In this report, "Occidental" means Occidental Petroleum Corporation, a Delaware corporation (OPC) incorporated in 1986, or OPC and one or more entities in which it owns a controlling interest (subsidiaries). Occidental conducts its operations through various subsidiaries and affiliates. Occidental's executive offices are located at 5 Greenway Plaza, Suite 110, Houston, Texas 77046; telephone (713) 215-7000.

GENERAL

Occidental's principal businesses consist of three segments. The oil and gas segment explores for, develops and produces oil and condensate, natural gas liquids (NGLs) and natural gas. The chemical segment (OxyChem) mainly manufactures and markets basic chemicals and vinyls. The midstream and marketing segment gathers, processes, transports, stores, purchases and markets oil, condensate, NGLs, natural gas, carbon dioxide (CO 2 ) and power. It also trades around its assets, including transportation and storage capacity. Additionally, the midstream and marketing segment operates a crude oil export terminal, as well as invests in entities that conduct similar activities.

For information regarding Occidental's segments, geographic areas of operation and current developments, including strategies and actions related thereto, see the information in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" (MD&A) section of this report and Note 16 to the Consolidated Financial Statements.

OIL AND GAS OPERATIONS

General

Occidental's domestic upstream oil and gas operations are located in New Mexico and Texas. International operations are located in Colombia, Oman, Qatar and the United Arab Emirates (UAE).

Proved Reserves and Sales Volumes

The table below shows Occidental's total oil, NGLs and natural gas proved reserves and sales volumes in 2017 , 2016 and 2015 . See "MD&A - Oil and Gas Segment," and the information under the caption "Supplemental Oil and Gas Information" for certain details regarding Occidental's proved reserves, the reserves estimation process, sales and production volumes, production costs and other reserves-related data.

Competition

As a producer of oil and condensate, NGLs and natural gas, Occidental competes with numerous other domestic and foreign private and government producers. Oil, NGLs and natural gas are commodities that are sensitive to prevailing global and local, current and anticipated market conditions. Occidental competes for transportation capacity and infrastructure for the delivery of its products, which are sold at current market prices or on a forward basis to refiners and other market participants. Occidental's competitive strategy relies on increasing production through developing conventional and unconventional fields, utilizing primary and enhanced oil recovery (EOR) techniques and strategic acquisitions in areas where Occidental has a competitive advantage as a result of its current successful operations or investments in shared infrastructure. Occidental also competes to develop and produce its worldwide oil and gas reserves cost-effectively, maintain a skilled workforce and obtain quality services.

CHEMICAL OPERATIONS

General

OxyChem owns and operates manufacturing plants at 22 domestic sites in Alabama, Georgia, Illinois, Kansas, Louisiana, Michigan, New Jersey, New York, Ohio, Tennessee and Texas and at two international sites in Canada and Chile. In early 2014, OxyChem, through a 50/50 joint venture with Mexichem S.A.B. de C.V., broke ground on a 1.2 billion pound-per-year ethylene cracker at the OxyChem Ingleside facility. The cracker began commercial operations in the first quarter of 2017. OxyChem completed construction on the previously announced expansion of its manufacturing plant in Geismar, Louisiana, on budget and on time. In December 2017, the new facility began producing 4CPe, a new raw

material used in making next-generation, climate-friendly refrigerants with a low global-warming and zero ozone-depletion potential.

Competition

OxyChem competes with numerous other domestic and foreign chemical producers. OxyChem's market position was first or second in the United States (U.S.) in 2017 for the principal basic chemicals products it manufactures and markets as well as for vinyl chloride monomer (VCM). OxyChem ranks in the top three producers of polyvinyl chloride (PVC) in the United States. OxyChem's competitive strategy is to be a low-cost producer of its products in order to compete on price.

MIDSTREAM AND MARKETING OPERATIONS

General

Occidental's midstream and marketing operations primarily support and enhance its oil and gas and chemicals businesses and also provide similar services for third parties.

In 2017, Occidental became the largest exporter of Permian light sweet crude from the U.S. Gulf Coast.  The export market for crude has developed since the lifting of the export ban in 2016. While U.S. producers have increased production of light crude, U.S. refineries are constrained in their ability to process incremental volumes of light crude without significant incremental capital investment, necessitating exports to international markets. Occidental owns and operates a crude oil terminal at Ingleside in the Port of Corpus Christi. Occidental believes it is the premier crude oil terminal on the U.S. Gulf Coast due to its logistical benefits, high loading rate and access to sizable quantities of consistent quality Permian crude oil. In response to the increase in Permian production and the need to export these barrels, Occidental is expanding its Ingleside Crude Terminal to approximately 750,000 barrels per day of capacity and 6.8 million barrels of storage which is expected to be operational by the end of 2019. Occidental is also expanding the facility to be capable of

loading very large crude carrier (VLCC) size vessels by the fourth quarter of 2018.

Competition

Occidental's midstream and marketing businesses operate in competitive and highly regulated markets. Occidental's Ingleside Crude Terminal and domestic pipeline businesses compete with other midstream companies to provide transportation services. The competitive strategy of Occidental's domestic pipeline business is to ensure that its pipeline and gathering systems connect various production areas to multiple market locations. Transportation rates are regulated and tariff-based. Occidental's Ingleside Crude Terminal business is to provide terminalling services and access to domestic and international markets for increasing Permian Basin production. Other midstream and marketing operations also support Occidental's domestic and international oil and gas and chemical operations. Occidental's marketing business competes with other market participants on exchange platforms and through other bilateral transactions with direct counterparties. Occidental maximizes the value of its transportation and storage assets by marketing its own and third-party production in the oil and gas business.

CAPITAL EXPENDITURES

For information on capital expenditures, see the information under the heading "Liquidity and Capital Resources" in the MD&A section of this report.

EMPLOYEES

Occidental employed approximately 11,000 people at December 31, 2017 , 7,000 of whom were located in the U.S. Occidental employed approximately 7,000 people in the oil and gas and midstream and marketing segments and 3,000 people in the chemical segment. An additional 1,000 people were employed in administrative and headquarters functions. Approximately 500 U.S.-based employees and 900 foreign-based employees are represented by labor unions.

ENVIRONMENTAL REGULATION

For environmental regulation information, including associated costs, see the information under the heading "Environmental Liabilities and Expenditures" in the MD&A section of this report and "Risk Factors."

AVAILABLE INFORMATION

Occidental makes the following information available free of charge on its website at www.oxy.com:

Information contained on Occidental's website is not part of this report.

Volatile global and local commodity pricing strongly affect Occidental's results of operations.

Occidental's financial results correlate closely to the prices it obtains for its products, particularly oil and, to a lesser extent, natural gas and NGLs, and its chemical products.

Prices for crude oil, natural gas and NGLs fluctuate widely. Historically, the markets for crude oil, natural gas, NGLs and refined products have been volatile and may continue to be volatile in the future. If the prices of oil, natural gas, or NGLs continue to be volatile, reverse their recent increases or decline, Occidental's operations, financial condition, cash flows and level of expenditures may be materially and adversely affected.

Prices are set by global and local market forces which are not in Occidental's control. These factors include, among others:

including available transportation capacity and infrastructure constraints in producing areas.

The long-term effects of these and other conditions on the prices of crude oil, natural gas, NGLs and refined products are uncertain. Generally, Occidental's practice is to remain exposed to market prices of commodities; however, management may elect to hedge the price risk of crude oil, natural gas and NGLs in the future.

The prices obtained for Occidental's chemical products correlate strongly to the health of the United States and global economies, as well as chemical industry expansion and contraction cycles. Occidental also depends on feedstocks and energy to produce chemicals, which are commodities subject to significant price fluctuations.

Occidental may experience delays, cost overruns, losses or other unrealized expectations in development efforts and exploration activities.

Occidental bears the risks of equipment failures, construction delays, escalating costs or competition for services, materials, supplies or labor, property or border disputes, disappointing drilling results or reservoir performance, title problems and other associated risks that may affect its ability to profitably grow production, replace reserves and achieve its targeted returns.

Exploration is inherently risky and is subject to delays, misinterpretation of geologic or engineering data, unexpected geologic conditions or finding reserves of disappointing quality or quantity, which may result in significant losses.

Governmental actions and political instability may affect Occidental's results of operations.

Occidental's businesses are subject to the decisions of many federal, state, local and foreign governments and political interests. As a result, Occidental faces risks of:

Occidental's costs or reduce demand for Occidental's products.

In addition, Occidental has and may continue to experience adverse consequences, such as risk of loss or production limitations, because certain of its international operations are located in countries affected by political instability, nationalizations, corruption, armed conflict, terrorism, insurgency, civil unrest, security problems, labor unrest, OPEC production restrictions, equipment import restrictions and sanctions. Exposure to such risks may increase if a greater percentage of Occidental's future oil and gas production or revenue comes from international sources.

Occidental's oil and gas business operates in highly competitive environments, which affect, among other things, its ability to make acquisitions to grow production and replace reserves.

Results of operations, reserves replacement and growth in oil and gas production depend, in part, on Occidental's ability to profitably acquire additional reserves. Occidental has many competitors (including national oil companies), some of which: (i) are larger and better funded, (ii) may be willing to accept greater risks or (iii) have special competencies. Competition for reserves may make it more difficult to find attractive investment opportunities or require delay of reserve replacement efforts. In addition, during periods of low product prices, any cash conservation efforts may delay production growth and reserve replacement efforts.

Occidental's acquisition activities also carry risks that it may: (i) not fully realize anticipated benefits due to less-than-expected reserves or production or changed circumstances, such as declines in crude oil, NGL, and gas prices; (ii) bear unexpected integration costs or experience other integration difficulties; (iii) experience share price declines based on the market's evaluation of the activity; or (iv) assume liabilities that are greater than anticipated.

Occidental's oil and gas reserves are estimates based on professional judgments and may be subject to revision.

Reported oil and gas reserves are an estimate based on periodic review of reservoir characteristics and recoverability, including production decline rates, operating performance and economic feasibility at the prevailing commodity prices, assumptions concerning future crude oil and natural gas prices, future operating costs and capital expenditures, and assumed effects of regulation by governmental agencies. The procedures and methods for estimating the reserves by our internal engineers were reviewed by independent petroleum consultants; however, there are inherent uncertainties in estimating reserves. Actual production, revenues and expenditures with respect to our reserves may vary from estimates, and the variance may be material. If Occidental were required to make significant negative reserve revisions, its results of operations and stock price could be adversely affected. In addition, the discounted cash flows included in this Form 10-K should not be construed as the fair value of the reserves attributable to our properties. The estimated discounted future net cash flows from proved reserves are based on an unweighted 12-month average first-day-of-the-month prices in accordance with SEC regulations. Actual future

prices and costs may differ materially from SEC regulation-compliant prices and costs used for purposes of estimating future discounted net cash flows from proved reserves.

Concerns about climate change and further regulation of greenhouse gas emissions may adversely affect Occidental's operations or results.

Continuing political and social attention to the issue of climate change has resulted in both existing and pending international agreements and national, regional and local legislation and regulatory programs to reduce greenhouse gas emissions. These and other government actions relating to greenhouse gas emissions could require Occidental to incur increased operating and maintenance costs, such as costs to purchase and operate emissions control systems, to acquire emissions allowances or comply with new regulatory or reporting requirements, or they could promote the use of alternative sources of energy and thereby decrease demand for oil, natural gas and other products that Occidental's businesses produce. Any such legislation or regulatory programs could also increase the cost of consuming, and thereby reduce demand for, oil, natural gas and other products produced by Occidental's businesses. Consequently, government actions designed to reduce emissions of greenhouse gases could have an adverse effect on Occidental's business, financial condition and results of operations. In addition, increasing attention to climate change risks has resulted in an increased possibility of governmental investigations and additional private litigation against Occidental, which could increase our costs or otherwise adversely affect our business.

It is difficult to predict the timing and certainty of such government actions and the ultimate effect on Occidental, which could depend on, among other things, the type and extent of greenhouse gas reductions required, the availability and price of emissions allowances or credits, the availability and price of alternative fuel sources, the energy sectors covered, and Occidental's ability to recover the costs incurred through its operating agreements or the pricing of the company's oil, natural gas and other products.

Occidental's businesses may experience catastrophic events.

The occurrence of events such as hurricanes, floods, droughts, earthquakes or other acts of nature, well blowouts, fires, explosions, chemical releases, crude oil releases, including maritime releases and releases into navigable waters, material or mechanical failure, industrial accidents, physical attacks and other events that cause operations to cease or be curtailed may negatively affect Occidental's businesses and the communities in which it operates. Coastal operations are particularly susceptible to disruption from extreme weather events. Third-party insurance may not provide adequate coverage or Occidental may be self-insured with respect to the related losses.

Cyber-attacks could significantly affect Occidental.

Cyber-attacks on businesses have escalated in recent years. Occidental relies on digital systems, related infrastructure, technologies and networks to run its business and to control and manage its oil and gas, chemicals, marketing and pipeline operations.  Use of the internet, cloud services and other public networks exposes Occidental's business and that of other third parties with whom Occidental does business to cyber-attacks that attempt to gain unauthorized access to

data and systems, release confidential information, corrupt data and disrupt critical systems and operations.  Even though Occidental has implemented controls and multiple layers of security to mitigate the risks of a cyber-attack that it believes are reasonable, there can be no assurance that such cyber security measures will be sufficient to prevent security breaches of its systems from occurring. Further, Occidental has no control over the comparable systems of the third parties with whom it does business. While Occidental has experienced cyber-attacks in the past, Occidental has not suffered any material losses.  However, if in the future Occidental's cyber security measures are compromised or prove insufficient, the potential consequences to Occidental's businesses and the communities in which it operates could be significant.  As cyber-attacks continue to evolve in magnitude and sophistication, Occidental may be required to expend additional resources in order to continue to enhance Occidental's cyber security measures and to investigate and remediate any digital systems, related infrastructure, technologies and network security vulnerabilities.

Occidental's oil and gas reserve additions may not continue at the same rate and a failure to replace reserves may negatively affect Occidental's business.

Unless Occidental conducts successful exploration or development activities, acquires properties containing proved reserves, or both, proved reserves will generally decline. Management expects improved recovery, extensions and discoveries to continue as main sources for reserve additions but factors such as geology, government regulations and permits, and the effectiveness of development plans are partially or fully outside management's control and could cause results to differ materially from expectations.

The ultimate impact of the 2017 Tax Cuts and Jobs Act (Tax Reform) may differ from Occidental's estimates.

Tax Reform was enacted in December 2017 and made significant changes to the U.S. federal income tax law, including lowering the federal corporate income tax rate from 35 percent to 21 percent, repealing the corporate alternative minimum tax (AMT) and mandating a deemed repatriation of accumulated earnings and profits of U.S.-owned foreign corporations. Occidental recorded the effects of the changes in the tax law for which the accounting was complete. In accordance with the guidance from the SEC, Occidental recorded a provisional estimate for the federal and state tax associated with the mandatory deemed repatriation and the resulting impact to the net federal deferred tax liability. With regards to the global intangible low-taxed income (GILTI) and base erosion anti-abuse tax (BEAT) provisions of the new tax law, Occidental has recorded no tax liability based on preliminary estimates. The ultimate impact of Tax Reform may differ from Occidental's

estimates due to changes in interpretations and assumptions, as well as additional regulatory guidance. Occidental will adjust provisional amounts as updated information is evaluated.

Other risk factors.

Additional discussion of risks and uncertainties related to price and demand, litigation, environmental matters, oil and gas reserves estimation processes, impairments, derivatives, market risks and internal controls appears under the headings: "MD&A - Oil & Gas Segment - Proved Reserves" and "- Industry Outlook," "- Chemical Segment - Industry Outlook," "- Midstream and Marketing Segment - Industry Outlook," "- Lawsuits, Claims and Contingencies," "- Environmental Liabilities and Expenditures," "- Critical Accounting Policies and Estimates," "- Quantitative and Qualitative Disclosures About Market Risk," and "Management's Annual Assessment of and Report on Internal Control Over Financial Reporting."

The risks described in this report are not the only risks facing Occidental and other risks, including risks deemed immaterial, may have material adverse effects.

None.

In the fourth quarter of 2014, the U.S. Department of Transportation Pipeline and Hazardous Materials Safety Administration sent a notice to an OPC subsidiary that it is seeking penalties of $165,900 related to a routine, comprehensive inspection of the subsidiary's records, procedures and facilities, covering a multi-year period. The subsidiary contested the penalties and is awaiting a decision.

In the third quarter of 2014, the U.S. Department of Transportation Pipeline and Hazardous Materials Safety Administration sent a notice to an OPC subsidiary that it is seeking civil penalties related to a crude oil pipeline incident in Scurry County, Texas. The subsidiary is contesting the $122,400 in penalties being sought.

For information regarding other legal proceedings, see the information under the caption "Lawsuits, Claims Commitments and Contingencies" in the MD&A section of this report and in Note 9 to the Consolidated Financial Statements.

Not applicable.

In this report, "Occidental" means Occidental Petroleum Corporation (OPC), or OPC and one or more entities in which it owns a controlling interest (subsidiaries). Occidental's principal businesses consist of three segments. The oil and gas segment explores for, develops and produces oil and condensate, natural gas liquids (NGLs) and natural gas. The chemical segment (OxyChem) mainly manufactures and markets basic chemicals and vinyls. The midstream and marketing segment gathers, processes, transports, stores, purchases and markets oil, condensate, NGLs, natural gas, carbon dioxide (CO 2 ) and power. It also trades around its assets, including transportation and storage capacity. Additionally, the midstream and marketing segment operates a crude oil export terminal, as well as invests in entities that conduct similar activities.

Occidental's oil and gas assets are located in some of the world's highest-margin basins and are characterized by an advantaged mix of short- and long-cycle, high-return development opportunities. In the United States, Occidental continues to hold a leading position in the Permian Basin. Other core operations are in the Middle East (Oman, Qatar and UAE) and Latin America (Colombia). Occidental's midstream and marketing business provides access to domestic and international markets through pipeline infrastructure and Occidental's Ingleside Crude Terminal with an emphasis on operational excellence. OxyChem is a world-class chemical business that generates high financial returns.

STRATEGY

General

Occidental is focused on delivering a unique shareholder value proposition through continual enhancements to its asset quality, organizational capability and innovative technical applications that provide competitive advantages. The attributes of Occidental's strategy include its mix of short- and long-cycle investment opportunities, low base production declines, strong financial position and focus on generating shareholder returns through its value-based development approach. Occidental aims to maximize shareholder returns through a combination of:

Occidental conducts its operations with a focus on its social responsibility commitments and initiatives, including health and safety, and environmental stewardship. Capital is employed to operate all assets in a safe and environmentally sound manner. Occidental accepts

commodity, engineering and limited exploration risks. Occidental seeks to limit its financial and political risks.

Price volatility is inherent in the oil and gas business and Occidental's strategy is to position the business to thrive in an up- or down-cycle commodity price environment. Recent strategic initiatives have resulted in Occidental exiting its non-core areas, including South Texas in 2017, and strengthening its position in areas where Occidental has a competitive advantage and an advantaged asset portfolio. In 2017, Occidental continued to build upon its business, including a growing dividend and production growth at low oil prices. During the year, Occidental's board of directors and management implemented a short-term strategic plan that is intended to maintain production and sustain the dividend at a West Texas Intermediate (WTI) oil price of $40 per barrel. At $50 WTI, Occidental's plan anticipates that the business will generate additional capital to cover production growth of 5 to 8 percent, and fulfill Occidental's dividend growth goal. This plan has continued into 2018 and, longer term, Occidental will continue to build upon this low-cost, high-margin value proposition through development and operation of its focused and advantaged assets.

The following describes the application of Occidental's overall strategy for each of its operating segments:

Oil and Gas

Occidental's oil and gas segment focuses on long-term value creation and leadership in health, safety and the environment. In each core operating area, Occidental's operations benefit from scale, technical expertise, environmental and safety leadership, and commercial and governmental collaboration. These attributes allow Occidental to bring additional production quickly to market, extend the life of older fields at lower costs, and provide low-cost growth opportunities with advanced technology.

As a result of Occidental's strategic positioning, Occidental's assets provide current production and a future portfolio of projects that are flexible, have short-cycle investment paybacks, deliver a low base decline and provide decades of diverse and unique opportunities to support energy demand across many future scenarios. Together with Occidental's technical capabilities, the oil and gas segment is able to achieve low development and operating costs to obtain full-cycle value while promoting innovative ideas that differentiate Occidental's approach and provide future opportunities.

The oil and gas business implements Occidental's strategy primarily by:

In 2017, oil and gas capital expenditures were approximately $3.0 billion, and were mainly comprised of expenditures in the Permian Basin and the Middle East. This activity reflects Occidental's strategy to focus on achieving returns well above the cost of capital even in a low price environment.

Management believes Occidental's oil and gas segment growth will occur primarily through exploitation and development opportunities in the Permian Basin and Colombia and focused international projects in the Middle East.

Chemical

The primary objective of OxyChem is to generate cash flow in excess of its normal capital expenditure requirements and achieve above-cost-of-capital returns. The chemical segment's strategy is to be a low-cost producer in order to maximize its cash flow generation. OxyChem concentrates on the chlorovinyls chain beginning with chlorine, which is co-produced with caustic soda, and markets both to external customers. In addition, chlorine, together with ethylene, is converted through a series of intermediate products into polyvinyl chloride (PVC). OxyChem's focus on chlorovinyls allows it to maximize the benefits of integration and take advantage of economies of scale. Capital is employed to sustain production capacity in a safe and environmentally sound manner, as well as to focus on projects and developments designed to improve the competitiveness of segment assets. Acquisitions and plant development opportunities may be pursued when they are expected to enhance the existing core chlor-alkali and PVC businesses or take advantage of other specific opportunities. In the first quarter of 2017, OxyChem, through a 50/50 joint venture with Mexichem S.A.B. de C.V., began commercial operations on a 1.2 billion pound-per-year ethylene cracker at the OxyChem Ingleside facility. The joint venture provides an opportunity to capitalize on the advantage that U.S. shale gas development has presented to U.S. chemical producers by providing low-cost ethane as a raw material. The joint venture will provide OxyChem with an ongoing source of ethylene, significantly reducing OxyChem's reliance on third-party ethylene suppliers. In 2017, capital expenditures for OxyChem totaled $308 million. An additional $39 million was contributed to the Mexichem joint venture. OxyChem completed construction on the previously announced expansion of its manufacturing plant in Geismar, Louisiana, on budget and on time. In December 2017, the new facility began producing 4CPe, a new raw

material used in making next-generation, climate-friendly refrigerants with a low global-warming and zero ozone-depletion potential.

Midstream and Marketing

The midstream and marketing segment strives to maximize realized value by optimizing the use of its transportation, storage and terminal assets and by providing access to domestic and international market alternatives. To generate returns, the segment evaluates opportunities across the value chain and uses its assets to provide services to Occidental subsidiaries as well as third parties. The midstream and marketing segment invests in and operates pipeline and gathering systems, gas plants, co-generation facilities, storage facilities and terminal assets. This segment also seeks to minimize the costs of gas, power and other commodities used in Occidental's various businesses. Capital is employed to sustain or expand facilities in the gathering, transportation, storage and terminal assets to improve the competitiveness of Occidental's businesses. In 2017, capital expenditures totaled $284 million related to Permian Basin gas processing and gathering infrastructure, Al Hosn Gas, the Ingleside Crude Terminal, and expansion of the oil pipeline system in New Mexico by an additional 50 miles.

Key Performance Indicators

Occidental seeks to meet its strategic goals by continually measuring its success in its key performance metrics that drive total stockholder return. In addition to production growth and capital allocation and deployment discussed above, Occidental believes the following are its most significant metrics:

OIL AND GAS SEGMENT

Business Environment

Oil and gas prices are the major variables that drive the industry's financial performance. The following table presents the average daily West Texas Intermediate (WTI), Brent and New York Mercantile Exchange (NYMEX) prices for 2017 and 2016 :

The following table presents Occidental's average realized prices as a percentage of WTI, Brent and NYMEX for 2017 and 2016 :

Average WTI and Brent oil price indexes increased 18 percent and 22 percent, from $43.32 and $45.04 in 2016 to $50.95 and $54.82 in 2017 , respectively. Average worldwide realized oil prices rose $10.20, or 26 percent, in 2017 compared to 2016. WTI and Brent oil price indexes increased in the fourth quarter of 2017 , closing at $60.42 per barrel and $66.87 per barrel, respectively, well above 2017 average prices. The average realized domestic natural gas price in 2017 increased 22 percent from 2016 . Average NYMEX natural gas prices increased 28 percent, from $2.42 in 2016 to $3.09 in 2017 .

Prices and differentials can vary significantly, even on a short-term basis, making it difficult to predict realized prices with a reliable degree of certainty.

Operations

2017 Developments

In the third quarter of 2017, Occidental closed on two divestitures of non-core acreage in the Permian Basin for proceeds of approximately $0.6 billion, resulting in a pre-tax gain of approximately $81 million. Concurrently, Occidental purchased additional ownership interests and assumed operatorship in CO 2 enhanced oil recovery (EOR) properties located in the Seminole-San Andres Unit for approximately $0.6 billion, which was primarily allocated to proved property. In the fourth quarter of 2017, Occidental sold other non-core proved and unproved acreage in the Permian Basin for approximately $90 million, resulting in a pre-tax gain of approximately $55 million. Occidental also classified approximately $0.5 billion in non-core proved and unproved Permian acreage to assets held for sale at December 31, 2017.

In April 2017, Occidental completed the sale of its South Texas operations for net proceeds of $0.5 billion resulting in pre-tax gain of $0.5 billion.

Business Review

Domestic Interests

Occidental conducts its domestic operations through land leases, subsurface mineral rights it owns, or a combination of both surface land and subsurface mineral rights it owns. Occidental's domestic oil and gas leases have a primary term ranging from one to ten years, which is extended through the end of production once it commences. Of the total 3.4 million net acres in which Occidental has interests, approximately 83 percent is leased, 16 percent is owned subsurface mineral rights and 1 percent is owned land with mineral rights.

The following charts show Occidental's domestic total production volumes for the last five years:

Domestic Production Volumes

(thousands BOE/day)

Notes :

United States Assets

United States

Permian Basin

The Permian Basin extends throughout West Texas and southeast New Mexico and is one of the largest and most active oil basins in the United States, accounting for more than 20% of the total United States oil production.

Occidental manages its Permian Basin operations through two business units: Permian Resources, which includes growth-oriented unconventional opportunities, and Permian EOR, which utilizes enhanced oil recovery techniques such as CO 2 floods and waterfloods. Occidental has a leading position in the Permian Basin, producing

approximately 9 percent of the total oil in the basin. By exploiting the natural synergies between Permian Resources and Permian EOR, Occidental is able to deliver unique short- and long-term advantages, efficiencies and expertise across its Permian Basin operations. Occidental can decrease its Permian Basin full-cycle breakeven costs, while continuing to add high-quality, low-cost breakeven inventory of future drilling locations faster than it is developed. The combined technical advancements, infrastructure utilization opportunities and operations across over 2.5 million net acres will provide sustainability of Occidental's low cost position in the Permian Basin.

In the next few years, growth within Occidental's Permian Basin portfolio will be focused in the Permian Resources unconventional assets. In 2017, Occidental spent approximately $2.1 billion of capital in the Permian Basin, of which over 75 percent was spent on Permian Resources assets. In 2018, Occidental expects to allocate approximately half of its worldwide 2018 capital budget to Permian Resources for development and approximately 15 percent to Permian EOR for the expansion of existing facilities to increase CO 2 production and injection capacity.

Permian Resources

Permian Resources' unconventional oil development projects provide very short-cycle investment payback, averaging less than two years, that replaces the lower return production from assets divested during the 2013-2017 portfolio optimization, while also providing some of the highest margin and returns of any oil and gas projects in the world. These investments provide better cash-flow and production growth, while increasing long-term value and sustainability through higher return on capital employed.

Occidental's Permian Resources inventory includes over 11,200 horizontal drilling locations in the Midland and Delaware sub-basins. As of December 31, 2017, approximately 750 of these drilling locations represented proved undeveloped reserves. In 2017, Permian Resources produced approximately 141,000 net BOE per day from approximately 5,050 net wells, of which 18 percent are operated by other companies. In 2017, Permian Resources drilled 138 horizontal wells and added 127 million BOE from improved recovery to Occidental's proved reserves.

Permian EOR

The Permian Basin's concentration of large conventional reservoirs, favorable CO 2 flooding performance and the proximity to naturally occurring CO 2 supply has resulted in decades of steady growth in enhanced oil production. With 34 active floods and over 40 years of experience, Occidental is the industry leader in Permian Basin CO 2 flooding, which can increase ultimate oil recovery by 10 to 25 percent. Technology improvements, such as the recent trend toward vertical expansion of the CO 2 flooded interval into residual oil zone targets, continue to yield more recovery from existing projects. Occidental utilizes workover rigs to drill extra depth into additional CO 2 floodable sections of the reservoir, and completed 91 well workovers in 2017 and has plans to complete 100 well workovers in 2018. In 2017, Permian EOR added 21 million

BOE to Occidental's proved reserves for improved recovery additions, primarily as a result of executing CO 2 flood development projects and expansions. Occidental's share of production from Permian EOR was approximately 150,000 BOE per day in 2017.

Significant opportunities also remain to gain additional recovery by expanding Occidental's existing CO 2 projects into new portions of reservoirs that have only been water-flooded. Permian EOR has a large inventory of future CO 2 projects which could be developed over the next 20 years or accelerated, depending on market conditions.

Other Domestic

Occidental holds approximately 908,000 net acres in other domestic locations. Occidental's share of production in other domestic locations was approximately 5,000 BOE per day.

International Interests

Production-Sharing Contracts

Occidental's interests in Oman and Qatar are subject to production sharing contracts (PSC). Under such contracts, Occidental records a share of production and reserves to recover certain development and production costs and an additional share for profit. In addition, certain contracts in Colombia are subject to contractual arrangements similar to a PSC. These contracts do not transfer any right of ownership to Occidental and reserves reported from these arrangements are based on Occidental's economic interest as defined in the contracts. Occidental's share of production and reserves from these contracts decreases when product prices rise and increases when prices decline. Overall, Occidental's net economic benefit from these contracts is greater when product prices are higher.

The following charts show Occidental's international production volumes for the last five years:

International Production Volumes

(thousands BOE/day)

Notes :

Middle East Assets

Oman

In Oman, Occidental is the operator of Block 9 with a 50-percent working interest, Block 27 with a 65-percent working interest, Block 53 with a 45-percent working interest; and Block 62, with an 80-percent working interest. Also, in November 2017, Occidental was awarded a three-year exploration contract in Block 30.

In December 2015, the existing PSC for Block 9 expired and Occidental agreed to operate Block 9 under modified operating terms until a new contract was approved. The Block 9 Exploration and Production Sharing Agreement 15-year extension was signed in January 2017 and was ratified in March 2017 through Royal Decree. In 2017, the average gross production from Block 9 was 91,000 BOE per day.

The term for Block 27 expires in 2035 and the average gross production was 16,000 BOE per day in 2017.

A 30-year PSC for Block 53 (Mukhaizna Field) was signed with the Government of Oman in 2005, pursuant to which Occidental assumed operation of the field. By the end of 2017, Occidental had drilled more than 3,000 new wells and continued implementation of a major steamflood project. In 2017, the average gross daily production was 123,000 BOE per day.

In 2008, Occidental was awarded a 20-year contract for Block 62, subject to declaration of commerciality, where it is pursuing development and exploration opportunities targeting natural gas and condensate resources. In 2014, Occidental signed a five-year extension for the initial phase for the discovered non-associated gas area (natural gas not in contact with crude oil in a reservoir) for Block 62. In 2017, the average gross daily production was 22,000 BOE per day.

Occidental's Oman operations reached a significant milestone in November 2017 with the production of its one billionth gross barrel of oil, including condensate, from all its blocks. Over two-thirds of this production has come in the last ten years, illustrating the tremendous growth achieved over that period. In 2017, Occidental's share of production in Oman averaged 95,000 BOE per day.

Qatar

In Qatar, Occidental is the operator of the offshore fields Idd El Shargi North Dome (ISND) and Idd El Shargi South Dome (ISSD), with a 100-percent working interest in each. The terms for ISND and ISSD expire in October 2019 and December 2022, respectively. Occidental's net share of production from ISND and ISSD was 53,000 BOE and 4,000 BOE per day respectively, in 2017.

Occidental operated Al-Rayyan (Block 12) until the term expired on May 31, 2017, when Block 12 was successfully transitioned back to the Government of Qatar. Production from Block 12 in 2017 was not significant.

Occidental has continued to successfully implement large scale water flooding projects combined with state-of-the-art horizontal drilling, advanced completion techniques as well as utilizing extensive automated artificial lift systems that are significantly extending the life of the fields. Since the commencement of its operations in 1994, Occidental has boosted the production from the Idd El Shargi fields by over 400 percent with current gross oil rates of around 91,000 BOE per day.

Utilizing Occidental's expertise in artificial lift, together with other game-changing technologies and innovations, the ISSD field continues to outperform expectations and exited 2017 with record gross production rates of over 9,000 BOE per day. Despite complex marine operations, Occidental is recognized as a regional leader in its safety performance as well as being the lowest-cost offshore oil operator in the State of Qatar.

Occidental also partners in the Dolphin Energy project, an investment that is comprised of two separate economic interests. Occidental has a 24.5-percent interest in the upstream operations to develop and produce natural gas, NGLs and condensate from Qatar's North Field through mid-2032. Occidental also has a 24.5-percent interest in Dolphin Energy Limited which operates a pipeline and is discussed further in "Midstream and Marketing Segment – Pipeline Transportation. Occidental's net share of production from the Dolphin upstream operations was 42,000 BOE per day in 2017.

Occidental's share of production from Qatar was approximately 100,000 BOE per day in 2017.

United Arab Emirates

In 2011, Occidental acquired a 40-percent participating interest in Al Hosn Gas, joining with the Abu Dhabi National Oil Company (ADNOC) in a 30-year joint venture agreement. In 2017, Al Hosn Gas gross production exceeded expectations, producing over 525 MMcf per day of natural gas and 90,000 barrels per day of NGLs and condensate. Occidental's share of production from Al Hosn Gas was 211 MMcf per day of natural gas and 36,000 barrels per day of NGLs and condensate in 2017. Al Hosn Gas includes gas processing facilities which are discussed further in "Midstream and Marketing Segment - Gas Processing Plants and CO 2 Fields and Facilities".

Occidental conducts a majority of its Middle East business development activities through its office in Abu Dhabi, which also provides various support functions for Occidental's Middle East oil and gas operations.

Latin America Assets

Colombia

Occidental has working interests in the La Cira-Infantas and Teca areas and has operations within the Llanos Norte Basin. Occidental's interests range from 39 to 61 percent and certain interests expire between 2023 and 2038, while others extend through the economic limit of the areas. In 2017, Occidental continued a thermal recovery pilot at the Teca heavy oil field and the initial results are better than anticipated. Production began from these pilots in 2016. Occidental's share of production from Colombia was approximately 31,000 BOE per day in 2017 .

Proved Reserves

Proved oil, NGLs and gas reserves were estimated using the unweighted arithmetic average of the first-day-of-the-month price for each month within the year, unless prices were defined by contractual arrangements. Oil, NGLs and natural gas prices used for this purpose were based on posted benchmark prices and adjusted for price differentials including gravity, quality and transportation costs. For the 2017 , 2016 and 2015 disclosures, the calculated average West Texas Intermediate oil prices were $51.34, $42.75 and $50.28 per barrel, respectively. The calculated average Brent oil prices for 2017 , 2016 and 2015 disclosures were $54.93, $44.49 and $55.57, per barrel, respectively. The calculated average Henry Hub gas prices for 2017 , 2016 and 2015 were $3.08, $2.55 and $2.66 per MMBtu, respectively.

Occidental had proved reserves at year-end 2017 of 2,598 million BOE, compared to the year-end 2016 amount of 2,406 million BOE. Proved reserves at year-end 2017 and 2016 consisted of, respectively, 58 percent and 56 percent oil, 17 percent and 17 percent NGLs and 25 percent and 27 percent natural gas. Proved developed reserves represented approximately 74 percent and 77 percent, respectively, of Occidental's total proved reserves at year-end 2017 and 2016 .

Occidental does not have any reserves from non-traditional sources. For further information regarding Occidental's proved reserves, see "Supplemental Oil and Gas Information" following the "Financial Statements."

Changes in Proved Reserves

Occidental's total proved reserves increased 192 million BOE in 2017 , which included additions of 206 million BOE from Occidental's development program.

Changes in reserves were as follows:

Occidental's ability to add reserves, other than through purchases, depends on the success of improved recovery, extension and discovery projects, each of which depends on reservoir characteristics, technology improvements and oil and natural gas prices, as well as capital and operating costs. Many of these factors are outside management's control, and may negatively or positively affect Occidental's reserves.

Revisions of Previous Estimates

Revisions can include upward or downward changes to previous proved reserve estimates for existing fields due to the evaluation or interpretation of geologic, production decline or operating performance data. In addition, product price changes affect proved reserves recorded by Occidental. For example, lower prices may decrease the economically recoverable reserves, particularly for domestic properties, because the reduced margin limits the expected life of the operations. Offsetting this effect, lower prices increase Occidental's share of proved reserves under PSCs because more oil is required to recover costs. Conversely, when prices rise, Occidental's share of proved reserves decreases for PSCs and economically recoverable reserves may increase for other operations. In 2017, Occidental had positive revisions of 151 million BOE, mainly in the Permian Basin and Oman.

Reserve estimation rules require that estimated ultimate recoveries be much more likely to increase or remain constant than to decrease, as changes are made due to increased availability of technical data.

Improved Recovery

In 2017 , Occidental added proved reserves of 201 million BOE mainly associated with the Permian Basin and UAE. These properties comprise both conventional projects, which are characterized by the deployment of EOR development methods, largely employing application of CO 2 flood, waterflood or steam flood, and unconventional projects. These types of conventional EOR development methods can be applied through existing wells, though additional drilling is frequently required to fully optimize the development configuration. Waterflooding is the technique of injecting water into the formation to displace the oil to the offsetting oil production wells. The use of either CO 2 or steam flooding depends on the geology of the formation, the evaluation of engineering data, availability and cost of

either CO 2 or steam and other economic factors. Both techniques work similarly to lower viscosity causing the oil to move more easily to the producing wells. Many of Occidental's projects, including unconventional projects, rely on improving permeability to increase flow in the wells. In addition, some improved recovery comes from drilling infill wells that allow recovery of reserves that would not be recoverable from existing wells.

Extensions and Discoveries

Occidental also added proved reserves from extensions and discoveries, which are dependent on successful exploration and exploitation programs. In 2017 , extensions and discoveries added 5 million BOE related primarily to the recognition of proved developed reserves in Oman.

Purchases of Proved Reserves

Occidental continues to seek opportunities to add reserves through acquisitions when properties are available at prices it deems reasonable. As market conditions change, the available supply of properties may increase or decrease accordingly.

In 2017, Occidental purchased 99 million BOE of proved reserves in the Permian Basin, which mainly came from acquisitions made in the third quarter of 2017.

Sales of Proved Reserves

In 2017, Occidental sold 44 million BOE in proved reserves mainly related to the sales of South Texas and non-core Permian acreage.

Proved Undeveloped Reserves

Occidental had proved undeveloped reserves at year-end 2017 of 670 million BOE, compared to the year-end 2016 amount of 550 million BOE.

Changes in proved undeveloped reserves were as follows:

The increase in proved undeveloped reserves from the Permian Basin added approximately 168 million BOE through improved recovery, positive revisions and purchases. The remaining additions mainly came from Oman and UAE.

The 2017 additions to proved undeveloped reserves were partially offset by 89 million BOE of transfers to proved developed reserves, mainly from the Permian Basin, and sales of proved undeveloped reserves related to the sales of South Texas and non-core Permian acreage.

Occidental's highest-return projects and most active development areas are located in the Permian Basin, which

represented 73 percent of the proved undeveloped reserves as of December 31, 2017. The majority of Occidental's 2018 capital program of $3.9 billion is allocated to the development program in the Permian Basin. Overall, Occidental plans to spend approximately $8 billion, or over 76 percent of total estimated future development costs, over the next five years to develop its proved undeveloped reserves in the Permian Basin.

Occidental's proved undeveloped reserves in international locations are associated with approved long-term international development projects.

Reserves Evaluation and Review Process

Occidental's estimates of proved reserves and associated future net cash flows as of December 31, 2017 , were made by Occidental's technical personnel and are the responsibility of management. The estimation of proved reserves is based on the requirement of reasonable certainty of economic producibility and funding commitments by Occidental to develop the reserves. This process involves reservoir engineers, geoscientists, planning engineers and financial analysts. As part of the proved reserves estimation process, all reserve volumes are estimated by a forecast of production rates, operating costs and capital expenditures. Price differentials between benchmark prices (the unweighted arithmetic average of the first-day-of-the-month price for each month within the year) and realized prices and specifics of each operating agreement are then used to estimate the net reserves. Production rate forecasts are derived by a number of methods, including estimates from decline curve analysis, type curve analysis, material balance calculations that take into account the volumes of substances replacing the volumes produced, and associated reservoir pressure changes, seismic analysis and computer simulation of the reservoir performance. These field-tested technologies have demonstrated reasonably certain results with consistency and repeatability in the formation being evaluated or in an analogous formation. Operating and capital costs are forecast using the current cost environment applied to expectations of future operating and development activities.

Net proved developed reserves are those volumes that are expected to be recovered through existing wells with existing equipment and operating methods for which the incremental cost of any additional required investment is relatively minor.

Net proved undeveloped reserves are those volumes that are expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required for recompletion. Proved undeveloped reserves are supported by a five-year, detailed, field-level development plan, which includes the timing, location and capital commitment of the wells to be drilled. The development plan is reviewed and approved annually by senior management and technical personnel. Annually a detailed review is performed by Occidental's Worldwide Reserves Group and its technical personnel on a lease-by-lease basis to assess whether proved undeveloped reserves are being converted on a timely basis within five years from the initial disclosure date. Any leases not showing timely transfers from proved

undeveloped reserves to proved developed reserves are reviewed by senior management to determine if the remaining reserves will be developed in a timely manner and has sufficient capital committed in the development plan. Only proved undeveloped reserves that are reasonably certain to be drilled within five years of booking and are supported by a final investment decision to drill them are included in the development plan. A portion of the proved developed reserves associated with international operations are expected to be developed beyond the five years and are tied to approved long-term development plans.

The current Senior Vice President, Reserves for Oxy Oil and Gas is responsible for overseeing the preparation of reserve estimates, in compliance with U.S. Securities and Exchange Commission (SEC) rules and regulations, including the internal audit and review of Occidental's oil and gas reserves data. He has over 30 years of experience in the upstream sector of the exploration and production business, and has held various assignments in North America, Asia and Europe. He is a three-time past Chair of the Society of Petroleum Engineers Oil and Gas Reserves Committee. He is an American Association of Petroleum Geologists (AAPG) Certified Petroleum Geologist and currently serves on the AAPG Committee on Resource Evaluation. He is a member of the Society of Petroleum Evaluation Engineers, the Colorado School of Mines Potential Gas Committee and the UNECE Expert Group on Resource Classification. He has Bachelor of Science and Master of Science degrees in geology from Emory University in Atlanta.

Occidental has a Corporate Reserves Review Committee (Reserves Committee), consisting of senior corporate officers, to review and approve Occidental's oil and gas reserves. The Reserves Committee reports to the Audit Committee of Occidental's Board of Directors during the year. Since 2003, Occidental has retained Ryder Scott Company, L.P. (Ryder Scott), independent petroleum engineering consultants, to review its annual oil and gas reserve estimation processes.

In 2017 , Ryder Scott conducted a process review of the methods and analytical procedures utilized by Occidental's engineering and geological staff for estimating the proved reserves volumes, preparing the economic evaluations and determining the reserves classifications as of December 31, 2017 , in accordance with the SEC regulatory standards. Ryder Scott reviewed the specific application of such methods and procedures for selected oil and gas properties considered to be a valid representation of Occidental's 2017 year-end total proved reserves portfolio. In 2017 , Ryder Scott reviewed approximately 20 percent of Occidental's proved oil and gas reserves. Since being engaged in 2003, Ryder Scott has reviewed the specific application of Occidental's reserve estimation methods and procedures for approximately 80 percent of Occidental's existing proved oil and gas reserves. Management retains Ryder Scott to provide objective third-party input on its methods and procedures and to gather industry information applicable to Occidental's reserve estimation and reporting process. Ryder Scott has not been engaged to render an opinion as to the reasonableness of reserves quantities reported by

Occidental. Occidental has filed Ryder Scott's independent report as an exhibit to this Form 10-K.

Based on its reviews, including the data, technical processes and interpretations presented by Occidental, Ryder Scott has concluded that the overall procedures and methodologies Occidental utilized in estimating the proved reserves volumes, documenting the changes in reserves from prior estimates, preparing the economic evaluations and determining the reserves classifications for the reviewed properties are appropriate for the purpose thereof and comply with current SEC regulations.

Industry Outlook

The petroleum industry is highly competitive and subject to significant volatility due to various market conditions. WTI and Brent oil price indexes for 2017 were above the 2016 index prices closing at $60.42 per barrel and $66.87 per barrel, respectively, as of December 31, 2017 . Commodity prices remained relatively constant in 2017 and started to increase in the latter part of the fourth quarter.

Oil prices will continue to be affected by: (i) global supply and demand, which are generally a function of global economic conditions, inventory levels, production disruptions, technological advances, regional market conditions and the actions of OPEC, other significant producers and governments; (ii) transportation capacity, infrastructure constraints, and costs in producing areas; (iii) currency exchange rates; and (iv) the effect of changes in these variables on market perceptions.

NGLs prices are related to the supply and demand for the components of products making up these liquids. Some of them more typically correlate to the price of oil while others are affected by natural gas prices as well as the demand for certain chemical products for which they are used as feedstock. In addition, infrastructure constraints magnify the pricing volatility from region to region.

Domestic natural gas prices and local differentials are strongly affected by local supply and demand fundamentals, as well as government regulations and availability of transportation capacity from producing areas.

These and other factors make it difficult to predict the future direction of oil, NGLs and domestic gas prices reliably. For purposes of the current capital plan, Occidental anticipates 2018 oil prices to be higher than average 2017 oil prices. International gas prices are generally fixed under long-term contracts. Occidental continues to respond to economic conditions by adjusting capital expenditures in line with current economic conditions with the goal of keeping returns well above its cost of capital.

CHEMICAL SEGMENT

Business Environment

In 2017, U.S. economic growth surpassed that of 2016 and was supported by growing demand for domestically produced energy and feedstocks, even though natural gas and ethylene pricing was higher on average than in 2016. Hurricane Harvey impacted the ethylene market in the second half of 2017 and ethylene pricing on average ended the year slightly higher than 2016. The impact of higher energy and feedstock costs was offset in 2017, as tighter supply and increased demand in the caustic market

resulted in higher margins, while PVC margins slightly improved as prices kept up with raw material costs.

Business Review

Basic Chemicals

In 2017, the U.S. economic growth rate was expected to exceed the 1.5 percent experienced in 2016. The higher U.S. growth rate bolstered domestic demand as the 2017 industry chlorine operating rate increased by 4 percent, to 88 percent, resulting in an improvement in chlorine pricing in the second half of 2017. Exports of downstream chlorine derivatives into the vinyls chain were stable in 2017 as U.S. ethylene and energy costs remained advantaged over global pricing. Liquid caustic soda prices improved both domestically and globally in 2017, as increased demand and tighter supply supported the higher pricing.

Vinyls

Demand for PVC improved year-over-year with domestic demand improving 5 percent and export demand being on par with 2016. Domestic demand was driven by construction as housing starts continued their year-over-year increase and rising home values drove increased home remodeling. Export volume remains a significant portion of PVC sales, representing over 30 percent of total North American producer's production. PVC industry operating rates decreased less than one percent compared to 2016, despite impact from Hurricane Harvey. Industry PVC margins slightly improved in 2017, as PVC pricing kept pace with higher ethylene cost.

Industry Outlook

I ndustry performance will depend on the health of the global economy, specifically in the housing, construction, automotive and durable goods markets. Margins also depend on market supply-and-demand balances and feedstock and energy prices. Strengthening in the petroleum industry may positively affect the demand and pricing of a number of Occidental's products that are consumed by industry participants. U.S. commodity export markets will continue to be impacted by the relative strength of the U.S. dollar, which is anticipated to be relatively neutral in 2018.

Basic Chemicals

Continued improvement in the United States housing, automotive and durable goods markets should drive a moderate increase in domestic demand for basic chemical products in 2018. Export demand for caustic is also expected to remain firm in 2018. Chlor-alkali operating rates should improve moderately with higher demand and continued competitive energy and raw material pricing as compared to global feedstock costs. Businesses such as calcium chloride and muriatic acid continue to improve as oil and gas drilling activity increases in the U.S., which is expected to continue in 2018.

Vinyls

North American demand should continue to show improvement in 2018 over 2017 levels as growth in construction spending continues with further upside potential driven by new infrastructure projects. North

American operating rates are expected to remain relatively flat with 2017 but margins should improve as demand in the United States strengthens.

MIDSTREAM AND MARKETING SEGMENT

Business Environment

Midstream and marketing segment earnings are affected by the performance of its various businesses including its gas processing, transportation, power-generation assets, and storage facilities and terminal business. The marketing business aggregates markets, and stores Occidental's and third-party volumes. Marketing performance is affected primarily by commodity price changes and margins in oil and gas transportation and storage programs. Gas processing and transportation results are affected by the volumes that are processed and transported through the segment's plants and pipelines, as well as the margins obtained on related services.

The midstream and marketing segment earnings in 2017 were significantly higher than those in 2016 primarily due to improved Permian to Gulf Coast price differentials, higher plant income due to higher NGL prices and higher income from a full year of operating the Ingleside Crude Terminal.

Business Review

Pipeline and Gathering Systems and Transportation

Margin and cash flow from pipeline transportation operations mainly reflect volumes shipped. Dolphin Energy owns and operates a 230-mile-long, 48-inch-diameter natural gas pipeline (Dolphin Pipeline), which transports dry natural gas from Qatar to the UAE and Oman. The Dolphin Pipeline contributes significantly to Occidental's pipeline transportation results through Occidental's 24.5-percent interest in Dolphin Energy. The Dolphin Pipeline has capacity to transport up to 3.2 Bcf of natural gas per day and currently transports approximately 2.2 Bcf per day, and up to 2.5 Bcf per day in the summer.

Occidental owns an oil common carrier pipeline and storage system with approximately 2,950 miles of pipelines from southeast New Mexico across the Permian Basin in West Texas to Cushing, Oklahoma. The system has a current throughput capacity of about 720,000 barrels per day, 7.1 million barrels of active storage capability and 128 truck unloading facilities at various points along the system, which allow for additional volumes to be delivered into the pipeline. In 2017, Occidental expanded its oil pipeline system in New Mexico by an additional 50 miles.

Occidental's 2017 pipeline transportation earnings increased from 2016 due to higher throughput volumes and improved margins.

Gas Processing Plants and CO 2 Fields and Facilities

Occidental processes its and third-party domestic wet gas to extract NGLs and other gas byproducts, including CO 2 , and delivers dry gas to pipelines. Margins primarily result from the difference between inlet costs of wet gas and market prices for NGLs. Occidental's 2017 earnings from these operations increased compared to 2016 due to higher throughput volumes and higher realized NGL pricing.

Occidental has a 40-percent participating interest in Al Hosn Gas which is designed to process 1.0 Bcf per day of

natural gas and separate it into sales gas, condensate, NGLs and sulfur. The facilities produce approximately 10,500 tons per day of sulfur, of which approximately 4,200 tons is Occidental's share. Al Hosn Gas facilities generate revenues from gas processing fees and the sale of sulfur. The increase in 2017 earnings compared to 2016 was primarily due to higher throughput volumes and higher sulfur pricing.

Power Generation Facilities

Earnings from power and steam generation facilities are derived from sales to affiliates and third parties. The decrease in earnings in 2017 compared to 2016 was a result of lower production due to longer outages and lower ancillary sales.

Storage Facilities and Terminal Assets

Occidental owns the Oxy Ingleside Energy Center, which includes the Ingleside Crude Terminal, a crude oil storage and export terminal located in the Port of Corpus Christi in Ingleside, Texas. The facility has a competitive advantage over other similarly situated export terminals, with a location near port entry, access to deep water, industry-leading loading rates and reduced lay times while berthed. The facility has over 300,000 barrels per day of throughput capacity, along with 2.1 million barrels of storage and three loading berths with 80,000 barrels per hour loading capability. The terminal is currently capable of loading articulated tug barges (ATB), medium range (MR), Aframax and Suezmax size vessels.

In 2017, Occidental became the largest exporter of Permian light sweet crude from the United States (U.S.) Gulf Coast. The export market for crude has developed since the lifting of the export ban in 2016. While U.S. producers have increased production of light crude, U.S. refineries are constrained in their ability to process incremental volumes of light crude without significant incremental capital investment, necessitating exports to international markets. In response to the increase in Permian production and the need to export these barrels, Occidental is expanding its terminal to approximately 750,000 barrels per day of capacity and 6.8 million barrels of storage which will be operational by the end of 2019. Occidental is also expanding the facility to be capable of loading VLCC size vessels by the fourth quarter of 2018.

Marketing

The marketing group markets substantially all of Occidental's oil, NGLs and gas production, as well as trades around its assets, including its own and third-party transportation and storage capacity. Occidental's third-party marketing activities focus on purchasing oil, NGLs and gas for resale from parties whose oil and gas supply is located near its transportation and storage assets. These purchases allow Occidental to aggregate volumes to better utilize and optimize its assets. Marketing performance in 2017 improved compared to 2016 due to favorable Permian-to-Gulf Coast crude oil price differentials and higher marketing volumes.

Industry Outlook

The pipeline transportation and power generation businesses are expected to remain relatively stable. Marketing results can have significant volatile results depending on significant price swings, as well as Permian-to-Gulf Coast crude oil differentials. The gas processing plant operations could have volatile results depending on NGLs prices. Generally, higher NGLs prices result in higher profitability.

SEGMENT RESULTS OF OPERATIONS AND SIGNIFICANT ITEMS AFFECTING EARNINGS

Segment earnings exclude income taxes, interest income, interest expense, environmental remediation expenses, unallocated corporate expenses and discontinued operations, but include gains and losses from dispositions of segment assets and income from the segments' equity investments. Seasonality is not a primary driver of changes in Occidental's consolidated quarterly earnings during the year.

The following table sets forth the sales and earnings of each operating segment and corporate items:

Oil and Gas

Domestic oil and gas results were losses of $0.6 billion, $1.6 billion and $4.2 billion in 2017, 2016 and 2015, respectively. Excluding significant items affecting results, domestic oil and gas results in 2017 increased from 2016, due to a 22 percent increase in realized oil prices, and lower DD&A rates.

Excluding significant items affecting results, domestic oil and gas results in 2016 were lower than 2015, due to a 13 percent decrease in realized oil prices, higher DD&A rates, and lower oil volumes due to the sale of non-core domestic operations. These decreases were partially offset by lower operating expenses.

International oil and gas earnings were $1.8 billion and $1.0 billion in 2017 and 2016, respectively and a loss of $3.7 billion in 2015. Excluding significant items affecting results, international oil and gas earnings in 2017, increased from 2016. The improved 2017 earnings reflected a 32 and 20 percent increase in realized crude oil and NGL prices in the Middle East, respectively.

Excluding significant items affecting results, the decrease in international oil and gas results in 2016, compared to 2015, reflected lower realized crude oil prices, which had decreased by 23 percent in the Middle East and 16 percent in Latin America. The decrease in prices was partially offset by lower DD&A rates.

Average production costs for 2017, excluding taxes other than on income, were $11.73 per BOE, compared to $10.76 per BOE for 2016. The increase in average production costs per BOE reflected the sales of low margin non-core gas assets, including South Texas and Piceance Basin. Permian Resources production costs per BOE for 2017 decreased by 5 percent from the prior year due to continued improved operational efficiencies.

Average production costs for 2016, excluding taxes other than on income, were $10.76 per BOE,compared to $11.57 per BOE for 2015. The decrease in average costs reflected lower maintenance, workover, and support costs as a result of improvements in operating efficiencies, especially in domestic operations.

The following table sets forth the production volumes of oil, NGLs and natural gas per day from ongoing operations for each of the three years in the period ended December 31, 2017 .

Average daily production volumes were 602,000 BOE and 630,000 BOE for 2017 and 2016, respectively, and included production from assets sold or exited of 8,000 BOE and 55,000 BOE for 2017 and 2016, respectively. Excluding production for assets sold or exited, average daily production volumes were 594,000 BOE and 575,000 BOE for 2017 and 2016, respectively. The increase in production mainly reflected higher Permian Resources production which increased by 14 percent from the prior year.

Average daily production volumes were 630,000 BOE and 668,000 BOE for 2016 and 2015, respectively, and included production from assets sold or exited of 55,000 BOE and 139,000 BOE for 2016 and 2015, respectively. Excluding production for assets sold or exited, average daily production volumes were 575,000 BOE and 529,000 BOE for 2016 and 2015, respectively. The increase in production from on-going operations mainly reflected higher production from Al Hosn Gas as it was not fully operational in 2015 and higher production from Permian Resources, which increased its 2016 production by 13 percent compared to 2015. These increases were offset by lower production from South Texas and Other due to curtailed drilling.

Chemical

Chemical segment earnings were $822 million, $571 million and $542 million for 2017, 2016 and 2015, respectively. Excluding significant items affecting results, the year over year increase in 2017 earnings compared to 2016, was the result of higher realized pricing for caustic soda, improved vinyls margins, higher sales volumes across most product lines, and the addition of equity income from the joint venture ethylene cracker in Ingleside, Texas.

Excluding significant items affecting results, the decrease in 2016 earnings, compared to 2015, reflected lower PVC margins as PVC pricing decreased with lower ethylene pricing, which was partially offset by lower ethylene and energy costs.

Midstream and Marketing