Occidental Reports Sharply Lower Earnings
Occidental Petroleum Corp. on Monday reported a second-quarter net income of $186 million, or 51 cents a share, up from $158 million, or 41 cents, for the second quarter of 1997.
However, earnings before special items were $47 million for the latest quarter, well below the $138 million for the same period in 1997, a shortfall the Los Angeles-based company attributed to low oil and basic chemical prices.
Sales were $1.54 billion for the ’98 second quarter, down from $2.2 billion for the like period of 1997.
The oil and chemical company’s results matched the average estimate of analysts polled by First Call Corp.
The results for the eighth-largest U.S. oil producer are expected to be among the worst of major oil companies to be reporting second-quarter earnings this week, because Occidental gets relatively little of its revenue from refining, a business less sensitive to changes in crude prices.
“This is a company that’s highly leveraged to crude oil prices, especially after their restructuring,” said Steve Enger, a Petrie Parkman & Co. analyst.
Occidental’s fortunes became tied even more closely to oil prices this year when it agreed to sell its MidCon natural-gas pipeline unit, for $3.1 billion, and bought an Elk Hills oil field near Bakersfield, for $3.5 billion.
Occidental will have a hard time showing earnings improvement as long as oil and basic chemical prices remain low. Crude oil on the New York Mercantile Exchange averaged $14.67 a barrel in the second quarter, 26% lower than a year earlier. Oil prices closed at $13.34 a barrel on Monday.
Occidental reported that its second-quarter sales fell 28% to $1.54 billion from $2.16 billion for the ’97 second quarter. Oil and natural gas operating profit, not including a gain, fell 35% to $90 million from $139 million.
Occidental stock fell 31 cents to close at $25.19 on the New York Stock Exchange.
Enger said he expects third-quarter earnings will be less than the 55 cents a share earned for last year’s third quarter, but that fourth-quarter profit may exceed the 29 cents of a year ago if oil prices improve.
The company’s chemicals segment earned $90 million, not including a charge. That’s down 52% from $189 million for the year-earlier quarter. Lower chemical prices and weak Asian demand were cited as the causes.
Including a net gain of $139 million, or 36 cents a share, from the sale of U.S. oil and gas assets and the cost of cutting jobs at its Equistar chemical partnership, Occidental had net income of $186 million, or 49 cents a share.
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Oxy Results
Occidental Petroleum Corp.’s quarterly revenue and earnings:
Revenue
In billions of dollars:
2nd quarter: $1.54 billion
Earnings
In millions of dollars:
2nd quarter: $186 million
Source: Company reports
