KFDA - NewsChannel 10 / Amarillo, TX: newschannel10.comOccidental's oil production jumps, profits slump
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NEW YORK (AP) - Occidental Petroleum says it's producing more crude and making more money off of it in the third quarter even though profits slumped compared with last year when energy prices were at record highs.
The rebound in crude prices has allowed oil producers to ramp up production quickly, and Occidental produced more oil and gas during the past three months than it did in the same part of 2008.
The challenge will be to find buyers for all that extra oil. While crude prices have soared, demand hasn't. In five of the last six weeks, U.S. refiners that make gasoline, diesel and jet fuel have been buying less crude.
Crude, which has become a popular hedge against the weak dollar, could fall again if the dollar improves and demand doesn't return, said Ann Kohler, an analyst with Caris and Company. Crude prices have climbed from about $70 a barrel to more than $82 recently as the dollar hit 14-month lows against the euro. Investors holding euros and other currencies can essentially get more crude when the value of the dollar falls.
But it has allowed companies to continue operations, easing fears of a price spike later if oil producers cut back on drilling because of low prices.
At current prices it makes sense to continue oil exploration and production.
A healthy demand for energy has not yet materialized, however, and Occidental like other producers must watch costs more than they had in the run-up to the record prices of last year.
"So far they've done that," said Kohler.
Occidental on Thursday reported net income of $927 million, or $1.14 per share. That's 59 percent less than the same period last year.
Like most petroleum companies, Los Angeles-based Occidental's earnings suffered as it compared results with the July-September period of 2008, when oil prices spiked above $147 per barrel.
Occidental also will expand its oil trading business. The company announced earlier in October that it would buy Citigroup's Phibro commodities trading division.
Citigroup, which had received federal bailout funds and was prodded by the government to get rid of Phibro, sold the division for a relatively cheap $250 million. Phibro earned an average $371 million annually during the past five years.
Occidental shares added $2.45, or 3 percent, to close at $84 on Thursday, though they slipped 2.5 percent in aftermarket trading.
Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
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