2nd UPDATE: Occidental 3Q Profit Drops 59%; Production Rises
(Adds CEO comments from conference call on Iraq, expected fourth-quarter
acquisitions and capital spending.)
By Isabel Ordonez
Of DOW JONES NEWSWIRES
HOUSTON -(Dow Jones)- Occidental Petroleum Corp.'s (OXY) said Thursday its
third-quarter earnings fell 59% compared with the same period last year due to
lower oil prices, even as its oil and gas production rose 7%.
The fourth-largest U.S. oil company by market value said a significant portion
of its output growth came from its new discovery in Kern County, Calif.,
announced last quarter, and that it expects to close on several hundred million
of dollars in property acquisitions in the fourth quarter, mainly in California
and the Permian Basin.
Speaking to analysts on a conference call, Occidental Chief Executive Ray
Irani also said the company continues to see opportunity in the Middle East,
especially in Iraq, for further growth. "We hope to expand our position over
time and continue our involvement in Iraq," Irani said.
Occidental, Italy's Eni SpA (E, EN.MI) and Korea Gas Corp. (036460.SE) belong
to a consortium that was awarded a license this month for the development of the
giant Zubair field in Iraq. Eni has said the development of the field would
require investments of about $10 billion in the first six years.
Irani said the stakes in the project are still being negotiated among the
different companies and that Occidental probably will share its part with Abu
Dhabi.
The head of Occidental also said the addition of Phibro, a major energy
trading company it's buying from Citigroup Inc. (C), should bring $100 million a
year in after-tax profit.
The oil company has never been a major participant in derivatives markets, but
jumped at the chance to acquire the highly successful trading team from
Citigroup, which was all but forced to sell after coming under fire for Phibro
head Andrew Hall's expected $100 million payday this year.
Executives also said Occidental's long-term production growth target is still
in the 5% to 8% range, but added that the company could update that figure
during the fourth quarter. Officials said the company's capital expenditure
budget for 2009 will be $3.7 billion. The company previously said its 2009 total
capital spending budget likely would remain under $4 billion.
Occidental's shares were recently trading up $2.58, or 3.2%, at $84.13.
Occidental posted a profit of $927 million, or $1.14 a share, down from $2.27
billion, or $2.77 a share, a year earlier. Revenue dropped 42% to $4.1 billion.
The earnings results, however, topped the average estimate of analysts, who
expected the Los Angeles-based company to report earnings of $1.08 a share, on
revenue of $4.14 billion.
After a multiyear boom in commodity prices and skyrocketing profits, energy
companies have seen earnings tumble after oil and gas prices collapsed last
year. Oil prices have rebounded from this year's low of $33 a barrel in
February, trading at more than $81 a barrel Thursday, but they are still below
the all-time high over $147 a barrel reached in July of last year. Occidental
said during the third quarter its realized oil price was $62.79 a barrel,
compared with $104.15 a barrel for the same period last year.
However, higher crude oil prices in the third quarter compared with the second
quarter resulted in a 36% increase in Occidental's sequential earnings.
Occidental quarterly production was boosted by output increases in the U.S.,
the Middle East and North Africa.
"Occidental is showing positive production growth and capital discipline,
which is all good," said Fadel Gheit, analyst at Oppenheimer & Co. Inc.
-By Isabel Ordonez, Dow Jones Newswires; 713-547-9207; isabel.ordonez@
dowjones.com
(END) Dow Jones Newswires
10-22-091608ET
Copyright (c) 2009 Dow Jones & Company, Inc.
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