Occidental profits down 70 pct; still beats street

HOUSTON - Occidental Petroleum Corp. said Thursday its second-quarter earnings fell 70 percent from a year ago as results were hit hard by lower oil and natural gas prices. But the company's profit topped Wall Street expectations and its production rose.

The Los Angeles-based oil and gas producer said net income for the April-June period amounted to $682 million, or 84 cents a share. That compared with $2.3 billion, or $2.78 a share, a year ago, when commodity prices were soaring.

Revenue plunged 48 percent to $3.7 billion.

Occidental's profit was 4 cents better than the average estimate of analysts polled by Thomson Reuters. Those same analysts expected revenue of $3.8 billion.

Company shares rose $1.96, or 2.8 percent, to close at $71.95 Thursday. Their 52-week range is $39.93 to $85.44.

Occidental, like others in the industry, has faced severe market conditions amid the worst recession in a generation.

The biggest difference from a year ago was the price of oil, which spent most of 2008 at triple-digit levels and contributed to enormous profits before crude markets collapsed. A barrel of crude was trading Thursday at around $65 on the New York Mercantile Exchange, twice what a barrel cost earlier this year.

Natural gas prices have fallen sharply too as consumers scale back energy consumption and inventories build.

Occidental said its worldwide realized price for crude in the second quarter was $52.97 a barrel, compared with $110.12 a barrel a year earlier. Domestic realized natural gas prices fell too — $2.87 per thousand cubic feet in the most-recent quarter versus $9.99 a year ago.

On a positive note, Occidental said daily oil and natural-gas output in the second quarter rose 10 percent to 649,000 barrels of oil equivalent.

In a conference call with analysts, Occidental Chief Financial Officer Steve Chazen said the company expects third-quarter production to be flat versus second-quarter levels, in part because weak sales of natural gas have slowed some drilling. Natural-gas futures were trading Thursday at $3.79 per thousand cubic feet on the Nymex, down 3.8 percent.

"I think everybody is still hoping for a sizable increase in natural-gas prices for the back half of the year," Chazen said. "There's no sign of that mind you."

Analysts expected the oil sector's April-June results to be somewhat better than first-quarter earnings, which were the lowest in several years, but declines of 50 percent or more from a year ago are likely to be the norm. The industry's majors, including Exxon Mobil Corp. and Royal Dutch Shell PLC, are scheduled to report second-quarter results next week.

Occidental said its oil-and-gas segment earnings were $1.1 billion in the quarter, a sharp falloff from the $3.8 billion it posted a year ago.

For the first six months of 2009, Occidental's earnings were $1.1 billion, or $1.29 a share, down from $4.1 billion, or $5 a share, a year ago. Sales fell to $6.8 billion from $13.1 billion.

In a recent report, Sterne Agee analyst J. David Anderson said he viewed Occidental as in a "particularly enviable" position among competitors because of a production portfolio weighted toward oil and a healthy pipeline of large development projects.

On Wednesday, Occidental said it had made what could be the largest oil and natural gas discovery in California in 35 years. The company said the find in Kern County could amount to 150 million to 250 million barrels of oil equivalent reserves. Occidental has an 80 percent interest in the find, while Chevron Corp. holds the rest.

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