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Occidental's Record High Profit | Oil Watchdog

Occidental's Record High Profit

Fri, Apr 25, 2008 at 3:18 pm

    Occidental's Record High Profit

    Occidental’s Profit Soars 53% to Record High on Surging Oil Prices

    Buoyed by booming energy prices and output, Westwood-based Occidental
    Petroleum Corp. said Thursday that first-quarter profit leaped 53% to
    an all-time high.

    Analysts predicted continuing good fortune for the company but warned
    that a slowing global economy could lower demand and prices for crude
    oil, which averaged $98 for the January-March quarter.

    Advocacy groups complained that the rosy outlook for Occidental and
    other oil companies came at a steep price: drivers’ suffering.

    Judy Dugan, research director of Consumer Watchdog in Santa Monica,
    said oil companies’ profits show "an industry operating in an economic
    bubble with no connection to the pain its prices are causing in the
    rest of the economy."

    Net income for Occidental, the fourth-largest U.S. oil company, vaulted
    to $1.85 billion, or $2.23 a share, from $1.21 billion, or $1.43, a
    year earlier. Analysts surveyed by Thomson Financial had expected
    income of $1.98 a share.

    Houston-based ConocoPhillips, the third-largest U.S. oil company,
    reported Thursday that first-quarter net income jumped to $4.14
    billion, or $2.62 a share, from $3.55 billion, or $2.12, in the
    year-earlier quarter. The company would have done even better,
    executives said, if its refineries and service stations had been able
    to pass along more of oil’s rapid price increase.

    At Occidental, a 50% sales surge to $6.02 billion from $4.02 billion in
    the year-earlier quarter suggested that 2008 could overtake 2007 as the
    most successful year in the company’s history, Chief Executive Ray R.
    Irani said.

    Compared with $1.88 billion in first-quarter operating earnings last
    year for its oil and gas segment, Occidental pulled in $2.89 billion
    this year, offset by higher operating expenses. The company’s
    production is more than 80% oil.

    The total for last year’s period includes funds from a $412-million
    sale of a joint venture in Russia and $109 million from legal
    settlements, including a large tax payment from Ecuador over a property

    The rapid run-up in oil prices over the last two months has squeezed
    refiners, which have struggled to transfer skyrocketing oil costs to
    consumers, Citigroup analyst Doug Leggate said.

    But with no refining operation and a business model that touts
    disciplined investment and aggressive international growth, Occidental
    should expect smooth sailing.

    "Occidental has been the most profitable company in the sector, bar
    none," Leggate said. "If any company deserves this, it’s them."

    Occidental’s production of oil and natural gas increased to a daily
    average of 607,000 barrels of oil equivalent from 560,000 a day in the
    first quarter of last year, mainly because of output from its shared
    Middle East Dolphin natural gas project.

    Occidental executives said they hoped to boost production to as many as
    620,000 barrels a day in the second quarter, assuming oil at $100 a
    barrel. The company commanded $86.75 per barrel of crude during the
    quarter, up 68% from $51.67 last year.

    Occidental’s shares fell $1.66, or 2%, to $82.83, on a day when most oil companies lost ground in reaction to lower oil prices.
    Contact the author at: tiffany.hsu@latimes.com

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