LEASE COMMITMENTS

12 Months Ended

Dec. 31, 2020

Leases [Abstract]

LEASE COMMITMENTS

NOTE 8 - LEASE COMMITMENTS

Occidental identifies leases through its accounts payable and contract monitoring process. Since the adoption of ASC 842, operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. The ROU assets include the discounted obligation in addition to any upfront payments or costs incurred during the contract execution of the lease and amortized on a straight-line basis over the course of the lease term. Except for leases with explicitly defined contract terms, Occidental utilizes judgment to assess likelihood of renewals, terminations and purchase options, in order to determine the lease term. Occidental uses the incremental borrowing rate at commencement date to determine the present value of lease payments. The incremental borrowing rate equates to the rate of interest that Occidental would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. Certain leases include variable lease payments which are over and above the minimum lease liability used to derive the ROU asset and lease liability and are based on the underlying asset’s operations. These variable lease costs are reported in the lease cost classification table.

Occidental’s operating lease agreements include lease liability for oil and gas exploration and development equipment, including offshore and onshore drilling rigs of $45 million, compressors of $140 million, storage facilities of $253 million, office space $406 million and other field equipment of $57 million, which are recorded gross on the Consolidated Balance Sheet and in the lease cost disclosures below. Contract expiration terms generally range from two to eight years. Further, actual expenditures are netted against joint-interest recoveries on the income statement through the normal joint-interest billing process. Occidental’s leases also include pipelines, rail cars, easements, aircraft and real estate of $213 million, which typically are not associated with joint-interest recoveries. Real estate and rail cars leases have contract expiration terms ranging from one to 13 years.

Occidental’s finance lease agreements include leases for oil and gas exploration and development equipment, as well as real estate offices, compressors and field equipment of approximately $358 million. The following table presents lease balances and their location on the Consolidated Balance Sheet at December 31, 2020 and 2019:

millions	Balance sheet location	2020		2019
Assets:
Operating	Operating lease assets	$	1,062	$	1,411
Finance	Property, plant and equipment	365		397
Total lease assets		$	1,427	$	1,808
Liabilities:
Current
Operating	Current operating lease liabilities	$	473	$	579
Finance	Current maturities of long-term debt	42		51
Non-current
Operating	Deferred credits and other liabilities - Operating lease liabilities	641		872
Finance	Long-term debt, net	316		347
Total lease liabilities		$	1,472	$	1,849

At December 31, 2020, Occidental’s leases expire based on the following schedule:

millions	Operating Leases (a)		Finance Leases (b)		Total
2021	$	456	$	44	$	500
2022	182		43		225
2023	108		41		149
2024	87		46		133
2025	71		30		101
Thereafter	385		231		616
Total lease payments	1,289		435		1,724
Less: Interest	(175)		(77)		(252)
Total lease liabilities	$	1,114	$	358	$	1,472

(a)The weighted-average remaining lease term is 6.2 years and the weighted-average discount rate is 4.73%.

(b)The weighted-average remaining lease term is 10.6 years and the weighted-average discount rate is 3.47%.

The following tables present Occidental’s total lease cost and classifications, as well as cash paid for amounts included in the measurement of operating and finance lease liabilities for the years ended December 31:

millions
Lease cost classification (a)	2020		2019
Operating lease costs (b)
Property, plant and equipment, net	$	197	$	449
Operating expense and cost of sales	557		391
Selling, general and administrative expenses	107		92
Finance lease cost
Amortization of ROU assets	29		19
Interest on lease liabilities	14		2
Total lease cost	$	904	$	953

(a)Amounts reflected are gross before joint-interest recoveries.

(b)Included short-term lease cost of $207 million and $404 million and variable lease cost of $95 million and $162 million for the years ended December 31, 2020 and 2019, respectively.

millions	2020		2019
Operating cash flows	$	506	$	262
Investing cash flows	$	89	$	112
Financing cash flows (a)	$	29	$	19

(a)Excludes cash received of approximately $300 million associated with a failed sale-leaseback in 2019, see Note 4 - Divestitures and Other Transactions.

LEASE COMMITMENTS

NOTE 8 - LEASE COMMITMENTS

Occidental identifies leases through its accounts payable and contract monitoring process. Since the adoption of ASC 842, operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. The ROU assets include the discounted obligation in addition to any upfront payments or costs incurred during the contract execution of the lease and amortized on a straight-line basis over the course of the lease term. Except for leases with explicitly defined contract terms, Occidental utilizes judgment to assess likelihood of renewals, terminations and purchase options, in order to determine the lease term. Occidental uses the incremental borrowing rate at commencement date to determine the present value of lease payments. The incremental borrowing rate equates to the rate of interest that Occidental would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. Certain leases include variable lease payments which are over and above the minimum lease liability used to derive the ROU asset and lease liability and are based on the underlying asset’s operations. These variable lease costs are reported in the lease cost classification table.

Occidental’s operating lease agreements include lease liability for oil and gas exploration and development equipment, including offshore and onshore drilling rigs of $45 million, compressors of $140 million, storage facilities of $253 million, office space $406 million and other field equipment of $57 million, which are recorded gross on the Consolidated Balance Sheet and in the lease cost disclosures below. Contract expiration terms generally range from two to eight years. Further, actual expenditures are netted against joint-interest recoveries on the income statement through the normal joint-interest billing process. Occidental’s leases also include pipelines, rail cars, easements, aircraft and real estate of $213 million, which typically are not associated with joint-interest recoveries. Real estate and rail cars leases have contract expiration terms ranging from one to 13 years.

Occidental’s finance lease agreements include leases for oil and gas exploration and development equipment, as well as real estate offices, compressors and field equipment of approximately $358 million. The following table presents lease balances and their location on the Consolidated Balance Sheet at December 31, 2020 and 2019:

millions	Balance sheet location	2020		2019
Assets:
Operating	Operating lease assets	$	1,062	$	1,411
Finance	Property, plant and equipment	365		397
Total lease assets		$	1,427	$	1,808
Liabilities:
Current
Operating	Current operating lease liabilities	$	473	$	579
Finance	Current maturities of long-term debt	42		51
Non-current
Operating	Deferred credits and other liabilities - Operating lease liabilities	641		872
Finance	Long-term debt, net	316		347
Total lease liabilities		$	1,472	$	1,849

At December 31, 2020, Occidental’s leases expire based on the following schedule:

millions	Operating Leases (a)		Finance Leases (b)		Total
2021	$	456	$	44	$	500
2022	182		43		225
2023	108		41		149
2024	87		46		133
2025	71		30		101
Thereafter	385		231		616
Total lease payments	1,289		435		1,724
Less: Interest	(175)		(77)		(252)
Total lease liabilities	$	1,114	$	358	$	1,472

(a)The weighted-average remaining lease term is 6.2 years and the weighted-average discount rate is 4.73%.

(b)The weighted-average remaining lease term is 10.6 years and the weighted-average discount rate is 3.47%.

The following tables present Occidental’s total lease cost and classifications, as well as cash paid for amounts included in the measurement of operating and finance lease liabilities for the years ended December 31:

millions
Lease cost classification (a)	2020		2019
Operating lease costs (b)
Property, plant and equipment, net	$	197	$	449
Operating expense and cost of sales	557		391
Selling, general and administrative expenses	107		92
Finance lease cost
Amortization of ROU assets	29		19
Interest on lease liabilities	14		2
Total lease cost	$	904	$	953

(a)Amounts reflected are gross before joint-interest recoveries.

(b)Included short-term lease cost of $207 million and $404 million and variable lease cost of $95 million and $162 million for the years ended December 31, 2020 and 2019, respectively.

millions	2020		2019
Operating cash flows	$	506	$	262
Investing cash flows	$	89	$	112
Financing cash flows (a)	$	29	$	19

(a)Excludes cash received of approximately $300 million associated with a failed sale-leaseback in 2019, see Note 4 - Divestitures and Other Transactions.