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Occidental Petroleum posts profit gain as Exxon Mobil falters

April 26, 2012|By Ronald D. White
  • An Occidental Petroleum oil rig is shown in the Elk Hills Oil Field in Kern County, near Bakersfield. Occidental Petroleum says it set oil and gas production records in the first quarter.
An Occidental Petroleum oil rig is shown in the Elk Hills Oil Field in Kern… (Gary Kazanjian / for the…)

Occidental Petroleum Corp., the nation’s fourth-largest oil company, saw a slight increase in first-quarter profits compared to a year ago and set records in oil and natural gas production, the company said in a news release Thursday.

The Westwood-based company said it generated a net profit of $1.56 billion in the first quarter, or $1.92 a share. That compared to the 2011 results of $1.55 billion and $1.90 a share. Sales jumped to $6.27 billion compared to $5.73 billion a year earlier. The company also poured more money into capital spending, which rose to $2.41 billion in the quarter compared to $1.33 billion a year earlier.

Occidental’s president and chief executive,Stephen I. Chazen, said the production results of 755,000 barrels of oil a day “was the highest in Occidental’s history and our domestic production of 455,000 barrels of oil [a day] was a record for the sixth consecutive quarter.”

Occidental was producing 730,000 barrels of oil a day in the first quarter of 2011.

Fadel Gheit, senior energy analyst for Oppenheimer & Co. in New York, had been expecting a strong performance from Occidental Petroleum. Gheit said analysts had predicted that Occidental earnings would come in somewhere between $1.50 a share and $1.55 a share.

“Occidental and the oil industry as a whole have benefited from higher oil prices in the first quarter,” Gheit said. “Oil companies with reserves that are highly leveraged toward oil compared to natural gas will do very well.” Gheit went on to describe Occidental as one of the industry’s best-run companies, saying it had “few negatives.”

Occidental's performance contrasted sharply with the world's largest oil company, Exxon Mobil, which saw its first quarter profits fall to $9.45 billion, from $10.7 billion a year earlier, missing Wall Street expectations. The company last saw a year-to-year quarterly profit drop in 2009.

Exxon Mobil said it was hurt by lower production and weaker profits from its chemicals and U.S. refining businesses.

Analysts said this year could be one of the best ever for earnings among the major oil companies. That’s because crude prices have set new highs this year in terms of averages.

For the first time ever, prices for the U.S. commodities trading benchmark—West Texas intermediate crude—have been averaging more than $100 a barrel. WTI futures are traded on the New York Mercantile Exchange. The Energy Department now expects WTI to average $105.71 a barrel in 2012, or $10.83 a barrel higher than a year ago.

The situation with Brent North Sea crude is similar. Brent crude is traded on the ICE Futures Europe Exchange in London. It is used to set the price of most U.S. oil imports. In the first quarter, Brent has averaged more than $118 a barrel, a pace substantially above the record average for Brent of $111.26 a barrel set last year.

“By and large, profits for the oil industry are going to be enormous,” said James DiGeorgia, founder and publisher of the Gold and Energy Advisor, in Boca Raton, Fla. “If the U.S. economy picks up steam, we could easily see oil prices at $115 to $120 a barrel later this year.”

Oxy’s realized price for crude oil in the first quarter was $107.98 a barrel. That compared to $92.14 per barrel for the first quarter of 2011.

Earlier this week, Houston-based ConocoPhillips, said net profits fell to $2.94 billion, or $2.27 a share, in the first quarter, compared to $3.03 billion, or $2.09 a share a year earlier. One reason was a 6.2% profit decline, to $452 million, in its refining segment.

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