Oil Company Profits Take a Sharp Jump
Arco reported a nearly 22% increase in third quarter profit on Monday and other oil companies posted significant gains as energy firms reaped the benefits of higher crude oil prices triggered by the Iraqi invasion of Kuwait.
Industry analysts said profits of some companies would have been even higher if they had passed along to consumers the total increase in crude oil prices, which have shot up past $40 a barrel before retreating under $30 Monday.
The robust earnings report come as energy companies face public ire over rising gasoline prices and claims that the industry is taking advantage of Mideast tensions to fatten its bottom line.
“The companies are very cognizant of what they want to show and what they don’t want to show” in terms of profits, said Thomas Lewis, head of the energy research group at Duff & Phelps in Chicago. “They certainly don’t want to be accused of gouging.”
Los Angeles-based Atlantic Richfield Co. said its profit for the three-month period ending Sept. 30 rose to $462 million from $379 million in the same period last year. Quarterly revenue shot up about 30% to $4.82 billion.
Arco--one of the largest producers of Alaskan crude oil--said the average price for its domestic crude rose to $16.89 a barrel in the third quarter from $12.97 a barrel in the same period last year.
The quarterly profit included an $80-million one-time gain from the settlement of an offshore accident and the sale of Arco’s Norwegian assets. However, the gain was partially offset by Arco’s payment to settle a dispute with the state of Alaska over North Slope oil royalties.
Not counting these one-time charges and gains, Arco said its third-quarter profits would have been roughly equal to those in the year-ago quarter.
Given the degree of uncertainty in energy markets, “Arco made every effort to moderate prices to our dealers,” said Chairman Lodwrick M. Cook, whose company froze gasoline prices for two weeks in August in response to President Bush’s call for oil companies to show restraint in price hikes.
Arco’s profits “could have been substantially higher in the quarter if they passed all that through,” said Craig Schwerdt, an industry analyst at Drake Capital Securities in Santa Monica.
In other oil company earnings reports, Phillips Petroleum Co. said higher crude oil and natural gas prices more than doubled its third-quarter profit, which rose to $178 million on revenue of $3.4 billion.
Ashland Oil Inc., whose fourth quarter ended Sept. 30, reported quarterly profits of $59 million, contrasted with a loss of $39 million in the year-ago period. Its quarterly revenue was $2.5 billion. For the fiscal year, Ashland said profit more than doubled to $182 million on revenue of $9 billion.
