Occidental Petroleum Corp. reported a 70% drop in second-quarter earnings because of sharply lower oil prices -- but still managed to beat Wall Street expectations.
The Westwood company can appear as though it is being left in the dust by the oil industry giants when crude prices are running at high levels, analysts say, adding that Occidental tends to shine brighter than its bigger rivals when prices are lower.
Second-quarter earnings for the rest of the oil industry will be a "mixed bag," said Jim Byrne, an analyst for BMO Capital Markets in Calgary, Canada.
But Occidental "keeps to a very conservative strategy that works well in these challenging times," Byrne said. "Investors always return to Oxy because they deliver consistently year over year."
This time around, analysts polled by Thomson Reuters were expecting the nation's fourth-biggest oil company to post earnings of 80 cents a share.
Occidental beat those predictions with a profit of $682 million, or 84 cents a share, in the April-June period. In the year-earlier quarter, when oil prices were rising toward a record high of $145 a barrel in July, the company netted $2.3 billion.
Revenue sank to just under $3.7 billion in the second quarter, compared with more than $7.1 billion a year earlier.
Analysts said that the year-over-year difference in energy prices was particularly wide. Oxy's realized price for worldwide crude oil was $52.97 a barrel for the second quarter, compared with $110.12 a barrel in the year-earlier period.
Occidental's latest results were a big improvement over the first quarter, when profit was $368 million, or 45 cents a share.
Fadel Gheit, senior energy analyst for Oppenheimer & Co., said the quarterly financial performance showed how Occidental closes the gap with bigger rivals when there has been a big drop in the price of oil.
"They have pushed for cost cuts. They are known for their hard-nosed pressure on companies to get the best prices. That serves them well," Gheit said. "They [also] have a very strong balance sheet. They have very little debt and they are not burdened with financial obligations like most of their competition."
In announcing the quarterly results, Occidental Chairman and Chief Executive Ray R. Irani stressed the company's success in building production, which grew to the equivalent of 649,000 barrels of oil in the second quarter, compared with 588,000 a year earlier.
"Occidental achieved year-over-year production growth of 10% in the second quarter and nearly 9% in the six months of 2009," Irani said.
The earnings release came a day after Occidental announced what could be California's biggest petroleum discovery in more than 35 years.
The company on Wednesday said that it had found the equivalent of 150 million to 250 million barrels of oil in a field in Kern County, adding that two-thirds of the new source was believed to be natural gas. (Occidental owns 80% of the field; Chevron Corp. of San Ramon, Calif., owns the rest.)
Analysts considered the find another example of what makes Occidental a strong company.
"Occidental will tell you that they will get 415 million barrels out of Elk Hills, and then they'll get almost 900 million barrels out of it," said Phil Weiss, an analyst for Argus Research, referring to a natural gas field near Bakersfield. "The cost of this Kern County oil will be between $5 and $10 a barrel. It's the sweet stuff and they are getting it cheap."
Irani said that the Kern County field "should also contribute to our future growth."
Occidental shares rose $1.96, or 2.8%, to close at $71.95.