Lower Prices Depress Oil Firms’ Profits
Mobil Corp. reported surprisingly strong third-quarter earnings Tuesday, but other major oil companies reported net income down because of lower crude oil and natural gas prices and poor demand for petroleum products because of the recession.
Los Angeles-based Occidental Petroleum Corp. also reported strong third-quarter results, but they reflected one-time gains from the company’s restructuring program.
“Generally, profits are down year to year, mainly because last year in the third quarter oil prices were already rising after the Iraqi invasion of Kuwait,” said Paul Mlotok, an oil industry analyst with Morgan Stanley & Co. in New York.
The futures price of light, sweet crude oil averaged $21.70 per barrel in the third quarter of 1991, more than $5 a barrel below the $26.80 average price for the same oil in the third quarter of 1990, according to Pegasus Econometric Group in Hoboken, N.J.
“One company that has been a positive surprise has been Mobil--and in part, that’s because last year’s earnings for them weren’t as strong as the rest,” Mlotok added.
Fairfax, Va.-based Mobil, the nation’s second-largest energy company, reported net income down 3.7% to $365 million from $379 million a year earlier. Excluding one-time items, operating earnings were $395 million, up 47% from a year ago.
The company benefited from higher international, refining and marketing profits.
Texaco Inc., the No. 4 U.S. energy company, reported net income of $286 million in the third quarter, down 25% from 1990’s $381 million.
Operating earnings were down in all sectors of the White Plains, N.Y.-based company except international refining and marketing. Texaco Chairman James W. Kinnear said the company’s crude oil prices averaged $18.70 a barrel in the quarter, compared to $24.60 a year earlier.
Refining, marketing and chemical profit margins were hurt because of weak demand for chemicals and petroleum products, particularly on the West Coast, he added. Revenue for the company was $9.4 billion, down from $11 billion
Phillips Petroleum Co. of Bartlesville, Okla., reported net quarterly income of $56 million, down 68.5% from last year’s $178 million. Quarterly revenue was down to $3.1 billion from $3.4 billion.
Chairman C. J. Silas said lower prices and profit margins in all of the company’s key product lines led to the downturn. He blamed the poor economy and continuing fallout from a fire earlier this year at the company’s Sweeny, Tex., oil refinery.
Income would have fallen even further without extraordinary gains from asset sales, favorable settlement of tax claims and lucrative foreign currency transactions, the company said.
In Los Angeles, Occidental reported that net income was up 58.3% to $171 million from $108 million a year ago.
But the increase reflected tax benefits and one-time gains from sales of major assets under the company’s ongoing restructuring program. The gains were offset in part by one-time losses connected with early repayment of the company’s debt under the program.
Excluding special items, Occidental’s oil and gas operations reported income of $51 million in the quarter, down from $78 million in 1990. The company’s chemical division, which has typically provided most of its net income, lost $261 million in the quarter, contrasted with a profit of $152 million a year ago.
Overall, Occidental’s third-quarter revenues were down to $2.33 billion from $2.72 billion in 1990.
In other earnings, Ashland Oil Inc. reported fourth-quarter net income up 6.3% to $63 million from $59 million in 1990. Amerada Hess Corp. reported a net loss of $7.5 million in the third quarter, contrasted with a profit of $280 million a year ago.
