Occidental Petroleum Corporation
Q&A Regarding Warrants
1. Why is Occidental Petroleum Corporation issuing warrants as a distribution on its common stock?
Occidental is issuing warrants as a distribution on the common stock to provide value to our existing stockholders. Occidental has taken significant actions to address the issues created by the protracted downturn associated with the COVID-19 pandemic and the decline in oil prices in the first half of 2020, including the pursuit of divestitures of assets not as directly impacted by the decline in commodity prices, aggressive cost reductions and the difficult decision to significantly reduce the common dividend. Occidental has been clear in its prioritization of liquidity, addressing near-term maturities and balance sheet repair. The warrants will allow our common stockholders the opportunity to acquire additional common stock in the future at what Occidental believes will be an attractive price. Recipients also may sell the warrants they receive to achieve immediate value.
2. Does this distribution mean that Occidental is changing its dividend policy?
No—this distribution does not mean that Occidental is changing its dividend policy. The amount of future dividends to be paid on our common stock, if any, will be determined by our Board based on a number of factors, including our financial condition and expected capital needs.
3. What will I receive in the distribution?
You will receive 1/8th of a warrant for every share of common stock of which you are the record holder as of July 6, 2020.
4. Who will receive the warrants? How many warrants will I receive?
All holders of record of common stock as of July 6, 2020 will receive warrants in the amount of 1/8th of a warrant per share of common stock.
5. Do I have to do anything in order to receive the warrants?
No—all holders of record of common stock as of July 6, 2020 will automatically receive the warrants in the amounts described above in book-entry form.
6. When can I exercise the warrants?
You can exercise the warrants at any time from August 3, 2020 through, and including, August 3, 2027.
7. What is the exercise price? What does the exercise price mean?
The exercise price of the warrants is $22 per share of common stock. The exercise price is the amount required to be paid in cash to purchase shares of common stock pursuant to the warrants.
8. Do I have to pay anything when I exercise the warrants? How will the warrants be settled on exercise?
Yes—you will have to pay the exercise price of $22 per share of common stock. The exercise price must be paid in cash when the warrants are exercised.
9. Will the warrants be adjusted for future transactions?
The exercise price and number of common shares issuable on exercise of the warrants will be adjusted only for stock splits, subdivisions, reclassifications or combinations of the common stock. There will be no adjustments for cash dividends, the issuance of below market warrants, rights or options, distributions of assets or securities (other than stock dividends as a result of stock splits) or self-tender offers.
10. What happens to the warrants in the event of a merger or business combination?
If the warrants are in the money at the time of the transaction (meaning that the price of our common stock exceeds the exercise price at the time of the transaction), the right to exercise the warrants will be changed into a right to purchase the type and amount of securities or other property or assets that a warrantholder would have been entitled to purchase had the warrantholder exercised its warrants immediately prior to such transaction. If the warrants are out of the money at the time of the transaction, they will be canceled.
11. Will holders of Occidental’s Series A preferred stock be entitled to receive the warrants?
No—only holders of Occidental’s common stock will be entitled to receive the warrants.
12. Will the exercise of the warrants result in the issuance of additional shares of common stock?
Yes—upon exercise of the warrants, new shares of common stock will be issued. However, unlike an equity offering which would have immediately resulted in the issuance of additional shares, the warrants will only result in the issuance of shares of common stock to the extent holders choose to exercise the warrants. A holder will have 7 years to decide whether or not to exercise the warrants.
13. What happens to fractional warrants?
Fractional warrants will not be distributed. Occidental expects that fractional warrants to which Occidental’s holders of record would otherwise be entitled to receive will be aggregated and sold in the public market by the warrant agent. The aggregate net cash proceeds of the sales will be distributed ratably to those stockholders who would otherwise have received fractional warrants.
14. What will happen to the proceeds from the exercise of the warrants?
Occidental will receive the proceeds from the exercise of the warrants and may use the proceeds for any authorized corporate purpose, which will be based on our cash flow priorities at that time.
15. Will the warrants expire?
Yes—the warrants will expire after August 3, 2027.
16. What happens if I do not exercise the warrants before they expire?
After the expiration date, you will no longer be entitled to exercise the warrant to purchase shares of common stock at the exercise price.
17. If I do not exercise the warrants before they expire, will my preexisting ownership of common stock be affected?
No—the warrants are a separate security from any shares of Occidental common stock that you own.
18. What happens to my warrants if I sell my shares of common stock?
Shares of Occidental’s common stock will not trade with a "due bill." As a result, if you are a holder of record on July 6, 2020, you may subsequently sell your shares of common stock and keep the right to receive the warrants in the distribution. You do not need to remain a common stockholder after July 6, 2020 in order to receive, hold or exercise the warrants.
19. Will the warrants be listed? Will I be able to sell the warrants?
Yes—Occidental intends to list the warrants on the NYSE, however we cannot provide any assurances as to whether a trading market for the warrants will develop. If a market does develop, you will be able to sell the warrants at the prevailing market price on the NYSE. You should consult your financial advisor for assistance.
20. How can I sell the warrants?
Occidental intends to list the warrants on the NYSE, however we cannot provide any assurances as to whether a trading market for the warrants will develop. If a market does develop, you will be able to sell the warrants at the prevailing market price on the NYSE. You should consult your financial advisor for assistance.
21. What will the warrants be worth?
The "intrinsic" value of a warrant is generally considered to be the amount by which the price of the common stock issuable upon exercise of the warrant exceeds the exercise price of the warrant at that time. There are other methodologies for calculating the "theoretical" value of a warrant. You should consult your financial advisor for assistance.
22. Will the issuance of the warrants be a taxable transaction? If so, how and when will Occidental notify recipients of the tax details?
We expect to provide further details about tax consequences to warrantholders in subsequent press releases or filings with the Securities and Exchange Commission prior to the distribution of the warrants.