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CALIFORNIA

Gas Prices Help Earnings at 2 Firms

April 28, 1999|NANCY RIVERA BROOKS | TIMES STAFF WRITER

The recent flare-up in California gasoline prices provided the only bright spot in dismal earnings for Texaco and Ultramar Diamond Shamrock, the companies reported Tuesday.

Two other big U.S. oil companies, Conoco and Phillips Petroleum, said first-quarter earnings plummeted 65% and 89%, respectively, as oil prices remained near historic lows in January and February, before rallying in March after oil-producing nations vowed to reduce output.

San Antonio-based Ultramar Diamond Shamrock provided an unusually detailed look at how the run-up in California's gas prices affected one relatively small refiner and retailer: The price surge and accompanying boost in refinery revenue were responsible for about 5 cents a share of first-quarter earnings.

However, the company's gas stations--about 400 company-owned or dealer-operated locations in California--found less profit on gasoline than on merchandise, because wholesale gas prices rose more quickly than retail prices, Ultramar said.

Ultramar, which operates a refinery in Wilmington and is one of the nation's largest independent oil refiners and gasoline retailers, said its earnings were virtually unchanged from a year ago at $16 million, or 18 cents a share, thanks in part to the California price hikes.

At Texaco, the third-largest U.S. oil company by revenue, net income fell 59% to $105 million, or 18 cents a share.

Chevron last week reported a 35% earnings drop but noted that its U.S. refining and retailing earnings rose 82% from the market disruption. The San Francisco-based oil company lost a gasoline unit in an explosion at its Northern California refinery in late March, a few days before the end of the quarter.

That and other refinery snafus, including an earlier fatal explosion and fire at the Tosco Corp. refinery near San Francisco, helped send the average price of gasoline up more than 50 cents a gallon between late February and mid-April.

California's average price for regular self-service unleaded gasoline has since retreated almost 6 cents to nearly $1.57 a gallon. The increase led to a sharp improvement in refinery margins, or the revenue refiners have available to pay costs.

Morgan Stanley oil analyst Douglas Terreson estimates that refinery margins in the state swelled to about $22 a barrel, or nearly 53 cents a gallon, but have since fallen to a more normal range of about $8.65 a barrel.

"The gains are transitory . . . and oil refining remains a difficult business," Terreson said.

The California Legislature will hold a special hearing today on the gas price increase, featuring oil company executives, industry experts and state officials. Tosco and Exxon turned down requests to testify, but Chevron, Atlantic Richfield Co. and Shell accepted.

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