Occidental Petroleum profit jumps 28% in third quarter
Higher oil prices and record production helped propel Occidental Petroleum Corp. to a 28% jump in third-quarter earnings, the company said Tuesday.
The earnings results came a week after Occidental announced that Chief Executive Ray R. Irani would be stepping down from that post during the company’s annual meeting in May but would remain as chairman. In a conference call with investors and analysts, the 77-year-old CEO couldn’t resist the chance to highlight the Westwood company’s gains during his tenure.
“Our management team has transformed Oxy from a conglomerate of unrelated business entities with a market capitalization of $5 billion into the fourth-largest oil and gas company in the United States with a market capitalization today of $67 billion,” said Irani, who added that he expected more of the same under his replacement, Stephen I. Chazen.
Occidental’s net income was $1.2 billion, or $1.46 a share, in the third quarter, compared with $927 million, or $1.14 a share, in the year-earlier quarter. Revenue rose 20% to $4.9 billion in the third quarter from $4.1 billion in the third quarter of 2009.
Occidental benefited during the quarter from crude oil prices that averaged $70.71 a barrel, compared with $62.79 a barrel in the year-earlier quarter. But even with the boost in prices, 16 analysts polled by Thomson Reuters were expecting earnings of only $1.34 per share. Occidental beat that estimate by 12 cents a share, generally impressing analysts with its performance.
On the production side, Occidental extracted the equivalent of 751,000 barrels of oil and natural gas a day — the most in company history — compared with 705,000 barrels a day during the third quarter of 2009. Most of those gains came from the company’s holdings in the Middle East and North Africa, with smaller increases in Argentina and the U.S.
Occidental is betting on increasing production in California, a state largely abandoned by the world’s major oil companies. Occidental continues to acquire property and test new wells.
“We expect to add an additional 300,000 to 380,000 acres to our California acreage position and interest in 100,000 acres in other producing areas. Our California acreage will now reach 1.6 million acres,” said Chazen, currently president and chief operating officer. Occidental also is increasing its shale drilling, he said.
“They did very well. The only reason their stock went down today was because crude oil prices were lower,” said Fadel Gheit, senior energy analyst at Oppenheimer & Co.
Occidental closed at $81.20, down $4.25, or 5%.
Phil Weiss, an analyst at Argus Research, said that Occidental was “generating a lot of cash, which gives it a lot of opportunities for future growth.” Weiss said that Occidental was doing what more oil companies should: emphasize production of oil rather than natural gas because it generates more profits.
“If more companies did that, the price of natural gas would probably get a boost,” Weiss said.
