INITIATING COVERAGE REPORT

William C. Dunkelberg Owl Fund April, 14 th 2014

Michael Lam: Lead Analyst mlam@theowlfund.com Niclas Dombrowski: Associate Analyst ndombrowski@theowlfund.com Ethan Friedland: Associate Analyst efriedland@theowlfund.com

Occidental Petroleum Corp.

Exchange: NYSE Ticker: OXY Target Price: $ 108.84

Integrated Oil & Gas

COMPANY OVERVIEW Occidental Petroleum Corporation (OXY) is an integrated oil and gas company operating within the US (65.5% of revenue) and internationally (34.5% of revenues) through three segments: Oil and Gas, Chemical, and Midstream & Marketing. The Oil and Gas segment (75.5% of revenue, 77.3% of net income) explores for and produces oil, natural gas, and natural gas liquid. The segments primary domestic operations are in California and Texas. International operations include South America, North Africa, and the Middle East. The Chemical segment: (18.4% of revenue, 15.4% of net income) manufactures and sells basic chemicals and vinyls. The Midstream& Marketing segment (6.1% of revenue, 7.3% of net income) provides specialized services to support the other segments and includes gathering, processing, transporting, storage, and marketing. INVESTMENT THESIS OXY is currently trading at a 12% discount to its peer and historical 5 year average EV/ EBITDA multiple. OXY first became undervalued at the end of 2012 after investors became concerned with the drop in natural gas, OXYs high production costs ($17.38 per barrel of oil equivalent (BOE)), and increasing capex. OXY is still undervalued due to the recent energy sell off, and investors waiting to see how OXYs restructuring initiatives unfold. OXY is still amongst the leaders in the Oil and Gas industry and has built a narrow moat via its location and expertise/asset quality advantages. OXY s locations advantage is seen most prominently in its acreage ownership worldwide, and in key areas like the Permian in Texas and across California. OXY expertise/asset quality is seen in its commitment to exploring and producing on proven legacy assets through its specialized enhanced energy recovery techniques. OXY has been able to leverage its chemical and midstream & marketing segment to provide efficiencies and diversification. To combat the current investor sentiment, OXY has engaged in a long list of restructuring inanities to unlock value and to grow through shrinking. These initiatives include the spinoff of its California Business, selling a minority stake in its MENA segment, and other divesting initiatives. These initiatives along with the startup and completion of the Al Hosn Gas project in the Middle East, and the Bridge Tex Pipeline should expand margins, and generate a more profitable long term outlook. As a result, OXY should start to trade back at its fair value to yield a price target of $108.84, or a dividend adjusted return of 19.62%.

Sector Outperform Recommendation: BUY

Key Statistics:
Price Return Shares O/S (mm) Market Cap (mm) $93.33 19.61% 790.1 $74,460 52 Week Low 52 Week High Yield
Enterprise Value

$79.00 $99.42 3.00% $78,227

Earnings History:
Quarters 1Q13 2Q13 3Q13 4Q13 EPS $1.684 $1.577 $1.970 $1.710 Rev. YoY -6.32% 3.36% 12.15% 0.00% Price -1.45% 2.39% -1.09% -0.55%

Energy :

Earnings Projections:
Year 2011 2012 2013 2014e 2015e Q1 $1.721 $1.908 $1.684 $1.706 $1.748 Q2 $2.213 $1.638 $1.577 $1.730 $1.738 Q3 $2.160 $1.701 $1.970 $1.789 $1.797 Q4 $2.025 $1.858 $1.710 $1.789 $1.773 Total $8.119 $7.105 $6.941 $7.014 $7.056

All prices current at end of previous trading sessions from date of report. Data is sourced from local exchanges via CapIQ, Bloomberg and other vendors. The William C. Dunkelberg Owl fund does and seeks to do business with companies covered in its research reports.

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RISKS:
Commodity: Fluctuation in commodity prices (oil, natural gas, and chemicals) would have adverse effects on operations. Price fluctuations are attributed to economic conditions, production levels, exploration activity, and geopolitical activity. Restructuring: OXYs restructuring efforts could experience lower proceeds, longer timelines, or create situations where OXY retains more than expected liability. This would affect OXYs financial stability and stock price. Operational: The capital intensive nature puts daily operations at risk of delays, costs over runs, and other events that could derail operations. This would negatively affect OXYs top and bottom line growth. Regulations: Any reform, increased regulation, or environmental laws would increase the operational difficulties. This risk would decelerate revenue growth and squeeze margins through increased expenses. International: OXY operates in multiple different countries and is exposed to currency and geopolitical risks. Major concerns include fluctuating currency, government intervention, and OPEC activity.

CATALYSTS: Restructuring Initiative: To unlock more value and create a greater focus, OXY, like the rest of the industry, will divest or spinoff parts of its business. However, unlike its competitors, OXY will maintain its diversity and spinoff/divest within its Oil and Gas segment. This allows OXY to focus more of is resources and capital expenditure on the Permian, a more proven operation that still offers stable production growth through conventional means, and growth opportunities through unconventional means. Expectations are that all cash flow generated will go to a buyback program. o California Spinoff: On Feb14th, OXY announced the spinoff of its California Business. The split will allow OXY to focus on exploration and production in the Texas area, and its two other business segments. OXY expects to complete the separation by the end of 2014 or early 2015. Analyst have valued the spinoff at $15 to $18 billion, assuming an EBITDA of $2.6 billion, and about $5 billion in of debt. o MENA Minority Sale: OXY announced in Oct. 2013 that it is planning to sell a minority stake in its Middle East and North Africa (MENA) operations. The selling process has been difficult because of the size and complexity of the deal. The deal could be for 20% of its MENA operations in the range of $6 to $8 billion. o Other initiatives: OXY sold a portion of its 35% investments in Plains All-American Pipeline GP for a pre-tax gain of $1.3 billion. The first part of the sale is expected to be completed by Q3 2014, where OXY will still have 25% worth $4 billion. On Feb, 2014, OXY announced the selling of its Hugoton Field, one of the largest natural gas fields in the mid continental area, for $1.4 billion and will close the sale at the end of April. Expectations are that there will be more divestitures of its mid-continental assets. Projects: OXY expects the start-up and completion of certain projects throughout 2014 and 2015 to apply incremental gains in top and bottom line growth. The key projects that should include the Al Hosn Gas Project, and Bridge Tex pipeline Project, and a focus on chemical growth. o Al Hosn Gas: In the United Arab Emirates, OXY has been developing one of the largest natural gas fields in the Middle East. This 30 year joint project, (OXY has a 40% stake), is anticipated to produce over 500 million cubic feet per day of natural gas as well as over 50,000 bpd of NGLs. Production is an ticipated to start in late 2014, and should contribute to OXYs production growth. o Bridge Tex Pipeline OXY teamed up with Magellan to form the BridgeTex Pipeline Company, LLC. This project will build a new crude oil pipeline from Colorado City, Texas to the Houston Gulf Coast area by mid-2014. This pipeline will span over 400 miles and an initial capacity of 278,000 barrels per day with access to seven terminals, transportation hubs and refineries. The pipeline should increase efficiency and expand the midstream & marketing segment. o Chemical Growth: OXY has made investments in developing chlor-alkali manufacturing plant in Jacksonville, and should come online this year. OXY has also formed a joint venture with Mexichem to build a world scale ethylene cracker starting in mid2014. These investments are the two major examples of OXYs commitment to growing the downstream portion of its natural gas and NGL operations.

ECONOMIC MOATS:
Summary: OXY owns a narrow moat created through a location and asset quality advantage Location: OXY has large acreage positions in both California and in the Permian. In California they are the largest acreage holder with 1.7 million acres, opening them up to multiple types of development including 870,000 acres prospective for shale. In the Permian OXY has increased its acreage from 1.7 to 1.9 million acres. This enables OXY to add projects quickly and efficiently due to its large acreage positions in certain areas. OXY accounts for 20% of Permian production. Expertise/Asset Quality : OXY is the leader in enhanced oil recovery (EOR) where a large portion of OXYs assets are legacy assets that have been in production for multiple years. In turn, this limits OXY to very little exploratory risk. EOR is also known as tertiary recovery, and can extract 30 to 60%of the reservoirs original oil vs. 20 to 40% using primary or secondary recovery. EOR is known to be the much more complex method that does have a higher cost associated with it. However, OXY has been able to leverage its expertise to expand domestically and internationally, and increase production to meet growing demand.

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INDUSTRY ANALYSIS:

US Gas & Oil Production Forecast

Overview:

The integrated oil & gas industry should benefit from increased demand as worldwide consumption continues to grow, and benefit from increased production where the US production of oil & gas will continue to grow at a CAGR of 6% till 2018. Demand is mainly driven by GDP growth, population growth, and energy efficiency for residential, industrial, and transportation uses. Global GDP growth in 2013 was reported as 4.5%, driven by growth of Non-OCED countries, with similar growth rates expected for 2014 and 2015, which should lead to higher consumption. The US Energy Information Administration (EIA) reported a global oil demand growth of 1.21 million barrels per day (MMb/d) to 90.38 MMb/d in 2013, and estimates a global demand growth of 1.21 MMb/d in 2014 and 1.37 MMb/d in 2015. Global oil supply grew by 0.61 MMb/d to 89.92 MMb/d in 2013, and is forecasted to grow by 1.6 MMb/d in 2014 and 2015 due to increase production from North America. According to the EIA, natural gas production is expected to rise 2% in 2014 and 1% in 2015 after growing 8% and 4% in 2011 and 2012, respectively. In 2012, upstream spending grew by 13% to about $590 billion, while spending of E&P companies increased by 4%. Capital spending is expected to grow by 3% in 2013 and 2.5% in 2014. The oil & gas exploration and production industry is subject to numerous laws and heavy taxation depending on the country of operations. Although regulatory changes are not expected in the near term, additional taxes and regulations will adversely impact margins and profits. The Integrated companies combine E&P operations with midstream or refining and marketing activities and thus tend to have more flexibility with more stable earnings and cash flows. As an integrated company, OXY should be able to capitalize on the growth in consumption and production, especially as it develops a stronger focus on the Permian in Texas. Commodity: Commodity R2 WTI currently trades at about $103; Capital IQ estimates an average WTI oil Crude Oil WTI Active 0.301 price for 2014 of $98.62. As indicated by the growth rates, the global supply Crude Oil WTI Generic 0.317 growth is expected to outpace global demand growth which could depress oil Crude Oil Brent Active 0.278 and gas prices. Natural gas prices are estimated to be around an average of $3.69 Crude Oil Brent Generic 0.280 per million Btu for 2014. The EIA predicts that nearly 80% of the natural gas export will end up in Asia, especially in China. China is expected to triple its Natural Gas Active 0.014 demand for natural gas by 2020. However, since oil and gas prices have seen Natural Gas Generic 0.012 high volatility, especially due to economic and political turmoil, price trends are hard to predict. Weak economic growth in the US and the European Union, and the slowdown in growth in emerging markets such as China and India will keep commodity prices volatile. The geopolitical tensions in North Africa and the Middle East will also continue to have impacts on the energy markets. Sanctions on Iran, frictions in Iraq and supply disruptions in Libya could affect global crude oil supplies. OXYs revenues and operation are highly dependent on oil & gas commodity prices; to analyze this relation the daily prices on a 5 year basis are regressed against these commodities. Chemicals: The US, China, Japan and Germany produce and import the most chemicals, whereas countries in Asia, the Middle East and South America are experiencing exponential industrial growth. Demand depends on the overall performance of the economy, because most industrial chemicals are used in numerous, more complex products. In the first half of 2013, total revenues decreased by 0.70% YOY. However, net income was up by 17.5% YOY due to increased production efficiencies. Stagnant revenues are mainly contributed to the sluggish global economy. However, the decline in U.S. natural gas prices relative to global crude oil prices has improved cost competitiveness of the U.S. chemical industry versus other global regions, and thus helping boost U.S. industry exports. Therefore, revenue and net income growth are expected for 2014 for OXYs chemical segment that operates 22 facilities domestically.

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DETAILED COMPANY OVERVIEW: Oil and Gas: (75.5% of revenue, 77.3% of net income) this segment accounts for all of OXYs exploration and p roduction of oil, gas, and natural gas liquid. Oil: accounts for 62% of total production on an oil equivalent million barrels (BOE) basis. Oil also accounts for 73.36% of total proven reserves. About 56% of oil production comes from the US, and 44% from MENA and South America. Gas: Accounts for 27.89% of total BOE production. About 64% of total gas production comes from the US, and the remaining 36% from MENA. NGL: Accounts for 9.69% of total BOE production. About 92% of NGL production comes from the US, and remaining 8% from MENA. This segment relies on enhanced recovery techniques (extract harder to recover reserves), exploration (target areas with untapped reservoirs), and acquisition (inorganic expansion into key areas). OXY focuses on long lived or legacy assets with long term production growth potential domestically and internationally. US: OXY domestic oil and gas operations are located in California, Colorado, Kansas, New Mexico, North Dakota, Oklahoma and Texas. The US accounted for 62% of total BOE production with the largest portion coming from California and the Permian. Results for the US include an operating margin of 20.4% in 2013 vs. 11.25% in 2012. OXY expects to expand this margin in 2014 as the cost of production decreases and production rate increases. International: Operations are located in Latin America (Bolivia, and Colombia) and the Middle East/North Africa (Bahrain, Iraq, Libya, Oman, Qatar, the United Arab Emirates (UAE) and Yemen.) Latin America accounted for 4.06% of total BOE production with an operating margin of 47% in 2013 vs. the 44% in 2012. Expectations are for productions and margins to remain about the same. The MENA operations accounted for 33.8% of total BOE production with an operating margin of 28% in 2013. Expectations are that production will grow through the startup of the Al Hosn Gas project. OXYs enhanced oil recovery (EOR) techniques includes both conventional (vertical), and unconventional (horizontal) drilling and utilizes water flooding, infill drilling, recompletions, artificial lift and carbon dioxide (CO2) flooding. These EOR techniques are typically more costly to implement but have the advantage of operating on proven or legacy land, and recovering about 10% to 20% more from the reservoirs original oils than primary and secondary recovery methods. Chemicals (OXYChem): (18.4% of revenue, 15.4% of net income) OXYs chemicals can be segmented into 3 different product groups: Basics, Vinyls, and Other Chemicals. Within basics, OXY produces chlorine, caustic soda, chlorinated organics, potassium chemicals, EDC, Chlorinated Isocyanurates, Sodium Silicates, and calcium chloride. Within its Vnyls, OXY produces vinyl chloride monomer (VCM) and polyvinyl chloride (PVC) resins. For other chemicals it produces resorcinol. These raw materials are used to manufacture industrial chemicals, pharmaceuticals, detergents, and bleaching agents. The segment operates 22 domestic and 2 international manufacturing sites. Midstream/Marketing: (6.1% of revenue, 7.3% of net income): Within this segment, OXY provides pipelines, gas plants, marketing and trading, and power generation, and CO 2 source field and facilitates. Pipelines: In the Permian, OXY owns Centurion Pipeline (2,700 mile, capacity of 5.8 million barrels) and an interest in the Plains All-American Pipeline. In the Middle East, OXY has a 24.5% interest in the Dolphin Pipeline (230-mile, capacity of 3.2 billion cubic feet of natural gas per day). OXY is developing the BridgeTex Pipeline (450mile) in Texas, and will begin service in mid-2014 and capable of transporting 300,000 barrels per day of crude oil. Marketing and Trading: Occidental Energy Marketing, Inc. (OEMI) markets OXYs equity production and engages in third-party marketing and trading activities, and Phibro trades commodities such as WTI and Brent. Other: Power Generation: 3 cogeneration plants and 1 gas-fired combined cycle to provide electricity and steam to OXYs chemical and oilfield complexes. Gas Processing Plants: The natural gas production plants for OXY and 3rd-parties CO2 Source Fields and Facilities: CO2 is process and transportation unit used OXY's EOR program.

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ENERGY SPECIFIC STATISTICS Production OXY has grown its total production at a 2.38% CAGR since 2010 from 711thousand barrels of oil equivalent (MBOE) to 763 MBOE. Growth in production can be sourced from overall growth in all commodities where oil production has grown at a 1.82% CAGR, gas production has grown at a 2.5% CAGR, and NGL production has grown at a 8.37% CAGR. However, 2013s 763 MBOE is a decrease of -.4% from 2012s 766 where weather, a focus on capital efficiency through development programs, and lower foreign production led to this slight decline. Guidance for production is set at 780 to 790 BOE or a 2.2% to 3.5% growth YOY. This growth will be driven by increasing production by 9% in the US (specifically from the California, and Permian) and incremental contribution from the Al Hosn gas project. Production and Exploration costs Production costs are the expenses associated with the actual production or extraction of the commodity, and exploration cost are expenses associated with the finding or exploring for new reserves. The absolute and relative total of exploration and development costs has grown at a 28.30% CAGR since 2010 where it accounts for 46% of Oil & Gas revenue. The same is true with the average production cost per BOE, where the cost was $12.02 in 2010 and grew to $16.33 in 2013. The increases in relative costs are primarily due to the events in 2012 where natural gas prices declined, and there were regulatory issues in California. Management has since focused strongly on maximizing capital efficiency, and was able to exceed expectations in 2013 by reducing US drilling expense by 24%. Expectations for next year is that the relative costs will continue to decline to about $14 per BOE as management continues to utilize development programs to maximize capital efficiency. Reserves Proven reserves are the quantity of energy sources estimated to be recoverable from well-established reservoirs with the existing equipment and operating conditions. OXY has been successful in growing its reserves and has ended 2013 at a historical high of 3.5 billion BOE or a 5.67% YOY growth, and a 3.23% CAGR growth since 2010. The reserve replacement ratio is the amount of proved reserves added versus the amount produced. OXY recorded a reserve replacement ratio of 169%, showing its ability to grow it reserves faster than its production. The growth in its reserves can be attributed to its organic development domestically and internationally in all commodities; where oil reserves has grown at a CAGR of 2.19%, gas has grown at a CAGR if 2.70%, and NGL has grown at a CAGR of 11.04%. OXYs focus on organic development through exploration should continue to drive reserve growth. Capital Expenditures Capital expenditure is an important part of OXY s business where OXYs capital allocation and spending is used on new projects, exploration, finance development programs, and to accelerate production. Capex has grown from 20.69% of sales in 2010 to 36.95% of sales in 2013. This increase is mostly due to increase spending in oil and gas; with a majority of in domestic properties such as Permian (20% of capex) and California (19%), and in MENA (21%). CapEx for the past year was about $8.8 billion and is expected to increase to $10.2 billion in 2014, a 15.9% increase. Approximately $1.2 billion includes additional capital allocated to the California and Permian operation for additional drilling to accelerate development plans and production growth. OXY also expects to continue to fund growth opportunities in key international assets, mainly Oman and Qatar, which will get approximately $300 million of the increased capital to complete the Al Hosn gas project . OXYs ROIC has declined from 2010s 11% to 2012s 7.88% but has shown a positive trend upwards where 2013 recorded a ROIC of 8.79%. This uptrend shows that OXYs capital expenditure is starting to yield returns and that it should expect higher returns as multiple projects are completed and the capital efficiency is maximized through development programs.

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FINANCIALS Revenue: OXY sources its revenues from the price and amount of the commodity that it produces, from the midstream, and from the chemicals it manufactures. Revenue has grown at a CAGR of 8.69% since 2010, but only experienced ~1% growth in the last two years vs. the 25% plus growth in 2010 and 2011. The deceleration in growth is attributed to the share decline of Natural gas prices in 2012, regulatory headwinds in California, and the recent weather effect in late 2013. Oil& Gas: Grew at a CAGR of 10.42% since 2010 driven by a 13.75% CAGR growth in its US Oil & Gas segment. With expectation that domestic production will grow at 5-8% per year, and the current forecast of commodity prices; this segment should continue to grow in the upper single digits. Chemical: Grew at a CAGR of 5.18% since 2010 but declined by 5% in 2012 due to weak demand for chlorine and other basic materials. The rebound in sales will be driven by increased demand from developing and industrializing nations, and the expansion of its facilities through its new chlor-alkali manufacturing plant. Midstream & Marketing: Grew at a CAGR of 1.5% since 2010 primarily due to the slowdown in sales growth in the Oil & Gas segment. Revenue for this segment should continue to grow in the lower single digits moving forward but will experience a boost with the completion of the Bridge Tex Pipeline project. Moving forward, revenue is expected to grow at a CAGR of 2.18% till 2016. The growth of OXYs revenues is contingent on its ability to grow production and on commodity prices. Current forecast suggest that the price of commodities should be increasing as the global economy continues to recover and grow. OXY has also s tated that it will be more focused on growing production rates, after spending 2013 building a better capital efficiencies per BOE Margins: In 2013 OXY was able to increase its margins after experiencing a decline in 2012; where gross margin grew to 69.1% in 2013 vs. 67.5% in 2012, EBITDA margin grew to 57.6% from 56.6%, and net margin grew from 19% to 24.1%. Operating margins per segment experienced sim ilar trends, especially within the Oil and Gas segment. Oil and Gas: Margins for 2013 were 69% versus 66% in 2012, and 77% in 2011. Expected to grow as production growth increase, and continuation of development programs to improve capital efficiency. Chemical: Margins have historically been 1% above or below 31%, and should experience incremental gains after the completion of the new chlor-alkali manufacturing facility Midstream & Marketing: Margins have historically been around 30%, but experienced a jump to 102% due to the selling of part of its stake in the Plains All-American Pipeline GP. Margin should remain constant and could experience growth after the completion of the Bridge Tex Pipeline Project. The drop in margins in 2012 was due to the drop in natural gas prices, and the higher production costs of $17.38 per BOE in 2012 vs. $15.05 in 2011 (15.5% YOY increase). Since 2012, OXY has committed to development programs that maximized capital efficiency where drilling costs declined by 24% YOY domestically from 2012 to 2013. Expectations are that margins will expand dramatically, especially EBITDA margin where it could expand to 63% by 2016. The increase in margins is attributed to the expected lower production cost of $14 per BOE in 2014, the completion of key growth projects, and the shift in focus towards the higher margin Permian Business. Earnings: OXY last missed earnings in Q2 2013 but that was only the second miss in the past 3 year or 12 quarters. Earnings have grown at a CAGR of 6.71% since 2010 and are expected to grow at CAGR of about 2% till 2016. The deceleration in growth is attributed to a divestiture of certain assets, and fluctuating commodity prices. The actual growth is accounting for increased optimization through a stronger focus on the Permian, the divestiture of certain operations, the completion of new projects, and the continued capital efficiency gains through new development programs. Moving forward, OXYs earnings will continue to face volatility due to the the business s relationship to commodity prices but will continue to grow through a combination of production growth, and margin expansion.

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Fixed Assets/ Depreciation, Depletion, Amortization (DD&A) Net Property, plant and equipment has increased at a15.18% CAGR since 2010. DD&A has been increasing at a CAGR of 19.25% since 2010. The expectations are that fixed asset and DD&A should continue to grow as OXY continues to increase its capital expenditure and increase production rates. Oil& Gas: About 66.55% of total assets, and has grown at a CAGR of 13% since 2010. The segment also account for 88.86% of DD&A, which has grown at a 21.23% CAGR since 2010. Total assets in this segment should continue to grow due to increases in production rates, and proven reserves; even after the spinoff of the California segment. Chemical: About 5.68% of total assets, and has grown at a CAGR of 2% since 2010. The segment also accounts for 6.47% of DD&A, which has grown at a CAGR of 14.29% since 2010. Both assets and DD&A should increase for this segment as OXY begins its spending and construction on the new chlor-alkali manufacturing plant. Midstream & Marketing: About 20.70% of total assets, and has grown at CAGR of 11% since 2010. This segment also accounts for 3.96% of DD&A, which has grown at a CAGR of 14.29% since 2010. Although, OXY did sell part of its ownership in Plains All-American Pipeline; the completion of the Bridge Tex Project should offset this divestiture which should lead to total assets and depreciation growth. Cash Flow Since2010 FCF has decreased at a CAGR of -24.62% and is expected to have a CAGR of -14.65% till 2016. The decrease can be attributed to the increase in capex and to the effect of commodity prices on CFFO. Although the decrease is alarming, FCF is expected to trend upwards after 2016 as the company develops higher margins, and increased productions from the completion of its restructuring initiatives and project completions. CFFO since 2009 has increased at a CAGR of 10.56% and is expected grow at a CAGR of 3.97% till 2016. With a CAPEX/Depreciation at 10.98x, OXY is increasing its capital allocation and spending in order to accelerate production rates and maximize capital efficiency. With a CFFO/CAPEX at 1.43x, OXY has more than enough CFFO to cover these expenditures. Although the increase in capex takes away from FCF growth, the spending is needed to pursue projects and accelerate production rates in order to develop a stronger long term outlook. Debt & Liquidity

As of 2013, OXY has a debt to equity ratio (D/E) of 16.00% and a debt to capital ratio (D/C) of 13.79%. Both ratios have stayed at this low level over the past years and are not expected to see any significant increase. OXY s leverage ratios are well below the comps average D/E of 48.50% and D/C of 32.35%. With no short-term obligations, long-term debt represents the total companys debt. The next principal of about $1.5 billion is due in 2016 with minor interest payments due in the next two years. Having a quick ratio of 1.34x and an interest coverage ratio of 74.07x as well as a credit revolver of about $2 billion in 2016, OXY efficiently manages its liabilities and is able to meet its debt obligations. Shareholder return OXY s dividend is currently 3.00%, representing about $1.5 billion in total and a dividend payout ratio of 31.13%. Dividends grew by 18.17% over the last three years and the payout ratio is expected to increase in 2014 to about 40%, mainly due to the big cash inflows through the spinoff of its California business unit and other divestitures. In 2013, OXY repurchased shares in the amount of $943 million or about 10 million shares which indicates an almost 50% increase to 2012. Additionally, through the spinoff, management plans to further increase share repurchases in the following years with the authorization increasing to 37 million shares. Assuming that the current price is used, the share repurchase would equate to over $3 billion or about 3.5% of OXYs current market cap. Expectations are the buyback could grow to $7 billion under authorization as OXY continues to divest, sell, and spinoff its assets.

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VALUATION TARGET PRICE
RV TP: Using consensus NTM EBITDA estimates of $15,195.18 million. The relative valuation indicates an EV/EBITDA of 6.00x . These values yield an enterprise value of $91,171.08. DCF TP: The WACC used is 11.272%. The industry analysis indicates an EV/EBITDA of 6.00x and a perpetuity growth rate of 5.0%. These values yield an EV of $89,831.81 and $82,370 Cash ($3,393mm) is added and total debt (6,936mm)/minority interest ($246 mm) is subtracted to obtain the equity value. The equity value is divided by shares outstanding (790.1mm)

PEER GROUP IDENTIFICATION Anadarko Petroleum Corporation (NYSE: APC) Operates as global E&P with operations in the midstream and marketing functions Hess Corporation (NYSE: HES) o Operates as an Integrated with operations in E&P along with marketing & refining Devon Energy Corporation (NYSE: DVN) o Operates as an E&P with midstream and martking operations primarily in the US and Canada EOG Resources, Incorporated (NYSE: EOG) o Operates as an E&P with marketing services mostly in the US o

Target Price= $108.84

Relative valuation TP = $110.59 Discounted Cash Flow TP = $107.08

Undervaluation: In the second half of 2012 OXYs stock price and EV/EBITDA multiple experienced a major drop, mainly due to a decline in natural gas prices of 29% YOY, higher than expected operating costs, and fears of excessive capex spending. In the third quarter, profits of 2012 fell 22% YOY; where the expected growth in the California segment could not be realized because the operating costs in California doubled, and permitting in new fields was slower than anticipated. By the end of 2012, OXYs product ion costs reached a historical high of $17.38 per barrel. This put considerable pressure on the stock price and led to multiple downgrades as low gas prices, higher costs, and increasing capex began to worry investors about OXYs long term profitability. OXY was able to narrow the discount after implementing cost cutting initiatives that brought the costs down in 2013 ( $16.33 per barrel in 2013), but at the beginning of 2014 stock began to decline due to concerns about OXYs M&A plans, lower commodity prices, and an industry sell-off in energy. These events led to a steep decrease; but partially recovered after the announcement of the California spinoff. However, with certain regulation headwinds in California, and the geopolitical complexity associated with its MENA deal; investors have been timid about buying in to OXYs restructuring plans, keeping the company undervalued to itself and peers. Currently, OXY is trading at a 5.40x EV/EBITDA compared to its 5 year average of 6.10x, representing a possible 12.96% multiple expansion. Over the last few years OXY has underperformed relative to the Energy industry due to the concerns listed above where OXY now trades at a 17% discount to the S&P 500 Energy Index on a EV/EBITDA base versus its 5 year average of trading in line with the index. Against the S&P 500 Oil, Gas & Consumable Fuels Index, OXY is currently trading at 12% discount versus trading on a 5 year average on an EV/EBITDA basis.

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Peer Group Valuation:

The companies used in the relative valuation include Anadarko Petroleum Corporation (APC), Hess Corporation (HES), Devon Energy Corporation (DVN), EOG Resources, Inc. (EOG). The following companies were used in the relative valuation because of the similar geographic exposure and similar business operations. Historically, OXY has traded in line with these companies on a 3 year and 5 year EV/EBITDA basis but is currently trading at a 12% discount to this group due to the reasons stated above. Through OXYs restructuring program, and project launches; OXY should experience a multiple expansion back to normal level or in line with its peer groups average. The price target is achieved by using the average EV/EBITDA multiple of the comp group of 6.0x, multiplying it with NTM EBITDA of $15,195.18 million, subtracting total debt of $6,939 million, subtracting minority interest of $246 million, adding total cash of $3,393 million, and dividing by 790.1 million shares. Using these metrics yields a price target of $110.59 and after incorporating a dividend yield of 3.00%, the total return equates to 21.50%.

3 Year EV/EBITDA Benchmarked

Target EV/EBITDA 6.00x

Consensus EBITDA
$15,195.18

Target Price

$110.59

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Discounted Cash Flow:

WACC

EM Method
EM:6.0x $111.72

GP Method
GP: 5.0% $102.44

11.272%

Assumptions: The 7 year CAGR sales growth of 2.8 % is derived through the expected growth in production, the increasing consumption of the world economy, and assuming modest increase in commodity prices. Gross margin is expected to increase significantly this year as production cost are expected to decrease due capital efficiencies, and production rates are expected to increase through increased capital expenditures. EBITDA margin grows along with gross margin and have an added increase due to the increase in depreciation (DD&A). DD&A will increase to about 25% of sales to compensate for the expected increases in capital expenditure. Capital Expenditures is forecasted to be $10.8 billion 2014 and is expected to increase to as high as $12billion in 2016, afterwards there are modest decreases as OXY moves out of the peak in capital spending cycle. The selling of PPE includes the expected divestiture of OXYs mid-continental assets, the minority interest in its MENA operations, and the divestiture of its 25% stake in Plains All-American Pipeline GP. WACC The WACC is calculated to be 11.272% using the 5 year average weights of 92% for Equity and 8% for Debt. Cost of equity of 12.023% is calculated using CAPM, with a risk free rate of 2.652%, a market risk premium is 10.24%, and using a 3 year daily beta of 1.234. The daily beta is used because of OXYs daily volatility to the market trend and commodity prices. The cost of debt of 2.07% is calculated using the pre-tax weighted cost of ST debt of 0% and interest rate of 2.62%, the pre-tax weighted cost of LT debt of 100% and interest rate of 2.62%, and the effective tax rate of 38.8%. Price Targets For the EV/EBITDA method, the EV/EBITDA of 6.0x is derived from the relative valuation. The exit multiple method yields an enterprise value of $85,072.81, an equity value of $89,831.81, and a price target of $111.72 per share. FCF should increase in growth as OXY becomes a more steady and growing cash flow business by focusing on its Permian operation, therefore a 5% rate is used for the growing perpetuity. This method yields an enterprise value of $77,611.0, an equity value of $82,370.0, and a price target of $102.44 per share. Conclusion

DCF TP

RV TP

Blend TP $108.84

$111.75 $102.44

$110.59

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APPENDIX

5 year EV/EBITDA vs. Comps

5 Year EV/EBITDA vs S&P 500 Oil, Gas and Consumables

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DCF: Projection Summary

DCF: EM Method

DCF: GP Method

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DISCLAIMER This report is prepared strictly for educational purposes and should not be used as an actual investment guide. The forward looking statements contained within are simply the authors opinions. The writer does not own any Occidental Petroleum Corporation stock. TUIA STATEMENT Established in honor of Professor William C. Dunkelberg, former Dean of the Fox School of Business, for his tireless dedication to educating students in real -world principles of economics and business, the William C. Dunkelberg (WCD) Owl Fund will ensure that future generations of students have exposure to a challenging, practical learning experience. Managed by Fox School of Business graduate and undergraduate students with oversight from its Board of Directors, the WCD Owl Funds g oals are threefold: Provide students with hands-on investment management experience Enable students to work in a team -based setting in consultation with investment professionals. Connect student participants with nationally recognized money managers and financial institutions

Earnings from the fund will be reinvested net of fund expenses, which are primarily trading and auditing costs and partial scholarships for student participants.

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