LTD CONTRIBUTIONS UP FOR BUT PRETAX CHANGE HELPS

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1 Occidental Petroleum Corporation and Oxy Vinyls, LP December 2001 LTD CONTRIBUTIONS UP FOR BUT PRETAX CHANGE HELPS Oxy s LTD Plan is losing money. The premiums we are paying for coverage under the Long-Term Disability (LTD) Plan simply aren t supporting the benefit. Hartford, the plan s insurance carrier, has lost money on Oxy s plan since we insured the benefit in October 1995, and now they require a significant contribution increase. To lessen the impact of the increase, LTD contributions will be deducted from your base pay on a pretax basis. This means that the net effect on your current out-of-pocket contribution expense for LTD Plan coverage should remain roughly the same as it is now (assuming you re in a 28% marginal federal tax bracket). However, this also means the LTD benefits that new claimants receive will be taxable after next year (though under current tax law, they will not be fully taxable until 2005). The new 2002 contribution rates per $100 of monthly base pay are shown below. Coverage New Net Impact Current Option 2002 Rates When Pretax 2001 Rates Income Plus $1.28 $0.92 $0.88 Basic Income $0.97 $0.72 $0.67 Assumes 28% marginal federal tax rate The plan will also change to more closely align with the definition of disability used by the Social Security Administration (SSA). On the basis that people approved for LTD benefits should be truly disabled, claimants who become disabled on or after January 1, 2002, but are not approved to receive SSA disability benefits, will have their Oxy LTD benefit reduced to 30% from 60% of monthly base pay. IT S UP TO YOU Now is the time to make a thoughtful, informed decision about your LTD Plan coverage. Work through the following questions to help make a decision about your need for coverage under Oxy s LTD Plan: Do you and others who rely on you for support need the financial protection that your disability insurance coverage can provide? Can you obtain better or less expensive coverage elsewhere? And, if yes, How important is continued eligibility for coverage under Oxy s medical, dental and life insurance plans if you became disabled? Do you need the Disability Completion Benefit provided with the higher Income Plus option? continued on page 2 The information shown or referenced in the articles entitled 2002 PSA/OSA Contribution Tables and 2002 Savings & Retirement Update constitute part of a prospectus covering securities that have been registered under the Securities Act of RETIREMENT & SAVINGS IMPROVEMENTS DELAYED NOT ALL STATES ON BOARD Earlier this year, President Bush signed into federal law the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA). The legislation has received a great deal of media attention because it represents the largest federal tax reduction measure passed by Congress in 20 years. EGTRRA also contains a number of provisions that improve savings opportunities for employees who participate in employer-sponsored defined contribution plans like the PSA/OSA and PRA/ORA. A critical but less publicized aspect of any new federal tax legislation such as EGTRRA is its adoption by individual states. In the past, most states would merely rubber-stamp the adoption of federal tax changes with little debate. However, at the last minute, a number of states that face serious budget deficits have balked at immediately adopting the improved tax deferral opportunities provided under EGTRRA because of its impact on lost state tax revenue. Since a significant number of Oxy plan participants reside in these nonconforming states, we are delaying the company s option to implement the provisions of EGTRRA under Oxy s plans until the dust settles. Nevertheless, assuming these states legislate favorably in early 2002, Oxy is hopeful that it will be able to implement savings opportunities for eligible employees later next year.

2 LTD UPDATE...(CONTINUED) 2002 LTD ENROLLMENT PERIOD Because LTD contributions will be deducted on a pretax basis in 2002, the IRS requires that Oxy offer only one opportunity each year to enroll, change, or cancel your LTD coverage, unless you experience a qualified change in status. During the annual enrollment period taking place now through January 31, 2002, you may: Retain your current LTD coverage at the 2002 rates no action is required on your part. Reduce your current coverage level from the Income Plus to the Basic Income Option. Cancel your current LTD coverage. Apply to Hartford for new LTD Plan coverage (if you are not currently enrolled) or apply to increase your current level of coverage from the Basic Income to the Income Plus option. If you elect either of these options, you will be required to submit an application to Hartford along with evidence of good health. Any costs associated with providing such evidence will be at your expense, and coverage will begin only if Hartford approves your application. If you wish to enroll, or increase your coverage level from the Basic Income to the Income Plan option, call OxyLink by January 31, 2002 to request an application form. If you wish to cancel or reduce your coverage, call OxyLink at by January 31, The change will take effect in the next available pay period. Keep in mind, however, that if you cancel or reduce your LTD coverage and wish to re-enroll or increase coverage in a future enrollment period, you will be required to submit a new application and provide evidence of good health satisfactory to Hartford. You also risk the possibility that Hartford may not approve your application. If you do not wish to change your current LTD coverage, no action is required. After January 31, 2002, you generally will not be eligible to change your election until the next annual enrollment period. LTD COVERAGE OPTIONS The Basic Income option provides an income benefit that, subject to offsets for income from other sources, generally provides a benefit of 60% of your base pay. The Income Plus option provides the Basic Income benefit plus an additional Disability Completion Benefit (DCB) equal to 10% of your monthly pre-disability base pay times the number of months you are disabled, plus a 6% annual cost of living adjustment. The DCB is payable to you in a lump sum at the end of your disability (or to your beneficiary under the life insurance plan in the event of your death). IMPORTANT: Currently under both options, eligibility for medical, dental and life insurance coverage also continues, under the terms of those plans, while you are eligible for LTD benefits. TEXAS HMO COVERAGE REQUIREMENT A recently enacted Texas law requires HMOs and other fully insured health care plans to allow participants in Texas access to expanded coverage for children and grandchildren. Unmarried children (including stepchildren) of participants may be covered until their 25 th birthday. Unmarried grandchildren of participants may be covered until their 25 th birthday, if the grandchildren are tax dependents of the participant when first enrolled. Self-insured employer-sponsored health care plans like the Aetna PPO and dental plans and insured plans in other states are not subject to this state regulation. Any Texas participants who elect to cover these types of dependents will pay the full coverage cost equal to the higher rates charged to participants and dependents who elect COBRA coverage (between $214 and $277 per person/per month, depending on the Texas HMO). For more information call OxyLink. 2

3 2002 PSA/OSA CONTRIBUTION TABLES The 2002 PSA/OSA Contribution tables appear on page 6. The tables are based on age and annual base pay. Table A takes into account the change in the amount of Oxy s contributions to your PRA or ORA because of the higher 2002 Social Security Wage Base, $84,900. The table also reflects the current plan and government limits for combined employee and company contributions under defined contributions plans like the PSA/ PRA and the OSA/ORA (the lesser of 25% of base pay up to $170,000, or $35,000). The government s indexed before-tax employee contribution limit in 2002 will increase to $11,000 (from $10,500). To determine your maximum contribution percentage in 2002, find the category on the table that applies to you. If you are eligible to participate in the PRA or ORA, use Table A. If you receive pension accruals under a company-sponsored defined benefit pension plan or the Oxy Permian Cash Balance Retirement Plan, use Table B. The company matches 100%* of both your before-tax and after-tax contributions to the PSA or OSA up to 6%. If you contribute to the PSA or OSA on a before-tax basis in 2002 and your contributions reach the $11,000 limit, your contributions automatically will be switched to after-tax for the remainder of the year and you will be notified of the change. If this occurs, your contributions automatically will be switched back to before-tax at the beginning of 2003 if you are contributing to the plan at that time. If your maximum contribution percentage will be higher in 2002 and you wish to make a change, you may do so on or after December 28, The change will take effect in the next available pay period following the date you make your election. If you participate in the PSA, contact OxyLink at oxylink.oxy.com or call OSA participants should contact the OSC at osa.oxyvinyls.com or call *Represented employees may have negotiated different company match rates. DISABILITY PLAN CLAIMS NEW AETNA CARDS PROCESSING CHANGES Under revised ERISA guidelines, Hartford is implementing the following claims processing changes under the Long- Term Disability (LTD) Plan effective January 1, When a claim for LTD benefits is submitted, Hartford will notify the claimant of their decision within 45 days. If delays beyond Hartford s control occur while gathering the required information to make their decision, the claimant will be notified that a 30-day extension is necessary. A second 30-day extension may also be requested. If Hartford makes an adverse decision or denies a claim, the claimant has up to 180 days to submit a written appeal to Hartford. Following Hartford s receipt of an appeal, they must make a decision within 45 days. Special circumstances may require an additional 45-day extension for Hartford to make a determination on an appeal. By reference, these changes are incorporated into the plan s summary plan description that may be found in your Employee Benefits Handbook. Due to year-end system changes, some employees at Elk Hills will receive new Aetna ID cards. Other Aetna participants who change their name or elected new Aetna coverage in 2002 during the Choices enrollment period will also receive new cards. FINAL REMINDER SUBMIT YOUR 2001 SPENDING ACCOUNT CLAIMS NOW!! If you participated in the Pretax Spending Plan in 2001, you have until the end of the year to use up the money in your accounts. Under current IRS regulations, unspent money remaining at the end of 2001 will be forfeited. To qualify for reimbursement under a 2001 Health Care or Dependent Day-Care Spending Account, expenses must be incurred on or before December 31, 2001, and claims must be submitted to Aetna by March 15,

4 2002 SAVINGS & RETIREMENT UPDATE LARGE CAP II FUND TERMINATION The PSA/OSA s Large Cap II Fund will be terminated as of March 31, 2002 because this fund s investment style is already represented by other existing fund choices. The Large Cap II Fund is invested in the Fidelity Contrafund. If you have a balance remaining in this fund on that date, it automatically will be transferred to the S&P 500 Index Fund. In addition, if you are investing a percentage of your future employee contributions into the Large Cap II Fund, that portion of your future investment election automatically will be redirected to the S&P 500 Index Fund at the same time. If you want your Large Cap II Fund balance or future contribution investment election directed to different funds, you must make these elections between now and 2:00 P.M. (Central Time) on March 31, PSA participants may make their elections on any trading day through OxyLink s Internet web site at oxylink.oxy.com, or by calling Through 2:00 P.M. on February 28, 2002, OSA participants can make the same elections by contacting the OxyVinyls Service Center at osa.oxyvinyls.com, or by calling Beginning on March 1, a brief quiet period will then take place to complete the recently announced plan merger of the OSA into the PSA. During the quiet period, estimated for completion by mid- March, no investment changes may be requested. From the end of the quiet period through 2:00 P.M. on March 31, 2002, current OSA participants may then make fund transfer and future investment changes through the OxyLink web site or IVR system shown in the previous paragraph. Two new investment options will be offered under the PSA beginning in April Information about these new funds will be announced next March. CATCH-UP CONTRIBUTIONS DELAYED CHANGES TO ROLLOVER RULES ROLLOVERS FROM THE SAVINGS & RETIREMENT PLANS Under current federal law, plan participants are permitted to roll over all or part of the taxable portion of a rollover-eligible plan payment from a qualified Oxy plan to a traditional IRA or to another employer s qualified plan that accepts rollovers. Beginning in 2002, participants may elect to roll over all or part of the taxable and/or nontaxable portions of a rollover-eligible plan payment to a traditional IRA or, if permitted by the receiving plan s sponsor, to another employer s qualified plan, 403(b) plan or 457 government plan that accepts rollovers. Rollovers are not permitted to Roth, SIMPLE or education IRAs. Since the tax laws of some states may not conform to this new federal regulation, participants should consult with a tax advisor before rolling over nontaxable balances into another plan. Ask if the subsequent earnings on nontaxable contributions rolled over are permitted to be tax deferred under state law in your state of residence. ROLLOVERS INTO THE PSA/OSA Active employees may currently elect to roll over taxable distributions they received from qualified employer-sponsored plans, 403(b) plans, 457 government plans and conduit IRAs (as defined under the Internal Revenue Code). In 2002, Oxy s plans will continue to accept rollovers into the PSA or OSA of taxable distributions from the same types of qualified plans or conduit IRAs, but the nontaxable portion of any distribution rolled over to an Oxy plan, if any, will not be accepted. DISTRIBUTIONS TO SURVIVING SPOUSES In addition to traditional IRAs, surviving spouses who receive a rollover-eligible payment from their deceased spouse s qualified plan will also be permitted to roll over all or part of the taxable and/or nontaxable portions of that payment from a qualified Oxy plan into their own employer s qualified plan, 403(b) plan or government 457 plan that accepts rollovers beginning in One of the most publicized provisions of EGTRRA that employers may adopt permits an employee who is age 50 or older to make additional before-tax catch-up contributions when his or her annual before-tax contributions reach the federal limit. In 2002, the maximum catch-up contribution amount under EGTRRA is $1,000. However, the implementation of catch-up contributions under Oxy s plans will be delayed until the government issues final administrative guidelines, and we also are able to adopt other EGTRRA provisions under Oxy s plans. We hope this will be possible during NOTICES - NO ACTION REQUIRED Summary Annual Reports are enclosed. The government requires plan sponsors to distribute these financial statements to plan participants annually. Also enclosed are Notices to Interested Parties under the PSA and PRA that are required to be distributed to plan participants due to Oxy s IRS filings of amended PSA and PRA plan documents to obtain new determination letters. Plan amendments are required to comply with government regulations and incorporate previously announced plan changes.

5 OXYLINK S ENHANCED WEB SITE NOW AVAILABLE!! As some of you recently may have discovered, a new and improved interactive OxyLink web site is now available at oxylink.oxy.com. You may access the enhanced site from work or home through the Internet (or the Oxy Intranet). When you reach the site, we suggest you bookmark it to ease future access. The site offers both unsecured and secured options. From the unsecured options on the site s home page, you can access general information about Oxy s benefit plans and link to other sites such as Aetna, Merck-Medco, the Social Security Administration and the IRS. For example, from the Retirement & Savings option, you can access the PSA/PRA rates of return, general fund information, view the PSA/PRA tax notice, and obtain information about domestic relations orders, 529 plans and investment education. The Forms and Publications option lets you view Oxy s summary plan descriptions and other benefit publications and print generic claim forms. For security reasons, you may not navigate between the secured and unsecured options. Switching between these options will require you to logoff and re-enter your ID number and PIN to access the secured site. The secured options that you may access by providing your ID number and OxyLink PIN are dynamically designed to only display the options you are eligible to view. For example, a terminated employee who needs to access and manage his or her deferred PSA and PRA balances would not see the Payroll or Vacation Information options that are available to active employees. You can easily navigate through the site by selecting the option you wish to view from the navigation panel shown to the left of the screen. Here is a brief summary of the options available from the secured portion of the site: PERSONAL DATA View and update certain personal data such as your name, address, telephone numbers and emergency contact information. For certain data fields like birth date, marital status, etc., you will only be able to view information (and you will be asked to contact OxyLink or your HR representative to request a change). PAYROLL INFORMATION View your pay stubs on-line (if you directly deposit your net pay and are signed up for E-Delivery), add or change payroll direct deposit elections, change federal withholding elections and request generic forms to change State elections, and access other payroll forms. VACATION INFORMATION Link to Oxy s online Vacation and Absence System (if your location has been set up for access). RETIREMENT & SAVINGS View your plan balances, make investment changes, model/request PSA loans (active employees only), obtain personalized payment request and other forms, and, if you sign up for E-Delivery, view your PSA and PRA statements on-line (future enhancement). 5 INVESTMENT ADVICE In April 2002, active employees will be able to obtain individualized retirement and savings investment advice through this site from Financial Engines. For more information about this future company-paid service, please view the summary under this option. MEDICAL AND DENTAL View current health care coverage and dependent information, obtain generic Aetna and Merck-Medco claim forms, etc. LIFE, ACCIDENT & DISABILITY View your current levels of company and employee-paid coverage under Oxy s life, accident and disability plans, and obtain beneficiary designation forms. PRETAX SPENDING ACCOUNTS If enrolled, view elected annual contribution amounts for the current year and obtain generic claim forms. ELECTRONIC DELIVERY Sign up for E-Delivery to obtain pay stubs, participant statements, benefit communications, etc., on-line. One of the new features on the secured site is the ability to print personalized beneficiary designation and payment request forms. If you have a printer at your desktop, this means that you no longer need to wait for a form to be mailed to you by OxyLink, which reduces turnaround time. If you do not have a printer, a mail form request option is also available. The best way to become familiar with the features and convenience of the new site is to simply logon to oxylink.oxy.com and just explore. It s designed to make managing and getting in touch with your benefits and personal information easier than ever before...and, remember the site will continue to grow as more features are added in the future.

6 TABLE A 2002 PSA/OSA CONTRIBUTION TABLE FOR PRA/ORA-ELIGIBLE EMPLOYEES If Your Age and Your Maximum PSA/OSA Base Pay are: Contribution Percentage is: Under Age 35 and Pay up to $ 84,900 15% Pay from $ 84,901 to $113,199 14% Pay from $113,200 to $142,207 13% Pay from $142,208 to $147,676 12% Pay from $147,677 to $153,584 11% Pay from $153,585 to $159,983 10% Pay from $159,984 to $166,939 9% Pay from $166,940 to $170,000 8% Pay over $170,000 compensation limit 7%* Age 35 or older Pay up to $ 84,900 12% Pay from $ 84,901 to $106,125 11% Pay from $106,126 to $140,160 10% Pay from $140,161 to $145,351 9% Pay from $145,352 to $150,942 8% Pay from $150,943 to $156,980 7% Pay from $156,981 to $162,583 6% Pay over $162,583 (up to $170,000 compensation limit) 7%* *Under this category, your retirement contributions will be credited to the Supplemental Retirement Plan and you are eligible to contribute up to 7% of the base pay you receive to the PSA/OSA, up to compensation limit. TABLE B 2002 PSA CONTRIBUTION TABLE FOR NON-PRA-ELIGIBLE EMPLOYEES If Your Base Pay is: Your Maximum PSA Contribution Percentage is: Any Age Pay up to $166,666 15% Pay over $166,666 (up to $170,000 compensation limit) 14% Note: These tables do not apply to represented employees at INDSPEC The company expects and intends to continue its benefit plans but does not guarantee any specific level of benefits or the continuation of any benefits during any periods of active employment, inactive employment, disability or retirement. Benefits are provided solely at the company s discretion and do not create a contract of employment. The company reserves the right to modify, change or terminate any of its plans at any time. 6