Good morning. My name is Vanessa and I will be your conference operator today. At this time I would welcome everyone to the Occidental Petroleum Second Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remark there will be a question and answer period. [Operator Instructions]. Thank you. It's now my pleasure to turn the phone over to your host Mr. Christopher Stavros. Sir, you may begin you conference.

Thank you Vanessa and good morning everyone. I would like to welcome you to Occidental second quarter 2007 earnings conference call. Joining us on the call from Los Angeles this morning are Dr. Ray Irani, Oxy's Chairman, President, and CEO; Steve Chazen, Senior Executive Vice President and CFO; and John Morgan, President of Occidental Oil and Gas Western Hemisphere. In a moment, I will turn over the call to Dr. Irani who will provide some comments on the Dolphin Project as well some opportunities in the Middle East region that we are looking at currently. Steve Chazen will then review in detail our second quarter and first half 2007 financial results to be followed by a question and answer session. Conference call presentation slides, which refer to Steve's remarks can be downloaded off of our website. I will now turn the call over to Dr. Irani. Dr Irani please go ahead.

Thank you Chris. Good morning and thank you all for joining us. As you know, we announced two weeks ago that the giant Dolphin Project was fully operational and is delivering natural gas from Dolphin wells in Qatar's North Field to customers in the United Arab Emirates. As one of the largest energy initiatives ever undertaken in the Middle East, this unique project will have a significant impact on the development of the region and we expect it to be a steady contributor to Oxy's financial performance over the next 25 years. When this project was in its formative stages some 5, 6 years ago. From industry observers expressed doubt that it could be completed on time and on budget because of huge cost over run and lengthy construction delays typically incurred by other mega-energy projects. In the case of Dolphin, we are exceptionally pleased that it is on target to deliver the projected production of 2 billion cubic feet per day of gas with minimum variance in the project's budget and construction schedule. This is a remarkable achievement for a project of this size and scope. Let me take a minute or two to give you an overview over the project to date. More than 20 wells were drilled to a depth of between 10,000 and 12,000 feet in the North Fields Khuff Zone, which is one of the world's largest natural gas reservoir. These wells produce not only natural gas but also associated natural gas liquids. The liquids are separated from the gas stream at Dolphin's newly completed 500-acre gas processing plant in Ras Laffan in Qatar. The dry gas is then transported through a 48-inch, 230 mile long subsea pipeline completed last year, to the Taweellah receiving facility in the United Arab Emirates. The gas then supplies…

Thank you Ray. Net income for the quarter was $1.412 billion, or $1.68 per diluted share compared to $860 million or $0.99 per diluted share in the second quarter of last year. 2007 second quarter net income includes $419 million of after-tax gains, $0.50 per diluted share and the sale of non-core assets comprised of the following: $181 million from the sale of 18.6 million shares of our investment in Lyondell, the remaining 2.4 million shares were sold in early July; a $116 million gain from the sale of Pakistan assets, a gain of a $107 million from the swap of Horn Mountain assets with BP and $15 million gain from the sale of domestic mineral interest. At the second quarter, we sold Pakistan and exchanged the Gulf of Mexico, Horn Mountain assets with BP for producing properties in the Permian Basin and oil pipelines. Results these operations will be reported as discontinued operations in our second quarter 10-Q filing with the SEC.The second quarter 2007 also includes $44 million after-tax income, $0.06 a share from Pakistan and Horn Mountain operations and other. Here's the segment breakdown for the second quarter. Oil and gas second quarter 2007 results, excluding Horn Mountain and Pakistan operations were $1.682 billion. After excluding these gain from the sale of domestic mineral interests, the second quarter 2007 results were $1.656 billion, compared to $1.857 billion for the second quarter of last year.

Lower worldwide oil price realizations offset by higher gas realizations resulted in a decrease of $66 million of earnings over the same period last year. The average price of West Texas Intermediate oil for the second quarter 2007 was $65.05 per barrel which was $5.65 per barrel lower than the last year's $70.70. Occidental's average realized price for the 2007 second quarter was $2.55 lower than in the comparable period last year. The differentials in the second quarter narrowed mainly in the Middle East and domestically at Elk Hills. The NYMEX gas price for the quarter was $7.56, compared to $7.26 for the second quarter of 2006. Oxy's domestic realized price for the quarter was $7.07, up from $6.23 for the second quarter of last year. Worldwide oil and gas production for the quarter averaged 583,000 barrels of oil equivalent per day, compared to 609,000 in the second quarter of last year. The second quarter production excluding volumes from the Russian non-operated asset sale in January, the Horn Mountain swap and the Pakistan sale in June was 558,000 in the second quarter 2007, compared to 551,000 in the same basis for the last year. Our guidance for the second quarter was in the range of 585,000 to 600,000 barrels a day. We were slightly under this range due to the impact of product prices that reduced our volumes for production sharing contracts in the Middle East by approximately 3,000 barrels a day. In this product price range for the current quarter, each dollar per barrel change in the price of oil impacts production by 600 barrels a day. We also had some weather related downtime in the Permian and processing plant maintenance in Libya during the quarter. Exploration expense of $93 million in the quarter was lower than our previous…

[Operator Instructions]. Your first is question coming from Doug Leggate from Citigroup.

Thanks. Good morning Steve. You got one out there. Couple of things Steve real quick, Dolphin coming on stream if we take your reserve entitlement that you talked about I think it is roughly 200 million barrels equivalent on the CapEx share of $4 DD&A is that... should we expect the depreciation... unit depreciation for the stock to slide back over the balance of this year or next?

The almost... the pipeline part of the capital won't be depreciated at the same rate as the reserves we depreciated a much lower rate because the pipeline goes on really for 30 years. So, the depreciation will be somewhat lower than you have been indicating.

Okay. Either way it was... the unit rates are going to start to come down a bit to the weaker level.

Yeah for sure.

I don't know if you have this... Dr. Irani, Ray can we get some I guess some more optimistic noises on the... for new projects in the Middle East but could I maybe approach that issue slightly differently you talked about $3.4 billion of CapEx this year, what should we be thinking about in the event ex the Emirates Gas projects, in other words I will just add the Bab and Shah what should we be thinking about as a reasonable kind of level of capital expenditure, should you succeed in the projects that you're pursuing outside of the Emirates?

Somewhere in... a little over $4 billion I would guess.

Is an annualized run rate?

Yeah. We probably won't make that next year. We have to probably ramp up in the next year, so if you looked at the run rate a year from now it probably going to be in that range.

Well I guess the final one than is it, if we used our ...

Remembering the high steps down some in Dolphin is done so there is more if you want to call it other growth in that number you might guess.

So you probably guess that I am going next one and is really a final one from me is well clearly but practically zero net debt or very close to zero net debt and that kind of CapEx run rate still leaves you with enough lot of headroom for buyback side guidance there, Steve?

Yeah it does leave a lot of room and we continue to focus as we... I think Ray said in the release on the dividends the share buybacks are important part of our strategy for improving returns to shareholders.

All right. I will leave it there and thanks.

Thank you. Your next question is coming from Robert Morris from Banc of America.

Good morning.

Good Morning.

Couple of quick questions, Steve. On the last quarter you mentioned that oil field service cost seem to be planning out and indicated that it will probably about flat for the year. But it looks like here in the second quarter that they are continuing to increase. Can you just shed a little bit of light on that?

I think fair amount of that's in Argentina where we had some real... not with the well but with the production equipment. The production equipment there was sort of rusty. So, we are going to replace some of it. So, it's been a fair amount of expense money spent in Argentina trying to get the equipment in a shape that's meets our standard. So, I think that is probably a lot of the growth. There has been some growth but other than that, not much.

Now, is that work behind you or is that going to continue for the second half of the year?

I think it will continue.

Okay. Second quick question, maybe... I know you have got a big expiration slide last time the onshore wells weren't material enough to discuss but I know you had potentially significant at least the first of three offshore wells that should have been entity by now. Can you tell us the results of that?

The two offshore wells are dry.

Okay.

Now, they shed some mildest gas shows, but not with... you need a fair size of discovery there to make it worthwhile.

Okay. And then just last quick question, hedging, you guys have been active in putting on some commodity price hedging given the level that we have seen here recently?

No.

No additional hedges?

No.

Okay, great. Thank you.

Hello.

Hello, Chris?

Yes, I am here.

Yeah,operator there?

Operator?

Hello, Chris?

Yes, Steve.

I am sorry. Next question is coming from John Herrlin.

Okay.

Yeah, hi.

Hi John.

Fair calculations you have a $1.5 billion that's $2 billion in free cash in the second half. You already said that you had addressed returning cash to the shareholders, what about on the acquisitions Steve? What are you seeing in terms of properties? Are you seeing anything and if you have a choice would you take some of the free cash and do more bolt-ons or larger sized acquisitions or prefer buybacks?

Well, this depends I guess. We see more small bolt-on especially in California and so we would expect... California looks pretty good right now. No, we don't plan any large scale acquisitions if that's the question. The $6 gas hasn't really changed the expectations much. So, and if... as we generate more cash, we'll repurchase more shares.

Okay. That's it for me. Thanks.

Thank you, John.

Your next question is from Arjun Murti from Goldman Sachs.

Thank you. I think you answered the Libya offshore exploration question and any other meaningful exploration wells we should be thinking about for the remainder of this year?

Libya continues, we are drilling a fair number wells in Libya, so --.

Primarily onshore Steve?

Yes, well there is two more offshore ones.

Okay.

One that's drilling and one after that. So, that program will, we'll know where we are at the end of the year or sooner. Now onshore ones, there is a fair number of probably smaller impact but still decent size opportunities in Libya. So, Libya out of comment for the... you will hear results from Libya every quarter for rest of this year.

That's great. With a year ago or maybe even two years ago you and BP had a press release about using Tier 2 from I think Carson to flat Elk Hill, any update on the status of that project?

Yes, we continue to work on that and as a matter of fact I had a telephone discussion with the new CEO, where he expressed their continued interest and I confirmed our continued interest. As you know Arjun, this is a longer term project and normal but both companies are still interested in pursuing that program.

That's what I think. Thank you Dr. Irani.

Thank you. Your next question is coming from Ron Oster.

On the gross initiatives and the progress in Argentina and Oman and then secondly if you could is there can you quantify the start up expenses you expect to be included in the third quarter for Dolphin?

I didn't hear the first question.

Let me try that Steve. First question about the growth opportunities with Argentina and Oman, Argentina as Steve indicated some of the equipments we got with the Vintage acquisition were less in good shape than we would like. So, we spent effort to get them back in July and we expect to ramp up the production to start being very meaningful. So, we expect by the end of the year to be telling you at least production numbers in Argentina and more than they used to come. With regards to Oman, the Mukhaizna Project is moving along on schedule and we do expect that we would exit the year in Mukhaizna at a production level gross in the 30,000 to 35,000 barrels a day. You may recall when we took this project over it was producing 8,500 barrels a day. So that's progressed. In addition, we continue to look at other opportunities in Oman and we are opportunistic about future programs there. With regards to cost, Steve do you want to handle that?

Yeah. The $10 million net is net of all the cost, if that's your question.

10 million net will be included in the third quarter?

Right. But that's net of all the cost. So its income will be whatever in the cost, we will take it down to about $10 million.

Okay. Thank you.

But as Steve said the profits will be moving up sharply in quarters to come as we go past the start up dates.

Thank you. Your next question is coming from Paul Sankey from Deutsche Bank.

Can you hear me?

Yeah

Good. Just thinking about your long-term growth outlook, a question for Dr. Irani. The call back at the '06 Analyst Meeting, you had a range of 2010 of 700,000 to 785,000 barrels a day of production with a stretched target, you said at the time of million barrels a day. Obviously it's been moving part from the sides of that. Could you give us some thoughts about how realistic for example that million barrels a day stretched target is now with what happened over the prior --?

I don't think it's unrealistic. Since we talked, we have changed our portfolio but the number of opportunities we see available to us is grown since we gave you that target. So, with more projects in the pipeline, it's probably more realistic than them. However time will tell. With regards to the production targets, we think those are very realistic.

But essentially you are sticking with the range of 700 to 785 that you have that even with the 50,000 or so thousand of disposals that you have made?

Correct.

Disposals were in the table remember?

Yeah. Okay, I was just kind of resetting it if you want?

Feel free.

Specifically on Argentina, how much growth you are expecting to see this year and next from those assets?

Probably next year we'll be in the 50,000 barrel a day area.

And going back to the same as buyback question, you've spoken and talked about wanting to having to maintain a stronger balance sheet, given that you want to compete in the Middle East with much bigger companies, what would be your debt-to-cap? Would you take that to up somewhat in order to help us with buyback as well or what you are thinking there?

We don't think debt as debt-to-cap is more as much as debt per barrel. Since historic cost in that were meaningfulness in this. So, a debt of $1 to $2 a barrel is probably a decent range per reserves.

And just on the way of trading the buyback, I guess you'll kind of step... it's a notably low number for the quarter but that doesn't mean that you are not going to step in if we continue to see weakness the kind of we think today?

As I think, I have told you, we buy on down days and it became buy to day unfortunately, but we buy on down days and last quarter there was significantly more up days and down days in the first quarter were significantly more down days and up days. So probably accounts for bulk of a change you see.

I have got. And then very finally from me, the $4 billion that you are talking about the CapEx going forward, what's the range on that if you want to minus the potential for that's coming as a 5 or do you think that's the level that you would stretched by?

I think we would be frightened to death that's why.

Right. I have got you. Thanks gentlemen.

Thank you. Your next question is coming from Paval Molchanov from Raymond James.

Hi. Good morning. Could you clarify one thing regarding Dolphin, you mentioned two Bcf a day gross number for year-end and yet 47 to 65 net range implies a gross number of more like 1.5 piece a day. Just if you can reconcile those two?

No the two Bcf is there. I think the range really depends on oil prices frankly more than anything else.

It's a production sharing contract overlays this with the government at Qatar. And so that's what counts for your difference.

So, the 24.5% that's the working interest but that may not be net revenue is that right?

That's right.

Okay. Thank you.

Thank you. Your next question is coming from Robert Morris from Banc of America.

I already asked my question. Thanks.

I do apologize for the previous technical difficulty. It has now been corrected. [Operators instructions]. There appears to be no further questions at this time. I will now like to turn the floor back to Mr. Christopher Stavros for any closing comments.

Well, thank you very much everyone for joining us this morning and have a good rest of the day. We are available in New York, should you have any further questions. Thank you.

This concludes today's conference call. You may now disconnect.