Arco Leads Oil Industry in Rising Profits

The oil industry began reporting results Monday for a year in which oil prices rebounded from their nose dive of 1986, and among the biggest winners was Atlantic Richfield.

Arco, whose fortunes are more closely tied than most oil giants to the price of crude oil, said earnings more than quintupled to $340 million in the October-December quarter. For the year, profits doubled to $1.22 billion.

By contrast, Unocal--which relies more heavily than Arco on the sale of refined products--said the benefits of the climb in the price of crude were largely offset by shrunken refining profits. The company reported generally flat results.

Exxon, the biggest of the oil companies, reported a big improvement in fourth-quarter profits once the sale of nearly half a billion dollars in assets in the comparative quarter is removed from the equation. For the year, Exxon’s operating profits were roughly unchanged.

Unocal’s results were below forecast while Arco and Exxon generally matched the expectations of analysts, whose earnings projections at a time of changing crude prices are usually based on the extent to which a company relies on the sale of crude oil, compared to gasoline or other refined products.

For Arco, whose huge oil reserves in Alaska give it more crude oil production each day than its own refineries could process, the story lies in figures showing that the company’s 1987 price for crude averaged $12.56 per barrel, compared to $8.95 in the previous year.

Salomon Bros. analyst Bernard J. Picchi said Arco was “just a little bit stronger than we expected all the way across the board. . . . They had a fabulous quarter.” Picchi said earnings from the Lyondell Petrochemical unit were especially strong.

Picchi and other analysts are likely to boost their 1988 forecasts for Arco in light of the Los Angeles-based company’s decision last week to sell its recently acquired stake in Britoil, a large United Kingdom oil concern, for a $239-million pretax profit. The deal is likely to boost results for the current quarter by 75 cents to 85 cents a share, analysts estimated.

Unocal reported a 39% decline in fourth-quarter earnings to $30 million. Though the decline was more than explained by one-time asset sales in the year-earlier period, earnings for the quarter still fell below expectations. For the year, profit edged up 3% to $181 million.

“Unocal was a little disappointing. Refining profits were poor, and their fourth quarter didn’t show much improvement in natural gas prices,” said analyst M. Craig Schwerdt of the Morgan, Olmstead brokerage in Los Angeles.

Unocal said it boosted its capital spending sharply in the fourth quarter, including a 45% rise in exploration expenses to $42 million.

Exxon’s fourth-quarter net climbed 8.8% to $1.56 billion. But when proceeds of the 1986 sale of the company’s Reliance Electric unit are deleted, the fourth-quarter profit is 66% higher than the comparable year-ago result. For the year, net earnings declined 10% to $4.84 billion.

Exxon said the October-December period was its best showing in eight quarters. Like Arco, it reported a strong showing by its petrochemical units.

Exxon’s revenue rose 18% in the fourth quarter to $22.6 billion and climbed nearly 10% for the year to $84.1 billion.