Occidental’s profit nearly triples; BP’s more than doubles
Higher crude prices are again pumping up profits of major oil companies worldwide.
Occidental Petroleum Corp. nearly tripled its net income compared with a year earlier, with $1.1 billion, or $1.32 a share, in the first quarter of 2010, the Westwood company said Thursday. The announcement came during a week in which most of the giants of oil and gas reported sharp increases in quarterly earnings.
Exxon Mobil Corp., the world’s biggest integrated oil company, reported a 38% gain in first-quarter net earnings, with $6.3 billion, or $1.33 a share. Royal Dutch Shell’s net income grew 57% to $5.48 billion. But it was London-based BP, with quarterly profits that rose to $6.1 billion from $2.6 billion a year earlier, that was the lightning rod for ire over huge earnings in the midst of a deadly and growing disaster.
Eleven workers were missing and presumed dead after a BP oil platform built by Transocean Ltd. exploded and sank last week in the Gulf of Mexico. A resulting oil spill five times as large as BP originally suspected was classified as an incident of national significance Thursday by Homeland Security Secretary Janet Napolitano.
Tyson Slocum, director of Public Citizen’s Energy Program, called it an example of what happens “when you let the oil industry run things on the cheap.”
“The issue with BP is that they were failing to reinvest adequate money into energy infrastructure assets and employee safety measures. They claim the cost is too high,” Slocum said. “They’re posting huge profits. There’s no excuse.”
BP Chief Executive Tony Hayward told shareholders April 15 that the company had worked hard to improve its safety record. On Thursday, Hayward said BP was doing all it could to contain the spill.
“Our action plan is safety-focused, multi-layered and has the full resources of the BP Group behind it,” he said.
Rep. Edward J. Markey (D-Mass.), chairman of the House Select Committee for Energy Independence and Global Warming, called on the heads of the nation’s five biggest oil companies to appear before his panel. Markey noted that gasoline and oil prices were continuing to rise “even as American families and businesses are beginning to recover from a recession. And driving season hasn’t even yet begun.”
Even with greatly improved oil earnings, Wall Street had been expecting better.
Exxon Mobil’s earnings were 8 cents short of the $1.41 a share expected by analysts polled by Thomsen Reuters, drawn down by weakness in its refinery operations. Occidental’s net profit was short of the expected $1.36 a share.
Ray R. Irani, Occidental’s chairman and chief executive, focused on the much better business climate provided by sharply higher oil prices compared with last year.
“We continue to see progressive growth in Occidental’s quarterly net income into 2010,” Irani said, later adding that the performance “reflects strengthening of worldwide product prices and higher volumes.”
Occidental said it got $71.88 a barrel for its oil in the first quarter, up from $39.29 a barrel in the first quarter of 2009.
Occidental’s performance was quite good, said Fadel Gheit, managing director of oil and gas research for Oppenheimer & Co.
On Gheit’s list of the industry’s most important attributes, Occidental ranks near the top in such things as production costs per barrel. With 73% of its reserves in oil rather than natural gas, higher than most in the industry, Occidental is better positioned to take advantage of oil-price increases, he said.
Phil Weiss, a senior energy analyst for Argus Research, said Occidental could compete against much bigger oil companies.
“They are able to do business and negotiate deals on the kind of major projects that other companies of similar size cannot,” Weiss said.
Occidental reported a profit of $1.1 billion, or $1.32 per diluted share, in the first quarter, up from $371 million, or 45 cents, a year earlier. The company also reported a sales increase of more than 55% to $4.77 billion, compared with $3.07 billion a year earlier. Production of oil and natural gas rose to the equivalent of 743,000 barrels from 713,000 in the year-earlier quarter.
The one weak spot came in chemicals, where earnings fell to $30 million from $169 million. The company said this reflected “continued weakness in the domestic market, particularly in the housing and construction sectors.”