UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2017

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ___________

Commission file number 1-9210

_____________________

(Exact name of registrant as specified in its charter)

(713) 215-7000

(Registrant's telephone number, including area code)

______________________________________________________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    

☑ Yes    o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    

☑ Yes    o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer a smaller reporting company, or an emerging growth company. (See definition of "accelerated filer", "large accelerated filer", "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act): 

Large Accelerated Filer         ☑ Accelerated Filer         o Non-Accelerated Filer      o

Smaller Reporting Company     o     Emerging Growth Company     o

If an Emerging Growth Company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.     o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)    

o Yes    ☑ No

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES

TABLE OF CONTENTS

PART I    FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)

OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS

SEPTEMBER 30, 2017 , AND DECEMBER 31, 2016

(Amounts in millions)

OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS

SEPTEMBER 30, 2017 , AND DECEMBER 31, 2016

(Amounts in millions except share amounts)

OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 , AND 2016

(Amounts in millions, except per-share amounts)

OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 , AND 2016

(Amounts in millions)

(a)	Net of tax of $(5) and $(1) for the three months ended September 30, 2017, and 2016, respectively, and $(8) and $6 for the nine months ended September 30, 2017, and 2016, respectively.

(b)	Net of tax of $(3) and $(2) for the three months ended September 30, 2017, and 2016, respectively, and $(7) and $(9) for the nine months ended September 30, 2017, and 2016, respectively.

(c)	Net of tax of zero for the three months ended September 30, 2017, and 2016, and $1 and $(4) for the nine months ended September 30, 2017, and 2016, respectively.

The accompanying notes are an integral part of these consolidated condensed financial statements.

OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016

(Amounts in millions)

OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2017

1. General

In these unaudited consolidated condensed financial statements, "Occidental" means Occidental Petroleum Corporation, a Delaware corporation (OPC), or OPC and one or more entities in which it owns a controlling interest (subsidiaries). Occidental has made its disclosures in accordance with United States generally accepted accounting principles (GAAP) as they apply to interim reporting, and condensed or omitted, as permitted by the Securities and Exchange Commission's rules and regulations, certain information and disclosures normally included in consolidated financial statements and the notes. These unaudited consolidated condensed financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto in Occidental's Annual Report on Form 10-K for the year ended December 31, 2016 .

In the opinion of Occidental's management, the accompanying unaudited consolidated condensed financial statements contain all adjustments (consisting of normal recurring adjustments) necessary to fairly present Occidental's consolidated financial position as of September 30, 2017 , the consolidated statements of operations and comprehensive income for the three and nine months ended September 30, 2017, and 2016, and cash flows for the nine months ended September 30, 2017 , and 2016 . The income and cash flows for the periods ended September 30, 2017 , and 2016 are not necessarily indicative of the income or cash flows to be expected for the full year.

2. Asset Acquisitions, Dispositions and Other

In the third quarter of 2017, Occidental closed on two divestitures of non-strategic acreage in the Midland Basin for approximately $0.6 billion, resulting in a pre-tax gain of approximately $81 million. The assets related to these operations primarily included property, plant and equipment. 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 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.

3. Accounting and Disclosure Changes

In August 2017, the Financial Accounting Standards Board (FASB) released targeted improvements to hedge accounting standards that will expand hedge accounting for nonfinancial and financial risk components and amend measurement methodologies to more closely align hedge accounting with a company's risk management activities. These rules also decrease the cost and complexity of hedge accounting. The new rules are effective for fiscal years beginning after December 15, 2018. Occidental is currently evaluating the effect of the new rules on its hedges.

In March 2017, FASB issued guidance related to presentation of net periodic pension cost and net periodic postretirement benefit cost. The rules become effective for annual periods beginning after December 15, 2017. These rules are not expected to have a material impact to Occidental's financial statements upon adoption.

In 2016, the FASB issued rules clarifying several aspects of the new revenue recognition standard Topic 606 - Revenue from Contracts with Customers, previously issued in May 2014. Under the new standard, an entity will recognize revenue when it transfers promised goods or services to customers in an amount that reflects what it expects to receive in exchange for the goods and services. The new standard also requires more detailed disclosures related to the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. Occidental will adopt the standard using the modified retrospective approach and recognize a cumulative effect adjustment to Retained Earnings as of January 1, 2018. Occidental continues to make progress on evaluating the accounting implications of the standard and has stratified all revenue streams within each operating segment and has compiled an inventory of all contracts. A representative sample of contracts has been pulled from these significant revenue streams and reviewed in detail against the requirements of the new standard to identify whether such contracts are in scope of the new standard; whether there will be material changes in the timing or amount of revenue recognized; whether processes and controls are in place to evaluate new contracts for revenue recognition and to

assemble any additional required disclosures. The Entities with Oil and Gas Producing Activities Revenue Recognition Task Force of the American Institute of Certified Public Accountants and certain public accounting firms have published guides and interpretations. Occidental is reviewing recently released interpretations against the sample of contracts. Additionally, Occidental is training accounting staff on the new standard and finalizing estimates of potential financial impacts. Occidental has identified controls related to the implementation of the new standard, and the ongoing assessment of revenue accounting for existing and new contracts, and controls over the preparation of the newly required disclosures. Based upon work performed through September 30, 2017, Occidental does not currently anticipate a material impact to earnings as a result of adopting the new standard and is continuing to evaluate the impact of this and other provisions of the standard on its accounting policies, internal controls and consolidated financial statements and related disclosures.

In February 2016, the FASB issued rules which require Occidental to recognize most leases, including operating leases, on the balance sheet. The new rules require lessees to recognize a right-of-use asset and lease liability for all leases with lease terms of more than 12 months. The lease liability represents the discounted obligation to make future minimum lease payments and the corresponding right-of-use asset on the balance sheet for most leases. The guidance retains the current accounting for lessors and does not make significant changes to the recognition, measurement and presentation of expenses and cash flows by a lessee. Recognition, measurement and presentation of expenses and cash flows arising from a lease will depend on classification as a finance or operating lease. Occidental is the lessee under various agreements for real estate, equipment, plants and facilities, aircraft, IT hardware and vehicles that are currently accounted for as operating leases, refer to Note 6, Lease Commitments in Occidental's Annual Report on Form 10-K for the year ended December 31, 2016 . As a result, these new rules will increase reported assets and liabilities. Occidental will not be an early adopter of this standard. Occidental will apply the revised lease rules for our interim and annual reporting periods starting January 1, 2019, using a modified retrospective approach, including several optional practical expedients related to leases commenced before the effective date. Occidental is currently evaluating the effect of these rules on its financial statements, training accounting staff and developing an internal interim software solution for the identification, documentation and tracking of leases in order to create an adoption plan based on Occidental's population of leases under the revised definition of leases. The quantitative impacts of the new standard are dependent on the leases in force at the time of adoption. As a result, the evaluation of the effect of the new standard will extend over future periods.

4. Supplemental Cash Flow Information

Occidental paid foreign and state income taxes of $553 million and $442 million during the nine months ended September 30, 2017 , and 2016 , respectively. Occidental received federal income tax refunds of $749 million and $302 million in the nine months ended September 30, 2017, and 2016, respectively. Interest paid totaled $266 million and $224 million in the nine months ended September 30, 2017 , and 2016 , respectively.

5. Inventories

Inventories as of September 30, 2017 , and December 31, 2016 , consisted of the following (in millions):

6. Environmental Liabilities and Expenditures

Occidental's operations are subject to stringent federal, state, local and foreign laws, and regulations related to improving or maintaining environmental quality. The laws that require or address environmental remediation, including the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) and similar federal, state, local and foreign laws, may apply retroactively and regardless of fault, the legality of the original activities or the

current ownership or control of sites. OPC or certain of its subsidiaries participate in or actively monitor a range of remedial activities and government or private proceedings under these laws with respect to alleged past practices at operating, closed and third-party sites. Remedial activities may include one or more of the following: investigation involving sampling, modeling, risk assessment or monitoring; cleanup measures including removal, treatment or disposal of hazardous substances; or operation and maintenance of remedial systems. These environmental proceedings seek funding or performance of remediation and, in some cases, compensation for alleged property damage, punitive damages, civil penalties, injunctive relief and government oversight costs.

As of September 30, 2017 , Occidental participated in or monitored remedial activities or proceedings at 148 sites.  The following table presents Occidental's environmental remediation reserves as of September 30, 2017 . The current portion of $131 million is included in accrued liabilities and the noncurrent portion of $732 million is included in deferred credits and other liabilities - other.  The reserves are grouped as environmental remediation sites listed or proposed for listing by the United States Environmental Protection Agency on the CERCLA National Priorities List (NPL sites) and three categories of non-NPL sites - third-party sites, Occidental-operated sites and closed or non-operated Occidental sites.

As of September 30, 2017 , Occidental's environmental reserves exceeded $10 million each at 16 of the 148 sites described above, and 88 of the sites each had reserves of $1 million or less.  Based on current estimates, Occidental expects to expend funds corresponding to approximately half of the current environmental reserves at the sites described above over the next three to four years and the balance at these sites over the subsequent 10 or more years. Occidental believes its estimable amount of reasonably possible additional losses beyond those liabilities recorded for environmental remediation at these sites could range up to $1.1 billion. The status of Occidental's involvement with the sites and related significant assumptions, including those sites indemnified by Maxus Energy Corporation (see further discussion below), has not changed materially since December 31, 2016.  

When Occidental acquired Diamond Shamrock Chemicals Company (DSCC) in 1986, Maxus Energy Corporation (Maxus), formerly a subsidiary of YPF S.A. (YPF), agreed to indemnify Occidental for a number of environmental sites, including the Diamond Alkali Superfund Site (Site) along a portion of the Passaic River. On June 17, 2016, Maxus and several affiliated companies filed for Chapter 11 bankruptcy in Federal District Court in the State of Delaware. Prior to filing for bankruptcy, Maxus defended and indemnified Occidental in connection with cleanup and other costs associated with the sites subject to the indemnity, including the Site. Occidental is pursuing Maxus' current and former parent companies, YPF and Repsol, as the alter egos of Maxus, to recover all indemnified costs, which will include costs to be incurred at the Site.

In March 2016, the EPA issued a Record of Decision (ROD) specifying remedial actions required for the lower 8.3 miles of the Lower Passaic River. The ROD does not address any potential remedial action for the upper nine miles of the Lower Passaic River or Newark Bay. During the third quarter of 2016, and following Maxus's bankruptcy filing, Occidental and the EPA entered into an Administrative Order on Consent (AOC) to complete the design of the proposed cleanup plan outlined in the ROD at an estimated cost of $165 million. The EPA announced that it will pursue similar agreements with other potentially responsible parties.

Occidental has accrued a reserve relating to its estimated allocable share of the costs to perform the design and the remediation called for in the AOC and the ROD, as well as for certain other Maxus-indemnified sites. Occidental's accrued estimated environmental reserve does not consider any recoveries for indemnified costs. Occidental's ultimate share of this liability may be higher or lower than the reserved amount, and is subject to final design plans and the resolution of Occidental's allocable share with other potentially responsible parties. Occidental continues to evaluate the costs to be incurred to comply with the AOC, the ROD and to perform remediation at other Maxus-indemnified sites in light of the Maxus bankruptcy and the share of ultimate liability of other potentially responsible parties. In June 2017, the court overseeing the Maxus bankruptcy approved a Plan of Liquidation (Plan) to liquidate

Maxus and create a trust to pursue claims against YPF, Repsol and others to satisfy claims by Occidental and other creditors for past and future cleanup and other costs. In July 2017, the court-approved Plan became final and the trust became effective. Among other responsibilities, the trust will pursue claims against YPF, Repsol and others and distribute assets to Maxus' creditors in accordance with the trust agreement and Plan.

7. Lawsuits, Claims, Commitments and Contingencies

Occidental or certain of its subsidiaries are involved, in the normal course of business, in lawsuits, claims and other legal proceedings that seek, among other things, compensation for alleged personal injury, breach of contract, property damage or other losses, punitive damages, civil penalties, or injunctive or declaratory relief. Occidental or certain of its subsidiaries also are involved in proceedings under CERCLA and similar federal, state, local and foreign environmental laws. These environmental proceedings seek funding or performance of remediation and, in some cases, compensation for alleged property damage, punitive damages, civil penalties and injunctive relief. Usually Occidental or such subsidiaries are among many companies in these environmental proceedings and have to date been successful in sharing response costs with other financially sound companies. Further, some lawsuits, claims and legal proceedings involve acquired or disposed assets with respect to which a third party or Occidental retains liability or indemnifies the other party for conditions that existed prior to the transaction.

In accordance with applicable accounting guidance, Occidental accrues reserves for outstanding lawsuits, claims and proceedings when it is probable that a liability has been incurred and the liability can be reasonably estimated. In Note 6, Environmental Liabilities and Expenditures, Occidental has disclosed its reserve balances for environmental remediation matters that satisfy this criteria. Reserve balances for matters, other than environmental remediation, that satisfy this criteria as of September 30, 2017, and December 31, 2016, were not material to Occidental's consolidated condensed balance sheets.

Occidental also evaluates the amount of reasonably possible losses that it could incur as a result of outstanding lawsuits, claims and proceedings and discloses its estimable range of reasonably possible additional losses for sites where it is a participant in environmental remediation. Occidental believes that other reasonably possible losses for non-environmental matters that it could incur in excess of reserves accrued on the balance sheet would not be material to its consolidated financial position or results of operations. Occidental reassesses the probability and estimability of contingent losses as new information becomes available.

Tax Matters

During the course of its operations, Occidental is subject to audit by tax authorities for varying periods in various federal, state, local and foreign tax jurisdictions. Although taxable years through 2009 for United States federal income tax purposes have been audited by the United States Internal Revenue Service (IRS) pursuant to its Compliance Assurance Program, subsequent taxable years are currently under review.  Taxable years from 2002 through the current year remain subject to examination by foreign and state government tax authorities in certain jurisdictions. In certain of these jurisdictions, tax authorities are in various stages of auditing Occidental's income taxes. During the course of tax audits, disputes have arisen and other disputes may arise as to facts and matters of law. Occidental believes that the resolution of outstanding tax matters would not have a material adverse effect on its consolidated financial position or results of operations.

Indemnities to Third Parties

Occidental, its subsidiaries or both, have indemnified various parties against specified liabilities those parties might incur in the future in connection with purchases and other transactions that they have entered into with Occidental. These indemnities usually are contingent upon the other party incurring liabilities that reach specified thresholds. As of September 30, 2017, Occidental is not aware of circumstances that it believes would reasonably be expected to lead to indemnity claims that would result in payments materially in excess of reserves.

8. Retirement and Post-retirement Benefit Plans

The following tables set forth the components of the net periodic benefit costs for Occidental's defined benefit pension and post-retirement benefit plans for the three and nine months ended September 30, 2017 , and 2016 (in millions):

Occidental contributed approximately $1 million and zero in the three months ended September 30, 2017, and 2016 , respectively, and approximately $3 million and $2 million in the nine months ended September 30, 2017, and 2016, respectively, to its defined benefit plans.

9. Fair Value Measurements

Occidental has categorized its assets and liabilities that are measured at fair value in a three-level fair value hierarchy, based on the inputs to the valuation techniques: Level 1 - using quoted prices in active markets for the assets or liabilities; Level 2 - using observable inputs other than quoted prices for the assets or liabilities; and Level 3 - using unobservable inputs.  Transfers between levels, if any, are recognized at the end of each reporting period.

The following tables provide fair value measurement information for such assets and liabilities that are measured on a recurring basis as of September 30, 2017, and December 31, 2016 (in millions):

Fair Values - Nonrecurring

During the nine months ended September 30, 2017, Occidental did not have any assets or liabilities measured at fair value on a nonrecurring basis. During the year ended December 31, 2016, Occidental recognized pre-tax impairment charges of $15 million related to proved oil and gas properties.

Other Financial Instruments

The carrying amounts of cash and cash equivalents and other on-balance-sheet financial instruments, other than long-term, fixed-rate debt, approximate fair value. The cost, if any, to terminate Occidental's off-balance-sheet financial instruments is not significant. Occidental estimates the fair value of fixed-rate debt based on the quoted market prices for those instruments or on quoted market yields for similarly rated debt instruments, taking into account such instruments' maturities. The estimated fair value of Occidental's debt as of September 30, 2017, and December 31, 2016, was $10.3 billion and $10.2 billion, respectively, and its carrying value net of unamortized discount and debt issuance costs as of September 30, 2017, and December 31, 2016, was $9.8 billion. The majority of Occidental's debt is classified as Level 1, with $225 million classified as Level 2.

10. Derivatives

Occidental uses a variety of derivative financial instruments and physical contracts, including those designated as cash-flow hedges, to manage its exposure to commodity price fluctuations, transportation commitments and to fix margins on the future sale of stored volumes of oil and natural gas. Where Occidental buys product for its own consumption or sells its production to a defined customer, Occidental may elect normal purchases and normal sales exclusions. Occidental usually applies cash-flow hedge accounting treatment to derivative financial instruments to lock in margins on the forecasted sales of its natural gas storage volumes, and at times for other strategies to lock in margins. Occidental also enters into derivative financial instruments for speculative or trading purposes; however, the results of any transactions are immaterial to the marketing portfolio.

The financial instruments not designated as hedges will impact Occidental's earnings through mark-to-market until the offsetting future physical commodity is delivered. For GAAP purposes, any physical inventory is carried at the lower of cost or market on the balance sheet. A substantial majority of Occidental's physical derivative contracts are index-based and carry no mark-to-market value in earnings. Net gains and losses associated with derivative instruments not designated as hedging instruments are recognized currently in net sales. Net gains and losses

attributable to derivative instruments subject to hedge accounting reside in accumulated other comprehensive income (loss) and are reclassified to earnings as the transactions to which the derivatives relate are recognized in earnings.

Credit Risk

The majority of Occidental's counterparty credit risk is related to the physical delivery of energy commodities to its customers and their inability to meet their settlement commitments. Occidental manages credit risk by selecting counterparties that it believes to be financially strong, by entering into master netting arrangements with counterparties and by requiring collateral or other credit risk-mitigants, as appropriate. Occidental actively evaluates the creditworthiness of its counterparties, assigns appropriate credit limits and monitors credit exposures against those assigned limits. Occidental also enters into future contracts through regulated exchanges with select clearinghouses and brokers, which are subject to minimal credit risk as a significant portion of these transactions settle on a daily margin basis.

Certain of Occidental's over-the-counter derivative instruments contain credit-risk-contingent features, primarily tied to credit ratings for Occidental or its counterparties, which may affect the amount of collateral that each would need to post. Occidental believes that if it had received a one-notch reduction in its credit ratings, it would not have resulted in a material change in its collateral-posting requirements as of September 30, 2017, and December 31, 2016.

Cash-Flow Hedges

Occidental's marketing operations store natural gas purchased from third parties at Occidental's leased storage facilities. Derivative instruments are used to fix margins on the future sales of the stored volumes. These agreements continue through 2018. As of September 30, 2017, Occidental had approximately 7 billion cubic feet (Bcf) of natural gas held in storage, and had cash-flow hedges for the forecasted sales to be settled by physical delivery of approximately 6 Bcf of stored natural gas. As of December 31, 2016, Occidental had approximately 7 Bcf of natural gas held in storage, and had cash-flow hedges for the forecasted sales, to be settled by physical delivery, of approximately 7 Bcf of stored natural gas. The amount of cash-flow hedges, including the ineffective portion, was immaterial for the nine months ended September 30, 2017, and the year ended December 31, 2016.

Derivatives Not Designated as Hedging Instruments

The following table summarizes the amounts reported in net sales related to the outstanding commodity derivative instruments not designated as hedging instruments as of September 30, 2017, and December 31, 2016:

Fair Value of Derivatives

The following tables presents the gross and net fair values of Occidental's outstanding derivatives as of September 30, 2017, and December 31, 2016 (in millions):

(a)	Fair values are presented at gross amounts, including when the derivatives are subject to netting arrangements and presented on a net basis in the consolidated condensed balance sheets.

(b)

These amounts do not include collateral. As of September 30, 2017, collateral received of $2 million has been netted against derivative assets and collateral paid of $31 million has been netted against derivative liabilities. As of December 31, 2016, collateral received of $4 million has been netted against derivative assets and collateral paid of $13 million has been netted against derivative liabilities. Collateral deposited by Occidental, mainly for initial margin, of $33 million and $25 million as of September 30, 2017, and December 31, 2016, respectively, has not been reflected in these derivative fair value tables. This collateral is included in other current assets in the consolidated condensed balance sheets.

11. Industry Segments

Occidental conducts its operations through three segments: (1) oil and gas (2) chemical and (3) midstream and marketing. The oil and gas segment explores for, develops and produces oil and condensate, natural gas liquids (NGLs) and natural gas.  The chemical segment 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, CO 2 and power. It also trades around its assets, including transportation and storage capacity. Additionally, the midstream and marketing segment invests in entities that conduct similar activities.

Results of industry segments generally 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. Intersegment sales eliminate upon consolidation and are generally made at prices approximating those that the selling entity would be able to obtain in third-party transactions.

The following tables present Occidental's industry segments (in millions):

(a) The three and nine months ended September 30, 2017, included pre-tax gains on sale of non-strategic acreage in the Midland Basin of $81 million. The nine months ended September 30, 2017, also included pre-tax gains of $510 million on sale of domestic oil and gas assets, including South Texas.

(b) Included unallocated net interest expense, administration expense, environmental remediation and other pre-tax items.

(c) Included all foreign and domestic income taxes from continuing operations.

(d) The three and nine months ended September 30, 2016, included pre-tax impairment charges of $112 million related to Occidental's former Libya operations and $160 million related to terminated crude oil supply contracts partially offset by pre-tax gains of $59 million on the sale of South Texas Eagle Ford non-operated properties. The nine months ended September 30, 2016, also reflected a $121 million pre-tax gain on the sale of Occidental's Piceance Basin operations in Colorado.

(e) Included a pre-tax non-cash fair value gain of $94 million on the Plains equity investment.

(f) Included a pre-tax gain on sale of $57 million and $31 million related to the Occidental Tower in Dallas, Texas, and a non-core specialty chemicals business, respectively.

12. Earnings Per Share

Occidental's instruments containing rights to nonforfeitable dividends granted in stock-based awards are considered participating securities prior to vesting and, therefore, net income allocated to these participating securities has been deducted from earnings in computing basic and diluted EPS under the two-class method.

Basic EPS was computed by dividing net income attributable to common stock, net of income allocated to participating securities, by the weighted-average number of common shares outstanding during each period, net of treasury shares and including vested but unissued shares and share units.  The computation of diluted EPS reflects the additional dilutive effect of stock options and unvested stock awards.

The following table presents the calculation of basic and diluted EPS for the three and nine months ended September 30, 2017 , and 2016 (in millions, except per-share amounts):

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

In this report, "Occidental" means Occidental Petroleum Corporation (OPC), or OPC and one or more entities in which it owns a controlling interest (subsidiaries). Portions of this report contain forward-looking statements and involve risks and uncertainties that could materially affect expected results of operations, liquidity, cash flows and business prospects. Actual results may differ from anticipated results, sometimes materially, and reported results should not be considered an indication of future performance. Factors that could cause results to differ include, but are not limited to: global commodity pricing fluctuations; supply and demand considerations for Occidental's products; higher-than-expected costs; the regulatory approval environment; not successfully completing, or any material delay of, field developments, expansion projects, capital expenditures, efficiency projects, acquisitions or dispositions; uncertainties about the estimated quantities of oil and natural gas reserves; lower-than-expected production from development projects or acquisitions; exploration risks; general economic slowdowns domestically or internationally; political conditions and events; liability under environmental regulations including remedial actions; litigation; disruption or interruption of production or manufacturing or facility damage due to accidents, chemical releases, labor unrest, weather, natural disasters, cyber attacks or insurgent activity; failure of risk management; changes in law or regulations; reorganization or restructuring of Occidental's operations; or changes in tax rates. Words such as "estimate," "project," "predict," "will," "would," "should," "could," "may," "might," "anticipate," "plan," "intend," "believe," "expect," "aim," "goal," "target," "objective," "likely" or similar expressions that convey the prospective nature of events or outcomes generally indicate forward-looking statements. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this report. Unless legally required, Occidental does not undertake any obligation to update any forward-looking statements, as a result of new information, future events or otherwise. Material risks that may affect Occidental's results of operations and financial position appear in Part I, Item 1A "Risk Factors" of Occidental's Annual Report on Form 10-K for the year ended December 31, 2016 (the 2016 Form 10-K).

Consolidated Results of Operations

Occidental reported net income of $190 million for the third quarter of 2017 on net sales of $3.0 billion, compared to a net loss of $241 million on net sales of $2.6 billion for the third quarter of 2016. Diluted earnings per share was $0.25 for the third quarter of 2017, compared to a diluted loss of $0.32 per share for the third quarter of 2016.

Occidental reported net income of $814 million for the first nine months of 2017 on net sales of $9.0 billion, compared to a net loss of $302 million on net sales of $7.3 billion for the same period in 2016. Diluted earnings per share was $1.06 per share for the first nine months of 2017, compared to a diluted loss per share of $0.40 for the same period of 2016. Net income for the nine months ended September 30, 2016, included income from discontinued operations of $432 million or diluted income of $0.56 per share for the same period of 2016.

The third quarter of 2017 reflected the impact of Hurricane Harvey which reduced Chemical and Midstream and Marketing segment earnings by $70 million and reduced average daily production by 1,000 BOE in the Permian Resources operations. The increase in net income for the three and nine months ended September 30, 2017, compared to the same periods in 2016, reflected higher oil and NGLs prices, higher chemical sales prices across most products and lower asset impairment and related charges. The increase in net income for the nine months ended September 30, 2017, compared to the same period of 2016, also reflected higher gains on sale of assets, lower depreciation, depletion and amortization rates and the addition of equity income from the Ingleside ethylene cracker and the fair value gain on the Plains equity investment.

Selected Statements of Operations Items

Net sales increased for the three and nine months ended September 30, 2017, compared to the same periods in 2016, due to higher realized crude oil and NGLs prices and higher sale prices across most chemical product lines. The increase in net sales for the nine months ended September 30, 2017, also reflected higher chemical sales volumes across most products and higher realized domestic natural gas prices in the oil and gas segment. Gain on sale of assets, net, totaling $598 million for the nine months ended September 30, 2017, primarily reflected gains on the sale of the South Texas operations and the sale of non-strategic acreage in the Midland Basin. Gain on sale of assets, net, for the nine months ended September 30, 2016, primarily reflected the sales of the Piceance Basin operations in Colorado for a pre-tax gain of $121 million, the South Texas Eagle Ford non-operated properties for a pre-tax gain of $59 million, the Occidental Tower building in Dallas for a pre-tax gain of $57 million and a non-core specialty chemical business for a pre-tax gain of $31 million.

Compared to the same periods of 2016, cost of sales for the nine months ended September 30, 2017, reflected higher raw materials and energy costs in the chemical segment and higher energy and purchase injectant and gas plant costs in the oil and gas segment. Compared to the same periods of 2016, DD&A expense for the three and nine months ended September 30, 2017, reflected improved DD&A rates and the sale of oil and gas assets. The nine months ended September 30, 2016 reflected impairment and related charges of $112 million related to Occidental's former Libya operations and $160 million related to terminated crude oil supply contracts.

The increases in domestic and foreign income tax provisions for the three and nine months ended September 30, 2017 , compared to the income tax benefits for same periods of 2016, reflect higher pre-tax operating income. In addition, the 2016 benefits included a tax benefit associated with the relinquishment of foreign exploration blocks not included in the 2017 provision.

The increase in income from equity investments for the nine months ended September 30, 2017, reflected a non-cash fair value gain on the Plains equity investment and equity income from the Ingleside ethylene cracker, which commenced operations in February 2017.

Selected Analysis of Financial Position

See "Liquidity and Capital Resources" for a discussion about the changes in cash and cash equivalents and restricted cash.

The increase in inventories at September 30, 2017, compared to December 31, 2016, reflected higher crude oil storage and prices. The decrease in other current assets is primarily related to receipt of a federal tax refund relating to the 2016 net operating loss carryback. The decrease in property, plant and equipment at September 30, 2017, compared to December 31, 2016, reflected current year DD&A of $2.9 billion partially offset by capital expenditures of $2.4 billion.

Current maturities of long-term debt at September 30, 2017, reflected the reclassification of 1.5-percent senior notes due February 2018 from long-term debt. The decrease in accrued liabilities at September 30, 2017, is mainly due to payments for the extension of Oman Block 9 and litigation settlements in the Chemical segment. The decrease in long term other liabilities at September 30, 2017, is mainly due to the decrease in asset retirement obligations for the South Texas assets that were sold in April.

Segment Operations

Occidental conducts its operations through three segments: (1) oil and gas (2) chemical and (3) midstream and marketing. The oil and gas segment explores for, develops and produces oil and condensate, NGLs and natural gas. The chemical segment 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, CO 2 and power. It also trades around its assets, including transportation and storage capacity. Additionally, the midstream and marketing segment invests in entities that conduct similar activities.

The following table sets forth the sales and earnings of each operating segment and corporate items for the three and nine months ended September 30, 2017 , and 2016 (in millions):

(a) Intersegment sales eliminate upon consolidation and are generally made at prices approximating those that the selling entity would be able to obtain in third-party transactions.

(b) Refer to "Significant Transactions and Events Affecting Earnings."