Ladies and gentlemen, thank you standing by and welcome to the Occidental Petroleum Fourth Quarter 2008 Earnings Release Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions). Thank you. Mr. Stavros, you may begin.

Thank you, Charde, and good morning, everyone. I'd like to welcome you to Occidental's fourth quarter 2008 Earnings Call. Joining us on the call from Los Angeles this morning are Dr. Ray Irani, Oxy's Chairman and CEO; Steve Chazen, our President and CFO; and Casey Olson, President of our international oil and gas operations. In just a moment, I will be passing the call over to Dr. Irani, who will discuss our plans for managing the business in the current challenging economic period, as well as some of our future growth opportunities. Steve will then review our fourth quarter and full year 2008 financial results, and provide some additional insight on our capital spending plans for 2009. Our fourth quarter earnings press release, Investor Relations supplemental schedules and the conference call presentation slides that refer to Steve's remarks, can be downloaded from our website at www.oxy.com. I will now turn the call over to Dr. Irani. Dr. Irani, please go ahead.

Thank you, Chris. Good morning, ladies and gentlemen. Last year was an interesting year. Oxy achieved solid results in 2008 including record earnings of $6.9 billion, an increase of 27% from 2007. However, 2008 was in fact three years in one for our industry. Collectively, we experienced solid growth in the first part of the year, followed by unprecedented record high oil prices, and finally a collapse of those prices as the global economy went into recession. Today I will focus on how we plan to manage and grow the business in the future, even though the current economy and low oil and gas prices make it challenging. First, I want to mention a few developments from 2008 that will be key to Oxy's continued success. Oxy's worldwide production increased 5.4% over 2007, reaching 601,000 barrels of oil equivalent per day. Even more significant was the growth in our oil and gas reserves. We estimate that we replaced approximately 200% of our production in 2008 without taking into account the effect of price changes from 2007 to 2008, with the majority coming through organic growth. Steve will talk more about this later on. We ended the year with cash on hand of $1.8 billion and very little net debt. And in the past twelve months, we have capitalized on some key opportunities to strengthen our position and achieve further growth. In the fourth quarter of 2008, we signed an exploration and production sharing agreement with the government of Oman to develop four medium-sized gas fields and to explore for potential new discoveries. We expect the existing fields to reach production of 10,000 BOE per day net to Oxy. We also continued production growth at Mukhaizna oil field in South Central Oman where we have a major steam flood project for…

Thank you, Ray. Net income for the quarter was $443 million, or $0.55 per diluted share, compared to $1.5 billion, or $1.74 per diluted share last year. 2008 fourth quarter net income includes after-tax non-core charges totaling $514 million. These charges include $390 million for impairment of undeveloped acreage in Argentina and Yemen, $27 million for impairment of U.S. producing oil and gas properties, $37 million for rig contract terminations and $55 million for chemical plant closure and impairments. Core results were $957 million, or $1.18 per diluted share, in the fourth quarter of 2008, compared to $1.5 billion, or $1.76 per diluted share, last year. Here is the segment breakdown for the fourth quarter. Oil and gas fourth quarter 2008 segment earnings were $339 million compared to $2.5 billion last year. Oil and gas core results for the fourth quarter were $996 million after excluding the asset impairments and rig termination costs. The following accounted for the decrease in oil and gas earnings between these quarters. $1.5 billion decrease in the fourth quarter of 2008 core results was due to $1.4 billion lower crude and natural gas prices and a benefit of $0.1 billion for higher volumes offset by higher operating expenses, DD&A and exploration expense. Occidental's average realized crude price for the 2008 fourth quarter is $53.52 a barrel, a decrease of 33% from the comparable period last year. Oxy's domestic realized gas price for the quarter was $4.67 per MCF compared with $6.77 per MCF in the fourth quarter of 2007. Worldwide oil and gas sales volume for the fourth quarter of 2008 were 620,000 barrels of oil equivalent per day, an increase of 5% compared to 590,000 BOE in the fourth quarter of last year. The increase includes 22,000 BOE a day from Dolphin, 14,000 BOE…

(Operator Instructions). Your first question comes from the line of Michael Jacobs.

Good morning.

Good morning.

Thank you for all the additional guidance on capital spending. Steve, you touched on your return focused investment philosophy. And while your business model doesn't warrant some of the tougher decisions of trying to live within cash flow, can you take a second to discuss what differentiates the Oxy business model and how you think about potentially accelerating cash flow at the cost of returns in the current environment?

Since we can't predict oil prices, and we have to live with what the oil prices are, and if we look at each project, especially the US projects which are sort of infinitely deferrable, we look at the returns at the current oil situation or gas situation, figure out what the returns are, and if the returns are below our cost of capital we'll defer it. When you get a different cost structure or price structure, whichever or both, we'll reevaluate that and boost the spending or decrease it for that matter. So we have a lot of flexibility in deferral, maybe not infinite, but a lot. The contracts outside the United States basically are production sharing contracts, which tend to protect the returns when things are real good. They don't return as well as you might hope, and when things are bad they cushion the blow. So we lived with this $40 environment. It wasn't that long ago, so we're borrowing all we're doing is bringing our capital spending down to our 2007 levels. We are investing for growth and we're protecting our long-term outlook, but just deferring some things that we can defer.

That's great. Moving on to reserves and specifically focusing on Oman, we've seen some pretty meaningful production growth in the last few quarters. It seems steam is clearly penetrating the reservoir Mukhaizna. Can you give us a quick update of what you're seeing operationally and how that factored into reserve adds in 2008?

We'll let Casey talk about the operational part, I think. But on the reserve adds, it was a sizable reserve add in Oman, probably the almost -- I guess the largest single area of reserve adds last year. Also there were positive price impact there too because of the production sharing contracts. We're not through with the reserve adds there, just so there is still more -- as the steam continues to penetrate we'll add additional reserves. Casey?

Operationally, things are going very well as we say. There have been some substantial increases in production. They're right in line and our development plans are turning outright in line with what we anticipated when we won the project a few years ago. As we noted in the comments, gross production from the field is up over six times what it was at the end of 2005 when we took over the operations. I think we can say that in general the reservoir is in fact performing better than we expected. The steam flood project is doing exactly as we thought it would. But as I say, performing even better. We had a lot of facility activity during the course of the year, building the huge water treatment facilities that ultimately purified the water and generated the steam. There were some moderate delays during the course of the past year in getting those on stream. By the end of the year we were fully caught up. The remainder of those facilities will be completed as expected and on time this year, and so remain very confident in both the performance of the reservoir and our potential to continue to meet the anticipated schedule for the increase of production to probably 150,000 barrels a day gross by late 2011, early 2012.

That's great. Thank you. Just one final question before I hop back into the queue. You mentioned higher workover expenses were partly responsible for the year-over-year increase in LOE. Just looking ahead, how much of an improvement would you expect in your cost structure as you reduce your quick payout activity?

Overall for the company probably about $0.70 or $0.80.

That's great. Thank you.

Your next question comes from the line of Robert Kessler. Robert Kessler - Simmons & Company International: Good morning, gentlemen. With respect to reserve for replacement last year, it looks like about 50% of your production equivalent was negative price effect. I guess it's about 110 million barrels equivalent. I was curious if you could perhaps gross that out to the positive effects of PSEs and the negative effects of shortening production life. And maybe a little bit more on the geography, particularly the shortened production life.

It's fairly straight forward on shortened one, since we are only in effectively three places. So Permian obviously -- Robert Kessler - Simmons & Company International: Yes --

And Yucatan gas reserves and some in California. So the big slug is in the Permian. You have a mismatch right now on this price revision. You use the year end prices. But effectively your costs for cutoff are the old higher costs, so you wind up overstating I think the negative revisions in the domestic properties, because you have a mismatch between your costs and your price. And you're not allowed to forecast a decline in your cost of operating using SEC rules. So my guess is this number will -- if we ran it a year from now on the prices with the same kind of price change, we would have a much smaller number. So we'll recoup the stuff, but in the production sharing contracts offset a lot of big gains at Dolphin and Qatar and Oman were the big pieces of that. So we'll give you more detail when we roll out the exact numbers. Robert Kessler - Simmons & Company International: Okay. But no guesstimate on the magnitude on the positives for PSEs in aggregate?

No, I'd just as not get into that at this point. Robert Kessler - Simmons & Company International: Okay. It looks like on the cost side you're certainly doing your part to try and lower the $80 a barrel of cost environment down to $40 a barrel with $58 million termination charge on rig contracts and the like. Can you get any more specific on where that is and future contract cancelations and assuming maybe the Permian --

I think we're about done with the contract cancelations. Robert Kessler - Simmons & Company International: Okay .

We've begun to see some reduction from some of the service companies, but certainly not the order of magnitude we would like to see. But looking at their results, it looks like they're still making too much money to me. Robert Kessler - Simmons & Company International: Okay. Thanks very much.

Sure.

Your next question comes from the line of Ben Dell.

Hi, Steve.

Hi, Ben.

I just had one question regarding your U.S. gas prices. They came in relatively low versus the benchmark. I wonder if there was any particular reason for that during the quarter.

The gas out of the Rockies and the Permian, which basically heads west, was [crummy], and which is why we're reducing the drilling in the Rockies now. It's tightened a little bit, but not very much.

When you look at that going forward, is there any plans put in any sort of base hedges to cover that going forward or is that something you've avoided?

We've avoided that because it seems like a way to make the brokers rich and me poor. So --

I just had one other question. There's been some talk obviously in the news recently about Libya commentary coming out about the potential for renationalization, which seems like more noise than anything else. I was wondering if you could give us your view on that, if you've heard anything from the Libyan government.

It is noise.

Okay. Thank you.

That's Ray.

Your next question comes from the line of Arjun Murti.

Thanks. First thanks for breaking out the production taxes. That will be helpful. The rig contract cancelations, can you say where they are, Steve?

Actually they're scattered. Somewhere here I have it -- they are South America and Mid-Continent are the bulk of them.

Got you. Some Piceance drilling as well.

Yeah, we call that Mid-Continent.

Okay, got you. If I missed it in your remarks, I apologize. I assume as the pace of stock buyback slows, you'll want to preserve balance sheet capacity to keep all options open, or am I mistaken in that?

No, you're not mistaken. We would like the business to get some idea where we're headed here. Keep on reading Wall Street reports and I can get [any number] I want. So I am waiting for more consistency.

I know those reports are so helpful.

They are very helpful. We always listen to them.

We'll keep them coming. On the production potential for the Middle East projects, can you scale that either the new ones, Bahrain, the couple from -- in Abu Dhabi and Oman, net or gross production over the next few years?

As I said in my remarks, Arjun, we expect growth in 2009 even with reduced capital of 5% and the growth for the company would come primarily from the Middle East projects, which I talked about, and additional 5% growth in 2010 and further as you go down.

Okay.

Listed in the remarks the individual projects, the Bahrain one because it is not a signed contract, we just don't want to talk about that at this time.

That's great. I guess it seems like some of those projects will help offset whatever declines or less growth from the Permian, California and then --

We don't expect declines.

Okay. That's great. Thank you very much.

Your next question comes from the line of Erik Mielke.

Good morning. My question relates to the chemicals business. Can you give us an update on what you're seeing in 2009, and particularly in light of the write-down that you've taken in the segment as well? And I have a follow-up.

The write-down are basically PVC plants, relatively small PCV plants and that's not -- it's not material in the total. Basically those plants, we added capacity in one of our large plants and we've basically taking out the capacity in the smaller less efficient plants. We don't know. We had a good fourth quarter, a crummy December and there is some signs of life this quarter. But, we have to outlook the earnings for the chemical segment. I wouldn't view that as reflective of necessarily other people's chemical segment. This is pretty narrow business. The demand for caustic soda has declined some, but not as fast as the decline in people's production of it because there is no place to put the chlorine. We wouldn't go out and outlook the whole year at this point. We're lucky to get the quarter.

The 100 million you outlined for the first quarter therefore is just -- that's as far as you can go at this point?

Pardon me?

So the 100 million you've outlined for the first quarter is as far as you can go in terms of guidance?

That's as far as I am willing to, anything else wouldn't be very reliable.

We'd be guessing. We're giving you what we think we have a feel for, but beyond that you have to do macroeconomics.

Sure.

And wait on the new President's plan --

Maybe he wants to buy a bunch of PVC pipe.

Okay. My follow-up question is a follow-up to an earlier question on capital costs in the industry. Can you talk a bit about what are the areas in particular that you think costs need to come down and maybe the timeframe in which you envisage this happening?

The steel costs have already started to fall and they're falling fairly sharply, but there is more to go there. They look like they've fallen maybe a third from the peak. The big cost in the business is not so much for us, since we don't have big offshore drilling. It's really completion costs, and the completion costs are the area where I think there is a lot more room for improvement by the service providers, so I think that's the big area that I would look for. Seismic stuff is probably falling like a rock right now, but I think the completion costs are the key area. That's mostly labor and not so much hard goods.

That can be quite sticky.

The suppliers want it to be sticky.

In terms of timing, are you optimistic that you might see more of a match towards the middle of the year?

We're always optimistic, but who knows? They're coming down. There is no argument that it's coming down. It's just not whether it's fast enough and I think like a lot of people they're hoping that the current environment is temporary and good times will come back so they won't have to cut so much. We'll see as the year progresses since our crystal ball is no better than anybody else's.

Finally, can I ask about the M&A landscape? You've previously been very willing to talk about the gap between the bid ask spread on what the sellers were looking for and what the buyers were willing to pay. Are you seeing signs that is changing? Would you consider making what you can probably term as strategic resource acquisitions such as the oil sands or are you keeping your wallet closed at this point?

There is just not a lot of opportunity right now. The material that's up for sale is probably shrinking rather than growing, and there really isn't a lot of opportunity. I think they have the same view, the service people, this is temporary and good times will come here soon. So as far as for the short-term we don't see anything. As far as resource, we're mostly looking for cash flow and less looking for -- we have a huge inventory of things to do. Just an enormous inventory of things to do and once we get the costs in line and we'll -- there is no pressure on us to do something that's to build some imaginary resource. So as far as oil sands are concerned, we'll wait and see how that shakes out.

Thank you.

Thanks.

Your next question comes from the line of Paul Sankey.

Hi. Good morning.

Good morning.

You said that you expect to grow by more than 5% volumes in 2009 and 2010. And you also said that you felt that the lower CapEx wouldn't have a major impact on 2009 volumes. So I was wondering what the scale of the impact you'd expect to see on 2010 in volume terms.

We don't know. We gave you a rough idea for this year, about 10,000 barrels a day and we just don't know. And I think some of these other projects that Ray has talked about will more than offset whatever effect that is. Remember, the capital we're taking out was largely focused on quick payout sort of things rather than long term, and so we just don't know. We're hopeful that by year end that the costs will be in line with the product prices. So there may not be much effect in 2010. But if it is, it's still not going to be a big number.

I understand. And in terms of the split between gas and oil, do we assume that the -- your previous plan from two quarters ago you had to get that gas growing in '09, and I guess we would expect to see more impact on that gas based on your comments?

That's right. More impact on domestic gas.

Do you have a similar number to the $5 per MCF number that you gave for oil which at drilling becomes unattractive?

Probably under 30.

Steve, if we could just move over for that matter to Argentina, can you talk a little bit more, firstly, about the impairments, and secondly about the contract negotiations, and thirdly about the outlook for growth there in the context of both of those? Thanks.

The impairment was the acreage, not the production, and sort of tied to the contract discussions where we've been in discussions with them about extending the contract, but no results yet. And that acreage really depends -- exploiting that acreage well depends on the contract extension. So without a contract extension in the current environment, we thought it prudent to expense the acreage at this time.

What's the prospect there for the extension?

We're still talking. I can't give you a deadline.

We just --

When it comes to government, whether it's in Argentina or Libya, it is dangerous to start to give you deadlines when this might happen. Discussions continue.

I understand. So you'd expect volumes then to be relatively flat to down?

Well, no, no. We expect growth in Argentina, more modest than we would have told you a year ago. But there will be growth environment in Argentina in 2009, modest but definitely growth.

Okay. That does it for me. Thank you.

The next question comes from the line of Jason Gammel.

Thanks. My question was starting to get exhausted here, but I wanted to come back to the reserve replacement numbers and try to put that in context of capital spend as well. I have got capital spend roughly $3.8 billion in the upstream in 2008. So am I kind of in the ballpark in thinking that were it not for price effects, finding and development costs would have been in the range of $17.50 a barrel, which is pretty favorable in comparison to what you've done the last couple of years in the industry. But when we look at the numbers that will actually get reported in the SEC reports, that number will be more like 35 a barrel, does that sound about right?

17 is about right.

But if you just wait a week or two you will get the accurate number.

Fair enough. Okay.

But the 17 is about right.

Okay. That's all I had, guys. Thank you.

Thanks.

Your next question comes from the line of Pavel with Raymond James.

Hi. Historically you have avoided hedging and certainly worked very well in first half of '08. Are you reevaluating your position in hedging in light of the current commodity environment?

No.

And any circumstances where you would?

I suppose. I just can't come up with it right now. You never say never I suppose. But the answer to your question is my view on the counterparty risk is not becoming more comfortable.

Sounds good. Thank you.

Your next question comes from the line of Faisel Khan.

Good morning.

Good morning.

How much of the 5% growth rate in '09 is coming from the acquisitions that you made in '08?

It's not very different than the chart we gave you in July.

Okay.

You might be a little off. There is obviously -- every time you re-estimate, the things move around. But in aggregate it's not very different than the chart we gave you in July, a little more probably the growth out in the Middle East because production sharing contracts have boosted our production.

And the projects in Oman.

Yes, but that was in the chart there.

Right.

From in July.

Okay.

So it's not a lot different except -- again we could re-estimate this every month to come up with slightly different numbers.

Okay, fair enough. And in the new gas projects in Oman and Abu Dhabi, what kind of gas price should we expect for those projects? So it could be something linked to some GCC oil price or it will be something else?

Let me just cover this in total. Just like we told you in Dolphin, the returns on both projects will be attractive, and that's all I care to share with you.

Okay. Fair enough. On your -- sorry, go ahead.

No, I mean, the projects include liquid, and they include gas, and so on and so forth. So to get into breaking out what this is and that is, the returns are very attractive even at today's price environment.

Okay. And on the sandwich deal that you guys signed last year, how is that project progressing in terms of construction and in terms of drilling on their end?

We don't watch their drilling, but you can ask them about the drilling, I think. But the plant itself is on track.

Okay. You're pretty confident that they will deliver the CO2 volumes?

I think so. But it's like any other contract. We believe they will. The CO2 is there, so there isn't a question of whether it's there or not. It's just a matter of drilling the wells, and there is no -- you won't see anything till into next year or sometime, 2010. So we don't see -- we have no reason to believe they won't deliver.

This is a long-term investment and it's going to happen, and it's going to improve our production. Now to try and guess which month in 2010 or 2009 it is happening would not be useful, so for the longer term.

We don't see any reason to believe that they won't drill oil wells.

Okay, fair enough. In the last quarter I believe you guys accessed the debt capital markets. Do you foresee yourself doing that again this year?

Given our current program, we wouldn't probably. If we buy stuff or something like that and we look at it again, our debt if you take it per barrel equivalent we have got round figures, 3 billion barrels of reserves and we're pretty much committed to keeping our debt below $2 a barrel. So we've got that would be $6 billion of debt -- from my perspective debt capacity. And so we're a long way from that. But we don't foresee a need to just our operations to tap the markets. We have some debt maturities this year, about $700 million or so of debt maturities, and so we'll just see where we are. But we would only tap it for some sort of opportunity probably.

Okay. Fair enough. Thank you for your time.

Sure.

(Operator Instructions). You have a follow-up question from the line of Michael Jacobs.

Just a follow-up kind of high level question for Ray. You currently have a lot of international development opportunities in the queue. From a high level have you seen an increase in demand for your capital or technical expertise with respect to any future opportunities?

No. Governments don't react that quickly and the places where we operate are quite different from one country to another. Clearly when you are dealing with Abu Dhabi, there is plenty of money. They don't need the money; it's the technology and know-how we have. Other places it's different. But overall there is no demand for additional investment. Our program has always been long term and the projects we just announced, we have been working on them for at least three years, some more, some less, and we have in the pipeline other projects which down the road will happen. It is not an instant response sort of thing.

Great. Thank you.

Your next question comes from the line of Manuel Heim.

You don't know. It's also -- there really isn't much out there being offered either. I think it isn't just been as spread as wide, there is nothing to bid on that amounts to much. So I think almost everybody is in some belief that by mid-year or some other time, things are going to get better. And all we can do is -- we just don't know. I think the pressure from the banks doesn't seem to me at this point to be a lot of pressure on small producers by the banks. You don't really see it. Even they are renegotiating the reserve base, because actually the bank really doesn't want to impair the value of any loans I think right now.

Okay.

I wouldn't guess. They are impaired loans right now.

So in your own personal assessment, things will get better by the middle of the year or there is no way to know?

We don't know. I slept through the economics course in school.

Okay. Good for you. That's why you're a good CFO, or were, and now President. Sorry about that.

Thanks.

There are no further questions at this time. Do you have any closing remarks?

Thank you.

Thank you, operator. And please feel free to call us in New York if you have any further questions. Thank you for listening in.

This concludes today's Occidental Petroleum fourth quarter 2008 earnings release call. You may now disconnect.

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