Lower oil, gas prices cut into Occidental, Exxon earnings
Exxon Mobil Corp.andOccidental Petroleum Corp.said second-quarter earnings took a hit from lower oil and natural gas prices, a pattern that analysts expect to be repeated throughout the energy industry.
But in an economy that is struggling to gain momentum, the oil business is still posting numbers that many others would love to have. Exxon Mobil, in fact, reported record profits, but it needed the help of asset sales to do it.
Analysts said the stage for this week’s earnings reports was set when oil declined nearly 9% and natural gas plunged 46% during the quarter compared with year-earlier prices. Oil prices have recovered a bit since then, but analysts said some companies would struggle.
“The companies with the stronger balance sheets will be better able to weather this lower price environment,” said Tim Rezvan, an oil exploration and production analyst for Sterne Agee. “You might see a dramatic decrease in activity in some of the more expensive production plays like shale oil and oil sands” if oil prices move lower.
Exxon Mobil, the world’s largest publicly traded oil company, reported second-quarter net income of $15.9 billion, or $3.41 a share, up 49% from $10.7 billion, or $2.18, in last year’s second quarter. Earnings included $7.5 billion from selling a Japanese refining and chemicals business as well as tax items.
Revenue rose 1.5% to $127.4 billion.
Without the boost from divestitures, Irving, Texas-based Exxon Mobil saw profit fall to $8.4 billion, or $1.80 a share, down 22% compared with a year earlier. That was less than the $1.95 average forecast by analysts, according to Thomson Reuters IBES.
Occidental Petroleum posted net income of $1.3 billion, or $1.64 a share. That was a decline of nearly 28% compared with $1.8 billion, or $2.23 a share, a year earlier, but it was better than the $1.60 a share projected by analysts.
Occidental’s revenue fell 6.5% to $5.8 billion.
Westwood-based Occidental is the nation’s fourth-largest oil company and biggest producer of domestic crude oil. Analysts said it was poised to do well in the current oil price environment.
“Occidental is a very disciplined company,” said Fadel Gheit, senior energy analyst for Oppenheimer and Co. “They do not spend what they don’t have, and they live within their means.”
Occidental Chief ExecutiveStephen I. Chazensaid the company would “work on improving operating costs.... We expect to do more with less money in the rest of the year.”
Occidental posted a second consecutive quarter of record oil production, averaging 766,000 barrels a day compared with 715,000 in the same quarter in 2011.
Royal Dutch Shell, Europe’s biggest oil company, said profits fell 13% in the second quarter to $5.7 billion. On Wednesday, Conoco Phillips said it had a second-quarter profit decline of 33% to $2.3 billion, or $1.80 a share.
Industry critics took the oil firms to task for failing to devote more profits to alternative energy programs.
“When the nation is forced to rely on a single fuel, oil, more family budgets and business budgets are hurt,” said Daniel J. Weiss, senior fellow and director for climate strategy at the Center for American Progress.
John Felmy, chief economist for the American Petroleum Institute, urged the public to look beyond the profits to see that the oil and gas industry is providing jobs for many Americans.
Oil prices rose 42 cents to $89.39 a barrel in New York, which helped push most oil company shares higher.
Occidental jumped $3.80 to $87.32. Exxon Mobil rose $1.28 to $86.52. Royal Dutch Shell fell 72 cents to $67.34.
