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Chevron, Arco Report Sharp Drop in Income

Energy: Two firms are suffering from crude oil prices that are nearly 30% less than a year ago.

October 23, 1998|From Times Wire Services

Chevron Corp. and Atlantic Richfield Co. on Thursday joined sister oil companies in reporting sharp drops in third-quarter earnings, and a warning from Chevron's top oilman that crude prices won't rebound this year sent oil stocks plummeting.

San Francisco-based Chevron, the fourth-largest U.S. oil company, posted a 47% decline from year-ago levels, and Los Angeles-based Arco, the seventh-largest, said earnings fell 81%. The two companies, like others throughout the industry, are suffering from crude oil prices that are nearly 30% less than a year ago. The average drop in earnings reported by big oil companies so far in the third quarter has been 54%.

Kenneth Derr, Chevron's chairman and chief executive, said Thursday that oil companies will continue to struggle in the fourth quarter. "We do not see any significant near-term improvement" in oil prices, Derr said.

Chevron shares fell $5.75 to close at $81.50 on the New York Stock Exchange. Arco fell $2.50 to $67.06, also on the NYSE.

The Standard & Poor's index of U.S. shares of the six biggest publicly traded oil companies has fallen nearly 5% in the last two days. It fell 28.11, or 3.37%, to 807.12 on Thursday.

Chevron's earnings, before gains and charges, fell to $386 million, or 59 cents a share, from $732 million, or $1.11, in the year-ago quarter. Revenue fell 26% to $7.68 billion from $10.3 billion.

Chevron said Hurricane Georges, which closed oil platforms in the Gulf of Mexico and a refinery in Pascagoula, Miss., cost it $50 million in earnings in the quarter.

Arco, which last week announced a restructuring that will involve 900 layoffs to lower costs by $500 million, posted third-quarter earnings, excluding special items and discontinued operations, of $61 million, or 19 cents a share, compared with $313 million, or 96 cents a share, a year ago.

Arco, more sensitive to swings in oil prices than its bigger rivals, sold crude for an average of $5.34 a barrel less than in the year-earlier quarter. Asian refiners, unable to sell gasoline in their economically depressed nations, also shipped more fuel to Arco's home market, cutting profit margins.

Revenue was $2.80 billion, down 22%, compared with $3.60 billion in the third quarter of last year.

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