3 Oil Companies Record Losses
ChevronTexaco Corp., Marathon Oil Corp. and Unocal Corp. had fourth-quarter losses because the prices of oil and natural gas tumbled. ChevronTexaco also had merger costs and wrote down assets.
ChevronTexaco, the No. 2 U.S. oil company created by Chevron Corp.’s $45.8-billion purchase of Texaco Inc., posted a loss of $2.52billion, or $2.36 a share, contrasted with net income of $2.04billion, or $1.92, in the year-earlier period.
Marathon said its loss almost tripled to $898 million, or $2.90 a share.
Unocal posted a loss of $29million, or 12 cents a share, contrasted with net income of $173million, or 70 cents, a year earlier.
U.S. oil prices fell 36% in the period from a year earlier and gas prices dropped 59% as the country endured its third quarter of recession. Exxon Mobil Corp., the No.1 publicly traded oil company, and Conoco Inc. and Phillips Petroleum Co., whose merger will displace Marathon as the No.3 oil company in the U.S., last week posted a drop in fourth-quarter earnings.
“It’s just pricing,” said Alan Meyers, who manages $800 million, including oil stocks, in the Fifth Third Large Cap Value Fund. “Oil is the commodity and until you get the demand back up, you’re not going to see stable pricing. It may well take economic recovery to do that.”
El Segundo-based Unocal reduced its forecast for first-quarter and full-year earnings because of lower prices.
Shares of San Francisco-based ChevronTexaco dropped $3.70 to close at $85.17 on the New York Stock Exchange. Shares of Marathon, based in Houston, fell 60 cents to close at $27.40, and Unocal shares dipped 7cents to $34 on the NYSE.
ChevronTexaco said revenue fell by a third to $21.5 billion from $32.3 billion. The year-earlier figures are based on the combined results of the separate companies.
The company said it wrote down the value of oil- and gas-producing properties by $1.4 billion because prices fell. It also had write-offs of $452 million for assets in its chemical unit and properties that it considers unprofitable to develop.
Merger expenses of $1.17 billion included $700 million for job cuts and $300 million for office closings and relocations.
Without those items, ChevronTexaco said, earnings would have been $498 million, or 47 cents a share. On that basis, the company was forecast to earn 90 cents a share, the average estimate of analysts polled by Thomson Financial/First Call.
“We made some difficult decisions on investment priorities for the combined asset portfolio following the merger,” said Chief Executive David O’Reilly. “Many of these investment and operating decisions had unfavorable impacts on fourth-quarter earnings.”
Profit from producing oil and natural gas plunged 73% to $544million in the quarter from $2.05billion, the company said. Income from refining, marketing and transportation fell 57% to $215million from $498 million. The company said the amount it made on each barrel of oil it refined fell 45% to $24.25 a barrel.
