Oil and natural gas producer Occidental Petroleum Corp. said Friday that its second-quarter profit dropped 44%, as the government seizure of its Ecuadorean project wiped out the company's gains from higher oil prices and a jump in production.
The Westwood-based company reported net income of $857 million, or $1.97 a share, down from $1.54 billion, or $3.77, for the year-earlier period.
Occidental's results were hurt by a net $347-million after-tax loss on discontinued operations, which included the lost value of the oil operation in Ecuador as well as income from assets set aside for sale.
The 2005 second-quarter results were boosted by after-tax gains.
Excluding the special items for both years, the company's core earnings totaled $2.77 a share for the quarter versus $3.63 a year earlier. On average, analysts surveyed by Thomson Financial were expecting $2.79 a share.
"It was pretty much right on the money," said John Parry, a senior analyst at John S. Herold Inc., an energy research and consulting firm in Norwalk, Conn. Parry said he held a small number of Occidental shares in his personal portfolio.
Nonetheless, investors sent the oil company's stock downward on the earnings report. The shares fell $1.70, or 1.6%, to $105.24. Occidental's shares have gained nearly 32% year to date.
Bruce Lanni, an analyst with A.G. Edwards & Sons Inc., said Wall Street's move was largely a reaction to a delay in the start-up of the $4-billion Dolphin gas project, which includes producing natural gas in Qatar, selling some of it in that country and sending some to the United Arab Emirates via an undersea pipeline. Occidental holds a 24.5% interest in the project.
Oil and natural gas production at the company rose 18%, to an average of 609,000 barrels of oil a day.
Occidental benefited from higher prices for both commodities, booking oil sales at an average price of $60.67 a barrel during the quarter, up 31% from a year earlier, and collecting an average of $6.24 per 1,000 cubic feet of North American natural gas, a 1% increase.
The higher prices helped boost the company's second-quarter sales by 36% to $4.6 billion.
For the current quarter, the company said every $1 movement in the price of oil would raise or lower pretax earnings by $38 million, while each 25-cent change in the price for natural gas would change earnings by $12 million.
Last month, Occidental said it would take a write-off and classify its Ecuadorean project as discontinued to reflect the mid-May seizure of its Block 15 operation by the Andean nation's government.
Occidental's ouster, which wiped out 7% of its 2005 worldwide production, stemmed from an escalating contract and tax dispute, as well as an Ecuadorean populist push to reap more benefits from its oil fields.
The company sought arbitration of the dispute by an arm of the World Bank, but Occidental warned Friday that the process would be lengthy.