Arco, Unocal Say Lower Oil Prices a Factor in Profits Fall

Arco and Unocal Corp. on Monday both reported lower third-quarter earnings, though Arco’s beat analysts’ estimates because of stronger-than-expected refining profit on the West Coast.

Arco was expected to post a bigger drop from the year-ago quarter, when the introduction of cleaner-burning gasoline in California raised pump prices and profit. Lower crude oil prices and a surge in gasoline demand in the 1997 quarter helped Arco’s refining arm, bolstering earnings, analysts said.

Unocal sold its refining business to Tosco Corp. earlier this year, and the company couldn’t offset declining oil prices with profit from gasoline sales as integrated rivals did.

“It’s the power of integration” said Bruce Lanni, an analyst with Oppenheimer & Co. “You have a lot better earnings stream over the long run because you’re not as dependent on one business.”

Unocal’s profit fell 20% because of lower worldwide oil prices and a decline in oil and natural gas production in the U.S. Oil prices averaged about $19.80 a barrel in the 1997 quarter on the New York Mercantile Exchange, compared with about $22.30 a year earlier. Shares of the El Segundo-based oil company fell $3.06 to close at $39.25 on the New York Stock Exchange.

Los Angeles-based Arco’s profit fell 10% because of lower profit from its chemicals business and lower oil prices. The company’s shares fell $2.94 to close at $78.56, also on the NYSE.

Arco’s profit from operations fell to $431 million, or $1.31 a share, from $479 million, or $1.47, in the year-ago quarter. The company was expected to earn $1.17 a share, based on the average estimate of analysts. Revenue fell 3.6% to $4.7 billion from $4.88 billion.

Net gains of $85 million in the current quarter brought net income to $516 million, or $1.57 a share. There were no special items reported in the 1996 quarter.

Unocal’s profit from continuing operations declined to $94 million, or 38 cents a share, from $118 million, or 25 cents, a year earlier. Per-share figures for the 1996 quarter reflect an exchange of preferred stock. Revenue rose 4.5% to $1.40 billion from $1.34 billion.

Results lagged forecasts that the company would earn 42 cents a share.

In the latest quarter, a gain of $83 million, or 33 cents a share, from an accounting change, tax adjustments, and environmental and legal provisions, resulted in net income of $177 million, or 71 cents.

At a Glance:

Mountain View-based Silicon Graphics Inc. said its loss for the fiscal first quarter widened to $55.7 million, or 31 cents per share, hurt by slack sales of its computers that run networks of business machines. A year ago it reported earnings of $21.6 million, or 13 cents.

Enova Corp. of San Diego reported third-quarter earnings of $65.1 million, or 57 cents per share, compared with $62.7 million, or 54 cents, in the 1996 quarter.

Pixar Animation Studios, based in Richmond, reported third-quarter net income of $3.7 million, or 8 cents per share, compared with $9.6 million, or 21 cents, a year ago.

Emeryville-based Chiron Corp. said its third-quarter earnings rose 33% to $17 million, or 10 cents a share, from $13 million, or 7 cents, a year ago.

Hambrecht & Quist Group of San Francisco said fiscal fourth-quarter earnings fell 16% to $9.7 million, or 37 cents a share, compared with net income of $11.5 million, or 47 cents, a year earlier.

Chatsworth-based MRV Communications Inc. reported third-quarter net income of $5.9 million, or 23 cents per share, compared with a net loss of $15.5 million, or 79 cents, a year ago that included charges.