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Occidental Reports 11% Jump in Profit

Higher oil and natural gas prices, increased production and cost cutting in the chemicals unit boost results.

October 22, 2003|Elizabeth Douglass | Times Staff Writer

Oil and natural gas producer Occidental Petroleum Corp. said Tuesday that its third-quarter profit rose 11%, buoyed by higher energy prices and production along with better results at its chemicals unit.

The Westwood-based company's net income increased to $446 million, or $1.14 a share, for the quarter ended Sept. 30. That compares with a profit of $402 million, or $1.06 a share, for the same quarter last year. Sales jumped 18% to $2.3 billion.

Occidental's performance beat the $1.02-per-share consensus profit estimate among Wall Street analysts. The earnings report, issued before the stock market opened Tuesday, boosted the company's shares, which ended the day up 83 cents, or 2.3%, at $36.38 on the New York Stock Exchange.

"It was a very strong quarter. Everything's going in the right direction," said Jacques Rousseau, an analyst at Friedman Billings Ramsey & Co., who has an "outperform" rating on Occidental shares and doesn't own any.

Much of Occidental's gains came courtesy of higher prices for its oil and natural gas. In the third quarter, the company sold its oil for an average price of $28.24 a barrel in the United States, up nearly 10% from the average a year ago. U.S. natural gas prices averaged $5 per thousand cubic feet, 70% higher than in last year's third quarter.

Those higher prices showed in the earnings for Occidental's dominant oil and natural gas unit, which posted profit of $660 million. Cost cutting at the chemical operation also helped the bottom line by producing earnings of $60 million, an unexpected 22% increase over the $50 million in earnings on operations in the third quarter of 2002, when a one-time gain on the sale of an investment boosted the unit's total earnings to $214 million.

Occidental posted almost 9% higher oil and natural gas production for the quarter, equal to 546 million barrels of oil a day, reflecting the launch of Horn Mountain production in the Gulf of Mexico in late 2002 and the Sept. 1 completion of an oil export pipeline in Ecuador.

In the current quarter, the firm expects production to increase "modestly," Chief Financial Officer Stephen Chazen said Tuesday during a phone conference with analysts.

Profit levels largely will reflect the market prices for oil and natural gas for the last three months of the year.

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