Occidental Earnings Soar on Higher Oil Prices

Higher oil and natural gas prices turbocharged earnings at Occidental Petroleum Corp., which Tuesday reported first-quarter net income of $325 million, or 86 cents a share, up from $25 million, or 7 cents, in the year-earlier period.

Los Angeles-based Occidental’s financial report is the first in an expected parade of surging profits for oil companies. During the quarter, oil prices averaged $33.85 a barrel and natural gas prices averaged $4.75 per million British thermal units on the New York Mercantile Exchange, according to Occidental.

The higher prices will translate into a 172% increase in first-quarter earnings for U.S.-based oil companies, to a total of $8.8 billion, said Matthew Warburton, oil analyst for UBS Warburg.

Earnings are expected to decelerate later in the year as oil prices continue to moderate, but oil companies as a group will earn 46% more in 2003 than they did in 2002, Warburton said.

The Nymex crude oil futures contract for May delivery, which expired Tuesday, lost 96 cents to $29.92 a barrel as traders await a decision Thursday by the Organization of the Petroleum Exporting Countries on whether to cut production. Crude oil for June delivery declined 84 cents to $27.99.

Occidental shares slipped 3 cents to $30.57 on the New York Stock Exchange.

For Occidental, every $1-per-barrel increase in oil prices adds $31 million to quarterly earnings, and every 10-cent increase per million BTUs of natural gas adds $5 million, the firm said.

Occidental’s operating income jumped to $433 million, or $1.14 a share, from $123 million, or 33 cents, in the first quarter of last year.

That beat the $1.11-a-share consensus of analysts surveyed by Thomson First Call.

First-quarter revenue at Occidental rose 60% to $2.4 billion from $1.5 billion.

In addition to the boost from higher prices, Occidental saw the highest quarterly oil and gas production in its history, Chief Executive Ray R. Irani told analysts and investors during a conference call.

Thanks to acquisitions and improved recovery from existing wells, production rose 1.3% to the equivalent of 532,000 barrels of oil a day during the quarter and will continue to increase during the next three years, he said.

Irani said the firm was interested in helping rebuild Iraq’s oil industry, adding, “I think our chances are as good as anybody’s” in winning some of that business.