Occidental Petroleum Profit Rises on High Oil Prices

Oil and gas company Occidental Petroleumposted better-than-expectedthird-quarter earnings Wednesday on soaring crude prices.

Net income rose to $1.32 billion, or $1.58 a share, from $1.17 billion, or $1.36 a share, a year earlier.

Excluding one-time items, the company said it had core earnings of $1.45 a share in the quarter, well ahead of the average forecast of Wall Street analysts of $1.32 a share, according to Reuters Estimates.

Oil prices surged during the quarter, hitting new highs on concerns about supply and geopolitical uncertainty. The Los Angeles company's average realized price for crude oil was $67.81 per barrel, compared with $61.83 per barrel in the year-earlier quarter.

U.S. oil futures have since moved even higher, cracking $90 barrel last week on expectations of a winter supply crunch, fears of a Turkish incursion into Iraq and the weakening dollar.

Raymond James analyst Pavel Molchanov said Occidental's reluctance to hedge its production allow the company to take advantage of the spikes in oil pricing, pushing its realized oil prices higher than he had expected.

"Oxy management has said before that putting on hedges is like buying insurance when you don't know what the premium is," said Molchanov, who has "strong buy" rating on the company.

"Certainly with record oil prices right now -- and this company is 80 percent oil-weighted -- they are extremely well positioned to generate fourth-quarter earnings that should easily be a record for them."

Occidental's production averaged about 570,000 barrels of oil equivalent per day (boepd) in the quarter compared with 533,000 boepd a year before, helped in part by new output from the giant Dolphin Energy project in the Middle East.

Still, the company's production was below its July forecast of 585,000 to 590,000 boepd for the quarter.

Occidental's shares closed at $66.75 on the New York Stock Exchange Tuesday. Since the beginning of the year, Occidental shares are up around 37 percent, outperforming the Chicago Board Options Exchange's Oil Index which rose about 24 percent over the same period.