- ---------- ----------
Income before taxes and other items 961 690 1,807 1,451
Provision for domestic and foreign income and other taxes 383 290 744 623
Minority interest 23 19 36 38
(Income) loss from equity investments (26) 7 (41) 23
---------- ---------- ---------- ----------
Income from continuing operations 581 374 1,068 767
Cumulative effect of changes in accounting principles, net -- -- -- (68)
---------- ---------- ---------- ----------
NET INCOME $ 581 $ 374 $ 1,068 $ 699
========== ========== ========== ==========

BASIC EARNINGS PER COMMON SHARE
Income from continuing operations $ 1.48 $ 0.98 $ 2.72 $ 2.02
Cumulative effect of changes in accounting principles, net -- -- -- (0.18)
---------- ---------- ---------- ----------
Basic earnings per common share $ 1.48 $ 0.98 $ 2.72 $ 1.84
========== ========== ========== ==========

DILUTED EARNINGS PER COMMON SHARE
Income from continuing operations $ 1.46 $ 0.97 $ 2.68 $ 1.99
Cumulative effect of changes in accounting principles, net -- -- -- (0.18)
---------- ---------- ---------- ----------
Diluted earnings per common share $ 1.46 $ 0.97 $ 2.68 $ 1.81
========== ========== ========== ==========

DIVIDENDS PER COMMON SHARE $ 0.275 $ 0.260 $ 0.550 $ 0.520
========== ========== ========== ==========

BASIC SHARES 393.9 382.6 392.8 380.9
========== ========== ========== ==========

DILUTED SHARES 398.9 386.7 398.0 384.9
=============================================================== ========== ========== ========== ==========


The accompanying notes are an integral part of these financial statements.


4



OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2004 AND 2003
(Amounts in millions)



2004 2003
================================================================================ ========== ==========

CASH FLOW FROM OPERATING ACTIVITIES
Income from continuing operations $ 1,068 $ 767
Adjustments to reconcile income to net cash provided by operating activities:
Depreciation, depletion and amortization of assets 650 571
Deferred income tax provision 77 50
Other noncash charges to income 176 112
Gains on disposition of assets, net (1) (22)
(Income)/loss from equity investments (41) 23
Dry hole and impairment expense 69 30
Changes in operating assets and liabilities (464) 36
Other operating, net (77) (101)
---------- ----------
Net cash provided by operating activities 1,457 1,466
---------- ----------

CASH FLOW FROM INVESTING ACTIVITIES
Capital expenditures (804) (791)
Purchase of businesses, net (177) (251)
Sales of businesses and disposal of property, plant and equipment, net 4 26
Equity investments and other investing, net (215) (110)
---------- ----------
Net cash used by investing activities (1,192) (1,126)
---------- ----------

CASH FLOW FROM FINANCING ACTIVITIES
Redemption (2004) / Repurchase (2003) of trust preferred securities (466) (1)
Proceeds from long-term debt -- 298
Payments of long-term debt and capital lease liabilities -- (587)
Proceeds from issuance of common stock 3 7
Cash dividends paid (208) (193)
Stock options exercised 110 106
Other (4) (1)
---------- ----------
Net cash used by financing activities (565) (371)
---------- ----------
Decrease in cash and cash equivalents (300) (31)
Cash and cash equivalents--beginning of period 683 146
---------- ----------
Cash and cash equivalents--end of period $ 383 $ 115
================================================================================ ========== ==========


The accompanying notes are an integral part of these financial statements.


5



OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

June 30, 2004

1. General

In these unaudited consolidated condensed financial statements,
"Occidental" means Occidental Petroleum Corporation (OPC) and/or one or
more entities where it owns a majority voting interest (subsidiaries).
Certain information and disclosures normally included in notes to
consolidated financial statements have been condensed or omitted pursuant
to the Securities and Exchange Commission's rules and regulations, but
resultant disclosures are in accordance with accounting principles
generally accepted in the United States of America as they apply to interim
reporting. The consolidated condensed financial statements should be read
in conjunction with the consolidated financial statements and the notes
thereto in Occidental's Annual Report on Form 10-K for the year ended
December 31, 2003 (2003 Form 10-K).

In the opinion of Occidental's management, the accompanying consolidated
condensed financial statements contain all adjustments (consisting only of
normal recurring adjustments) necessary to fairly present Occidental's
consolidated financial position as of June 30, 2004, the consolidated
statements of operations for the three and six months then ended and the
statements of cash flows for the six months then ended. The income and cash
flows for the period ended June 30, 2004, are not necessarily indicative of
the income or cash flows to be expected for the full year.

Certain financial statements and notes for the prior year have been changed
to conform to the 2004 presentation.

Refer to Note 1 to the consolidated financial statements in the 2003 Form
10-K for a summary of significant accounting policies, including critical
accounting policies.


2. Asset Acquisitions and Other Transactions

In January 2004, Occidental acquired a 1,300-mile oil pipeline and
gathering system located in the Permian Basin for approximately $143
million in cash (including a $5 million deposit in 2003).

In January 2004, Occidental redeemed all of its outstanding 8.16 percent
Trust Preferred Redeemable Securities (trust preferred securities) at par
plus accrued interest which resulted in a decrease in current liabilities
of approximately $453 million. This resulted in an after-tax charge of $7
million.

In the second quarter of 2004, Occidental discontinued, for the present
time, the sale of an interest in its outstanding accounts receivable
balance which had the effect of increasing receivables by approximately
$360 million. There was no gain or loss associated with this transaction.

In April 2004, Occidental agreed with the government of Colombia to extend
the term of its contract for the Cano Limon field. The contract was
extended to the economic life of the field, which Occidental will continue
to operate.

3. Accounting Changes

In December 2003, the Financial Accounting Standards Board (FASB) revised
Interpretation No. (FIN) 46, "Consolidation of Variable Interest Entities"
to exempt certain entities from its requirements and to clarify certain
issues arising during the initial implementation of FIN 46. Occidental
adopted the revised FIN 46 in the first quarter of 2004 and it did not have
a material effect on its financial statements when adopted.


6



In June 2001, FASB issued Statement of Financial Accounting Standards
(SFAS) No. 142, "Goodwill and Other Intangible Assets", which states in
paragraph 8(b) that the accounting specified in SFAS No. 19, "Financial
Accounting and Reporting by Oil and Gas Producing Companies" is not
affected by SFAS No. 142. A question has arisen about whether the balance
sheet classification and disclosure requirements for oil and gas mineral
and drilling rights are included in this exception and, if they are not
included, whether these rights should be classified as intangible assets.
The FASB has issued a proposed FASB Staff Position (FSP), No. FAS 142-b,
"Application of FASB Statement No. 142, Goodwill and Other Intangible
Assets, to Oil and Gas Producing Entities", which states that the scope
exception does include the classification and disclosure of mineral and
drilling rights.

Historically, Occidental has classified all of its mineral and drilling
rights within property, plant and equipment and has generally not
identified these amounts separately. If FSP No. FAS 142-b is not approved
by the FASB and it determines that these mineral rights should be presented
as intangible assets, Occidental would have to reclassify its oil and gas
mineral and drilling rights to intangible assets and make additional
disclosures in accordance with SFAS No. 142. If Occidental adopted this
change for rights acquired after June 30, 2001, approximately $544 million
and $492 million, net of accumulated depreciation, depletion and
amortization (DD&A), of the property, plant and equipment balance would be
reclassified to intangible assets as at June 30, 2004 and December 31,
2003, respectively. Occidental currently amortizes these amounts under the
unit-of-production method and would continue to amortize the mineral rights
under this method. Occidental believes the change would have no material
effect on its results of operations.

See Note 12 for accounting changes relating to pension and postretirement
obligations.


4. Comprehensive Income

The following table presents Occidental's comprehensive income items (in
millions):



Periods Ended June 30
----------------------------------------------------
Three Months Six Months
------------------------ -------------------------
2004 2003 2004 2003
===========================================================================================================

Net income $ 581 $ 374 $ 1,068 $ 699
Other comprehensive income items
Foreign currency translation adjustments (3) 22 (10) 24
Derivative mark-to-market adjustments 3 7 1 (5)
Minimum pension liability adjustments -- (4) -- (4)
Unrealized gains (losses) on securities 39 (24) 68 (1)
---------- ---------- ---------- ----------
Other comprehensive income, net of tax 39 1 59 14
---------- ---------- ---------- ----------
Comprehensive income $ 620 $ 375 $ 1,127 $ 713
=================================================== ========== ========== ========== ==========



5. Supplemental Cash Flow Information

During the six months ended June 30, 2004 and 2003, net cash payments for
federal, foreign and state income taxes were approximately $404 million and
$152 million, respectively. Interest paid (net of interest capitalized of
$2 million and $3 million, respectively) totaled approximately $104 million
and $180 million (including a $61 million debt repayment fee) for the six
months ended June 30, 2004 and 2003, respectively.


7



6. Inventories

A portion of inventories is valued under the LIFO method. The valuation of
LIFO inventory for interim periods is based on Occidental's estimates of
year-end inventory levels and costs. Inventories consist of the following
(in millions):



Balance at June 30, 2004 December 31, 2003
========================= ==================== ====================

Raw materials $ 55 $ 46
Materials and supplies 154 143
Finished goods 262 342
---------- ----------
471 531
LIFO reserve (22) (21)
---------- ----------
Total $ 449 $ 510
========================= ========== ==========



7. Asset Retirement Obligations

In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations." SFAS No. 143 requires companies to recognize the
fair value of a liability for an asset retirement obligation in the period
in which the liability is incurred if there is a legal obligation to
dismantle the asset and reclaim or remediate the property at the end of its
useful life. When the liability is initially recorded, the company
capitalizes the cost into property, plant and equipment. Over time, the
liability is accreted and the cost is depreciated, both over the asset's
useful life. Occidental's asset retirement obligations primarily relate to
the cost of plugging and abandoning wells, well-site cleanup, facilities
abandonment and closure and post-closure care.

The following table summarizes the activity of the asset retirement
obligations of which $4 million is included in accrued liabilities in both
2004 and 2003 and the remaining balance in both years is included in
deferred credits and other liabilities - other (in millions):



Six Months Ended June 30 2004 2003
============================================================ ==================== ====================

Beginning balance $ 167 $ --
Cumulative effect of change in accounting principles -- 150
Liabilities incurred in the period 9 --
Liabilities settled in the period (5) (5)
Acquisitions and other 29 2
Accretion expense 6 5
Revisions to estimated cash flows (2) 3
-------------------- --------------------
Ending balance $ 204 $ 155
============================================================ ==================== ====================



8. Environmental Liabilities and Expenditures

Occidental's operations in the United States are subject to stringent
federal, state and local laws and regulations relating to improving or
maintaining environmental quality. Foreign operations also are subject to
environmental-protection laws. The laws that require or address
environmental remediation may apply retroactively to past waste disposal
practices and releases. In many cases, the laws apply regardless of fault,
legality of the original activities, or current ownership or control of
sites. Pursuant to these laws, OPC or certain of its subsidiaries are
currently participating in environmental assessments and cleanups at
federal Superfund sites and other sites subject to the Comprehensive
Environmental Response, Compensation, and Liability Act (CERCLA), sites
subject to equivalent state laws, and other remediation sites, including
Occidental facilities and previously owned sites.


8



The following table presents Occidental's environmental remediation
reserves at June 30, 2004, which are included in accrued liabilities ($76
million) and deferred credits and other liabilities - other ($277 million).
The reserves are grouped by three categories of environmental remediation
sites as follows ($ amounts in millions):



# of Sites Reserve
============================== =============== ===============

CERCLA & Equivalent Sites 121 $ 229
Active Facilities 14 72
Closed or Sold Facilities 40 52
--------------- ---------------
Total 175 $ 353
============================== =============== ===============


In determining the environmental remediation reserves and reasonably
possible range of loss, Occidental refers to currently available
information, including relevant past experience, available technology,
regulations in effect, the timing of remediation and cost-sharing
arrangements. Occidental expects that it may continue to incur additional
liabilities beyond those recorded for environmental remediation at these
and other sites. The range of reasonably possible loss for existing
environmental remediation matters could be up to $400 million beyond the
amount accrued.

At June 30, 2004, OPC or certain of its subsidiaries have been named in
CERCLA or state equivalent proceedings, as shown below ($ amounts in
millions):



Description # of Sites Reserve
============================== =============== ===============

Minimal/No Exposure (a) 99 $ 5
Reserves between $1-10 MM 15 58
Reserves over $10 MM 7 166
--------------- ---------------
Total 121 $ 229
============================== =============== ===============


(a) Includes 27 sites for which Maxus Energy Corporation has retained the
liability and indemnified Occidental, 7 sites where Occidental has
denied liability without challenge, 54 sites where Occidental's
reserves are less than $50,000 each, and 11 sites where reserves are
between $50,000 and $1 million each.


Refer to Note 8 to the consolidated financial statements in the 2003 Form
10-K for additional information regarding Occidental's environmental
expenditures.


9. Lawsuits, Claims, Commitments, Contingencies and Related Matters

OPC and certain of its subsidiaries have been named in a substantial number
of lawsuits, claims and other legal proceedings. These actions seek, among
other things, compensation for alleged personal injury, breach of contract,
property damage, punitive damages, civil penalties or other losses; or
injunctive or declaratory relief. OPC and certain of its subsidiaries also
have been named in proceedings under CERCLA and similar federal, state and
local environmental laws. These environmental proceedings seek funding or
performance of remediation and, in some cases, compensation for alleged
property damage, punitive damages and civil penalties; however, Occidental
is usually one of many companies in these proceedings and has to date been
successful in sharing response costs with other financially sound
companies. With respect to all such lawsuits, claims and proceedings,
including environmental proceedings, Occidental accrues reserves when it
believes it is probable a liability has been incurred and the amount of
loss can be reasonably estimated.

During the course of its operations, Occidental is subject to audit by tax
authorities for varying periods in various federal, state, local and
foreign tax jurisdictions. Taxable years prior to 1997 are closed for U.S.
federal income tax purposes. Taxable years 1997 through 2002 are in various
stages of audit by the Internal Revenue Service. Disputes arise during the
course of such audits as to facts and matters of law.


9



Occidental has guarantees outstanding at June 30, 2004 which encompass
performance bonds, letters of credit, indemnities, commitments and other
forms of guarantees provided by Occidental to third parties, mainly to
provide assurance that Occidental and/or its subsidiaries and affiliates
will meet their various obligations (guarantees). At June 30, 2004, the
notional amount of these guarantees was approximately $400 million. Of this
amount, approximately $300 million relates to Occidental's guarantee of
equity investees' debt and other commitments. The remaining $100 million
relates to various indemnities and guarantees provided to third parties.
The amount of these guarantees recorded on the consolidated balance sheet
was immaterial.

It is impossible at this time to determine the ultimate liabilities that
OPC and its subsidiaries may incur resulting from any lawsuits, claims and
proceedings, audits, commitments, contingencies and related matters. If
these matters were to be ultimately resolved unfavorably at amounts
substantially exceeding Occidental's reserves, an outcome not currently
anticipated, it is possible that such outcome could have a material adverse
effect upon Occidental's consolidated financial position or results of
operations. However, after taking into account reserves, management does
not expect the ultimate resolution of any of these matters to have a
material adverse effect upon Occidental's consolidated financial position
or results of operations.

10. Income Taxes

The provision for taxes based on income for the 2004 and 2003 interim
periods was computed in accordance with Interpretation No. 18 of Accounting
Principles Board Opinion (APB) No. 28 on reporting taxes for interim
periods and was based on projections of total year pre-tax income.

The provision for income taxes for the first quarter of 2004 includes a $20
million credit from settlement of a tax issue. The second quarter of 2004
reflected a lower U.S. income tax rate resulting from the crediting of
foreign income taxes.

11. Stock-Based Compensation

Occidental accounts for its stock incentive plans (Plans) using the
intrinsic value method under APB No. 25 and related interpretations.
Occidental's policy is to recognize compensation expense over the vesting
period of the award. Had compensation expense for those Plans been
determined in accordance with SFAS No. 123, "Accounting for Stock Based
Compensation", Occidental's pro-forma net income and earnings per share
would have been as follows (in $ millions, except per share amounts):



Periods Ended June 30
-------------------------------------------------------
Three Months Six Months
------------------------- -------------------------
2004 2003 2004 2003
================================================== ========== ========== ========== ==========

Net income $ 581 $ 374 $ 1,068 $ 699
Add: Stock-based compensation included in net
income, net of tax, under APB No. 25 8 9 17 16
Deduct : Stock-based compensation, net of tax,
determined under SFAS No. 123 fair value
method (12) (14) (26) (25)
---------- ---------- ---------- ----------
Pro-forma net income $ 577 $ 369 $ 1,059 $ 690
================================================== ========== ========== ========== ==========

Earnings Per Share:
Basic - as reported $ 1.48 $ 0.98 $ 2.72 $ 1.84
Basic - pro forma 1.46 0.97 2.70 1.81

Diluted - as reported $ 1.46 $ 0.97 $ 2.68 $ 1.81
Diluted - pro forma 1.45 0.95 2.66 1.78
---------- ---------- ---------- ----------



10



12. Retirement Plans and Postretirement Benefits

Occidental has various defined contribution and defined benefit retirement
plans for its salaried, domestic union and nonunion hourly, and certain
foreign national employees.

The following tables set forth the components of the net periodic benefit
costs for Occidental's defined benefit pension and postretirement benefit
plans as of June 30 (in millions):



Three Months Ended June 30, 2004 2003
------------------------------ ----------------------------------- -----------------------------------
Pension Postretirement Pension Postretirement
Net Periodic Benefit Cost Benefit Benefit Benefit Benefit
============================== =============== =============== =============== ===============

Service cost $ 3 $ 2 $ 3 $ 2
Interest cost 6 8 6 9
Expected return on plan assets (5) -- (5) --
Recognized actuarial loss 1 3 1 1
--------------- --------------- --------------- ---------------
Total $ 5 $ 13 $ 5 $ 12
============================== =============== =============== =============== ===============




Six Months Ended June 30, 2004 2003
------------------------------ ----------------------------------- -----------------------------------
Pension Postretirement Pension Postretirement
Net Periodic Benefit Cost Benefit Benefit Benefit Benefit
============================== =============== =============== =============== ===============

Service cost $ 7 $ 4 $ 6 $ 4
Interest cost 12 16 12 17
Expected return on plan assets (10) -- (10) --
Recognized actuarial loss 2 5 2 4
--------------- --------------- --------------- ---------------
Total $ 11 $ 25 $ 10 $ 25
============================== =============== =============== =============== ===============


On December 8, 2003, President Bush signed into law a bill that expands
Medicare, primarily adding a prescription drug benefit for
Medicare-eligible retirees starting in 2006. Occidental intends to review
its retirees' health care plans in light of the new Medicare provisions,
which may change Occidental's obligations under the plan. At this time,
Occidental is unable to determine the impact of the new Medicare provisions
due to the lack of regulations for determining the actuarial equivalency of
its benefits compared to the new Medicare benefits. Therefore, the retiree
medical obligations and costs reported do not reflect the impact of this
legislation in accordance with FSP No. FAS 106-2. When the regulations are
clarified and Occidental is able to determine the impact of these
provisions, it will adopt the requirements of this standard.

Occidental funded approximately $3 million to its domestic defined benefit
pension plans for the six months ended June 30, 2004 and it expects to
contribute a total of $6.3 million during 2004. All of the contributions
are expected to be in the form of cash.

Refer to Note 13 to the consolidated financial statements in the 2003 Form
10-K for additional information regarding Occidental's retirement plans and
postretirement benefits.


11



13. Industry Segments

The following table presents Occidental's interim industry segment and
corporate disclosures (in millions):



Corporate
Oil and Gas Chemical and Other Total
======================================== =============== =============== =============== ===============

Six Months Ended June 30, 2004
Net sales $ 3,476 $ 1,794 $ 60 $ 5,330
=============== =============== =============== ===============
Pretax operating profit (loss) $ 1,904 $ 140 $ (232)(a) $ 1,812
Income taxes (340) (5) (399)(b) (744)
--------------- --------------- --------------- ---------------
Net income (loss) $ 1,564 $ 135 $ (631)(c) $ 1,068
======================================== =============== =============== =============== ===============
Six Months Ended June 30, 2003
Net sales $ 2,993 $ 1,575 $ 69 $ 4,637
=============== =============== =============== ===============
Pretax operating profit (loss) $ 1,637 $ 84 $ (331)(a) $ 1,390
Income taxes (273) (6) (344)(b) (623)
Cumulative effect of changes in
accounting principles, net -- -- (68) (68)
--------------- --------------- --------------- ---------------
Net income (loss) $ 1,364 $ 78 $ (743)(d) $ 699
======================================== =============== =============== =============== ===============


(a) Includes unallocated net interest expense, administration expense and other
items.
(b) Includes unallocated income taxes. The 2004 amount includes a $20 million
credit from a tax settlement.
(c) Includes a trust preferred securities redemption pre-tax charge of $11
million ($7 million net of tax).
(d) Includes a $61 million pre-tax interest charge ($40 million net of tax) to
repay a $450 million 6.4 percent senior note issue that had ten years of
remaining life, but was subject to remarketing on April 1, 2003.


12



ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

CONSOLIDATED RESULTS OF OPERATIONS

Occidental (as defined in Note 1 to the consolidated condensed financial
statements) reported net income for the first six months of 2004 of $1.1
billion, on net sales of $5.3 billion, compared with net income of $699 million,
on net sales of $4.6 billion, for the same period of 2003. Basic earnings per
common share were $2.72 for the first six months of 2004, compared with basic
earnings per share of $1.84 for the same period of 2003. Occidental reported net
income for the second quarter of 2004 of $581 million, on net sales of $2.8
billion, compared with net income of $374 million, on net sales of $2.3 billion,
for the same period of 2003. Basic earnings per common share were $1.48 for the
second quarter of 2004, compared with basic earnings per share of $0.98 for the
same period of 2003.

Net income for the first six months and the second quarter of 2004, compared
with the same periods in 2003, reflected higher crude oil prices and sales
volumes. Additionally, net income in both periods of 2004, compared with the
same periods in 2003, increased due to higher chemical prices and volumes,
partially offset by higher energy and raw material costs.

SELECTED INCOME STATEMENT ITEMS

The increase in net sales of $484 million and $693 million for the three and six
months ended June 30, 2004, compared with the same periods in 2003, primarily
reflected higher crude oil and chemical prices, higher oil production and higher
chemical sales volumes. For the three and six months ended June 30, 2003, the
gains (losses) on disposition of assets, net account included a pre-tax gain of
$22 million on the sale of the remaining interests in a subsidiary holding
assets in the Gulf of Mexico.

The increase in cost of sales of $203 million and $311 million for the three and
six months ended June 30, 2004, respectively, compared with the same periods in
2003, primarily reflected higher oil production, higher energy and raw material
costs and higher sales volumes. The increase of $28 million in selling, general
and administrative and other operating expenses for the six months ended June
30, 2004, compared to the same period in 2003, primarily reflected increases in
various oil and gas costs, including higher production-related taxes, and higher
operating costs. Additionally, for the three months ended June 30, 2003,
selling, general and administrative and other operating expenses included $16
million of severance costs for the chemical segment and a $9 million pre-tax
write-off for certain assets at a Niagara Falls plant. The increase in
exploration expense of $11 million and $37 million for the three and six months
ended June 30, 2004, respectively, compared with the same periods in 2003,
primarily reflected higher lease impairment charges. Interest and debt expense,
net, for the first six months of 2004 included a pre-tax charge of $11 million
for redemption of trust preferred securities. Interest and debt expense, net,
for the first six months of 2003 included a pre-tax debt repayment charge of $61
million. The provision for income taxes for the first six months of 2004
included a $20 million credit from settlement of a tax issue. The second quarter
of 2004 reflected a lower U.S. income tax rate resulting from the crediting of
foreign income taxes. The increase in income from equity investments of $33
million and $64 million for the three and six months ended June 30, 2004,
respectively, compared with the same periods in 2003, was primarily attributable
to improved results from the Lyondell equity investment and higher income from a
Russian oil and gas affiliate.


13



ANALYSIS OF FINANCIAL POSITION

The increase in receivables, net, of $841 million at June 30, 2004, compared
with December 31, 2003, was primarily due to the discontinuation, for the
present time, of the sale of an interest in Occidental's outstanding accounts
receivable balance totaling $360 million and higher receivable balances due to
higher sales prices. The increase in investments in unconsolidated entities of
$348 million at June 30, 2004, compared with December 31, 2003, was primarily
due to a $208 million advance to the Elk Hills Power LLC (EHP) equity investment
which EHP used to repay a portion of its debt and a fair value adjustment on the
Premcor Inc. available-for-sale investment which is recorded in other
comprehensive income (OCI).

The increase in accounts payable of $370 million at June 30, 2004, compared with
December 31, 2003, was primarily due to higher payable balances in the oil and
gas marketing and trading operations. In January 2004, Occidental redeemed all
of its outstanding 8.16 percent Trust Preferred Redeemable Securities (trust
preferred securities) which reduced trust preferred securities to zero.

SEGMENT OPERATIONS

The following table sets forth the sales and earnings of each operating segment
and unallocated corporate items (in millions):



Periods Ended June 30
-------------------------------------------------------
Three Months Six Months
------------------------- -------------------------
2004 2003 2004 2003
============================================================ ========== ========== ========== ==========

SEGMENT NET SALES
Oil and gas $ 1,783 $ 1,440 $ 3,476 $ 2,993
Chemical 937 785 1,794 1,575
Other 30 41 60 69
---------- ---------- ---------- ----------

NET SALES $ 2,750 $ 2,266 $ 5,330 $ 4,637
========== ========== ========== ==========
SEGMENT EARNINGS
Oil and gas $ 814 $ 637 $ 1,564 $ 1,364
Chemical 85 43 135 78
---------- ---------- ---------- ----------
899 680 1,699 1,442
UNALLOCATED CORPORATE ITEMS
Interest expense, net - debt and trust preferred
distributions (a) (60) (64) (128) (199)
Income taxes (b) (209) (167) (399) (345)
Other (49) (75) (104) (131)
---------- ---------- ---------- ----------

INCOME FROM CONTINUING OPERATIONS 581 374 1,068 767
Cumulative effect of changes in accounting
principles, net -- -- -- (68)
---------- ---------- ---------- ----------

NET INCOME $ 581 $ 374 $ 1,068 $ 699
============================================================ ========== ========== ========== ==========


(a) The six months 2004 amount includes an $11 million pre-tax interest charge
to redeem all the outstanding 8.16 percent trust preferred securities on
January 20, 2004. The six months 2003 amount includes a $61 million pre-tax
interest charge to repay a $450 million 6.4 percent senior notes issue that
had ten years of remaining life, but was subject to remarketing on April 1,
2003.
(b) The six months 2004 amount includes a $20 million credit related to a first
quarter settlement of an issue with the Internal Revenue Service. The
second quarter of 2004 amount reflected a lower U.S. income tax rate
resulting from the crediting of foreign income taxes.


14



SIGNIFICANT ITEMS AFFECTING EARNINGS


Occidental's results of operations often include the effects of significant
transactions and events affecting earnings that vary widely and unpredictably in
nature, timing and amount. Therefore, management uses a measure called "core
earnings", which excludes those items. This non-GAAP measure is not meant to
disassociate those items from management's performance, but rather is meant to
provide useful information to investors interested in comparing Occidental's
earnings performance between periods. Reported earnings are considered
representative of management's performance over the long term. Core earnings is
not considered to be an alternative to operating income in accordance with
generally accepted accounting principles.


The following table sets forth the core earnings and significant items affecting
earnings for each operating segment and corporate for the three months ended
June 30, 2004 and 2003:



Three Months Ended June 30
-------------------------------------------------------
(in millions, except per-share amounts) 2004 EPS 2003 EPS
================================================== ========== ========== ========== ==========

TOTAL REPORTED EARNINGS $ 581 $ 1.48 $ 374 $ 0.98
========== ========== ========== ==========

OIL AND GAS
- -----------
Segment Earnings 814 637
No significant items affecting earnings -- --
---------- ----------
Segment Core Earnings 814 637
---------- ----------

CHEMICAL
- --------
Segment Earnings 85 43
No significant items affecting earnings -- --
---------- ----------
Segment Core Earnings 85 43
---------- ----------

CORPORATE
- ---------
Results (318) (306)
---------- ----------

TOTAL CORE EARNINGS $ 581 $ 1.48 $ 374 $ 0.98
================================================== ========== ========== ========== ==========



15



The following table sets forth the core earnings and significant items affecting
earnings for each operating segment and corporate for the six months ended June
30, 2004 and 2003:



Six Months Ended June 30
-------------------------------------------------------
(in millions, except per-share amounts) 2004 EPS 2003 EPS
================================================== ========== ========== ========== ==========

TOTAL REPORTED EARNINGS $ 1,068 $ 2.72 $ 699 $ 1.84
========== ========== ========== ==========

OIL AND GAS
Segment Earnings 1,564 1,364
No significant items affecting earnings -- --
---------- ----------
Segment Core Earnings 1,564 1,364
---------- ----------

CHEMICAL
Segment Earnings 135 78
No significant items affecting earnings -- --
---------- ----------
Segment Core Earnings 135 78
---------- ----------

CORPORATE
Results (631) (743)
Less:
Trust preferred securities redemption charge (11) --
Settlement of tax issue 20 --
Debt repayment charge -- (61)
Tax effect of pre-tax adjustments 4 21
Changes in accounting principles, net* -- (68)
---------- ----------

TOTAL CORE EARNINGS $ 1,055 $ 2.69 $ 807 $ 2.12
================================================== ========== ========== ========== ==========


* This amount is shown after-tax


16



WORLDWIDE EFFECTIVE TAX RATE

The following table sets forth the calculation of the worldwide effective tax
rate for reported income and core earnings:



Periods Ended June 30
-------------------------------------------------------
Three Months Six Months
------------------------- -------------------------
(in millions) 2004 2003 2004 2003
======================================== ========== ========== ========== ==========

REPORTED INCOME

Oil and Gas $ 985 $ 757 $ 1,904 $ 1,637
Chemical 88 46 140 83
Corporate and other (109) (139) (232) (330)
---------- ---------- ---------- ----------
Pre-tax income 964 664 1,812 1,390

Income tax expense
Federal and State 213 175 404 354
Foreign (included in segments) (a) 170 115 340 269
---------- ---------- ---------- ----------
Total 383 290 744 623

---------- ---------- ---------- ----------
Income from continuing operations $ 581 $ 374 $ 1,068 $ 767
========== ========== ========== ==========

Worldwide effective tax rate 40% 44% 41% 45%
========== ========== ========== ==========

CORE INCOME

Oil and Gas $ 985 $ 757 $ 1,904 $ 1,637
Chemical 88 46 140 83
Corporate and other (109) (139) (221) (269)
---------- ---------- ---------- ----------
Pre-tax income 964 664 1,823 1,451

Income tax expense
Federal and State 213 175 428 375
Foreign (included in segments) (a) 170 115 340 269
---------- ---------- ---------- ----------
Total 383 290 768 644

---------- ---------- ---------- ----------
Income from continuing operations $ 581 $ 374 $ 1,055 $ 807
========== ========== ========== ==========

Worldwide effective tax rate 40% 44% 42% 44%
======================================== ========== ========== ========== ==========


(a) Revenues and income tax expense include taxes owed by Occidental but paid
by governmental entities on its behalf. Oil and gas pre-tax income includes
the following revenue amounts by period: second quarter 2004 - $116, second
quarter 2003 - $87, first six months 2004 - $232, first six months 2003 -
$191.

Occidental's second quarter 2004 worldwide effective tax rate was 40 percent.
The second quarter 2004 reflected a lower U.S. income tax rate resulting from
the crediting of foreign income taxes. Previously, foreign income taxes were
deducted in determining U.S. taxable income. An annual tax election permits a
taxpayer to claim a credit or deduction for foreign income taxes, whichever is
more beneficial. Occidental expects to continue its election to credit foreign
income taxes in future years.


17



OIL AND GAS SEGMENT




Periods Ended June 30
-------------------------------------------------------
Three Months Six Months
------------------------- -------------------------
Summary of Operating Statistics 2004 2003 2004 2003
================================================== ========== ========== ========== ==========

NET PRODUCTION PER DAY:
CRUDE OIL AND NATURAL GAS LIQUIDS (MBL)
United States 260 254 259 246
Latin America 86 54 82 54
Middle East 86 97 90 98
Other Eastern Hemisphere 8 10 8 10

NATURAL GAS (MMCF)
United States 513 541 520 535
Middle East 56 -- 33 --
Other Eastern Hemisphere 73 77 74 76

BARRELS OF OIL EQUIVALENT (MBOE)
Consolidated subsidiaries 547 518 544 510
Other interests 27 26 27 28
---------- ---------- ---------- ----------
Worldwide production 574 544 571 538
================================================== ========== ========== ========== ==========

AVERAGE SALES PRICE:
CRUDE OIL ($/BBL)
United States 35.44 26.89 34.02 29.15
Latin America 30.60 25.01 29.83 28.06
Middle East 34.51 25.16 32.18 27.80
Other Eastern Hemisphere 32.26 25.75 30.79 26.89

NATURAL GAS ($/MCF)
United States 4.90 5.46 4.95 4.89
Middle East 0.97 -- 0.97 --
Other Eastern Hemisphere 2.47 1.91 2.35 1.91
================================================== ========== ========== ========== ==========


Oil and gas segment and core earnings for the six months ended June 30, 2004
were $1.6 billion, compared with $1.4 billion for the same period of 2003. Oil
and gas segment and core earnings for the three months ended June 30, 2004 were
$814 million, compared with $637 million for the same period of 2003. The
increase in earnings for the three and six months ended June 30, 2004, compared
with the same periods in 2003, primarily reflected higher crude oil prices and
production partially offset by higher operating expenses and overall increased
DD&A rates.

The increase in net sales of $343 million and $483 million for the three and six
months ended June 30, 2004, compared with the same periods in 2003, primarily
reflected higher crude oil prices and higher crude oil production. Additionally,
for the three months ended June 30, 2004, U.S. natural gas prices were lower
than the comparable period of 2003.

The average West Texas Intermediate price in the second quarter of 2004 was
$38.32 per barrel and the New York Mercantile Exchange (NYMEX) natural gas price
for the second quarter of 2004 was $5.79 per million BTU's. A change of 10 cents
per million BTU's in NYMEX gas prices has a quarterly impact on oil and gas
segment earnings of $5 million while a $1.00 per barrel change in oil prices has
a quarterly impact of $35 million, in each case before the effect of income
taxes.

Average worldwide production costs for the first six months of 2004 were $6.79
per barrel of oil equivalent (BOE) compared to the average 2003 production cost
of $6.08 per BOE.


18



For the first six months of 2004, production volumes increased to 571,000 BOE
per day compared with 538,000 BOE per day for the same period in 2003. For the
second quarter of 2004, production volumes increased to 574,000 BOE per day
compared with 544,000 BOE per day for the same period in 2003. Occidental
expects third quarter 2004 oil and gas production to remain at approximately the
same level as the second quarter of 2004 and it expects exploration expense to
be about $45 million.

In July 2004, a tribunal of international arbitrators issued a decision awarding
value added tax refunds to Occidental's Block 15 operations that the Government
of Ecuador had withheld through December 31, 2003. The Government of Ecuador has
indicated that it will appeal the award.

OIL AND GAS RESERVES

A senior corporate officer of Occidental is responsible for the audit of its oil
and gas reserves data. In addition, a Corporate Reserves Review Committee (the
Reserves Committee) has been established, consisting of five senior corporate
officers, to monitor and review Occidental's oil and gas reserves. The Reserves
Committee reports to the Audit Committee of Occidental's Board of Directors
periodically throughout the year. Occidental has retained Ryder Scott Company,
L.P. (Ryder Scott), independent petroleum engineering consultants, to review its
oil and gas estimation processes.

Ryder Scott has compared Occidental's methods and procedures for estimating oil
and gas reserves to generally accepted industry standards and has reviewed
certain data, methods and procedures used in estimating reserves volumes, the
reserve and economic evaluations and reserves classifications. Ryder Scott then
reviewed the specific application of such methods and procedures for a selection
of oil and gas fields considered to be a valid representation of Occidental's
total reserves portfolio.

Based on this review, including the data, technical processes and
interpretations presented by Occidental, Ryder Scott has concluded that the
methodologies used by Occidental in preparing the relevant estimates generally
comply with current Securities and Exchange Commission (SEC) standards. Ryder
Scott has not been engaged to render an opinion as to the reserves volumes
presented by Occidental.

The Reserves Committee has retained Ryder Scott to advise on oil and gas
reserves matters and to conduct reviews of selected properties in 2004.

CHEMICAL SEGMENT



Periods Ended June 30
-------------------------------------------------------
Three Months Six Months
------------------------- -------------------------
Summary of Operating Statistics 2004 2003 2004 2003
============================================================ ========== ========== ========== ==========

MAJOR PRODUCT VOLUMES (Thousands of Tons, except PVC
Resins)
Chlorine (a) 740 664 1,446 1,350
Caustic Soda 819 719 1,551 1,356
Ethylene Dichloride 100 108 222 239
PVC Resins (millions of pounds) 1,090 872 2,161 1,935

MAJOR PRODUCT PRICE INDEX (BASE 1987 THROUGH 1990
AVERAGE PRICE = 1.0)
Chlorine 2.00 1.81 1.80 1.72
Caustic Soda 0.61 0.87 0.66 0.84
Ethylene Dichloride 1.51 1.17 1.40 1.21
PVC Resins (b) 1.06 0.97 1.00 0.92
============================================================ ========== ========== ========== ==========


(a) Product volumes include those manufactured and consumed internally.
(b) Product volumes produced at former PolyOne facilities, now part of
Occidental, are excluded from the product price indexes.


Chemical segment and core earnings for the six months ended June 30, 2004 were
$135 million, compared with $78 million for the same period of 2003. Chemical
segment and core earnings for the three months ended June 30, 2004 were $85
million, compared with $43 million for the same period of


19



2003. The increase in earnings for the three and six months ended June 30, 2004,
compared with the same periods in 2003, primarily reflected higher sales volumes
and prices for polyvinyl chloride resins (PVC), vinyl chloride monomer (VCM) and
chlorine, higher ethylene dichloride (EDC) prices and higher sales volumes for
caustic soda partially offset by lower prices for caustic soda and higher
ethylene and energy costs. The three and six months ended June 30, 2003 included
a $9 million asset write-down charge and a $15 million severance charge.

The increase in net sales of $152 million and $219 million for the three and six
months ended June 30, 2004, respectively, compared with the same periods in
2003, primarily reflected higher sales volumes and prices for PVC, VCM and
chlorine, higher EDC prices and higher sales volumes for caustic soda partially
offset by lower prices for caustic soda.

Occidental expects the upturn in the chemical markets to continue in the third
quarter 2004 which should lead to moderate margin improvement and higher
utilization rates.

CORPORATE AND OTHER

The six months ended June 30, 2004, unallocated corporate items - income taxes
account includes a $20 million credit related to a settlement of a tax issue.
Continuing tax audit discussions could result in additional settlements in 2004
or later.

LIQUIDITY AND CAPITAL RESOURCES

Occidental's net cash provided by operating activities was approximately $1.5
billion for both the first six months of 2004 and 2003. The 2004 amount includes
the effect of the discontinuation, for the present time, of the sale of an
interest in Occidental's outstanding accounts receivable balance which reduced
the 2004 operating cash flow by $360 million. This has the effect of offsetting
the higher income from continuing operations for the first six months of 2004
compared with the same period in 2003.

Occidental's net cash used by investing activities was $1.2 billion for the
first six months of 2004, compared with net cash used of $1.1 billion for the
same period of 2003. The 2004 amount includes a $208 million advance to the Elk
Hills Power LLC (EHP) equity investment which EHP used to repay a portion of its
debt. The 2004 amount also includes the purchase of the pipeline and gathering
system in the Permian Basin. The 2003 amount includes the purchase of Permian
assets, advances to equity investees, purchases of equity investee debt and an
additional stock purchase of a cost-method investee.

Capital expenditures for the first six months of 2004 were $804 million,
including $744 million for oil and gas. Capital expenditures for the first six
months of 2003 were $791 million, including $508 million for oil and gas and
$273 million for chemical. The 2003 chemical amount includes $180 million for
the purchase of a leased facility in La Porte, Texas and $44 million related to
the exercise of purchase options for certain leased assets.

Financing activities used net cash of $565 million in the first six months of
2004, compared with cash used of $371 million for the same period of 2003. The
2004 amount includes the total cash paid of $466 million to redeem the trust
preferred securities in January 2004. The 2003 amount includes net debt payments
of approximately $289 million.

Available but unused lines of committed bank credit totaled approximately $1.5
billion at June 30, 2004. In June 2004, Occidental entered into a five-year $1.5
billion committed revolving bank facility that replaced its previous five-year
and 364-day revolving credit facilities, which collectively totaled $1.5
billion. Although its income and cash flows are largely dependent on oil and gas
prices and production, Occidental believes that cash on hand and cash generated
from operations will be sufficient to fund its operating needs, capital
expenditure requirements and dividend payments. If needed, Occidental could
access its existing credit facilities.


20



In July 2004, Dolphin Energy Limited ("Dolphin Energy"), the operator of the
Dolphin Project, entered into a facility agreement with banks to provide a $1.36
billion bridge loan for the Dolphin Project. The loan has a term of five years
and is a revolver for the first two years. Occidental guaranteed 24.5-percent of
the obligations of Dolphin Energy under the facility agreement. In addition, the
subsidiary of Occidental which is an upstream participant in the Dolphin Project
entered into an on-loan agreement with Dolphin Energy to borrow up to $245
million from the proceeds of loans under the facility agreement for its share of
upstream costs.

ENVIRONMENTAL LIABILITIES AND EXPENDITURES

Occidental's operations in the United States are subject to stringent federal,
state and local laws and regulations relating to improving or maintaining
environmental quality. Foreign operations also are subject to
environmental-protection laws. The laws that require or address environmental
remediation may apply retroactively to past waste disposal practices and
releases. In many cases, the laws apply regardless of fault, legality of the
original activities, or current ownership or control of sites. Pursuant to these
laws, Occidental Petroleum Corporation (OPC) or certain of its subsidiaries are
currently participating in environmental assessments and cleanups at federal
Superfund sites and other sites subject to the Comprehensive Environmental
Response, Compensation, and Liability Act (CERCLA), sites subject to equivalent
state laws, and other remediation sites, including Occidental facilities and
previously owned sites.

The following table presents Occidental's environmental remediation reserves at
June 30, 2004, grouped by three categories of environmental remediation sites ($
amounts in millions):



# of Sites Reserve
=================================== =============== ===============

CERCLA & Equivalent Sites 121 $ 229
Active Facilities 14 72
Closed or Sold Facilities 40 52
--------------- ---------------
Total 175 $ 353
=================================== =============== ===============


In determining the environmental remediation reserves and reasonably possible
range of loss, Occidental refers to currently available information, including
relevant past experience, available technology, regulations in effect, the
timing of remediation and cost-sharing arrangements. Occidental expects that it
may continue to incur additional liabilities beyond those recorded for
environmental remediation at these and other sites. The range of reasonably
possible loss for existing environmental remediation matters could be up to $400
million beyond the amount accrued.

At June 30, 2004, OPC or certain of its subsidiaries have been named in CERCLA
or state equivalent proceedings, as shown below ($ amounts in millions):



Description # of Sites Reserve
=================================== =============== ===============

Minimal/No Exposure (a) 99 $ 5
Reserves between $1-10 MM 15 58
Reserves over $10 MM 7 166
--------------- ---------------
Total 121 $ 229
=================================== =============== ===============


(a) Includes 27 sites for which Maxus Energy Corporation has retained the
liability and indemnified Occidental, 7 sites where Occidental has
denied liability without challenge, 54 sites where Occidental's
reserves are less than $50,000 each, and 11 sites where reserves are
between $50,000 and $1 million each.


Refer to the "Environmental Expenditures" section of Management's Discussion and
Analysis of Financial Condition and Results of Operations in the 2003 Form 10-K
for additional information regarding Occidental's environmental expenditures.


21



LAWSUITS, CLAIMS, COMMITMENTS, CONTINGENCIES AND RELATED MATTERS

OPC and certain of its subsidiaries have been named in a substantial number of
lawsuits, claims and other legal proceedings. These actions seek, among other
things, compensation for alleged personal injury, breach of contract, property
damage, punitive damages, civil penalties or other losses; or injunctive or
declaratory relief. OPC and certain of its subsidiaries also have been named in
proceedings under CERCLA and similar federal, state and local environmental
laws. These environmental proceedings seek funding or performance of remediation
and, in some cases, compensation for alleged property damage, punitive damages
and civil penalties; however, Occidental is usually one of many companies in
these proceedings and has to date been successful in sharing response costs with
other financially sound companies. With respect to all such lawsuits, claims and
proceedings, including environmental proceedings, Occidental accrues reserves
when it believes it is probable a liability has been incurred and the amount of
loss can be reasonably estimated.

During the course of its operations, Occidental is subject to audit by tax
authorities for varying periods in various federal, state, local and foreign tax
jurisdictions. Taxable years prior to 1997 are closed for U.S. federal income
tax purposes. Taxable years 1997 through 2002 are in various stages of audit by
the Internal Revenue Service. Disputes arise during the course of such audits as
to facts and matters of law.

Occidental has guarantees outstanding at June 30, 2004 which encompass
performance bonds, letters of credit, indemnities, commitments and other forms
of guarantees provided by Occidental to third parties, mainly to provide
assurance that Occidental and/or its subsidiaries and affiliates will meet their
various obligations (guarantees). At June 30, 2004, the notional amount of these
guarantees was approximately $400 million. Of this amount, approximately $300
million relates to Occidental's guarantee of equity investees' debt and other
commitments. The remaining $100 million relates to various indemnities and
guarantees provided to third parties. The amount of these guarantees recorded on
the consolidated balance sheet was immaterial.

It is impossible at this time to determine the ultimate liabilities that OPC and
its subsidiaries may incur resulting from any lawsuits, claims and proceedings,
audits, commitments, contingencies and related matters. If these matters were to
be ultimately resolved unfavorably at amounts substantially exceeding
Occidental's reserves, an outcome not currently anticipated, it is possible that
such outcome could have a material adverse effect upon Occidental's consolidated
financial position or results of operations. However, after taking into account
reserves, management does not expect the ultimate resolution of any of these
matters to have a material adverse effect upon Occidental's consolidated
financial position or results of operations.

ACCOUNTING CHANGES

In December 2003, the FASB revised FIN 46, "Consolidation of Variable Interest
Entities" to exempt certain entities from its requirements and to clarify
certain issues arising during the initial implementation of FIN 46. Occidental
adopted the revised FIN 46 in the first quarter of 2004 and it did not have a
material effect on its financial statements when adopted.

In June 2001, FASB issued Statement of Financial Accounting Standards (SFAS) No.
142, "Goodwill and Other Intangible Assets", which states in paragraph 8(b) that
the accounting specified in SFAS No. 19, "Financial Accounting and Reporting by
Oil and Gas Producing Companies" is not affected by SFAS No. 142. A question has
arisen about whether the balance sheet classification and disclosure
requirements for oil and gas mineral and drilling rights are included in this
exception and, if they are not included, whether these rights should be
classified as intangible assets. The FASB has issued a proposed FASB Staff
Position (FSP), No. FAS 142-b, "Application of FASB Statement No. 142, Goodwill
and Other Intangible Assets, to Oil and Gas Producing Entities", which states
that the scope exception does include the classification and disclosure of
mineral and drilling rights.

Historically, Occidental has classified all of its mineral and drilling rights
within property, plant and equipment and has generally not identified these
amounts separately. If this proposed FSP is not


22



approved by the FASB and it determines that these mineral rights should be
presented as intangible assets, Occidental would have to reclassify its oil and
gas mineral and drilling rights to intangible assets and make additional
disclosures in accordance with SFAS No. 142. If Occidental adopted this change
for rights acquired after June 30, 2001, approximately $544 million and $492
million, net of accumulated DD&A, of the property, plant and equipment balance
would be reclassified to intangible assets as at June 30, 2004 and December 31,
2003, respectively. Occidental currently amortizes these amounts under the
unit-of-production method and would continue to amortize the mineral rights
under this method. Occidental believes the change would have no material effect
on its results of operations.

SAFE HARBOR STATEMENT REGARDING OUTLOOK AND FORWARD-LOOKING INFORMATION

Portions of this report contain forward-looking statements and involve risks and
uncertainties that could significantly affect expected results of operations,
liquidity, cash flows and business prospects. Factors that could cause results
to differ materially include, but are not limited to: global commodity pricing
fluctuations; competitive pricing pressures; higher-than-expected costs,
including feedstocks; crude oil and natural gas prices; chemical prices;
potential liability for remedial actions under existing or future environmental
regulations and litigation; potential liability resulting from pending or future
litigation; general domestic and international political conditions; potential
disruption or interruption of Occidental's production or manufacturing
facilities due to accidents, political events or insurgent activity; potential
failure to achieve expected production from existing and future oil and gas
development projects; the supply/demand considerations for Occidental's
products; any general economic recession or slowdown domestically or
internationally; regulatory uncertainties; and not successfully completing, or
any material delay of, any development of new fields, expansion, capital
expenditure, efficiency-improvement project, acquisition or disposition.
Forward-looking statements are generally accompanied by words such as
"estimate", "project", "predict", "will", "anticipate", "plan", "intend",
"believe", "expect" or similar expressions that convey the uncertainty of future
events or outcomes. Occidental expressly disclaims any obligation to publicly
update or revise any forward-looking statements, whether as a result of new
information or otherwise. In light of these risks, uncertainties and
assumptions, the forward-looking events discussed might not occur.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

For the period ended June 30, 2004, there were no material changes in the
information required to be provided under Item 305 of Regulation S-X included
under the caption "Management's Discussion and Analysis of Financial Condition
and Results of Operations (Incorporating Item 7A) - Derivative Activities and
Market Risk" in Occidental's 2003 Annual Report on Form 10-K.

ITEM 4. CONTROLS AND PROCEDURES

Occidental's Chief Executive Officer and Chief Financial Officer supervised and
participated in Occidental's evaluation of its disclosure controls and
procedures as of the end of the period covered by this report. Disclosure
controls and procedures are controls and procedures designed to ensure that
information required to be disclosed in Occidental's periodic reports filed or
submitted under the Securities Exchange Act of 1934, as amended, is recorded,
processed, summarized and reported within the time periods specified in the
Securities and Exchange Commission's rules and forms. Based upon that
evaluation, Occidental's Chief Executive Officer and Chief Financial Officer
concluded that Occidental's disclosure controls and procedures are effective.

There has been no change in Occidental's internal control over financial
reporting during the period covered by this report that has materially affected,
or is reasonably likely to materially affect, Occidental's internal control over
financial reporting.


23



PART II OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS


GENERAL

This item incorporates by reference the information regarding legal proceedings
in Note 9 to the consolidated condensed financial statements in Part I of this
Form 10-Q.

On October 1, 2003, the Environmental Protection Agency (EPA) served OxyChem
with an administrative compliance order and an administrative complaint alleging
certain violations of environmental laws at OxyChem's Pottstown, Pennsylvania
facility. On July 14, 2004, the Regional Judicial Officer for EPA Region III
entered a Consent Agreement and Final Order (CAFO) between OxyChem and EPA.
Pursuant to the CAFO, OxyChem agreed to pay EPA and the U.S. Coast Guard a total
of $150,000 in penalties and to expend not less than $902,000 performing certain
supplemental environmental projects intended to reduce emissions from the
facility.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS

Occidental's 2004 Annual Meeting of Stockholders (the Annual Meeting) was held
on April 30, 2004. The following actions were taken at the Annual Meeting, for
which proxies were solicited pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended:

1. The twelve nominees proposed by the Board of Directors were elected as
directors by the following votes:



NOMINEE VOTES FOR WITHHELD
------- --------- --------

Ronald W. Burkle 340,882,894 3,504,515
John S. Chalsty 340,543,591 3,843,818
Edward P. Djerejian 340,791,629 3,595,780
R. Chad Dreier 340,731,402 3,656,007
John E. Feick 340,723,298 3,664,111
Ray R. Irani 335,248,167 9,139,242
Dale R. Laurance 340,851,111 3,536,298
Irvin W. Maloney 340,198,440 4,188,969
Rodolfo Segovia 340,867,843 3,519,566
Aziz D. Syriani 336,779,572 7,607,837
Rosemary Tomich 340,390,871 3,996,538
Walter L. Weisman 340,707,414 3,679,995



2. A proposal to ratify the selection of KPMG as independent auditors was
approved. The proposal received: 341,112,007 votes for, 1,185,238
votes against, and 2,090,164 abstentions.


3. A proposal to amend the Restricted Stock Plan for Non-Employee
Directors to increase the number of shares available for issuance from
150,000 to 250,000 was approved. The proposal received 281,662,517
votes for, 18,814,311 votes against, 2,817,945 abstentions and
41,092,636 broker non-votes.


4. A stockholder proposal requesting discontinuance of options, rights
and severance payments was not approved. The proposal received
12,076,118 votes for, 287,607,549 votes against, 3,611,100 abstentions
and 41,092,642 broker non-votes.


24



ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

4.1 Occidental Petroleum Corporation Five-Year Credit
Agreement, dated as of June 18, 2004, among Occidental,
JPMorgan Chase Bank and Citicorp USA, Inc., as
Co-Syndication Agents, BNP Paribas, Bank of America,
N.A., Barclays Bank PLC and The Royal Bank of Scotland
PLC as Co-Documentation Agents, The Bank of Nova
Scotia, as Administrative Agent, and the banks named
therein.

10.1 Employment Agreement Amendment, dated July 19, 2004
between Occidental and Dale R. Laurance.

10.2 Consulting Agreement entered into as of July 19, 2004,
between Occidental and Dale R. Laurance.

10.3 Terms and Conditions of Stock Appreciation Rights Award
under Occidental Petroleum Corporation 2001 Incentive
Compensation Plan.

10.4 Terms and Conditions of Restricted Share Unit Award
(without deferred issuance of shares) under Occidental
Petroleum Corporation 2001 Incentive Compensation Plan.

11 Statement regarding the computation of earnings per
share for the three and six months ended June 30, 2004
and 2003.

12 Statement regarding the computation of total enterprise
ratios of earnings to fixed charges for the six months
ended June 30, 2004 and 2003 and the five years ended
December 31, 2003.

23 Expert Consent.

31.1 Certification of CEO Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.

31.2 Certification of CFO Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.

32.1 Certifications of CEO and CFO Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.


25



(b) Reports on Form 8-K

During the quarter ended June 30, 2004, Occidental filed the
following Current Reports on Form 8-K:

1. Current Report on Form 8-K dated April 23, 2004 (date of
earliest event reported), filed on April 23, 2004, for the
purpose of reporting, under Item 5, Occidental's results of
operations for the first quarter ended March 31, 2004, and
under Items 9 and 12, speeches and supplemental investor
information relating to Occidental's first quarter 2004
earnings announcement (which information under Items 9 and
12 shall not be deemed to be filed).

2. Current Report on Form 8-K dated April 30, 2004 (date of
earliest event reported), filed on April 30, 2004, for the
purpose of reporting, under Item 9, a presentation by Dr.
Ray R. Irani, CEO, at Occidental's 2004 Annual Meeting of
Stockholders (which information under Item 9 shall not be
deemed to be filed).

3. Current Report on Form 8-K dated June 16, 2004 (date of
earliest event reported), filed on June 16, 2004, for the
purpose of reporting, under Item 9, a presentation by Tom
Menges of Occidental Permian Ltd. (which information under
Item 9 shall not be deemed to be filed).

From June 30, 2004 to the date hereof, Occidental filed the
following Current Reports on Form 8-K:

1. Current Report on Form 8-K dated July 19, 2004 (date of
earliest event reported), filed on July 19, 2004, for the
purpose of reporting, under Item 5, Occidental's results of
operations for the second quarter ended June 30, 2004 and
certain senior management changes, and under Items 9 and 12,
a speech and supplemental investor information relating to
Occidental's second quarter 2004 earnings announcement
(which information under Items 9 and 12 shall not be deemed
to be filed).


26



SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.



OCCIDENTAL PETROLEUM CORPORATION







DATE: August 2, 2004 S. P. Dominick, Jr.
--------------------------------------------------
S. P. Dominick, Jr., Vice President and Controller
(Chief Accounting and Duly Authorized Officer)


27



EXHIBIT INDEX


EXHIBITS
- --------

4.1 Occidental Petroleum Corporation Five-Year Credit Agreement, dated as
of June 18, 2004, among Occidental, JPMorgan Chase Bank and Citicorp
USA, Inc., as Co-Syndication Agents, BNP Paribas, Bank of America,
N.A., Barclays Bank PLC and The Royal Bank of Scotland PLC as
Co-Documentation Agents, The Bank of Nova Scotia, as Administrative
Agent, and the banks named therein.

10.1 Employment Agreement Amendment, dated July 19, 2004 between Occidental
and Dale R. Laurance.

10.2 Consulting Agreement entered into as of July 19, 2004, between
Occidental and Dale R. Laurance.

10.3 Terms and Conditions of Stock Appreciation Rights Award under
Occidental Petroleum Corporation 2001 Incentive Compensation Plan.

10.4 Terms and Conditions of Restricted Share Unit Award (without deferred
issuance of shares) under Occidental Petroleum Corporation 2001
Incentive Compensation Plan.

11 Statement regarding the computation of earnings per share for the
three and six months ended June 30, 2004 and 2003.

12 Statement regarding the computation of total enterprise ratios of
earnings to fixed charges for the six months ended June 30, 2004 and
2003 and the five years ended December 31, 2003.

23 Expert Consent.

31.1 Certification of CEO Pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.

31.2 Certification of CFO Pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.

32.1 Certifications of CEO and CFO Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.