Profits at Big U.S. Oil Firms Sharply Lower

Three of the nation’s largest oil companies--Texaco, Shell and Phillips Petroleum--on Thursday reported sharply lower second-quarter earnings, while Standard Oil said it suffered a huge loss.

Pennzoil, meanwhile, said its profit was down more than 50% from a year ago.

All five blamed the poor quarterly performance on slumping worldwide oil prices.

Texaco, the nation’s third-largest oil company, said it netted $185 million on revenue of $7.9 billion. In the second quarter of 1985, it earned $305 million on $11.7 billion in revenue.

Shell, ranked seventh, said second-quarter net earnings were $219 million on revenue of $4.09 billion, compared to $317 million on revenue of $5.07 billion in the comparable period last year. The Houston-based company is wholly owned by Royal Dutch-Shell, which is based in the Netherlands.

No. 8 Phillips said its second-quarter net income was $8 million, compared to restated net income of $117 million. Revenue totaled $2.34 billion, down from $3.98 billion in 1985.

The Bartlesville, Okla.-based company said it also incurred a $54-million after-tax charge for a work force reduction program.

No. 12 Standard Oil, based in Cleveland, said it lost $681 million--after a special charge of $804 million--on revenue of $2.6 billion. That compared to second-quarter 1985 earnings of $390 million on $3.49 billion in revenue.

Pennzoil, based in Houston, said it netted $25.2 million in the second quarter, down 52% from $52.6 million in 1985. Second-quarter revenue totaled $480 million, compared to $565 million last year.

Texaco Chairman John K. McKinley said that “extremely low crude oil prices in the United States and abroad have adversely affected” quarterly results.

“The petroleum industry continues to be confronted by a large surplus supply in relation to demand,” he said. “As long as the excess crude oil supply continues, the outlook for product prices will remain uncertain and under downward pressure.”

His remarks were echoed in reports by top executives of Shell, Phillips, Standard and Pennzoil, all of whom blamed the volatile oil market on declining earnings for all of this year. The price of crude oil, which was as high as $32 a barrel last fall, currently is hovering between $10 and $12 a barrel, amid increased production.

For the first six months of 1986, White Plains, N.Y.-based Texaco earned $513 million, compared to $625 million in 1985. Texaco’s six-month performance in 1986 included a first-quarter after-tax charge of $20 million for an accounting adjustment.

Shell said it earned $495 million in the first half of the year, down from $633 million in 1985. Revenue during the period totaled $8.83 billion, versus $9.84 billion.

For the six months ended June 30, Phillips had net income of $104 million on revenue of $5.45 billion. In the same period in 1985, restated net income was $230 million on revenue of $7.94 billion.

Phillips Chairman C. J. Silas also said the company incurred a $54-million after-tax charge for the work force reduction program, but the cost was partially offset by a $10-million after-tax gain on asset sales.

Since the beginning of the year, Phillips has reduced its work force by about 3,400 employees through attrition, early retirement and layoffs. About 2,300 of those were U.S. employees who were part of the special reduction program, which included inducements for early retirement.

For the first half of 1986, Standard Oil said it incurred a net loss of $428 million, compared to earnings of $733 million in the first six months of 1985.

Standard Oil said its after-tax charge on second-quarter earnings was related mostly to the devaluation of oil, energy exploration expenses and restructuring of its coal, exploration and production units. The effect was partially offset by an income tax benefit of $622 million, the company added.

Pennzoil said it earned $9 million in the first six months of this year. That represented a 92% reduction from six-month earnings of $110 million in 1985. Revenue totaled $991 million in 1986, compared to $1.1 billion last year.