MISC. OIL & GAS NEWS - FRIDAY A.M. 10/22/98
Lowest oil price in 12 years slashes big oil earnings
NEW YORK, Oct 21 - A drop in oil prices to their lowest level since 1986 slashed third-quarter earnings of the nation's biggest oil companies, with Exxon Corp. (NYSE:XON - news) saying on Wednesday its profits tumbled 23 percent to the lowest in four years.
The Irving, Texas-based company reported net income of $1.4 billion, down from $1.82 billion. Revenues slid to $28.8 billion from $32.75 billion as average oil prices fell by one-third from last year.
Yet, Exxon's diluted earnings of 58 cents a share beat analysts' forecasts of 56 cents per share, compared with 73 cents last year.
''It is another quarter in which it is good to be Exxon. This earnings report shows extremely good balance given weaker oil prices,'' said Eugene Nowak, an analyst for ABN AMRO Inc.
The price of oil was down 33 percent from a year earlier at about $12.50 a barrel as the global economic slowdown dampened consumption.
The picture for Exxon was rosy compared to the other big oil companies.
Amoco Corp. (NYSE:AN), Texaco Inc. (NYSE:TX), and Occidental Petroleum Corp. (NYSE:OXY), which are less insulated from oil prices than Exxon saw their earnings fall by more than double Exxon in percentage terms.
The worst was Occidental, where net income fell more than 75 percent to $38 million from $157 million.
Earnings per share fell to 10 cents from 40 cents, while revenues at Los Angeles-based Occidental fell to $1.7 billion from $2.0 billion.
Meanwhile, White Plains, N.Y.-based Texaco said it had offset some of the effects of weaker oil prices with a 9 percent increase in oil and natural gas production from a year ago. Yet, the company still showed the scars of the sharp drop in oil prices.
Its income slid 56 percent to $215 million from $490 million as revenues dropped to $7.71 billion from $11.09 billion.
Fully diluted earnings per share dropped to 38 cents from 41 cents compared with analysts' forecasts of 41 cents.
Texaco Chief Executive Peter Bijur said the company was involved in a cost cutting program at its Caltex refining venture with Chevron Corp. (NYSE:CHV) in Asia.
Income at Amoco, which is to combine with British Petroleum Co. Plc (UK & Ireland: BP.L) in the world's largest industrial merger, fell 49 percent to $295 million from $635 million, with revenues dropping to $7.5 billion from almost $9.0 billion.
Diluted per share earnings of 31 cents, were down from 64 cents a year ago, which was shy of analysts' forecasts of 32 cents.
Even as oil production earnings were thumped by the drop in prices, refining operations remained weak as profit margins continued their long term decline.
Exxon also saw its domestic refining and marketing earnings shrink and there were sharp declines at Texaco and Amoco.
Overseas refining earnings were a bright spot for Exxon, rising $90 million to $439 million, but at Texaco, weak Asian markets kept earnings under pressure.
The sharp drop in global economic activity and the start of the bust period in the boom and bust chemicals cycle, hurt chemicals earnings at Exxon, Amoco and Occidental.
At Exxon, chemicals earnings fell 14 percent to $301 million, at Occidental they dropped to $62 million, one-third the level of a year ago and at Amoco, profits slumped to $99 million from $172 million.
Nowak said that the reason Exxon beat analysts' forecasts is because their chemicals earnings were better than expected.
''Exxon's chemicals earnings tend to hold up well in tough times,'' he said.
However, even Exxon may be feeling the effect of this year's earnings eroding drop in oil prices as its stock buyback program in the third quarter took in only 8.9 million shares, down from 13.6 million in the second quarter.
Exxon has bought back a total of 37.5 million shares in the first nine months of the year.
Elsewhere in the beleaguered oil patch, Texaco warned that the gloom surrounding the industry was unlikely to lift any time soon.
Texaco's Bijur said the company is going to keep a lid on costs and would see $50 million in savings from a reorganization at Caltex and further savings from its domestic downstream operations.
The stock of Exxon fell $1 to $75.69, Amoco was down 69 cents at $52.69, Texaco fell $2.31 to $59.19 and Occidental lost 19 cents at $20.625 in mid-afternoon trading on the New York Stock Exchange.
Today in the energy markets - Oct 23
FRIDAY, OCTOBER 23
WARSAW - Polish firm Petro-oil holds news conference on domestic oil sector; speakers include Petrochemia Plock chief executive Konrad Jaskola 0900 GMT.
TAMPERE, Finland - Energy 98-fair (Final day).
NEW YORK, UNITED NATIONS - Second and final day of closed meetings of international weapons experts convened by UNSCOM to discuss findings of tests in U.S,, France and Switzerland on whether traces of VX nerve gas were found on unearthed Iraqi warheads (1000 edt/1400 gmt).
Security Council holds consultations on clarifications requested by Baghdad concerning proposed comprehensive review of Iraq-U.N. relations (1030 edt/1430 gmt).
Security Council's Libya sanctions committee holds closed-door meeting (1530 edt/1930 gmt).
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