Mideast Fallout Is Uneven; Oil Profits Mixed

Texaco Inc. said earnings were up in the third quarter, mainly because of higher crude oil prices, but Mobil Corp. and Shell Oil Co. reported profits that were down sharply as losses in chemicals, refining and marketing more than offset crude oil gains.

Amerada Hess Corp. reported a fivefold increase in net income for the quarter, primarily because of gains in petroleum futures trading.

The results underscored the varying effects the Middle East crisis is having on oil companies, which saw crude oil prices soar from $21 a barrel Aug. 1 to as high as $40 a barrel during the third quarter. The difference depended on a company’s balance of businesses, analysts said.

“You’re talking about an industry with three legs: ‘upstream’ (oil exploration and production); refining and marketing, and chemicals,” said Jack Aydin, an energy analyst with McDonald & Co. Securities Inc. in New York. “When one side of the business does well, the other segments may do poorly, and there’s definitely an offset.”

White Plains, N.Y.-based Texaco Inc., the nation’s third-largest oil company, reported net income of $381 million in its third quarter, a 25% increase over the $305 million reported in the year-ago quarter.

Texaco’s exploration and production operations benefited from higher crude oil prices. These so-called upstream operations reported net income of $346 million, up from $189 million.

On the refining and marketing side, Texaco also reported a profit gain, unlike other oil companies whose so-called downstream operations suffered.

Refining and marketing reported net income of $169 million in the quarter, up from $159 million a year ago.

That increase might have been greater had not Texaco held back on increasing its wholesale and retail gasoline prices, James W. Kinnear, Texaco’s president and chief executive, said in a statement.

“While this (crude oil price) increase benefited the company’s upstream results, downstream refined product margins declined significantly since July due to the inability of the competitive marketplace to absorb higher crude and product acquisition costs,” Kinnear said.

Texaco’s petrochemical operations also suffered from higher costs of crude oil, as well as a general malaise in the petrochemical industry, with net income of $12 million in the quarter, down from $69 million a year ago.

Mobil Corp., the nation’s second-largest oil company, based in Fairfax, Va., saw its net income drop dramatically in the third quarter, despite increased earnings from higher crude prices. Net income was $379 million, down 29% from the $532 million reported a year earlier.

Mobil, one of the nation’s largest refiners and a net buyer of crude oil, said losses in chemicals and refining and marketing operations more than offset gains in its oil exploration and production business.

“In the United States, our monthly average crude oil cost more than doubled from June to September,” Mobil Chairman Allen E. Murray said in a statement. “However, we only recovered about half of the increase in the market.”

Upstream, Mobil reported net income of $380 million, up from $205 million a year ago. But refining and marketing profits fell to only $5 million in the quarter from $366 million a year earlier.

Similarly, chemicals, upon which Mobil is heavily dependent, saw earnings fall to $85 million from $121 million in the same quarter last year.

Shell Oil Co. of Houston, the nation’s largest marketer and retailer of gasoline, also blamed losses in refining and marketing for the 33% decline in its third-quarter net income, to $227 million from $340 million a year ago.

Exploration and production profits were up to $203 million from $136 million last year. But refining and marketing profits fell to $13 million from $106 million because of slimmer margins and increased refinery maintenance.

Chemical earnings fell to $65 million from $137 million because of higher crude and feedstock costs.

Amerada Hess Corp., which is mainly a refiner and marketer based in New York, reported net income of $280 million, a whopping 5 1/2 times the $51.8 million earned in the third quarter a year ago.

Of the third-quarter income total, $213.8 million resulted from petroleum futures trading, the company reported. Amerada Hess took the unusual step of breaking out those profits in an effort to deflect criticism about the huge increase in its overall profit and to show that it did not make it at the expense of consumers, analysts said.

Meanwhile, Sun Co., a major refiner based in Radnor, Pa., reported net income of $25 million in the third quarter, a 71% decrease from $85 million in the third quarter of 1989.