Company: OXY-WT
Filing Date: 2025-02-18
Form Type: 10-K
Source: 0000797468-25-000029
Chunk: 6

Company: OCCIDENTAL PETROLEUM CORP /DE/
Filing Date: 2025-02-18
Form: 10-K
Item: Item 8
Chunk 6
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 of the transaction, the Company acquired oil and gas properties, which were recognized at their acquisition date fair value of $11.8 billion. The Company used a combination of valuation methodologies to estimate the initial fair value of acquired oil and gas properties. Unproved oil and gas properties were valued using a market approach based on comparable transactions for similar properties. Proved oil and gas properties were valued using an income approach.

We identified the evaluation of the acquisition-date fair value of the oil and gas properties of CrownRock as a critical audit matter. Complex auditor judgment was required in evaluating the key assumptions used to estimate the fair value of the oil and gas properties as changes to those assumptions could have had a significant effect on the fair value. The income approach utilized a risk adjusted discounted cash flow model, which included key assumptions related to estimated future production quantities, estimated operating and capital costs, forecasted commodity pricing, and the discount rate. Estimating proved oil and gas reserves requires the expertise of professional petroleum reservoir engineers. Additionally, the audit effort associated with evaluating the forecasted commodity pricing and discount rate assumptions required specialized skills and knowledge. The market approach also required specialized skills and knowledge to determine which market-based transactions were most relevant to the Company’s acquisition of CrownRock’s oil and gas properties.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s acquisition-date valuation process, including controls related to the determination of the key assumptions, as noted above, used to measure the fair value of the acquired oil and gas properties. We assessed compliance of the methodology used by the Company’s engineering and technical staff to estimate proved oil and gas reserves with industry and regulatory standards. We compared the estimated future production quantities to historical production rates. We evaluated the operating and capital cost assumptions used by the Company by comparing them to historical costs incurred. We evaluated the professional qualifications and the knowledge, skills, and ability of the Company’s internal reserve engineers. In addition, we involved valuation professionals with specialized skills and knowledge, who assisted in:

•evaluating the forecasted commodity pricing assumptions by comparing them to independently developed ranges of forward price estimates using data from analysts and other industry sources

•evaluating the discount rate by comparing it to a discount rate range that was independently developed using publicly available market data for comparable entities.

•assessing the acreage valuation in the market approach by comparing such valuation to a range of indicated values for comparable transactions for similar properties using publicly available market data.

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