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Occidental Petroleum Corporation Presented by the Red Baron’s Juanice Christian Randy Cobb John Lampl Ernesto Miranda Eric Yost

Program l World Oil Consumption l World Oil Production l Hubbert’s Peak l Occidental Petroleum Corporation – Business Model – Competitors – Production – Financials – Threats l Red Baron’s Forecast

Spring 1999 Fall 2003 Source: The Economist The Changing Perception of the Oil Industry’s Dynamics PETRIE PARKMAN & Co. Summer 2004 Source: The Economist

Is the U.S. Running Out of Oil? Accordingly, in practical terms, the U. S. issue is already resolved. The remaining question is: World

World Oil Trading to Meet Demand Source: BP

World Per Capita Annual Oil Consumption ∆ Demand ?

US Oil Demand Source:

US Import Supply Source:

Predicted production curve Results match Hubbert’s prediction World Oil Production – “Hubbert’s Peak” Source: Deffeyes, K.S. (2001), Hubbert’s Peak 5 PETRIE PARKMAN & Co. ?

Source:

A Popular Topic, but No Clear Public Consensus “We’re draining our reserves dry.” “Enough oil to last for 500 years.” Houston Chronicle May 30, 2004 Llewellyn King Chairman & CEO King Publishing Co. Publisher for: White House Weekly & Energy Daily Houston Chronicle May 30, 2004 H. Sterling Burnett Senior Fellow National Center for Policy Analysis

Red Baron’s View is that both statements are correct, “We’re draining our reserves dry.” Houston Chronicle May 30, 2004 Llewellyn King Chairman & CEO King Publishing Co. Publisher for: White House Weekly & Energy Daily “Enough oil to last for 500 years.” Houston Chronicle May 30, 2004 H. Sterling Burnett Senior Fellow National Center for Policy Analysis Cheap Red Baron’s Edit ^, if the price is high enough. Red Baron’s Edit ^ with slight editing….

March 5, 2005

Financial Information (millions of dollars)Q303Q304% Change Corporate Revenue (24)c178,584231, Net Income (24)10,51516, Worldwide Lines of Business Net Income Petroleum (26) d13,9819, Oil and Natural Gas Production (20)e10,82114, Refining/Marketing (13)e3,168 5, Downstream Natural Gas and Power (9) Chemicals (9)3921, Domestic Net Income by Function Oil and Natural Gas Production (13) 5,376 6, Refining/Marketing (13)2,5523, Foreign Net Income by Function Oil and Natural Gas Production (6)3,3094, Refining/Marketing (4)8651, OCCIDENTAL PETROLEUM CORP (NYSE: OXY)

Major Oil Companies

Industry Consolidation 14 Number of Independent Companies with Mkt Cap > $150 MM PETRIE PARKMAN & Co. Source:

Refining/Downstream

Hurricane Ivan

Other Forces / Considerations US Dollar $1 = EUR 2/27/05 $1 = JPY 2/27/05

% 1% 2% 3% 4% 5% 6% 7% 01/01/89 01/01/90 01/01/91 01/01/9201/01/93 01/01/94 01/01/9501/01/9601/01/9701/01/9801/01/9901/01/00 01/01/0101/01/0201/01/0301/01/04 CPICore CPI 01/01/05 Inflation

Changes in the Federal Fund Rate SOURCE: The Washington Post | GRAPHIC: washingtonpost.com

Source: Bloomberg U.S. Crude Oil Inventory VS Oil Price (The Last 13+ years) Economic Jaws of Inventory & Price – Leading Indicator or Symptomatic Result?

Free Markets At Work: Impact of Rising Prices Conservation & Demand destruction Fuel switching Reserve & production expansion Increase in service costs Innovation & technology are rewarded ($$$) Impact of Low Prices Unrestrained use & Demand stimulation Fuel switching Reserve & production contraction Pressure on service costs Low cost operators are rewarded ($$$) & technology advances Sample Factors

Accuracy of the Market’s Vision on Prices Actual Price Forward Curve Source: Bloomberg

Conclusion l World Oil Consumption - Increasing l World Oil Production – Increasing to Meet Demand l Hubbert’s Peak – Will Not Last Forever l Occidental Petroleum Corporation – Business Model – Competitors – Production – Financials – Threats l Red Baron’s Forecast Anything Is Possible

Thank You From the Red Barons Juanice Christian Randy Cobb John Lampl Ernesto Miranda Eric Yost You Decide