Shrinking demand and declining energy prices have put a damper on the oil industry's profit party, with Occidental Petroleum Corp. posting its steepest quarterly earnings decline in seven years and ConocoPhillips reporting an 80% plunge in income.
Although the companies' first-quarter financial results were in line with analysts' predictions of the worst quarter in several years for the energy sector, both Westwood-based Occidental and ConocoPhillips of Houston beat Wall Street's gloomy expectations.
As Occidental executives told investors about a series of fresh exploration wells in California and the prospects of new oil field opportunities in Iraq, Chairman and Chief Executive Ray R. Irani talked about growth, not retrenching.
"What I think we have consistently said over time, and we reconfirm, ignoring this economic downturn issue for now, is that we believe we can grow the business in volume between 5% and 7%," Irani said in a conference call with analysts and investors. However, he warned, "our business is not going to be growing in a smooth curve."
Occidental, the nation's fourth-biggest oil company, earned $368 million, or 45 cents a share, in the first quarter. That was an 80% plunge compared with $1.85 billion, or $2.22, a year ago, when oil futures were soaring toward a record of more than $147 a barrel in July.
Analysts surveyed by Thomson Reuters expected earnings of 37 cents a share.
Occidental's first-quarter sales fell 49% to $3.1 billion. The company's core business, exploring for and producing oil and natural gas, earned $545 million in the quarter, compared with $2.9 billion a year earlier.
ConocoPhillips reported earnings of $840 million in the first quarter, versus $4.2 billion a year ago. Sales fell to $30.7 billion from $54.9 billion.
Analysts said they were impressed that Occidental had increased production at a time when other oil companies were shutting wells and reducing capital spending because of the lower price for oil.
Occidental said daily oil and natural gas output in the first quarter rose nearly 8% from a year ago, to the equivalent of 654,000 barrels of oil.
"They have managed to grow production in this environment, which was really not expected. They are a very financially disciplined company," said Fadel Gheit, senior energy analyst for Oppenheimer and Co.
Occidental shares rose 41 cents to $55.97. ConocoPhillips climbed $1.87 to $39.93. Both gains came on a day when crude oil for June delivery rose 77 cents to $49.62 a barrel.