Asset Sale Boosts Profit for Occidental
Falling in line with much of the oil industry, Mobil and Phillips Petroleum reported sharp drops in second-quarter profit Tuesday, while Occidental Petroleum managed a spurt in net income by disposing of unwanted assets.
Meanwhile, reports that Iraq may be allowed to pump oil again on a limited basis sent oil futures prices lower. But industry experts said Baghdad’s oil, should it be added to world supplies, will ease a tight market later this year.
For oil companies, the second quarter proved to be a difficult one despite crude prices $2 to $3 a barrel higher than during the same period last year. Analysts blamed hard times in the chemicals business, sharply lower natural gas prices and heavy competition coupled with lower demand at the gasoline pump, particularly in the West.
Results are “kind of a mixed bag depending on the mix of your businesses,” said Michael L. Mayer, a San Francisco-based analyst for Wertheim Schroder & Co.
Occidental Petroleum posted second-quarter net income of $147 million, or 49 cents a share, up 65% from year-ago net income of $89 million, or 30 cents a share.
The 1991 period was boosted by an $85-million after-tax gain from the sale of Occidental’s interest in the An Tai Bao coal mine in China, as well as an extraordinary gain of $12 million in tax benefits. The second quarter of 1990 included an extraordinary gain of $20 million in tax benefits.
However, Occidental’s earnings from operations slipped nearly 21% to $242 million, from $305 million in the same quarter last year. Earnings from the company’s chemical, agribusiness and natural gas transmission operations were all down. Revenue for the quarter edged down to $5.06 billion from $5.12 billion.
Mobil Corp. said second-quarter net income was $445 million, or $1.08 a share, down 11% from the $498 million, or $1.19 a share, earned in the same period last year. The 1991 quarter included $44 million in asset sales, while last year’s second quarter included favorable net special items of $70 million.
Revenue rose to $14.45 billion from $13.83 million in the second quarter of 1990.
Phillips Petroleum posted net income for the quarter of $16 million, or 6 cents a share, compared to $105 million, or 43 cents a share, in the 1990 second quarter. The 1991 period included a $17-million extraordinary loss from the early retirement of some high-cost debt as well as $9 million in losses from foreign currency transactions.
Revenue stood at $3.3 billion, compared to $3 billion a year ago.
Oil prices fell Tuesday on news that the United States may support a temporary lifting of the United Nations’ economic embargo against Iraq, allowing it to resume selling oil and raise money for food and medicine. On the New York Mercantile Exchange, crude oil for September delivery closed at $21.32 a barrel, down 55 cents.
“The oil market really has been waiting for Godot and, in this case, Godot is Kuwaiti and Iraqi oil,” said Daniel Yergin, president of Cambridge Energy Research Associates, a consulting firm.
Even if Iraq is allowed to pump an estimated $1 billion worth of oil, it would take a few months for the oil to reach refiners--probably not until the fall, when cold-weather demand will begin to build, Yergin said.
“It will be coming into a market that would otherwise be looking to be pretty tight in winter,” he said.
Oil analyst Jim Murchie of Sanford C. Bernstein & Co. said he expects oil prices to hover around $20 a barrel if Iraq is allowed to resume sales, well below the winter prices of $24 or $25 a barrel that some have predicted.
