Major U.S. oil companies, including leaders Exxon and Mobil, on Monday reported substantial increases in earnings for the first quarter, a period in which many large oil firms profited from big revenue jumps in natural gas and marketing, refinery and chemical operations.
Los Angeles-based Occidental Petroleum Corp. and Unocal Corp. were among the oil firms that recorded first-quarter gains.
No. 1 Exxon posted earnings of $1.46 billion, a 36% increase over 1987 first-quarter earnings. The New York-based company's sales totaled $22 billion, compared to $19.4 billion last year.
Improved profit margins for petroleum products--partly the result of lower refining costs--and continued strength in earnings from chemical operations were major factors in the improvement, Exxon Chairman L. G. Rawl said.
Booming chemical sales also helped Mobil, which had earnings of $505 million, compared to $252 million in the year-ago quarter. Earnings from chemical operations totaled $134 million, compared to $41 million in 1987's first quarter.
Demand for Chemicals Cited
Chemical operations were more profitable because of an increase in demand for products like polypropylene, a thermoplastic resin used in packaging, and other plastic products, according to Don Bustos, an analyst at Duff & Phelps.
"The demand will continue to be very strong for chemicals," Bustos said.
Bustos, citing Unocal as a company that has benefited greatly from natural gas operations, said, "The effect of lower crude oil prices is being wiped out by higher natural gas prices."
Unocal, which had a 6% increase in natural gas production, earned $178 million in the first quarter--most of it from accounting changes related to tax reform laws. Earnings from operations--profits before the tax-related adjustments--were $44 million, compared to $61 million in the 1987 period.
Unocal has been reducing debt it incurred to fight off a takeover bid by corporate raider T. Boone Pickens Jr. in 1985. The company had about $6 billion in total debt in October, 1985--more than $4 billion related to the takeover battle--and currently is about $4.3 billion in debt. The company is cutting its debt by about $300 million a year, according to Fred Hartley, Unocal's chairman.
Occidental also benefited from a rise in natural gas prices, according to Blake Childs, an analyst at the brokerage firm of Bateman Eichler, Hill Richards Inc.
"The (profit) margins for refining and marketing are better," said Childs. "Gas price should increase moderately as we go into summer. . . . We're bullish on refiners."
Occidental had net income of $113 million--about $53 million from the sale of a stock interest in an oil and gas subsidiary--on sales of $4.5 billion for the quarter, compared to net income of $97 million on sales of $4.2 billion last year.
Earnings were also up at Chicago-based Amoco, which reported an increase of 80.4%. Amoco earned $469 million, compared to $260 million last year.