OXY Reaps California Gas Profits
Occidental Petroleum earnings of $466 million ($1.25 per share) beat Wall Street estimates by more than 20 cents/share. The company posted a 34% gain in net income before special items from the same period a year ago mainly on higher western gas prices and improved chemicals operations.
"Strong energy prices, particularly in California's natural gas market, resulted in outstanding earnings and cash flow for the second quarter and the first half of this year," said CEO Ray R. Irani. "The chemical segment returned to profitability in the second quarter after experiencing losses for the previous two quarters."
During the first half of the year, Occidental's earnings before special items of $976 million, or $2.63 on a per share basis, were the highest in the history of the company for any six-month period, he said. "We have used our free cash flow to reduce debt by approximately $480 million during the first six months, raising the debt reduction total to nearly $3.3 billion from our pro-forma peak debt of $9.2 billion in April 2000. Our debt to capitalization ratio at the end of June was 51%.
"Over the past week we announced the sale of our interest in the Tangguh LNG project in Indonesia and the sale of the entity that leased a pipeline in Texas to our former MidCon subsidiary," Irani added. "These two transactions will provide an additional $750 million in after-tax net proceeds for debt reduction, which would increase our total debt reduction so far this year to $1.23 billion. We expect to have additional and significant debt reduction during the balance of this year, and debt reduction will remain a high priority next year."
OXY's net income was $473 million ($1.27 per share), compared with $564 million ($1.53 per share) for the same period last year. The second quarter 2001 included a $7 million gain, net of tax, related to the sale of additional interests in the Gulf of Mexico. The second quarter 2000 included an after-tax gain of $300 million and an after-tax charge of $79 million.
Sales increased 19% to $3.8 billion in the second quarter from $3.2 billion for the same period a year ago. Total debt was reduced by $244 million to $5.9 billion.
The oil and gas segment earnings before special items were $799 million compared with $557 million in 2Q2000. The California gas market price premium remained strong in the second quarter, resulting in an average domestic gas price of $8.55/Mcf, OXY said.
OXY's domestic gas production declined 73 MMcf/d from 2Q2000 to 607 MMcf/d. Its California gas production was flat at 298 MMcf/d compared to the same quarter last year.
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