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.
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.
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