Rising Gas Prices Boost Occidental’s Profit
Occidental Petroleum Corp. said Wednesday that first-quarter profit rose 88% because of increased oil production and higher gas prices in California.
The Los Angeles-based oil and natural-gas producer said profit from operations rose to $510 million, or $1.37 a share after a payment of preferred dividends, from net income of $271 million, or 74 cents, a year earlier, the company said in a statement. Revenue rose 74% to $4.48 billion.
Production rose 36% to 478,000 barrels a day of oil, gas and gas liquids, the company said. “Premium pricing” for gas from Elk Hills production in California also boosted profit, and prices are expected to remain high for as long as three years, the company said.
The average price of gas in California quadrupled last quarter to $13.24 per million British thermal units from a year ago, according to Bloomberg Energy Service statistics. That was more than double the average of the benchmark New York Mercantile Exchange gas contract for delivery at Louisiana’s Henry Hub, which connects to nine interstate pipelines.
California has been hit by a 10-month power shortage that has sent electricity and gas prices soaring and forced the state’s largest utility into bankruptcy.
Occidental’s shares fell 50 cents to close at $27.10 on the New York Stock Exchange. They had risen 37% in the past year.
Occidental’s chemical unit had a $53-million loss from operations compared with a $143-million profit a year ago as costs rose and sales fell because of the slowing economy, Chief Executive Ray Irani said. The unit makes chlorine and caustic soda used in the water purification and sanitation industries, and vinyl and petrochemicals used in plastics.
Occidental was expected to earn 99 cents a share, the average estimate of analysts polled by First Call/Thomson Financial.
In the latest quarter, items including a charge of $26 million, or 7 cents a share, for accounting changes, severance charges and plant write-downs made net income $484 million, or $1.30.
