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Oxy, Conoco post lower profits but beat expectations

October 26, 2012|Ronald D. White
  • Occidental's third-quarter results benefited from its holdings producing more oil than natural gas, analyst Phil Weiss says. Above, an Occidental oil pump in Bakersfield.
Occidental's third-quarter results benefited from its holdings… (Gary Kazanjian, For The…)

Occidental Petroleum Corp. and ConocoPhillips posted lower earnings but still beat analyst expectations, leading off what is expected to be a weaker third-quarter earnings performance for the U.S. oil and gas industry compared with a year earlier.

Occidental, the nation's fourth-biggest oil and gas company, reported net income of $1.4 billion, or $1.70 a share, compared with a profit of $1.8 billion, or $2.18 a share, in the third quarter of 2011. Analysts had been expecting the Westwood company to report $1.63 a share, according to Thomson Reuters.

Lower commodity prices were a major reason for the decline.

Occidental said that oil prices averaged $96.62 a barrel in the third quarter, compared with $97.24 a year earlier.

But the biggest effect came from a sharp decline in natural gas prices caused by a major increase in U.S. production. Domestic natural gas prices were down 41% in the third quarter from a year earlier.

The best news for Occidental in the quarter, Chief Executive Stephen I. Chazen said, was its continuing string of U.S. production records.

"Our domestic production of 469,000 barrels of oil [a day] was 8% higher than the third quarter of 2011 and was a record for the eighth consecutive quarter," Chazen said.

Overall, Occidental's crude oil production rose 27,000 barrels a day, or 4%, to 766,000 barrels a day, from a year earlier.

Phil Weiss, senior energy analyst for Argus Research, said Occidental benefited from its holdings' producing more oil than natural gas.

"Occidental is more heavily weighted toward oil than peers and should benefit from oil prices that remain high," Weiss said.

Chazen said that California's permitting process was creating delays.

"The exploration program has been slowed by the permitting process," Chazen said. "We're two years behind where we thought we'd be."

Fadel Gheit, senior oil analyst for Oppenheimer & Co., said lower third-quarter profits would be typical of the oil and gas industry "on sharply lower natural gas prices in North America, which hit a 12-year low earlier this year."

ConocoPhillips reported third-quarter net income of $1.8 billion, or $1.44 a share, down 31% from a year earlier. Analysts polled by Thomson Reuters had been expecting the Houston company to earn $1.19 a share.

Occidental shares were up $1.84, or 2.3%, to $82.52. ConocoPhillips increased $1.21, or 2.2%, to $57.16.

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ron.white@latimes.com

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