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Occidental's profit falls on lower energy prices

January 26, 2007|Ronald D. White | Times Staff Writer

Occidental Petroleum Corp. of Westwood said Thursday that fourth-quarter net income fell 19% on lower energy prices, another signal that oil industry profits may have peaked.

On Wednesday, Houston-based ConocoPhillips became the first of the major oil companies to report fourth-quarter results, posting a 14% drop in earnings. Although analysts expect another round of earnings records for 2006, oil's sharp decline from the July high of $77.03 a barrel, combined with cheaper natural gas and gasoline, will cause most companies to report lower quarterly results.

"Barring a global crisis that could speed the speculation frenzy again or sharp production cuts from OPEC [the Organization of the Petroleum Exporting Countries], we expect oil prices to continue to decline and a slowing U.S. economy could exacerbate this" oil profit cool-down, said Fadel Gheit, senior energy analyst for Oppenheimer & Co.

Still, Occidental is better positioned than many in the industry because its production is increasing, several analysts said. Some other major companies have struggled to find new sources of oil and natural gas.

Occidental, the fourth-largest U.S. oil company, said it expected the output boost despite the sale this month of its 50% stake in Russian venture Vanyoganneft to oil giant BP and the loss of 43,000 barrels of daily production from Ecuador when the government seized its operations there in May.

"They will have production growth in 2007 to about 625,000 barrels of oil or equivalent a day, up from 608,000, which was already a record for them. That will help them offset an absolute decline in oil prices," said Wesley Ralston, senior integrated oils analyst for Howard Weil Inc. in New Orleans.

For the fourth quarter, Occidental's net earnings fell to $928 million, or $1.09 a share, from $1.15 billion, or $1.40, a year earlier, the company said. Revenue slipped to $4.14 billion from $4.18 billion. Analysts had expected Occidental to earn 90 cents a share, excluding one-time items. Occidental beat that projection by 8 cents.

"Our financial performance continues to reflect the successful implementation of our long-term strategy that is focused on long-lived oil and gas assets and disciplined investment philosophy and maintaining a strong balance sheet," Occidental Chief Executive Ray R. Irani said in a conference call with analysts and investors.

Occidental's stock finished down 80 cents, or 2% to $45.40.


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