Oxy reports record profit on oil prices
Record oil prices pushed Occidental Petroleum Corp. to record profit for the fourth quarter and all of 2007, the Westwood company said Tuesday.
Occidental earned $1.5 billion, or $1.74 a share, during the fourth quarter of 2007, up from $930 million, or $1.09, during the same three months in 2006. That was well above the $1.69 that had been predicted by analysts polled by Thomson Financial.
Net income for the year climbed 29% to $5.4 billion, or $6.44 a share, from $4.2 billion, or $4.87, in 2006, driven by crude prices that lingered above $90 a barrel.
The company said it was expecting oil production to average the equivalent of 620 million to 630 million barrels a day in 2008, helped by a new pipeline in the United Arab Emirates and work in Oman, Argentina and Colombia.
Occidental shares rose $3.92, or 6.1%, to $68.49.
But some analysts expressed concern that Occidental failed to reach its production goals for the quarter. Production rose in the fourth quarter to the equivalent of 590 million barrels of oil from 561 million in the year-earlier quarter, said Stephen I. Chazen, Occidental’s president and chief financial officer. That was still well short of the 600 million to 615 million barrels the company had projected for the quarter.
Chazen blamed the shortfall on high crude prices that reduced Occidental’s volume from production-sharing contracts by about 8,000 barrels a day and on a variety of mishaps.
Analyst Phil Weiss of Argus Research said he would have been more bothered by the production shortfall “if their oil fields were depleting faster than expected or if they were setting goals that were too ambitious.” Weiss added, “They were still able to improve their margins. That’s a positive.”
Benjamin Dell, an analyst with Sanford C. Bernstein & Co., wondered whether Occidental’s well-known discipline in judging when to invest in production projects might leave openings for bigger oil companies.
“It’s a double-edged sword, really. It shows discipline, but it’s also a negative because they could lose out on other projects. It’s a very competitive environment,” Dell said.
But Occidental Chief Executive Ray R. Irani said he saw no reason for change.
“We still follow religiously the discipline for our returns on investments,” Irani said in a conference call with analysts and investors.
“So, to the extent other people who want to chase projects for whatever reason, we are willing to give up on” them, he said.
Also Wednesday, San Antonio-based Valero Energy Corp., the largest U.S. refiner, saw its net income drop 49% to $567 million, or $1.02 a share, compared with more than $1.1 billion, or $1.80, in the year-earlier quarter as prices for its refined products were unable to keep pace with the rapid rise in oil prices in 2007.
But shareholders were pleased that the decline in profit wasn’t as large as analysts had predicted. They gave Valero stock its biggest single-day boost since 2002, raising it $5.68, or 10.4%, to $60.58.
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