The oil industry's troubled first quarter neared its end Thursday with Mobil joining the crowd by slashing its spending plans while Southland, a big refiner and gasoline marketer, projected heavy losses.
Both represent more fallout of the collapse in the price of oil, expected to create red ink for many independent oil concerns and weak earnings for the major producers in the quarter ending Monday.
Mobil, the nation's second-largest oil company, said it will reduce its 1986 capital and exploration spending by $1.1 billion--27% below its earlier plans to spend $4.1 billion this year.
Allen E. Murray, Mobil's chairman and chief executive, said that about $925 million of the cut will be in exploration. The decline in the price of crude oil to the $12 to $15-per-barrel range from $31 in late November is slashing producers' revenues and making it less financially attractive to explore for new oil fields.
Southland, the Dallas-based operator of 7-Eleven convenience stores and owner of Citgo Petroleum, said Citgo could send the parent company's first-quarter loss to more than $100 million.
Southland refines oil into gasoline at its Louisiana refinery and sells the gasoline at about 3,500 7-Eleven stores, making it the nation's biggest independent gasoline retailer.
Refiners and marketers are the part of the oil industry expected to be the least harmed by the collapse in crude oil prices. The cost of buying oil for their refineries, over time, will drop by about the same amount as the prices that they charge for the refined product.
But Southland officials complained in February of "free-falling wholesale prices" that forced Citgo to sell its product for less than it had paid for crude that it contracted to buy when prices were several dollars per barrel higher.
That and other factors will cause a pretax operating loss of about $40 million at Citgo, and an undetermined inventory write-down due to the lower value of its oil will drive the companywide loss to $100 million or more, Chairman John P. Thompson said.
After the current quarter, "Citgo's raw material costs should be more in line with the prices it receives for its refined products," Thompson said.
Separately, Pennzoil Chairman Hugh Liedtke told a meeting of New York securities analysts that in order to cut costs, the Houston oil company has cut its capital budget 20% and will invoke an across-the-board salary freeze.
As it is, he said, Pennzoil's earnings from continuing operations for the first quarter will be "substantially less" than year-ago results unless current energy industry conditions continue.